<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NORTHLAND CABLE TELEVISION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
WASHINGTON 91-1311836
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
AND SUBSIDIARY GUARANTOR:
NORTHLAND CABLE NEWS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
WASHINGTON 91-1638891
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
4841
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
<TABLE>
<S> <C>
1201 THIRD AVE., SUITE 3600 JAMES A. PENNEY
SEATTLE, WA 98101 VICE PRESIDENT AND SECRETARY
(206) 621-1351 NORTHLAND CABLE TELEVISION, INC.
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE 1201 THIRD AVE., SUITE 3600
NUMBER, SEATTLE, WA 98101
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL (206) 621-1351
EXECUTIVE OFFICE) (NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
COPIES TO:
SCOTT T. BELL
JOHN P. STOKKE
CAIRNCROSS & HEMPELMANN P.S.
701 FIFTH AVE., SUITE 7000
SEATTLE, WA 98104
(206) 587-0700
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. [X]
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT TO AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED REGISTRATION FEE
- ----------------------------------------------------------------------------------------------
Senior Subordinated Notes................................. $100,000,000 $29,500.00
==============================================================================================
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS
- ----------------
NORTHLAND CABLE TELEVISION, INC.
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF ITS
10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR
EACH $1,000 IN PRINCIPAL AMOUNT OF ITS OUTSTANDING
10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
------------------------
Northland Cable Television, Inc., a Washington corporation (the "Company"),
hereby offers to exchange (the "Exchange Offer") up to $100,000,000 in aggregate
principal amount of its 10 1/4% Senior Subordinated Notes due 2007 (the
"Exchange Notes") for up to $100,000,000 in aggregate principal amount of their
outstanding 10 1/4% Senior Subordinated Notes due 2007 (the "Original Notes"
and, together with the Exchange Notes, the "Notes") that were issued and sold in
a transaction exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"). As used herein, the "Company" refers to
Northland Cable Television, Inc. and its wholly-owned subsidiary, Northland
Cable News, Inc., unless the context otherwise indicates. There will be no cash
proceeds to the Company from the Exchange Offer.
The terms of the Exchange Notes are substantially identical (including
principal amount, interest rate, maturity, security and ranking) to the terms of
the Original Notes for which they may be exchanged pursuant to the Exchange
Offer, except that the Exchange Notes (i) are freely transferable by holders
thereof (except as provided below) and (ii) are not entitled to certain
registration rights and certain additional interest provisions which are
applicable to the Original Notes under the Registration Rights Agreement (as
defined). The Exchange Notes will be issued under the indenture governing the
Original Notes. For a complete description of the terms of the Exchange Notes,
see "Description of the Notes."
The Original Notes were originally issued and sold (the "Offering") on
November 12, 1997 in a transaction not registered under the Securities Act, in
reliance upon the exemption provided in Section 4(2) of the Securities Act and
Rule 144A promulgated under the Securities Act. Accordingly, the Original Notes
may not be reoffered, resold or otherwise pledged, hypothecated or transferred
in the United States unless so registered or unless an applicable exemption from
the registration requirements of the Securities Act is available. Based upon its
view of interpretations provided to third parties by the Staff (the "Staff") of
the Securities and Exchange Commission (the "Commission"), the Company believes
that the Exchange Notes issued pursuant to the Exchange Offer in exchange for
the Original Notes may be offered for resale, resold and otherwise transferred
by holders thereof (other than any holder which is (i) an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act (an
"Affiliate"), (ii) a broker-dealer who acquired Original Notes directly from the
Company or (iii) a broker-dealer who acquired Original Notes as a result of
market making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes. Each broker-dealer that receives Exchange
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of Exchange Notes.
The Letter of Transmittal that is filed as an exhibit to the Registration
Statement of which this Prospectus is a part (the "Letter of Transmittal")
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. Broker-dealers who acquired Original Notes as a result of
market making or other trading activities may use this Prospectus, as
supplemented or amended, in connection with resales of the Exchange Notes. The
Company has agreed that, for a period of 180 days after the Registration
Statement of which this Prospectus is a part is declared effective by the
Commission, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. Any holder who tenders in the Exchange Offer
for the purpose of participating in a distribution of the Exchange Notes and any
other holder that cannot rely upon interpretations must comply with the
registration and prospectus requirements of the Securities Act in connection
with a secondary resale transaction.
(Cover continued on next page)
SEE "RISK FACTORS" BEGINING ON PAGE 15 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS TO CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997.
LOGO
<PAGE> 3
(Continued from cover page)
Original Notes initially purchased by qualified institutional buyers were
initially represented by a single, global Note in registered form, registered in
the name of a nominee of the Depository Trust Company ("DTC"), as depository.
The Exchange Notes exchanged for Original Notes represented by the global Note
will be represented by one or more global Exchange Notes in registered form,
registered in the name of the nominee of DTC. See "Description of the
Notes -- Book-Entry; Delivery and Form." Exchange Notes issued to non-qualified
institutional buyers in exchange for Original Notes held by such investors will
be issued only in certificated, fully registered, definitive form. Except as
described herein, Exchange Notes in definitive certificated form will not be
issued in exchange for the global Note(s) or interests therein.
The Exchange Notes constitute new issues of securities with no established
public trading market. The Original Notes, however, have traded on the National
Association of Securities Dealers, Inc.'s PORTAL market. Any Original Notes not
tendered and accepted in the Exchange Offer will remain outstanding. To the
extent that Original Notes are not tendered or are tendered but not accepted in
the Exchange Offer, a holder's ability to sell such Original Notes could be
adversely affected. Following consummation of the Exchange Offer, the holders of
any remaining Original Notes will continue to be subject to the existing
restrictions on transfer thereof and the Company will have no further obligation
to such holders to provide for the registration under the Securities Act of the
Original Notes except under certain limited circumstances. See "Original Notes
Registration Rights." No assurance can be given as to the liquidity of the
trading market for either the Original Notes or the Exchange Notes. The Original
Notes are not listed on any securities exchange and the Company does not intend
to apply for a listing of the Exchange Notes on a Securities Exchange.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered or accepted for exchange. The Exchange
Offer will expire at 5:00 p.m., New York City time, on , 1998,
unless extended (the "Expiration Date"). The date of acceptance for exchange of
the Original Notes (the "Exchange Date") will be the first business day
following the Expiration Date, upon surrender of the Original Notes. Original
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior
to the Expiration Date; otherwise such tenders are irrevocable.
<PAGE> 4
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement") under the Securities Act with respect to the Exchange Notes being
offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain items of which are omitted as permitted by the rules and
regulations of the Commission. For further information with respect to the
Company, the Guarantor and the Exchange Notes, reference is hereby made to the
Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily complete and,
where such contract or other document is an exhibit to the Registration
Statement, each such statement is qualified in all respects by the provisions in
such exhibit, to which reference is hereby made.
The Company is not currently subject to the informational requirements of
the Exchange Act. Upon the effectiveness of the Registration Statement or, if
earlier, the Shelf Registration Statement (as defined herein), the Company will
become subject to the informational requirements of the Exchange Act and, in
accordance therewith, will file all reports and other information required by
the Commission. The Registration Statement, as well as periodic reports, proxy
statements and other information filed by the Company with the Commission, may
be inspected at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W, Washington, D.C. 20549, or at its regional
offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can be obtained from the Company upon
request. Any such request should be addressed to the Company's principal offices
at 1201 Third Ave., Suite 3600, Seattle, WA 98101 (telephone number (206)
674-3900). The Commission maintains a Web site that contains reports, proxy and
information statements and other materials that are filed through the
Commission's Electronic Data Gathering, Analysis and Retrieval System. This Web
site can be accessed at http://www.sec.gov.
The Company's obligation to file periodic reports with the Commission
pursuant to the Exchange Act may be suspended if the Notes are held of record by
fewer than 300 holders at the beginning of any fiscal year of the Company, other
than the fiscal year in which the Registration Statement or the Shelf
Registration Statement becomes effective. However, the Company has agreed,
pursuant to the indenture dated as of November 12, 1997 (the "Indenture")
governing the Notes, that, whether or not it is then subject to Section 13 or
15(d) of the Exchange Act, it will file with the Commission and furnish to the
holders of the Notes and the Trustee (and, if filing such documents with the
Commission is prohibited, to prospective holders of the Notes upon request)
copies of the annual reports, quarterly reports and other periodic reports which
the Company would have been required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act if the Company were subject to such
Sections. In addition, the Company will furnish, upon the request of any holder
of a Note, such information as is specified in paragraph (d)(4) of Rule 144A, to
such holder or to a prospective purchaser of such Note which such holder
reasonably believes is a qualified institutional buyer within the meaning of
Rule 144A, in order to permit compliance by such holder with Rule 144A in
connection with the resale of such Note by such holder unless, at the time of
such request, the Company are subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act.
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
2
<PAGE> 5
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS (THE "PROSPECTUS") DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY NOTES BY
ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE
SUCH AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------------
The Northland Cable Television, Inc. logo and the Northland Cable News name
and logo are registered trademarks of Northland Telecommunications Corporation.
All other product and service names referenced herein are the trademarks or
registered trademarks of their respective owners.
3
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements and pro forma financial information (including the notes thereto)
appearing elsewhere in this Prospectus. The Company has executed a definitive
agreement to acquire six cable television systems in South Carolina (the
"Acquisition"), subject to customary closing conditions. Unless otherwise
indicated: (i) all references in this Prospectus to the Company's business on a
pro forma basis give effect to the offering of the Original Notes (the
"Offering"), the application of the net proceeds therefrom, and the Acquisition;
and (ii) all references herein to the "Company" refer to Northland Cable
Television, Inc. and its consolidated subsidiary, Northland Cable News, Inc.
THE COMPANY
OVERVIEW
Northland Cable Television, Inc. owns and operates 35 cable television
systems serving small cities, towns and rural communities (i.e., non-urban
markets) in California, Georgia, Oregon, South Carolina, Texas and Washington
(the "Existing Systems"). The Company is a wholly owned subsidiary of Northland
Telecommunications Corporation ("NTC") which, together with the Company and its
other affiliates, has specialized in providing cable television and related
services in non-urban markets since 1981. As of September 30, 1997, without
giving effect to the Acquisition, NTC and its affiliates operated a total of 99
cable television systems serving approximately 215,115 subscribers in 245
communities in 10 states. See "Certain Transactions."
Since closing its initial acquisition in 1986, Northland Cable Television,
Inc. has demonstrated a strong and consistent ability to target, negotiate and
complete acquisitions of cable systems and integrate the operation of such
systems. The Company believes it has created a loyal relationship with the
communities it serves by maintaining local offices, hiring staff predominantly
from these communities and providing high quality customer service. In many
communities, the Company offers its exclusive local news and information
programming, produced by the Company's wholly owned subsidiary, Northland Cable
News, Inc. The Company has increased its basic and premium subscribers through
strategic acquisitions, selective system upgrades and extensions of its cable
systems. Additionally, the Company believes its subscriber growth and revenue
per subscriber have been enhanced by consistent economic growth and favorable
demographics in its markets. As a result of these factors, from December 31,
1992 through September 30, 1997, the Company experienced compound annual growth
in basic subscribers and EBITDA (as defined) on an annualized basis of 21.2% and
22.8%, respectively. As of September 30, 1997, the Existing Systems passed
approximately 135,180 homes and served 92,800 basic subscribers, representing a
basic penetration rate of 68.6%. The Existing Systems achieved average monthly
revenue per basic subscriber of $34.63 for the nine months ended September 30,
1997.
The Company has executed a definitive agreement to acquire six cable
television systems in South Carolina (the "Acquisition Systems") from InterMedia
Partners of Carolina, L.P. and Robin Cable Systems, L.P. (collectively, the
"Sellers"). The Acquisition Systems are clustered in close proximity to several
of the Existing Systems in South Carolina, which the Company believes will allow
it to achieve certain economies of scale and operating efficiencies. As of
September 30, 1997, the Acquisition Systems passed an estimated 59,260 homes and
served approximately 35,705 basic subscribers, representing a basic penetration
rate of 60.3%. The Acquisition Systems achieved average monthly revenue per
basic subscriber of $34.43 for the nine months ended September 30, 1997.
Historically, the Company has successfully assimilated acquired systems
into its existing operations, which has resulted in increased revenues and
EBITDA. Management's strategy to enhance the financial performance of the
Company's systems includes: (i) customizing programming services to the local
market; (ii) upgrading its cable systems to increase signal quality,
4
<PAGE> 7
improve technical reliability and expand channel capacity; (iii) offering more
diversified packages of programming services and pricing; and (iv) leveraging
its local presence for both marketing and community-focused customer service.
The Company expects this strategy to increase basic penetration in the
Acquisition Systems and the revenues and EBITDA generated by those systems. As
of September 30, 1997, after giving pro forma effect to the Acquisition, the
Company's systems passed an estimated 194,440 homes and served approximately
128,505 basic subscribers, for a basic penetration rate of 66.1%. For the nine
months ended September 30, 1997 and the year ended December 31, 1996, on a pro
forma basis, the Company had revenues of approximately $39.7 million and $49.4
million, respectively, and EBITDA of approximately $17.8 million and $22.3
million, respectively.
The Company believes it is well positioned to capitalize on favorable
competitive and economic characteristics associated with owning and operating
cable television systems in non-urban markets. These attractive characteristics
as compared to urban and suburban markets, include: (i) lower population
densities which lead to a higher likelihood of only one cable television
provider; (ii) lower churn rates; (iii) greater subscriber penetration rates;
(iv) limited reception of over-the-air television stations; and (v) fewer
alternative entertainment sources.
By clustering systems, the Company is able to take advantage of certain
economies of scale, such as reduced payroll, billing and technical costs on a
per subscriber basis, and consolidated regional advertising. The Company intends
to continue to pursue its clustering strategy through the acquisition of
additional systems in or near its current operating regions.
John S. Whetzell is the founder, Chairman of the Board and President of NTC
and the Company. Mr. Whetzell has assembled a senior management team of six
individuals who have an average of approximately 21 years of experience in the
cable industry to execute the Company's business strategy. The Company's senior
management team has been in place for over 10 years. The Company believes that
the depth and experience of its senior management, together with their history
of managing the Company as a team, is a key asset which significantly enhances
the Company's operating performance. See "Management."
BUSINESS STRATEGY
The Company's objective is to increase its revenues and EBITDA by utilizing
its experience and expertise in acquiring and operating cable television
systems. Elements of the Company's business strategy are discussed below.
Target Non-Urban Markets. The Company operates clusters of cable television
systems serving non-urban markets. The Company believes non-urban markets
provide attractive and stable subscriber demographics and opportunities for
clustering systems. As a result of the Company's experience in operating cable
systems in non-urban markets, management believes it can continue to increase
subscriber penetration in its Existing Systems while pursuing strategic
acquisitions which complement the Company's Existing Systems.
Pursue Strategic Acquisitions. The Company actively considers opportunities
to acquire additional cable systems in non-urban markets and generally targets
markets with limited off-air broadcast signal reception, few entertainment
alternatives and strong community identity. In general, the Company seeks to
acquire stand-alone systems, or groups of systems, with an emphasis on those in
close proximity to its Existing Systems. In addition, the Company considers
acquisitions in other geographic areas where the Company believes it can
leverage its experience in operating cable systems in non-urban markets. From
time to time the Company may divest itself, through asset exchanges or outright
sales, of cable systems that do not readily lend themselves to the Company's
philosophy of clustering systems or for other reasons. Among the factors the
Company considers in evaluating the desirability of a potential acquisition or
asset exchange opportunity are price and terms, subscriber densities, plant
quality, availability of off-air broadcast signals, growth potential (in terms
of homes passed, revenues and EBITDA) and whether the target system can be
readily integrated into the Company's operations. The Company's management team
has a history of successfully integrating acquisitions and intends to continue
to acquire systems which will further improve revenues and EBITDA.
5
<PAGE> 8
Strategically Upgrade Systems. The Company strategically upgrades its cable
systems as part of its goal to satisfy current and future customer demand and
maximize return on investment. The centerpiece of this strategy is the
systematic deployment of fiber optic technology. The Company believes that
construction of fiber optic backbones significantly enhances picture quality and
system reliability and expands channel capacity, such that the Company is able
to offer a product that is competitive or superior to other potential video
providers competing in the same markets. Typically, the Company utilizes a 550
MHz system architecture for new trunk and feeder lines, with the flexibility to
upgrade to 750 MHz capacity in those specific districts of a service area where
future demand for such capacity may develop. The Company believes this strategy
enables it to be more responsive, in a cost-efficient manner, to fast changing
technologies and local demand for new services, such as data transfer services
and digital tiers. As of September 30, 1997, on a pro forma basis, 65.9% of the
Company's subscribers were served by systems with fiber optic backbones. The
Company plans to invest approximately $14.1 million in system upgrades prior to
December 31, 1999, at which time, on a pro forma basis, the Company anticipates
that over 70% of the Company's subscribers will be served by systems with fiber
optic backbones.
Pursue New Business Opportunities. The Company has identified several
business opportunities which complement its core video delivery operations. In
many systems, the Company has begun utilizing its own advertising sales force to
market spot advertising availabilities and production to area merchants.
Advertising revenue has grown rapidly and constituted 5.6% of the Company's
revenues for the year ended December 31, 1996. In addition, the Company is
seeking to construct fiber optic wide area networks in certain communities to be
leased to local governments, schools and businesses for various
telecommunications applications, such as remote classrooms, voice networks and
data transfer. The Company is also exploring the launch of enhanced digital
video, such as Headend In the Sky(R) ("HITS"), a digital video compression
service. Digital video services such as HITS will enable the Company to
significantly expand its program offering by more efficiently utilizing current
analog channel capacity. The Company also believes that high speed data services
delivered via a hybrid fiber and coaxial plant may provide the Company with
opportunities for new revenue sources, such as Internet access, in selected
communities.
Focus on the Community. A significant component of the Company's business
strategy is to bring all aspects of its programming and operations to a local
focus in order to increase revenues, EBITDA and subscriber loyalty and to
provide key competitive advantages in the markets it serves.
Customize Programming and Expand Service Offerings. The Company
believes that a system-by-system, decentralized approach to
programming is required as each area served has unique demographic and
economic characteristics. A primary focus of the Company's programming
strategy is the offering of specialty tiers of service which typically
contain eight to ten channels of programming such as family, sports,
or movie channels that target particular niches of subscribers. The
Company's tier subscribers have grown at a compound annual growth rate
of 27.2% from December 31, 1992 through September 30, 1997. The
Company intends to implement a similar strategy in the Acquisition
Systems.
Provide Local News. The Company, through its wholly owned subsidiary,
Northland Cable News, Inc., provides local news, sports and
information to several of the Company's cable systems, serving 42.2%
of the Company's current subscribers. This news service, Northland
Cable News(R), is available exclusively to systems owned by the
Company and its affiliates, and serves to differentiate the Company's
programming from any potential competitors.
Maintain Local Offices and Personnel. Because the Company specializes
in operating cable systems in small cities and towns, the Company
emphasizes locally focused customer service. Key aspects of the
Company's customer service commitment include local offices and a
decentralized management structure. Conveniently accessible offices in
or near each of the communities served by the Company are staffed
predominantly by locally hired employees who are generally familiar
with the community's customer base.
6
<PAGE> 9
THE ACQUISITION
The Company has executed a definitive agreement pursuant to which it will
acquire the Acquisition Systems for approximately $70.0 million. The Company
anticipates that the Acquisition will be consummated on or prior to early
January 1998, subject to the satisfaction of customary closing conditions and
the receipt of certain third party and governmental approvals. However, there
can be no assurance that the Acquisition will be consummated. See "Risk
Factors -- Risks Associated with the Acquisition" and "Description of the
Notes -- Repurchase at the Option of Holders -- Special Repurchase Offer."
The Acquisition is part of a transaction among the Company and certain
affiliates of the Company and the Sellers and an affiliate of the Sellers,
whereby 12 cable television systems serving approximately 54,400 subscribers
will be purchased by the Company and certain Company affiliates for
approximately $101.8 million. Allocation of the systems among the Company and
its affiliates was based on NTC's analysis of geographic concentration, ease of
technical and administrative integration and the financial and local management
capacities of the Company and its affiliates. The approximately $70.0 million
purchase price to be paid by the Company for the Acquisition Systems was arrived
at by negotiations between the Company and the Sellers, independent of the
negotiations of the purchase price for the other systems. See "Risk
Factors -- Conflicts of Interest; Transactions with Affiliates."
------------------------------
The Company is a Washington corporation with its principal executive
offices located at 1201 Third Avenue, Suite 3600, Seattle, Washington 98101, and
its telephone number is (206) 621-1351.
THE EXCHANGE OFFER
The Exchange Offer......... The Company is offering to exchange (the "Exchange
Offer") up to $100,000,000 aggregate principal
amount of its 10 1/4% Senior Subordinated Notes due
2007 (the "Exchange Notes") for up to $100,000,000
aggregate principal amount of its outstanding
10 1/4% Senior Subordinated Notes due 2007 that
were issued and sold in a transaction exempt from
registration under the Securities Act ((the
"Original Notes") and, together with the Exchange
Notes, the "Notes"). The form and terms of the
Exchange Notes are substantially identical
(including principal amount, interest rate,
maturity, security and ranking) to the form and
terms of the Original Notes for which they may be
exchanged pursuant to the Exchange Offer, except
that the Exchange Notes are freely transferable by
holders thereof except as provided herein (see "The
Exchange Offer -- Terms of the Exchange" and
"-- Terms and Conditions of the Letter of
Transmittal") and are not entitled to certain
registration rights and certain additional interest
provisions which are applicable to the Original
Notes under a registration rights agreement dated
as of November 12, 1997 (the "Registration Rights
Agreement") among the Company, the Guarantor and
BancAmerica Robertson Stephens and First Chicago
Capital Markets, Inc. as initial purchasers
(collectively, the "Initial Purchasers"). Exchange
Notes issued pursuant to the Exchange Offer in
exchange for the Original Notes may be offered for
resale, resold and otherwise transferred by holders
thereof (other than any holder which is (i) an
Affiliate of the Company, (ii) a broker-dealer who
acquired Original Notes directly from the Company
or (iii) a broker-dealer who acquired Original
Notes as a result of market-making or other trading
activities), without compliance
7
<PAGE> 10
with the registration and prospectus delivery
provisions of the Securities Act, provided that
such Exchange Notes are acquired in the ordinary
course of such holders' business and such holders
are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any
person to participate in, a distribution of such
Exchange Notes.
Minimum Condition.......... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Original
Notes being tendered or accepted for exchange.
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998, unless
extended (the "Expiration Date").
Exchange Date.............. The first date of acceptance for exchange for the
Original Notes will be the first business day
following the Expiration Date.
Conditions to the Exchange
Offer.................... The obligation of the Company to consummate the
Exchange Offer is subject to certain conditions.
See "The Exchange Offer -- Conditions to the
Exchange Offer." The Company reserves the right to
terminate or amend the Exchange Offer at any time
prior to the Expiration Date upon the occurrence of
any such condition.
Withdrawal Rights.......... Tenders of Original Notes pursuant to the Exchange
Offer may be withdrawn at any time prior to the
Expiration Date. Any Original Notes not accepted
for any reason will be returned without expense to
the tendering holders thereof as promptly as
practicable after the expiration or termination of
the Exchange Offer.
Procedures for Tendering
Original Notes........... See "The Exchange Offer -- How to Tender."
Federal Income Tax
Consequences............. The exchange of Original Notes for Exchange Notes
by tendering holders will not be a taxable exchange
for federal income tax purposes, and such holders
should not recognize any taxable gain or loss as a
result of such exchange. See "The Exchange Offer --
Federal Income Tax Consequences."
Use of Proceeds............ There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer.
Effects on Holders of
Original Notes........... As a result of the making of this Exchange Offer,
and upon acceptance for exchange of all validly
tendered Original Notes pursuant to the terms of
this Exchange Offer, the Company will have
fulfilled a covenant contained in the terms of the
Original Notes and the Registration Rights
Agreement, and, accordingly, the holders of the
Original Notes will have no further registration or
other rights under the Registration Rights
Agreement, except under certain limited
circumstances. See "Original Notes Registration
Rights." Holders of the Original Notes who do not
tender their Original Notes in the Exchange Offer
will continue to hold such Original Notes and will
be entitled to all the rights and limitations
applicable thereto under the Indenture. All
untendered, and tendered but unaccepted, Original
Notes will continue to be subject to the
restrictions on transfer provided for in the
Original
8
<PAGE> 11
Notes and the Indenture. To the extent that
Original Notes are tendered and accepted in the
Exchange Offer, the trading market, if any, for the
Original Notes not so tendered could be adversely
affected. See "Risk Factors -- Consequences of
Failure to Exchange Original Notes."
TERMS OF THE EXCHANGE NOTES
The Exchange Offer applies to $100,000,000 aggregate principal amount of
Original Notes. The form and terms of the Exchange Notes are substantially
identical to the form and terms of the Original Notes, except that the Exchange
Notes have been registered under the Securities Act and, therefore, will not
bear legends restricting the transfer thereof. The Exchange Notes will evidence
the same debt as the Original Notes and will be entitled to the benefits of the
Indenture. Unless the context otherwise requires, all references to the "Notes"
shall include the Original Notes and the Exchange Notes. See "Description of the
Notes."
Issuer..................... Northland Cable Television, Inc.
Securities Offered......... $100,000,000 aggregate principal amount of 10 1/4%
Senior Subordinated Notes due 2007.
Maturity Date.............. November 15, 2007.
Interest Payment Dates..... The Exchange Notes will bear interest from and
including their respective dates of issuance.
Holders whose Original Notes are accepted for
exchange will receive accrued interest thereon to,
but not including, the date of issuance of the
Exchange Notes, such interest to be payable with
the first interest payment on the Exchange Notes,
but will not receive any payment in respect of
interest on the Original Notes accrued after the
issuance of the Exchange Notes. Interest on the
Notes will be payable in cash semi-annually in
arrears on May 15 and November 15 of each year,
commencing May 15, 1998.
Mandatory Sinking Fund or
Redemption............... None.
Optional Redemption........ The Notes may be redeemed, in whole or in part, at
any time on or after November 15, 2002 at the
option of the Company, at the redemption prices set
forth herein, plus, in each case, accrued and
unpaid interest, if any, to the date of redemption.
In addition, at any time prior to November 15,
2000, the Company may, at its option, redeem up to
30% of the aggregate principal amount of the Notes
issued under the Indenture at a redemption price of
110.25% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of
redemption, with the Net Cash Proceeds of one or
more Public Equity Offerings, provided that at
least 70% of the Notes remains outstanding
immediately after the occurrence of such
redemption.
Change of Control.......... In the event of a Change of Control, each Holder
will have the right to require the Company to make
an offer to repurchase such Holder's Notes, in
whole or in part, at a price of 101% of the
aggregate principal amount thereof plus accrued and
unpaid interest to the date of repurchase.
Special Repurchase Offer... In the event the Acquisition has not been
consummated prior to March 1, 1998, the Notes will
be subject to a special repurchase offer (the
"Special Repurchase Offer") at an offer price equal
to
9
<PAGE> 12
101% of the aggregate principal amount thereof,
plus accrued and unpaid interest, to the date of
repurchase.
Ranking.................... The Notes will be general unsecured obligations of
the Company, subordinated in right of payment to
all present and future Senior Debt of the Company,
including the Company's obligations under the
Senior Credit Facility. The Notes will rank pari
passu with any future senior subordinated
indebtedness of the Company and will rank senior to
any other subordinated indebtedness of the Company.
As of September 30, 1997, on a pro forma basis, the
Company would have had approximately $77.3 million
of Senior Debt outstanding.
Subsidiary Guarantees...... The Notes will be unconditionally guaranteed
jointly and severally, on a senior subordinated
basis as to the payment of principal and interest,
if any, by the Company's existing subsidiary,
Northland Cable News, Inc., and each of the
Company's future subsidiaries. Each Subsidiary
Guarantee will be a general unsecured obligation of
such Guarantor, subordinated in right of payment to
all present and future senior indebtedness of such
Guarantor.
Certain Covenants.......... The Indenture pursuant to which the Notes will be
issued will, among other things, limit the ability
of the Company and its Subsidiaries to: (i) incur
additional indebtedness or issue preferred stock;
(ii) make certain Restricted Payments; (iii) grant
Liens on assets; (iv) merge, consolidate or
transfer substantially all of their assets; (v)
enter into transactions with Related Persons; (vi)
make certain payments affecting Subsidiaries; (vii)
sell assets; and (viii) issue capital stock of
Subsidiaries.
Original Notes;
Registration Rights........ The Company and the Guarantor have agreed to file
on or prior to January 26, 1998 and to use their
respective best efforts to cause to become
effective on or prior to April 11, 1998 a
registration statement under the Securities Act
with respect to an offer to Holders to exchange the
Original Notes (and the related guarantees) for the
Exchange Notes (and the related guarantees). In the
event that the Exchange Offer is not consummated on
or before May 11, 1998, or, under certain
circumstances, if the Initial Purchasers so
request, the Company will file and use its best
efforts to cause to become effective under the
Securities Act a Shelf Registration Statement on or
before May 11, 1998 with respect to the resale of
the Notes and keep such Shelf Registration
Statement effective generally until two years after
the effective date thereof. In the event any of the
registration requirements are not met, a
Registration Default shall be deemed to have
occurred and Additional Interest will accrue on the
Original Notes over and above the accrued interest
at a rate of 0.50% per annum during the 90-day
period immediately following the occurrence of any
Registration Default and shall increase by 0.25%
per annum at the end of each subsequent 90-day
period until such Registration Default has been
cured, but in no event shall such rate exceed 2.00%
per annum.
Use of Proceeds............ There will be no cash proceeds. See "Use of
Proceeds" and "Capitalization."
10
<PAGE> 13
PORTAL Listing............. The Notes are eligible for trading in the PORTAL
Market.
Risk Factors............... See "Risk Factors" for a discussion of certain
factors that should be considered in connection
with The Exchange Notes, including factors
affecting forward-looking statements.
A description of the terms of the Notes, including definitions of terms
which are capitalized above, is set forth herein under "Description of the
Notes."
11
<PAGE> 14
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth certain summary historical and pro forma
consolidated financial data for the Company for each of the years in the
three-year period ended December 31, 1996 and for the nine-month period ended
September 30, 1997. The summary historical consolidated financial data for the
years ended December 31, 1994, 1995 and 1996 have been derived from the
consolidated financial statements of the Company which have been audited by
Arthur Andersen LLP, independent public accountants. The pro forma financial
data for the year ended December 31, 1996 and as of and for the nine-month
period ended September 30, 1997 have also been adjusted for financial
information derived from the historical carve-out financial statements of Aiken
II Cable Systems (a component of Robin Cable Systems, L.P.) and Greenwood Cable
System (a component of InterMedia Partners of Carolina, L.P.), audited by Price
Waterhouse LLP, independent accountants. In the opinion of the Company, the
unaudited summary historical and pro forma consolidated financial data presented
as of and for the nine-month period ended September 30, 1997 reflect all
adjustments (consisting solely of normal recurring adjustments) necessary for a
fair presentation of such data. Actual and pro forma results for the nine-month
period ended September 30, 1997 are not necessarily indicative of the future
financial position or future results of operations of the Company for any other
interim period or the year as a whole.
The following information should be read in conjunction with, and is
qualified in its entirety by, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and accompanying notes of the Company and the Acquisition Systems and the Pro
Forma Unaudited Consolidated Combined Financial Statements and accompanying
discussion and notes included herein. The pro forma financial data is derived
from the Company's Pro Forma Unaudited Consolidated Combined Financial
Statements and the notes thereto contained elsewhere in this Offering Memorandum
which have not been audited by the independent auditors of the Company or the
Sellers. Such pro forma financial data are intended for informational purposes
only and are not necessarily indicative of the future financial position or
future results of operations of the combined Company or of the financial
position or the results of operations of the combined Company that would have
been realized had the Moses Lake Acquisition (as defined), the Offering, and the
application of the net proceeds therefrom, and the Acquisition occurred as of
the dates or for the periods presented.
12
<PAGE> 15
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
PRO FORMA(1) NINE MONTHS ENDED SEPTEMBER 30,
-------------------------- ---------------------------------------
FOR THE PRO FORMA(2)
FOR THE MOSES LAKE -------------------------
MOSES LAKE ACQUISITION, FOR THE
ACQUISITION THE OFFERING OFFERING
AND THE AND THE FOR THE AND THE
OFFERING ACQUISITION OFFERING ACQUISITION
1994 1995 1996 1996 1996 1997 1997 1997
---------- ----------- ----------- ----------- ------------ ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Service revenues... $ 15,345 $ 26,395 $ 32,561 $ 35,751 $ 49,370 $ 28,700 $ 28,700 $ 39,671
Operating expenses:
Operating......... 4,183 7,515 9,448 10,342 14,499 8,626 8,626 12,047
General and
administrative.. 2,782 4,710 5,955 6,598 9,653 5,332 5,332 7,492
Management fees... 332 1,320 1,625 1,785 2,466 1,433 1,433 1,982
Depreciation and
amortization.... 5,307 9,022 10,727 12,910 20,076 9,653 9,653 15,028
------- ------- ------- -------- -------- ------- -------- --------
Total operating
expenses...... 12,604 22,567 27,755 31,635 46,694 25,044 25,044 36,549
------- ------- ------- -------- -------- ------- -------- --------
Income from
operations........ 2,741 3,828 4,806 4,116 2,676 3,656 3,656 3,122
Interest
expense......... (3,226) (7,215) (8,263) (11,924) (17,986) (7,378) (8,853) (13,400)
Other income
(expense),
net............. 100 (371) (772) (772) (774) (240) (240) (220)
------- ------- ------- -------- -------- ------- -------- --------
Net loss........... $ (385) $ (3,758) $ (4,229) $ (8,580) $(16,084) $ (3,962) $ (5,437) $ (10,498)
======= ======= ======= ======== ======== ======= ======== ========
FINANCIAL RATIOS
AND OTHER DATA:
EBITDA(3).......... $ 8,094 $ 12,426 $ 15,101 $ 16,594 $ 22,320 $ 12,997 $ 12,997 $ 17,838
Annualized EBITDA(4)................................................................................. $ 17,656 $ 23,548
Capital
expenditures...... $ 1,825 $ 2,731 $ 2,843 $ 2,843 $ 4,581 $ 3,230 $ 3,230 $ 4,249
Ratio of pro forma total
debt to Annualized
EBITDA(4)........................................................................................... 6.1x 7.5x
Ratio of pro forma
Annualized EBITDA to cash
interest expense(4)(5).............................................................................. 1.6x 1.4x
Deficiency of
earnings to fixed
charges(6)........ $ (385) $ (3,758) $ (4,229) $ (3,962)
OPERATING
STATISTICAL DATA:
Homes passed....... 93,245 115,421 132,905 132,905 191,553 135,180 135,180 194,440
Basic
subscribers....... 64,130 79,848 90,327 90,327 125,442 92,800 92,800 128,505
Basic
penetration....... 68.8% 69.2% 68.0% 68.0% 65.5% 68.6% 68.6% 66.1%
Premium units...... 20,219 23,924 27,406 27,406 45,253 28,972 28,972 47,035
Premium
penetration....... 31.5% 30.0% 30.3% 30.3% 36.1% 31.2% 31.2% 36.6%
Average monthly
revenue per
subscriber(7)..... $ 29.59 $ 31.12 $ 33.22 $ 32.70 $ 32.59 $ 34.63 $ 34.63 $ 34.57
EBITDA per
subscriber(8)..... $ 187.34 $ 175.80 $ 184.87 $ 182.11 $ 176.81 $ 191.75 $ 191.75 $ 184.70
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
---------------------------------------
PRO FORMA(2)
-------------------------
FOR THE
OFFERING
FOR THE AND THE
OFFERING ACQUISITION
1997 1997 1997
----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets........................................................................... $ 89,118 $ 94,118 $ 163,747
Total debt............................................................................. 102,968 107,968 177,253
Shareholder's deficit.................................................................. (20,632) (20,632) (20,632)
</TABLE>
13
<PAGE> 16
- ---------------
(1) The unaudited pro forma consolidated combined statement of operations data
for the year ended December 31, 1996 give effect to the acquisition of three
cable systems in Moses Lake, Ephrata and Othello, Washington on October 11,
1995 (the "Moses Lake Acquisition"), the Offering, and the application of
the net proceeds therefrom, and the Acquisition as if they had occurred on
the first day of such period. See "Pro Forma Unaudited Consolidated Combined
Financial Statements" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(2) The unaudited pro forma consolidated combined statement of operations data
for the nine-month period ended September 30, 1997 give effect to the
Offering, and the application of the net proceeds therefrom, and the
Acquisition as if they had occurred on the first day of such period. The
unaudited pro forma consolidated combined balance sheet data as of September
30, 1997 give effect to the Offering, and the application of the net
proceeds therefrom, and the Acquisition as if they had occurred on September
30, 1997. See "Pro Forma Unaudited Consolidated Combined Financial
Statements" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(3) EBITDA represents income before interest expenses, income taxes,
depreciation and amortization and other non-cash income (expenses). EBITDA
is not intended to represent cash flow from operations or net income (loss)
as defined by generally accepted accounting principles and should not be
considered as a measure of liquidity or an alternative to, or more
meaningful than, operating income or operating cash flow as an indication of
the Company's operating performance. EBITDA is included herein because
management believes that certain investors find it a useful tool for
measuring the Company's ability to service its indebtedness. For the fiscal
years ended December 31, 1994, 1995 and 1996 and the nine-month period ended
September 30, 1997, EBITDA includes the net operating results of Northland
Cable News, Inc. of $46, $(424), $(432) and $(312), respectively. Northland
Cable News, Inc., a wholly owned subsidiary of the Company, began operations
in fiscal year 1994.
(4) Annualized EBITDA represents EBITDA for the quarter ended September 30, 1997
multiplied by four.
(5) Cash interest expense represents total interest expense as reduced for
interest expense relating to the amortization of deferred financing costs.
(6) For purposes of this calculation, "earnings" is defined as earnings before
extraordinary items and accounting changes, interest expense, amortization
of deferred financing costs, taxes and the portion of rent expense under
operating leases representative of interest. Fixed charges consist of
interest expense, amortization of deferred financing costs and a portion of
rent expense under operating leases representative of interest.
(7) Reflects revenues for the applicable period divided by the average number of
basic subscribers for the applicable period, divided by the number of months
in the applicable period.
(8) Reflects EBITDA for the applicable period divided by the average number of
basic subscribers for the applicable period. For purposes of this
calculation, EBITDA for the quarter ended September 30, 1997 was multiplied
by four.
14
<PAGE> 17
RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering their Original Notes for the Exchange Notes offered hereby, holders of
Original Notes should consider carefully the following factors, which (other
than "Consequences of Failure to Exchange Original Notes" and "Absence of Public
Market for the Exchange Notes") are generally applicable to the Original Notes
as well as to the Exchange Notes:
CONSEQUENCES OF FAILURE TO EXCHANGE ORIGINAL NOTES
Holders of Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes, as set forth in the legend
thereon, as a consequence of the issuance of the Original Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold, unless registered under
the Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom. Except under certain limited circumstances, the Company
does not intend to register the Original Notes under the Securities Act. In
addition, any holder of Original Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes may be deemed
to have received restricted securities and, if so, will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. To the extent Original Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for the
Original Notes not so tendered could be adversely affected. See "The Exchange
Offer" and "Original Notes Registration Rights."
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Exchange Notes are being offered to the holders of the Original Notes.
The Original Notes were offered and sold in November 1997 to a small number of
institutional and accredited investors and are eligible for trading in the
Private offerings, Resale and Trading through Automatic Linkages (PORTAL)
Market.
The Company does not intend to apply for a listing of the Exchange Notes on
a securities exchange. There is currently no established market for the Exchange
Notes and there can be no assurance as to the liquidity of markets that may
develop for the Exchange Notes, the ability of the holders of the Exchange Notes
to sell their Exchange Notes or the price at which such holders would be able to
sell their Exchange Notes. If such markets were to exist, the Exchange Notes
could trade at prices that may be lower than the initial market values thereof,
depending on many factors, including prevailing interest rates, the markets for
similar securities, and the financial performance of the Company. The Initial
Purchasers have made a market for the Original Notes. Although there is
currently no market for the Exchange Notes, the Initial Purchasers advised the
Company that they currently intend to make a market in the Exchange Notes.
However, the Initial Purchasers are not obligated to do so, and any such market
making with respect to the Original Notes or the Exchange Notes may be
discontinued at any time without notice. In addition, such market making
activities will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer or the pendency of an
applicable Shelf Registration Statement (as defined herein).
The liquidity of, and trading market for, the Exchange Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading market
independent of the financial performance of, and prospects for, the Company.
15
<PAGE> 18
SUBSTANTIAL LEVERAGE AND DEBT SERVICE
The Company has incurred a substantial amount of indebtedness prior to
giving effect to the indebtedness incurred in connection with the Offering and
its earnings have been insufficient to cover fixed charges for each of the years
ended December 31, 1992 to 1996. The Company will incur substantial additional
indebtedness in connection with the Offering and the financing of the
Acquisition. As of September 30, 1997, on a pro forma basis, the Company would
have had total indebtedness of $177.3 million and shareholder's deficit of $20.6
million. Furthermore, the Company's earnings would have been insufficient to
cover fixed charges by $16.1 million for the year ended December 31, 1996. The
Company may incur additional indebtedness in the future, subject to limitations
imposed by the Indenture, the Senior Credit Facility and such other borrowing
arrangements the Company may, from time to time, be a party to. See
"Capitalization," "Description of the Notes" and "Description of the Senior
Credit Facility."
The Company's ability to make scheduled payments of principal or interest,
or to refinance its indebtedness, including the Notes, depends on its future
performance, which, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors beyond its
control. Based upon the current level of operations and anticipated growth, the
Company believes that cash flow from operations, together with available
borrowings under the Senior Credit Facility and other sources of liquidity, will
be adequate to meet the Company's anticipated future requirements for working
capital, capital expenditures and scheduled payments of principal and interest
on its indebtedness including the Notes. There can be no assurance that the
Company's business will generate sufficient cash flow from operations or that
future borrowings will be available in an amount sufficient to enable the
Company to service its indebtedness, including the Notes, or to make necessary
capital expenditures, or, if required, to refinance indebtedness, including the
Notes, on commercially reasonable terms or at all. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
The degree to which the Company will be leveraged following the Offering
could have important consequences to Holders of the Notes, including, but not
limited to, the following: (i) a substantial portion of the Company's cash flow
from operations will be dedicated to debt service payments and will not be
available for other purposes; (ii) the Company's ability to obtain additional
financing in the future could be limited; (iii) certain of the Company's
borrowings are at variable rates of interest, which could result in higher
interest expenses in the event of an increase in interest rates; and (iv) the
Indenture and the Senior Credit Facility will contain financial and restrictive
covenants that limit the ability of the Company to, among other things, incur
additional indebtedness, borrow additional funds, dispose of assets or pay cash
dividends. Failure by the Company to comply with such covenants could result in
an event of default, which, if not cured or waived, would have a material
adverse effect on the Company, its financial condition, prospects and debt
service ability. In addition, the degree to which the Company is leveraged, as
well as restrictions under the Senior Credit Facility, would prevent it from
repurchasing all Notes tendered to it upon the occurrence of a Change of
Control. See "Description of the Notes -- Repurchase at the Option of Holders --
Change of Control," and "Description of the Senior Credit Facility."
HISTORICAL AND ANTICIPATED LOSSES
Since commencing operations in 1986, the Company has reported a net loss in
each year, including net losses of approximately $385,000, $3.8 million, $4.2
million and $4.0 million (unaudited) for the fiscal years ended December 31,
1994, 1995, 1996 and the nine months ended September 30, 1997, respectively.
These losses are primarily attributable to: (i) depreciation, amortization and
interest expenses associated with the acquisitions of the Existing Systems; and
(ii) the depreciation expenses relating to subsequent capital expenditures. The
Acquisition Systems likewise generally have reported net losses on a historical
basis. The Company expects to experience continued net losses for the
foreseeable future.
16
<PAGE> 19
RANKING OF NOTES; SUBORDINATION
The Notes will be subordinated in right of payment to all existing and
future Senior Debt, including principal, premium, if any, and interest and all
other amounts due on or payable in connection with Senior Debt. As of September
30, 1997, on a pro forma basis, there would have been outstanding approximately
$77.3 million of Senior Debt. By reason of such subordination, in the event of
the insolvency, liquidation, reorganization, dissolution or other winding-up of
the Company or upon a default in payment with respect to, or the acceleration
of, any Senior Debt, the holders of such Senior Debt must be paid in full before
the Holders of the Notes may be paid. If the Company incurs any additional pari
passu debt, the holders of such debt would be entitled to share ratably with the
Holders of the Notes in any proceeds distributed in connection with any
insolvency, liquidation, reorganization, dissolution or other winding-up of the
Company. This may have the effect of reducing the amount of proceeds paid to
Holders of the Notes. In addition, no payments may be made with respect to
principal, premium, if any, or interest on the Notes if a payment default exists
with respect to Designated Senior Debt (as defined) and, under certain
circumstances, no payments may be made with respect to principal, premium, if
any, or interest on the Notes for a period of up to 179 days if a non-payment
default exists with respect to Designated Senior Debt. In addition, the
Indenture will permit the Company and its Subsidiaries to incur additional
indebtedness if certain conditions are met. See "Description of the
Notes -- Subordination."
Under the Senior Credit Facility, the senior lenders receive: (i) a first
perfected security interest in substantially all of the current and future
assets of the Company and any subsidiaries of the Company; (ii) a first
perfected security interest in all of the issued and outstanding shares of
capital stock of the Company; (iii) a first perfected security interest in all
of the issued and outstanding capital stock of Northland Cable News, Inc.; and
(iv) guarantees by all current and future subsidiaries. In the event of a
default on secured indebtedness (whether as a result of the failure to comply
with a payment or other covenant, a cross-default, or otherwise), such lenders
will have a prior secured claim on the capital stock of the Company and the
assets of the Company and any subsidiary of the Company. If such lenders should
attempt to foreclose on their collateral, the Company's financial condition and
the value of the Notes would be materially adversely affected. See "Description
of the Senior Credit Facility."
COMPETITION; LITIGATION
Cable television systems face competition from alternative methods of
receiving and distributing television signals and from other sources of news,
information and entertainment. Because the Company's franchises are
non-exclusive, there is the potential for competition with the Company's systems
from other operators of cable television systems, including systems operated by
local governmental authorities, and from other distribution systems capable of
delivering video and other programming to homes or businesses, including direct
broadcast satellite ("DBS") systems and multichannel, multipoint distribution
systems ("MMDS"). In recent years, there has been significant growth in the
number of subscribers to DBS and MMDS services. Additionally, recent changes in
federal law have removed certain of the restrictions that have limited entry
into the cable television business by potential competitors such as telephone
companies and registered utility holding companies and their subsidiaries. Such
developments will enable local telephone companies to provide a wide variety of
video services in the telephone company's own service area which will be
directly competitive with services provided by cable television systems. Some
local telephone companies already have begun offering their competitive services
in limited areas.
Many of the Company's potential competitors have substantially greater
resources than the Company, and the Company cannot predict the extent to which
competition will materialize in its franchise areas from other cable television
operators and other distribution systems, or, if such competition materializes,
the extent of its effect on the Company. See "Business -- Competition" and
"Legislation and Regulation."
17
<PAGE> 20
In 1993, North Willamette Telecom, Inc., an affiliate of Canby Telephone
Association, petitioned to obtain a franchise from the City of Woodburn, Oregon
to operate a cable system which would compete with the Company's Woodburn
system. Such franchise has not been granted. On March 20, 1996, the Company was
served with a complaint in a suit commenced in the United States District Court
for the District of Oregon by North Willamette Telecom, Inc. and Canby Telephone
Association. The suit alleges the Company violated federal antitrust laws,
intentionally interfered with plaintiffs' prospective business relationships
with potential cable customers, and intentionally interfered with plaintiffs'
business relationships with the Canby Telephone Association's members. The
complaint seeks actual damages ranging from $1.2 million to $10.2 million,
punitive damages of $10.0 million and other relief. The Company denies the
allegations of the complaint and is vigorously defending the case. The Company
has filed summary judgment motions and no trial date has been set. An adverse
ruling could have a material adverse effect on the Company, its financial
condition, prospects and debt service ability. See "Business -- Litigation."
SIGNIFICANT CAPITAL EXPENDITURES; RAPID TECHNOLOGICAL ADVANCEMENTS
The business of delivering and producing televised news, information and
entertainment are characterized by new market entrants, increasingly rapid
technological change and evolving industry standards. There can be no assurance
that the Company will be able to fund the capital expenditures necessary to keep
pace with technological developments or that the Company will successfully
predict the technical demand of its subscribers. The Company's inability to
provide enhanced services in a timely manner or to predict the demands of the
marketplace could have a material adverse effect on the Company, its financial
condition, prospects and debt service ability. See "Business -- Competition."
NON-EXCLUSIVE FRANCHISES; NON-RENEWAL OR TERMINATION OF FRANCHISES
Cable television companies operate under non-exclusive franchises granted
by local authorities which are subject to renewal and renegotiation from time to
time. The Company's business is dependent upon the retention and renewal of its
local franchises. A franchise is generally granted for a fixed term ranging from
five to 15 years but in many cases is terminable if the franchisee fails to
comply with the material provisions thereof. The Company's franchises typically
impose conditions relating to the use and operation of the cable television
system, including requirements relating to the payment of fees, system bandwidth
capacity, customer service requirements, franchise renewal and termination. On a
pro forma basis, the Company has 17 franchises (representing 21.4% of the
Company's basic subscribers) expiring prior to 2000 and 24 franchises
(representing 37.1% of its basic subscribers) expiring between 2000 and 2004.
The Cable Television Consumer Protection and Competition Act of 1992 (the
"1992 Cable Act") prohibits franchising authorities from granting exclusive
cable television franchises and from unreasonably refusing to award additional
competitive franchises; it also permits municipal authorities to operate cable
television systems in their communities without franchises. The Cable
Communications Policy Act of 1984 (the "1984 Cable Act"), provides, among other
things, for an orderly franchise renewal process in which franchise renewal will
not be unreasonably withheld or, if renewal is denied and the franchising
authority acquires ownership of the system or effects a transfer of the system
to another person or entity, the previous operator generally is entitled to the
"fair market value" for the system covered by such franchise. Although the
Company believes that it generally has good relationships with its franchising
authorities, no assurance can be given that the Company will be able to retain
or renew such franchises or that the terms of any such renewals will be on terms
as favorable to the Company as the Company's existing franchises. The
non-renewal or termination of franchises relating to a significant portion of
the Company's subscribers could have a material adverse effect on the Company,
its financial condition, prospects and debt service ability. See
"Business -- Franchises" and "Legislation and Regulation."
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RISKS ASSOCIATED WITH THE ACQUISITION
There can be no assurance that the Acquisition will be consummated or that
conditions will not be imposed by third parties in connection with such closing.
Moreover, although the Company has attempted to minimize the risks of unexpected
liabilities or contingencies associated with the Acquisition, there can be no
assurance that such contingencies will not arise. Unanticipated contingencies
could have a material adverse effect on the Company, its financial condition,
prospects and debt service ability. In addition, the Acquisition is subject to
certain express material conditions, including approval by the Federal
Communications Commission (the "FCC") of the transfers of certain licenses and
the consent of local franchising authorities. Although to date the Company has
not experienced material difficulties in obtaining required approvals in
connection with its acquisitions of cable television systems, no assurance can
be given that it will be able to obtain the required approvals to complete the
Acquisition or that conditions will not be imposed in connection with obtaining
any such approval. Moreover, consummation of the Acquisition is contingent on
certain of the Company's affiliates consummating related acquisitions with the
Sellers. There can be no assurance that such related acquisitions will be
consummated.
In addition, the Company may elect to waive certain express conditions
intended to benefit the Company and proceed with the closing of the Acquisition.
Closing the Acquisition notwithstanding the failure of such conditions could
have a material adverse effect on the Company, its financial condition,
prospects and debt service ability. In the event the Acquisition has not been
consummated prior to March 1, 1998, the Notes will be subject to the Special
Repurchase Offer at an offer price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest, to the date of
repurchase. See "Description of the Notes -- Repurchase at the Option of
Holders -- Special Repurchase Offer."
NO ASSURANCE OF SUCCESSFUL FUTURE ACQUISITIONS
An element of the Company's acquisition strategy is to achieve operational
efficiencies by providing cable television and related services over an expanded
subscriber base within a concentrated geographic area. Consequently, the Company
seeks to acquire or exchange Existing Systems for additional cable systems and
expects that it will require additional financing to fund such acquisitions.
There can be no assurance that the Company will in the future be able to
successfully complete acquisitions or exchanges of additional cable systems
consistent with its business strategy. Further, there can be no assurance that
the Company will successfully obtain financing to complete such acquisitions, if
needed, or that the terms thereof will be favorable to the Company.
In addition, any acquisition or exchange could have an adverse effect upon
the Company's results of operations or cash flow, particularly acquisitions of
new systems which must be integrated with the Company's existing operations.
There can be no assurance that the Company will be able to integrate
successfully any acquired systems with its existing operations or realize any
efficiencies from any acquisition or exchange. There can also be no assurance
that any acquisition or exchange, if consummated, will improve operating
results. In addition, any acquisition or exchange will be subject to, among
other things, the satisfaction of customary closing conditions and the receipt
of certain third-party, or governmental approvals, including the consents of
franchising authorities. In carrying out its acquisition strategy, the Company
attempts to minimize the risk of unexpected liabilities and contingencies
associated with acquired businesses through planning, investigation and
negotiation, but such liabilities and contingencies may nevertheless accompany
acquisitions. See "Business -- Business Strategy."
CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES
The Company has engaged in and expects to continue to engage in certain
transactions with its affiliates. These transactions have involved management
agreements related to supervisory and
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managerial services as well as day-to-day technical, computer, financial and
administrative services provided to the Company by affiliates and investments in
and/or the acquisition of assets from affiliated companies. For the year ended
December 31, 1996, approximately $619,000 or 1.9% of the Company's revenues and
approximately $2.2 million or 14.2% of its total operating, general and
administrative expenses involved related party transactions. In addition, in
1996 the Company paid NTC $1.6 million for management fees. Because officers and
directors of the Company are also officers and directors of certain affiliated
companies, the terms of any agreements between the Company and such affiliates
are not and will not be the result of arm's-length negotiations. Although the
Company believes the overall terms of each such agreement are no less favorable
than those available from unrelated parties, there can be no assurance that the
terms of any transactions between the Company and its affiliates have been or
will be as favorable as the Company could obtain from unrelated parties. See
"Certain Transactions."
SUBSTANTIAL REGULATION IN THE CABLE TELEVISION INDUSTRY
The cable television industry generally, and the rates charged for cable
television services in particular, are subject to extensive governmental
regulation on the federal, state and local levels (but principally by the FCC
and by local franchising authorities). Many aspects of such regulation have
recently been extensively revised and are currently the subject of judicial
proceedings and administrative rulemakings, which are potentially significant to
the Company. The Company believes that the regulation of cable television
systems, including the rates charged for cable services, remains a matter of
interest to Congress, the FCC and local regulatory officials. Accordingly, no
assurance can be given as to what future actions such parties or the courts may
take or the effect thereof on the Company. See "Legislation and Regulation."
The principal federal statute governing cable television is the
Communications Act of 1934, as amended (the "Communications Act"). Amendments to
the Communications Act in 1984 and 1992 and amendments in 1996 (codified as the
1996 Telecommunications Act) have had particular impact on the way in which
cable systems are regulated. The 1984 and 1992 amendments created a new
regulatory framework for cable operators, particularly in the areas of: (i)
cable system rates for both basic and certain non-basic services; (ii)
programming access and exclusivity arrangements; (iii) leased access terms and
conditions; (iv) horizontal and vertical ownership of cable systems; (v)
customer service requirements; (vi) franchise renewals; (vii) television
broadcast signal carriage and retransmission consent; (viii) technical
standards; (ix) customer privacy; (x) consumer protection issues; (xi) cable
equipment compatibility; (xii) obscene or indecent programming; and (xiii)
requiring subscribers to subscribe to tiers of service other than basic service
as a condition of purchasing premium services. The 1996 Telecommunications Act
substantially amended the Communications Act by, among other things, removing
barriers to competition in the cable television and telephone markets and
reducing the regulation of cable television rates.
Under the FCC's rate regulations, most cable systems were required to
reduce their basic service tier and cable programming service tier ("CPST")
rates in 1993 and 1994, and have since had their rate increases governed by a
complicated price cap scheme. However, operators also have the opportunity of
bypassing this "benchmark" regulatory scheme in favor of traditional "cost-
of-service" regulation in cases where the latter methodology appears favorable.
The 1996 Telecommunications Act provided substantial rate relief for the
cable industry generally and small cable operators in particular. Under the new
law, large operators will not be subject to rate regulation of their optional
CPSTs as of April 1, 1999, while small operators had that regulation end
immediately. The Company qualifies as a "small operator" under the statutory
definition and, thus, today remains subject to rate regulation only as to "basic
service tier" or lowest level of programming service.
With regard to continuing regulation of the basic service tier, all of the
Existing Systems and all of the Acquisition Systems except the systems serving
Greenwood and Aiken, South Carolina
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<PAGE> 23
qualify for the favorable "cost-of-service" treatment afforded "small systems"
under existing FCC rules. The Company has elected to rely on the favorable
"small system" cost-of-service rules when its systems are required to justify
their rates for regulated services and, therefore, has not implemented the rate
reductions that would otherwise have been required if it were subject to the
FCC's benchmarks. Under the cost-of-service rules applicable to small cable
companies, eligible systems can establish permitted rates under a simple formula
that considers total operating expenses (including depreciation and amortization
expenses), net rate base, rate of return, channel count and subscribers. If the
monthly per channel rate resulting from these inputs for a cable system is no
more than $1.24, the cable system's rates will be presumed reasonable. If the
formula-generated rate exceeds $1.24, the burden is on the cable operator to
establish the reasonableness of its calculations. Certain of the Acquisition
Systems in Greenwood and Aiken, South Carolina, by virtue of their size, are
required to comply with the cost-of-service rules applicable to larger systems;
however, the Company believes it is eligible for a waiver of the FCC's rate
regulation rules such that these systems may qualify for the simplified rate
regulations afforded to smaller systems.
Substantially all of the Company's basic service rates are currently under
the $1.24 per channel level, and the Company believes that all of its rates for
such systems in excess of the $1.24 per channel level are reasonable using the
cost-of-service methodology described above. However, FCC rules permit local
franchise authorities to review basic service rates. An adverse ruling in any
such proceeding could require the Company to reduce its rates and pay refunds. A
reduction in the rates it charges for regulated services or the requirement that
it pay refunds could have a material adverse effect on the Company, its
financial condition, prospects and debt service ability. Once the Company
charges the maximum permitted rate allowed by FCC rules in regulated
communities, future rate increases may not exceed an inflation-indexed amount,
plus increases in certain costs beyond the cable operator's control, such as
taxes, franchise fees and increased programming costs.
Other provisions of the Communications Act could in the future have a
material adverse effect on the Company, its financial condition, prospects and
debt service ability. In particular, the 1992 Cable Act conveyed to broadcasters
the right generally to require either that the cable operator: (i) carry their
signal; or (ii) obtain their consent before doing so. To date, compliance with
these provisions has not had a material effect on the Company, although this
result may change in the future depending on such factors as market conditions,
channel capacity and similar matters when such arrangements are renegotiated.
See "Legislation and Regulation."
PAYMENT UPON CHANGE OF CONTROL
In the event of a Change of Control, each Holder will have the right to
require the Company to make an offer to repurchase such Holder's Notes, in whole
or in part, at a price of 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest to the date of repurchase. Prior to commencing such
an offer to repurchase, the Company may be required to: (i) repay in full all
Debt (as defined) of the Company that would prohibit the repurchase of the
Notes, including indebtedness under the Senior Credit Facility; or (ii) obtain
the consent of the senior lender and any other consent required to make the
repurchase. If the Company is unable to repay all of such Debt or is unable to
obtain the necessary consents, the Company will be unable to offer to repurchase
the Notes and such failure would constitute an Event of Default under the
Indenture. There is no assurance that the Company will have sufficient financial
resources available to satisfy all of its obligations under the Senior Credit
Facility and the Notes in the event of a Change of Control. The events that
require a repurchase upon a Change of Control under the Indenture may also
constitute events of default under the Senior Credit Facility or subsequently
incurred indebtedness of the Company. See "Description of the
Notes -- Repurchase at the Option of Holders -- Change of Control."
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<PAGE> 24
FRAUDULENT TRANSFER STATUTES
Substantially all of the net proceeds from the Offering will be used by the
Company to repay a portion of the Company's indebtedness under the Senior Credit
Facility. The incurrence by the Company of indebtedness such as the Notes may be
subject to review under relevant state and federal fraudulent conveyance laws if
a bankruptcy case or lawsuit is commenced by or on behalf of unpaid creditors of
the Company. Under these laws, if a court were to find that, after giving effect
to the sale of the Notes and the application of the net proceeds therefrom,
either (a) the Company incurred such indebtedness with the intent of hindering,
delaying or defrauding creditors or (b) the Company received less than
reasonably equivalent value or consideration for incurring such indebtedness
and: (i) was insolvent or was rendered insolvent by reason of such transactions;
(ii) was engaged in a business or transaction for which the assets remaining
with the Company constituted unreasonably small capital; or (iii) intended to
incur, or believed that it would incur, debts beyond its ability to pay such
debts as they matured, such court may subordinate such indebtedness to presently
existing and future indebtedness of the Company, as the case may be, avoid the
issuance of such indebtedness and direct the repayment of any amounts paid
thereunder to the Company's creditors or take other action detrimental to the
holders of such indebtedness.
The measure of insolvency for purposes of determining whether a transfer is
avoidable as a fraudulent transfer varies depending upon the law of the
jurisdiction which is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all its liabilities, including contingent
liabilities, were greater than the value of all its property at a fair
valuation, or if the present fair saleable value of the debtor's assets were
less than the amount required to repay its probable liabilities on its debts,
including contingent liabilities, as they become absolute and matured.
The Company believes that it will receive equivalent value at the time the
indebtedness under the Notes is incurred. In addition, the Company does not
believe that it, after giving effect to the Offering, and the application of the
net proceeds therefrom: (i) was or will be insolvent or rendered insolvent; (ii)
was or will be engaged in a business or transaction for which its remaining
assets constituted unreasonably small capital; or (iii) intends or intended to
incur, or believes or believed that it will or would incur, debts beyond its
ability to pay such debts as they mature. These beliefs are based on the
Company's operating history and analysis of internal cash flow projections and
estimated values of assets and liabilities of the Company at the time of the
Offering. There can be no assurance, however, that a court passing on these
issues would make the same determination.
RELIANCE ON MANAGEMENT; RESPONSIBILITY TO AFFILIATES
The Company's business is substantially dependent upon the performance of
the senior managers of NTC, who provide management services to the Company
pursuant to a Management Agreement (as defined) between NTC and the Company.
Through NTC, the Company maintains a strong management team, and the loss of any
of these individuals could have a material adverse effect on the Company, its
financial condition, prospects and debt service ability. Moreover, each of these
senior managers devotes a substantial amount of his time to the affairs of
affiliates of the Company. See "Management" and "Certain Transactions."
CONTROL BY PRINCIPAL SHAREHOLDER
The Company is a wholly owned subsidiary of NTC. John S. Whetzell, Chairman
of the Board and President of NTC, beneficially owns 22.8% of the outstanding
common stock of NTC and he effectively may be able to control all matters
requiring approval by the shareholders of the Company, including the election of
directors.
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UNCERTAINTY OF ADEQUATE INSURANCE
The Company's equipment and its physical plant are subject to casualty from
a variety of sources. Although the Company has obtained commercial insurance
against certain risks, there can be no assurance that such insurance will be
adequate. The Company began self-insuring its aerial and underground plant in
1996. The Company has recently begun to make monthly contributions into an
insurance fund maintained by NTC. The fund, which currently has an insignificant
balance, is maintained for the collective benefit of the Company and its
affiliates. If an uninsured loss was incurred by the Company or any of its
affiliates, the fund would be applied to defray a portion of such loss. If the
Company was to sustain a material uninsured loss, such reserves would be
insufficient to fully fund such loss. To the extent the Company's uninsured
losses exceed the fund's balance or the fund is depleted from losses incurred by
affiliates of the Company, the resulting reduction in cash flow caused by
interrupted service, together with the capital cost of replacing such equipment
and/or physical plant, could have a material adverse effect on the Company, its
financial condition, prospects and debt service ability. See
"Business -- Insurance."
FORWARD LOOKING STATEMENTS
Statements contained in this Prospectus that are not based on historical
fact, including without limitation statements containing the words "believes,"
"anticipates," "intends," "expects" and words of similar import, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, events or developments to be materially different from any future
results, events or developments expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions, both nationally and in the regions in which the Company
operates; technology changes; competition; changes in business strategy or
development plans; the high leverage of the Company; the ability to attract and
retain qualified personnel; existing governmental regulations and changes in, or
the failure to comply with, governmental regulations; liability and other claims
asserted against the Company; and other factors referenced in this Prospectus,
including without limitation under the captions "Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." GIVEN THESE UNCERTAINTIES, PROSPECTIVE INVESTORS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future results, events or developments.
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USE OF PROCEEDS
There will be no cash proceeds to the Company resulting from the Exchange
Offer.
The Company used the gross proceeds from the sale of the Original Notes to:
(i) repay a portion of the Senior Credit Facility (as defined) and (ii) pay fees
and expenses related to the offering of Original Notes. The indebtedness repaid
under the Senior Credit Facility bore interest at a weighted average rate of
approximately 8.6919% per annum as of December 16, 1997, and had a maturity date
of December 31, 2005.
The Company has executed a definitive agreement pursuant to which it will
acquire the Acquisition Systems for approximately $70.0 million. The Company
intends to draw on the Senior Credit Facility to finance the purchase price of
the Acquisition. See "Business -- The Acquisition."
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Company and the Guarantor under the Registration Rights Agreement.
The Original Notes were originally issued and sold on November 12, 1997
(the "Issue Date"). Such sales were not registered under the Securities Act in
reliance upon the exemption provided by Section 4(2) of the Securities Act and
Rule 144A promulgated under the Securities Act. In connection with the sale of
the Original Notes, the Company agreed to file with the Commission a
registration statement relating to the Exchange Offer (the "Registration
Statement"), pursuant to which the Exchange Notes, consisting of another series
of senior subordinated notes of the Company covered by such Registration
Statement and containing substantially identical terms to the Original Notes,
except as set forth in this Prospectus, would be offered in exchange for
Original Notes tendered at the option of the holders thereof. If (i) the Company
determines in reasonably good faith that (x) because of any changes in the law
or the applicable interpretations of the Staff of the Commission, the Commission
is not likely to permit the Company to effect the Exchange Offer prior to the
150th day after the Issue Date (the "Effectiveness Date"), or (y) that the
Exchange Notes would not be tradable upon receipt by the holders of Original
Notes that participate in the Exchange Offer without restriction under state and
federal securities laws (other than due solely to the status of a holder of
Original Notes as an Affiliate of the Company or by breach by such holder of its
representation to the Company as described in the last paragraph under "-- Terms
and Conditions of the Letter of Transmittal" below), (ii) the Exchange Offer is
not consummated within 180 days after the Issue Date, (iii) in certain
circumstances, certain holders of unregistered Exchange Notes so request or (iv)
in the case of any holder of Original Notes that participates in the Exchange
Offer, such holder of Original Notes does not receive Exchange Notes on the date
of the exchange that may be sold without restriction under state and federal
securities laws (other than due solely to the status of such holder of Original
Notes as an Affiliate of the Company or by breach by such holder of its
representation to the Company as described in the last paragraph under "-- Terms
and Conditions of the Letter of Transmittal" below) and so notifies the Company
within 60 days after such holder of Original Notes first becomes aware of such
restriction and concurrently therewith provides the Company with a reasonable
basis for its conclusion, then, in the case of each of clauses (i) through (iv)
of this sentence, the Company will file with the Commission a registration
statement (the "Shelf Registration Statement") to cover resales of the Original
Notes by the holders thereof who satisfy certain conditions relating to the
provision of information in connection with the Shelf Registration Statement. In
the event that (i) the Company fail to file the Registration Statement, (ii) the
Registration Statement or, if applicable, the Shelf Registration Statement, is
not declared effective by the Commission, or (iii) the Exchange Offer is not
consummated or the Shelf Registration Statement ceases to be effective, in each
case within specified time periods, the interest rate borne by the Original
Notes will be increased. See "Original Notes Registration Rights."
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TERMS OF THE EXCHANGE
The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal accompanying the
Registration Statement of which this Prospectus is a part (the "Letter of
Transmittal"), $1,000 in principal amount of Exchange Notes for each $1,000 in
principal amount of Original Notes. The terms of the Exchange Notes are
substantially identical to the terms of the Original Notes for which they may be
exchanged pursuant to this Exchange Offer, except that the Exchange Notes will
generally be freely transferable by holders thereof, and the holders of the
Exchange Notes (as well as remaining holders of any Original Notes) are not
entitled to certain registration rights and certain additional interest
provisions which are applicable to the Original Notes under the Registration
Rights Agreement. The Exchange Notes will evidence the same debt as the Original
Notes and will be entitled to the benefits of the Indenture. See "Description of
the Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered or accepted for exchange.
Based on their view of interpretations set forth in no-action letters
issued by the Staff to third parties, the Company believes that Exchange Notes
issued pursuant to the Exchange Offer in exchange for the Original Notes may be
offered for resale, resold and otherwise transferred by holders thereof (other
than any holder which is (i) an Affiliate of the Company, (ii) a broker-dealer
who acquired Original Notes directly from the Company or (iii) a broker-dealer
who acquired Original Notes as a result of market making or other trading
activities) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business, and such holders are not
engaged in, and do not intend to engage in, and have no arrangement or
understanding with any person to participate in, a distribution of such Exchange
Notes. Any broker-dealer that resells Exchange Notes that were received by it
for its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. Broker-dealers who acquired Original Notes as a result of market making or
other trading activities may use this Prospectus, as supplemented or amended, in
connection with resales of the Exchange Notes. The Company has agreed that, for
a period of 180 days after the Registration Statement is declared effective,
they will make this Prospectus available to any broker-dealer for use in
connection with any such resale. Any holder who tenders in the Exchange Offer
for the purpose of participating in a distribution of the Exchange Notes or any
other holder that cannot rely upon such interpretations must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction.
Tendering holders of Original Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Original Notes
pursuant to the Exchange Offer.
The Exchange Notes will bear interest from and including their respective
dates of issuance. Holders whose Original Notes are accepted for exchange will
receive accrued interest thereon to, but not including, the date of issuance of
the Exchange Notes, such interest to be payable with the first interest payment
on the Exchange Notes, but will not receive any payment in respect of interest
on the Original Notes accrued after the issuance of the Exchange Notes. Interest
on the Notes is payable semiannually in arrears on May 15 and November 15 of
each year, commencing May 15, 1998 at a rate of 10 1/4% per annum.
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EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer expires on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1998 unless the
Company in its sole discretion extend the period during which the Exchange Offer
is open, in which event the term "Expiration Date" means the latest time and
date on which the Exchange Offer, as so extended by the Company, expires. The
Company reserves the right to extend the Exchange Offer at any time and from
time to time prior to the Expiration Date by giving written notice to Harris
Trust Company of California (the "Exchange Agent") and by timely public
announcement communicated by no later than 5:00 p.m. on the next business day
following the Expiration Date, unless otherwise required by applicable law or
regulation, by making a release to the Dow Jones News Service. During any
extension of the Exchange Offer, all Original Notes previously tendered pursuant
to the Exchange Offer will remain subject to the Exchange Offer.
The initial Exchange Date will be the first business day following the
Expiration Date. The Company expressly reserves the right to (i) terminate the
Exchange Offer and not accept for exchange any Original Notes for any reason,
including if any of the events set forth below under "Conditions to the Exchange
Offer" shall have occurred and shall not have been waived by the Company and
(ii) amend the terms of the Exchange Offer in any manner, whether before or
after any tender of the Original Notes. If any such termination or amendment
occurs, the Company will notify the Exchange Agent in writing and will either
issue a press release or give written notice to the holders of the Original
Notes as promptly as practicable. Unless the Company terminates the Exchange
Offer prior to 5:00 p.m., New York City time, on the Expiration Date, the
Company will exchange the Exchange Notes for Original Notes on the Exchange
Date.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Company to record holders of Original Notes and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the lists of holders for subsequent
transmittal to beneficial owners of Original Notes.
HOW TO TENDER
The tender to the Company of Original Notes by a holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between such
holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
GENERAL PROCEDURES
A holder of an Original Note may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all references in
this Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Original Notes being tendered and any required
signature guarantees (or a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") pursuant to the procedure described below), to the
Exchange Agent at its address set forth on the back cover of this Prospectus on
or prior to the Expiration Date or (ii) complying with the guaranteed delivery
procedures described below.
If tendered Original Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Original Notes are to be reissued) in the
name of the registered holder, the signature of such signer need not be
guaranteed. In any other case, the tendered Original Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Company and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a bank, broker,
dealer, credit union, savings association, clearing agency or other institution
(each an "Eligible Institution") that is a member of a recognized signature
26
<PAGE> 29
guarantee medallion program within the meaning of Rule 17Ad-15 under the
Exchange Act. If the Exchange Notes and/or Original Notes not exchanged are to
be delivered to an address other than that of the registered holder appearing on
the note register for the Original Notes, the signature on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Original Notes should contact such holder promptly and instruct such
holder to tender Original Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Original Notes himself, such beneficial
owner must, prior to completing and executing the Letter of Transmittal and
delivering such Original Notes, either make appropriate arrangements to register
ownership of the Original Notes in such beneficial owner's name or follow the
procedures described in the immediately preceding paragraph. The transfer of
record ownership may take considerable time.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Original Notes at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Exchange Offer within two business days after
receipt of this Prospectus, and any financial institution that is a participant
in the Book-Entry Transfer Facility's systems may make book-entry delivery of
Original Notes by causing the Book-Entry Transfer Facility to transfer such
Original Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility in accordance with the BookEntry Transfer Facility's procedures for
transfer. However, although delivery of Original Notes may be effected through
book-entry transfer at the Book-Entry Transfer Facility, the Letter of
Transmittal, with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received by the Exchange
Agent at the address specified on the back cover of this Prospectus on or prior
to the Expiration Date or the guaranteed delivery procedures described below
must be complied with.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE
TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a holder pursuant to the Exchange Offer if the holder does not
provide his taxpayer identification number (social security number or employer
identification number, as applicable) and certify that such number is correct.
Each tendering holder should complete and sign the main signature form and the
Substitute Form W-9 included as part of the Letter of Transmittal, so as to
provide the information and certification necessary to avoid backup withholding,
unless an applicable exemption exists and is proved in a manner satisfactory to
the Company and the Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Original Notes to reach the Exchange Agent before the
Expiration Date, a tender may be effected if the Exchange Agent has received at
its office listed on the Letter of Transmittal on or prior to the Expiration
Date a letter, telegram or facsimile transmission from an Eligible Institution
setting forth the name and address of the tendering holder, the principal amount
of the Original Notes being tendered, the names in which the Original Notes are
registered and, if possible, the certificate numbers of the Original Notes to be
tendered, and stating that the tender is being made thereby and guaranteeing
that within three New York Stock Exchange trading days after the date of
execution of such letter, telegram or facsimile transmission by the Eligible
Institution, the Original Notes, in
27
<PAGE> 30
proper form for transfer, will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Original Notes being tendered by the
above-described method (or a timely Book-Entry Confirmation) are deposited with
the Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), the Company may, at their option, reject the tender. Copies of a
Notice of Guaranteed Delivery which may be used by Eligible Institutions for the
purposes described in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Original Notes (or a timely Book-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Original Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) by an
Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Original Notes
(or a timely Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Original Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel to
the Company, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularities in
tenders of any particular holder whether or not similar defects or
irregularities are waived in the case of other holders. Neither the Company, the
Exchange Agent nor any other person will be under any duty to give notification
of any defects or irregularities in tenders or shall incur any liability for
failure to give any such notification. The Company' interpretation of the terms
and conditions of the Exchange Offer (including the Letter of Transmittal and
the instructions thereto) will be final and binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Original Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Original Notes to the Company and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Original Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Original
Notes and to acquire Exchange Notes issuable upon the exchange of such tendered
Original Notes, and that, when the same are accepted for exchange, the Company
will acquire good and unencumbered title to the tendered Original Notes, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Company to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Original Notes. The Transferor further agrees that acceptance of any
tendered Original Notes by the Company and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Company of their
obligations under the Registration Rights Agreement and that the Company shall
have no further obligations or liabilities thereunder (except in certain limited
circumstances). All authority conferred by the Transferor will survive the death
or incapacity of the Transferor and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
By tendering Original Notes and executing the Letter of Transmittal, the
Transferor certifies that (a) it is not an Affiliate of the Company, that it is
not a broker-dealer that owns Original Notes
28
<PAGE> 31
acquired directly from the Company or an Affiliate of the Company, that it is
acquiring the Exchange Notes offered hereby in the ordinary course of such
Transferor's business and that such transferor has no arrangement with any
person to participate in the distribution of such Exchange Notes, (b) that it is
an Affiliate of the Company or of the initial purchaser of the Original Notes in
the Offering and that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable to it, or
(c) that it is a participating Broker-Dealer (as defined in the Registration
Rights Agreement) and that it will deliver a prospectus in connection with any
resale of such Exchange Notes. By tendering Original Notes and executing the
Letter of Transmittal, the Transferor further certifies that it is not engaged
in and does not intend to engage in a distribution of the Exchange Notes.
WITHDRAWAL RIGHTS
Original Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth on the back cover of this Prospectus prior to the Expiration
Date. Any such notice of withdrawal must specify the person named in the Letter
of Transmittal as having tendered Original Notes to be withdrawn, the
certificate numbers of Original Notes to be withdrawn, the principal amount of
Original Notes to be withdrawn, a statement that such holder is withdrawing his
election to have such Original Notes exchanged, and the name of the registered
holder of such Original Notes, and must be signed by the holder in the same
manner as the original signature on the Letter of Transmittal (including any
required signature guarantees) or be accompanied by evidence satisfactory to the
Company that the person withdrawing the tender has succeeded to the beneficial
ownership of the Original Notes being withdrawn. The Exchange Agent will return
the properly withdrawn Original Notes promptly following receipt of notice of
withdrawal. All questions as to the validity of notices of withdrawals,
including time of receipt, will be determined by the Company, and such
determination will be final and binding on all parties.
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Original Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made on the Exchange Date.
The Exchange Agent will act as agent for the tendering holders of Original
Notes for the purposes of receiving Exchange Notes from the Company and causing
the Original Notes to be assigned, transferred and exchanged. Upon the terms and
subject to conditions of the Exchange Offer, delivery of Exchange Notes to be
issued in exchange for accepted Original Notes will be made by the Exchange
Agent promptly after acceptance of the tendered Original Notes. Original Notes
not accepted for exchange by the Company will be returned without expense to the
tendering holders (or in the case of Original Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the procedures described above, such non-exchanged Original Notes
will be credited to an account maintained with such Book- Entry Transfer
Facility) promptly following the Expiration Date or, if the Company terminates
the Exchange Offer prior to the Expiration Date, promptly after the Exchange
Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue Exchange Notes
in respect of any properly tendered Original Notes not previously accepted and
may terminate the Exchange Offer (by oral or written notice to the Exchange
Agent and by timely public announcement communicated by no later than 5:00 p.m.
on the next business day following the Expiration Date, unless otherwise
required by
29
<PAGE> 32
applicable law or regulation, by making a release to the Dow Jones News Service)
or, at their option, modify or otherwise amend the Exchange Offer, if (a) there
shall be threatened, instituted or pending any action or proceeding before, or
any injunction, order or decree shall have been issued by, any court or
governmental agency or other governmental regulatory or administrative agency or
commission, (i) seeking to restrain or prohibit the making or consummation of
the Exchange Offer or any other transaction contemplated by the Exchange Offer,
(ii) assessing or seeking any damages as a result thereof or (iii) resulting in
a material delay in the ability of the Company to accept for exchange some or
all of the Original Notes pursuant to the Exchange Offer; (b) any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced, enacted,
promulgated or deemed applicable to the Exchange Offer or any of the
transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority, agency
or court, domestic or foreign, that in the reasonable judgment of the Company
might directly or indirectly result in any of the consequences referred to in
clauses (a)(i) or (ii) above or, in the reasonable judgment of the Company,
might result in the holders of Exchange Notes having obligations with respect to
resales and transfers of Exchange Notes which are greater than those described
in the interpretations of the Staff referred to on the cover page of this
Prospectus, or would otherwise make it inadvisable to proceed with the Exchange
Offer; or (c) a material adverse change shall have occurred in the business,
condition (financial or otherwise), operations, or prospects of the Company.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by them with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Company) giving rise to such condition or may be waived by the Company in whole
or in part at any time or from time to time in their sole discretion. The
failure by the Company at any time to exercise any of the foregoing rights will
not be deemed a waiver of any such right, and each right will be deemed an
ongoing right which may be asserted at any time or from time to time. In
addition, the Company have reserved the right, notwithstanding the satisfaction
of each of the foregoing conditions, to terminate or amend the Exchange Offer.
Any determination by the Company concerning the fulfillment or
nonfulfillment of any conditions will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Original Notes
tendered and no Exchange Notes will be issued in exchange for any such Original
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or qualification of the Indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
30
<PAGE> 33
EXCHANGE AGENT
Harris Trust Company of California (the "Exchange Agent") has been
appointed as the Exchange Agent for the Exchange Offer. Letters of Transmittal
must be addressed or transmitted to the Exchange Agent at the mailing address,
hand delivery address or facsimile numbers set forth on the back cover of this
Prospectus. Delivery to an address other than as set forth herein, or
transmissions of instructions via a facsimile or telex number other than the
ones set forth herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Company
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including the fees and expenses
of the Exchange Agent and printing, accounting, investment banking and legal
fees, will be paid by the Company and are estimated to be approximately
$120,000.
No person has been authorized to given any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Neither the delivery of this
Prospectus nor any exchange made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of the
Company since the respective dates as of which information is given herein. The
Exchange Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Original Notes in any jurisdiction in which the making of
the Exchange Offer or the acceptance thereof would not be in compliance with the
laws of such jurisdiction. However, the Company may, at their discretion, take
such action as they may deem necessary to make the Exchange Offer in any such
jurisdiction and extend the Exchange Offer to holders of Original Notes in such
jurisdiction. In any jurisdiction the securities laws or blue sky laws of which
require the Exchange Offer to be made by a licensed broker or dealer, the
Exchange Offer is being made on behalf of the Company by one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
DISSENTER AND APPRAISAL RIGHTS
HOLDERS OF ORIGINAL NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL
RIGHTS IN CONNECTION WITH THE EXCHANGE OFFER.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Original Notes for Exchange Notes by tendering holders will
not be a taxable exchange for federal income tax purposes, and such holders
should not recognize any taxable gain or loss as a result of such exchange.
OTHER
Participation in the Exchange Offer is voluntary and holders of Original
Notes should carefully consider whether to accept the terms and conditions
thereof. Holders of the Original Notes are urged to consult their financial and
tax advisors in making their own decisions on what action to take with respect
to the Exchange Offer.
31
<PAGE> 34
As a result of the making of and upon acceptance for exchange of all
validly tendered Original Notes pursuant to the terms of this Exchange Offer,
the Company will have fulfilled a covenant contained in the terms of the
Original Notes and the Registration Rights Agreement. Holders of the Original
Notes who do not tender their Original Notes in the Exchange Offer will continue
to hold such Original Notes and will be entitled to all the rights, and
limitations applicable thereto under the Indenture, except for any such rights
under the Registration Rights Agreement which by their terms terminate or cease
to have further effect as a result of the making of this Exchange Offer. See
"Description of the Notes." All untendered Original Notes will continue to be
subject to the restriction on transfer set forth in the Indenture. To the extent
that Original Notes are tendered and accepted in the Exchange Offer, the trading
market, if any, for any remaining Original Notes could be adversely affected.
See "Risk Factors-- Consequences of Failure to Exchange Original Notes."
The Company may in the future seek to acquire untendered Original Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Company have no present plan to acquire any Original
Notes which are not tendered in the Exchange Offer.
32
<PAGE> 35
CAPITALIZATION
The following table sets forth: (i) the Company's actual consolidated
capitalization as of September 30, 1997; (ii) the Company's consolidated
capitalization, on a pro forma basis to give effect to the Offering, and the
application of the net proceeds therefrom, as if each had occurred on September
30, 1997; and (iii) the Company's capitalization on a pro forma basis to give
effect to the Offering, and the application of the net proceeds therefrom, and
the Acquisition as if each had occurred on September 30, 1997. This table should
be read in conjunction with "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Selected Historical
and Pro Forma Consolidated Financial Data," and the Company's unaudited actual
consolidated and pro forma financial statements, including the related notes
thereto included elsewhere in this Offering Memorandum.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
---------------------------------------------
PRO FORMA FOR
PRO FORMA FOR THE OFFERING AND
ACTUAL THE OFFERING THE ACQUISITION
-------- ------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt (including current portion):
Senior Credit Facility(1)........................... $102,822 $ 7,822 $ 77,107
Notes offered hereby................................ -- 100,000 100,000
Other indebtedness.................................. 146 146 146
-------- -------- --------
Total long-term debt........................ 102,968 107,968 177,253
Shareholder's deficit................................. (20,632) (20,632) (20,632)
-------- -------- --------
Total capitalization........................ $ 82,336 $ 87,336 $156,621
======== ======== ========
</TABLE>
- ---------------
(1) Concurrently with the closing of the Offering, the Company and The First
National Bank of Chicago ("First Chicago"), as lender and managing agent,
amended and restated the Senior Credit Facility to, among other things,
adjust covenants to reflect the new capital structure and to increase
revolving credit availability. The Senior Credit Facility consists of a
$25.0 million reducing revolving credit facility and a $75.0 million term
loan with availability subject to certain borrowing conditions. The Company
has received a commitment from First Chicago for the Supplemental Credit
Facility with maximum borrowings of $115.0 million which will provide any
additional financing necessary to consummate the Special Repurchase Offer in
the event the Acquisition is not consummated. See "Description of the Senior
Credit Facility" and "Description of the Notes -- Repurchase at the Option
of Holders -- Special Repurchase Offer."
33
<PAGE> 36
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth certain selected historical and pro forma
consolidated financial data for the Company for each of the years in the
five-year period ended December 31, 1996 and for the nine-month periods ended
September 30, 1996 and 1997. The selected historical consolidated financial data
for the years ended December 31, 1992 to 1996 have been derived from the
consolidated financial statements of the Company which have been audited by
Arthur Andersen LLP, independent public accountants. The pro forma financial
data for the year ended December 31, 1996 and as of and for the nine-month
period ended September 30, 1997 have also been adjusted for financial
information derived from the historical carve-out financial statements of Aiken
II Cable Systems (a component of Robin Cable Systems, L.P.) and Greenwood Cable
System (a component of InterMedia Partners of Carolina, L.P.), audited by Price
Waterhouse LLP, independent accountants. In the opinion of the Company, the
unaudited selected historical and pro forma consolidated financial data
presented as of and for the nine-month periods ended September 30, 1996 and 1997
reflect all adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation of such data. Actual and pro forma results for
the nine-month period ended September 30, 1997 are not necessarily indicative of
the future financial position or future results of operations of the Company for
any other interim period or the year as a whole.
The following information should be read in conjunction with, and is
qualified in its entirety by, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and accompanying notes of the Company and the Acquisition Systems and the Pro
Forma Unaudited Consolidated Combined Financial Statements and accompanying
discussion and notes included herein. The pro forma financial data is derived
from the Company's Pro Forma Unaudited Consolidated Combined Financial
Statements and the notes thereto contained elsewhere in this Offering
Memorandum, which have not been audited by the independent auditors of the
Company or the Sellers. Such pro forma financial data are intended for
informational purposes only and are not necessarily indicative of the future
financial position or future results of operations of the combined Company or of
the financial position or the results of operations of the combined Company that
would have been realized had the Moses Lake Acquisition, the Offering, and the
application of the net proceeds therefrom, and the Acquisition occurred as of
the dates or for the periods presented.
34
<PAGE> 37
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE
FISCAL YEAR ENDED DECEMBER 31, MONTHS
---------------------------------------------------------------------------------- ENDED
PRO FORMA(1) SEPTEMBER
---------------------- 30,
FOR THE --------
FOR THE MOSES LAKE
MOSES ACQUISITION,
LAKE THE
ACQUISITION OFFERING
AND THE AND THE
OFFERING ACQUISITION
1992 1993 1994 1995 1996 1996 1996 1996
-------- -------- -------- -------- -------- -------- ---------- --------
(DOLLARS IN THOUSANDS, EXCEPT SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service revenues............. $ 11,957 $ 13,191 $ 15,345 $ 26,395 $ 32,561 $35,751 $ 49,370 $ 23,443
Operating expenses:
Operating................... 3,202 3,639 4,183 7,515 9,448 10,342 14,499 6,884
General and administrative.. 2,232 2,496 2,782 4,710 5,955 6,598 9,653 4,230
Management fees............. -- -- 332 1,320 1,625 1,785 2,466 1,170
Depreciation and
amortization.............. 5,490 5,337 5,307 9,022 10,727 12,910 20,076 7,591
------- ------- ------- -------- -------- -------- -------- --------
Total operating expenses.. 10,924 11,472 12,604 22,567 27,755 31,635 46,694 19,875
------- ------- ------- -------- -------- -------- -------- --------
Income from operations....... 1,033 1,719 2,741 3,828 4,806 4,116 2,676 3,568
Interest expense............ (3,051) (2,592) (3,226) (7,215) (8,263) (11,924) (17,986) (5,884)
Other income (expense),
net....................... (5) 112 100 (371) (772) (772) (774) (210)
------- ------- ------- -------- -------- -------- -------- --------
Net loss..................... $ (2,023) $ (761) $ (385) $ (3,758) $ (4,229) $(8,580) $(16,084) $ (2,526)
======= ======= ======= ======== ======== ======== ======== ========
FINANCIAL RATIOS AND OTHER
DATA:
EBITDA(3).................... $ 6,523 $ 7,056 $ 8,094 $ 12,426 $ 15,101 $16,594 $ 22,320 $ 10,845
Annualized EBITDA (4)........
Capital expenditures......... $ 1,908 $ 1,709 $ 1,825 $ 2,731 $ 2,843 $ 2,843 $ 4,581 $ 2,024
Ratio of pro forma total debt
to Annualized EBITDA(4).....
Ratio of pro forma Annualized
EBITDA to cash interest
expense(4)(5)...............
Deficiency of earnings to
fixed charges(6)............ $ (2,023) $ (761) $ (385) $ (3,758) $ (4,229) $ (2,526)
OPERATING STATISTICAL DATA:
Homes passed................. 47,488 48,200 93,245 115,421 132,905 132,905 191,553 117,905
Basic subscribers............ 37,210 38,631 64,130 79,848 90,327 90,327 125,442 77,835
Basic penetration............ 78.4% 80.1% 68.8% 69.2% 68.0% 68.0% 65.5% 66.0%
Premium units................ 11,581 12,021 20,219 23,924 27,406 27,406 45,253 21,893
Premium penetration.......... 31.1% 31.1% 31.5% 30.0% 30.3% 30.3% 36.1% 28.1%
Average monthly revenue per
subscriber(7)............... $ 27.70 $ 29.23 $ 29.59 $ 31.12 $ 33.22 $ 32.70 $ 32.59 $ 33.06
EBITDA per subscriber(8)..... $ 181.37 $ 187.58 $ 187.34 $ 175.80 $ 184.87 $182.11 $ 176.81 $ 182.98
<CAPTION>
PRO FORMA(2)
-----------------------
FOR THE
OFFERING
FOR THE AND THE
OFFERING ACQUISITION
1997 1997 1997
-------- -------- -----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service revenues............. $ 28,700 $28,700 $ 39,671
Operating expenses:
Operating................... 8,626 8,626 12,047
General and administrative.. 5,332 5,332 7,492
Management fees............. 1,433 1,433 1,982
Depreciation and
amortization.............. 9,653 9,653 15,028
-------- -------- --------
Total operating expenses.. 25,044 25,044 36,549
-------- -------- --------
Income from operations....... 3,656 3,656 3,122
Interest expense............ (7,378) (8,853) (13,400)
Other income (expense),
net....................... (240) (240) (220)
-------- -------- --------
Net loss..................... $ (3,962) $(5,437) $ (10,498)
======== ======== ========
FINANCIAL RATIOS AND OTHER
DATA:
EBITDA(3).................... $ 12,997 $12,997 $ 17,838
Annualized EBITDA (4)........ $17,656 $ 23,548
Capital expenditures......... $ 3,230 $ 3,230 $ 4,249
Ratio of pro forma total debt
to Annualized EBITDA(4)..... 6.1 x 7.5x
Ratio of pro forma Annualized
EBITDA to cash interest
expense(4)(5)............... 1.6 x 1.4x
Deficiency of earnings to
fixed charges(6)............ $ (3,962)
OPERATING STATISTICAL DATA:
Homes passed................. 135,180 135,180 194,440
Basic subscribers............ 92,800 92,800 128,505
Basic penetration............ 68.6% 68.6% 66.1%
Premium units................ 28,972 28,972 47,035
Premium penetration.......... 31.2% 31.2% 36.6%
Average monthly revenue per
subscriber(7)............... $ 34.63 $ 34.63 $ 34.57
EBITDA per subscriber(8)..... $ 191.75 $191.75 $ 184.70
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................. $ 35,403 $ 31,793 $ 61,695 $ 75,755 $ 91,559
Total debt................... 41,869 38,728 65,531 83,145 102,155
Shareholder's deficit........ (16,876) (17,637) (18,022) (21,780) (26,009)
<CAPTION>
AS OF SEPTEMBER 30,
-----------------------------------
PRO FORMA(2)
-----------------------
FOR THE
OFFERING
FOR THE AND THE
OFFERING ACQUISITION
1997 1997 1997
-------- -------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................. $ 89,118 $94,118 $ 163,747
Total debt................... 102,968 107,968 177,253
Shareholder's deficit........ (20,632) (20,632) (20,632)
</TABLE>
35
<PAGE> 38
- ---------------
(1) The unaudited pro forma consolidated combined statement of operations data
for the year ended December 31, 1996 give effect to the Moses Lake
Acquisition, the Offering, and the application of the net proceeds
therefrom, and the Acquisition as if they had occurred on the first day of
such period. See "Pro Forma Unaudited Consolidated Combined Financial
Statements" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(2) The unaudited pro forma consolidated combined statement of operations data
for the nine-month period ended September 30, 1997 give effect to the
Offering, and the application of the net proceeds therefrom, and the
Acquisition as if they had occurred on the first day of such period. The
unaudited pro forma consolidated combined balance sheet data as of September
30, 1997 give effect to the Offering, and the application of the net
proceeds therefrom, and the Acquisition as if they had occurred on September
30, 1997. See "Pro Forma Unaudited Consolidated Combined Financial
Statements" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(3) EBITDA represents income before interest expenses, income taxes,
depreciation and amortization and other non-cash income (expenses). EBITDA
is not intended to represent cash flow from operations or net income (loss)
as defined by generally accepted accounting principles and should not be
considered as a measure of liquidity or an alternative to, or more
meaningful than, operating income or operating cash flow as an indication of
the Company's operating performance. EBITDA is included herein because
management believes that certain investors find it a useful tool for
measuring the Company's ability to service its indebtedness. For the fiscal
years ended December 31, 1994, 1995 and 1996 and the nine-month periods
ended September 30, 1996 and 1997, EBITDA includes the net operating results
of Northland Cable News, Inc. of $46, $(424), $(432), $(314) and $(312),
respectively. Northland Cable News, Inc., a wholly owned subsidiary of the
Company, began operations in fiscal year 1994.
(4) Annualized EBITDA represents EBITDA for the quarter ended September 30, 1997
multiplied by four.
(5) Cash interest expense represents total interest expense as reduced for
interest expense relating to the amortization of deferred financing costs.
(6) For purposes of this calculation, "earnings" is defined as earnings before
extraordinary items and accounting changes, interest expense, amortization
of deferred financing costs, taxes and the portion of rent expense under
operating leases representative of interest. Fixed charges consist of
interest expense, amortization of deferred financing costs and a portion of
rent expense under operating leases representative of interest.
(7) Reflects revenues for the applicable period divided by the average number of
basic subscribers for the applicable period, divided by the number of months
in the applicable period.
(8) Reflects EBITDA for the applicable period divided by the average number of
basic subscribers for the applicable period. For purposes of this
calculation, EBITDA for the quarter ended September 30, 1997 was multiplied
by four.
36
<PAGE> 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following discussion provides additional information regarding the
financial condition and results of operations of the Company for the nine-month
periods ended September 30, 1996 and 1997 and for each of the years ended
December 31, 1994, 1995 and 1996. This discussion should be read in conjunction
with "Selected Historical and Pro Forma Consolidated Financial Data" and the
Company's consolidated financial statements and the notes thereto appearing
elsewhere in this Offering Memorandum.
The Company has executed a definitive agreement pursuant to which it will
acquire the Acquisition Systems for approximately $70.0 million. If consummated,
the purchase of the Acquisition Systems will result in a substantial increase in
the number of subscribers and the revenue and expenses of the Company.
Accordingly, the discussion and analysis of historical periods does not reflect
the significant impact the Acquisition will have on the Company. See
"Business -- The Acquisition."
GENERAL
Both the Company and the Acquisition Systems generate substantially all of
their revenues from monthly subscriber fees for basic, premium, optional
programming tiers and other cable television services. The balance of the
revenues generated by the Company and the Acquisition Systems are attributable
to various ancillary sources, including installation charges, advertising,
in-home wiring maintenance contracts, converter rentals, and commissions from
home shopping networks.
During the past three fiscal years the Company has engaged in significant
acquisition activity which has accounted for the majority of the increases in
revenues, operating expenses and EBITDA during this period. These acquisitions
have been primarily financed through borrowings under the Senior Credit Facility
which have resulted in substantial increases in interest expense.
The Company has consistently reported and the Acquisition Systems have
experienced net losses due to the high level of depreciation and amortization
expenses associated with cable systems. Additionally, the Company has incurred
significant interest expense associated with the financing of acquisitions. The
Company expects to experience continued net losses for the foreseeable future.
EBITDA as a percentage of revenue ("EBITDA Margin") for the Company has
declined over the past three fiscal years and for the nine months ended
September 30, 1997. In August 1994, the Company entered into a Management
Agreement with its parent, NTC, under which it agreed to pay to NTC a management
fee equal to 5.0% of the Company's gross revenues and to reimburse certain of
NTC's expenses. The initiation of this agreement in late 1994 had a significant
impact on the 1995 EBITDA Margin compared to 1994. Additionally, the Company's
acquisition activity since 1994 has resulted in the integration of cable
television operations which had significantly varying operating characteristics
and EBITDA Margins. The operating characteristics of acquired systems that
affected EBITDA Margins included rates charged to subscribers and the amount of
programming offered which directly relates to programming costs incurred. As the
Company pursues its acquisition strategy, including the Acquisition Systems, it
is expected that fluctuations in EBITDA Margins will continue which may not be
reflective of the year to year operating performance of the Existing Systems.
See "Pro Forma Unaudited Consolidated Combined Financial Statements."
37
<PAGE> 40
HISTORICAL RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data
expressed as a percentage of revenues.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- ---------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Operating............................. 27.3 28.5 29.0 29.4 30.1
General and administrative............ 18.1 17.8 18.3 18.0 18.6
Management fees....................... 2.2 5.0 5.0 5.0 5.0
Depreciation and amortization......... 34.6 34.2 32.9 32.4 33.6
------- ----- ------- ----- -------
Total operating expenses....... 82.2 85.5 85.2 84.8 87.3
Income from operations.................. 17.8 14.5 14.8 15.2 12.7
Interest expense...................... (21.0) (27.3) (25.4) (25.1) (25.7)
Other income (expense), net........... 0.7 (1.4) (2.4) (0.9) (0.8)
------- ----- ------- ----- -------
Net loss................................ (2.5%) (14.2%) (13.0%) (10.8%) (13.8%)
======= ===== ======= ===== =======
EBITDA(1)............................... 52.7% 47.1% 46.4% 46.3% 45.3%
======= ===== ======= ===== =======
</TABLE>
- ---------------
(1) EBITDA represents income (loss) before interest expenses, income taxes,
depreciation and amortization and other non-cash income (expenses). EBITDA
is not intended to represent cash flow from operations or net income as
defined by generally accepted accounting principles and should not be
considered as a measure of liquidity or an alternative to, or more
meaningful than, operating income or operating cash flow as an indication
of the Company's operating performance. EBITDA is included herein because
management believes that certain investors find it a useful tool for
measuring the Company's ability to service its indebtedness. For the fiscal
years ended December 31, 1994, 1995 and 1996 and the nine-month periods
ended September 30, 1996 and 1997, EBITDA includes the net operating
results of Northland Cable News, Inc. of $46,000, $(424,000), $(432,000),
$(314,000) and $(312,000), respectively. Northland Cable News, Inc., a
wholly owned subsidiary of the Company, began operations in fiscal year
1994.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Basic subscribers increased 14,965 or 19.2%, from 77,835 to 92,800 for the
nine months ended September 30, 1997.
Revenues. Revenues increased $5.3 million or 22.7%, from $23.4 million to
$28.7 million for the nine months ended September 30, 1997. Such increase was
primarily attributable to a full period inclusion of the three Moses Lake area
systems serving approximately 12,580 subscribers which were acquired in October
1996 (the "Moses Lake Acquisition"). Average monthly revenue per basic
subscriber increased $1.57 or 4.7%, from $33.06 to $34.63 for the nine months
ended September 30, 1997. Such increase was attributable to: (i) rate increases,
which averaged 6.7%, implemented in a majority of the Company's systems
effective August 1, 1996; and (ii) revenue from the increase in penetration of
new product tiers. Basic revenue per average basic subscriber increased $1.31 or
5.9%, from $22.39 to $23.70 for the nine months ended September 30, 1997. Tier
revenue per average basic subscriber increased $0.56 or 23.9%, from $2.34 to
$2.90 for the nine months ended September 30, 1997. Excluding the impact of the
Moses Lake Acquisition, for the nine months ended September 30, 1997: (i)
revenues would have increased $1.9 million or 8.1%, from $23.4 million to $25.3
million; and (ii) revenue per average basic subscriber would have increased
$2.09 or 6.3%, from $33.06 to $35.15.
Operating Expenses. Operating expenses, which include costs related to
programming, technical personnel, repairs and maintenance and advertising sales,
increased $1.7 million or 24.6%, from $6.9 million to $8.6 million for the nine
months ended September 30, 1997. Operating expenses as a percentage of revenues
increased from 29.4% to 30.1% for the nine months ended September 30,
38
<PAGE> 41
1997. A substantial portion of these increases was due to the Moses Lake
Acquisition, which included approximately 12,580 subscribers. Excluding the
impact of the Moses Lake Acquisition, operating expenses would have increased
approximately $600,000 or 8.7%, from $6.9 million to $7.5 million for the nine
months ended September 30, 1997. Such increase would have been attributable to:
(i) annual wage and benefit increases; and (ii) higher programming costs
resulting from rate increases by certain programming vendors and the launch of
new programming services in various systems.
General and Administrative Expenses. General and administrative expenses,
which include on-site office and customer service personnel costs, customer
billing, postage and marketing expenses and franchise fees increased
approximately $1.1 million or 26.2%, from $4.2 million to $5.3 million for the
nine months ended September 30, 1997. General and administrative expenses, as a
percentage of revenues, increased from 18.0% to 18.6% for the nine months ended
September 30, 1997. These increases were attributable primarily to the Moses
Lake Acquisition. Excluding the impact of the Moses Lake Acquisition, general
and administrative expenses would have increased approximately $300,000 or 7.1%,
from $4.2 million to $4.5 million for the nine months ended September 30, 1997.
This increase was attributable to: (i) annual wage and benefit increases; and
(ii) increases in revenue-based expenses such as franchise fees.
Management Fees. Management fees increased $200,000 or 16.7%, from $1.2
million to $1.4 million for the nine months ended September 30, 1997. Such
increase was directly attributable to the revenue increases discussed above.
Management fees are calculated at 5.0% of gross revenues.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased $2.1 million or 27.6%, from $7.6 million to $9.7 million for
the nine months ended September 30, 1997. Such increase was due to the Moses
Lake Acquisition and the Company's capital expenditures.
Interest Expense. Interest expense increased by $1.5 million or 25.4%, from
$5.9 million to $7.4 million for the nine months ended September 30, 1997. Such
increase was primarily attributable to increased borrowings incurred in
connection with the Moses Lake Acquisition which increased average outstanding
indebtedness $21.9 million or 26.6%, from $82.2 million to $104.1 million for
the nine months ended September 30, 1997.
EBITDA. EBITDA increased approximately $2.2 million or 20.4%, from $10.8
million to $13.0 million for the nine months ended September 30, 1997. EBITDA
Margin decreased from 46.3% to 45.3% for the nine months ended September 30,
1997. These changes were attributable primarily to the Moses Lake Acquisition,
which contributed approximately $1.4 million of EBITDA for the nine months ended
September 30, 1997. The EBITDA Margin for the Moses Lake area systems was 39.7%
for the nine months ended September 30, 1997. Excluding the effects of the Moses
Lake Acquisition, EBITDA would have increased $800,000 or 7.4%, from $10.8
million to $11.6 million for the nine months ended September 30, 1997.
FISCAL YEAR ENDED DECEMBER 31, 1996 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1995
The Company served 90,327 basic subscribers as of December 31, 1996, an
increase of 13.1%. In 1996, the net number of subscribers added through system
acquisitions was approximately 12,582. Excluding such acquired subscribers, the
Company served 77,745 basic subscribers as of December 31, 1996.
Revenues. Revenues increased $6.2 million or 23.5%, from $26.4 million to
$32.6 million in 1996. Such increase was due primarily to: (i) the full period
inclusion of systems acquired in 1995; and (ii) results for the Moses Lake area
systems acquired in October 1996. Average monthly revenue per basic subscriber
increased $2.10 or 6.7%, from $31.12 to $33.22 in 1996. Such increase
39
<PAGE> 42
was attributable to: (i) increases in rates charged for subscriptions to basic
and tier services; (ii) an increase in the average number of tier subscribers
from 21,682 to 28,964 in 1996; and (iii) increases in advertising revenue.
Revenues, from systems owned as of January 1, 1995, increased $2.0 million or
8.3%, from $24.0 million to $26.0 million in 1996. Average monthly revenue per
basic subscriber, for systems owned as of January 1, 1995, increased $2.50 or
8.0%, from $31.22 to $33.72 in 1996.
Operating Expenses. Operating expenses increased $1.9 million or 25.3%,
from $7.5 million to $9.4 million in 1996. Such increase was primarily
attributable to the Company's acquisition activities. Operating expenses as a
percentage of revenues increased from 28.5% to 29.0% in 1996. Such increase was
attributable to increased: (i) programming costs; and (ii) costs associated with
the Company's expanding advertising efforts. The average monthly programming
costs per subscriber increased 9.5% from 1995 to 1996 as a result of the launch
of new programming services and increases in rates charged by program providers.
General and Administrative Expenses. General and administrative expenses
increased $1.3 million or 27.7%, from $4.7 million to $6.0 million in 1996. Such
increase was primarily attributable to the Company's acquisition activities.
General and administrative expenses, as a percentage of revenues, increased from
17.8% to 18.3% in 1996. Such increase was primarily attributable to increases
in: (i) property tax expense; and (ii) consulting fees.
Management Fees. Management fees increased approximately $300,000 or 23.1%,
from $1.3 million to $1.6 million in 1996. Such increase was attributable to the
revenue increases discussed above. Management fees are calculated at 5.0% of
gross revenues.
EBITDA. EBITDA increased $2.7 million or 21.8%, from $12.4 million to $15.1
million in 1996. Such increase was primarily attributable to the Company's
acquisition activities. EBITDA Margin declined from 47.1% to 46.4% in 1996. Such
decrease was attributable to: (i) the acquisition of certain systems with lower
EBITDA Margins; and (ii) the resulting increase in operating and general and
administrative expenses as a percentage of revenues.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1994
The Company served 79,848 basic subscribers as of December 31, 1995, an
increase of 15,718 or 24.5%. In 1995, the net number of subscribers added
through system acquisitions was approximately 14,415. Excluding such acquired
subscribers, the Company served 65,433 basic subscribers as of December 31,
1995.
Revenues. Revenues increased $11.1 million or 72.5%, from $15.3 million to
$26.4 million in 1995. Such increase was due primarily to the acquisition of
systems in late 1994 and in 1995. Average monthly revenue per basic subscriber
increased $1.53 or 5.2%, from $29.59 to $31.12 in 1995. Such increase was
attributable to: (i) increases in rates charged for subscriptions to basic and
tier services; (ii) an increase in the average number of tier subscribers from
14,171 to 21,682; and (iii) a 32.5% increase in average monthly advertising
revenue per basic subscriber. Revenues from systems owned as of January 1, 1994,
increased $1.2 million or 8.6%, from $14.0 million to $15.2 million in 1995.
Average monthly revenue per basic subscriber, for systems owned as of January 1,
1994, increased $1.98 or 6.6%, from $29.80 to $31.78 in 1995. These increases
for systems owned as of January 1, 1994 were attributable to: (i) a 1.8% growth
in basic subscribers served; (ii) increases in revenues from launches of new
product tiers; and (iii) the Company's expanding advertising sales efforts.
Operating Expenses. Operating expenses increased $3.3 million or 78.6%,
from $4.2 million to $7.5 million in 1995. Such increase was primarily
attributable to system acquisitions in late 1994 and in 1995. Operating expenses
as a percentage of revenues increased from 27.3% to 28.5% in 1995. Such increase
was attributable to increases in: (i) pole attachment fees; and (ii) costs
associated with the Company's expanding advertising sales efforts.
40
<PAGE> 43
General and Administrative Expenses. General and administrative expenses
increased $1.9 million or 67.9%, from $2.8 million to $4.7 million in 1996. Such
increase was primarily attributable to system acquisitions in late 1994 and
1995. These costs declined as a percentage of revenues from 18.1% to 17.8% in
1995. Such decrease was primarily attributable to a decrease in wage and benefit
costs as a percentage of revenues from 2.9% to 2.5% in 1995.
Management Fees. Management fees increased $968,000 or 291.6%, from
$332,000 to $1.3 million in 1995. Such increase was attributable to the
initiation of a management fee payable to the Company's parent, effective August
1994, calculated at 5.0% of the Company's gross revenue.
EBITDA. EBITDA increased $4.3 million or 53.1%, from $8.1 million to $12.4
million in 1995. Such increase was primarily attributable to the system
acquisitions. EBITDA Margin declined from 52.7% to 47.1% in 1995. Such decrease
was attributable to: (i) the initiation of a management fee payable to the
Company's parent in August 1994; and (ii) increases in operating expenses as a
percentage of revenues.
LIQUIDITY AND CAPITAL RESOURCES
The cable television business generally requires substantial capital for
the construction, expansion and maintenance of the signal distribution system.
In addition, the Company has pursued, and intends to pursue, a business strategy
which includes selective acquisitions. The Company has financed these
expenditures through a combination of cash flow from operations and borrowings
under the Senior Credit Facility. For the years ended December 31, 1994, 1995
and 1996 and for the nine months ended September 30, 1996 and 1997, the
Company's net cash provided from operations was $5.8 million, $5.6 million, $8.0
million, $4.9 million and $6.9 million, respectively, all of which were
sufficient to meet the Company's debt service obligations, working capital and
capital expenditure requirements for the respective periods, excluding
acquisitions. Acquisitions of cable television systems during these periods
primarily were financed through bank borrowings. The Company believes that cash
flow from operations will be adequate to meet the Company's short-term and
long-term liquidity requirements, excluding acquisitions, prior to the maturity
of its long-term indebtedness, although no assurance can be given in this
regard.
Effective June 30, 1997, the Company received a non-cash capital
contribution of approximately $9.3 million which replaced, in its entirety, the
then outstanding net unsecured advances that had previously been owed to NTC and
other affiliates of the Company other than amounts due for normal operations,
management fees paid to NCC and for services provided by affiliated entities as
discussed above. As of September 30, 1997, the Company had no outstanding
unsecured indebtedness to affiliates. See "Certain Transactions -- Capital
Contribution."
Upon consummation of the Offering, and the application of the proceeds
therefrom, and the Acquisition, on a pro forma basis as of September 30, 1997,
the Company will increase its total consolidated Debt to approximately $177.3
million from $103.0 million. Following the consummation of the Offering, and the
application of proceeds therefrom, and the Acquisition, the Company expects to
have unused commitments under the Senior Credit Facility of approximately $22.9
million which will be available for permitted acquisitions (as defined under the
Senior Credit Facility) and general corporate purposes subject to the Company's
compliance with all covenants under the Senior Credit Facility. The Company has
received a commitment from its senior lender for the Supplemental Credit
Facility with maximum borrowings of $115.0 million which will provide any
additional financing necessary to consummate the Special Repurchase Offer in the
event the Acquisition is not consummated. Interest payments under the Notes and
interest and principal payments under the Senior Credit Facility will represent
significant liquidity requirements for the Company. See "-- Recent
Developments," "Description of the Senior Credit Facility" and "Description of
the Notes -- Repurchase at the Option of Holders -- Special Repurchase Offer."
Borrowings under the Senior Credit Facility will bear interest at floating
rates and will require payments on various dates depending on the interest rate
options selected by the Company. The
41
<PAGE> 44
Company expects that cash provided by operations will be sufficient to cover its
future debt service obligations.
CAPITAL EXPENDITURES
For the years ended December 31, 1994, 1995 and 1996 and for the nine
months ended September 30, 1996 and 1997, the Company had capital expenditures
of $1.8 million, $2.7 million, $2.8 million, $2.0 million and $3.2 million,
respectively. Capital expenditures included: (i) expansion and improvements of
cable properties; (ii) additions to plant and equipment; (iii) maintenance of
existing equipment; and (iv) cable line drops and extensions and installations
of cable plant facilities.
The Company plans to invest approximately $14.1 million in system upgrades
prior to December 31, 1999. This represents anticipated expenditures for
upgrading and rebuilding certain distribution facilities, new product launches,
extensions of distribution facilities to add new subscribers and general
maintenance. It is expected that cash flow from operations will be sufficient to
fund planned capital expenditures.
42
<PAGE> 45
BUSINESS
The Company owns and operates 35 cable television systems serving small
cities, towns and rural communities (i.e., non-urban markets) in California,
Georgia, Oregon, South Carolina, Texas and Washington. The Company is a wholly
owned subsidiary of Northland Telecommunications Corporation ("NTC"), which,
together with the Company and its other affiliates, has specialized in providing
cable television and related services in non-urban markets since 1981. See
"Certain Transactions."
Since closing its initial acquisition in 1986, Northland Cable Television,
Inc. has demonstrated a strong and consistent ability to target, negotiate and
complete acquisitions of cable systems and integrate the operation of such
systems. The Company believes it has created a loyal relationship with the
communities it serves by maintaining local offices, hiring staff predominantly
from these communities and providing high quality customer service. In many
communities, the Company offers its exclusive local news and information
programming, produced by the Company's wholly owned subsidiary, Northland Cable
News, Inc. The Company has increased its basic and premium subscribers through
strategic acquisitions, selective system upgrades and extensions of its cable
systems. Additionally, the Company believes its subscriber growth and revenue
per subscriber have been enhanced by consistent economic growth and favorable
demographics in its markets. As a result of these factors, from December 31,
1992 through September 30, 1997, the Company experienced compound annual growth
in basic subscribers and EBITDA on an annualized basis of 21.2% and 22.8%,
respectively. As of September 30, 1997, the Existing Systems passed
approximately 135,180 homes and served 92,800 basic subscribers, representing a
basic penetration rate of 68.6%. The Existing Systems achieved average monthly
revenue per basic subscriber of $34.63 for the nine months ended September 30,
1997.
The Company has executed a definitive agreement to acquire the Acquisition
Systems from the Sellers. The Acquisition Systems are clustered in close
proximity to several of the Existing Systems in South Carolina, which the
Company believes will allow it to achieve certain economies of scale and
operating efficiencies. As of September 30, 1997, the Acquisition Systems passed
an estimated 59,260 homes and served approximately 35,705 basic subscribers,
representing a basic penetration rate of 60.3%. The Acquisition Systems achieved
average monthly revenue per basic subscriber of $34.43 for the nine months ended
September 30, 1997.
Historically, the Company has successfully assimilated acquired systems
into its existing operations, which has resulted in increased revenues and
EBITDA. Management's strategy to enhance the financial performance of the
Company's systems includes: (i) customizing programming services to the local
market; (ii) upgrading its cable systems to increase signal quality, improve
technical reliability and expand channel capacity; (iii) offering more
diversified packages of programming services and pricing; and (iv) leveraging
its local presence for both marketing and community-focused customer service.
The Company expects this strategy to increase basic penetration in the
Acquisition Systems and the revenues and EBITDA generated by those systems. As
of September 30, 1997, after giving pro forma effect to the Acquisition, the
Company's systems passed an estimated 194,440 homes and served approximately
128,505 basic subscribers, for a basic penetration rate of 66.1%. For the nine
months ended September 30, 1997 and the year ended December 31, 1996, on a pro
forma basis, the Company had revenues of approximately $39.7 million and $49.4
million, respectively, and EBITDA of approximately $17.8 million and $22.3
million, respectively.
The Company believes it is well positioned to capitalize on favorable
competitive and economic characteristics associated with owning and operating
cable television systems in non-urban markets. These attractive characteristics
as compared to urban and suburban markets, include: (i) lower population
densities which lead to a higher likelihood of only one cable television
provider; (ii) lower churn rates; (iii) greater subscriber penetration rates;
(iv) limited reception of over-the-air television stations; and (v) fewer
alternative entertainment sources.
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<PAGE> 46
By clustering systems, the Company is able to take advantage of certain
economies of scale, such as reduced payroll, billing and technical costs on a
per subscriber basis, and consolidated regional advertising. The Company intends
to continue to pursue its clustering strategy through the acquisition of
additional systems in or near its current operating regions.
John S. Whetzell is the founder, Chairman of the Board and President of NTC
and the Company. Mr. Whetzell has assembled a senior management team of six
individuals who have an average of approximately 21 years of experience in the
cable industry to execute the Company's business strategy. The Company's senior
management team has been in place for over 10 years. The Company believes that
the depth and experience of its senior management, together with their history
of managing the Company as a team, is a key asset which significantly enhances
the Company's operating performance. See "Management."
BUSINESS STRATEGY
The Company's objective is to increase its revenue and EBITDA by utilizing
its experience and expertise in acquiring and operating cable television
systems. Elements of the Company's operating and acquisition strategy are
discussed below.
Target Non-Urban Markets. The Company operates clusters of cable television
systems serving non-urban markets. The Company believes non-urban markets
provide attractive and stable subscriber demographics and opportunities for
clustering systems. As a result of the Company's experience in operating cable
systems in non-urban markets, management believes it can continue to increase
subscriber penetration in its Existing Systems while pursuing strategic
acquisitions which complement the Company's Existing Systems.
Pursue Strategic Acquisitions. The Company actively considers opportunities
to acquire additional cable systems in non-urban markets and generally targets
markets with limited off-air broadcast signal reception, few entertainment
alternatives and strong community identity. In general, the Company seeks to
acquire stand-alone systems, or groups of systems, with an emphasis on those in
close proximity to its Existing Systems. In addition, the Company considers
acquisitions in other geographic areas where the Company believes it can
leverage its experience in operating cable systems in non-urban markets. From
time to time the Company may divest itself, through asset exchanges or outright
sales, of cable systems that do not readily lend themselves to the Company's
philosophy of clustering systems or for other reasons. Among the factors the
Company considers in evaluating the desirability of a potential acquisition or
asset exchange opportunity are price and terms, subscriber densities, plant
quality, availability of off-air broadcast signals, growth potential (in terms
of homes passed, revenue and EBITDA) and whether the target system can be
readily integrated into the Company's operations. The Company's management team
has a history of successfully integrating acquisitions and intends to continue
to acquire systems which will further improve revenues and EBITDA.
Strategically Upgrade Systems. The Company strategically upgrades its cable
systems as part of its goal to satisfy current and future customer demand and
maximize return on investment. The centerpiece of this strategy is the
systematic deployment of fiber optic technology. The Company believes that
construction of fiber optic backbones significantly enhances picture quality and
system reliability and expands channel capacity, such that the Company is able
to offer a product that is competitive or superior to other potential video
providers competing in the same markets. Typically, the Company utilizes a 550
MHz system architecture for new trunk and feeder lines, with the flexibility to
upgrade to 750 MHz capacity in those specific districts of a service area where
future demand for such capacity may develop. The Company believes this strategy
enables it to be more responsive, in a cost-efficient manner, to fast changing
technologies and local demand for new services, such as data transfer services
and digital tiers. As of September 30, 1997, on a pro forma basis, 65.9% of the
Company's subscribers were served by systems with fiber optic backbones. The
Company plans to invest approximately $14.1 million in system upgrades prior to
December 31,
44
<PAGE> 47
1999, at which time, on a pro forma basis the Company anticipates that over 70%
of the Company's subscribers will be served by systems with fiber optic
backbones.
Pursue New Business Opportunities. The Company has identified several
business opportunities which complement its core video delivery operations. In
many systems, the Company has begun utilizing its own advertising sales force to
market spot advertising availabilities and production to area merchants.
Advertising revenue has grown rapidly and constituted 5.6% of the Company's
revenues for the year ended December 31, 1996. In addition, the Company is
seeking to construct fiber optic wide area networks in certain communities to be
leased to local governments, schools and businesses for various
telecommunications applications, such as remote classrooms, voice networks and
data transfer. The Company is also exploring the launch of enhanced digital
video, such as Headend In the Sky(R) ("HITS"), a digital video compression
service. Digital video service such as HITS will enable the Company to
significantly expand its program offering by more efficiently utilizing current
analog channel capacity. The Company also believes that high speed data services
delivered via hybrid fiber and coaxial plant may provide the Company with
opportunities for new revenue sources, such as Internet access, in selected
communities.
Focus on the Community. A significant component of the Company's business
strategy is to bring all aspects of its programming and operations to a local
focus in order to increase revenues, EBITDA and subscriber loyalty and to
provide key competitive advantages in the markets it serves.
Customize Programming and Expand Service Offerings. The Company
believes that a system-by-system, decentralized approach to
programming is required as each area served has unique demographic and
economic characteristics. A primary focus of the Company's programming
strategy is the offering of specialty tiers of service which typically
contain eight to ten channels of programming such as family, sports or
movie channels that target particular niches of subscribers. The
Company's tier subscribers have grown at a compound annual growth rate
of 27.2% from December 31, 1992 through September 30, 1997. Upon
acquiring a system, the Company analyzes the system's current
programming and tier structure and, in most cases, takes prompt action
to increase the menu of services and channels provided. For example,
after acquiring a system in Moses Lake, Washington in October 1996,
the Company increased the number of channels offered from 39 to 53,
including one additional basic channel and the addition of a new
nine-channel optional tier and four new pay services. Average monthly
revenue per subscriber in the Moses Lake system grew by approximately
15.9%, increasing from $28.26 per month at the time of acquisition
(for the first full month of operations) to a monthly average of
$32.74 in the third quarter of 1997. The Company intends to implement
a similar strategy in the Acquisition Systems.
Provide Local News. The Company, through its wholly owned subsidiary,
Northland Cable News, Inc., provides local news, sports and
information to several of the Company's cable systems, serving 42.2%
of the Company's current subscribers. This news service, Northland
Cable News is available exclusively to systems owned by the Company
and its affiliates with a total of approximately 96,966 subscribers
served as of September 30, 1997. Northland Cable News focuses on
stories of particular interest to the residents of each community,
including local news, sports, weather, features and coverage of local
people and events. The Company believes that Northland Cable News
serves to differentiate the Company's programming from any potential
competitors and strengthens the Company's ties with the community.
Northland Cable News also enables systems to expand local advertising
sales. As part of its operational strategy, the Company intends to
introduce Northland Cable News in certain of the Acquired Systems.
Maintain Local Offices and Personnel. Because the Company specializes
in operating cable systems in small cities and towns, the Company
emphasizes locally focused customer service. Key aspects of the
Company's customer service commitment include local offices
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<PAGE> 48
and a decentralized management structure. Conveniently accessible offices
in or near each of the communities it serves are staffed predominantly by
locally hired employees who are generally familiar with the community's
customer base. Local employees and managers have authority to quickly
resolve customer-related problems and serve to put a local "face" to the
Northland Cable Television name. Personnel at local offices implement the
Northland Quality Assurance Program, which was introduced in 1989 and
entails random telephonic customer surveys and telephonic follow-up within
48 hours of any service call. In addition, local offices integrate
themselves into the communities they serve, purchasing such items as
vehicles, uniforms and office supplies from local merchants, conducting
charity food drives and utilizing Company "bucket trucks" for civic
purposes.
THE SYSTEMS
The Company's systems are divided into four geographical regions. Unless
otherwise indicated, all operating statistical data set forth in the following
table and the region-by-region description of the Company's Existing Systems and
the Acquisition Systems which follows is as of September 30, 1997.
<TABLE>
<CAPTION>
AVERAGE
MONTHLY
REVENUE
PERCENT OF PREMIUM PER
HOMES BASIC BASIC BASIC SERVICE PREMIUM BASIC EBITDA
REGION PASSED(1) SUBSCRIBERS(2) PENETRATION SUBSCRIBERS(3) UNITS(4) PENETRATION SUBSCRIBER MARGIN
- ------------------- --------- -------------- ----------- -------------- ------- ----------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EXISTING SYSTEMS
So.
Car./Georgia... 35,815 24,362 68.0% 19.0% 7,470 30.7% $38.12 47.7%
Washington....... 34,670 25,847 74.6% 20.1% 7,767 30.0% $34.26 43.3%
Texas............ 46,385 29,834 64.3% 23.2% 9,038 30.3% $32.83 49.0%
Oregon/Calif..... 18,310 12,757 69.7% 9.9% 4,697 36.8% $32.87 44.1%
------- ------- ------ ----- ------ ----- ------ -----
Total Existing
Systems(5)....... 135,180 92,800 68.6% 72.2% 28,972 31.2% $34.63 45.3%
ACQUISITION SYSTEMS
South Carolina... 59,260 35,705 60.3% 27.8% 18,063 50.6% $34.43 44.1%
------- ------- ----- ------
Total Systems(5)... 194,440 128,505 66.1% 100.0% 47,035 36.6% $34.57 45.0%
======= ======= ===== ======
</TABLE>
- ---------------
(1) Homes passed refers to estimates of the number of dwelling units in a
particular community that can be connected to the distribution system
without any further extension of principal transmission lines. Such
estimates are based upon a variety of sources, including billing records,
house counts, city directories and other local sources.
(2) The number of basic subscribers has been computed by adding the actual
number of subscribers for all non-bulk accounts and the equivalent
subscribers for all bulk accounts. The number of such equivalent subscribers
has been calculated by dividing aggregate basic service revenue for bulk
accounts by the full basic service rate for the community in which the
account is located.
(3) Percentage of all basic subscribers based on an aggregate of the Existing
Systems and the Acquisition Systems.
(4) Premium service units represents the number of subscriptions to premium
channels.
(5) EBITDA Margin for the Existing Systems and "Total Systems" includes
Northland Cable News, Inc.'s net operating results.
The South Carolina/Georgia Region. Prior to giving effect to the
Acquisition, the South Carolina/Georgia Region consists of four headends serving
24,362 subscribers. Two headends, located in Clemson, South Carolina and
Statesboro, Georgia, serve 21,451 subscribers or 88.1% of the total subscribers
in the region. The region is currently operated from two local offices located
in Clemson and Statesboro. After giving effect to the Acquisition, the South
Carolina/Georgia region will consist of 10 headends serving 60,067 subscribers.
Two of the headends are expected to be interconnected by year-end 1999.
46
<PAGE> 49
Clemson, South Carolina. The Clemson area systems serve 15,586
subscribers from three headends, one of which is expected to be
eliminated through interconnection. The Clemson system, which is home
to Clemson University, is the largest system, serving 12,675
subscribers, and is in the final stages of a 400 MHz rebuild project,
in which approximately 90% of the subscribers are expected to benefit
from expanded channel capacity by spring 1998. The Company is
culminating an intensive five-year capital plan for the Clemson area
systems which includes the installation of a fiber optic backbone
designed to support a 750 MHz trunk and feeder architecture.
Additionally, the Clemson area systems offer Northland Cable News,
have a strong advertising sales effort and their principal office and
headend sites are owned by the Company.
Statesboro, Georgia. The Statesboro system serves 8,776 subscribers
from a single headend and is in the final phase of a 400 MHz upgrade
scheduled for completion by early 1998. The Statesboro system offers
Northland Cable News, has a strong advertising sales effort and owns
its office and headend site. Statesboro, which is home to Georgia
Southern University, has experienced steady population growth, with a
compound annual growth rate for the period 1990 through 1995 of 2.4%,
more than double the national average of 1.1%, in each case according
to the U.S. Bureau of the Census.
The Acquisition Systems. The six Acquisition Systems serve portions of
Aiken, Greenwood, McCormick, Laurens, Abbeville, Saluda and Edgefield
Counties in western South Carolina. The Acquisition Systems passed an
estimated 59,260 homes and served approximately 35,705 basic
subscribers. Over 89% of the subscribers in the Acquisition Systems
are served by cable plant with 400 MHz or better capacity. The Company
expects to upgrade the Greenwood system to 550 MHz capacity by
year-end 1999, which will result in approximately 93% of subscribers
in the Acquisition Systems being served by cable plant with 550 MHz
capacity. Although this system currently employs fiber optic
technology, the Company plans to design and construct an expanded
fiber optic backbone designed to support a 750 MHz trunk and feeder
architecture by year-end 1999.
The Aiken and Greenwood systems serve approximately 15,794 and 16,301
subscribers, respectively, constituting approximately 89.9% of the
subscribers served by the Acquisition Systems. Aiken and Greenwood
counties have a diversified industrial base consisting of local,
national and foreign manufacturing companies covering such diverse
industries as pharmaceuticals, textiles, industrial robotics,
gardening seeds and prefabricated homes. Specific employers in the
region include Greenwood Mills, Fuji Photo, Monsanto, Sara Lee,
Schlumberger Industries, Tarma MidAtlantic and Velux-Greenwood.
Piedmont Technical College, located in Greenwood, has 3,000 regular
students and 15,000 continuing education students further diversifying
the local economy. The largest employer in the Aiken area is the
Westinghouse Savannah River Company.
The Washington Region. The Washington Region serves 25,847 subscribers from
five headends and is operated from three offices located in Port Angeles,
Bainbridge Island, and Moses Lake, Washington. The three largest headends serve
21,097 subscribers or 81.6% of the total subscribers in the region.
Port Angeles, Washington. The Port Angeles system serves 8,622
subscribers from one headend. The system utilizes a fiber optic
backbone designed to support a 750 MHz trunk and feeder architecture
with 30.0% of the subscribers served by 450 MHz capacity plant and the
remainder of subscribers served by 330 MHz capacity plant. A 450 MHz
upgrade is in process. The system provides Northland Cable News, which
acts as a major news source for the area. Port Angeles is located near
the Olympic National Park and is the county seat for Clallam County.
The system's office and headend sites are owned by the Company.
Bainbridge Island, Washington. The Bainbridge Island system serves
5,220 subscribers from one headend. Although physically close to
Seattle, hilly terrain makes for poor off-air
47
<PAGE> 50
reception in many areas of the island. Current channel capacity is 330 MHz.
The construction of a fiber optic backbone designed to support a 750 MHz
trunk and feeder architecture is 50.0% accomplished, with completion
expected by early 1998. A 550 MHz design upgrade is now 25.0% accomplished,
with completion expected by year-end 1999. The system's combination office
and headend site is owned. Northland Cable News is offered to subscribers,
which has helped develop a successful advertising sales business.
Bainbridge Island had a compound annual growth rate for the period 1990
through 1995 of 3.6%, far exceeding the national average.
Moses Lake, Washington. The Moses Lake area systems serve 12,005
subscribers from three headends. The Moses Lake headend serves 60.4%
of the subscribers and has 400 MHz channel capacity including a
recently constructed fiber optic backbone designed to support a 750
MHz trunk and feeder architecture. With the resulting increased
channel capacity, the Company added 14 new channels, including a new
product tier that it believes will enhance the financial performance
of that system. The office, three headend sites and a microwave site
are owned by the Company. The three headends are interconnected via
microwave for the delivery of certain off-air broadcast signals
imported from the Seattle and Spokane, Washington markets. Each system
maintains a separate headend facility for reception and distribution
of satellite signals. The Othello system recently was upgraded to 400
MHz capacity, and the Ephrata System is intended to be upgraded to 550
MHz capacity by year-end 1999. The Moses Lake area, located in central
Washington state, has experienced a compound annual growth rate of its
population for the period 1990 through 1995 of 3.3%, well above the
national average.
The Texas Region. The Texas Region is characterized by smaller systems,
with 19 headends serving 29,834 subscribers. Three of the region's headends are
scheduled to be interconnected by year-end 1999. Six headends currently serve
64.0% of the subscribers. Additionally, the Company's management structure
allows it to achieve operating efficiencies, as only five local offices are
required to service the region.
Stephenville, Texas. The Stephenville area systems serve 6,183
subscribers from a cluster of three headends. Stephenville is home to
Tarleton State College, an affiliate of Texas A&M University.
Approximately 78.4% of subscribers currently are served by plant with
400 MHz capacity, and due to the systems size and household density,
the systems will not require fiber optic technology to achieve 550 MHz
capacity. The systems have experienced steady growth in their tier
subscriptions and advertising sales revenue. The office and headend
site are owned by the Company.
Mexia, Texas. The Mexia area systems serve 6,871 subscribers from a
cluster of five headends, with the two largest headends, Mexia and
Fairfield/Teague, serving 89.8% of the subscribers. The Mexia and
Fairfield/Teague systems currently have channel capacity of 400 MHz,
with Mexia utilizing a fiber optic backbone. The Company recently
launched a new product tier in Fairfield/Teague which the Company
believes will enhance the financial performance of that system. The
Mexia area has a diversified economy with Nucor Steel, Inc. as a major
employer.
Marble Falls, Texas. The Marble Falls area systems serve 8,685
subscribers from a cluster of five headends. The Company recently
completed a fiber optic interconnect of the Horseshoe Bay system to
the Marble Falls system, thereby eliminating the Horseshoe Bay
headend. Over the next two years, the Company plans to continue its
strategy to interconnect headends by completing a fiber optic
interconnect of the Kingsland system to the Marble Falls system,
thereby eliminating an additional headend. At the completion of the
Kingsland interconnect, approximately 66.0% of the subscribers in the
area will be served from a single headend. The combination office and
headend site in Marble Falls is owned by the Company. The Burnet
system is currently at 450 MHz capacity and over the
48
<PAGE> 51
next three to five years the remaining systems in the Marble Falls area are
scheduled to be upgraded to 400 MHz or 450 MHz capacity. The Marble Falls
region is a popular outdoor recreation and retirement area for families
from nearby Austin and San Antonio. The population growth rate in the area
is 3.7%, in excess of three times the national average.
The remaining six headends in the Texas region serve 8,095 subscribers,
with 89.0% of subscribers served by plant with 330 MHz capacity or better.
The Oregon/California Region. The Oregon/California Region serves 12,757
subscribers from seven headends, which are operated from three offices located
in Woodburn, Oregon, and Yreka and Oakhurst, California. Three headends serve
10,980 subscribers or 86.1% of the total subscribers in the region.
Woodburn, Oregon. Located between Portland and Salem, Oregon, the
Woodburn system serves 4,170 subscribers from one headend with a 450
MHz capacity system. The office and headend site are owned. The
system's Northland Cable News production was a key factor in its
recently being named the Business of the Year by the Woodburn Chamber
of Commerce. Woodburn is located in the Willamette Valley, a major
agricultural area, and has historically enjoyed strong population
growth. See "-- Competition" and "-- Litigation."
Oakhurst, California. The Oakhurst, California area is one of the
entrances to Yosemite National Park. The Oakhurst area systems serve
4,949 subscribers from a cluster of five headends. The Oakhurst
headend serves 64.1% of the subscribers in the area and is currently
330 MHz capacity. An upgrade of the Oakhurst system to 450 MHz
capacity is in process, and the Company anticipates that 32.0% of
Oakhurst system's subscribers will be served by 450 MHz capacity plant
by mid-1998, and the entire Oakhurst system upgrade will be completed
by 1999. The current upgrade plan includes the construction of a fiber
optic backbone, with the interconnect and subsequent elimination of
one headend.
Yreka, California. The Yreka, California system, located near Mt.
Shasta National Park, serves 3,638 subscribers from a single headend.
Yreka is the county seat of Siskiyou County. The majority of the
system currently has 330 MHz capacity. An upgrade of the system to 450
MHz capacity is now underway. Portions of the system serving 64.2% of
the subscribers already have been designed to 450 MHz capacity, with
completion projected by year-end 1999. The Yreka office and headend
sites are owned by the Company.
THE ACQUISITION
The Company has executed a definitive agreement pursuant to which it will
acquire the Acquisition Systems for $69,975,000. The Company anticipates that
the Acquisition will be consummated on or prior to early January 1998, subject
to the satisfaction of customary closing conditions and the receipt of certain
third party and governmental approvals. However, there can be no assurance that
the Acquisition will be consummated. See "Risk Factors -- Risks Associated with
the Acquisition" and "Description of the Notes -- Redemption at the Option of
Holders -- Special Repurchase Offer."
The Acquisition is part of a transaction among the Company and certain
affiliates of the Company and the Sellers and an affiliate of the Sellers,
whereby 12 cable television systems serving approximately 54,400 subscribers
will be purchased by the Company and certain Company affiliates for
approximately $101.8 million. Allocation of the systems among the Company and
its affiliates was based on NTC's analysis of geographic concentration, ease of
technical and administrative integration and the financial and local management
capacities of the Company and its affiliates. The approximately $70.0 million
purchase price to be paid by the Company for the Acquisition Systems was arrived
at by negotiations between the Company and the Sellers, independent of the
negotiations of the purchase price for the other systems. See "Risk
Factors -- Conflicts of Interest; Transactions with Affiliates."
49
<PAGE> 52
INDUSTRY OVERVIEW
A cable television system receives television, radio and data signals at
the system's "headend" site by means of off-air antennas, microwave relay
systems and satellite earth stations. These signals are then modulated,
amplified and distributed, primarily through coaxial and fiber optic
distribution systems, to deliver a wide variety of channels of television
programming, primarily entertainment and informational video programming, to the
homes of subscribers who pay fees for this service, generally on a monthly
basis. A cable television system may also produce its own television programming
and other information services for distribution through the system. See
"Business -- Northland Cable News." Cable television systems generally are
constructed and operated pursuant to non-exclusive franchises or similar
licenses granted by local governmental authorities for a specified period of
time.
The cable television industry developed in the United States in the late
1940s and early 1950s in response to the needs of residents in predominantly
rural and mountainous areas of the country where the quality of off-air
television reception was inadequate due to factors such as topography and
remoteness from television broadcast towers. In the 1960s, cable systems also
developed in small and medium-sized cities and suburban areas that had a limited
availability of clear off-air television station signals. All of these markets
are regarded within the cable industry as "classic" cable television system
markets. In more recent years, cable television systems have been constructed in
large urban cities and nearby suburban areas, where good off-air reception from
multiple television stations usually is already available, in order to offer
customers the numerous satellite-delivered channels typically carried by cable
systems that are not otherwise available through broadcast television reception.
Cable television systems offer customers various levels (or "tiers") of
cable services consisting of broadcast television signals of local network
affiliates, independent and educational television stations, a limited number of
broadcast television signals from so-called "super stations" originating from
distant cities (such as WGN), various satellite-delivered, non-broadcast
channels (such as Cable News Network ("CNN"), MTV: Music Television ("MTV"), the
USA Network ("USA"), ESPN and Turner Network Television ("TNT")), programming
originated locally by the cable television system (such as public, educational
and governmental access programs) and informational displays featuring news,
weather and public service announcements. Cable television systems also offer
"premium" television services to customers on a per-channel basis and sometimes
on a pay-per-view basis. These services (such as Home Box Office ("HBO") and
Showtime and selected regional sports networks) are satellite channels that
consist principally of feature films, live sporting events, concerts and other
special entertainment features, usually presented without commercial
interruption.
A customer generally pays an initial installation charge and fixed monthly
fees for basic, tier and premium television services and for other services
(such as the rental of converters and remote control devices). Such monthly
service fees constitute the primary source of revenue for cable television
systems. In addition to customer revenue, cable television systems also
frequently offer to their customers home shopping services, which pay such
systems a share of revenue from products sold in the systems' service areas.
Some cable television systems also receive revenue from the sale of available
spots on advertiser-supported programming.
PROGRAMMING AND SUBSCRIBER RATES
The Company has various contracts to obtain basic, satellite and premium
programming for the systems from program suppliers, including, in limited
circumstances, some broadcast stations, with compensation generally based on a
fixed fee per customer or a percentage of the gross receipts for the particular
service. Some program suppliers provide volume discount pricing structures
and/or offer marketing support. In addition, the Company is a member of the
National Cable Television Cooperative (the "NCTC"), a programming consortium
consisting of small to medium sized cable
50
<PAGE> 53
operators and individual cable systems serving, in the aggregate, over eight
million cable subscribers. The consortium helps create efficiencies in the areas
of securing and administering certain billing related aspects of programming
contracts, as well as to establish more favorable programming rates and contract
terms for small and medium sized cable operators. The Company contracts for
approximately 25.6% of its programming through the NCTC. The Company does not
have long-term programming contracts for the supply of a substantial amount of
its programming, due in part to ongoing negotiations with a number of its
programming suppliers, but also due to the Company's belief that it is in its
best interests to enter into long-term programming contracts only if additional
benefits are derived from the contractual arrangements. In cases where the
Company does have such contracts, they are generally for fixed periods of time
ranging from one to five years and are subject to negotiated renewal. While
management believes that the Company's relations with its programming suppliers
are generally good, the loss of contracts with certain of its programming
suppliers could have a material adverse effect on the Company, its financial
condition, prospects and debt service ability.
Cable programming costs are expected to continue to increase due to
additional programming being provided to customers, inflationary increases and
other factors. In 1995, 1996 and the first nine months of 1997, programming
costs as a percentage of the Company's revenues were 20.9%, 20.7% and 20.1%,
respectively.
Cable television systems offer their customers programming that includes
the local network, independent and educational broadcast television stations, a
limited number of broadcast television signals from distant cities, numerous
satellite-delivered, non-broadcast channels and in some systems local
information and public, educational and governmental access channels. Depending
upon each system's channel capacity and viewer interests, the Company offers up
to four tiers of cable television programming: a basic programming tier
(consisting generally of network, independent and public television signals
available over-the-air), an "expanded basic" programming tier (consisting
generally of satellite-delivered programming services with broad based
viewership appealing to a wide variety of subscriber tastes), a specialty tier
(consisting of satellite-delivered programming, services tailored to particular
niche subscriber groups such as the Sci-Fi Channel, Home & Garden, The Cartoon
Network, American Movie Classics, ESPN2 and regional sports programming) and a
fourth tier consisting of premium services purchased from content suppliers such
as HBO, Cinemax and The Disney Channel. In certain systems, the Company, through
its subsidiary Northland Cable News, produces a local news program which is
cablecast in a variety of time slots. See "Business -- Northland Cable News."
Monthly customer rates for services vary from market to market, primarily
according to the amount of programming provided. As of September 30, 1997, the
Company's monthly full basic service rates for residential customers ranged from
$21.25 to $28.20, per-channel premium service rates ranged from $2.95 to $13.50
per service and tier service rates ranged from $5.95 to $9.95. As of September
30, 1997, the weighted average price for the Company's monthly full basic
service rate was approximately $25.46.
In addition to subscriber fees, the Company derived 5.6% of its revenues in
fiscal 1996 from the sale of local spot advertising time on locally produced and
satellite-delivered programming. The Company also derives modest amounts of
revenue from affiliations with home shopping services (which offer merchandise
for sale to customers and compensate system operators with a percentage of their
sales receipts) and from offering in-home wiring maintenance contracts to
subscribers.
A one-time installation fee, which the Company may wholly or partially
waive during limited promotional periods, is usually charged to new customers.
The Company charges monthly fees for converters and remote control tuning
devices, although these devices are typically only installed when the customer's
television is not capable of delivering the number of channels included in the
programming tier purchased. The Company also charges administrative fees for
delinquent payments for service. Customers are free to discontinue service at
any time without additional charge
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<PAGE> 54
but may be charged a reconnection fee to resume service. Multiple dwelling unit
accounts typically are offered a bulk rate in exchange for single-point billing
and basic service to all units.
NORTHLAND CABLE NEWS
The Company, through its wholly owned subsidiary, Northland Cable News,
Inc., provides local news and information to several of the Company's cable
systems, serving 42.2% of the Company's current subscribers. This news service,
Northland Cable News, also is provided to the Company's affiliates, resulting in
a total of approximately 96,966 subscribers served as of September 30, 1997.
Northland Cable News focuses on stories of particular interest to the residents
of each community, including local news, sports, weather, features and coverage
of local people and events. Northland Cable News is available exclusively to
systems owned by the Company and its affiliates, and serves to differentiate the
Company's programming from any potential competitors. The Company believes that
Northland Cable News increases the number of subscribers where offered by
enhancing the appeal of the Company's cable services and strengthens the
Company's ties with the community. Northland Cable News also enables systems to
expand local advertising sales. In addition, Northland Cable News, Inc. has
introduced radio programming on AM radio stations owned by affiliates of the
Company in Statesboro, Georgia and Corsicana, Texas. The Company believes such
crossmarketing techniques will foster synergistic revenue and promotional
opportunities as well as significant cost efficiencies in the reporting of local
news and sports. See "Certain Transactions -- Arrangements Between Northland
Cable News and Affiliates."
CUSTOMER SERVICE AND MARKETING
The Company emphasizes customer service, which it believes is important to
the successful operation of its business. By specializing in operating cable
television systems in small towns and cities, the Company focuses on adopting
business approaches which permit it to provide high-quality locally focused
service to each community served. The Company believes that a system-by-system,
decentralized approach to operations is required as each area served has
distinct characteristics such as demographics, economic diversity and geographic
setting. The Company's local management strives to become an integral part of
the communities served. These efforts enable the Company periodically to adjust
its local service offerings so that the needs of a particular community can be
met on a timely basis.
To ensure the successful execution of the Company's local customer service
and marketing strategies, the Company maintains conveniently accessible local
offices in many of its service areas. In the communities it serves, the Company
has found that many customers prefer to personally visit the local office to pay
their bills or ask questions about their service. The Company's local staff, who
are typically native to the areas they serve, are familiar with the community's
customer base. The Company believes that this combination of local offices and
local staffing helps the Company to provide the highest level of customer
service. Additionally, the Company believes its familiarity with the communities
it serves allows it to customize its menu of services and respective pricing to
provide its customers with products that are both diverse and affordable.
Since 1989, the Company has operated under a Quality Assurance Program
which seeks to ensure that quality and consistent service is provided to each
customer. The Quality Assurance Program focuses on both customer satisfaction
and system technical performance. To evaluate customer satisfaction at each
system, on an annual basis, Company employees at the corporate, regional and
local levels make an aggregate of over 500 telephone calls to customers chosen
on a random basis. Additionally, local customer service representatives call
each customer within 48 hours after a service call to determine whether all
problems have been resolved. System technical performance is also monitored by
random telephone calls to customers and system tests which exceed the FCC's
minimum requirements.
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<PAGE> 55
Finally, the Company believes that highly trained and motivated employees
with sound technical and interpersonal skills are essential in providing quality
service to its customers. In 1995, the Company developed a comprehensive
training and certification program which provides specific technical training as
well as wage increases and career advancement incentives. The training program
is multi-leveled, offering specific structured steps of company-paid courses,
monitored on the job training for specialized tasks, and periodic scheduled
performance evaluations. The Company believes that this training program will
help to ensure the continued successful implementation of its Quality Assurance
Program.
TECHNICAL OVERVIEW
The following table sets forth certain information regarding the analog
channel capacities and miles of plant of the Company's systems after giving
effect to the Acquisition as if it had occurred as of September 30, 1997:
<TABLE>
<CAPTION>
220 TO 270 330 TO 350 400 TO 550
MHZ 300 MHZ MHZ MHZ
22 TO 31 UP TO 37 UP TO 47 UP TO 77
CHANNELS CHANNELS CHANNELS CHANNELS TOTAL
---------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
Number of headends................... 7 10 11 13 41
Subscribers as of September 30, 2,173 14,447 36,866 75,019 128,505
1997...............................
% of total subscribers............... 1.7% 11.2% 28.7% 58.4% 100.0%
Miles of plant....................... 155 524 1,208 2,448 4,335
% of total plant..................... 3.5% 12.1% 27.9% 56.5% 100.0%
</TABLE>
The Company has completed rebuilds and upgrades to 400 MHz or better on
nine cable systems. These systems represent over 1,100 miles of coaxial plant
and serve over 38.0% of the total subscribers of the Existing Systems. In
addition, the Company has begun plans to upgrade 890 miles of plant, improving
its 300 MHz, 330 MHz and 350 MHz systems to 400 MHz or better. On average these
plans are more than 35.0% complete. The Company expects to invest $800,000, $5.9
million and $7.3 million, in the fourth quarter of 1997, 1998 and 1999,
respectively, to continue to upgrade its plant.
The Company systematically deploys fiber optic technology to accomplish its
near and long-term service and operating capacity objectives. This strategy
provides for future capacity expansion to 750 MHz and beyond due to fiber optic
capability of carrying hundreds of video, data, and voice channels over extended
distances without the extensive signal amplification typically required for
coaxial cable. The Company's plans include the use of fiber optic technology to
interconnect headends and installation of fiber optic backbones to reduce
amplifier cascades, thereby gaining operational efficiencies and improved
picture quality and system reliability.
On a pro forma basis, 65.9% of the Company's subscribers are served by
systems that have deployed fiber optic technology. Furthermore, due to their
compact geographic nature, systems serving 15.6% of subscribers will not require
fiber optic technology to achieve operating capacities of 550 MHz.
The Company utilizes a "trap" system whereby a technician installs filters,
or traps, at each cabled home enabling the technician to configure the
programming received by each subscriber. As compared to converters, traps allow
subscribers benefits such as full use of their remote controls and VCR recording
of any channel while watching any other channel at the same time. This method
also enables the Company to reduce piracy of cable services by placing the
signal interdiction device outside the customer's premises.
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FRANCHISES
Cable television systems are generally constructed and operated under
non-exclusive franchises granted by local governmental authorities. These
franchises typically contain many conditions, including: (i) time limitations on
commencement and completion of construction; (ii) conditions of service
including customer response requests, technical standards, compliance with FCC
regulations and the provision of free service to schools and certain other
public institutions; and (iii) the maintenance of insurance and indemnity bonds.
Certain provisions of local franchises are subject to federal regulation under
the 1984 Cable Act, the 1992 Cable Act and the 1996 Telecommunications Act.
Certain localities, including unincorporated areas in Texas where certain of the
Company's Existing Systems are located, do not require franchises to operate
cable systems.
As of September 30, 1997, on a pro forma basis, the Company held 82
franchises. These franchises, all of which are non-exclusive, generally provide
for the payment of fees to the issuing authority. Annual franchise fees
typically range from 3.0% to 5.0% of the gross revenue generated by a system.
For the past three years, franchise fee payments made by the Company have
averaged approximately 3.0% of total gross system revenue. Franchise fees are
generally passed directly through to the customers on their monthly bills.
General business or utility taxes may also be imposed in various jurisdictions.
As amended by the 1996 Telecommunications Act, the 1984 Cable Act prohibits
franchising authorities from imposing franchise fees in excess of 5.0% of gross
revenue from the provision of cable services and also permits the cable operator
to seek renegotiation and modification of franchise requirements if warranted by
changed circumstances. Most of the Company's franchises can be terminated prior
to their stated expirations for uncured breaches of material provisions. See
"Legislation and Regulation."
The following table sets forth the number of franchises by year of
franchise expiration and the number and percentage of basic subscribers as of
September 30, 1997, after giving pro forma effect to the Acquisition:
<TABLE>
<CAPTION>
NUMBER PERCENTAGE NUMBER PERCENTAGE
OF OF TOTAL OF BASIC OF BASIC
YEAR OF FRANCHISE EXPIRATION FRANCHISES FRANCHISES SUBSCRIBERS SUBSCRIBERS
- ------------------------------------------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Prior to 2000.................................... 17 20.7% 27,536 21.4%
2000 - 2004...................................... 24 29.3% 47,707 37.1%
2005 - 2008...................................... 22 26.8% 27,272 21.2%
2009 and after................................... 19 23.2% 22,434 17.5%
-- ----- ------- -----
Subtotal....................................... 82 100.0% 124,949 97.2%
No franchise required............................ 3,556 2.8%
------- -----
Total.......................................... 128,505 100.0%
======= =====
</TABLE>
The Company believes that it has good relationships with its franchising
authorities. To date, the Company has never had a franchise revoked for any of
its systems, and no request of the Company for franchise renewals or extensions
has been denied. However, such renewed or extended franchises have sometimes
resulted in more rigorous franchise requirements.
The 1984 Cable Act provides for, among other things, procedural and
substantive safeguards for cable operators and creates an orderly franchise
renewal process in which renewal of franchise licenses issued by governmental
authorities cannot be unreasonably withheld, or, if renewal is withheld and the
franchise authority chooses to acquire the system or transfer ownership to
another person, such franchise authority or other person must pay the operator
either: (i) the "fair market value" (without value assigned to the franchise)
for the system if the franchise was granted after the effective date of the 1984
Cable Act (December 1984) or the franchise was pre-existing but the franchise
agreement did not provide a buyout; or (ii) the price set in franchise
agreements predating the 1984 Cable Act. In addition, the 1984 Cable Act
established comprehensive renewal
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procedures which require that an incumbent franchisee's renewal application be
assessed on its own merits and not as part of a comparative process with
competing applications. See "Legislation and Regulation."
The 1984 Cable Act also establishes buyout rates in the event the franchise
is terminated "for cause" and the franchise authority desires to acquire the
system. For franchises which post-date the existence of the 1984 Cable Act or
pre-date the 1984 Cable Act but do not specify buyout terms, the franchise
authority must pay the operator an "equitable" price. To date, none of the
Company's franchises has been terminated.
The 1992 Cable Act prohibits the award of exclusive franchises, prohibits
franchising authorities from unreasonably refusing to award additional
franchises and permits them to operate cable systems themselves without
franchises. The 1996 Telecommunications Act provides that no state or local laws
or regulations may prohibit or have the effect of prohibiting any entity from
providing any interstate or intrastate telecommunications service. State and
local authorities retain authority to manage the public rights of way and
"competitively neutral" requirements concerning right of way fees, universal
service, public safety and welfare, service quality, and consumer protection are
permitted with respect to telecommunications services. See "Legislation and
Regulation" and "Risk Factors -- Non-Exclusive Franchises; Non-Renewal or
Termination of Franchises."
COMPETITION
Cable television systems face competition from alternative methods of
receiving and distributing television signals and from other sources of news,
information and entertainment such as off-air television broadcast programming,
satellite master antenna television services, DBS services, wireless cable
services, newspapers, movie theaters, live sporting events, online computer
services and home video products, including videotape cassette recorders. The
extent to which a cable communications system is competitive depends, in part,
upon the cable system's ability to provide, at a reasonable price to customers,
a greater variety of programming and other communications services than those
which are available off-air or through other alternative delivery sources and
upon superior technical performance and customer service.
Cable television systems generally operate pursuant to franchises granted
on a non-exclusive basis. The 1992 Cable Act prohibits franchising authorities
from unreasonably denying requests for additional franchises and permits
franchising authorities to operate cable television systems without a franchise.
It is possible that a franchising authority might grant a second franchise to
another company containing terms and conditions more favorable than those
afforded the Company.
Well-financed businesses from outside the cable industry (such as the
public utilities and other companies that own the poles to which cable is
attached) may become competitors for franchises or providers of competing
services. Congress has repealed the prohibition against national television
networks owning cable systems, and telephone companies may now enter the cable
industry, as described below. Such new entrants may become competitors for
franchises or providers of competitive services. In general, a cable system's
financial performance will be adversely affected when a competing cable service
exists (referred to in the cable industry as an "overbuild").
In 1993, a potential competitor petitioned to obtain a franchise from the
City of Woodburn, Oregon to operate a cable system which would compete with the
Company's Woodburn system. Such franchise has not been granted. The Company's
Woodburn system serves 4,170 subscribers, constituting approximately 3.2% of the
Company's total subscribers on a pro forma basis. See "-- Litigation" and "Risk
Factors -- Competition; Litigation."
In recent years, the FCC and the Congress have adopted policies providing a
more favorable operating environment for new and existing technologies that
provide, or have the potential to provide, substantial competition to cable
television systems. These technologies include, among
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<PAGE> 58
others, DBS, whereby signals are transmitted by satellite to small receiving
dishes located on subscribers' homes. Programming is currently available to DBS
subscribers through conventional, medium- and high-powered satellites. Existing
DBS systems offer in excess of seventy-five channels of programming and
pay-per-view services and are expected to increase channel capacity to 100 or
more channels, enabling them to provide program service comparable to and in
some instances, superior to those of cable television systems. At least four
well-financed companies currently offer DBS services and have undertaken
extensive marketing efforts to promote their products. The FCC has implemented
regulations under the 1992 Cable Act to enhance the ability of DBS systems to
make available to home satellite dish owners certain satellite delivered cable
programming at competitive costs. Programming offered by DBS systems has certain
advantages over cable systems with respect to number of channels offered,
programming capacity and digital quality, as well as disadvantages that include
high upfront and monthly costs and a lack of local programming, service and
equipment distribution. DBS systems will provide increasing competition to cable
systems as the cost of DBS reception equipment continues to decline. At least
one DBS provider is undertaking the technical and legislative steps necessary to
enhance its service by adding local broadcast signals which could further
increase competitive pressures from DBS systems.
Cable television systems also compete with wireless program distribution
services such as MMDS which uses low power microwave to transmit video
programming over the air to customers. Additionally, the FCC recently adopted
new regulations allocating frequencies in the 28 GHz band for a new multichannel
wireless video service similar to MMDS, known as Local Multipoint Distribution
Service ("LMDS"). LMDS is also suited for providing wireless data services,
including the possibility of Internet access. Wireless distribution services
generally provide many of the programming services provided by cable systems,
although current technology limits the number of channels which may be offered.
Moreover, because MMDS service generally requires unobstructed "line of sight"
transmission paths, the ability of MMDS systems to compete may be hampered in
some areas by physical terrain and foliage.
The 1996 Telecommunications Act eliminated the previous prohibition on the
provision of video programming by local exchange telephone companies ("LECs") in
their telephone service areas. Various LECs currently are providing and seeking
to provide video programming services within their telephone service areas
through a variety of distribution methods, primarily through the deployment of
broadband wire facilities, wireless transmission and installation of traditional
cable systems alongside existing telephone equipment. Cable television systems
could be placed at a competitive disadvantage if the delivery of video
programming services by LECs becomes widespread, since LECs may not be required,
under certain circumstances, to obtain local franchises to deliver such video
services or to comply with the variety of obligations imposed upon cable
television systems under such franchises. Issues of cross subsidization by LECs
of video and telephony services also pose strategic disadvantages for cable
operators seeking to compete with LECs that provide video services. The Company
believes, however, that the small to medium markets in which it provides or
expects to provide cable services are unlikely to support competition in the
provision of video and telecommunications broadband services given the lower
population densities and higher costs per subscriber of installing plant. The
1996 Telecommunications Act's provisions promoting facilities-based broadband
competition are primarily targeted at larger systems and markets. The 1996
Telecommunications Act includes certain limited exceptions to the general
prohibition on buy outs and joint ventures between incumbent cable operators and
LECs for smaller non-urban cable systems and carriers meeting certain criteria.
See "Legislation and Regulations."
Other new technologies may become competitive with non-entertainment
services that cable television systems can offer. The FCC has authorized
television broadcast stations to transmit textual and graphic information useful
both to consumers and businesses. The FCC also permits commercial and
noncommercial FM stations to use their subcarrier frequencies to provide non-
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broadcast services including data transmissions. The FCC has established an
over-the-air Interactive Video and Data Service that will permit two-way
interaction with commercial and educational programming along with informational
and data services. The expansion of fiber optic systems by LECs and other common
carriers, and electric utilities is providing facilities for the transmission
and distribution to homes and businesses of video services, including
interactive computer-based services like the Internet, data and other nonvideo
services.
The business of delivering and producing televised news, information and
entertainment are characterized by new market entrants, increasingly rapid
technological change and evolving industry standards. There can be no assurance
that the Company will be able to fund the capital expenditures necessary to keep
pace with technological developments or that the Company will successfully
predict the technical demand of its subscribers. The Company's inability to
provide enhanced services in a timely manner or to predict the demands of the
marketplace could have a material adverse effect on the Company, its financial
condition, prospects and debt service ability.
Advances in communications technology as well as changes in the marketplace
and the regulatory and legislative environments are constantly occurring. Thus,
it is not possible to predict the effect that ongoing or future developments
might have on the cable industry or on the operations of the Company. See "Risk
Factors -- Competition; Litigation" and "Significant Capital Expenditures; Rapid
Technological Advancements in the Cable Television Business."
EMPLOYEES
As of September 30, 1997, the Company had approximately 170 full-time
employees and nine part-time employees. Ten of the Company's employees at its
Moses Lake, Washington system are represented by a labor union. The Company
considers its relations with its employees to be good.
PROPERTIES
A cable television system consists of three principal operating components.
The first component, known as the headend, receives television, radio and
information signals generally by means of special antennas and satellite earth
stations. The second component, the distribution network, which originates at
the headend and extends throughout the system's service area, consists of
microwave relays, coaxial or fiber optic cables and associated electronic
equipment placed on utility poles or buried underground. The third component of
the system is a "drop cable," which extends from the distribution network into
each customer's home and connects the distribution system to the customer's
television set. An additional component used in certain systems is the home
terminal device, or converter, that expands channel capacity to permit reception
of more than twelve channels of programming on a non-cable ready television set.
The Company's principal physical assets consist of cable television
systems, including signal-receiving, encoding and decoding apparatus, headends,
distribution systems and subscriber house drop equipment for each of its
systems. The signal receiving apparatus typically includes a tower, antennas,
ancillary electronic equipment and earth stations for reception of satellite
signals. Headends, consisting of associated electronic equipment necessary for
the reception, amplification and modulation of signals, typically are located
near the receiving devices. The Company's distribution systems consist primarily
of coaxial cable and related electronic equipment. As upgrades are completed,
the systems will generally incorporate fiber optic cable. Subscriber equipment
consists of traps, house drops and, in some cases, converters. The Company owns
its distribution systems, various office fixtures, test equipment and certain
service vehicles. The physical components of the systems require maintenance and
periodic upgrading to keep pace with technological advances.
The Company's cables are generally attached to utility poles under pole
rental agreements with local public utilities, although in some areas the
distribution cable is buried in trenches or placed in
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<PAGE> 60
underground ducts. The FCC regulates most pole attachment rates under the
federal Pole Attachment Act although in certain cases attachment rates are
regulated by state law.
The Company owns or leases parcels of real property for signal reception
sites (antenna towers and headends), microwave complexes and business offices.
The Company believes that its properties, both owned and leased, are in good
condition and are suitable and adequate for the Company's business operations as
presently conducted.
INSURANCE
With certain exceptions, the Company has insurance covering risks incurred
in the ordinary course of business, including general liability, property
coverage and business interruption insurance. As is typical in the cable
television industry, the Company does not maintain insurance covering its
underground plant. Furthermore, due to significant industry wide insurance
increases in premiums, the Company elected not to renew its aerial plant
casualty insurance effective June 30, 1996. A cable system's "aerial plant"
consists of its transmission lines, equipment attached to utility poles and
other above-ground fixtures. Such equipment is subject to damage from a variety
of factors, notably hurricanes and ice and wind storms. Although none of the
Company's Systems are located in coastal areas, and thus not likely to be
severely damaged by hurricanes, many are subject to risks from ice and wind
storms. To attempt to mitigate these risks, the Company has entered into a
"self-insurance" arrangement with certain of its affiliates. See "Certain
Transactions -- Insurance." However, if the Company's aerial plant sustains
significant damage, or if the self-insurance program is inadequate to cover such
losses, the resulting reduction in cash flow caused by interrupted service,
together with the capital cost of replacing damaged equipment, could have a
material adverse effect on the Company, its financial condition, prospects and
debt service ability. See "Risk Factors -- Uncertainty of Adequate Insurance."
Notwithstanding the foregoing, the Company believes that the amounts and types
of its insurance coverage are commercially reasonable for its current needs.
LITIGATION
In 1993, North Willamette Telecom, Inc., an affiliate of Canby Telephone
Association, petitioned to obtain a franchise from the City of Woodburn, Oregon
to operate a cable system which would compete with the Company's Woodburn
system. Such franchise has not been granted. On March 20, 1996, the Company was
served with a complaint in a suit commenced in the United States District Court
for the District of Oregon by North Willamette Telecom, Inc. and Canby Telephone
Association. The suit alleges the Company violated federal antitrust laws,
intentionally interfered with plaintiffs' prospective business relationships
with potential cable customers, and intentionally interfered with plaintiffs'
business relationships with the Canby Telephone Association's members. The
complaint seeks actual damages ranging from $1.2 million to $10.2 million,
punitive damages of $10.0 million and other relief. The Company denies the
allegations of the complaint and is vigorously defending the case. The Company
has filed summary judgment motions and no trial date has been set. An adverse
ruling could have a material adverse effect on the Company, its financial
condition, prospects and debt service ability.
In addition, the Company is a party to ordinary and routine litigation
proceedings that are incidental to the Company's business. Management believes
that the outcome of all pending legal proceedings will not, individually or in
the aggregate, have a material adverse effect on the Company, its financial
condition, prospects and debt service ability. See "Risk Factors -- Competition;
Litigation."
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LEGISLATION AND REGULATION
INTRODUCTION
The operation of cable television systems is extensively regulated by the
FCC, some state governments and most local governments. The Telecommunications
Act of 1996 alters the regulatory structure governing the nation's
telecommunications providers. The Telecommunications Act of 1996 is intended to
remove barriers to competition in both the cable television market and the local
telephone market. It also reduces the scope of cable rate regulation.
The 1996 Telecommunications Act requires the FCC to undertake a host of
implementing rulemakings, the final outcome of which cannot yet be determined.
Moreover, Congress and the FCC have frequently revisited the subject of cable
regulation. Future legislative and regulatory changes could adversely affect the
Company's operations. This section briefly summarizes key laws and regulations
affecting the operation of the Company's systems and does not purport to
describe all present, proposed, or possible laws and regulations affecting the
Company or its systems. See "Risk Factors -- Substantial Regulation in the Cable
Television Industry."
CABLE RATE REGULATION
The 1992 Cable Act imposed an extensive rate regulation regime on the cable
television industry. Under that regime, all cable systems are subject to rate
regulation, unless they face "effective competition" in their local franchise
area. Federal law now defines "effective competition" on a community-specific
basis as requiring either low penetration (less than 30%) by the incumbent cable
operator, appreciable penetration (more than 15%) by competing multichannel
video providers ("MVPs"), or the presence of a competing MVP affiliated with a
local telephone company.
Although the FCC rules control, local government units (commonly referred
to as "local franchising authorities" or "LFAs") are primarily responsible for
administering the regulation of the lowest level of cable, the basic service
tier ("BST"), which typically contains local broadcast stations and public,
educational, and government access channels. Before an LFA begins BST rate
regulation, it must certify to the FCC that it will follow applicable federal
rules, and many LFAs have voluntarily declined to exercise this authority. LFAs
also have primary responsibility for regulating cable equipment rates. Under
federal law, charges for various types of cable equipment must be unbundled from
each other and from monthly charges for programming services. The 1996
Telecommunications Act allows operators to aggregate costs for broad categories
of equipment across geographic and functional lines.
The FCC itself directly administers rate regulation of an operator's cable
programming service tiers ("CPST"), which typically contain satellite-delivered
programming. Under the 1996 Telecommunications Act, the FCC can regulate CPST
rates only if an LFA first receives at least two rate complaints from local
subscribers and then files a formal complaint with the FCC. When new CPST rate
complaints are filed, the FCC now considers only whether the incremental
increase is justified and will not reduce the previously established CPST rate.
Under the FCC's rate regulations, most cable systems were required to
reduce their BST and CPST rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel carnage. The FCC has modified its rate
adjustment regulations to allow for annual rate increases and to minimize
previous problems associated with regulatory lag. Operators also have the
opportunity of bypassing this "benchmark" regulatory scheme in favor of
traditional "cost-of-service," regulation in cases where the latter methodology
appears favorable. Premium cable services offered on a per-channel or
per-program basis remain unregulated, as do affirmatively marketed packages
consisting entirely of new programming product. Federal law requires that the
BST be offered to all cable subscribers, but limits the ability of
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operators to require purchase of any CPST before purchasing premium services
offered on a per-channel or per-program basis.
In an effort to ease the regulatory burden on small cable systems, the FCC
has created special rate rules applicable for systems with fewer than 15,000
subscribers owned by an operator with fewer than 400,000 subscribers. The
special rate rules allow for a simplified cost-of-service showing. All of the
Company's Existing Systems are eligible for these simplified cost-of-service
rules, and have calculated rates generally in accordance with those rules. All
of the Acquisition Systems, except the systems serving Greenwood and Aiken,
South Carolina, are also eligible for the simplified cost-of-service rules. The
Company believes, however, it is eligible for a waiver of the FCC's rate
regulation rules such that the Greenwood and Aiken systems may qualify for the
simplified rate regulations afforded to smaller systems.
The 1996 Telecommunications Act provides additional relief for small cable
operators. For franchising units with less than 50,000 subscribers and owned by
an operator with less than one percent of the nation's cable subscribers (i.e.,
approximately 600,000 subscribers) that is not affiliated with any entities with
aggregate annual gross revenue exceeding $250 million, CPST rate regulation is
automatically eliminated. The Company and all of its Existing Systems qualify
for this CPST deregulation.
The 1996 Cable Act sunsets FCC regulation of CPST rates for all systems
(regardless of size) on March 31, 1999. It also relaxes existing uniform rate
requirements by specifying that uniform rate requirements do not apply where the
operator faces "effective competition," and by exempting bulk discounts to
multiple dwelling units, although complaints about predatory pricing still may
be made to the FCC.
CABLE ENTRY INTO TELECOMMUNICATIONS
The 1996 Cable Act provides that no state or local laws or regulations may
prohibit or have the effect of prohibiting any entity from providing any
interstate or intrastate telecommunications service. States are authorized,
however, to impose "competitively neutral" requirements regarding universal
service, public safety and welfare, service quality, and consumer protection.
State and local governments also retain their authority to manage the public
rights-of-way and may require reasonable, competitively neutral compensation for
management of the public rights-of-way when cable operators provide
telecommunications service. The extent to which state and local governments may
impose requirements in such situations recently has been, and will continue to
be, the subject of litigation. The outcome of that litigation, and its effect on
the Company, cannot be predicted. The favorable pole attachment rates afforded
cable operators under federal law can be gradually increased by utility
companies owning the poles (beginning on February 8, 2001) if the operator
provides telecommunications service, as well as cable service, over its plant.
Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the 1996 Cable Act to facilitate the entry of new
telecommunications providers (including cable operators) is the interconnection
obligation imposed on all telecommunications carriers. Certain aspects of the
FCC's initial interconnection order were rejected by the Eighth Circuit Court of
Appeals on July 18, 1997, on the ground that the states, not the FCC, have
statutory authority to set the prices that incumbent local exchange carriers may
charge for interconnection. It is expected that the FCC will seek review by the
United States Supreme Court of the ruling.
TELEPHONE COMPANY ENTRY INTO CABLE TELEVISION
The 1996 Cable Act allows telephone companies to compete directly with
cable operators by repealing the historic telephone company/cable
cross-ownership ban. Local exchange carriers ("LECs"), including the Bell
Operating Companies, can now compete with cable operators both inside and
outside their telephone service areas. Because of their resources, LECs could be
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formidable competitors to traditional cable operators, and certain LECs have
begun offering cable service.
Under the 1996 Cable Act, a LEC providing video programming to subscribers
generally will be regulated as a traditional cable operator (subject to local
franchising and federal regulatory requirements), unless the LEC elects to
provide its programming via an "open video system" ("OVS"). To qualify for OVS
status, the LEC must reserve two-thirds of the system's activated channels for
unaffiliated entities.
Although LECs and cable operators can now expand their offerings across
traditional service boundaries, the general prohibition remains on LEC buyouts
(i.e., any ownership interest exceeding 10 percent) of co-located cable systems,
cable operator buyouts of co-located LEC systems, and joint ventures between
cable operators and LECs in the same market. The 1996 Telecommunications Act
provides a few limited exceptions to this buyout prohibition, including a
carefully circumscribed "rural exemption." The 1996 Telecommunications Act also
provides the FCC with the limited authority to grant waivers of the buyout
prohibition (subject to LFA approval).
ELECTRIC UTILITY ENTRY INTO TELECOMMUNICATIONS/CABLE TELEVISION
The 1996 Cable Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services (including cable
television) notwithstanding the Public Utilities Holding Company Act. Electric
utilities must establish separate subsidiaries, known as "exempt
telecommunications companies" and must apply to the FCC for operating authority.
Because of their resources, electric utilities could be formidable competitors
to traditional cable systems, and a few electric utilities have announced plans
to offer video programming. Recent technological advances have increased the
likelihood that electric utilities may become competitive with the Company.
ADDITIONAL OWNERSHIP RESTRICTIONS
The 1996 Cable Act eliminates statutory restrictions on broadcast/cable
cross-ownership (including broadcast network/cable restrictions), but leaves in
place existing FCC regulations prohibiting local cross-ownership between
co-located television stations and cable systems. The 1996 Cable Act also
eliminates the three year holding period required under the 1992 Cable Act's
"anti-trafficking" provision. The 1996 Cable Act leaves in place existing
restrictions on cable cross-ownership with satellite master antenna television
("SMATV") and MMDS facilities, but lifts those restrictions where the cable
operator is subject to effective competition. FCC regulations permit cable
operators to own and operate SMATV systems within their franchise area, provided
that such operation is consistent with local cable franchise requirements.
Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a cable
system from devoting more than 40% of its activated channel capacity to the
carriage of affiliated national program services. A companion rule establishing
a nationwide ownership cap on any cable operator equal to 30% of all domestic
cable subscribers has been stayed pending further judicial review.
There are no federal restrictions on non-U.S. entities having an ownership
interest in cable television systems or the FCC licenses commonly employed by
such systems.
MUST CARRY/RETRANSMISSION CONSENT
The 1992 Cable Act conveyed to a commercial broadcaster the right generally
to elect every three years either to require: (i) that the local cable operator
carry its signals ("must carry"); or (ii) that such operator obtain the
broadcaster's retransmission consent before doing so. The Company has been able
to reach agreements with all of the broadcasters who elected retransmission
consent and has not been required by broadcasters to remove any broadcast
stations from the cable television channel line-ups. To date, compliance with
the "retransmission consent" and "must
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carry" provisions of the 1992 Cable Act has not had a material effect on the
Company, although this result may change in the future depending on such factors
as market conditions, the introduction of digital broadcasts, channel capacity
and similar matters when such arrangements are renegotiated.
CHANNEL SET-ASIDES
LFAs can include franchise provisions, requiring cable operators to set
aside certain channels for public, educational and governmental access
programming. Federal law also requires cable systems to designate a portion of
their channel capacity (up to 15% in some cases) for commercial leased access by
unaffiliated third parties. The FCC has adopted rules regulating the terms,
conditions and maximum rates a cable operator may charge for use of this
designated channel capacity, but use of commercial leased access channels has
been relatively limited. The FCC recently modified its leased access rules,
making leased access somewhat more favorable to potential users. The changes,
however, were not as dramatic as leased access users had hoped, and should not
significantly infringe on the Company's control over its channel line-up. The
revised maximum rate formula has been challenged by one leased access applicant
in an appeal to the D.C. Circuit Court.
ACCESS TO PROGRAMMING
To spur the development of independent cable programmers and competition to
incumbent cable operators, the 1992 Cable Act imposed restrictions on dealings
between cable operators and cable programmers. The 1992 Cable Act precludes
video programmers affiliated with cable companies from favoring cable operators
over competitors and requires such programmers to sell their programming to
other multichannel video distributors. This provision limits the ability of
vertically integrated cable programmers to offer exclusive programming
arrangements to cable companies.
OTHER FCC REGULATIONS
In addition to the FCC regulations noted above, there are other FCC
regulations covering such areas as equal employment opportunity, subscriber
privacy, programming practices (including, among other things, syndicated
program exclusivity, network program non-duplication, local sports blackouts,
indecent programming, lottery programming, political programming, sponsorship
identification, and children's programming advertisements), registration of
cable systems and facilities licensing, maintenance of various records and
public inspection files, frequency usage, lockbox availability, antenna
structure notification, tower marking and lighting, consumer protection and
customer service standards, technical standards, and consumer electronics
equipment compatibility. The FCC recently adopted rules relating to the
ownership of cable wiring located inside multiple dwelling unit complexes. The
FCC has concluded that such wiring can, in certain cases, be unilaterally
acquired by the complex owner, making it easier for complex owners to terminate
service from the incumbent cable operator in favor of a new entrant. The FCC
recently imposed new Emergency Alert System requirements on cable operators
which will be phased in over several years. The FCC recently adopted "closed
captioning" rules that the Company does not expect to have an adverse effect on
its operations. The FCC has the authority to enforce its regulations through the
imposition of substantial fines, the issuance of cease and desist orders and/or
the imposition of other administrative sanctions, such as the revocation of FCC
licenses needed to operate certain transmission facilities used in connection
with cable operations.
PENDING PROCEEDING
The FCC has initiated a rulemaking proceeding involving whether cable
customers must be allowed to purchase cable converters from third party vendors.
If the FCC concludes that such distribution is required, and does not make
appropriate allowances for signal piracy concerns, it may become more difficult
for cable operators to combat theft of service.
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COPYRIGHT
Cable television systems are subject to federal copyright licensing
covering carriage of television and radio broadcast signals. In exchange for
filing certain reports and contributing a percentage of their revenue to a
federal copyright royalty pool (which varies depending on the size of the system
and the number of distant broadcast television signals carried), cable operators
can obtain blanket permission to retransmit copyrighted material on broadcast
signals. The possible modification or elimination of this compulsory copyright
license is the subject of continuing legislative review and could adversely
affect the Company's ability to obtain desired broadcast programming. In
addition, the cable industry pays music licensing fees to BMI and is negotiating
a similar arrangement with ASCAP. Copyright clearances for non-broadcast
programming services are arranged through private negotiations.
STATE AND LOCAL REGULATION
Cable television systems generally are operated pursuant to nonexclusive
franchises granted by a municipality or other state or local government entity
in exchange for the use of public rights-of-way. Federal law now prohibits
franchise authorities from granting exclusive franchises or from unreasonably
refusing to award additional franchises. Cable franchises generally are granted
for fixed terms and in many cases include monetary penalties for non-compliance
and may be terminable if the franchisee fails to comply with material
provisions.
The terms and conditions of franchises vary materially from jurisdiction to
jurisdiction. Each franchise generally contains provisions governing cable
operations, service rates, franchise fees, system construction and maintenance
obligations, system channel capacity, design and technical performance, customer
service standards, and indemnification protections. Although LFAs have
considerable discretion in establishing franchise terms, there are certain
federal limitations. For example, LFAs cannot require the payment of franchise
fees exceeding 5% of the system's gross revenue, cannot dictate the particular
technology used by the system, and cannot specify video programming other than
identifying broad categories of programming.
Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees as a condition of renewal. Similarly, if a franchise
authority's consent is required for the purchase or sale of a cable system or
franchise, such authority may attempt to impose more burdensome or onerous
franchise requirements in connection with a request for consent. Historically,
franchises have been renewed for cable operators that have provided satisfactory
services and have complied with the terms of their franchises. However, there
can be no assurance that renewal will be granted or that renewals will be made
on similar terms and conditions.
Various proposals have been introduced at the state and local levels with
regard to the regulation of cable television systems, and a number of states
have adopted legislation subjecting cable television systems to the jurisdiction
of state governmental agencies.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning directors and
executive officers of the Company, none of whom are compensated by the Company
for their respective services to the Company and each of whom devotes a
substantial amount of his time to the affairs of affiliated entities other than
the Company. Each director holds office until the next annual meeting of
shareholders or until his successor is elected or appointed and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------- --- ------------------------------------------------------------
<S> <C> <C>
John S. Whetzell.......... 56 Director, Chairman of the Board and President
Richard I. Clark.......... 40 Director, Vice President, Treasurer and Assistant Secretary
James A. Penney........... 43 Vice President and Secretary
Gary S. Jones............. 40 Vice President
Richard J. Dyste.......... 52 Vice President, Technical Services
James E. Hanlon........... 64 Divisional Vice President
H. Lee Johnson............ 54 Divisional Vice President
John E. Iverson........... 61 Director and Assistant Secretary
</TABLE>
John S. Whetzell. Mr. Whetzell has been President, Chairman of the Board
and a director of the Company since its inception in 1985. He also serves as
President, Chairman of the Board and a director of Northland Telecommunications
Corporation, Northland Communications Corporation (which is the general partner
of each of the Company's five affiliated limited partnerships), Northland Cable
Services Corporation, Cable Ad-Concepts, Inc., Northland Cable News, Inc. and
Northland Cable Properties, Inc. (collectively, the "Northland Affiliates"). He
has been involved with the cable television industry for over 21 years and
currently serves as a director on the board of the Cable Telecommunications
Association, a national cable television association. Between 1979 and 1982, he
was in charge of the Ernst & Whinney national cable television consulting
services. Mr. Whetzell first became involved in the cable television industry
when he served as the Chief Economist of the Cable Television Bureau of the FCC
from 1974 to 1979. He provided economic studies which support the deregulation
of cable television both in federal and state arenas. Mr. Whetzell also
participated in the formulation of accounting standards for the industry and
assisted the FCC in negotiating and developing the pole attachment rate formula
for cable television. His undergraduate degree is in economics from George
Washington University, and he has an MBA degree from New York University.
Richard I. Clark. Mr. Clark has served as Vice President and Treasurer of
the Company since 1985, as Assistant Secretary since 1987 and as a director
since 1985. Mr. Clark also serves as Vice President, Treasurer, Assistant
Secretary and a director of each of the Northland Affiliates. Mr. Clark was an
original incorporator of Northland Telecommunications Corporation and is
responsible for the administration and investor relations activities of
Northland Telecommunications Corporation, including financial planning and
corporate development. He has directed cable television feasibility studies and
on-site market surveys. Mr. Clark has assisted in the design and maintenance of
financial and budget computer programs, and has prepared documents for major
cable television companies in franchising and budgeting projects through the
application of these programs. From 1979 to 1982, Mr. Clark was employed by
Ernst & Whinney in the area of providing cable television consultation services
and has been involved with the cable television industry for nearly 17 years. In
1979, Mr. Clark graduated cum laude from Pacific Lutheran University with a
Bachelor of Arts degree in accounting.
James A. Penney. Mr. Penney has served as Vice President and General
Counsel of the Company since 1985, and as Secretary since 1987. Mr. Penney also
serves as Vice President, General Counsel and Secretary of each of the Northland
Affiliates. Mr. Penney is responsible for
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advising all Northland systems with regard to legal and regulatory matters, and
also is involved in the acquisition and financing of new cable systems. From
1983 until 1985 he was associated with the law firm of Ryan, Swanson &
Cleveland. Mr. Penney holds a Bachelor of Arts degree from the University of
Florida and a Juris Doctor from The College of William and Mary, where he was a
member of The William and Mary Law Review.
Gary S. Jones. Mr. Jones has been Vice President of the Company since 1986.
He also serves as Vice President of each of the Northland Affiliates. Mr. Jones
is responsible for cash management, financial reporting and banking relations
for the Company and each of the Northland Affiliates, and is involved in the
acquisition and financing of new cable systems. Prior to joining the Company,
Mr. Jones was employed as a Certified Public Accountant with Laventhol & Horwath
from 1980 to 1986. Mr. Jones received his Bachelor of Arts degree in Business
Administration with a major in accounting from the University of Washington in
1979.
Richard J. Dyste. Mr. Dyste has been Vice President-Technical Services of
the Company since 1988. Mr. Dyste also serves as Vice President-Technical
Services of each of the Northland Affiliates. Mr. Dyste joined the Company in
1986, originally as an engineer and operations consultant. From 1977 to 1985,
Mr. Dyste owned and operated Bainbridge TV Cable, which owned the Bainbridge
Island, Washington system now owned by the Company. Mr. Dyste is a past
President and a current member of the Mount Rainier Chapter of the Society of
Cable Television Engineers, Inc. He is a graduate of Washington Technology
Institute.
James E. Hanlon. Mr. Hanlon has served as Divisional Vice President of the
Company since 1985. Mr. Hanlon also serves as Divisional Vice President of each
of the Northland Affiliates. Prior to his association with the Company, he
served as Chief Executive of M.C.T. Communications from 1981 to 1985. His
responsibilities included supervision of the franchise, construction and
operation of a cable television system located near Tyler, Texas. From 1979 to
1981, Mr. Hanlon was President of the CATV Division of Buford Television, Inc.,
and from 1973 to 1979, he served as President and General Manager of Suffolk
Cablevision in Suffolk County, New York. Mr. Hanlon has also served as Vice
President and Corporate Controller of Viacom International, Inc. and Division
Controller of New York Yankees, Inc. Mr. Hanlon has a Bachelor of Science degree
in Business Administration from St. Johns University.
H. Lee Johnson. Mr. Johnson has been Divisional Vice President of the
Company since 1994. Mr. Johnson also serves as Divisional Vice President of each
of the Northland Affiliates. Mr. Johnson served as Regional Manager for several
systems of the Company and its affiliates from 1986 to 1994 until his promotion
to Divisional Vice President. Prior to his association with the Company, Mr.
Johnson served as Regional Manager for Warner Communications, managing four
cable systems in Georgia from 1968 to 1973. Mr. Johnson has also served as
President of Sunbelt Finance Corporation and was employed as a System Manager
for Statesboro CATV, which owned the Statesboro, Georgia system now owned by the
Company. Mr. Johnson has been involved in the cable television industry for
nearly 27 years and is a current member of the Society of Cable Television
Engineers. He is a graduate of Swainsboro Technical Institute.
John E. Iverson. Mr. Iverson has served as Assistant Secretary and a
director of the Company since 1985. He also serves as Assistant Secretary and a
director of each of the Northland Affiliates. Mr. Iverson is currently a member
of the law firm of Ryan, Swanson & Cleveland. He is a member of the Washington
State Bar Association and American Bar Association and has been practicing law
for more than 33 years. Mr. Iverson is the past President and a trustee of the
Pacific Northwest Ballet Association. Mr. Iverson has a Juris Doctor degree from
the University of Washington.
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EXECUTIVE COMPENSATION
None of the employees of the Company are deemed to be executive officers of
the Company. Services of the executive officers and other employees of NTC are
provided to the Company for which the Company pays NTC a fee pursuant to the
Management Agreement and overhead reimbursements. The executive officers and
other employees of NTC who provide services to the Company are compensated in
their capacity as executive officers and employees of NTC and therefore receive
no compensation from the Company. No portion of the management fee paid by the
Company is allocated to specific employees for the services performed by such
employees. See "Certain Transactions -- Management Agreement with NTC."
DIRECTOR COMPENSATION
The Company does not currently compensate members of its Board of Directors
for their services as directors.
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<PAGE> 69
PRINCIPAL SHAREHOLDERS
The Company is a wholly owned subsidiary of Northland Telecommunication
Corporation, a Washington corporation.
The following table sets forth certain information with respect to the
beneficial ownership of common stock of NTC as of the date of this Prospectus
by: (i) each person who is known by the Company to beneficially own 5% or more
of the outstanding shares of common stock of NTC; (ii) each director of the
Company; (iii) each executive officer of the Company; and (iv) the Company's
executive officers and directors as a group. The address of each such person is
in care of the Company, 1201 Third Avenue, Suite 3600, Seattle, Washington
98101.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHARES BENEFICIALLY SHARES BENEFICIALLY
BENEFICIAL OWNER OWNED(1) OWNED
- ---------------------------------------------------------- ------------------- -------------------
<S> <C> <C>
John S. Whetzell.......................................... 1,006,826 22.8%
Adele P. Butler........................................... 530,000 12.1%
Pamela B. McCabe.......................................... 510,144 11.6%
Robert M. Arnold.......................................... 384,000 8.7%
Richard I. Clark.......................................... 306,826 7.0%
Robert A. Mandich......................................... 278,400 6.3%
James E. Hanlon........................................... 56,826 1.3%
John E. Iverson........................................... 50,000 1.1%
Gary S. Jones............................................. 43,493 *
James A. Penney........................................... 43,026 *
Richard J. Dyste.......................................... 42,826 *
H. Lee Johnson............................................ 9,826 *
All executive officers and directors as a group (eight
persons)................................................ 1,561,649 35.4%
</TABLE>
- ---------------
* Represents less than 1% of the shares beneficially owned.
(1) This table is based on information supplied by executive officers and
directors of the Company and the shareholders of NTC. Subject to applicable
community property laws, each shareholder named in the table has sole voting
and investment power with respect to the shares set forth opposite such
shareholder's name.
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<PAGE> 70
CERTAIN TRANSACTIONS
GENERAL
The Company is part of an affiliated group of corporations and limited
partnerships controlled, directly or indirectly, by NTC. NTC, in turn, is owned
by the individuals and in the percentages set forth under the caption "Principal
Shareholders" appearing elsewhere in this Prospectus. The Company's officers and
directors are also officers and directors of NTC and certain of the Company's
other affiliates.
MANAGEMENT AGREEMENT WITH NTC
NTC currently supervises all aspects of the business and operations of the
Company pursuant to an Operating Management Agreement between the Company and
NTC dated August 23, 1994 (the "Management Agreement"). The Management Agreement
continues in effect until terminated by either party on 30-days' written notice.
The Management Agreement provides that NTC shall render or cause to be
rendered supervisory services to the Company, including, among other things
supervising and monitoring: (i) the affairs, management and operations of the
Company and its systems; (ii) the accounting and other financial books and
records of the Company and its systems; (iii) the hiring, training and
supervision of the Company's employees; and (iv) the Company's fulfillment of
its contractual obligations in connection with its systems. In return for its
management services, NTC receives a management fee, payable quarterly, equal to
5.0% of the Company's gross revenues (the "Management Fee"). For the years ended
December 31, 1994, 1995 and 1996, and for the nine months ended September 30,
1997, the Company paid a Management Fee of $331,602, $1.3 million, $1.6 million
and $1,432,783, respectively.
In addition to the Management Fee, the Management Agreement provides that
NTC is entitled to reimbursement from the Company for various expenses incurred
by it or its affiliates on behalf of the Company allocable to its management of
the Company, including travel expenses, pole and site rental, lease payments,
legal expenses, billing expenses, insurance, governmental fees and licenses,
headquarters supplies and expenses, pay television expenses, equipment and
vehicle charges, operating salaries and expenses, administrative salaries and
expenses, postage and office maintenance. These expenses are generally allocated
among the Company and other managed affiliates based upon relative subscriber
counts and revenues. NTC historically has assigned its right to reimbursement
from the Company to its affiliate, Northland Communications Corporation, and
expects to continue to do so in the future. For the years ended December 31,
1994, 1995 and 1996, and for the nine months ended September 30, 1997, the
Company reimbursed Northland Communications Corporation approximately $622,486,
$1.4 million, $1.7 million and $1,480,167, respectively, for such expenses.
ARRANGEMENTS BETWEEN NORTHLAND CABLE NEWS, INC. AND AFFILIATES
Pursuant to an arrangement commenced in July 1994, Northland Cable News,
Inc. receives monthly program license fees from certain affiliates of the
Company as payment for Northland Cable News programming provided to such
affiliates. The aggregate amount of such fees is based upon costs incurred in
providing such programming, and is allocated among participating affiliates
based upon relative subscriber counts. Total license fees received from
affiliates for the years ended December 31, 1994, 1995 and 1996, and for the
nine months ended September 30, 1997, were $342,462, $602,263, $619,466 and
$559,026, respectively.
ARRANGEMENTS WITH CABLE AD-CONCEPTS, INC.
Cable Ad-Concepts, Inc. ("CAC") is a wholly owned indirect subsidiary of
NTC engaged in the business of developing and producing video commercial
advertisements for cablecast on systems
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owned by the Company and its affiliates. The aggregate amount of the fees
charged by CAC to its affiliates is based upon costs incurred in providing such
advertisements, and is allocated among participating affiliates based upon
relative subscriber counts. Total fees paid to CAC by the Company for the years
ended December 31, 1994, 1995 and 1996, and for the nine months ended September
30, 1997, were $33,790, $161,627, $196,491 and $183,102, respectively.
ARRANGEMENTS WITH CABLE TELEVISION BILLING, INC.
Cable Television Billing, Inc. ("CTB") is a wholly owned indirect
subsidiary of NTC engaged in the business of providing billing services to the
Company and its affiliates. The aggregate amount of the fees charged by CTB to
its affiliates is based upon costs incurred in providing such billing services,
and is allocated among participating affiliates based upon relative subscriber
counts and revenues. Fees paid by the Company to CTB for billing services for
the years ended December 31, 1994, 1995 and 1996, and for the nine months ended
September 30, 1997, were $105,779, $175,632, $231,756 and $192,776,
respectively.
OPERATING AGREEMENTS WITH AFFILIATES
The Company is party to certain operating agreements with affiliates
pursuant to which, in certain instances, the Company serves as the local
managing agent for certain of such affiliates' systems and, in other instances,
certain affiliates serve as the local managing agent for certain of the
Company's systems. In addition, the Company and its affiliates render
miscellaneous services to one another on a cost-of-service basis. For the year
ended December 31, 1996 and the nine months ended September 30, 1997, the
Company paid affiliates an aggregate of $184,952 and $91,770, respectively, for
such services and received $100,800 and $94,681, respectively, for performing
such services for affiliates.
INSURANCE
The Company is part of a self-insurance program with its affiliates to
provide casualty coverage for their respective aerial and underground plants.
Commencing in 1997, the Company began making monthly contributions into an
insurance fund maintained by NTC, which fund is maintained for the collective
benefit of the Company and its affiliates. If an uninsured loss were incurred by
the Company or any of its affiliates, the fund would be applied to defray a
portion of such loss. To the extent the Company's losses exceed the fund's
balance or the fund is depleted from losses incurred by affiliates of the
Company, the Company must bear such losses directly. For the nine months ended
September 30, 1997, the Company contributed $41,469 to the self insurance fund.
As of September 30, 1997, the balance available under the fund was $96,445. See
"Risk Factors -- Uncertainty of Adequate Insurance" and "Business -- Insurance."
CAPITAL CONTRIBUTION
Effective June 30, 1997, the Company received a non-cash capital
contribution of approximately $9.3 million which replaced, in its entirety, the
then outstanding net unsecured advances that had previously been owed to NTC and
other affiliates of the Company other than amounts due for normal operations,
management fees paid to NCC and for services provided by affiliated entities as
discussed above. As of September 30, 1997 the Company had no outstanding
unsecured indebtedness to affiliates. See Note 2 of the Company's consolidated
financial statements.
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DESCRIPTION OF THE SENIOR CREDIT FACILITY
The Company has amended and restated the Company's Senior Credit Facility
with First Chicago, as lender and managing agent. The Senior Credit Facility, as
amended, establishes an eight-year reducing revolving loan facility in the
initial aggregate principal amount of $25.0 million (the "Reducing Revolving
Facility") and an eight-year term loan in the aggregate principal amount of
$75.0 million (the "Term Loan"). The Company has received a commitment from
First Chicago for the Supplemental Credit Facility with maximum borrowings of
$115.0 million which will provide any additional financing necessary to
consummate the Special Repurchase Offer in the event the Acquisition is not
consummated. See "Description of the Notes -- Repurchase at the Option of
Holders -- Special Repurchase Offer."
Purpose. Proceeds from borrowings under the Senior Credit Facility will be
utilized to finance the Acquisition, for working capital purposes and other
permitted uses as described in the Senior Credit Facility.
Availability and Repayment. The Company anticipates that the Reducing
Revolving Facility will be undrawn at the time of the Acquisition. It is
anticipated that borrowings under the Term Loan will be approximately $74.9
million upon consummation of the Acquisition. Under the terms of the Senior
Credit Facility, the Company has the ability to borrow on a revolving basis
under the Term Loan until March 31, 1998 at which time the balances drawn under
the Term Loan shall convert to a term loan and be subject to quarterly principal
reductions aggregating $1.0 million, $2.4 million, $3.0 million, $7.0 million,
$11.0 million, $14.9 million, $18.0 million, and $18.0 million for the years
ending December 31, 1998 through 2005, respectively. Availability under the
Reducing Revolving Facility is subject to compliance with all covenants
contained in the Senior Credit Facility including the interest coverage ratio
and leverage ratio described below.
Security; Guaranty. Obligations under the Senior Credit Facility are
secured by: (i) a first perfected security interest in substantially all of the
current and future assets of the Company and its subsidiaries; (ii) a first
perfected security interest in all of the issued and outstanding shares of
capital stock of the Company; (iii) a first perfected security interest in all
of the issued and outstanding capital stock of Northland Cable News, Inc.; and
(iv) guarantees by all current and future Subsidiaries.
Interest. At the Company's election, the interest rate per annum
applicable to the Senior Credit Facility is a fluctuating rate of interest
measured by reference to either: (i) an adjusted London inter-bank offered rate
("LIBOR") plus a borrowing margin; or (ii) the base rate of First Chicago the
"Base Rate," which Base Rate is equal to the greater of the Federal Funds
Effective Rate plus 0.50% or the corporate base rate announced by First Chicago,
plus a borrowing margin. The applicable borrowing margin vary, based upon the
Company's leverage ratio, from 1.00% to 3.00% for LIBOR loans and from 0.00% to
1.75% for Base Rate loans.
Fees. The Company has agreed to pay certain fees with respect to the
Senior Credit Facility, including: (i) quarterly commitment fees in the amount
of 0.50% on the average daily unborrowed amounts; (ii) upfront amendment fees;
and (iii) agent, administrative and other similar fees.
Covenants. The Senior Credit Facility contains a number of covenants that,
among other things, restrict the ability of the Company to: (i) dispose of
assets; (ii) incur additional indebtedness; (iii) incur guarantee obligations;
(iv) prepay other indebtedness; (v) pay dividends or management fees; (vi)create
liens on assets; (vii) make investments, loans or advances; (viii)make
acquisitions, engage in mergers or consolidations; (ix) change the business
conducted by the Company; (x) change control of the Company; or (xi) engage in
certain transactions with affiliates and otherwise restrict certain corporate
activities. In addition, the Company is required to comply with specified
financial ratios and tests, including continuing maintenance, as tested on a
quarterly basis, of: (A) an interest coverage ratio (the ratio of annualized
operating cash flow to interest expense, as such terms are defined) of at least
1.25 to 1.00 initially, increasing over time to
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<PAGE> 73
2.25 to 1.00; and (B) a leverage ratio (the ratio of total debt to annualized
operating cash flow, as such terms are defined) of not more than 7.00 to 1.00
initially, decreasing over time to 4.00 to 1.00 in accordance with the following
schedule.
<TABLE>
<CAPTION>
PERIOD RATIO
------------------------------------------------------------ ------
<S> <C>
Through 12/31/98............................................ 7.00:1
1/1/99 through 12/31/99..................................... 6.75:1
1/1/00 through 12/31/00..................................... 6.25:1
1/1/01 through 12/31/01..................................... 5.75:1
1/1/02 through 12/31/02..................................... 5.00:1
1/1/03 through 12/31/03..................................... 4.50:1
1/1/04 and thereafter....................................... 4.00:1
</TABLE>
The Senior Credit Facility also contains provisions that will prohibit any
modification of the Indenture in any manner adverse to the lenders thereunder
and that will limit the Company's ability to refinance the Notes without the
consent of such lenders.
Events of Default. The Senior Credit Facility contains customary events of
default, including: (i) nonpayment of principal, interest or fees; (ii)
violation of covenants; (iii) inaccuracy of representations or warranties in any
material respect; (iv) change of control; (v) revocation of franchises or other
material licenses; (vi) cross default and cross acceleration to certain other
indebtedness; and (vii) noncompliance with ERISA (as defined) and applicable
environmental laws and regulations.
Supplemental Credit Facility. The Senior Credit Facility will specifically
permit the Company, without first obtaining any consents or waivers, to make the
Special Repurchase Offer and to make the Special Repurchase Payment, whether
through the drawing by the Company of committed lines thereunder or otherwise.
Additionally, the Company will covenant with the Holders of the Notes that the
Company will exercise or extend, on or before January 15, 1998, its commitment
under the Supplemental Credit Facility to have available for drawing an amount
equal to 100% of the Special Repurchase Payment in the event all of the Notes
were tendered for repurchase. See "Description of the Notes -- Repurchase at the
Option of Holders -- Special Repurchase Offer."
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DESCRIPTION OF THE NOTES
The Exchange Notes will be issued, and the Original Notes were issued,
under an indenture (the "Indenture"), dated as of November 12, 1997, by and
among the Company, the Subsidiary Guarantor and Harris Trust Company of
California, as Trustee (the "Trustee"). The terms of the Exchange Notes are the
same in all respects (including principal amount, interest rate, maturity,
security and ranking) as the terms of the Original Notes for which they may be
exchanged pursuant to the Exchange Offer, except that the Exchange Notes (1) are
freely transferable by holders thereof (except as provided below) and (ii) are
not entitled to certain registration rights and certain additional interest
provisions which are applicable to the Original Notes under the Registration
Rights Agreement.
The following is a summary of certain provisions of the Notes and the
Indenture. This summary does not purport to be complete and is subject to the
detailed provisions of, and is qualified in its entirety by reference to, the
Notes and the Indenture. A copy of the Indenture may be obtained from the
Company or the Initial Purchasers. The definitions of certain terms used in the
following summary are set forth below under "-- Certain Definitions." Reference
is made to the Indenture for the full definition of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
Unless the context otherwise requires, all references herein to the "Notes"
shall include the Original Notes and the Exchange Notes. The Original Notes and
the Exchange Notes will be considered collectively to be a single class for all
purposes under the Indenture, including without limitation, waivers, amendments,
redemptions and for purposes of this Description of the Notes. For purposes of
this summary, the term "Company" refers only to Northland Cable Television,
Inc., a Washington corporation, and not to its Subsidiary, Northland Cable News,
Inc., a Washington corporation.
GENERAL
The Exchange Notes will be issued and the Original Notes were issued
pursuant to the Indenture. 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 of 1939 (the "Trust Indenture Act"). The Notes are subject to all
such terms, and Holders of the Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. Copies of the Indenture available as set
forth below under "-- Additional Information."
The Original Notes are, and the Exchange Notes will be, general unsecured
obligations of the Company and the Original Notes are, and the Exchange Notes
will be, subordinated in right of payment to all current and future Senior Debt.
The Company's payment obligations under the Original Notes are, and the Exchange
Notes will be, jointly and severally guaranteed (the "Subsidiary Guarantees") on
a senior subordinated basis by the Guarantors. See "-- Subsidiary Guarantees."
As of September 30, 1997, on a pro forma basis giving effect to the Acquisition
and the Offering and the application of the net proceeds therefrom, the Company
would have had Senior Debt of approximately $77.3 million. The Indenture will
permit the incurrence of additional Senior Debt in the future.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $150.0 million,
$100.0 million of which were issued on the Issue Date, and will mature on
November 15, 2007. Interest on the Notes will accrue at the rate of 10 1/4% per
annum and will be payable semi-annually in arrears on May 15 and November 15,
commencing on May 15, 1998, to Holders of record on the immediately preceding
May 1 and November 1. Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of original issuance. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months. Principal, premium, if any, and interest
on the Notes will be payable at the office or agency of the Company maintained
for
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such purpose within the City and State of New York or, at the option of the
Company, payment of interest may be made by check mailed to the Holders of the
Notes at their respective addresses set forth in the register of Holders of the
Notes; provided that all payments of principal, premium, interest with respect
to Notes the Holders of which have given wire transfer instructions to the
Company will be required to be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Trustee maintained for such purpose. The Notes will be issued
in denominations of $1,000 and integral multiples thereof.
SUBORDINATION
The payment of principal, premium, if any, and interest on the Notes will
be subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full of all Senior Debt, whether outstanding on the Issue Date or
thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Senior Debt) before the Holders of the Notes will be entitled to
receive any payment with respect to the Notes, and until all Obligations with
respect to Senior Debt are paid in full, any distribution to which the Holders
of the Notes would be entitled shall be made to the holders of Senior Debt
(except that Holders of the Notes may receive Permitted Junior Securities and
payments made from the trust described under "-- Legal Defeasance and Covenant
Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under
"-- Legal Defeasance and Covenant Defeasance") if (i) a default in the payment
of the principal, premium, if any, or interest on Designated Senior Debt occurs
and is continuing beyond any applicable period of grace or (ii) any other
default occurs and is continuing with respect to Designated Senior Debt that
permits holders of the Designated Senior Debt as to which such default relates
to accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the Company or the holders of any Designated
Senior Debt. Payments on the Notes may and shall be resumed (a) in the case of a
payment default, upon the date on which such default is cured or waived and (b)
in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt has been accelerated. No new period of payment blockage
may be commenced unless and until (i) 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal, premium, if any, and interest on the Notes that
have come due have been paid in full in cash. No nonpayment default that existed
or was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice
unless such default shall have been waived for a period of not less than 90
days.
As a result of the subordination provisions described above, in the event
of the insolvency, liquidation, reorganization or other winding up of the
Company, the lenders under the Senior Credit Facility and other creditors who
are holders of Senior Debt, as well as creditors with secured obligations that
are not defined as Debt under the Indenture, must be paid in full before payment
of amounts due on the Notes. Accordingly, there may be insufficient assets
remaining after such payments to pay amounts due on the Notes. See "-- Certain
Covenants -- Incurrence of Debt and Issuance of Preferred Stock."
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The Indenture will further require that the Company promptly notify holders
of Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Original Notes are, and the
Exchange Notes will be, jointly and severally guaranteed on a senior
subordinated basis by the Guarantors. As of the date of this Prospectus, the
Company's sole Subsidiary, Northland Cable News, Inc., is the Guarantor of the
Notes, and all future Subsidiaries of the Company are expected to become
Guarantors of the Notes.
The Subsidiary Guarantee of each Guarantor will be subordinated to the
prior payment in full of all senior debt of such Guarantor (as of September 30,
1997 the Guarantor had no senior debt outstanding), and the amounts for which
the Guarantors will be liable under the guarantees issued from time to time with
respect to Senior Debt. The obligations of each Guarantor under its Subsidiary
Guarantee will be limited so as not to constitute a fraudulent conveyance under
applicable law. See, however, "Risk Factors -- Fraudulent Transfer Statutes."
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless: (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee under the Notes and the Indenture; (ii) immediately after giving effect
to such transaction, no Default or Event of Default exists; (iii) such
Guarantor, or any Person formed by or surviving any such consolidation or
merger, would have Consolidated Net Worth immediately after giving effect to
such transaction equal to or greater than the Consolidated Net Worth of such
Guarantor immediately preceding the transaction; and (iv) the Company would be
permitted by virtue of the Company's pro forma Debt to Operating Cash Flow
Ratio, at the time of such transaction and immediately after giving pro forma
effect thereto, be permitted to incur at least $1.00 of additional Debt pursuant
to the Debt to Operating Cash Flow Ratio test set forth in the first paragraph
of the covenant described below under the caption "-- Certain
Covenants -- Incurrence of Debt and Issuance of Preferred Stock."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Cash Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of the Indenture. See
"-- Repurchase at the Option of Holders -- Asset Sales" and "-- Special
Repurchase Offer."
OPTIONAL REDEMPTION
The Original Notes are, and the Exchange Notes will not be redeemable at
the Company's option prior to November 15, 2002. Thereafter, the Notes will be
subject to redemption at any time at the option of the Company, in whole or in
part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
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accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on November 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
--------------------------------------------------------- ----------
<S> <C>
2002..................................................... 105.125%
2003..................................................... 103.417%
2004..................................................... 101.708%
2005 and thereafter...................................... 100.000%
</TABLE>
Except as set forth below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
Notwithstanding the foregoing, at any time prior to November 15, 2000, the
Company may redeem up to 30% of the aggregate principal amount of the Notes
issued under the Indenture at a redemption price of 110.25% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the
redemption date, with the Net Cash Proceeds of a Public Equity Offering;
provided that at least 70% of the Notes remain outstanding immediately after the
occurrence of such redemption; and provided, further, that such redemption shall
occur within 45 days of the date of the closing of such Public Equity Offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
the Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of the Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. The Notes
called for redemption become due on the date fixed for redemption. On and after
the redemption date, interest ceases to accrue on the Notes or portions of them
called for redemption.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of the Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, the Company will mail
a notice to each Holder of the Notes describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Notes on the
date specified in such notice, which date shall be no earlier than 30 days and
no later than 90 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by the Indenture and
described in such notice. The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer,
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(ii) deposit with the Trustee an amount equal to the Change of Control Payment
in respect of all Notes or portions thereof so tendered and (iii) deliver or
cause to be delivered to the Trustee the Notes so accepted together with an
Officers' Certificate stating the aggregate principal amount of the Notes or
portions thereof being purchased by the Company. The Trustee will promptly mail
to each Holder of the Notes so tendered the Change of Control Payment for such
Notes, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered, if any; provided that each
such new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Indenture will provide that, prior to complying with the provisions
of this covenant, but in any event within 90 days following a Change of Control,
the Company will either repay all outstanding Senior Debt or obtain the
requisite consents, if any, under all agreements governing outstanding Senior
Debt to permit the repurchase of the Notes required by this covenant and the
Company's failure to comply with this covenant shall constitute an Event of
Default under the Indenture. The Company will publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Senior Credit Facility currently prohibits the Company from purchasing
any Notes except as described below under "-- Special Redemption Offer," and
also provides that certain change of control events with respect to the Company
would constitute a default thereunder. Any future credit facility or other
agreements relating to Senior Debt to which the Company becomes a party may
contain similar restrictions and provisions. In the event a Change of Control
occurs at a time when the Company is prohibited from purchasing Notes, the
Company could seek the consent of its lenders to the purchase of the Notes or
could attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from purchasing Notes. In such case, the Company's
failure to purchase tendered Notes would constitute an Event of Default under
the Indenture which would, in turn, constitute a default under the Senior Credit
Facility. In such circumstances, the subordination provisions in the Indenture
would likely restrict payments to the Holders of the Notes. Finally, the
Company's ability to pay cash to the Holders of the Notes upon a repurchase may
be limited by the Company's then existing financial resources. See "Risk
Factors -- Payment Upon Change of Control."
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
Asset Sales
The Indenture provides that the Company will not, and will not permit any
Subsidiary to, consummate an Asset Sale unless: (i) the Company (or such
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests issued or sold or otherwise disposed
of; and (ii) at least 75% of the consideration therefor received by the Company
or such Subsidiary is in the form of (a) cash or Cash Equivalents or (b)
properties and capital assets (including franchises and licenses required to own
and operate such properties) to be used in the same lines of business being
conducted by the Company or any Subsidiary at such time, or Equity Interests in
one or more
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Persons which thereby become Wholly Owned Subsidiaries of the Company whose
assets consist primarily of such properties and capital assets; provided that
the amount of (x) any liabilities (as shown on the Company's or such
Subsidiary's most recent balance sheet) of the Company or any Subsidiary (other
than contingent liabilities and liabilities that are by their terms subordinated
to the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Company
or such Subsidiary from further liability and (y) any securities, notes or other
obligations received by the Company or any such Subsidiary from such transferee
that are immediately converted by the Company or such Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision.
Within 365 days after an Asset Sale, the Company may, at its option, (a)
apply such Net Cash Proceeds to repay Senior Debt (and to correspondingly reduce
commitments with respect thereto in the case of revolving borrowings), or (b)
commit in writing to apply such Net Cash Proceeds to a Related Business
Investment. Pending the final application of any such Net Cash Proceeds, the
Company may temporarily reduce Senior Debt outstanding under the Senior Credit
Facility or otherwise invest such Net Cash Proceeds in any manner that is not
prohibited by the Indenture. Any Net Cash Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company will be required to make an offer to
all Holders of the Notes (an "Asset Sale Offer") to purchase the maximum
principal amount of the Notes that may be purchased out of the Excess Proceeds,
at an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of
purchase, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of the Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
the Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds,
the Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
Special Repurchase Offer
In the event the Acquisition is not consummated by March 1, 1998, each
Holder of the Original Notes has, and each Holder of the Exchange Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Special Repurchase Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of purchase (the "Special Repurchase
Payment"). The Company will mail a notice to each Holder of the Notes no later
than March 31, 1998 describing the reasons the Acquisition was not consummated
by such date and offering to repurchase Notes on the date specified in such
notice, which date shall be no earlier than 30 days and no later than 60 days
from the date such notice is mailed (the "Special Repurchase Payment Date"),
pursuant to the procedures required by the Indenture and described in such
notice. The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with any Special
Repurchase Offer.
On the Special Repurchase Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Special Repurchase Offer, (ii) deposit with the Trustee an
amount equal to the Special Repurchase Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Trustee will promptly mail to each Holder of the Notes so tendered
the Special Repurchase Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any;
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<PAGE> 80
provided that each such new Note will be in a principal amount of $1,000 or an
integral multiple thereof. The Company will publicly announce the results of the
Special Repurchase Offer on or as soon as practicable after the Special
Repurchase Payment Date.
The Senior Credit Facility specifically permits the Company, without first
obtaining any consents or waivers, to make the Special Repurchase Offer and to
make the Special Repurchase Payment, whether through the drawing by the Company
of committed lines thereunder or otherwise. Additionally, the Company has
covenanted with the Holders of the Notes that the Company will exercise or
extend, on or before January 15, 1998, its commitment under the Supplemental
Credit Facility to have available for drawing an amount equal to 100% of the
Special Repurchase Payment in the event all of the Notes were tendered for
repurchase.
CERTAIN COVENANTS
Incurrence of Debt and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any
Subsidiary to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise
(collectively, "incur"), with respect to any Debt (including Acquired Debt) and
that the Company will not issue any Disqualified Stock and will not permit any
Subsidiary to issue any shares of preferred stock; provided, however, that if no
Default or Event of Default with respect to the Notes shall have occurred and be
continuing, or shall occur as a consequence of the incurrence of such Debt, the
Company or any Subsidiary may incur Debt (including Acquired Debt), and the
Company may issue Disqualified Stock and its Subsidiaries may issue shares of
preferred stock if, at the time of such incurrence or issuance and after giving
effect to the incurrence of such Debt (and any other Debt incurred since the end
of the last full fiscal quarter or fiscal year for which internal financial
statements are available and the application of the proceeds thereof), the Debt
to Operating Cash Flow Ratio would be less than or equal to 7.00 to 1.0, if such
Debt is incurred or such Disqualified Stock or preferred stock is issued on or
prior to December 31, 1998, or would be less than or equal to 6.75 to 1.0, if
such Debt is incurred or such Disqualified Stock or preferred stock is issued on
or prior to December 31, 2000, or would be less than or equal to 6.50 to 1.0, if
such Debt is incurred or such Disqualified Stock or preferred stock is issued
thereafter; provided that this covenant shall not apply to the incurrence of
Debt by the Company so long as all of the proceeds of such Debt are applied to
the repurchase of outstanding Notes by the Company pursuant to an offer to
purchase Notes pursuant to (x) the provisions of the Indenture described under
the first paragraph of "-- Optional Redemption" or "Repurchase at the Option of
Holders -- Special Repurchase Offer" or (y) a tender offer made to all Holders
of the Notes effected in accordance with all federal and state securities laws,
including, without limitation, Rule 14e-1 under the Exchange Act and any other
applicable federal or state regulations.
The provisions of the first paragraph of this covenant do not apply to the
incurrence of any of the following items of Debt (collectively, "Permitted
Debt"):
(i) the incurrence by the Company of Debt and letters of credit (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Subsidiaries thereunder)
under Credit Agreements; provided that the aggregate principal amount of
all revolving credit Debt outstanding under all Credit Agreements after
giving effect to such incurrence, including all Permitted Refinancing Debt
incurred to refund, refinance or replace any other Debt incurred pursuant
to this clause (i), does not exceed an amount equal to $100.0 million less
the aggregate amount of all Net Cash Proceeds of Asset Sales applied to
repay any such Debt pursuant to the covenant described above under the
caption "-- Asset Sales";
(ii) the incurrence by the Company and its Subsidiary of Existing
Debt;
(iii) the incurrence by the Company of Debt represented by the Notes;
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(iv) the incurrence by the Company or any of its Subsidiaries of Debt
represented by Capital Lease Obligations, mortgage financings or purchase
money obligations, in each case incurred for the purpose of financing all
or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Company or such
Subsidiary, in an aggregate principal amount not to exceed $3.0 million at
any time outstanding;
(v) the incurrence by the Company or any Subsidiary of Permitted
Refinancing Debt in exchange for, or the net proceeds of which are used to
refund, refinance or replace Debt that was permitted by the Indenture to be
incurred;
(vi) the incurrence by the Company or any Subsidiary of intercompany
Debt between or among the Company and any of its Wholly Owned Subsidiaries;
provided, however, that (i) if the Company is the obligor on such Debt,
such Debt is expressly subordinated to the prior payment in full in cash of
all Obligations with respect to the Notes and (ii)(A) any subsequent
issuance or transfer of Equity Interests that results in any such Debt
being held by a Person other than the Company or a Wholly Owned Subsidiary
and (B) any sale or other transfer of any such Debt to a Person that is not
either the Company or a Wholly Owned Subsidiary shall be deemed, in each
case, to constitute an incurrence of such Debt by the Company or such
Subsidiary, as the case may be;
(vii) the incurrence by the Company or any Subsidiary of Hedging
Obligations that are incurred for the purpose of fixing or hedging interest
rate risk with respect to any floating rate Debt that is permitted by the
terms of this Indenture to be outstanding;
(viii) the guarantee by the Company of Debt of a Subsidiary of the
Company that was permitted to be incurred by another provision of this
covenant;
(ix) the guarantee by the Company or any of the Guarantors of Debt of
the Company or a Subsidiary of the Company that was permitted to be
incurred by another provision of this covenant; and
(x) the incurrence by the Company or any Subsidiary of additional Debt
in an aggregate principal amount (or accreted value, as applicable) at any
time outstanding, including all Permitted Refinancing Debt incurred to
refund, refinance or replace any other Debt incurred pursuant to this
clause (x), not to exceed $5.0 million.
For purposes of determining compliance with this covenant, in the event
that an item of Debt meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (x) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Debt in any manner that complies with
this covenant and such item of Debt will be treated as having been incurred
pursuant to only one of such clauses or pursuant to the first paragraph hereof.
Accrual of interest and the accretion of accreted value will not be deemed to be
an incurrence of Debt for purposes of this covenant.
Restricted Payments
The Indenture provides that the Company will not, and will not permit any
Subsidiary to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any
Subsidiary's Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company) or to the
direct or indirect holders of the Company's or any Subsidiary's Equity Interests
in their capacity as such (other than dividends or distributions made to the
Company or a Wholly Owned Subsidiary of the Company and dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of the
Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company or other Affiliate of the Company (other than any
such Equity Interests owned by the Company or any Wholly Owned
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Subsidiary of the Company); (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any Debt that
is subordinated to the Notes (other than Notes), except a payment of interest or
principal at Stated Maturity; (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company, immediately after giving effect to such Restricted
Payment, would have been permitted to incur at least $1.00 of additional
Debt pursuant to the Debt to Operating Cash Flow Ratio test set forth in
the first paragraph of the covenant described above under caption
"-- Incurrence of Debt and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries after
the Issue Date (excluding Restricted Payments permitted by clause (ii) of
the next succeeding paragraph), is less than the sum of (i) the difference
between (x) 100% of cumulative Consolidated Operating Cash Flow for the
period (taken as one accounting period) from the end of the first fiscal
quarter during which the Issue Date occurs to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available and (y) 140% of cumulative Consolidated Interest Expense for the
period (taken as one accounting period) from the end of the first fiscal
quarter during which the Issue Date occurs to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available, plus (ii) 100% of the aggregate net cash proceeds received by
the Company from the issue or sale since the Issue Date of Equity Interests
of the Company (other than Disqualified Stock) or of Disqualified Stock or
debt securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company and other
than Disqualified Stock or convertible debt securities that have been
converted into Disqualified Stock), plus (iii) to the extent that any
Restricted Investment that was made after the Issue Date is sold for cash
or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost
of disposition, if any) and (B) the initial amount of such Restricted
Investment.
The foregoing provisions do not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Debt or Equity Interests of the Company in
exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause
(c)(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase
or other acquisition of subordinated Debt with the net cash proceeds from an
incurrence of Permitted Refinancing Debt; (iv) the payment of any dividend by a
Subsidiary of the Company to the holders of its Equity Interests on a pro rata
basis; (v) the payment for services rendered by affiliates, in the ordinary
course of the Company's business and consistent with past practices, pursuant to
the terms of those arrangements currently in effect on the Issue Date (including
extensions of such arrangements on terms substantially the same as those in
existence on the Issue Date), (vi) for such time that none of the officers of
the Company receive direct compensation for services rendered to, for or on
behalf of the Company other than as provided under the Management Agreement as
currently in effect on the Issue Date (including any extensions of such
agreement on terms substantially the same as those in existence on the Issue
Date), the payment of annual fees for management services to NTC not to exceed
in any fiscal year 5% of the Company's annual total revenues pursuant to the
terms of the
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Management Agreement as currently in effect on the Issue Date (including any
extensions of such agreement on terms substantially the same as those in
existence on the Issue Date); and (vii) the making and consummation of (A) a
Asset Sale Offer in accordance with the provisions of the Indenture with any
Excess Proceeds or (B) a Change of Control Offer with respect to the Notes in
accordance with the provisions of the Indenture as in effect on the date of the
Indenture.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $1.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant "Restricted Payments" were
computed, together with a copy of any fairness opinion or appraisal required by
the Indenture.
Liens
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to exist any Lien that secures obligations under any Pari Passu Debt or
Subordinated Debt on any asset or property of the Company or such Subsidiary, or
any income or profits therefrom, or assign or convey any right to receive income
therefrom, unless the Notes are equally and ratably secured with the obligations
so secured or until such time as such obligations are no longer secured by a
Lien.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and the Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction, no Default or Event of Default exists; and (iv) except in the case
of a merger of the Company with or into a Wholly Owned Subsidiary of the
Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) would have Consolidated Net Worth immediately after giving effect to
the transaction equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction and (B) immediately after giving
pro forma effect thereto, would be permitted to incur at least $1.00 of
additional Debt pursuant to the Debt to Operating Cash Flow Ratio test set forth
in the first paragraph of the covenant described above under the caption
"-- Incurrence of Debt and Issuance of Preferred Stock."
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Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any
Subsidiary to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction taken as a whole is on terms that are no less
favorable to the Company or the relevant Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Subsidiary with
an unrelated Person; (ii) such Affiliate Transaction relates to and is in
furtherance of the lines of business the Company was engaged in on the Issue
Date or as the Company's business has thereafter evolved in the fields of cable
television systems, enhanced video services and advanced telecommunications
services, such as Internet access and network data services, and telephony; and
(iii) the Company delivers to the Trustee (A)(1) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million prior to a Public Equity Offering, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clauses (i) and (ii)
above and that such Affiliate Transaction has been approved by the Board of
Directors and (2) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $1.0
million after the consummation of a Public Equity Offering, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clauses (i) and (ii) above and that such
Affiliate Transaction has been approved by a majority of the disinterested
members of the Board of Directors and (B) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $5.0 million, an opinion as to the fairness to the
Holders of the Notes of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing.
The provisions described in the foregoing paragraph do not apply to (u) the
payment for services rendered by affiliates, in the ordinary course of the
Company's business and consistent with past practices, pursuant to the terms of
those arrangements currently in effect on the Issue Date (including extensions
of such arrangements on terms substantially the same as those in existence on
the Issue Date), (v) customary directors' fees, indemnification and similar
arrangements with directors and officers, (w) for such time that none of the
officers of the Company receive direct compensation for services rendered to,
for or on behalf of the Company other than as provided under the Management
Agreement as currently in effect on the Issue Date (including any extensions of
such agreement on terms substantially the same as those in existence on the
Issue Date), the payment of annual fees for management services to NTC not to
exceed in any fiscal year 5% of the Company's annual total revenues pursuant to
the terms of the Management Agreement as currently in effect on the Issue Date
(including any extensions of such agreement on terms substantially the same as
those in existence on the Issue Date); (x) any employment agreement entered into
by the Company or any Subsidiary in the ordinary course of business and
consistent with the past practice of the Company or such Subsidiary, (y)
transactions between or among the Company and/or its Subsidiaries and (z)
Restricted Payments that are permitted by the provisions of the Indenture
described above under the caption " -- Restricted Payments."
Additional Subsidiary Guarantees
The Indenture provides that if the Company or any Subsidiary shall acquire
or create another Subsidiary after the date of the Indenture, then such newly
acquired or created Subsidiary shall execute a Subsidiary Guarantee and deliver
an opinion of counsel, in accordance with the terms of the Indenture.
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Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary to (i)(a) pay dividends or make any other distributions to the
Company or any Subsidiary (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits, or (b) pay any
indebtedness owed to the Company or any Subsidiary, (ii) make loans or advances
to the Company or any Subsidiary or (iii) transfer any of its properties or
assets to the Company or any Subsidiary, except for such encumbrances or
restrictions existing under or by reason of (a) existing Debt as in effect on
the Issue Date, (b) the Senior Credit Facility as in effect as of the Issue
Date, and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive with respect to
such dividend and other payment restrictions than those contained in the Senior
Credit Facility as in effect on the Issue Date, (c) the Indenture and the Notes,
(d) applicable law, (e) any instrument governing Debt or Capital Stock of a
Person acquired by the Company or any Subsidiary as in effect at the time of
such acquisition (except to the extent such Debt was incurred in connection with
or in contemplation of such acquisition), 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, provided
that, in the case of Debt, such Debt was permitted by the terms of the Indenture
to be incurred, (f) customary non-assignment provisions in leases entered into
in the ordinary course of business and consistent with past practices, (g)
Capital Lease Obligations and purchase money obligations for property acquired
in the ordinary course of business that impose restrictions of the nature
described in clause (iii) above on the property so acquired, or (h) Permitted
Refinancing Debt, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Debt are no more restrictive than those
contained in the agreements governing the Debt being refinanced.
Restrictions on Preferred Stock of Subsidiaries
The Indenture provides that the Company will not permit any Subsidiary to
issue any preferred stock (except preferred stock to the Company or a
Subsidiary), or permit any Person (other than the Company or a Subsidiary) to
own or hold an interest in any preferred stock unless the Company or such
Subsidiary would be entitled to incur Debt (other than Permitted Debt) under the
Debt to Operating Cash Flow Ratio test set forth in the first paragraph of the
covenant described above under the caption "-- Incurrence of Debt and Issuance
of Preferred Stock" in the aggregate principal amount equal to the aggregate
liquidation value of the preferred stock to be issued.
Limitation on Incurrence of Senior Subordinated Debt
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Debt that is subordinate or
junior in right of payment to any Senior Debt and senior in any respect in right
of payment to the Notes and (ii) no Guarantor will incur, create, issue, assume,
guarantee or otherwise become liable for any Debt that is subordinate or junior
in right of payment to any senior guarantees and senior in any respect in right
of payment to the Subsidiary Guarantees.
Payments for Consent
The Indenture provides that neither the Company nor any Subsidiary will,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
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is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will furnish or caused to be
furnished promptly to the Holders of the Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, the Company will
file a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, the Company has agreed that, for so long as any Notes
remain outstanding, it will furnish to the Holders of the Notes and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on the
Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by the subordination provisions of
the Indenture); (iii) failure by the Company to comply with the provisions
described under the captions "-- Repurchase at the Option of Holders -- Change
of Control," "-- Asset Sales," "-- Special Repurchase Offer," "-- Certain
Covenants -- Restricted Payments" or "-- Incurrence of Debt and Issuance of
Preferred Stock"; (iv) failure by the Company for 60 days after notice to comply
with any of its other agreements in the Indenture or the Notes; (v) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Debt for money borrowed by the
Company or any Subsidiary (or the payment of which is guaranteed by the Company
or any Subsidiary) whether such Debt or guarantee now exists, or is created
after the Issue Date, which default results in the acceleration of such Debt
prior to its express maturity and the principal amount of any such Debt,
together with the principal amount of any other such Debt or the maturity of
which has been so accelerated, aggregates $5.0 million or more; (vi) failure by
the Company or any Subsidiary to pay final judgments aggregating in excess of
$5.0 million, which judgments are not paid, discharged or stayed for a period of
60 days; (vii) except as permitted by the Indenture, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor, or any
Person acting on behalf of any Guarantor shall deny or disaffirm its obligations
under its Subsidiary Guarantee; and (viii) certain events of bankruptcy or
insolvency with respect to the Company or any Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
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limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium payable that the Company would
have had to pay if the Company then had elected to redeem the Notes on November
15, 2002 pursuant to the optional redemption provisions of the Indenture, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Notes. If an Event of
Default occurs prior to November 15, 2002 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding the prohibition on redemption of the Notes prior to November 15,
2002, then the premium specified in the Indenture shall also become immediately
due and payable to the extent permitted by law upon the acceleration of the
Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of the Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of the outstanding Notes to
receive payments in respect of the principal, premium, if any, and interest on
such Notes when such payments are due from the trust referred to below, (ii) the
Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be
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sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal, premium, if any, and interest on the
outstanding Notes on the stated maturity or on the applicable redemption date,
as the case may be, and the Company must specify whether the Notes are being
defeased to maturity or to a particular redemption date; (ii) in the case of
Legal Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the Issue Date, there has been a
change in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that, the Holders
of the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the date
of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Company or any Subsidiary
is a party or by which the Company or any Subsidiary is bound; (vi) the Company
must have delivered to the Trustee an opinion of counsel to the effect that
after the 91st day following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; (vii) the Company must deliver 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 Notes over the
other creditors of the Company with the intent of defeating, hindering, delaying
or defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder of the Notes may transfer or exchange Notes in accordance with the
Indenture. The Trustee may require a Holder of the Notes, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder of the Notes to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Note selected for redemption. Also, the Company is not required to transfer
or exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes).
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Without the consent of each Holder of the Notes affected, an amendment or
waiver may not (with respect to any Notes held by a non-consenting Holder of the
Notes): (i) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes (other than provisions relating to the covenants
described above under the caption "-- Repurchase at the Option of Holders"),
(iii) reduce the rate of or change the time for payment of interest on any Note,
(iv) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
of the Notes and a waiver of the payment default that resulted from such
acceleration), (v) make any Note payable in money other than that stated in the
Notes, (vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of the Notes to receive
payments of principal of or premium, if any, or interest on the Notes, (vii)
waive a redemption payment with respect to any Note (other than a payment
required by one of the covenants described above under the caption
"-- Repurchase at the Option of Holders") or (viii) make any change in the
foregoing amendment and waiver provisions. In addition, any amendment to the
provisions of Article 10 of the Indenture (which relate to subordination) will
require the consent of the Holders of at least 75% in aggregate principal amount
of the Notes then outstanding if such amendment would adversely affect the
rights of Holders of the Notes.
Without the consent of at least 75% in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for Notes), no waiver or amendment to the Indenture may make any
change in the provisions described above under the caption "-- Repurchase at the
Option of Holders" that adversely affect the rights of any Holder of the Notes.
Notwithstanding the foregoing, without the consent of any Holder of the
Notes, the Company and the Trustee may amend or supplement the Indenture or the
Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in the case of a merger or consolidation, to make any change that would provide
any additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of the Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
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ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to Northland Cable Television, Inc., 1201 Third
Avenue, Suite 3600, Seattle, Washington 98101, Attention: Vice President and
General Counsel.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i) Debt of
any other Person existing at the time such other Person is merged with or into
or became a Subsidiary of such specified Person, including, without limitation,
Debt incurred in connection with, or in contemplation of, such other Person
merging with or into or becoming a Subsidiary of such specified Person, and (ii)
Debt secured by a Lien encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) by the Company or any
Subsidiary in any other Person, or any acquisition or purchase of Equity
Interests of any other Person by the Company or any Subsidiary, in either case
pursuant to which such Person shall become a Subsidiary or shall be
consolidated, merged with or into the Company or any Subsidiary or (ii) any
acquisition by the Company or any 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 (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than in the ordinary course of business consistent with past
practices (provided that the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the Company and its Subsidiaries taken as
a whole will be governed by the provisions of the Indenture described above
under the caption "-- Repurchase at the Option of Holders -- Change of Control"
and/or the provisions described above under the caption "-- Certain
Covenants -- Merger, Consolidation or Sale of Assets" and not by the provisions
of the Asset Sale covenant), and (ii) the issue or sale by the Company or any
Subsidiary of Equity Interests of any of the Company's Subsidiaries, in the case
of either clause (i) or (ii), whether in a single transaction or a series of
related transactions (a) that have a fair market value in excess of $1.0 million
or (b) for net proceeds in excess of $1.0 million. Notwithstanding the
foregoing: (i) a transfer of assets by the Company to a Wholly Owned Subsidiary
or by a Wholly Owned Subsidiary to the Company or to another Wholly Owned
Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Subsidiary to
the Company or to another Wholly Owned Subsidiary and (iii) a Restricted Payment
that is permitted by the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments" will not be deemed to be Asset Sales.
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"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above and (v) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation and in each case maturing within six months after the date of
acquisition.
"Change of Control" means the occurrence of any of the following: (i) any
Person other than a Related Party or any Person owned or controlled, directly or
indirectly, by any Related Party (an "Unrelated Person"), together with any
Affiliates thereof that are also Unrelated Persons, (A) acquires or acquire
(whether through legal or beneficial ownership, by contract or otherwise),
directly or indirectly, the right to vote more than 45% of the total voting
power of all classes of Voting Stock of the either the Company or NTC or (B)
shall have elected, or caused to be elected, a sufficient number of its or their
nominees to the Board of Directors of the Company or NTC such that the nominees
so elected (regardless of when elected) shall collectively constitute a majority
of the Board of Directors of either the Company or NTC; (ii) the first day on
which NTC ceases to own a majority of the outstanding Equity Interests of the
Company, (iii) the adoption of a plan relating to the liquidation or dissolution
of the Company; (iv) the Company consolidates with, or merges with or into, any
Person or sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of its assets to any Person, or any Person consolidates
with, or merges with or into, the Company, in any such event pursuant to a
transaction in which any of the outstanding Voting Stock of the Company is
converted into or exchanged for cash, securities or other property, other than
any such transaction where the Voting Stock of the Company outstanding
immediately prior to such transaction is converted into or exchanged for Voting
Stock (other than Disqualified Stock) of the surviving or transferee Person
constituting a majority of the outstanding shares of such Voting Stock of such
surviving or transferee Person (immediately after giving effect to such
issuance). The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of the Company and its Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of the Notes to
require the Company to repurchase such Notes as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of the assets of the
Company and its Subsidiaries taken as a whole to another Person or group may be
uncertain. For purposes of this definition, "Person" includes any "group" as
that term is used in Section 13(d)(3) or 14(d)(2) of the Exchange Act, and
"beneficial ownership" shall have the meaning provided in Rule 13d-3 under the
Exchange Act.
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"Consolidated Interest Expense" means, for any given period and Person, the
aggregate of the interest expense in respect of all Debt of such Person and its
Subsidiaries for such period, on a consolidated basis, whether paid or accrued
and whether or not capitalized (including, without limitation, amortization of
debt issuance costs and original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to such
Person or a Wholly Owned Subsidiary thereof, (ii) the Net Income of any
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental approval
(that has not been obtained) or, 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 that Subsidiary or its
shareholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common shareholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the Issue Date in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Consolidated Operating Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period: plus (i)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income); plus (ii) provision for taxes based on
income or profits of such Person and its Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income; plus (iii) Consolidated Interest Expense of such Person and its
Subsidiaries for such period, to the extent that any such expense was deducted
in computing such Consolidated Net Income; plus (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other noncash expenses of such Person and its Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income; minus (v) non-cash items
increasing such Consolidated Net Income for such period, in each case, on a
consolidated basis and determined in accordance with GAAP.
"Credit Agreements" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Senior Credit Facility) or
commercial paper facilities with banks or other
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institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
Debt under Credit Agreements outstanding on the date on which Notes are first
issued and authenticated under the Indenture shall be deemed to have been
incurred on such date in reliance on the exception provided by clause (i) of the
definition of Permitted Debt.
"Debt" means, with respect to any Person, any indebtedness of such Person,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or banker's acceptances or representing Capital
Lease Obligations or the balance deferred and unpaid of the purchase price of
any property or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense (including any deferred management fees
pursuant to the Management Agreement) or trade payable, if and to the extent any
of the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all indebtedness of others secured
by a Lien on any asset of such Person (whether or not such indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any Debt
outstanding as of any date shall be (i) the accreted value thereof, in the case
of any Debt that does not require current payments of interest, and (ii) the
principal amount thereof, together with any interest thereon that is more than
30 days past due, in the case of any other Debt.
"Debt to Operating Cash Flow Ratio" means the ratio of (i) the Total
Consolidated Debt as of the date of calculation (the "Determination Date") to
(ii) four times the Pro Forma Consolidated Operating Cash Flow for the latest
fiscal quarter for which financial information is available immediately
preceding such Determination Date (the "Measurement Period"). For purposes of
calculating Consolidated Operating Cash Flow for the Measurement Period
immediately prior to the relevant Determination Date, if the Company or any
Subsidiary shall have in any manner (a) acquired (including through an Asset
Acquisition or the commencement of activities constituting such operating
business) or (b) disposed of (including by way of an Asset Sale or the
termination or discontinuance of activities constituting such operating
business) any operating business during such Measurement Period or after the end
of such period and on or prior to such Determination Date, such calculation will
be made on a pro forma basis in accordance with GAAP as if, in the case of an
Asset Acquisition or the commencement of activities constituting such operating
business, all such transactions had been consummated on the first day of such
Measurement Period and, in the case of an Asset Sale or termination or
discontinuance of activities constituting such operating business, all such
transactions had been consummated prior to the first day of such Measurement
Period.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) any Debt outstanding under the Senior
Credit Facility, (ii) any other Senior Debt permitted under the Indenture the
principal amount of which is $5.0 million or more and that has been designated
by the Company as "Designated Senior Debt."
"Disqualified Equity Interest" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable at the option of the holder thereof), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable, at the option of the holder thereof, in
whole or in part, or exchangeable into Debt on or prior to the earlier of the
maturity date of the Notes or the date on which no Notes remain outstanding.
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"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Debt" means up to $1.0 million in aggregate principal amount of
Debt of the Company and its Subsidiaries (other than Debt under the Senior
Credit Facility) in existence on the Issue Date, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any Debt.
"Guarantors" means (i) Northland Cable News, Inc., a Washington
corporation, and (ii) any other Subsidiary that executes a Subsidiary Guarantee
in accordance with the provisions of the Indenture, and their respective
successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Debt or other obligations), advances or
capital contributions (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Debt, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "-- Certain Covenants -- Restricted Payments."
"Issue Date" means the date of first issuance of the Notes under the
Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
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"Management Agreement" means that certain agreement dated as of August 23,
1994, as the same may from time to time be amended, by and between the Company
and NTC, relating to the retention by the Company of NTC as its managing agent
in connection with the overall affairs and operations of the Company's systems.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (A) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (B) the
disposition of any securities by such Person or any Subsidiary or the
extinguishment of any Debt of such Person or any Subsidiary and (ii) any
extraordinary or nonrecurring gain (but not loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain (but not loss).
"Net Cash Proceeds" means the aggregate cash proceeds received by the
Company or any Subsidiary in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of (i) the direct costs relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, (ii) taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements), amounts required to be applied to the repayment of Debt
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"NTC" means Northland Telecommunications Corporation, a Washington
corporation and parent company of the Company.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Debt.
"Pari Passu Debt" means (i) any Debt of the Company that is pari passu in
right of payment to the Notes and (ii) with respect to any Guarantee of the
Notes, Debt which ranks pari passu in right of payment to such Guarantee.
"Permitted Investments" means (a) any Related Business Investment; (b) any
Investment in Cash Equivalents; (c) any Investment by the Company or any
Subsidiary of the Company in a Person, if as a result of such Investment (i)
such Person becomes a Wholly Owned Subsidiary of the Company that is engaged in
the same or a similar line of business as the Company and its Subsidiaries were
engaged in on the Issue Date or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of
the Company that is engaged in the same or a similar line of business as the
Company and its Subsidiaries were engaged in on the Issue Date; (d) any
Restricted Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "-- Repurchase at the Option of
Holders -- Asset Sales"; (e) any acquisition of assets solely in exchange for
the issuance of Equity Interests (other than Disqualified Stock) of the Company;
and (f) other Investments in any Person (other than NTC or an Affiliate of NTC
that is not also a Subsidiary of the Company) having an aggregate fair market
value (measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (f) that are at the time outstanding,
not to exceed $2.0 million.
"Permitted Junior Securities" means Equity Interests in the Company or debt
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to
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substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Debt pursuant to Article 10 of the Indenture.
"Permitted Refinancing Debt" means any Debt of the Company or any
Subsidiary issued in exchange for, or the net proceeds of which are used to
extend, refinance, renew, replace, defease or refund other Debt of the Company
or any Subsidiary; provided that: (i) the principal amount (or accreted value,
if applicable) of such Permitted Refinancing Debt does not exceed the principal
amount of (or accreted value, if applicable), plus accrued interest on, the Debt
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (ii) such
Permitted Refinancing Debt has a final maturity date later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Debt being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Debt being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Notes, such Permitted Refinancing Debt has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the Notes on terms at least as favorable to the Holders of
the Notes as those contained in the documentation governing the Debt being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Debt is incurred either by the Company or by the Subsidiary who is the obligor
on the Debt being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, limited liability
limited partnership, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Principal" means John S. Whetzell.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of the Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act.
"Pro Forma Consolidated Operating Cash Flow" of any Person means for any
period the Consolidated Operating Cash Flow of such Person for such period
calculated on a pro forma basis to give effect to any Asset Sale or acquisition
of assets not in the ordinary course of business (including acquisitions of
other Persons by merger, consolidation or purchase of Capital Stock) during such
period as if such Asset Sale or acquisition of assets had taken place on the
first day of such period. For purposes of making the computations referred to
pursuant to the provisions of the Indenture described under "Certain
Covenants -- Incurrence of Debt and Issuance of Preferred Stock," any Asset Sale
or acquisition of assets not in the ordinary course of business made by the
Company, including all mergers and acquisitions subsequent to the last full
fiscal quarter, shall be calculated on a pro forma basis as if such Asset Sale
or acquisition of assets had taken place on the first day of such fiscal
quarter.
"Public Equity Offering" means a public offering of any Equity Interests
(other than Disqualified Stock) of (i) the Company or (ii) NTC to the extent the
net proceeds thereof are contributed to the Company as a capital contribution,
that, in each case, results in the net proceeds to the Company of at least $25.0
million.
"Related Business Investment" means (i) any capital expenditure or
Investment, in each case related to the business of the Company and its
Subsidiary as conducted on the Issue Date and as such business may thereafter
evolve in the fields of cable television systems, enhanced video services and
advanced telecommunications services, such as Internet access and network data
services, and telephony; and (ii) any Investment in any other Person primarily
engaged in the same business as provided in the foregoing subparagraph (i).
"Related Party" with respect to the Principal means (A) any controlling
shareholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) or trust,
corporation, partnership or other entity, the beneficiaries, sharehold-
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ers, partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means that certain Credit Agreement dated November
12, 1997, by and among the Company and The First National Bank of Chicago, as
lender and managing agent and the other lenders party thereto, providing for up
to $100.0 million of credit borrowings, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, renewed, refunded, replaced or
refinanced from time to time.
"Senior Debt" means (i) all Debt outstanding under Credit Agreements and
all Hedging Obligations with respect thereto, (ii) any other Debt permitted to
be incurred by the Company under the terms of the Indenture, unless the
instrument under which such Debt is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the Notes and (iii) all
Obligations with respect to the foregoing. Notwithstanding anything to the
contrary in the foregoing, Senior Debt will not include (w) any liability for
federal, state, local or other taxes owed or owing by the Company, (x) any Debt
of the Company to any Subsidiary or other Affiliate, (y) any trade payables or
Capital Lease Obligations or (z) any Debt that is incurred in violation of the
Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the Issue Date.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Debt, the date on which such payment of interest or
principal was scheduled to be paid in the original documentation governing such
Debt, and shall not include any contingent obligations to repay, redeem or
repurchase any such interest or principal prior to the date originally scheduled
for the payment thereof.
"Subordinated Debt" means any Debt of the Company which is by its terms
subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (A) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (B)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Supplemental Credit Facility" means that certain Senior Credit Facility
described in a commitment letter from The First National Bank of Chicago dated
October 15, 1997, as lead agent and a lender, to the Company setting forth a
commitment for up to $115.0 of revolving credit borrowings, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time, to which Facility
the Company may elect to convert the Senior Credit Facility (in which case, all
references in this Offering Memorandum to the "Senior Credit Facility," from and
after the date of such election by the Company, shall be deemed to refer to the
Supplemental Credit Facility).
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"Total Consolidated Debt" means, as at the date of determination, an amount
equal to the aggregate amount of all such Debt and Disqualified Equity Interests
of the Company and its Subsidiaries outstanding as of such date of
determination.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Debt at any
date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding principal amount of
such Debt.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
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ORIGINAL NOTES REGISTRATION RIGHTS
Pursuant to a registration rights agreement (the "Registration Rights
Agreement"), the Company and the Guarantor have agreed with the Initial
Purchasers, for the benefit of the Holders, that the Company and the Guarantors
will, at their cost, (i) not later than 75 days after the Issue Date file a
registration statement (the "Exchange Offer Registration Statement") with the
Commission with respect to a registered offer to exchange the Original Notes for
new notes of the Company (the "Exchange Notes") having terms substantially
identical in all material respects to the Original Notes (except that the
Exchange Notes will not contain terms with respect to transfer restrictions) and
(ii) use their respective best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act not later than 150
days after the Issue Date. Upon the effectiveness of the Exchange Offer
Registration Statement, the Company will promptly offer the Exchange Notes in
exchange for surrender of the Original Notes (the "Registered Exchange Offer").
The Company will keep the Registered Exchange Offer open for not less than 30
days (or longer if required by applicable law) after the date notice of the
Registered Exchange Offer is mailed to the Holders of the Original Notes. For
each Original Note surrendered to the Company pursuant to the Registered
Exchange Offer, the Holder of such Original Note will receive an Exchange Note
having a principal amount equal to that of the surrendered Note. Interest on
each Exchange Note will accrue from the last interest payment date on which
interest was paid on the Note surrendered in exchange thereof or, if no interest
has been paid on such Note, from the date of its original issue.
A Holder of Original Notes (other than certain specified holders) who
wishes to exchange such Notes for Exchange Notes in the Registered Exchange
Offer will be required to represent that any Exchange Notes to be received by it
will be acquired in the ordinary course of its business, and that at the time of
the commencement of the Registered Exchange Offer it has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and that it is not an
"affiliate" of the Company, as defined in Rule 405 of the Securities Act, or if
it is an affiliate, that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
In the event that applicable laws, regulations or interpretations of the
staff of the Commission do not permit the Company to effect such a Registered
Exchange Offer, or if for any reason the Registered Exchange Offer is not
consummated within 180 days after the Issue Date, or if the Initial Purchasers
so request with respect to Notes not eligible to be exchanged for Exchange Notes
in the Registered Exchange Offer, or if any Holder of the Notes is not eligible
to participate in the Registered Exchange Offer or participates in but does not
receive freely tradable (except for prospectus delivery requirements) Exchange
Notes in the Registered Exchange Offer, the Company will, at its cost, (i) as
promptly as practicable, file a shelf registration statement ("Shelf
Registration Statement") covering resales of the Notes or the Exchange Notes, as
the case may be, (ii) use its best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act within 180 days
after the Issue Date; and (iii) keep the Shelf Registration Statement effective
until two years after its effective date (or such shorter period that will
terminate when all Notes or Exchange Notes, as the case may be, covered by the
Shelf Registration Statement have been sold pursuant to the Shelf Registration
Statement). The Company will, in the event a Shelf Registration Statement is
filed, among other things, provide to each holder for whom such Shelf
Registration Statement was filed copies of the prospectus which is part of the
Shelf Registration Statement, notify each such holder when the Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resales of the Notes or the Exchange Notes,
as the case may be. A holder selling such Notes or Exchange Notes pursuant to
the Shelf Registration Statement generally will be required to be named as a
selling security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such
holder (including certain indemnification obligations).
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If (i) within 75 days after the Issue Date, neither the Exchange Offer
Registration Statement nor the Shelf Registration Statement has been filed with
the Commission; (ii) within 150 days after the Issue Date, the Exchange Offer
Registration Statement has not been declared effective; (iii) within 180 days
after the Issue Date, the Registered Exchange Offer has not been consummated;
(iv) within 180 days after the Issue Date, the Shelf Registration Statement has
not been declared effective if a Shelf Registration Statement is required to be
filed; or (v) after either the Exchange Offer Registration Statement or the
Shelf Registration Statement has been declared effective, such Registration
Statement thereafter ceases to be effective or usable (subject to certain
exceptions) in connection with resales of Notes or Exchange Notes in accordance
with and during the periods specified in the Registration Rights Agreement (each
such event referred to in clauses (i) through (v), a "Registration Default"),
interest ("Additional Interest") will accrue on the Notes and the Exchange Notes
(in addition to the stated interest on the Notes and the Exchange Notes) from
and including the date on which any such Registration Default shall occur to but
excluding the date on which all Registration Defaults have been cured.
Additional Interest will accrue at a rate of 0.50% per annum during the 90-day
period immediately following the occurrence of any Registration Default and
shall increase by 0.25% per annum at the end of each subsequent 90-day period,
but in no event shall such rate exceed 2.00% per annum.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the acquisition, ownership and disposition
of Notes by a beneficial owner of Notes that, for United States federal income
tax purposes, is not a "United States person" (a "Non-United States Holder").
This discussion is based upon the United States federal tax law now in effect,
which is subject to change, possibly retroactively. For purposes of this
discussion, a "United States person" means a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in the
United States or under the laws of the United States or of any political
subdivision thereof, an estate whose income is includible in gross income for
United States federal income tax purposes regardless of its source or a trust,
if a U.S. court is able to exercise primary supervision over the administration
of the trust and one or more U.S. persons have the authority to control all
substantial decisions of the trust. The tax treatment of the holders of the
Notes may vary depending upon their particular situations. U.S. persons
acquiring the Notes are subject to different rules than those discussed below.
In addition, certain other holders (including insurance companies, tax exempt
organizations, financial institutions and broker-dealers) may be subject to
special rules not discussed below. PROSPECTIVE INVESTORS ARE URGED TO CONSULT
THEIR TAX ADVISORS REGARDING THE UNITED STATES FEDERAL TAX CONSEQUENCES OF
ACQUIRING, HOLDING AND DISPOSING OF NOTES, AS WELL AS ANY TAX CONSEQUENCES THAT
MAY ARISE UNDER THE LAWS OF ANY FOREIGN, STATE, LOCAL OR OTHER TAXING
JURISDICTION.
Interest
Interest paid by the Company to a Non-United States Holder will not be
subject to United States federal income or withholding tax if such interest is
not effectively connected with the conduct of a trade or business within the
United States by such Non-United States Holder and such Non-United States
Holder: (i) does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company; (ii) is not a
controlled foreign corporation with respect to which the Company is a "related
person" within the meaning of the United States Internal Revenue Code of 1986,
as amended (the "Code"); and (iii) certifies, under penalties of perjury, that
such holder is not a United States person and provides such holder's name and
address.
Gain on Disposition
A Non-United States Holder will generally not be subject to United States
federal income tax on gain recognized on a sale, redemption or other disposition
of a Note unless (i) the gain is effectively connected with the conduct of a
trade or business within the United States by the Non-United States Holder or
(ii) in the case of a Non-United States Holder who is a nonresident alien
individual and holds the Note as a capital asset, such holder is present in the
United States for 183 or more days in the taxable year and certain other
requirements are met.
Federal Estate Taxes
If interest on the Notes is exempt from withholding of United States
federal income tax under the rules described above, the Notes will not be
included in the estate of a deceased Non-United States Holder for United States
federal estate tax purposes.
Information Reporting and Backup Withholding
The Company will, where required, report to the holders of the Notes and
the Internal Revenue Service the amount of any interest paid on the Notes in
each calendar year and the amounts of tax withheld, if any, with respect to such
payments.
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In the case of payments of interest to Non-United States Holders, temporary
Treasury regulations provide that the 31% backup withholding tax and certain
information reporting will not apply to such payments with respect to which
either the requisite certification, as described above, has been received or an
exemption has otherwise been established; provided that neither the Company not
its payment agents has actual knowledge that the holder is a United States
person or that the conditions of any other exemption are not in fact satisfied.
Under temporary Treasury regulations, these information reporting and backup
withholding requirements will apply, however, to the gross proceeds paid to a
Non-United States Holder on the disposition of the Notes by or through a United
States office of a United States or foreign broker, unless the holder certifies
to the broker under penalties of perjury as to its name, address and status as a
foreign person or the holder otherwise establishes an exemption. Information
reporting requirements, but not backup withholding, will also apply to a payment
of the proceeds of a disposition of the Notes by or through a foreign office of
a United States broker or foreign brokers will certain types of relationships to
the United States unless such broker has documentary evidence in its file that
the holder of the Notes is not a United States person, and such broker has not
actual knowledge to the contrary, or the holder establishes an exception.
Neither information reporting nor backup withholding generally will apply to a
payment of the proceeds or a disposition of the Notes by or through a foreign
office of a foreign broker not subject to the preceding sentence.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that the
required information is furnished to the Internal Revenue Service.
The Treasury Department recently promulgated final regulations regarding
the withholding and information reporting rules discussed above. In general, the
final regulations do not significantly alter the substantive withholding and
information reporting requirements but rather unify current certification
procedures and forms and clarify reliance standards. The final regulations are
generally effective for payments made after December 31, 1998, subject to
certain transition rules. NON-UNITED STATES HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE IMPACT, IF ANY, OF THE NEW FINAL REGULATIONS.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The summary is based on current law and certain proposed regulations and is
for general information only. Forthcoming legislative, regulatory, judicial or
administrative changes or interpretations could affect the federal income tax
consequences to holders of Notes. The tax treatment of a holder may vary
depending upon whether the holder is a cash-method or accrual-method taxpayer
and upon the holder's particular status. For example, certain holders, including
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers and foreign persons may be subject to special rules not discussed
below.
EXCHANGE OFFER
The exchange of Exchange Notes for Original Notes pursuant to the Exchange
Offer will not be treated as a taxable exchange for federal income tax purposes
because, other than the fact that the Exchange Notes will be registered, the
terms of the Exchange Notes will be identical in all material respects to the
terms of the Original Notes. The holder must continue to include stated interest
in income as if the exchange had not occurred.
SALE OR OTHER DISPOSITION OF NOTES
A holder of a Note will have a tax basis in the Note equal to the holder's
purchase price for the Note. A holder of a Note will generally recognize gain or
loss on the sale, exchange, redemption or retirement of the Note equal to the
difference (if any) between the amount realized from such sale,
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exchange, redemption or retirement and the holder's basis in the Note. Such gain
or loss will generally be long-term capital gain (except to the extent
attributable to market discount) or loss if the Note has been held more than one
year.
BACKUP WITHHOLDING
A noncorporate holder of Notes that either (a) is (i) a citizen or resident
of the United States, (ii) a partnership or other entity created or organized in
or under the laws of the United States or of any political subdivision thereof
or (iii) an estate or trust the income of which is subject to United States
federal income taxation regardless of its source or (b) is not described in the
preceding clause (a), but whose income from interest with respect to the Notes
or proceeds from the disposition of the Notes is effectively connected with such
holder's conduct of a United States trade or business, and that receive interest
with respect to the Notes or proceeds from the disposition of the Notes will
generally not be subject to backup withholding on such payments or distributions
if it certifies, under penalty of perjury, that it has furnished a correct
Taxpayer Identification Number ("TIN") and it is not subject to backup
withholding either because it has not been notified by the Service that is
subject to backup withholding or because the Service has notified it that it is
no longer subject to backup withholding. Such certification may be made on an
Internal Revenue Service Form W-9 or substantially similar form. However, backup
withholding will apply to such a holder if the holder (i) fails to furnish its
TIN, (ii) furnishes an incorrect TIN, (iii) is notified by the Service that it
has failed to properly report payments of interest or dividends or (iv) under
certain circumstances, fails to make such certification. The Company will
withhold (at a rate of 31%) all amounts required by law to be withheld from
reportable payments made and with respect to the Notes. Any amounts withheld
from a payment to a holder under the backup withholding rules will be allowed as
a credit against such holder's United States federal income tax liability and
may entitle such holder to a refund, provided that the required information is
furnished to the Service. Holders of the Notes should consult their tax advisors
regarding the application of backup withholding in their particular situations,
the availability of an exemption therefrom, and the procedure for obtaining such
an exemption, if available.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER OF
NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR TAX CONSEQUENCES OF
HOLDING, EXCHANGING OR SELLING THE NOTES INCLUDING THE APPLICATION AND EFFECT OF
ANY FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY CHANGES IN APPLICABLE
TAX LAWS.
ORIGINAL NOTES TRANSFER RESTRICTIONS
Because the following restrictions will apply to any Original Notes held by
holders who do not participate in the Exchange Offer, holders of Original Notes
are advised to consult legal counsel prior to making any offer, resale, pledge
or transfer of any of the Original Notes.
None of the Original Notes have been registered under the Securities Act
and they 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, or in
a transaction not subject to, the registration requirements of the Securities
Act. Accordingly, the Original Notes were sold only (A) to a limited number of
"qualified institutional buyers" (as defined in Rule 144A) ("QIBs") in
compliance with Rule 144A, (B) to a limited number of other institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) ("Accredited Investors") that, prior to their purchase of any
Original Notes, delivered to the Initial Purchasers a letter containing certain
representations and agreements, and (C) outside the United States to person
other than U.S. persons ("foreign purchasers," which term shall include dealers
or other professional fiduciaries in the United States acting on a discretionary
basis for foreign beneficial owners (other than an estate or trust)) in
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reliance upon Regulation S under the Securities Act ("Regulation S"). As used
herein, the terms "United States" and "U.S. person" have the meanings given to
them in Regulation S.
Each purchaser of Original Notes has been deemed to have represented and
agreed as follows:
1. It purchased the Original Notes for its own account or an account
with respect to which it exercises sole investment discretion and that it
and any such account is either (A) a QIB, and is aware that the sale to it
was made in reliance on Rule 144A, (B) an Accredited Investor, or (C) a
foreign purchaser that is outside the United States (or a foreign purchaser
that is a dealer or other fiduciary as referred to above).
2. It acknowledged that the Original Notes (and the related
guarantees) have not been registered under the Securities Act and that they
may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except as set forth below.
3. It shall not resell or otherwise transfer any of such Original
Notes within three years after the original issuance of the Original Notes
except (A) to the Company or any of its subsidiaries, (B) inside the United
States to a QIB in compliance with Rule 144A, (C) inside the United States
to an Accredited Investor that, prior to such transfer, furnishes (or has
furnished on its behalf by a U.S. broker dealer) to the Trustee a signed
letter containing certain representations and agreements relating to the
restrictions on transfer of the Original Notes (the form of which letter
can be obtained from the Trustee), (D) outside the United States in
compliance with Rule 904 under the Securities Act, (E) pursuant to the
exemption from registration provided by Rule 144 under the Securities Act
(if available), or (F) pursuant to an effective registration statement
under the Securities Act.
4. It agreed that it will give to each person to whom it transfers the
Original Notes notice of any restrictions on transfer of such Original
Notes.
5. It understands that all of the Original Notes bear, and if not
exchanged pursuant to the Exchange Offer will continue to bear, a legend
substantially to the following effect unless otherwise agreed by the
Company and the holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 501(a)(1), (2), (3), OR (7) UNDER THE ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT
WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL
OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE ACT, (C)
INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR
TO SUCH TRANSFER FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT, (E) PURSUANT TO
THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
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THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
SECURITY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE
COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT.
6. It shall not sell or otherwise transfer such Original Notes to, and
each purchaser represented and covenanted that it did not acquire the
Original Notes for or on behalf of, and will not transfer the Original
Notes to, any pension or welfare plan (as defined in Section 3 of the
Employee Retirement Income Security Act of 1974 ("ERISA"), except that such
a purchase for or on behalf of a pension or welfare plan shall be
permitted:
a. to the extent such purchase is made by or on behalf of a bank
collective investment fund maintained by the purchaser in which, at any
time while the Original Notes are held by the purchaser, no plan
(together with any other plans maintained by the same employer or
employee organization) has an interest in excess of 10% of the total
assets in such collective investment fund and the conditions of Section
III of Prohibited Transaction Class Exemption 91-38 issued by the
Department of Labor are satisfied;
b. to the extent such purchase is made by or on behalf of an
insurance company pooled separate account maintained by the purchaser in
which, at any time while the Original Notes are held by the purchaser,
no plan (together with any other plans maintained by the same employer
or employee organization) has an interest in excess of 10% of the total
of all assets in such pooled separate account and the conditions of
Section III of Prohibited Transaction Class Exemption 90-1 issued by the
Department of Labor are satisfied;
c. to the extent such purchase is made on behalf of a plan by (i)
an investment adviser registered under the Investment Advisers Act of
1940 that had as of the last day of its most recent fiscal year total
assets under its management and control in excess of $50,000,000 and had
stockholders' or partners' equity in excess of $750,000, as shown in its
most recent balance sheet prepared in accordance with generally accepted
accounting principles, (ii) a bank as defined in Section 202(a)(2) of
the Investment Advisers Act of 1940 with equity capital in excess of
$1,000,000 as of the last day of its most recent fiscal year, (iii) an
insurance company which is qualified under the laws of more than one
state to manage, acquire or dispose of any assets of a plan, which
insurance company has, as of the last day of its most recent fiscal
year, net worth in excess of $1,000,000 and which is subject to
supervision and examination by a state authority having supervision over
insurance companies, or (iv) a savings and loan association, the
accounts of which are insured by the Federal Savings and Loan Insurance
Corporation, that has made application for and been granted trust powers
to manage, acquire or dispose of assets of a plan by a State or Federal
authority having supervision over savings and loan associations, which
savings and loan association has, as of the last day of its most recent
fiscal year, equity capital or net worth in excess of $1,000,000 and, in
any case, such investment adviser, bank, insurance company or savings
and loan is otherwise a qualified professional asset manager, as such
term is used in Prohibited Transaction Exception 84-14 issued by the
Department of Labor, and the assets of such plan when combined with the
assets of other plans established or maintained by the same employer (or
affiliate thereof) or employee organization and managed by such
investment adviser, bank, insurance company or savings and loan do not
represent more than 20% of the total client assets managed by
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such investment adviser, bank, insurance company or savings and loan and
the conditions of Section I of such exemption are otherwise satisfied;
or
d. to the extent such plan is a governmental plan (as defined in
Section 3 of ERISA) which is not subject to the provisions of Title I of
ERISA or Section 4975 of the Internal Revenue Code.
7. It acknowledged that the Trustee for the Original Notes will not be
required to accept for registration of transfer any Original Notes acquired
by it, except upon presentation of evidence satisfactory to the Company and
the Trustee that the restrictions set forth herein have been complied with.
8. It acknowledged that the Company, the Initial Purchasers and others
will rely upon the truth and accuracy of the foregoing acknowledgements,
representations and agreements and agreed that if any of the
acknowledgements, representations or agreements deemed to have been made by
its purchase of the Original Notes are no longer accurate, it shall
promptly notify the Company and the Initial Purchasers. If it acquired the
Original Notes as a fiduciary or agent for one or more investor accounts,
it represented that it has sole investment discretion with respect to each
such account and it has full power to make the foregoing acknowledgements,
representations and agreements on behalf of each account.
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PLAN OF DISTRIBUTION
Based on interpretation by the Staff set forth in no-action letters issued
to third parties, the Company believes that Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Original Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an affiliate of the Company, (ii) a broker-dealer who acquired Original
Notes directly from the Company or (iii) a broker-dealer who acquired Original
Notes as a result of market-making or other trading activities) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such Exchange Notes are acquired in the ordinary
course of such holders' business, and such holders are not engaged in, and do
not intend to engage in, and have no arrangement or understanding with any
person to participate in, a distribution of such Exchange Notes; provided that
broker-dealers ("Participating Broker-Dealers") receiving Exchange Notes in the
Exchange Offer will be subject to a prospectus delivery requirement with respect
to resales of such Exchange Notes. To date, the Staff has taken the position
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to transactions involving an exchange of securities
such as the exchange pursuant to the Exchange Offer (other than a resale of an
unsold allotment from the sale of the Original Notes to the Initial Purchasers)
with the prospectus contained in the Registration Statement. Pursuant to the
Registration Rights Agreement, the Company have agreed to permit Participating
Broker Dealers and other persons, if any, subject to similar prospectus delivery
requirements to use this Prospectus in connection with the resale of such
Exchange Notes. The Company have agreed that, for a period of 180 days after the
Exchange Date, they will make this Prospectus, and any amendment or supplement
to this Prospectus, available to any broker-dealer that requests such documents
in the Letter of Transmittal.
Each holder of the Original Notes who wishes to exchange its Original Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer -- Terms and
Conditions of the Letter of Transmittal." In addition, each holder who is a
broker-dealer and who receives Exchange Notes for its own account in exchange
for Original Notes that were acquired by it as a result of market-making
activities or other trading activities will be required to acknowledge that it
will deliver a prospectus in connection with any resale by it of such Exchange
Notes.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
The Company have agreed to pay all expenses incidental to the Exchange
Offer other than commissions and concession of any brokers or dealers and will
indemnify holders of the Notes (including any brokers-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in the
Registration Rights Agreement.
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LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon on
behalf of the Company by Cairncross & Hempelmann, P.S., Seattle, Washington.
EXPERTS
The audited consolidated financial statements of the Company as of July 31,
1997, December 31, 1996 and 1995, and for each of the three years in the period
ended December 31, 1996 and for the seven months ended July 31, 1997, included
in this Offering Memorandum to the extent and for the periods in their reports
have been audited by Arthur Andersen LLP, independent public accountants and are
included herein upon the authority of said firm as experts in giving said
reports.
The financial statements of (i) Aiken II Cable Systems (a component of
Robin Cable Systems, L.P.) and (ii) Greenwood Cable System (a component of
InterMedia Partners of Carolina, L.P.) as of December 31, 1995 and 1996 and for
the three years in the period ended December 31, 1996 included in this Offering
Memorandum, have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
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PAGE
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<S> <C>
THE COMPANY:
Northland Cable Television, Inc. and subsidiary
Report of Independent Public Accountants........................................... F-2
Consolidated Balance Sheets as of September 30, 1997 (unaudited) and as of December
31, 1996 and 1995............................................................... F-3
Consolidated Statements of Operations for the nine-month periods ended September
30, 1997 and 1996 (unaudited) and for the years ended December 31, 1996, 1995
and 1994........................................................................ F-4
Consolidated Statements of Changes in Shareholder's Deficit for the nine-month
period ended September 30, 1997 (unaudited) and for the years ended December 31,
1996, 1995 and 1994............................................................. F-5
Consolidated Statements of Cash Flows for the nine-month periods ended September
30, 1997 and 1996 (unaudited) and for the years ended December 31, 1996, 1995
and 1994........................................................................ F-6
Notes to Consolidated Financial Statements......................................... F-7
Northland Cable Television, Inc. and subsidiary
Report of Independent Public Accountants........................................... F-17
Consolidated Balance Sheet as of July 31, 1997..................................... F-18
Consolidated Statement of Operations for the seven-month period ended July 31,
1997............................................................................ F-19
Consolidated Statement of Changes in Shareholder's Deficit for the seven-month
period ended July 31, 1997...................................................... F-20
Consolidated Statement of Cash Flows for the seven-month period ended July 31,
1997............................................................................ F-21
Notes to Consolidated Financial Statements......................................... F-22
ACQUISITION SYSTEMS:
Aiken II Cable Systems (a component of Robin Cable Systems, L.P.)
Report of Independent Accountants.................................................. F-30
Balance Sheet as of December 31, 1996 and 1995 and as of September 30, 1997
(unaudited)..................................................................... F-31
Statement of Operations for the years ended December 31, 1996, 1995 and 1994 and
for the nine-month periods ended September 30, 1997 and 1996 (unaudited)........ F-32
Statement of Changes in Equity for the years ended December 31, 1996, 1995 and 1994
and for the nine-month period ended September 30, 1997 (unaudited).............. F-33
Statement of Cash Flows for the years ended December 31, 1996, 1995 and 1994 and
for the nine-month periods ended September 30, 1997 and 1996 (unaudited)........ F-34
Notes to Financial Statements...................................................... F-35
Greenwood Cable System (a component of InterMedia Partners of Carolina, L.P.)
Report of Independent Accountants.................................................. F-42
Balance Sheet as of December 31, 1996 and 1995 and as of September 30, 1997
(unaudited)..................................................................... F-43
Statement of Operations for the years ended December 31, 1996, 1995 and 1994 and
for the nine-month periods ended September 30, 1997 and 1996 (unaudited)........ F-44
Statement of Changes in Equity for the years ended December 31, 1996, 1995 and 1994
and for the nine-month period ended September 30, 1997 (unaudited).............. F-45
Statement of Cash Flows for the years ended December 31, 1996, 1995 and 1994 and
for the nine-month periods ended September 30, 1997 and 1996 (unaudited)........ F-46
Notes to Financial Statements...................................................... F-47
</TABLE>
F-1
<PAGE> 110
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of
Northland Cable Television, Inc.:
We have audited the accompanying consolidated balance sheets of Northland
Cable Television, Inc. (a Washington corporation and a wholly owned subsidiary
of Northland Telecommunications Corporation) and subsidiary as of December 31,
1996 and 1995, and the related consolidated statements of operations, changes in
shareholder's deficit and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Northland Cable Television,
Inc. and subsidiary as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Seattle, Washington,
March 31, 1997
F-2
<PAGE> 111
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -----------------------------
1997 1996 1995
------------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash............................................. $ 1,156,123 $ 2,486,237 $ 982,295
Due from limited partnerships.................... 26,487 36,129 82,940
Accounts receivable.............................. 1,161,814 1,289,840 906,780
Prepaid expenses................................. 499,070 273,246 306,968
------------ ------------ ------------
Total current assets...................... 2,843,494 4,085,452 2,278,983
------------ ------------ ------------
UNSECURED ADVANCES TO PARENT....................... -- 1,003,457 1,003,457
------------ ------------ ------------
INVESTMENT IN MANAGED LIMITED PARTNERSHIP.......... -- -- 7,778
------------ ------------ ------------
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property and equipment, at cost.................. 67,174,497 61,891,985 55,241,912
Less -- Accumulated depreciation................. (27,495,056) (23,167,487) (18,444,806)
------------ ------------ ------------
39,679,441 38,724,498 36,797,106
Franchise agreements (net of accumulated
amortization of $27,985,880, $23,222,978 and
$18,334,932, respectively).................. 37,255,505 38,553,555 27,374,524
Goodwill (net of accumulated amortization of
$1,830,883, $1,701,050 and $1,527,939,
respectively)............................... 5,093,550 5,223,383 5,396,494
Other intangible assets (net of accumulated
amortization of $1,856,962, $1,196,286 and
$641,346, respectively)..................... 3,556,248 4,008,918 2,896,248
Fund deposited in escrow for purchase of cable
television system........................... 690,000 -- --
------------ ------------ ------------
86,274,744 86,510,354 72,464,372
------------ ------------ ------------
Total assets.............................. $ 89,118,238 $ 91,599,263 $75,754,590
============ ============ ============
LIABILITIES AND SHAREHOLDER'S DEFICIT
CURRENT LIABILITIES:
Accounts payable................................. $ 81,219 $ 779,724 $ 597,427
Subscriber prepayments........................... 1,028,998 868,030 680,513
Other current liabilities........................ 4,249,697 3,056,425... 1,906,574
Due to affiliates................................ 1,421,844 407,692 863,477
Current portion of notes payable................. 7,538,444 5,550,314 3,928,263
------------ ------------ ------------
Total current liabilities................. 14,320,202 10,662,185 7,976,254
NOTES PAYABLE...................................... 95,429,971 96,604,418 79,216,648
UNSECURED ADVANCES FROM AFFILIATES................. -- 10,341,650 10,341,650
------------ ------------ ------------
Total liabilities......................... 109,750,173 117,608,253 97,534,552
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDER'S DEFICIT:
Common stock (par value $1.00 per share,
authorized 50,000 shares; 10,000 shares issued
and outstanding) and additional paid-in
capital........................................ 11,560,527 2,222,334 2,222,334
Accumulated deficit.............................. (32,192,462) (28,231,324) (24,002,296)
------------ ------------ ------------
Total shareholder's deficit............... (20,631,935) (26,008,990) (21,779,962)
------------ ------------ ------------
Total liabilities and shareholder's
deficit................................. $ 89,118,238 $ 91,599,263 $75,754,590
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE> 112
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE-MONTH PERIOD ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- ---------------------------------------
1997 1996 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
SERVICE REVENUES.................... $28,700,196 $23,442,978 $32,560,981 $26,395,398 $15,344,842
----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES:
Cable system operations (including
$155,647 (unaudited), $203,197
(unaudited) $284,896, $177,976
and $111,471, net paid to
affiliates, respectively)....... 8,625,876 6,883,463 9,448,391 7,515,488 4,182,827
General and administrative
(including $1,701,082
(unaudited), $1,452,906
(unaudited), $1,902,405,
$1,665,688 and $692,066 paid to
affiliates, respectively)....... 5,331,900 4,230,072 5,955,139 4,709,765 2,782,381
Management fees paid to
affiliate....................... 1,432,783 1,169,963 1,625,118 1,320,492 331,602
Depreciation and amortization..... 9,652,832 7,591,399 10,727,032 9,022,367 5,307,010
----------- ----------- ----------- ----------- -----------
Total operating expenses... 25,043,391 19,874,897 27,755,680 22,568,112 12,603,820
----------- ----------- ----------- ----------- -----------
Income from operations..... 3,656,805 3,568,081 4,805,301 3,827,286 2,741,022
OTHER INCOME (EXPENSE):
Interest expense.................. (7,377,783) (5,884,442) (8,263,318) (7,214,737) (3,225,721)
Other, net (Note 6)............... (240,160) (209,649) (771,011) (370,666) 100,184
----------- ----------- ----------- ----------- -----------
Loss before provision for
income taxes............. (3,961,138) (2,526,010) (4,229,028) (3,758,117) (384,515)
PROVISION FOR INCOME TAXES.......... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
NET LOSS............................ $(3,961,138) $(2,526,010) $(4,229,028) $(3,758,117) $ (384,515)
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 113
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK AND
ADDITIONAL PAID-IN
CAPITAL
---------------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1993........... 10,000 $ 2,222,334 $(19,859,664) $(17,637,330)
Net loss........................... -- -- (384,515) (384,515)
------ ----------- ------------ ------------
BALANCE, December 31, 1994........... 10,000 2,222,334 (20,244,179) (18,021,845)
Net loss........................... -- -- (3,758,117) (3,758,117)
------ ----------- ------------ ------------
BALANCE, December 31, 1995........... 10,000 2,222,334 (24,002,296) (21,779,962)
Net loss........................... -- -- (4,229,028) (4,229,028)
------ ----------- ------------ ------------
BALANCE, December 31, 1996........... 10,000 2,222,334 (28,231,324) (26,008,990)
Net loss (unaudited)............... -- -- (3,961,138) (3,961,138)
Capital contribution (unaudited)... -- 9,338,193 -- 9,338,193
------ ----------- ------------ ------------
BALANCE, September 30, 1997
(unaudited)........................ 10,000 $11,560,527 $(32,192,462) $(20,631,935)
====== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 114
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE-MONTH PERIOD ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------------- -------------------------------------------
1997 1996 1996 1995 1994
------------ ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................... $ (3,961,138) $(2,526,010) $(4,229,028) $(3,758,117) $ (384,515)
Adjustments to reconcile net loss
to net cash provided by operating
activities --
Depreciation and
amortization................ 9,907,077 7,747,093 10,967,474 9,224,474 5,373,480
Other.......................... (72,177) (51,831) 320,513 79,295 153,083
Decrease (increase) in
operating assets:
Due from limited
partnerships.............. 15,195 69,642 116,164 (57,956) 12,641
Accounts receivable......... 128,026 (61,460) (383,060) (302,663) (108,056)
Prepaid expenses............ (225,824) (144,912) 33,722 (62,597) (94,231)
(Decrease) increase in
operating liabilities:
Accounts payable............ (246,561) (443,606) (120,904) 328,781 (41,897)
Subscriber prepayments...... 160,968 125,249 187,517 98,394 269,268
Other current liabilities... 1,193,272 168,243 1,149,851 1,231 643,484
------------ ----------- ------------ ------------ ------------
Net cash provided by
operating activities...... 6,898,838 4,882,408 8,042,249 5,550,842 5,823,257
------------ ----------- ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of cable systems....... (6,203,141) (637,737) (22,180,347) (21,717,081) (26,362,691)
Investment in cable television
properties....................... (3,230,270) (2,023,538) (2,843,391) (2,731,117) (1,824,681)
Funds deposited in escrow for
purchase of cable television
system........................... (690,000) -- -- -- --
Insurance proceeds................. 72,177 100,000 372,280 -- --
Franchise fees and other
intangibles...................... -- (103,387) (183,211) (41,279) (11,785)
Other.............................. -- -- 4,350 9,582 4,727
------------ ----------- ------------ ------------ ------------
Net cash used in investing
activities................ (10,051,234) (2,664,662) (24,830,319) (24,479,895) (28,194,430)
------------ ----------- ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable........ 5,000,000 -- 21,995,000 19,655,298 65,500,000
Principal payments on notes
payable.......................... (4,186,317) (2,582,673) (2,589,354) (2,437,231) (38,696,796)
Loan fees.......................... -- (50,000) (1,063,118) (55,573) (1,811,295)
Advances from (payments to)
affiliates....................... 1,008,599 50,406 (50,516) 201,358 (1,116,682)
------------ ----------- ------------ ------------ ------------
Net cash provided by (used in)
financing activities........... 1,822,282 (2,582,267) 18,292,012 17,363,852 23,875,227
------------ ----------- ------------ ------------ ------------
(DECREASE) INCREASE IN CASH.......... (1,330,114) (364,521) 1,503,942 (1,565,201) 1,504,054
CASH, beginning of year.............. 2,486,237 982,295 982,295 2,547,496 1,043,442
------------ ----------- ------------ ------------ ------------
CASH, end of period.................. $ 1,156,123 $ 617,774 $ 2,486,237 $ 982,295 $ 2,547,496
============ =========== ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for
interest......................... $ 6,986,059 $ 5,845,741 $ 7,673,330 $ 7,360,315 $ 2,986,799
============ =========== ============ ============ ============
Cash paid (received) during the
period for state income taxes.... $ 10,601 $ 23,745 $ 21,592 $ 5,610 $ (19,443)
============ =========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 115
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
----------------------------------------------------
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996 ARE UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
FORMATION AND BUSINESS
Northland Cable Television, Inc. (NCTV), a Washington corporation, was
formed to own and operate cable television systems. As of September 30, 1997,
NCTV had 65 nonexclusive franchises to operate cable television systems. These
franchises expire at various dates through 2020.
Northland Cable News, Inc. (NCN), a Washington corporation which was formed
to develop and distribute programming to certain of the Company's affiliated
entities, is a wholly owned subsidiary of NCTV. NCTV and NCN are collectively
referred to as the Company.
RELATED COMPANIES
The Company and its affiliates, Northland Communications Corporation and
subsidiary (NCC); Northland Cable Services Corporation and subsidiaries (NCSC);
and Northland Media, Inc. and subsidiary (NMI) are wholly owned subsidiaries of
Northland Telecommunications Corporation (NTC or Parent). NCC is the managing
general partner of six limited partnerships, which own and operate cable
television systems. Additionally, NCC owns and operates cable systems through
Northland Cable Properties, Inc. (NCP, Inc.), its wholly owned subsidiary. NCSC
is the parent company for Cable Television Billing, Inc. (CTB) and Cable
Ad-Concepts, Inc. (CAC). CTB provides billing services to cable systems owned by
managed limited partnerships of NCC and wholly owned systems of the Company and
NCC. CAC develops and produces video commercial advertisements to be cablecast
on Northland affiliated cable systems. NMI was formed as a holding company to
own certain noncable related assets.
BASIS OF INTERIM FINANCIAL STATEMENT PRESENTATION
The financial statements as of and for the nine-month periods ended
September 30, 1997 and September 30, 1996 have been prepared without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. These
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto.
The financial information included herein reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary to a fair presentation of the results of interim periods.
The results of operations for the nine-month period ended September 30, 1997 are
not necessarily indicative of the results to be expected for the full year.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation -- The consolidated financial statements of the
Company include the accounts of the Company and its wholly owned subsidiary,
NCN. Significant intercompany accounts and transactions have been eliminated.
The Company merged Cal-Nor Cableview, Inc., a former subsidiary, into the
Company during 1994.
F-7
<PAGE> 116
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
----------------------------------------------------
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996 ARE UNAUDITED)
Acquisition of Cable Television Systems -- Cable television system
acquisitions are accounted for as purchase transactions and their cost is
allocated to the estimated fair market value of net tangible assets acquired and
to the franchise and other determinable intangible costs. Any excess is
allocated to goodwill.
Cash and Cash Equivalents -- Cash and cash equivalents include cash and
investments in short-term, highly liquid securities, which have maturities when
purchased of three months or less.
Property and Equipment -- Property and equipment are stated at cost.
Replacements, renewals and improvements are capitalized. Maintenance and repairs
are charged to expense as incurred. Depreciation of property and equipment is
provided using the straight-line method over the following estimated service
lives:
<TABLE>
<S> <C>
Buildings............................................... 20 years
Distribution plant...................................... 10 years
Other equipment and leasehold improvements.............. 5-20 years
</TABLE>
The Company periodically reviews the carrying value of its long-lived
assets, including property, equipment and intangible assets, whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable. To the extent the estimated future cash inflows attributable to the
asset, less estimated future cash outflows, is less than the carrying amount, an
impairment loss is recognized.
Intangible Assets -- Costs assigned to goodwill, franchise agreements and
loan fees and other intangible assets are amortized using the straight-line
method over the following estimated useful lives:
<TABLE>
<S> <C>
Goodwill............................................... 40 years
Franchise agreements................................... 10-20 years
Loan fees and other intangible assets.................. 1-10 years
</TABLE>
Revenue Recognition -- Cable television service revenue is recognized in
the month service is provided to customers. Advance payments on cable services
to be rendered are recorded as subscriber prepayments. Revenue from management
services provided to Clemson-Seneca during 1995 and 1994 was recorded on the
accrual method in the month service was provided. License fee revenue is
recognized in the period service is provided.
Estimates Used in Financial Statement Presentation -- The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
2. TRANSACTIONS WITH MANAGED LIMITED PARTNERSHIP AND OTHER RELATED PARTIES:
Management Fees -- Prior to the acquisition of the assets of Clemson-Seneca
(see Note 9), the Company received a fee for its services equal to 6.75% of
Clemson-Seneca's gross revenues, excluding revenues from the sale of cable
television systems or franchises.
F-8
<PAGE> 117
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
----------------------------------------------------
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996 ARE UNAUDITED)
In August 1994, NCTV began paying management fees to NTC equal to 5% of
NCTV's gross revenues, excluding revenues from the sale of cable television
systems or franchises. The Company paid $1,625,118, $1,320,492 and $331,603 to
NTC in 1996, 1995 and 1994, respectively.
Program License Fees -- In July 1994, NCN began receiving monthly program
license fees from affiliated entities for programming produced by NCN. Total
license fees earned from affiliates during 1996, 1995 and 1994 were $619,466,
$602,263 and $342,462, respectively.
Unsecured Advances to Parent and Advances from Affiliates -- The Company's
advances from affiliates are intended to be repaid through future cash flow
generated by the Company. Under the terms of an intercompany borrowing
arrangement, the Company had agreed to repay all outstanding advances due to
affiliates by December 31, 2002; effective June 30, 1997, the Company received a
non-cash capital contribution of $9,338,193 from NTC which replaced the net
unsecured advances that had previously been owed to NTC and other affiliates of
the Company.
Reimbursements -- NTC provides or causes to be provided certain centralized
services to the Company and other affiliated entities. NTC is entitled to
reimbursement from the Company for various expenses incurred by it or its
affiliates on behalf of the Company allocable to its management of the Company,
including travel expenses, pole and site rental, lease payments, legal expenses,
billing expenses, insurance, governmental fees and licenses, headquarters
supplies and expenses, pay television expenses, equipment and vehicle charges,
operating salaries and expenses, administrative salaries and expenses, postage
and office maintenance. NTC has historically assigned its reimbursement rights
to NCC.
The amounts billed to the Company are based on costs incurred by affiliates
in rendering the services. The costs of certain services are charged directly to
the Company, based upon the personnel time spent by the employees rendering the
service. The cost of other services is allocated to the Company and affiliates
based upon relative size and revenue. Amounts charged for these services were
$1,670,409, $1,425,316 and $622,486 for 1996, 1995 and 1994, respectively.
In 1996, 1995 and 1994, the Company was charged billing service fees by CTB
of $231,756, $175,632 and $105,779, respectively. CAC billed the Company
$196,491, $161,627 and $33,790, respectively, for advertising services in 1996,
1995 and 1994.
The Company has operating management agreements with limited partnerships
managed by NCC. Under the terms of these agreements, the Company or an affiliate
serves as the managing agent for certain cable television systems and is
reimbursed for certain operating, administrative and programming expenses. The
Company paid $84,151, $65,921 and $25,087, net, under the terms of these
agreements during 1996, 1995 and 1994, respectively.
Accumulated Deficit in Managed Limited Partnership -- NCTV was a general
partner in Clemson-Seneca, which owned and operated a cable television system.
During 1995, NCTV purchased the assets of Clemson-Seneca. All items of income,
loss, deduction and credit generated by this limited partnership were allocated
99% to the limited partners and 1% to NCTV as managing general partner until the
limited partners had received aggregate cash distributions in an amount equal to
aggregate capital contributions. Thereafter, the general partners received 25%
and the limited partners were allocated 75% of partnership income, losses and
distributions. Distributions from the sale of the system have been determined
according to its partnership agreement.
F-9
<PAGE> 118
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
----------------------------------------------------
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996 ARE UNAUDITED)
3. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -----------------------------
1997 1996 1995
------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Land and buildings...... $ 2,053,834 $ 1,803,610 $ 1,935,828
Distribution plant...... 60,753,567 56,471,372 50,293,667
Other equipment......... 3,637,927 3,360,770 2,940,600
Leasehold
improvements.......... 39,805 39,805 38,451
Construction-in-
progress.............. 689,364 216,428 33,366
------------ ------------ ------------
$ 67,174,497 $ 61,891,985 $ 55,241,912
Less: Accumulated
Depreciation....... (27,495,056) (23,167,487) (18,444,806)
------------ ------------ ------------
$ 39,679,441 $ 38,724,498 $ 36,797,106
============ ============ ============
</TABLE>
4. OTHER CURRENT LIABILITIES:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -------------------------
1997 1996 1995
------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Programmer license fees...... $ 1,363,486 $1,000,147 $ 455,348
Accrued franchise fees....... 607,868 647,619 548,503
Accrued interest............. 702,783 565,704 222,908
Other........................ 1,575,560 842,955 679,815
---------- ---------- ----------
$ 4,249,697 $3,056,425 $1,906,574
========== ========== ==========
</TABLE>
5. NOTES PAYABLE:
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER 31,
30, ----------------------------
1997 1996 1995
------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Revolving credit and term
loan................... $102,821,769 $101,999,998 $82,569,998
Other.................... 146,646 154,734 574,913
------------ ------------ -----------
$102,968,415 $102,154,732 $83,144,911
============ ============ ===========
</TABLE>
The revolving credit and term loan is collateralized by a first lien
position on all present and future assets and stock of the Company. Interest
rates vary based on certain financial covenants; 8.91% as of October 22, 1997
(weighted average). Graduated principal and interest payments are due quarterly
until maturity on September 30, 2004.
F-10
<PAGE> 119
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
----------------------------------------------------
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996 ARE UNAUDITED)
Annual maturities of notes payable are as follows:
<TABLE>
<S> <C>
1997 (October 1 through December 31)........... $ 1,363,996
1998........................................... 8,232,650
1999........................................... 9,900,000
2000........................................... 12,600,000
2001........................................... 15,300,000
2002........................................... 23,000,000
Thereafter..................................... 32,571,769
------------
102,968,415
Less -- Current portion........................ (7,538,444)
------------
$ 95,429,971
============
</TABLE>
Under the revolving credit and term loan agreement, the Company has agreed
to restrictive covenants which require the maintenance of certain ratios,
including a Pro Forma Debt Service Ratio of 1.15 to 1 and a Leverage Ratio of
5.50 to 1 as of September 30, 1997, among other restrictions. The Company
submits quarterly debt compliance reports to its creditor under this
arrangement.
The Company has entered into interest-rate swap agreements to reduce the
impact of changes in interest rates. At December 31, 1996, the Company had seven
interest-rate swap agreements with its bank, having a notional principal amount
outstanding of $85,715,000. These agreements effectively change the Company's
interest rate exposure on the swapped portion of the loan to a fixed rate of
6.24% (weighted average), plus an applicable margin based on certain financial
covenants (the margin at December 31, 1996, was 2.75%). The maturity date, the
fixed interest rate and the notional amount of each swap are as follows:
<TABLE>
<CAPTION>
MATURITY DATE FIXED RATE AMOUNT
-------------------------------------------------- ---------- -----------
<S> <C> <C>
June 12, 1997..................................... 5.63% $13,500,000
June 30, 1997..................................... 5.97% 12,900,000
August 23, 1997................................... 6.65% 25,115,000
September 30, 1997................................ 6.00% 4,200,000
October 15, 1997.................................. 6.15% 21,000,000
March 9, 1998..................................... 7.25% 5,500,000
November 6, 1998.................................. 5.89% 3,500,000
-----------
$85,715,000
===========
</TABLE>
At December 31, 1996, the Company would have been required to pay
approximately $410,000 to settle these agreements based on fair value estimates
received from financial institutions. The carrying value of the Company's notes
payable approximate fair value due to their variable interest rate nature.
F-11
<PAGE> 120
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
----------------------------------------------------
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996 ARE UNAUDITED)
6. OTHER, NET:
Other, net in other income (expense) in the consolidated statements of
operations consists of:
<TABLE>
<CAPTION>
NINE-MONTH PERIOD ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------
1997 1996 1996 1995 1994
----------- ----------- ----------- ----------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NORTHLAND CABLE NEWS
PROGRAMMING OPERATIONS:
License fees from
affiliates................ $ 559,026 $ 462,366 $ 619,466 $ 602,263 $ 342,462
Operating expenses........... (870,651) (776,299) (1,051,556) (1,026,501) (296,778)
--------- --------- ----------- ----------- ---------
Income (loss) from
Programming Operations.. (311,625) (313,933) (432,090) (424,238) 45,684
MANAGEMENT OPERATIONS:
Management fees from
affiliate................. -- -- -- 120,618 226,043
General and administrative
expense................... -- -- -- (27,683) (45,872)
GAIN (LOSS) ON DISPOSAL OF
ASSETS....................... 72,177 51,831 (365,614) (80,045) (23,876)
INTEREST INCOME................ 17,038 36,225 54,331 65,158 33,038
OTHER.......................... (17,750) 16,228 (27,638) (24,476) (134,833)
--------- --------- ----------- ----------- ---------
$ (240,160) $ (209,649) $ (771,011) $ (370,666) $ 100,184
========= ========= =========== =========== =========
</TABLE>
7. INCOME TAXES:
The operations of the Company and its affiliates are included for federal
income tax purposes in a consolidated federal income tax return filed by NTC.
For financial reporting purposes, the provision (benefit) for income taxes is
computed as if the Company filed a separate federal income tax return utilizing
the tax rate applicable to NTC on a consolidated basis.
Deferred income taxes are determined on the asset and liability method in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." The asset and liability method requires the
recognition of deferred income taxes for the expected future tax consequences of
temporary differences between the carrying amounts on the financial statements
and the tax bases of assets and liabilities.
F-12
<PAGE> 121
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
----------------------------------------------------
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996 ARE UNAUDITED)
The primary components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------
1997 1996 1995
------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss
carryforward................ $12,410,000 $11,035,000 $ 8,762,000
Valuation allowance............ (8,123,000) (6,686,000) (5,230,000)
----------- ----------- -----------
4,287,000 4,349,000 3,532,000
Deferred tax liabilities:
Property and equipment......... 4,287,000 4,349,000 3,532,000
----------- ----------- -----------
$ -- $ -- $ --
=========== =========== ===========
</TABLE>
The federal income tax net operating loss carryforward of approximately
$36,500,000 (unaudited) as of September 30, 1997 expires beginning in the years
2003 through 2012. Management believes that the available objective evidence
creates sufficient uncertainty regarding the realization of the net deferred tax
assets due to the recurring operating losses being incurred by the Company.
Accordingly, a valuation allowance has been provided for the net deferred tax
assets of the Company. The change in the valuation allowance was $1,437,000
(unaudited) for the nine-month period ended September 30, 1997 and $1,456,000,
$1,250,000 and $185,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
The difference between the statutory tax rate of approximately 40% (34%
federal and 6% state, net of federal benefits) and the tax benefit of zero
recorded by the Company is primarily due to the Company's full valuation
allowance against its net deferred tax asset.
8. COMMITMENTS AND CONTINGENCIES:
Lease Arrangements -- The Company leases certain tower sites, office
facilities and pole attachments under leases accounted for as operating leases.
Rental expense (including month-to-month leases) was $439,261, $434,101 and
$214,401 in 1996, 1995 and 1994, respectively. Minimum lease payments to the end
of the lease terms are as follows:
<TABLE>
<S> <C>
1997 (October 1 through December 31)..................... $ 18,352
1998..................................................... 51,455
1999..................................................... 36,209
2000..................................................... 19,299
2001..................................................... 17,571
2002..................................................... 15,997
Thereafter............................................... 79,299
--------
$238,182
========
</TABLE>
EFFECTS OF REGULATION:
On February 8, 1996, the Telecommunications Act of 1996 (the 1996 Act) was
enacted. This act dramatically changed federal telecommunications laws and the
future competitiveness of the
F-13
<PAGE> 122
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
----------------------------------------------------
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996 ARE UNAUDITED)
industry. Many of the changes called for by the 1996 Act will not take effect
until the Federal Communications Commission (FCC) issues new regulations which,
in some cases, may not be completed for a few years. Because of this, the full
impact of the 1996 Act on NCTV's operations cannot be determined at this time. A
summary of the provisions affecting the cable television industry, more
specifically those affecting NCTV's operations, follows.
Cable Programming Service Tier Regulation -- FCC regulation of rates for
cable programming service tiers has been eliminated for small cable systems
owned by small companies. Small cable systems are those having 50,000 or fewer
subscribers which are owned by companies with fewer than 1% of national cable
subscribers (approximately 600,000). NCTV qualifies as a small cable company and
all of the Company's cable systems qualify as small cable systems. Basic tier
rates remain subject to regulations by the local franchising authority under
most circumstances until effective competition exists. The 1996 Act expands the
definition of effective competition to include the offering of video programming
services directly to subscribers in a franchised area served by a local
telephone exchange carrier, its affiliates or any multichannel video programming
distributor which uses the facilities of the local exchange carrier. The FCC has
not yet determined the penetration criteria that will trigger the presence of
effective competition under these circumstances.
Telephone Companies -- The 1996 Act allows telephone companies to offer
video programming services directly to customers in their service areas
immediately upon enactment. They may provide video programming as a cable
operator fully subject to any provision of the 1996 Act; a radio-based
multichannel programming distributor not subject to any provisions of the 1996
Act; or through nonfranchised "open video systems" offering nondiscriminatory
capacity to unaffiliated programmers, subject to select provisions of the 1996
Act. Although management's opinion is that the probability of competition from
telephone companies in rural areas is unlikely in the near future, there are no
assurances that such competition will not materialize. The 1996 Act encompasses
many other aspects of providing cable television service including prices for
equipment, discounting rates to multiple dwelling units, lifting of
anti-trafficking restrictions, cable-telephone cross ownership provisions, pole
attachment rate formulas, rate uniformity, program access, scrambling and
censoring of Public Educational and Governmental and leased access channels.
Self-Insurance:
The Company began self-insuring for aerial and underground plant in 1996.
NCTV makes monthly contributions into an insurance fund maintained by NTC which
covers all Northland entities and would defray a portion of any loss should the
Company be faced with a significant uninsured loss. To the extent the Company's
losses exceed the fund's balance, the Company would absorb any such loss.
9. ACQUISITION OF SYSTEMS:
On October 11, 1996, the Company acquired substantially all of the
operating assets and franchise rights of cable systems serving approximately
12,500 basic subscribers in or around the communities of Moses Lake, Othello,
Ephrata and certain unincorporated areas of Grant and Adams counties, all in the
state of Washington from Marcus Cable Associates, L.P. (Marcus). The purchase
price of the system was $21,031,760, which Marcus received at closing.
F-14
<PAGE> 123
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
----------------------------------------------------
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996 ARE UNAUDITED)
During 1995, the Company purchased the assets of Clemson-Seneca and the
operating assets of cable television systems in Oconee County, South Carolina;
Madera County, California; and communities in and around Mexia, Texas, adding
approximately 15,000 basic subscribers.
The aggregate purchase price of the assets was approximately $21,600,000.
As of December 31, 1995, the Company had paid approximately $20,582,000 of the
aggregate purchase price through borrowings under its revolving credit and term
loan and cash on hand. As of December 31, 1995, $870,447 remained payable under
the holdback provisions of the respective purchase agreements, which reflect
reductions for certain postclosing adjustments. At December 31, 1995, $474,622
of this amount was included in due to limited partnership on the consolidated
balance sheet. During 1996, the amount outstanding pursuant to the holdback
provisions of the purchase agreement was paid.
Pro forma operating results of the Company for 1996 and 1995, assuming the
acquisitions described above had been made at the beginning of 1995, follow:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1996 1995
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Service revenues....................... $36,275,438 $34,185,193
----------- -----------
Net loss............................... $(5,986,181) $(7,379,377)
=========== ===========
</TABLE>
During 1994, the Company purchased the assets of three partnerships which
were managed by NCC, an affiliate of the Company, adding approximately 24,000
basic subscribers, or an increase of 59%. The aggregate purchase price of the
partnerships was $30,100,000. As of December 31, 1994, the Company had paid
approximately $26,400,000 of the aggregate purchase price through borrowings
under its term loan, had outstanding approximately $900,000 of amounts to be
paid under the holdback provisions of the purchase agreements and had an
outstanding payable to an affiliate of approximately $2,800,000. For purposes of
the consolidated statement of cash flows, amounts due under the holdback and
amounts due to the Company's affiliate have been treated as noncash
transactions. During 1995, the amounts outstanding pursuant to the holdback
provisions of the purchase agreements were paid.
10. TRANSACTIONS FROM DECEMBER 31, 1996 TO SEPTEMBER 30, 1997 (UNAUDITED):
On January 31, 1997, the Company acquired substantially all of the
operating assets and franchise rights of the cable television system in and
around the community of Waterwood, Texas. This system serves approximately 400
basic subscribers. The total purchase price was approximately $580,000.
On March 31, 1997, the Company acquired substantially all operating assets
and franchise rights of the cable television systems in or around the
communities of Marlin, Madisonville and Buffalo, Texas. These systems serve
approximately 3,600 subscribers. The total purchase price was approximately
$5,269,000 of which approximately $5,019,000 was paid on the closing date. The
balance of $250,000 was deposited into an escrow account which will be released
to the seller, net of any purchase price adjustments. The acquisition was
financed by borrowings under the Company's term-loan facility.
F-15
<PAGE> 124
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
----------------------------------------------------
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996 ARE UNAUDITED)
In April 1997, the Company acquired substantially all of the operating
assets and franchise rights of the cable television system serving approximately
300 basic subscribers in Oconee County, South Carolina. The aggregate purchase
price of the assets was $370,000. As of September 1997, the Company owed
approximately $8,000 under the holdback provision of the purchase agreement.
Pro forma operating results of the Company for the nine-month period ended
September 1997, assuming the acquisitions described above had been made at the
beginning of 1997, would not be materially different than reported results.
11. EVENT SUBSEQUENT TO SEPTEMBER 30, 1997 (UNAUDITED):
In October 1997, the Company executed a definitive agreement to acquire six
cable television systems for an aggregate purchase price of $69,975,000. The
systems are located in South Carolina and serve approximately 35,300 basic
subscribers. The Company privately placed $100 million of senior subordinated
notes and renegotiated the terms of its bank credit facility to provide up to
$115 million of borrowing capacity, subject to certain borrowing conditions.
Management intends that proceeds from the notes and initial bank borrowings of
approximately $76 million will be utilized to fund the acquisitions, repay
amounts outstanding under the existing bank credit facility and pay transaction
costs. The unused capacity under the renegotiated bank credit facility will be
utilized for future acquisitions and working capital.
F-16
<PAGE> 125
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of
Northland Cable Television, Inc.:
We have audited the accompanying consolidated balance sheet of Northland
Cable Television, Inc. (a Washington corporation and a wholly owned subsidiary
of Northland Telecommunications Corporation) and subsidiary as of July 31, 1997,
and the related consolidated statements of operations, changes in shareholder's
deficit and cash flows for the seven-month period ended July 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Northland Cable Television,
Inc. and subsidiary as of July 31, 1997, and the results of their operations and
their cash flows for the seven-month period ended July 31, 1997, in conformity
with generally accepted accounting principles.
Arthur Andersen LLP
Seattle, Washington,
September 29, 1997
F-17
<PAGE> 126
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
CONSOLIDATED BALANCE SHEET
JULY 31, 1997
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash....................................................................... $ 1,887,808
Due from limited partnerships.............................................. 68,356
Accounts receivable........................................................ 1,033,593
Prepaid expenses........................................................... 455,218
------------
Total current assets............................................... 3,444,975
------------
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property and equipment, at cost............................................ 66,647,343
Less -- Accumulated depreciation........................................... (26,518,444)
------------
40,128,899
Franchise agreements (net of accumulated amortization of $26,954,988)...... 38,286,397
Goodwill (net of accumulated amortization of $1,802,032)................... 5,122,401
Loan fees and other intangible assets (net of accumulated amortization of
$1,704,664)............................................................. 3,702,969
------------
87,240,666
------------
Total assets....................................................... $ 90,685,641
============
LIABILITIES AND SHAREHOLDER'S DEFICIT
CURRENT LIABILITIES:
Accounts payable........................................................... $ 113,489
Subscriber prepayments..................................................... 1,127,190
Other current liabilities.................................................. 4,028,735
Due to affiliates.......................................................... 969,224
Current portion of notes payable........................................... 6,834,351
------------
Total current liabilities.......................................... 13,072,989
NOTES PAYABLE................................................................ 97,488,094
------------
Total liabilities.................................................. 110,561,083
------------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDER'S DEFICIT:
Common stock (par value $1.00 per share, authorized 50,000 shares; 10,000
shares issued and outstanding) and additional paid-in capital........... 11,560,527
Accumulated deficit........................................................ (31,435,969)
------------
Total shareholder's deficit........................................ (19,875,442)
------------
Total liabilities and shareholder's deficit........................ $ 90,685,641
============
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-18
<PAGE> 127
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SEVEN-MONTH PERIOD ENDED JULY 31, 1997
<TABLE>
<S> <C>
SERVICE REVENUES.............................................................. $22,056,434
-----------
OPERATING EXPENSES:
Operating (including $143,358, net paid to affiliates)...................... 6,628,385
General and administrative (including $1,279,674, paid to affiliates)....... 4,141,012
Management fees paid to affiliate........................................... 1,101,085
Depreciation and amortization............................................... 7,520,495
-----------
Total operating expenses............................................ 19,390,977
-----------
Income from operations.............................................. 2,665,457
OTHER EXPENSE:
Interest expense............................................................ (5,697,240)
Other, net (Note 6)......................................................... (172,862)
-----------
Loss before provision for income taxes.............................. (3,204,645)
PROVISION FOR INCOME TAXES.................................................... --
-----------
NET LOSS...................................................................... $(3,204,645)
===========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-19
<PAGE> 128
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S DEFICIT
FOR THE SEVEN-MONTH PERIOD ENDED JULY 31, 1997
<TABLE>
<CAPTION>
COMMON STOCK AND
ADDITIONAL PAID-IN
CAPITAL
-------------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1996................ 10,000 $ 2,222,334 $(28,231,324) $(26,008,990)
Net loss................................ -- -- (3,204,645) (3,204,645)
Capital contribution.................... -- 9,338,193 -- 9,338,193
------ ----------- ------------ ------------
BALANCE, July 31, 1997.................... 10,000 $11,560,527 $(31,435,969) $(19,875,442)
====== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-20
<PAGE> 129
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SEVEN-MONTH PERIOD ENDED JULY 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................................... $(3,204,645)
Adjustments to reconcile net loss to net cash provided by operating
activities-
Depreciation and amortization............................................ 7,718,241
Other.................................................................... (1,559)
(Increase) decrease in operating assets:
Due from limited partnerships.......................................... 40,619
Accounts receivable.................................................... 256,247
Prepaid expenses....................................................... (181,972)
Increase (decrease) in operating liabilities:
Accounts payable....................................................... (214,291)
Subscriber prepayments................................................. 259,160
Other current liabilities.............................................. 972,310
-----------
Net cash provided by operating activities........................... 5,644,110
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of cable systems................................................ (6,203,141)
Investment in cable television properties................................... (2,685,729)
Other....................................................................... (24,717)
-----------
Net cash used in investing activities............................... (8,913,587)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable................................................. 5,000,000
Principal payments on notes payable......................................... (2,839,646)
Advances from affiliates.................................................... 510,694
-----------
Net cash provided by financing activities........................... 2,671,048
-----------
NET DECREASE IN CASH.......................................................... (598,429)
CASH, beginning of year....................................................... 2,486,237
-----------
CASH, end of period........................................................... $ 1,887,808
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest................................. $ 5,221,108
===========
Cash paid during the period for state income taxes....................... $ 6,010
===========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-21
<PAGE> 130
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1997
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
FORMATION AND BUSINESS
Northland Cable Television, Inc. (NCTV), a Washington corporation, was
formed to own and operate cable television systems. As of July 31, 1997, NCTV
had 65 nonexclusive franchises to operate cable television systems. These
franchises expire at various dates through 2020.
In 1997, the Madera County, California and Anderson County, South Carolina
franchises expired. Less than 1% of NCTV's basic subscribers are in these
franchise areas at July 31, 1997. The Company has undertaken the franchise
renewal process in accordance with the Telecommunications Act of 1996 (the 1996
Act) and expects that these franchises will be renewed; however, there are no
assurances that the franchises will be renewed.
During fourth quarter 1997, the franchises for Adams county and Soap Lake,
Washington are due to expire. Approximately 1% of NCTV's basic subscribers at
July 31, 1997, are in these franchise areas. NCTV has undertaken the franchise
renewal process in accordance with the 1996 Act and expects that the franchise
will be renewed; however, there are no assurances that the franchises will be
renewed.
Northland Cable News, Inc. (NCN), a Washington corporation which was formed
to develop and distribute programming to certain of the Company's affiliated
entities, is a wholly owned subsidiary of NCTV. NCTV and NCN are collectively
referred to as the Company.
The Company and its affiliates, Northland Communications Corporation and
subsidiary (NCC); Northland Cable Services Corporation and subsidiaries (NCSC);
and Northland Media, Inc. and subsidiary (NMI) are wholly owned subsidiaries of
Northland Telecommunications Corporation (NTC or Parent). NCC is the managing
general partner of six limited partnerships, which own and operate cable
television systems. Additionally, NCC owns and operates cable systems through
Northland Cable Properties, Inc. (NCP, Inc.), its wholly owned subsidiary. NCSC
is the parent company for Cable Television Billing, Inc. (CTB) and Cable
Ad-Concepts, Inc. (CAC). CTB provides billing services to cable systems owned by
managed limited partnerships of NCC and wholly owned systems of the Company and
NCC. CAC develops and produces video commercial advertisements to be cablecast
on Northland affiliated cable systems. NMI was formed as a holding company to
own certain noncable related assets.
These financial statements are presented for purposes of complying with the
Securities and Exchange Commission's rules and regulations relating to the
acquisition of significant businesses. On October 11, 1996, the Company acquired
substantially all of the operating assets and franchise rights of cable systems
in or around the communities of Moses Lake, Othello, Ephrata and certain
unincorporated areas of Grant and Adams County, all in the state of Washington.
See Note 9.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation -- The consolidated financial statements of the
Company include the accounts of the Company and its wholly owned subsidiary,
NCN. Significant intercompany accounts and transactions have been eliminated.
Acquisition of Cable Television Systems -- Cable television system
acquisitions are accounted for as purchase transactions and their cost is
allocated to the estimated fair market value of net
F-22
<PAGE> 131
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1997
tangible assets acquired and to the franchise agreements and other determinable
intangible costs. Any excess is allocated to goodwill.
Cash and Cash Equivalents -- Cash and cash equivalents include cash and
investments in short-term, highly liquid securities, which have maturities when
purchased of three months or less.
Property and Equipment -- Property and equipment are stated at cost.
Replacements, renewals and improvements are capitalized. Maintenance and repairs
are charged to expense as incurred. Depreciation of property and equipment is
provided using the straight-line method over the following estimated service
lives:
<TABLE>
<S> <C>
Buildings............................................. 20 years
Distribution plant.................................... 10 years
Other equipment and leasehold improvements............ 5 - 20 years
</TABLE>
The Company periodically reviews the carrying value of its long-lived
assets, including property, equipment and intangible assets, whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable. To the extent the estimated future cash inflows attributable to the
asset, less estimated future cash outflows, is less than the carrying amount, an
impairment loss is recognized.
Intangible Assets -- Costs assigned to franchise agreements, goodwill and
organization costs and other intangible assets are amortized using the
straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Goodwill............................................. 40 years
Franchise agreements................................. 10 - 20 years
Loan fees and other intangible assets................ 1 - 10 years
</TABLE>
Revenue Recognition -- Cable television service revenue is recognized in
the month service is provided to customers. Advance payments on cable services
to be rendered are recorded as subscriber prepayments. License fee revenue and
production revenue are recognized in the period service is provided.
Estimates Used in Financial Statement Presentation -- The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
2. TRANSACTIONS WITH MANAGED LIMITED PARTNERSHIP AND OTHER RELATED PARTIES:
Management Fees -- In August 1994, NCTV began paying management fees to NTC
equal to 5% of NCTV's gross revenues, excluding revenues from programming,
production and the sale of cable television systems or franchises. The Company
paid $1,101,085 to NTC for the seven-month period ended July 31, 1997.
Program License Fees -- In July 1994, NCN began receiving monthly program
license fees from affiliated entities for programming produced by NCN. Total
license fees earned from affiliates for the seven-month period ended July 31,
1997 were $331,044.
F-23
<PAGE> 132
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1997
Production Fees -- In January 1997, NCN began receiving monthly production
fees from affiliated entities for production of advertising run tapes. Total
production fees earned from affiliates for the seven-month period ended July 31,
1997 were $99,334.
Unsecured Advances to Parent and Advances from Affiliates -- The Company's
advances from affiliates are intended to be repaid through future cash flow
generated by the Company. Under the terms of an intercompany borrowing
arrangement, the Company had agreed to repay all outstanding advances due to
affiliates by December 31, 2002; effective June 30, 1997, however, the Company
received a non-cash capital contribution of $9,338,193 from NTC which replaced
the net unsecured advances that had previously been owed to NTC and other
affiliates of the Company. Under the terms of a separate intercompany borrowing
arrangement, NTC has similarly agreed to repay all outstanding advances due to
the Company by December 31, 2002.
Reimbursements -- NTC provides or causes to be provided certain centralized
services to the Company and other affiliated entities. NTC is entitled to
reimbursement from the Company for various expenses incurred by it or its
affiliates on behalf of the Company allocable to its management of the Company,
including travel expenses, pole and site rental, lease payments, legal expenses,
billing expenses, insurance, governmental fees and licenses, headquarters
supplies and expenses, pay television expenses, equipment and vehicle charges,
operating salaries and expenses, administrative salaries and expenses, postage
and office maintenance. NTC has historically assigned its reimbursement rights
to NCC.
The amounts billed to the Company are based on costs incurred by affiliates
in rendering the services. The costs of certain services are charged directly to
the Company, based upon the personnel time spent by the employees rendering the
service. The cost of other services is allocated to the Company and affiliates
based upon relative size and revenue. Amounts charged for these services were
$1,131,118 for the seven-month period ended July 31, 1997.
For the seven-month period ended July 31, 1997, the Company was charged
billing service fees by CTB of $148,556. CAC billed the Company $146,230 for
advertising services for the seven-month period ended July 31, 1997.
The Company has operating management agreements with affiliates managed by
NCC. Under the terms of these agreements, the Company or an affiliate serves as
the managing agent for certain cable television systems and is reimbursed for
certain operating, administrative and programming expenses. The Company received
$1,472, net under the terms of these agreements for the seven-month period ended
July 31, 1997.
3. PROPERTY AND EQUIPMENT:
<TABLE>
<S> <C>
Land and buildings.................................... $ 2,053,833
Distribution plant.................................... 60,576,687
Other equipment....................................... 3,637,927
Leasehold improvements................................ 39,805
Construction-in-progress.............................. 339,091
-----------
$66,647,343
===========
</TABLE>
F-24
<PAGE> 133
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1997
4. OTHER CURRENT LIABILITIES:
<TABLE>
<S> <C>
Programmer license fees............................... $ 1,695,365
Accrued franchise fees................................ 421,400
Accrued interest...................................... 844,090
Other................................................. 1,067,880
-----------
$ 4,028,735
===========
</TABLE>
5. NOTES PAYABLE:
Notes payable consists of:
<TABLE>
<S> <C>
Revolving credit and term loan, collateralized by a first lien
position on all present and future assets and stock of the Company.
Interest rates vary based on certain financial covenants; currently
9.17% (weighted average). Graduated principal and interest payments
are due quarterly until maturity on September 30, 2004............. $104,171,769
Other................................................................ 150,676
------------
$104,322,445
============
</TABLE>
Annual maturities of notes payable for the years ending December 31, are as
follows:
<TABLE>
<S> <C>
1997 (August 1 through December 31).................. $ 2,718,026
1998................................................. 8,232,650
1999................................................. 9,900,000
2000................................................. 12,600,000
2001................................................. 15,300,000
2002................................................. 23,000,000
Thereafter........................................... 32,571,769
-----------
104,322,445
Less -- Current portion.............................. (6,834,351)
-----------
$ 97,488,094
===========
</TABLE>
Under the revolving credit and term loan agreement, the Company has agreed
to restrictive covenants which require the maintenance of certain ratios,
including a Pro Forma Debt Service Ratio of 1.15 to 1 and a Leverage Ratio of
6.00 to 1, among other restrictions. The Company submits quarterly debt
compliance reports to its creditor under this arrangement.
The Company has entered into interest-rate swap agreements to reduce the
impact of changes in interest rates. At July 31, 1997, the Company had seven
interest-rate swap agreements with its bank, having a notional principal amount
outstanding of $83,307,500. These agreements effectively change the Company's
interest rate exposure on the swapped portion of the loan to a fixed rate of
6.26% (weighted average), plus an applicable margin based on certain financial
covenants (the margin at July 31, 1997, was 2.75%). The Company has entered into
an additional interest rate swap that becomes effective August 25, 1997, and
expires August 25, 1998, that locks in a fixed rate of
F-25
<PAGE> 134
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1997
5.765% on a notional principal of $22,700,000. The maturity date, the fixed
interest rate and the notional amount of each swap at July 31, 1997, are as
follows:
<TABLE>
<CAPTION>
MATURITY DATE FIXED RATE AMOUNT
-------------------------------------------------- ---------- -----------
<S> <C> <C>
August 23, 1997................................... 6.65% $22,707,500
September 30, 1997................................ 6.00% 4,200,000
October 15, 1997.................................. 6.15% 21,000,000
March 9, 1998..................................... 7.25% 5,500,000
June 12, 1998..................................... 5.90% 13,500,000
June 30, 1998..................................... 5.90% 12,900,000
November 6, 1998.................................. 5.89% 3,500,000
-----------
$83,307,500
===========
</TABLE>
At July 31, 1997, the Company would have been required to pay approximately
$148,000 to settle these agreements based on fair value estimates received from
financial institutions. The carrying value of the Company's notes payable
approximates fair value due to the variable interest rate nature of the notes.
6. OTHER, NET:
Other, net in other expense in the consolidated statements of operations
consists of the following:
<TABLE>
<CAPTION>
FOR THE SEVEN-
MONTH PERIOD
ENDED
JULY 31,
1997
--------------
<S> <C>
NORTHLAND CABLE NEWS
PROGRAMMING OPERATIONS:
License fees from affiliates................................ $ 331,044
Operating expenses.......................................... (535,584)
---------
(Loss) from Programming Operations....................... (204,540)
PRODUCTION OPERATIONS:
Production revenues......................................... 99,334
Operating expenses.......................................... (136,330)
INTEREST INCOME............................................... 13,540
OTHER......................................................... 55,134
---------
$ (172,862)
=========
</TABLE>
7. INCOME TAXES:
The operations of the Company and its affiliates are included for federal
income tax purposes in a consolidated federal income tax return filed by NTC.
For financial reporting purposes, the provision for income taxes is computed as
if the Company filed a separate federal income tax return utilizing the tax rate
applicable to NTC on a consolidated basis.
Deferred income taxes are determined on the asset and liability method in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." The asset and liability method requires the
recognition of deferred income taxes for the expected
F-26
<PAGE> 135
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1997
future tax consequences of temporary differences between the carrying amounts on
the financial statements and the tax bases of assets and liabilities.
The primary components of deferred income taxes, as of July 31, 1997 are as
follows:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforward..................... $12,138,000
Valuation allowance................................. (7,877,000)
-----------
4,261,000
Deferred tax liabilities:
Property and equipment.............................. 4,261,000
-----------
$ --
===========
</TABLE>
The federal income tax net operating loss carryforward of approximately
$35,700,000 expires beginning in the years 2003 through 2012. Management
believes that the available objective evidence creates sufficient uncertainty
regarding the realization of the net deferred tax assets due to the recurring
operating losses being incurred by the Company. Accordingly, a valuation
allowance has been provided for the net deferred tax assets of the Company. The
change in the valuation allowance is $1,191,000 for the seven-month period ended
July 31, 1997.
The difference between the statutory tax rate of approximately 40% (34%
federal and 6% state, net of federal benefits) and the tax benefit of zero
recorded by the Company is primarily due to the Company's full valuation
allowance against its net deferred tax asset.
8. COMMITMENTS AND CONTINGENCIES:
Lease Arrangements -- The Company leases certain tower sites, office
facilities and pole attachments under leases accounted for as operating leases.
Rental expense (including month-to-month leases) is $330,057 for the seven-month
period ended July 31, 1997. Minimum lease payments to the end of the lease terms
are as follows:
<TABLE>
<S> <C>
1997 (August 1 through December 31).............. $ 30,587
1998............................................. 51,455
1999............................................. 36,209
2000............................................. 19,299
2001............................................. 17,571
2002............................................. 15,997
Thereafter....................................... 79,299
--------
$250,417
========
</TABLE>
EFFECTS OF REGULATION
On February 8, 1996, the 1996 Act was enacted. This act dramatically
changed federal telecommunications laws and the future competitiveness of the
industry. Many of the changes called for by the 1996 Act will not take effect
until the Federal Communications Commission (FCC) issues new regulations which,
in some cases, may not be completed for a few years. Because of this, the full
impact of the 1996 Act on NCTV's operations cannot be determined at this time. A
summary of the provisions affecting the cable television industry, more
specifically those affecting NCTV's operations, follows.
F-27
<PAGE> 136
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1997
Cable Programming Service Tier Regulation -- FCC regulation of rates for
cable programming service tiers has been eliminated for small cable systems
owned by small companies. Small cable systems are those having 50,000 or fewer
subscribers which are owned by companies with fewer than 1% of national cable
subscribers (approximately 600,000). NCTV qualifies as a small cable company and
all of the Company's cable systems qualify as small cable systems. Basic tier
rates remain subject to regulations by the local franchising authority under
most circumstances until effective competition exists. The 1996 Act expands the
definition of effective competition to include the offering of video programming
services directly to subscribers in a franchised area served by a local
telephone exchange carrier, its affiliates or any multichannel video programming
distributor which uses the facilities of the local exchange carrier. The FCC has
not yet determined the penetration criteria that will trigger the presence of
effective competition under these circumstances.
Telephone Companies -- The 1996 Act allows telephone companies to offer
video programming services directly to customers in their service areas
immediately upon enactment. They may provide video programming as a cable
operator fully subject to any provision of the 1996 Act; a radio-based
multichannel programming distributor not subject to any provisions of the 1996
Act; or through nonfranchised "open video systems" offering nondiscriminatory
capacity to unaffiliated programmers, subject to select provisions of the 1996
Act. Although management's opinion is that the probability of competition from
telephone companies in rural areas is unlikely in the near future, there are no
assurances that such competition will not materialize. The 1996 Act encompasses
many other aspects of providing cable television service including prices for
equipment, discounting rates to multiple dwelling units, lifting of
anti-trafficking restrictions, cable-telephone cross ownership provisions, pole
attachment rate formulas, rate uniformity, program access, scrambling and
censoring of Public Educational and Governmental and leased access channels.
SELF-INSURANCE
The Company self-insures for aerial and underground plant. NCTV makes
monthly contributions into an insurance fund maintained by NTC which covers all
Northland entities and would defray a portion of any loss should the Company be
faced with a significant uninsured loss. To the extent the Company's losses
exceed the fund's balance, the Company would absorb any such loss.
9. ACQUISITION OF SYSTEMS:
On January 31, 1997, the Company acquired substantially all of the
operating assets and franchise rights of the cable television system in and
around the community of Waterwood, Texas. This system serves approximately 400
basic subscribers. The total purchase price was approximately $580,000.
On March 31, 1997, the Company acquired substantially all of the operating
assets and franchise rights of the cable television systems in and around the
communities of Marlin, Madisonville and Buffalo, Texas. These systems serve
approximately 3,600 subscribers. The total purchase price was approximately
$5,250,000 of which approximately $5,000,000 was paid on the closing date. The
balance of $250,000 was deposited into an escrow account which will be released
to the seller, net of any purchase prices adjustments. The acquisition was
financed by borrowings under the Company's term-loan facility.
In April 1997, the Company acquired substantially all of the operating
assets and franchise rights of the cable television system serving approximately
300 basic subscribers in Oconee County,
F-28
<PAGE> 137
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF NORTHLAND TELECOMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1997
South Carolina. The aggregate purchase price of the assets was $370,000. As of
July 31, 1997, the Company owed approximately $8,000 under the holdback
provision of the purchase agreement.
Pro forma operating results (unaudited) of the Company for the seven-month
period ended July 31, 1997, assuming the acquisitions described above had been
made at the beginning of 1997, are not materially different than reported
results.
10. SUBSEQUENT EVENT (UNAUDITED):
In October 1997, the Company executed a definitive agreement to acquire six
cable television systems for an aggregate purchase price of $69,975,000. The
systems are located in South Carolina and serve approximately 35,300 basic
subscribers. The Company is currently in the process of privately placing $100
million of senior subordinated notes and negotiating the terms of its bank
credit facility to provide $100 million of borrowing capacity. Management
intends that proceeds from the notes and initial bank borrowings of
approximately $77 million will be utilized to fund the acquisitions, repay
amounts outstanding under the existing bank credit facility and pay transaction
costs. The Company expects to have approximately $25 million of unused capacity
under the renegotiated bank credit facility for future acquisitions and working
capital.
F-29
<PAGE> 138
REPORT OF INDEPENDENT ACCOUNTANTS
To The Partners of
Robin Cable Systems, L.P.
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in equity and of cash flows present fairly, in all
material respects, the financial position of Aiken II Cable Systems, a component
of Robin Cable Systems, L.P., at December 31, 1996 and 1995, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of Robin Cable
Systems, L.P.'s management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
October 10, 1997
F-30
<PAGE> 139
AIKEN II CABLE SYSTEMS
(A COMPONENT OF ROBIN CABLE SYSTEMS, L.P.)
BALANCE SHEET
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
SEPTEMBER 30, ------- -------
1997
-------------
(UNAUDITED)
<S> <C> <C> <C>
Accounts receivable, net of allowance for doubtful
accounts
of $12 (unaudited), $37 and $20....................... $ 286 $ 262 $ 278
Receivables from related parties........................ -- -- 127
Prepaid expenses........................................ 45 19 4
------- ------- -------
Total current assets.......................... 331 281 409
Intangible assets, net.................................. 1,336 1,799 2,599
Property and equipment, net............................. 9,547 11,812 13,577
Other assets............................................ 9 26 24
------- ------- -------
Total assets.................................. $11,223 $13,918 $16,609
======= ======= =======
LIABILITIES AND EQUITY
Accounts payable and accrued liabilities................ $ 912 $ 1,028 $ 877
Deferred revenue........................................ 189 144 130
Payables to related parties............................. 8 37 --
------- ------- -------
Total current liabilities..................... 1,109 1,209 1,007
Non-current liabilities................................. 142 1 --
------- ------- -------
Total liabilities............................. 1,251 1,210 1,007
------- ------- -------
Commitments and contingencies (Note 8)
Equity.................................................. 9,972 12,708 15,602
------- ------- -------
Total liabilities and equity.................. $11,223 $13,918 $16,609
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-31
<PAGE> 140
AIKEN II CABLE SYSTEMS
(A COMPONENT OF ROBIN CABLE SYSTEMS, L.P.)
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS
ENDED FOR THE YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------- ----------------------------
1997 1996 1996 1995 1994
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Basic and cable services................... $4,889 $4,589 $6,126 $5,690 $5,333
Pay services............................... 588 590 783 870 930
Other services............................. 890 762 1,042 1,033 1,154
------ ------ ------ ------ ------
6,367 5,941 7,951 7,593 7,417
------ ------ ------ ------ ------
OPERATING EXPENSES
Program fees............................... 1,318 1,119 1,528 1,314 1,145
Other direct expenses...................... 731 665 882 822 986
Depreciation and amortization.............. 2,384 2,801 3,736 3,429 3,771
Selling, general and administrative
expenses................................. 1,362 1,464 1,974 1,957 1,787
Management and consulting fees............. 248 249 331 334 239
------ ------ ------ ------ ------
6,043 6,298 8,451 7,856 7,928
------ ------ ------ ------ ------
Income (loss) from operations.............. 324 (357) (500) (263) (511)
------ ------ ------ ------ ------
OTHER INCOME (EXPENSE)
Other income............................... 15 9 12 -- --
Other expense.............................. (7) (5) (7) (81) (102)
------ ------ ------ ------ ------
8 4 5 (81) (102)
------ ------ ------ ------ ------
NET INCOME (LOSS).......................... $ 332 $ (353) $ (495) $ (344) $ (613)
====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-32
<PAGE> 141
AIKEN II CABLE SYSTEMS
(A COMPONENT OF ROBIN CABLE SYSTEMS, L.P.)
STATEMENT OF CHANGES IN EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
EQUITY
-------
<S> <C>
Balance at December 31, 1993...................................................... $14,697
Net loss........................................................................ (613)
Net distributions to parent..................................................... (399)
-------
Balance at December 31, 1994...................................................... 13,685
Net loss........................................................................ (344)
Net contributions from parent................................................... 2,261
-------
Balance at December 31, 1995...................................................... 15,602
Net loss........................................................................ (495)
Net distributions to parent..................................................... (2,399)
-------
Balance at December 31, 1996...................................................... 12,708
Net income (unaudited).......................................................... 332
Net distributions to parent (unaudited)......................................... (3,068)
-------
Balance at September 30, 1997 (unaudited)......................................... $ 9,972
=======
</TABLE>
See accompanying notes to financial statements.
F-33
<PAGE> 142
AIKEN II CABLE SYSTEMS
(A COMPONENT OF ROBIN CABLE SYSTEMS, L.P.)
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS FOR THE YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
------------------- -------------------------------
1997 1996 1996 1995 1994
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................. $ 332 $ (353) $ (495) $ (344) $ (613)
Adjustments to reconcile net income
(loss) to cash flows from
operating activities:
Depreciation and amortization... 2,384 2,801 3,736 3,429 3,771
Gain (loss) on disposal of fixed
assets........................ 6 -- -- (56) (79)
Changes in assets and
liabilities:
Accounts receivable........... (24) 3 16 (106) 55
Receivables from related
parties.................... -- 107 127 (127) 8
Prepaid expenses.............. (26) (48) (15) 6 (3)
Other assets.................. 17 (2) (2) -- 8
Accounts payable and accrued
liabilities................ (116) (7) 151 77 114
Deferred revenue.............. 45 13 14 20 15
Payables to related parties... (29) -- 37 (78) 78
Non-current liabilities....... 141 2 1 -- --
------- ------- ------- ------- -------
Cash flows from operating
activities...................... 2,730 2,516 3,570 2,821 3,354
------- ------- ------- ------- -------
CASH FLOWS PROVIDED BY/(USED BY)
INVESTING ACTIVITIES --
Sales (purchases) of property and
equipment....................... 338 (562) (1,171) (5,082) (2,955)
------- ------- ------- ------- -------
CASH FLOWS (USED BY)/PROVIDED BY
FINANCING ACTIVITIES --
Net (distributions) contributions
to/from parent.................. (3,068) (1,954) (2,399) 2,261 (399)
------- ------- ------- ------- -------
Net change in cash................... -- -- -- -- --
Cash at beginning of period.......... -- -- -- -- --
------- ------- ------- ------- -------
Cash at end of period................ $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-34
<PAGE> 143
AIKEN II CABLE SYSTEMS
(A COMPONENT OF ROBIN CABLE SYSTEMS, L.P.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. BASIS OF PRESENTATION
TRANSACTION
On August 27, 1997, Robin Cable Systems, L.P. ("RCS") and InterMedia
Partners of Carolina, L.P. ("IP of Carolina"), together referred to as the
"Partnerships," entered into an Asset Purchase and Sale Agreement (the
"Agreement") with Northland Cable Television, Inc. ("NCTV"), which provides for
the sale of certain of the Partnerships' cable television systems located in
South Carolina. The sale is expected to be consummated prior to December 31,
1997. The Partnerships are affiliated through common ownership and management by
the Partnerships' parent company, InterMedia Partners ("IP"). None of the
systems, either individually or collectively, comprise a separate legal entity,
but rather comprise three distinct operating units within the Partnerships. RCS
is selling its cable television systems serving subscribers located in
Allendale, Barnwell, Bamberg, Aiken, Edgefield, McCormick, Saluda and Ware
Shoals (the "Aiken Systems"). IP of Carolina is selling its cable television
systems serving subscribers in Bennetsville (the "Bennetsville Cable System")
and Greenwood (the "Greenwood Cable System").
NCTV has entered into an assignment agreement (the "Assignment Agreement")
with an affiliate, Northland Cable Properties Six Limited Partnership ("NCP
Six"). The Assignment Agreement assigns, immediately upon the close of the asset
purchase described above, certain assets of the Aiken Systems serving
subscribers in Allendale, Barnwell and Bamberg (the "Aiken I Cable Systems") and
the Bennetsville Cable System to NCP Six. NCTV will retain the remaining assets
of the Aiken Systems serving subscribers in Aiken, Edgefield, McCormick, Saluda
and Ware Shoals (the "Aiken II Cable Systems") and the Greenwood Cable System.
NCTV and NCP Six require separate financial statements for each of these
businesses being acquired. Accordingly, these carve-out financial statements of
the Aiken II Cable Systems have been prepared.
PRESENTATION
The accompanying financial statements represent the results of operations
of the business associated with the Aiken II Cable Systems and the related
assets used and liabilities incurred in the business. Throughout the periods
covered by the financial statements, the operations of the Aiken II Cable
Systems were conducted and accounted for as part of the Aiken Systems. These
financial statements have been carved-out from the historical accounting records
of RCS.
CARVE-OUT METHODOLOGY
Service revenues, program fees, depreciation and amortization can be
directly attributed to the Aiken II Cable Systems, while other direct expenses,
selling, general and administrative expenses and management and consulting fees
have been allocated to the Aiken II Cable Systems as described below. RCS
management believes the bases used for the allocations are reasonable. However,
these allocations are not necessarily indicative of the costs and expenses that
would have resulted if the Aiken II Cable Systems had been operated as a
separate entity and are not necessarily indicative of future operating results.
Other direct expenses and selling, general and administrative expenses are
directly incurred by the Aiken Systems and have been allocated based principally
on relative basic subscriber percentages between the Aiken I Cable Systems and
the Aiken II Cable Systems. Such expenses include employee and related employee
benefit costs, professional services, supplies, occupancy costs, repair and
maintenance and other costs included in other direct expenses and marketing,
communi-
F-35
<PAGE> 144
AIKEN II CABLE SYSTEMS
(A COMPONENT OF ROBIN CABLE SYSTEMS, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
cations, data processing, professional services and overhead expenses included
in selling, general and administrative expenses. As more fully described in Note
6, certain administrative services are provided by a related party and are
charged to all affiliates based on relative basic subscriber percentages.
Management and consulting fees represent an allocation of management fees
charged by InterMedia Capital Management, a California limited partnership
("ICM") and the former general partner of RCS's parent company, IP, a California
limited partnership (see Note 10 -- "Subsequent Events"). These fees are charged
at a fixed amount pursuant to a management agreement, initially determined by
reference to IP's total contributed capital. These fees are allocated based upon
the allocated contributed capital of the Aiken II Cable Systems as compared to
total contributed capital of all of the RCS systems.
Generally, assets and liabilities can be directly attributed to the Aiken
II Cable Systems. Certain prepaids, other assets and accrued liabilities were
allocated based on relative basic subscriber percentages; such amounts will be
retained by RCS.
CASH AND INTERCOMPANY ACCOUNTS
Under RCS's centralized cash management system, cash requirements of its
individual operating units were generally provided directly by RCS and the cash
generated or used by the Aiken II Cable Systems was transferred to/from RCS, as
appropriate, through intercompany accounts. The intercompany account balances
between RCS and the individual operating units are not intended to be settled.
Accordingly, the balances are included in equity and all net cash generated from
operations, investing activities and financing activities has been included in
the Aiken II Cable Systems' "net (distributions) contributions to/from parent"
in the statement of cash flows.
RCS maintains all debt which is used to fund and manage all of its
operations on a centralized basis. Debt, unamortized debt issue costs and
related interest expense have not been allocated to the Aiken II Cable System.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Cable television service revenue is recognized in the period in which
services are provided to customers. Deferred revenue represents revenue billed
in advance and deferred until cable service is provided.
PROPERTY AND EQUIPMENT
Additions to property and equipment, including new customer installations,
are recorded at cost. Self-constructed fixed assets include materials, labor and
overhead. Costs of disconnecting and reconnecting cable service are expensed.
Expenditures for maintenance and repairs are charged to expense as incurred.
Expenditures for major renewals and improvements are capitalized. Gains and
losses from disposals and retirements are included in earnings. Capitalized
fixed assets are written down to recoverable values whenever recoverability
through operations or sale of the systems becomes doubtful.
F-36
<PAGE> 145
AIKEN II CABLE SYSTEMS
(A COMPONENT OF ROBIN CABLE SYSTEMS, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
Depreciation is computed using the double-declining balance method over the
following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
------
<S> <C>
Cable television plant.............................. 5 - 10
Buildings and improvements.......................... 10
Furniture and fixtures.............................. 3 - 7
Equipment and other................................. 3 - 10
</TABLE>
INTANGIBLE ASSETS
The Aiken II Cable System has franchise rights to operate cable television
systems in various towns and political subdivisions. Franchise rights are being
amortized over the lesser of the remaining franchise lives or the base ten-year
term of IP. The remaining lives of the franchises range from one to four years.
Goodwill represents the excess of acquisition costs over the fair value of
net tangible and franchise assets acquired, and liabilities assumed, and is
being amortized on a straight-line basis over the base ten-year term of IP.
Capitalized intangibles are written down to recoverable values whenever
recoverability through operations or sale of the systems assets becomes
doubtful. The recoverability of the carrying value of intangible assets is
reviewed on an annual basis to determine whether the projected cash flows,
including projected cash flows from sale of the systems assets are sufficient to
recover the unamortized cost of these assets.
LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Aiken II Cable System has adopted Statement of Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." Property and equipment and intangible
assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. No
impairment losses have been recognized for the years presented.
INCOME TAXES
No provision or benefit for income taxes is reported in the accompanying
financial statements because the tax effects of the Aiken II Cable Systems'
results of operations accrue to the partners of RCS.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
F-37
<PAGE> 146
AIKEN II CABLE SYSTEMS
(A COMPONENT OF ROBIN CABLE SYSTEMS, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of receivables, payables, deferred revenue and accrued
liabilities approximates fair value due to their short maturity.
INTERIM FINANCIAL DATA (UNAUDITED)
The interim financial data for the nine months ended September 30, 1997 and
1996 is unaudited; however, in the opinion of management, the interim data
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim periods.
3. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Franchise rights..................................... $ 22,778 $ 22,778
Goodwill............................................. 3,351 3,351
-------- --------
26,129 26,129
Accumulated amortization............................. (24,330) (23,530)
-------- --------
$ 1,799 $ 2,599
======== ========
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Land................................................. $ 53 $ 53
Cable television plant............................... 24,838 24,398
Building and improvements............................ 241 242
Furniture and fixtures............................... 200 179
Equipment and other.................................. 793 773
Construction-in-progress............................. 1,113 537
-------- --------
27,238 26,182
Accumulated depreciation............................. (15,426) (12,605)
-------- --------
$ 11,812 $ 13,577
======== ========
</TABLE>
F-38
<PAGE> 147
AIKEN II CABLE SYSTEMS
(A COMPONENT OF ROBIN CABLE SYSTEMS, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1995
------ ----
<S> <C> <C>
Accounts payable........................................... $ 161 $ 65
Accrued program costs...................................... 140 112
Accrued franchise fees..................................... 135 139
Accrued copyright fees..................................... 106 97
Accrued payroll costs...................................... 53 63
Accrued property and other taxes........................... 311 270
Other accrued liabilities.................................. 122 131
------ ----
$1,028 $877
====== ====
</TABLE>
6. RELATED PARTY TRANSACTIONS
ICM provides certain management services to RCS (see Note 10 -- "Subsequent
Events") for a per annum fixed fee, of which 20% per annum is deferred and is
payable in each following year. Due to the fixed nature of the fee, changes in
the operating units' allocated contributed capital resulting from acquisitions
or dispositions within RCS result in changes in the allocation of the fee to
constituent operating units, including the Aiken II Cable Systems. The total
fixed, annual fee payable by RCS is $863 of which $331, $334 and $239 has been
charged to Aiken II Cable Systems.
InterMedia Management, Inc. ("IMI") is wholly-owned by the managing general
partner of ICM (see Note 10 -- "Subsequent Events"). IMI entered into an
agreement with RCS to provide accounting and administrative services at cost.
Under the terms of the agreement, the expenses associated with rendering these
services are charged to RCS and other affiliates based upon relative basic
subscriber percentages. Management believes this method to be reflective of the
actual cost. The costs charged to RCS have been charged to the Aiken II Cable
Systems on the same basis. During 1996, 1995 and 1994, related IMI
administrative fees charged to the Aiken II Cable Systems totaled $234, $249 and
$223, respectively. The accounting and administrative expenses charged are not
necessarily indicative of the costs that would have been incurred if the Aiken
II Cable Systems had been a separate entity.
RCS's parent is owned, in part, by Tele-Communications, Inc. ("TCI"). As an
affiliate of TCI, RCS is able to purchase programming services from a subsidiary
of TCI. Management believes that the overall programming rates made available
through this relationship are lower than the Aiken II Cable Systems could obtain
separately. The TCI subsidiary is under no obligation to continue to offer such
volume rates. Further, such rates are not available to any entity in which TCI
does not have a substantial investment. Accordingly, program fees expense
recognized is not necessarily indicative of the cost that would have been
incurred if the Aiken II Cable Systems had been a separate entity. During 1996,
1995 and 1994, program fees expense includes services purchased from the TCI
subsidiary of $1,121, $976, and $884, respectively. Accounts payable and accrued
liabilities include programming fees payable to the TCI subsidiary of $96 and
$81 at December 31, 1996 and 1995, respectively.
F-39
<PAGE> 148
AIKEN II CABLE SYSTEMS
(A COMPONENT OF ROBIN CABLE SYSTEMS, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
7. CABLE TELEVISION REGULATION
Cable television legislation and regulatory proposals under consideration
from time to time by Congress and various federal agencies have in the past, and
may in the future, materially affect RCS and the cable television industry.
The cable industry is currently regulated at the federal and local levels
under the Cable Act of 1984, the Cable Act of 1992 ("the 1992 Act"), the
Telecommunications Act of 1996 ("the 1996 Act") and regulations issued by the
Federal Communications Commission ("FCC") in response to the 1992 Act. FCC
regulations govern the determination of rates charged for basic, expanded basic
and certain ancillary services, and cover a number of other areas including
customer service and technical performance standards, the required transmission
of certain local broadcast stations and the requirement to negotiate
retransmission consent from major network and certain local television stations.
Among other provisions, the 1996 Act will eliminate rate regulation on the
expanded basic tier effective March 31, 1999.
Current regulations issued in conjunction with the 1992 Act empower the FCC
and/or local franchise authorities to order reductions of existing rates which
exceed the maximum permitted levels and to require refunds measured from the
date a complaint is filed in some circumstances or retroactively for up to one
year in other circumstances. Management believes it has made a fair
interpretation of the 1992 Act and related FCC regulations in determining
regulated cable television rates and other fees based on the information
currently available. However, complaints have been filed with the FCC on rates
for certain franchises and certain local franchise authorities have challenged
existing and prior rates. Further complaints and challenges could be
forthcoming, some of which could apply to revenue recorded in 1996 and prior
years. Management believes, however, that the effect, if any, of these
complaints and challenges will not be material to the Aiken II Cable Systems'
financial position or results of operations.
Many aspects of regulation at the federal and local levels are currently
the subject of judicial review and administrative proceedings. In addition, the
FCC is required to conduct rulemaking proceedings during 1997 to implement
various provisions of the 1996 Act. It is not possible at this time to predict
the ultimate outcome of these reviews or proceedings or their effect on Aiken II
Cable Systems.
8. COMMITMENTS AND CONTINGENCIES
The Aiken II Cable System is committed to provide cable television services
under franchise agreements with the State of South Carolina for the remaining
terms of the franchises. Franchise fees of up to 5% of gross basic and cable
service revenues are payable under these agreements.
The 1992 Act and related FCC regulations require that cable television
operators obtain permission to retransmit major network and certain local
television station signals. RCS has entered into long-term retransmission
agreements with all applicable stations in exchange for in-kind and/or other
consideration.
The Aiken II Cable System is subject to litigation and other claims in the
ordinary course of business. In the opinion of management, the ultimate outcome
of any existing litigation or other claims will not have a material adverse
effect on the Aiken II Cable Systems' financial position or results of
operations.
F-40
<PAGE> 149
AIKEN II CABLE SYSTEMS
(A COMPONENT OF ROBIN CABLE SYSTEMS, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
RCS has entered into pole rental agreements and leases certain of its
facilities and equipment under non-cancelable operating leases. Minimum rental
commitments for the next five years and thereafter under non-cancelable
operating leases related to the Aiken II Cable Systems are as follows:
<TABLE>
<S> <C>
1997.................................................. $ 7
1998.................................................. 7
1999.................................................. 4
2000.................................................. 4
2001.................................................. 3
Thereafter............................................ --
---
$25
===
</TABLE>
Rent expense, including operating rentals under cancelable and short-term
lease arrangements, for the years ended December 31, 1996, 1995 and 1994 was
$153, $145 and $157, respectively.
9. EMPLOYEE BENEFIT PLANS
RCS participates in the InterMedia Partners Tax Deferred Savings Plan which
covers all full-time employees who have completed at least one year of
employment. The plan provides for a base employee contribution of 1% and a
maximum of 15% of compensation. RCS's matching contributions under the plan are
at the rate of 50% of the employee's contribution, up to a maximum of 3% of
compensation. The Aiken II Cable Systems' allocated portion is included in the
statement of operations.
10. SUBSEQUENT EVENTS
PARTNERSHIP MODIFICATIONS
Effective June 10, 1997, InterMedia Capital Management I, LLC ("ICM-I
LLC"), a newly formed limited liability company, became the general partner of
IP, and ICM no longer holds an equity interest in IP. ICM-I LLC is owned by IMI,
the 95% managing member, and Robert J. Lewis, a 5% member, who is also the sole
shareholder of IMI. Also effective June 10, 1997, InterMedia Capital Management,
L.P. ("ICM-I"), a newly formed limited partnership, became a 1.1% limited
partner in IP, and now provides to RCS the management services that were
previously provided by ICM for a per annum fixed fee of $863.
ADVERTISING REVENUE (UNAUDITED)
During 1997, Aiken II Cable Systems was credited $298 representing its
share of payments received by IP from certain programmers to launch and promote
their channels. Of the total amount received, the Aiken II Cable Systems has
recognized advertising revenue of $71 during the nine months ended September 30,
1997 for advertising provided to promote the new channels. The remaining
payments received from the programmers will be amortized over the respective
terms of the launch agreements which range between five and ten years.
F-41
<PAGE> 150
REPORT OF INDEPENDENT ACCOUNTANTS
To The Partners of
InterMedia Partners of Carolina, L.P.
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in equity and of cash flows present fairly, in all
material respects, the financial position of the Greenwood Cable System, a
component of InterMedia Partners of Carolina, L.P., at December 31, 1996 and
1995, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of InterMedia Partners of Carolina, L.P.'s management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
San Francisco, California
October 10, 1997
F-42
<PAGE> 151
GREENWOOD CABLE SYSTEM
(A COMPONENT OF INTERMEDIA PARTNERS OF CAROLINA, L.P.)
BALANCE SHEET
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
SEPTEMBER ------ -------
30,
1997
-----------
(UNAUDITED)
<S> <C> <C> <C>
Accounts receivable, net of allowance for doubtful accounts
of $16 (unaudited), $13 and $13........................... $ 199 $ 141 $ 148
Prepaid expenses............................................ 25 15 6
Receivables from related parties............................ 18 -- --
------ ------ -------
Total current assets.............................. 242 156 154
Intangible assets, net...................................... 3,979 5,978 8,735
Property and equipment, net................................. 2,734 2,649 2,788
------ ------ -------
Total assets...................................... $ 6,955 $8,783 $11,677
====== ====== =======
LIABILITIES AND EQUITY
Accounts payable and accrued liabilities.................... $ 611 $ 614 $ 713
Deferred revenue............................................ 155 107 93
Payables to related parties................................. -- 22 133
------ ------ -------
Total current liabilities......................... 766 743 939
Non-current liabilities..................................... 136 7 7
------ ------ -------
Total liabilities................................. 902 750 946
------ ------ -------
Commitments and contingencies (Note 8)
Equity...................................................... 6,053 8,033 10,731
------ ------ -------
Total liabilities and equity...................... $ 6,955 $8,783 $11,677
====== ====== =======
</TABLE>
See accompanying notes to financial statements.
F-43
<PAGE> 152
GREENWOOD CABLE SYSTEM
(A COMPONENT OF INTERMEDIA PARTNERS OF CAROLINA, L.P.)
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS
ENDED SEPTEMBER FOR THE YEAR ENDED
30, DECEMBER 31,
------------------ -------------------------------
1997 1996 1996 1995 1994
------ ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Basic and cable services................ $3,591 $ 3,292 $ 4,408 $ 4,099 $ 3,572
Pay services............................ 475 481 638 686 682
Other services.......................... 538 457 622 517 523
------ ------- ------- ------- -------
4,604 4,230 5,668 5,302 4,777
------ ------- ------- ------- -------
OPERATING EXPENSES
Program fees............................ 982 876 1,184 984 809
Other direct expenses................... 390 410 563 632 526
Depreciation and amortization........... 2,393 2,585 3,459 3,310 3,399
Selling, general and administrative
expenses.............................. 798 807 1,081 1,089 1,052
Management and consulting fees.......... 378 378 504 504 504
------ ------- ------- ------- -------
4,941 5,056 6,791 6,519 6,290
------ ------- ------- ------- -------
Loss from operations.................... (337) (826) (1,123) (1,217) (1,513)
------ ------- ------- ------- -------
OTHER INCOME (EXPENSE)
Other income............................ 16 1 13 -- --
Other expense........................... (4) (3) (20) (14) (17)
------ ------- ------- ------- -------
12 (2) (7) (14) (17)
------ ------- ------- ------- -------
NET LOSS................................ $ (325) $ (828) $(1,130) $(1,231) $(1,530)
====== ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-44
<PAGE> 153
GREENWOOD CABLE SYSTEM
(A COMPONENT OF INTERMEDIA PARTNERS OF CAROLINA, L.P.)
STATEMENT OF CHANGES IN EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
EQUITY
-------
<S> <C>
Balance at December 31, 1993...................................................... $16,807
Net loss........................................................................ (1,530)
Net distributions to parent..................................................... (1,484)
-------
Balance at December 31, 1994...................................................... 13,793
Net loss........................................................................ (1,231)
Net distributions to parent..................................................... (1,831)
-------
Balance at December 31, 1995...................................................... 10,731
Net loss........................................................................ (1,130)
Net distributions to parent..................................................... (1,568)
-------
Balance at December 31, 1996...................................................... 8,033
Net loss (unaudited)............................................................ (325)
Net distributions to parent (unaudited)......................................... (1,655)
-------
Balance at September 30, 1997 (unaudited)......................................... $ 6,053
=======
</TABLE>
See accompanying notes to financial statements.
F-45
<PAGE> 154
GREENWOOD CABLE SYSTEM
(A COMPONENT OF INTERMEDIA PARTNERS OF CAROLINA, L.P.)
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------ -------------------------------
1997 1996 1996 1995 1994
------- ------ ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................... $ (325) $ (828) $(1,130) $(1,231) $(1,530)
Adjustments to reconcile net loss to cash flows
from operating activities:
Depreciation and amortization................ 2,393 2,585 3,459 3,310 3,399
(Gain) loss on disposal of fixed assets...... -- (1) 4 3 2
Changes in assets and liabilities:
Accounts receivable.......................... (58) (22) 7 (53) (12)
Prepaid expenses............................. (10) (20) (9) 4 15
Receivables from related parties............. (18) -- -- 14 (29)
Other assets................................. -- -- -- 4 4
Accounts payable and accrued liabilities..... (3) (89) (99) 208 63
Deferred revenue............................. 48 13 14 14 17
Payables to related parties.................. (22) (8) (111) 133 --
Non-current liabilities...................... 129 -- -- 7 --
------- ------ ------- ------- -------
Cash flows from operating activities......... 2,134 1,630 2,135 2,413 1,929
------- ------ ------- ------- -------
CASH FLOWS USED BY INVESTING ACTIVITIES --
Purchases of property and equipment............ (479) (474) (567) (582) (445)
------- ------ ------- ------- -------
CASH FLOWS USED BY FINANCING ACTIVITIES --
Net distributions to parent.................... (1,655) (1,156) (1,568) (1,831) (1,484)
------- ------ ------- ------- -------
Net change in cash............................... -- -- -- -- --
Cash at beginning of period...................... -- -- -- -- --
------- ------ ------- ------- -------
Cash at end of period............................ $ -- $ -- $ -- $ -- $ --
======= ====== ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-46
<PAGE> 155
GREENWOOD CABLE SYSTEM
(A COMPONENT OF INTERMEDIA PARTNERS OF CAROLINA, L.P.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. BASIS OF PRESENTATION
TRANSACTION
On August 27, 1997, Robin Cable Systems, L.P. ("RCS") and InterMedia
Partners of Carolina, L.P. ("IP of Carolina"), together referred to as the
"Partnerships," entered into an Asset Purchase and Sale Agreement (the
"Agreement") with Northland Cable Television, Inc. ("NCTV") which provides for
the sale of certain of the Partnerships' cable television systems located in
South Carolina. The sale is expected to be consummated prior to December 31,
1997. The Partnerships are affiliated through common ownership and management by
InterMedia Partners ("IP"). None of the systems, either individually or
collectively, comprise a separate legal entity, but rather comprise three
distinct operating units within the Partnerships. RCS is selling its cable
television systems serving subscribers located in Allendale, Barnwell, Bamberg,
Aiken, Edgefield, McCormick, Saluda and Ware Shoals, (the "Aiken Systems"). IP
of Carolina is selling its systems serving subscribers in Bennetsville (the
"Bennetsville Cable System") and Greenwood (the "Greenwood Cable System" or
"Greenwood").
NCTV has entered into an assignment agreement (the "Assignment Agreement")
with an affiliate, Northland Cable Properties Six Limited Partnership ("NCP
Six"). The Assignment Agreement assigns immediately upon the close of the asset
purchase described above, certain assets of the Aiken Systems serving
subscribers in Allendale, Barnwell and Bamberg (the "Aiken I Cable Systems") and
the Bennetsville Cable System to NCP Six. NCTV will retain the remaining assets
of the Aiken Systems serving subscribers located in Aiken, Edgefield, McCormick,
Saluda and Ware Shoals (the "Aiken II Cable Systems") and the Greenwood Cable
System. NCTV and NCP Six require separate financial statements for each of these
businesses being acquired. Accordingly, these carve-out financial statements of
the Greenwood Cable System have been prepared.
CARVE-OUT METHODOLOGY
The accompanying financial statements represent the results of operations
of the business associated with the Greenwood Cable System and the related
assets used and liabilities incurred in the business. Throughout the periods
covered, operating statements of the Greenwood Cable System were separately
maintained. However, as the Greenwood Cable System was not a separate legal
entity, these financial statements are carved-out from the historical accounting
records of IP of Carolina. Therefore, the results of operations are not
necessarily indicative of the costs and expenses which would have resulted if
Greenwood was a separate legal entity and are not necessarily indicative of
future operating results.
Management and consulting fees primarily represent an allocation of
management fees charged by InterMedia Capital Management, a California limited
partnership ("ICM") and the former general partner of IP of Carolina's parent
company, IP, a California limited partnership (see Note 10 -- "Subsequent
Events"). These fees are charged at a fixed amount pursuant to a management
agreement, initially determined by reference to IP's total contributed capital.
These fees are allocated based upon the allocated contributed capital of
Greenwood as compared to total contributed capital of all of the IP of Carolina
systems. Also, as more fully described in Note 6, certain administrative
services are provided by a related party at cost and are charged to all
affiliates based on relative basic subscriber percentages.
F-47
<PAGE> 156
GREENWOOD CABLE SYSTEM
(A COMPONENT OF INTERMEDIA PARTNERS OF CAROLINA, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
CASH AND INTERCOMPANY ACCOUNTS
Under IP of Carolina's centralized cash management system, cash
requirements of its individual operating units were generally provided directly
by IP of Carolina and the cash generated or used by the Greenwood Cable System
was transferred to/from IP of Carolina, as appropriate, through intercompany
accounts. The intercompany account balances between IP of Carolina and the
individual operating units are not intended to be settled. Accordingly, the
balances are included in equity and all net cash generated from operations,
investing activities and financing activities has been included in Greenwood's
"net distributions to parent" in the statement of cash flows.
IP of Carolina maintains all debt which is used to fund and manage all of
its operations on a centralized basis. Debt, unamortized debt issue costs and
related interest expense have not been allocated to Greenwood.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Cable television service revenue is recognized in the period in which
services are provided to customers. Deferred revenue represents revenue billed
in advance and deferred until cable service is provided.
PROPERTY AND EQUIPMENT
Additions to property and equipment, including new customer installations,
are recorded at cost. Self-constructed fixed assets include materials, labor and
overhead. Costs of disconnecting and reconnecting cable service are expensed.
Expenditures for maintenance and repairs are charged to expense as incurred.
Expenditures for major renewals and improvements are capitalized. Gains and
losses from disposals and retirements are included in earnings. Capitalized
fixed assets are written down to recoverable values whenever recoverability
through operations or sale of the system assets becomes doubtful.
Depreciation is computed using the double-declining balance method over the
following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
------
<S> <C>
Cable television plant...................................... 5 - 10
Buildings and improvements.................................. 10
Furniture and fixtures...................................... 3 - 7
Equipment and other......................................... 3 - 10
</TABLE>
INTANGIBLE ASSETS
Greenwood has franchise rights granted to operate cable television systems
in various towns and political subdivisions. Franchise rights are being
amortized over the lesser of the remaining franchise lives or the base ten-year
term of IP. The remaining lives of the franchises range from one to four years.
Capitalized intangibles are written down to recoverable values whenever
recoverability through operations or sale of the system assets becomes doubtful.
The recoverability of the carrying value of intangible assets is reviewed on an
annual basis to determine whether the projected cash flows,
F-48
<PAGE> 157
GREENWOOD CABLE SYSTEM
(A COMPONENT OF INTERMEDIA PARTNERS OF CAROLINA, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
including projected cash flows from sale of the system assets, are sufficient to
recover the unamortized cost of these assets.
LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
Greenwood has adopted Statement of Financial Accounting Standard No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." Property and equipment and intangible assets are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. No impairment losses have
been recognized for the years presented.
INCOME TAXES
No provision or benefit for income taxes is reported in the accompanying
financial statements because the tax effects of Greenwood's results of
operations accrue to the partners of IP of Carolina.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of receivables, payables, deferred revenue and accrued
liabilities approximates fair value due to their short maturity.
INTERIM FINANCIAL DATA (UNAUDITED)
The interim financial data for the nine months ended September 30, 1997 and
1996 is unaudited; however, in the opinion of management, the interim data
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim periods.
3. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Franchise rights............................. $ 23,996 $ 23,996
Accumulated amortization..................... (18,018) (15,261)
-------- --------
$ 5,978 $ 8,735
======== ========
</TABLE>
F-49
<PAGE> 158
GREENWOOD CABLE SYSTEM
(A COMPONENT OF INTERMEDIA PARTNERS OF CAROLINA, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
------- -------
<S> <C> <C>
Cable television plant.................... $ 6,549 $ 6,234
Building and improvements................. 1 1
Furniture and fixtures.................... 68 67
Equipment and other....................... 355 298
Construction-in-progress.................. 318 180
------- -------
7,291 6,780
Accumulated depreciation.................. (4,642) (3,992)
------- -------
$ 2,649 $ 2,788
======= =======
</TABLE>
5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1995
---- ----
<S> <C> <C>
Accounts payable................................ $ 14 $ 65
Accrued program costs........................... 110 93
Accrued franchise fees.......................... 172 156
Accrued copyright fees.......................... 52 52
Accrued payroll costs........................... 30 38
Accrued property and other taxes................ 114 130
Other accrued liabilities....................... 122 179
---- ----
$614 $713
==== ====
</TABLE>
6. RELATED PARTY TRANSACTIONS
ICM provides certain management services to IP of Carolina (see Note
10 -- "Subsequent Events") for a fixed fee of which 20% per annum is deferred
and is payable in each following year. The total fixed annual fee payable by IP
of Carolina is $930 of which $504 has been charged to Greenwood in each of the
years ended December 31, 1996, 1995 and 1994.
InterMedia Management, Inc. ("IMI") is wholly-owned by the managing general
partner of ICM (see Note 10 -- "Subsequent Events"). IMI has entered into an
agreement with IP of Carolina to provide accounting and administrative services
at cost. Under the terms of the agreement, the expenses associated with
rendering these services are charged to IP of Carolina and other affiliates
based upon relative basic subscriber percentages. Management believes this
method to be reflective of the actual cost. The costs charged to IP of Carolina
have been charged to Greenwood on the same basis. During 1996, 1995 and 1994,
related IMI administrative fees charged to Greenwood totaled $193, $201 and
$173, respectively. The accounting and administrative expenses charged are not
necessarily indicative of the costs that would have been incurred if Greenwood
had been a separate entity.
F-50
<PAGE> 159
GREENWOOD CABLE SYSTEM
(A COMPONENT OF INTERMEDIA PARTNERS OF CAROLINA, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
IP of Carolina's parent is owned, in part, by Tele-Communications, Inc.
("TCI"). As an affiliate of TCI, IP of Carolina is able to purchase programming
services from a subsidiary of TCI. Management believes that the overall
programming rates made available through this relationship are lower than
Greenwood could obtain separately. The TCI subsidiary is under no obligation to
continue to offer such volume rates. Further, such rates are not available to an
entity in which TCI does not have a substantial investment. Accordingly, program
fees expense recognized is not necessarily indicative of the cost that would
have been incurred if Greenwood had been a separate entity. During 1996, 1995
and 1994, program fees expense includes services purchased from the TCI
subsidiary of $925, $803, and $700, respectively. Accounts payable and accrued
liabilities include programming fees payable to the TCI subsidiary of $81 and
$68 at December 31, 1996 and 1995, respectively.
7. CABLE TELEVISION REGULATION
Cable television legislation and regulatory proposals under consideration
from time to time by Congress and various federal agencies have in the past, and
may in the future, materially affect IP of Carolina and the cable television
industry.
The cable industry is currently regulated at the federal and local levels
under the Cable Act of 1984, the Cable Act of 1992 ("the 1992 Act"), the
Telecommunications Act of 1996 ("the 1996 Act") and regulations issued by the
Federal Communications Commission ("FCC") in response to the 1992 Act. FCC
regulations govern the determination of rates charged for basic, expanded basic
and certain ancillary services, and cover a number of other areas including
customer service and technical performance standards, the required transmission
of certain local broadcast stations and the requirement to negotiate
retransmission consent from major network and certain local television stations.
Among other provisions, the 1996 Act will eliminate rate regulation on the
expanded basic tier effective March 31, 1999.
Current regulations issued in conjunction with the 1992 Act empower the FCC
and/or local franchise authorities to order reductions of existing rates which
exceed the maximum permitted levels and to require refunds measured from the
date a complaint is filed in some circumstances or retroactively for up to one
year in other circumstances. Management believes it has made a fair
interpretation of the 1992 Act and related FCC regulations in determining
regulated cable television rates and other fees based on the information
currently available. However, complaints have been filed with the FCC on rates
for certain franchises and certain local franchise authorities have challenged
existing and prior rates. Further complaints and challenges could be
forthcoming, some of which could apply to revenue recorded in 1996 and prior
years. Management believes, however, that the effect, if any, of these
complaints and challenges will not be material to Greenwood's financial position
or results of operations.
Many aspects of regulation at the federal and local levels are currently
the subject of judicial review and administrative proceedings. In addition, the
FCC is required to conduct rulemaking proceedings during 1997 to implement
various provisions of the 1996 Act. It is not possible at this time to predict
the ultimate outcome of these reviews or proceedings or their effect on
Greenwood.
8. COMMITMENTS AND CONTINGENCIES
Greenwood is committed to provide cable television services under franchise
agreements for the remaining terms of the franchises. Franchise fees of up to 5%
of gross basic and cable service revenues are payable under these agreements.
F-51
<PAGE> 160
GREENWOOD CABLE SYSTEM
(A COMPONENT OF INTERMEDIA PARTNERS OF CAROLINA, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
The 1992 Act and related FCC regulations require that cable television
operators obtain permission to retransmit major network and certain local
television station signals. IP of Carolina has entered into long-term
retransmission agreements with all applicable stations in exchange for in-kind
and/or other consideration.
Greenwood is subject to litigation and other claims in the ordinary course
of business. In the opinion of management, the ultimate outcome of any existing
litigation or other claims will not have a material adverse effect on
Greenwood's financial position or results of operations.
IP of Carolina has entered into pole rental agreements and leases certain
of its facilities and equipment under noncancelable operating leases. Minimum
rental commitments for the next five years and thereafter under non-cancelable
operating leases related to Greenwood are as follows:
<TABLE>
<S> <C>
1997....................................... $ 49
1998....................................... 49
1999....................................... 50
2000....................................... 50
2001....................................... 50
Thereafter................................. 151
----
$ 399
====
</TABLE>
Rent expense, including operating rentals under cancelable and short-term
lease arrangements, for the years ended December 31, 1996, 1995 and 1994 was
$53, $53 and $71, respectively.
9. EMPLOYEE BENEFIT PLANS
IP of Carolina participates in the InterMedia Partners Tax Deferred Savings
Plan which covers all full-time employees who have completed at least one year
of employment. The plan provides for a base employee contribution of 1% and a
maximum of 15% of compensation. IP of Carolina's matching contributions under
the plan are at the rate of 50% of the employee's contribution, up to a maximum
of 3% of compensation. Greenwood's allocated portion is included in the
statement of operations.
10. SUBSEQUENT EVENTS
PARTNERSHIP MODIFICATIONS
Effective June 10, 1997, InterMedia Capital Management I, LLC ("ICM-I
LLC"), a newly formed limited liability company, became the general partner of
IP, and ICM no longer holds an equity interest in IP. ICM-I LLC is owned by IMI,
the 95% managing member, and Robert J. Lewis, a 5% member, who is also the sole
shareholder of IMI. Also effective June 10, 1997, InterMedia Capital Management,
L.P. ("ICM-I"), a newly formed limited partnership, became a 1.1% limited
partner in IP, and now provides to IP of Carolina the management services that
were previously provided by ICM for a per annum fixed fee of $930.
ADVERTISING REVENUE (UNAUDITED)
During 1997, Greenwood Cable Systems was credited $164 representing its
share of payments received by IP from certain programmers to launch and promote
their channels. The payments received from the programmers have been deferred
and will be amortized over the respective terms of the launch agreements which
range between five and ten years.
F-52
<PAGE> 161
INDEX TO PRO FORMA UNAUDITED CONSOLIDATED
COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pro Forma Unaudited Consolidated Combined Statement of Operations for the nine months
ended September 30, 1997............................................................. P-3
Pro Forma Unaudited Consolidated Combined Balance Sheet as of September 30, 1997....... P-4
Pro Forma Unaudited Consolidated Combined Statement of Operations for the year ended
December 31, 1996.................................................................... P-5
Notes to Pro Forma Unaudited Consolidated Combined Financial Statements................ P-6
</TABLE>
P-1
<PAGE> 162
PRO FORMA UNAUDITED CONSOLIDATED COMBINED
FINANCIAL STATEMENTS
The Pro Forma Unaudited Consolidated Combined Statements of Operations data
for the nine months ended September 30, 1997 give effect to the Offering, and
the application of the net proceeds therefrom, and the Acquisition as if they
had occurred on the first day of such period. The Pro Forma Unaudited
Consolidated Combined Balance Sheet data as of September 30, 1997 give effect to
the Offering, and the application of the net proceeds therefrom, and the
Acquisition as if they had occurred on that date. The Pro Forma Unaudited
Consolidated Combined Statements of Operations data for the year ended December
31, 1996 give effect to the Moses Lake Acquisition, the Offering, and the
application of the net proceeds therefrom, and the Acquisition as if they had
occurred on the first day of such period. The pro forma information is based
upon (i) the Company's and (ii) Aiken II Cable Systems' and Greenwood Cable
System's, together, (the "Acquisition Systems") Statements of Operations for the
year ended December 31, 1996 and for the nine months ended September 30, 1997,
and the Company's and the Acquisition Systems' Balance Sheet as of September 30,
1997, after giving effect to the Acquisition under the purchase method of
accounting and the assumptions and adjustments in the accompanying notes to the
Pro Forma Unaudited Consolidated Combined Financial Statements.
The following information should be read in conjunction with and is
qualified in its entirety by "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and accompanying notes of the Company and the Acquisition Systems. The Pro Forma
Unaudited Consolidated Combined Financial Statements have not been audited by
the independent auditors of the Company or the Sellers, are intended for
informational purposes only and are not necessarily indicative of the future
financial position or future results of operations of the combined company or of
the financial position or the results of operations of the combined company that
would have been realized had the Moses Lake Acquisition, the Offering, and the
application of the net proceeds therefrom, and the Acquisition occurred as of
the dates or for the periods presented.
P-2
<PAGE> 163
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
PRO FORMA UNAUDITED CONSOLIDATED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
COMBINED
PRO FORMA
COMPANY FOR THE
PRO FORMA OFFERING
OFFERING FOR THE ACQUISITION ACQUISITION AND THE
COMPANY ADJUSTMENTS OFFERING SYSTEMS ADJUSTMENTS ACQUISITION
------- ----------- --------- ----------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Service revenues............. $28,700 $ -- $28,700 $10,971 $ -- $ 39,671
Operating expenses:
Operating.................. 8,626 -- 8,626 3,421 -- 12,047
General and
administrative........... 5,332 -- 5,332 2,160 -- 7,492
Management fees............ 1,433 -- 1,433 626 (77)(a) 1,982
Depreciation and
amortization............. 9,653 -- 9,653 4,777 (1,811)(b) 15,028
2,409 (c)
------- ------ -------- -------- ------- --------
Total operating
expenses............... 25,044 -- 25,044 10,984 521 36,549
------- ------ -------- -------- ------- --------
Income from operations....... 3,656 -- 3,656 (13) (521) 3,122
Interest expense........... (7,378) (1,077)(d) (8,853) -- (4,547)(e) (13,400)
(398)(f)
Other income (expense),
net...................... (240) -- (240) 20 -- (220)
------- ------ -------- -------- ------- --------
Net income (loss)............ $(3,962) $(1,475) $(5,437) $ 7 $(5,068) $(10,498)
======= ======= ======== ======== ======= ========
</TABLE>
P-3
<PAGE> 164
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
PRO FORMA UNAUDITED CONSOLIDATED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
COMBINED
PRO FORMA
COMPANY FOR THE
PRO FORMA OFFERING
OFFERING FOR THE ACQUISITION ACQUISITION AND THE
COMPANY ADJUSTMENTS OFFERING SYSTEMS ADJUSTMENTS ACQUISITION
-------- ----------- --------- ----------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cash............................... $ 1,156 $ 75 (g) $ 1,231 $ -- $ 69,285 (e) $ 1,090
(69,426)(h)
Accounts receivable................ 1,162 -- 1,162 485 -- 1,647
Prepaids and other................. 525 -- 525 88 (88)(h) 525
------- ------ -------- -------- --------- --------
Total current assets........... 2,843 75 2,918 573 (229) 3,262
Property and equipment, net........ 39,679 -- 39,679 12,281 6,509 (h) 58,469
Intangibles, net................... 45,906 4,925 (g) 50,831 5,315 45,870 (h) 102,016
Other assets....................... 690 -- 690 9 (699)(h) --
------- ------ -------- -------- --------- --------
Total assets................... $89,118 $ 5,000 $ 94,118 $18,178 $ 51,451 $163,747
======= ====== ======== ======== ========= ========
Accounts payable and other current
liabilities...................... $ 4,331 $ -- $ 4,331 $ 1,523 $ (1,523)(h) $ 4,331
Subscriber prepayments............. 1,029 -- 1,029 344 -- 1,373
Due to affiliates.................. 1,422 -- 1,422 8 (8)(h) 1,422
Current portion of notes payable... 7,538 (6,454)(g) 1,084 -- -- 1,084
------- ------ -------- -------- --------- --------
Total current liabilities...... 14,320 (6,454) 7,866 1,875 (1,531) 8,210
Notes payable...................... 95,430 11,454 (g) 106,884 -- 69,285 (e) 176,169
Other liabilities.................. -- -- -- 278 (278)(h) --
------- ------ -------- -------- --------- --------
Total liabilities.............. 109,750 5,000 114,750 2,153 67,476 184,379
Shareholder's equity (deficit)..... (20,632) -- (20,632) 16,025 (16,025)(h) (20,632)
------- ------ -------- -------- --------- --------
Total liabilities and
shareholder's equity
(deficit).................... $89,118 $ 5,000 $ 94,118 $18,178 $ 51,451 $163,747
======= ====== ======== ======== ========= ========
</TABLE>
P-4
<PAGE> 165
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
PRO FORMA UNAUDITED CONSOLIDATED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMBINED
PRO FORMA
COMPANY FOR THE
COMPANY PRO FORMA OFFERING AND
----------------------- OFFERING FOR THE ACQUISITION ACQUISITION THE
ACTUAL MOSES LAKE(I) ADJUSTMENTS OFFERING SYSTEMS ADJUSTMENTS ACQUISITION
------- ------------- ----------- -------------- ----------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Service revenues...... $32,561 $ 3,190 $ -- $ 35,751 $13,619 $ -- $ 49,370
Operating expenses:
Operating........... 9,448 894 -- 10,342 4,157 -- 14,499
General and
administrative.... 5,955 643 -- 6,598 3,055 -- 9,653
Management fees..... 1,625 160 -- 1,785 835 (154)(j) 2,466
Depreciation and
amortization...... 10,727 2,183 -- 12,910 7,195 (1,732)(k) 20,076
1,703 (l)
------- ------- ------- -------- -------- --------- ---------
Total operating
expenses.......... 27,755 3,880 -- 31,635 15,242 (183) 46,694
------- ------- ------- -------- -------- --------- ---------
Income (loss) from
operations.......... 4,806 (690) -- 4,116 (1,623) 183 2,676
Interest expense.... (8,263) (1,502) (2,159)(m) (11,924) -- (6,062)(n) (17,986)
Other income
(expenses), net... (772) -- -- (772) (2) -- (774)
------- ------- ------- -------- -------- --------- ---------
Net loss.............. $(4,229) $(2,192) $(2,159) $ (8,580) $(1,625) $ (5,879) $ (16,084)
======= ======= ======= ======== ======== ========= =========
</TABLE>
P-5
<PAGE> 166
NOTES TO THE PRO FORMA UNAUDITED CONSOLIDATED COMBINED
FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(a) To eliminate historical management fees of the Acquisition Systems and
record management fees based on the Company's Management Agreement of 5.0% of
gross revenues.
(b) To eliminate the Acquisition Systems' historical depreciation expense
and record depreciation expense, for the nine months ended September 30, 1997,
based upon the allocation of purchase price to various categories of property
and equipment using methods and terms consistent with those utilized by the
Company. Adjustments for each of the Acquisition Systems are as follows:
<TABLE>
<CAPTION>
ELIMINATE RECORD
--------- ------
<S> <C> <C>
Aiken II Cable Systems........................... $ 1,868 $ 901
Greenwood Cable System........................... 1,373 529
-------- ----
$ 3,241 $1,430
======== ====
</TABLE>
(c) To eliminate the Acquisition Systems' historical amortization expense
and record amortization expense, for the nine months ended September 30, 1997,
based upon the allocation of purchase price to various categories of intangible
assets using methods and terms consistent with those utilized by the Company.
Adjustments for each of the Acquisition Systems are as follows:
<TABLE>
<CAPTION>
ELIMINATE RECORD
--------- ------
<S> <C> <C>
Aiken II Cable Systems........................... $ 516 $2,189
Greenwood Cable System........................... 1,020 1,756
-------- ------
$ 1,536 $3,945
======== ======
</TABLE>
(d) To eliminate historical interest expense totaling $7,378 and record
estimated interest expenses of $8,455, for the nine months ended September 30,
1997, based upon the Offering and amounts outstanding under the Senior Credit
Facility of $7,822.
(e) To record borrowings under the Senior Credit Facility of $69,285 in
connection with the Acquisition and the related interest expense.
(f) To record amortization of debt issue costs for the nine months ended
September 30, 1997. Total issuance costs are estimated at $3,375 in conjunction
with the Offering and loan fees and costs are estimated at $1,550 in conjunction
with the Senior Credit Facility.
(g) To record the gross proceeds from the Offering of $100,000, repayments
of outstanding indebtedness totaling $95,000 and payment of debt issuance costs
and fees incurred in conjunction with the Offering and the Senior Credit
Facility estimated at $4,925.
(h) To record the cost of the Acquisition Systems totaling $69,975,
including step-ups in historical property and equipment basis to $18,790, and
franchise and other intangible costs to $51,185, based upon the Company's
allocation of purchase price. An Escrow deposit of $690 is released as partial
payment for the Acquisition Systems. Net accounts receivable over subscriber
prepayments are assumed to be acquired for an additional $141. The Acquisition
Systems' historical basis in assets not acquired or liabilities not assumed are
eliminated including prepaids and other assets, accounts payable and other
current liabilities, due to affiliates and shareholders' equity.
P-6
<PAGE> 167
NOTES TO THE PRO FORMA UNAUDITED CONSOLIDATED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(i) Service revenues, operating and general and administrative expenses
reflect historical results for the period January 1, 1996 to October 11, 1996,
the date on which the Company consummated the Moses Lake Acquisition.
Depreciation and amortization expense reflects the recording of expense for the
period January 1, 1996 to October 11, 1996, based upon the allocation of
purchase price to various categories of property and equipment using methods and
terms consistent with those utilized by the Company. The adjustments are as
follows:
<TABLE>
<CAPTION>
HISTORICAL RESTATED
--------- ------
<S> <C> <C>
Depreciation expense............................ $ 240 $ 454
Amortization expense............................ 683 1,729
------- ------
$ 923 $2,183
======= ======
</TABLE>
Interest expense represents the elimination of historical interest expense
in the amount of $867 and the recording of $1,502 of interest expense for the
period January 1, 1996 to October 11, 1996 on acquisition borrowings of $21,995
under the Company's revolving credit and term loan facility. Management fees are
recorded at 5.0% of revenues based on the Company's Management Agreement.
(j) To eliminate historical management fees of $835 for the Acquisition
Systems and record management fees based on the Company's Management Agreement
of 5.0% of revenues.
(k) To eliminate the Acquisition Systems' historical depreciation expense
and record depreciation expense for 1996 based upon the allocation of purchase
price to various categories of property and equipment using methods and terms
consistent with those utilized by the Company. Adjustments for each of the
Acquisition Systems are as follows:
<TABLE>
<CAPTION>
ELIMINATE RECORD
--------- ------
<S> <C> <C>
Aiken II Cable Systems.......................... $ 2,937 $1,200
Greenwood Cable System.......................... 701 706
------- ------
$ 3,638 $1,906
======= ======
</TABLE>
(l) To eliminate the Acquisition Systems' historical amortization expense
and record amortization expense for 1996 based upon the allocation of purchase
price to various categories of intangible assets using methods and terms
consistent with those utilized by the Company. Adjustments for each of the
Acquisition Systems are as follows:
<TABLE>
<CAPTION>
ELIMINATE RECORD
--------- ------
<S> <C> <C>
Aiken II Cable Systems.......................... $ 799 $2,918
Greenwood Cable System.......................... 2,758 2,342
---- ------
$ 3,557 $5,260
==== ======
</TABLE>
P-7
<PAGE> 168
NOTES TO THE PRO FORMA UNAUDITED CONSOLIDATED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(m) To eliminate historical interest expense of the Company of $9,765 and
to record estimated interest expense of $11,924 for 1996, including amortization
of debt issuance costs and loan fees based upon the Offering and amounts
outstanding under the Senior Credit Facility totaling $9,565 determined as
follows:
<TABLE>
<S> <C>
Indebtedness at January 1, 1996........................ $ 82,570
Borrowings in connection with the Moses Lake
Acquisition.......................................... 21,995
Repayment from net proceeds of the Notes............... (96,550)
Amounts borrowed for loan fees and costs on the Senior
Credit Facility...................................... 1,550
--------
$ 9,565
========
</TABLE>
(n) To record interest on borrowings under the Senior Credit Facility of
$69,285 in connection with the Acquisition.
P-8
<PAGE> 169
PROSPECTUS
------------------------
$100,000,000
NORTHLAND CABLE TELEVISION, INC.
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF ITS
10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR
[LOGO] EACH $1,000 IN PRINCIPAL AMOUNT OF ITS OUTSTANDING
10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
HARRIS TRUST AND SAVINGS BANK
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL: BY OVERNIGHT COURIER OR HAND:
HARRIS TRUST AND SAVINGS BANK HARRIS TRUST AND SAVINGS BANK
C/O HARRIS TRUST COMPANY OF NEW YORK C/O HARRIS TRUST COMPANY OF NEW YORK
P.O. BOX 1010 88 PINE STREET
WALL STREET STATION 19TH FLOOR
NEW YORK, NY 10268-1010 NEW YORK, NY 10005
BY FACSIMILE:
(212) 701-7336
CONFIRM BY TELEPHONE:
(212) 701-7624
</TABLE>
<PAGE> 170
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Capitalized terms used but not defined in Part II have the meanings
ascribed to them in the Prospectus contained in this Registration Statement.
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 23B.08.510 of the Revised Code of Washington authorizes Washington
corporations to indemnify their officers and directors under certain
circumstances against expenses and liabilities incurred in legal proceedings
involving such persons because of their being or having been an officer or
director. Each of the Company's and NCN's Articles of Incorporation and Bylaws
require indemnification of the Company's and NCN's respective officers and
directors to the fullest extent permitted by Washington law. The Company also
maintains directors' and officers' liability insurance.
Each of the Company's and NCN's By-laws and Articles of Incorporation
provide that the Company and NCN, respectively, shall, to the full extent
permitted by the Washington Business Corporation Act (the "Washington Business
Act") of the State of Washington, as amended from time to time, indemnify all
directors and officers of the Company. In addition, each of the Company's and
NCN's articles of Incorporation contains a provision eliminating the personal
liability of directors to the Company or NCN or either of their respective
shareholders or its shareholders for monetary damages arising out of a breach of
fiduciary duty. Under Washington law, this provision eliminates the liability of
a director for breach of fiduciary duty but does not eliminate the personal
liability of any director for (i) acts or omissions of a director that involve
intentional misconduct or a knowing violation of law, (ii) conduct in violation
of Section 23B.08.310 of the Revised Code of Washington (which section relates
to unlawful distributions) or (iii) any transaction from which a director
personally received a benefit in money, property or services to which the
director was not legally entitled.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
or NCN pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933, as amended (the "Securities Act") and is, therefore, unenforceable.
Reference is made to the Purchase Agreement, a copy of which is filed as
Exhibit 10.4 hereto, which provides for indemnification of the directors and
officers of the Company and NCN against certain liabilities, including those
arising under the Securities Act, the Securities Exchange Act of 1934, as
amended or otherwise in certain circumstances.
II-1
<PAGE> 171
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS:
The following exhibits are filed pursuant to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------------------------------------------------------------------
<C> <S>
3.1 Articles of Incorporation of Northland Cable Television, Inc., as
Amended
3.2 Articles of Incorporation of Northland Cable News, Inc.
3.3 Bylaws of Northland Cable Television, Inc.
3.4 Bylaws of Northland Cable News, Inc.
4.1 Indenture among Northland Cable Television, Inc., Northland Cable News,
Inc. and Harris Trust Company of California dated as of November 12,
1997.
5.1 Opinion of Cairncross & Hempelmann, P.S.*
10.1 Amended and Restated Credit Agreement between Northland Cable
Television, Inc. and the First National Bank of Chicago as agent dated
as of November 12, 1997.
10.2 Management Agreement dated August 23, 1994 between Northland Cable
Television, Inc. and Northland Telecommunication Corporation.
10.3 Asset Purchase and Sale Agreement dated as of August 17, 1997 between
InterMedia Partners of Carolina, L.P. and Robin Cable Systems, L.P. as
Sellers and Northland Cable Television, Inc.
10.4 Purchase Agreement between Northland Cable Television, Inc., Northland
Cable News, Inc., BancAmerica Robertson Stephens and First Chicago
Capital Markets, Inc., dated November 6, 1997.
10.5 Registration Rights Agreement among Northland Cable Television, Inc.,
Northland Cable News, Inc., BancAmerica Robertson Stephens and First
Chicago Capital Markets, Inc. dated as of November 12, 1997.
12.1 Computation of Deficiency of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Cairncross & Hempelmann, P.S. (See Exhibit 5.1)
23.3 Consent of Price Waterhouse LLP.
24.1 Power of Attorney (See II-4 and II-5)
25.1 Statement of Eligibility of Trustee.
99.1 Form or Letter of Transmittal to Exchange 10 1/4% Senior Subordinated
Notes due 2007.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Securities Dealers, Commercial Banks, Trust Companies
and Other Nominees.
99.4 Form of Letter to Clients.
</TABLE>
- ---------------
* To be filed by Amendment.
(b) FINANCIAL STATEMENT SCHEDULES:
None.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange
II-2
<PAGE> 172
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the adjudication of such issue.
With respect to the Securities registered on this form pursuant to Rule
415, the undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. 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.
(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.
(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.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE> 173
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Seattle,
State of Washington, as of December 23, 1997.
NORTHLAND CABLE TELEVISION, INC.
By: /s/ JOHN S. WHETZELL
-----------------------------------
Its: Chairman of the Board and
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John S. Whetzell and Gary S. Jones, and each of
them, as true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities to sign any and all amendments (including pre-effective and
post-effective amendments) to this Registration Statement, and to file the same
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in- fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- ----------------------- ------------------
<C> <S> <C>
/s/ JOHN S. WHETZELL Chairman of the Board, December 23, 1997
- ----------------------------------------------- President and Director
John S. Whetzell (Principal Executive
Officer)
/s/ GARY S. JONES Vice President December 23, 1997
- ----------------------------------------------- (Principal Financial
Gary S. Jones and Accounting Officer)
/s/ RICHARD I. CLARK Director December 23, 1997
- -----------------------------------------------
Richard I. Clark
/s/ Director
- -----------------------------------------------
John E. Iverson
</TABLE>
II-4
<PAGE> 174
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Seattle,
State of Washington, as of December 23, 1997.
NORTHLAND CABLE NEWS, INC.
By: /s/ JOHN S. WHETZELL
------------------------------------
Its: Chairman of the Board and
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John S. Whetzell and Gary S. Jones, and each of
them, as true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities to sign any and all amendments (including pre-effective and
post-effective amendments) to this Registration Statement, and to file the same
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in- fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- ----------------------- ------------------
<C> <S> <C>
/s/ JOHN S. WHETZELL Chairman of the Board, December 23, 1997
- ----------------------------------------------- President and Director
John S. Whetzell (Principal Executive
Officer)
/s/ GARY S. JONES Vice President December 23, 1997
- ----------------------------------------------- (Principal Financial
Gary S. Jones and Accounting Officer)
/s/ RICHARD I. CLARK Director December 23, 1997
- -----------------------------------------------
Richard I. Clark
/s/ Director
- -----------------------------------------------
John E. Iverson
</TABLE>
II-5
<PAGE> 1
EXHIBIT 3.1
FILED
STATE OF WASHINGTON
FEB 17 1995
RALPH MUNRO
SECRETARY OF STATE
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
NORTHLAND CABLE TELEVISION, INC.
Articles of Amendment of the Articles of Incorporation of NORTHLAND
CABLE TELEVISION, INC. are herein executed by said corporation, pursuant to the
provisions of RCW 23B.10.010 and RCW 23B.10.060, as follows:
1. The name of the corporation is Northland Cable Television, Inc.
2. The amendment to the Articles of Incorporation of said corporation
is as follows:
a) The fourth paragraph of Article V shall be deleted in its
entirety.
b) New Articles IX and X shall be added to the Articles of
Incorporation and shall read as follows:
ARTICLE IX
LIMITATION OF DIRECTORS' LIABILITY
A director shall have no liability to the corporation or its
shareholders for monetary damages for conduct as a director, except for acts or
omissions that involve intentional misconduct by the director, or a knowing
violation of law by the director, or for conduct violating RCW 2313.08.310 (as
may hereafter be amended or supplemented), or for any transaction from which the
director will personally receive a benefit in money, property or services to
which the director is not legally entitled. If the Washington Business
Corporation Act is hereafter amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director shall be eliminated or limited to the full extent permitted by the
Washington Business Corporation Act, as so amended. Any repeal or modification
of this Article shall not adversely affect any right or protection of a director
of the corporation existing at the time of such repeal or modification for or
with respect to an act or omission of such director occurring prior to such
repeal or modification.
Amendment to Articles of Incorporation Page 1
of Northland Cable Television, Inc.
<PAGE> 2
ARTICLE X.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Right to Indemnification. Any individual who is, was, or is threatened
to be made a party to or is otherwise involved in (including without limitation
as a witness) any threatened, pending, or completed action, suit, or other
proceeding, whether civil, criminal, administrative or investigative, and
whether formal or informal, by reason of the fact that he or she is or was a
director or officer of the corporation or that, while a director or officer, he
or she is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee or agent of another corporation or of a
partnership, joint venture, trust, employee benefit plan, or other enterprise,
shall be indemnified and held harmless by the corporation, to the full extent
permissible by applicable law as then in effect, against all expenses and
liabilities (including without limitation any obligation to pay any judgment,
settlement, penalty, fine, including without limitation an excise tax assessed
with respect to an employee benefit plan, or expense incurred with respect to
the proceeding, including without limitation attorneys' fees) actually and
reasonably incurred or suffered by such individual in connection therewith;
provided, however, that the corporation shall not indemnify any director from or
on account of (a) any act or omission of the director finally adjudged to be
intentional misconduct or a knowing violation of law, (b) any conduct of the
director finally adjudged to be in violation of RCW 23B.08.310 (as may
hereafter be amended or supplemented), or (c) any transaction with respect to
which it is finally adjudged that the director personally received a benefit in
money, property, or services, to which the director was not legally entitled;
and further provided that except as provided in the following paragraph with
respect to proceedings seeking to enforce rights to indemnification, the
corporation shall indemnify any such individual seeking indemnification in
connection with a proceeding (or part thereof) initiated by such individual only
if such proceeding (or part thereof) was, prior to its initiation, authorized by
the board of directors of the corporation. The right to indemnification
conferred in this paragraph shall be a contract right and shall include the
right to be paid by the corporation for the expenses incurred in defending any
such proceeding in advance of its final disposition; provided, however, that the
payment of such expenses in advance of the final disposition of a proceeding
shall be made only upon delivery to the corporation of a written undertaking, by
or on behalf of the director or officer, in the form of a general unlimited
obligation to repay all amounts so advanced if it shall ultimately be determined
that such director or officer is not entitled to be indemnified under this
paragraph or otherwise. The right to indemnification as provided herein shall
continue as to an individual who has ceased to be a director or officer and
shall inure to the benefit of his or her heirs, executors and administrators.
Amendment to Articles of Incorporation Page 2
of Northland Cable Television, Inc.
<PAGE> 3
Right of Claimant to Apply for Court Order. If a claim made on the
corporation for indemnification under the preceding paragraph of this Article is
not paid in full by the corporation within sixty (60) days after a written claim
has been received by the corporation, except in the case of a claim for expenses
incurred in defending a proceeding in advance of its final disposition, in
which case the applicable period shall be twenty (20) days, the claimant may at
any time thereafter commence an action or otherwise petition a court to order
the corporation to pay the unpaid amount of such claim and, to the extent
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of obtaining such a court order. A claimant shall be presumed to be
entitled to indemnification under this Article upon submission of a written
claim to the corporation or, in an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition, where the required undertaking has been tendered to the
corporation; and thereafter the corporation shall have the burden of proof to
overcome the presumption that the claimant is not so entitled. Neither the
failure of the corporation (including its board of directors, independent legal
counsel or its shareholders) to have made a determination prior to the filing of
such petition that indemnification or reimbursement or advancement of expenses
to the claimant is proper in the circumstances, nor an actual determination by
the corporation (including its board of directors, independent legal counsel or
its shareholders) that the claimant is not entitled to indemnification or to the
reimbursement or advancement of expenses, shall be a defense to the action or
create a presumption that the claimant is not so entitled.
Nonexclusivity of Rights. The right to indemnification and the payment
of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article shall not be exclusive of any other right
which any individual may have or hereafter acquire under any statute, provision
of the Articles of Incorporation, Bylaws, agreement, vote of shareholders or
disinterested directors or otherwise.
Insurance, Contracts and Funding. The corporation may maintain
insurance, at its expense, to protect itself and any director, trustee, officer,
employee or agent of the corporation or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability or loss,
whether or not the corporation would have the power to indemnify such individual
against such expense, liability or loss under the Washington Business
Corporation Act. Without further shareholder action, the corporation may enter
into contracts with any director or officer of the corporation in furtherance of
the provisions of this Article and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of credit)
to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Article.
Indemnification of Employees and Agents of the Corporation. From time to
time by action of its board of directors, the corporation may provide to
employees and agents
Amendment to Articles of Incorporation Page 3
of Northland Cable Television, Inc.
<PAGE> 4
of the corporation indemnification and payment of expenses in advance of the
final disposition of a proceeding to the same extent provided to officers of the
corporation by the provisions of this Article or pursuant to rights granted in
or provided by the Washington Business Corporation Act."
3. The above amendment was approved and adopted by the shareholder of
said corporation in accordance with the applicable provisions of RCW 23B.
10.030 and RCW 23B.10.040 on Feb. 15, 1995.
DATED: February 15, 1995.
NORTHLAND CABLE TELEVISION, INC.
By: /s/ RICHARD I. CLARK
--------------------------------
Richard I. Clark, Vice President
Attest:
/s/ JAMES A. PENNEY
------------------------------------
James A. Penney, Secretary
Amendment to Articles of Incorporation Page 4
of Northland Cable Television, Inc.
<PAGE> 5
FILED
OCT 25, 1985
SECRETARY OF STATE
STATE OF WASHINGTON
ARTICLES OF INCORPORATION
OF
NORTHLAND CABLE TELEVISION, INC.
Richard I. Clark, being over the age of eighteen (18) years, and for the
purpose of forming a corporation under the Washington Business Corporation Act
hereby certifies and adopts in duplicate the following Articles of
Incorporation:
ARTICLE I.
Name and Period of Duration
The name of this corporation shall be "Northland Cable Television, Inc."
and its existence shall be perpetual.
ARTICLE II.
Purpose
The purpose and objects of this corporation are as follows:
First: To engage in the business of the acquisition, ownership,
expansion, operation and maintenance of cable television systems and any and all
things necessary, suitable, convenient and proper for, or in connection with, or
incidental to, the accomplishment of any object or purpose designed directly or
indirectly to promote the interests of the corporation or enhance the value of
any of its assets; in general to carry on and undertake any lawful business,
either within or without the United States of America, which may from time to
time appear to the directors of the corporation capable of being carried on
conveniently in connection with such objects and purposes.
Second: To have and exercise all the powers now or hereafter
1
<PAGE> 6
conferred by the laws of the State of Washington upon corporations.
ARTICLE III.
Registered Office and Agent
The location and post office address of the initial registered office of
the corporation in this state shall be 32nd Floor, Bank of California Center,
Seattle, WA 98164, and the initial registered agent of the corporation shall be
John E. Iverson.
ARTICLE IV.
Capital Stock
The total number of shares of stock authorized and which may be issued
by this corporation is fifty thousand (50,000) shares, all of which shall be
common shares of the same class and having a par value of One Dollar ($1.00) per
share.
All of said common stock may be issued from time to time for such
consideration in property, labor, services, money or profits of any kind as
shall be fixed by the Board of Directors, and each share, when issued, shall be
fully paid and forever nonassessable.
The holders of shares of the corporation shall have no preemptive rights
to subscribe or purchase from the corporation any shares authorized but unissued
or any newly authorized shares. The holders of shares of the corporation shall
not have the right to cumulative voting.
ARTICLE V.
2
<PAGE> 7
Officers and Directors
The number of directors of the corporation shall be fixed as provided by
the Bylaws and may be changed from time to time by amending the Bylaws as
therein provided.
No contract or other transaction between the corporation and any other
corporation and no acts of the corporation shall be in any way affected or
invalidated by the fact that (i) any of the directors or officers of the
corporation are pecuniarily or otherwise interest in, or are directors or
officers of such other corporation; any director individually, or (ii) any firm
of which any director may be a member, may be a party to or may be pecuniarily
or otherwise interested in any contract or transaction of the corporation;
provided that the fact that he or such firm is so interested shall be disclosed
or shall have been known to the Board of Directors or such members thereof as
shall be present at any meeting of the Board at which action upon any such
contract or transaction shall be taken; and any director of such other
corporation or who is so interested may be counted in determining the existence
of a quorum at any meeting of the Board of Directors of the corporation which
shall authorize any such contract or transaction, with like force and effect as
if he were not such director or officer of such other corporation or not so
interested.
Any contract, transaction or act of the corporation or of the directors
of any committee which shall be ratified by the majority of a quorum of the
stockholders of the corporation at any annual
3
<PAGE> 8
meeting or at any special meeting called for such purpose, shall, insofar as
permitted by law, be as valid and as binding as though ratified by every
stockholder of the corporation.
The corporation agrees to indemnify and save harmless any and all
officers or directors of the corporation against any and all liabilities,
judgments, sums of money and expenses (including herein any and all amount or
amounts paid in settlement) reasonably incurred by them, or any of them, in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative and whether in law,
equity or otherwise, to which they, or any of them, may be a party, or may be
threatened by reason of being or having been an officer or director of the
corporation, or by reason of serving or having served at the request of the
corporation as a director, trustee, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise to the full
extent permitted by the Washington Business Corporation Act.
The names and post office addresses of the first directors of the
corporation who shall hold office until the first annual meeting of shareholders
or until their successors shall have been elected and qualified are as follows:
4
<PAGE> 9
Name Address
John S. Whetzell 3500 One Union Square
Seattle, WA 98101
Richard I. Clark 3500 One Union Square
Seattle, WA 98101
John E. Iverson 32nd Floor, Bank of California Center
Seattle, WA 98164
ARTICLE VI.
Incorporated
The name and post office address of the incorporator are Richard I.
Clark, 3500 One Union Square, Seattle, WA 98101.
ARTICLE VII.
Stockholders' Meeting
The annual meeting of stockholders of this corporation shall be fixed by
the Bylaws and may be changed from time to time by amending the Bylaws as
therein provided.
ARTICLE VIII
Bylaws
The authority to make, alter and repeal the Bylaws of the corporation is
hereby expressly vested in its Board of Directors, subject to the power of the
stockholders of the corporation to change or repeal such Bylaws.
IN WITNESS WHEREOF, the incorporator has hereunto set his hand on
October 23, 1985.
/s/ RICHARD I. CLARK
-----------------------------
Richard I. Clark
5
<PAGE> 10
CONSENT TO SERVE AS REGISTERED AGENT
I, John E. Iverson, hereby consent to serve as Registered Agent, in the
State of Washington, for NORTHLAND CABLE TELEVISION, INC. I understand that as
agent for the corporation, it will be my responsibility to receive service of
process in the name of the corporation; to forward all mail to the corporation;
and to immediately notify the office of the Secretary of State in the event of
my resignation, or of any changes in the registered office address of the
corporation for which I am agent.
DATED: October 23, 1985
/s/ JOHN E. IVERSON
---------------------------
John E. Iverson
Address:
32nd Floor, Bank of California
Center
Seattle, WA 98164
6
<PAGE> 1
EXHIBIT 3.2
FILED
STATE OF WASHINGTON
MAY 2 1994
RALPH MUNRO
SECRETARY OF STATE
ARTICLES OF INCORPORATION
OF
NORTHLAND CABLE NEWS, INC.
ARTICLE 1. NAME
The name of this corporation is "Northland Cable News, Inc."
ARTICLE 2. PURPOSES
This corporation is organized for the following purposes:
2.1 To engage in the business of developing and producing news
programming.
2.2 To hold interests in other businesses and to engage in any business,
trade or activity which may be conducted lawfully by a corporation organized
under the Washington Business Corporation Act.
ARTICLE 3. SHARES
The corporation is authorized to issue One Thousand (1,000) shares of
common stock and each share shall have a par value of One Dollar ($1.00).
ARTICLE 4. NO PREEMPTIVE RIGHTS
Except as may otherwise be provided by the board of directors, no
preemptive rights shall exist with respect to shares of stock or securities
convertible into shares of stock of this corporation.
ARTICLE 5. NO CUMULATIVE VOTING
At each election for directors, every shareholder entitled to vote at
such election has the right to vote in person or by proxy the number of shares
held by such shareholder for as many persons as there are directors to be
elected. No cumulative voting for directors shall be permitted.
Articles of Incorporation Page 1
of Northland Cable News, Inc.
<PAGE> 2
ARTICLE 6. BYLAWS
The board of directors shall have the power to adopt, amend or repeal
the Bylaws or adopt new Bylaws. Nothing herein shall deny the concurrent power
of the shareholders to adopt, alter, amend or repeal the Bylaws.
ARTICLE 7. REGISTERED AGENT AND OFFICE
The name of the initial registered agent of this corporation and the
address of its initial registered office are as follows:
RSC Corporation
1201 Third Avenue, Suite 3400
Seattle, WA 98101
ARTICLE 8. DIRECTORS
The number of directors of this corporation shall be fixed by the Bylaws
and may be increased or decreased from time to time in the manner specified
therein. The initial board of directors shall consist of three (3) directors,
and the names and addresses of the persons who shall serve as directors until
the first annual meeting of shareholders and until their successors are elected
and qualified, unless one or more of such persons resigns or is removed, are:
John S. Whetzell
1201 Third Avenue, Suite 3600
Seattle, WA 98101
Richard I. Clark
1201 Third Avenue, Suite 3600
Seattle, WA 98101
John E. Iverson
1201 Third Avenue, Suite 3400
Seattle, WA 98101
Articles of Incorporation Page 2
of Northland Cable News, Inc.
<PAGE> 3
ARTICLE 9. SHAREHOLDER VOTING REQUIREMENT
FOR CERTAIN TRANSACTIONS
In order to be adopted by the shareholders, an amendment of the Articles
of Incorporation, a plan of merger or share exchange, the sale, lease, exchange,
or other disposition of all, or substantially all, of the corporation's assets
other than in the usual and regular course of business, or the dissolution of
the corporation must be approved by the shareholders entitled to vote thereon by
sixty-six percent (66%) of all the votes entitled to be cast.
ARTICLE 10. LIMITATION OF DIRECTORS' LIABILITY
A director shall have no liability to the corporation or its
shareholders for monetary damages for conduct as a director, except for acts or
omissions that involve intentional misconduct by the director, or a knowing
violation of law by the director, or for conduct violating RCW 23B.08.310 (as
may hereafter be amended or supplemented), or for any transaction from which the
director will personally receive a benefit in money, property or services to
which the director is not legally entitled. If the Washington Business
Corporation Act is hereafter amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director shall be eliminated or limited to the full extent permitted by the
Washington Business Corporation Act as so amended. Any repeal or modification of
this Article shall not adversely affect any right or protection of a director of
the corporation existing at the time of such repeal or modification for or with
respect to an act or omission of such director occurring prior to such repeal or
modification.
ARTICLE 11. INDEMNIFICATION OF DIRECTORS AND OFFICERS
11.1 Right to Indemnification. Any individual who is, was, or is
threatened to be made a party to or is otherwise involved in (including without
limitation as a witness) any threatened, pending, or completed action, suit, or
other proceeding, whether civil, criminal, administrative or investigative, and
whether formal or informal, by reason of the fact that he or she is or was a
director or officer of the corporation or that, while a director or officer, he
or she is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee or agent of another corporation or of a
partnership, joint venture, trust, employee benefit plan, or other enterprise,
shall be indemnified and held harmless by the corporation, to the full extent
permissible by applicable law as then in effect, against all expenses and
liabilities (including without limitation any obligation to pay any judgment,
settlement, penalty, fine, including without limitation an excise tax assessed
with respect to an employee benefit plan, or expense incurred with respect to
the proceeding, including without limitation attorneys' fees) actually and
reasonably incurred or suffered by such individual in connection therewith;
provided, however, that the corporation shall not indemnify any director from or
on account of: (a) any act or omission of the director finally adjudged to be
intentional misconduct or a knowing violation of law, (b) any conduct of the
director finally adjudged to be in
Articles of Incorporation Page 3
of Northland Cable News, Inc.
<PAGE> 4
violation of RCW 23B.08.310 (as may hereafter be amended or supplemented), or
(c) any transaction with respect to which it is finally adjudged that the
director personally received a benefit in money, property, or services, to which
the director was not legally entitled; and further provided that except as
provided in the following paragraph with respect to proceedings seeking to
enforce rights to indemnification, the corporation shall indemnify any such
individual seeking indemnification in connection with a proceeding (or part
thereof) initiated by such individual only if such proceeding (or part thereof)
was, prior to its initiation, authorized by the board of directors of the
corporation. The right to indemnification conferred in this paragraph shall be a
contract right and shall include the right to be paid by the corporation for the
expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that the payment of such expenses in advance of
the final disposition of a proceeding shall be made only upon delivery to the
corporation of a written undertaking, by or on behalf of the director or
officer, in the form of a general unlimited obligation to repay all amounts so
advanced if it shall ultimately be determined that such director or officer is
not entitled to be indemnified under this paragraph or otherwise. The right to
indemnification as provided herein shall continue as to an individual who has
ceased to be a director or officer and shall inure to the benefit of his or her
heirs, executors and administrators.
11.2 Right of Claimant to Apply for Court Order. If a claim made on the
corporation for indemnification under the preceding paragraph of this Article is
not paid in full by the corporation within sixty (60) days after a written claim
has been received by the corporation, except in the case of a claim for expenses
incurred in defending a proceeding in advance of its final disposition, in which
case the applicable period shall be twenty (20) days, the claimant may at any
time thereafter commence an action or otherwise petition a court to order the
corporation to pay the unpaid amount of such claim and, to the extent successful
in whole or in part, the claimant shall be entitled to be paid also the expense
of obtaining such a court order. A claimant shall be presumed to be entitled to
indemnification under this Article upon submission of a written claim to the
corporation or, in an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition, where the required
undertaking has been tendered to the corporation; and thereafter the corporation
shall have the burden of proof to overcome the presumption that the claimant is
not so entitled. Neither the failure of the corporation (including its board of
directors, independent legal counsel or its shareholders) to have made a
determination prior to the filing of such petition that indemnification or
reimbursement or advancement of expenses to the claimant is proper in the
circumstances, nor an actual determination by the corporation (including its
board of directors, independent legal counsel or its shareholders) that the
claimant is not entitled to indemnification or to the reimbursement or
advancement of expenses, shall be a defense to the action or create a
presumption that the claimant is not so entitled.
11.3 Nonexclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article shall not be exclusive of any other right
which any individual may have or hereafter acquire under any statute, provision
of the Articles of Incorporation, Bylaws, agreement, vote of shareholders or
disinterested directors or otherwise.
Articles of Incorporation Page 4
of Northland Cable News, Inc.
<PAGE> 5
11.4 Insurance, Contracts and Funding. The corporation may maintain
insurance, at its expense, to protect itself and any director, trustee, officer,
employee or agent of the corporation or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability or loss,
whether or not the corporation would have the power to indemnify such individual
against such expense, liability or loss under the Washington Business
Corporation Act. Without further shareholder action, the corporation may enter
into contracts with any director or officer of the corporation in furtherance of
the provisions of this Article and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of credit)
to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Article.
11.5 Indemnification of Employees and Agents of the Corporation. From
time to time by action of its board of directors, the corporation may provide to
employees and agents of the corporation indemnification and payment of expenses
in advance of the final disposition of a proceeding to the same extent provided
to officers of the corporation by the provisions of this Article or pursuant to
rights granted in or provided by the Washington Business Corporation Act.
ARTICLE 12. TRANSACTIONS WITH INTERESTED SHAREHOLDERS
This corporation elects to be covered by the provisions of the Washington
Business Corporation Act concerning transactions with interested shareholders,
as therein defined, whether or not this corporation may at any time have fewer
than three hundred (300) holders of record of its shares.
ARTICLE 13. INCORPORATOR
The name and address of the incorporator are:
James A. Penney
1201 Third Avenue, Suite 3600
Seattle, WA 98101
EXECUTED this 24th day of April, 1994.
/s/ JAMES A. PENNEY
-------------------------------
James A. Penney, Incorporator
Articles of Incorporation Page 5
of Northland Cable News, Inc.
<PAGE> 6
CONSENT TO SERVE AS REGISTERED AGENT
RSC Corporation hereby consents to serve as Registered Agent, in the
State of Washington, for Northland Cable News, Inc. It understands that as agent
for the corporation, it will be its responsibility to receive service of process
in the name of the corporation; to forward all mail to the corporation; and to
immediately notify the office of the Secretary of State in the event of its
resignation, or of any changes in the registered office address of the
corporation for which it is agent.
RSC Corporation
April 29, 1994 By /s/ KEVIN J. COLLETTE
- ------------------------- -------------------------------------
Date Print Name Kevin J. Collette
---------------------------
Its Vice President
---------------------------------
1201 Third Avenue, Suite 3400
Seattle, Washington 98101
Articles of Incorporation Page 6
of Northland Cable News, Inc.
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
NORTHLAND CABLE TELEVISION, INC.
ARTICLE I.
NAME AND LOCATION
Section 1. Name. This corporation shall be known and designated
NORTHLAND CABLE TELEVISION, INC.
Section 2. Offices. The corporation may have offices at such places,
either within or without the State of Washington, as the Board of Directors may
from time to time designate or the business of the corporation may require. The
Board of Directors shall designate one such office as the principal office in
the State of Washington.
Section 3. Registered Office and Registered Agent. The registered office
of the corporation required by the Washington Business Corporation Act to be
maintained in the State of Washington may be, but need not be, identical with
the principal office of the State of Washington, and the address of the
registered office and the designated registered agent may be changed from time
to time by the Board of Directors.
ARTICLE II.
SEAL
If the corporation has a corporate seal, it may merely consist of the
words "corporate seal" or it may have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Washington." Said seal may be used by causing it, or a facsimile thereof, to be
impressed or affixed or reproduced or otherwise. One or more duplicate dies for
impressing such seal may be kept and used.
ARTICLE III.
STOCKHOLDERS MEETINGS
Section 1. Place of Meeting. All meetings of the stockholders shall be
held at the registered office of the corporation or at such other location as
the Board of Directors may determine.
<PAGE> 2
Section 2. Annual Meeting. The annual meeting of the stockholders of the
corporation for the election of directors to succeed those whose terms expire
and for the transaction of such other business as may come before the meeting
shall be held within one hundred eighty (180) days of the end of the fiscal year
of the corporation. The meeting shall not be held on a legal holiday in the
State of Washington. If for any reason an annual meeting shall not be held at
the time herein specified, the same may be held at any time thereafter upon
notice as hereinafter provided, or the business thereof may be transacted at any
special meeting called for the purpose.
Section 3. Special Meetings. Special meetings of the stockholders may be
called by the President or the Vice President whenever the one so calling the
meeting deems it necessary or advisable, and shall be called by the President or
a Vice President whenever so directed by order or resolution of a majority of
the Board of Directors, or a majority of the Executive Committee, and whenever
the holders of one-fourth (1/4) of the capital stock of the corporation entitled
to vote at such meeting shall request the same in writing.
Section 4. Notice of Meeting. Written or printed notice stating the time
and place of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called shall be delivered not less than ten
(10) nor more than fifty (50) days before the date of the meeting, either
personally or by mail, by or at the direction of the President, or the
Secretary, or the officer or persons calling the meeting, to each stockholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail, addressed to the
stockholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid.
Section 5. Closing of Transfer Books and Fixing Record Date. For the
purpose of determining stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of stockholders for
any other proper purpose, the Board of Directors of the corporation may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, fifty (50) days. If the stock transfer books shall be
closed for the purpose of determining stockholders entitled to notice of or to
vote at a meeting of stockholders, such stockholders, such books shall be closed
for at least ten (10) days immediately preceding such meeting. In lieu of
closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of stockholders, such date in
any case to be no more than fifty (50) days and, in case of a meeting of
stockholders, no less than ten (10) days prior to the
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date on which the particular action, requiring such determination of
stockholders, is to be taken. If the stock transfer books are not closed and no
record date is fixed for the determination of stockholders entitled to notice of
or to vote at a meeting of stockholders, or stockholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the Board of Directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of stockholders. When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, except where the
determination has been made through the closing of the stock transfer books and
the stated period of closing has expired.
Section 6. Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make, at least ten (10) days
before each meeting of stockholders, a complete list of the stockholders
entitled to vote at such meeting, or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each,
which list, for a period of ten (10) days prior to such meeting, shall be kept
on file at the registered office of the corporation and shall be subject to the
inspection by any stockholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any stockholder during the whole time of
the meeting. The original stock transfer book shall be prima facie evidence as
to who are the stockholders entitled to examine such list or transfer books or
to vote at any meeting of stockholders. Failure to comply with the requirements
of this section shall not affect the validity of any action taken at such
meeting.
Section 7. Quorum and Adjournment. The holders of record for the time
being of a majority of the total number of shares of stock issued and
outstanding and entitled to vote at a meeting of stockholders, present in person
or represented by proxy, shall be requisite to and shall constitute a quorum for
the transaction of business at such meeting. If, however, a quorum shall not be
present or represented at a meeting of stockholders, the stockholders present in
person or by proxy shall have power to adjourn the meeting from time to time
without notice, other than announcement at the meeting, until holders of record
of the requisite amount of stock shall be present or represented. At such
adjourned meeting at which the holders of the requisite amount of stock shall be
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 8. Proxies. At all meetings of stockholders, a stockholder may
vote by proxy executed in writing by the stockholder or by his duly authorized
attorney in fact. Such proxy shall be filed
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with the Secretary of the corporation before or at the time of the meeting. No
proxy shall be valid after eleven (11) months from the date of its execution
unless otherwise provided in the proxy.
Section 9. Voting of Shares. Subject to any provisions of Washington
law, each outstanding share entitled to vote shall be entitled to one vote upon
each matter submitted to a vote at a meeting of stockholders.
Section 10. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the Board of Directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator
may be voted by him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the name of a trustee may be voted by
him, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority to do so
be contained in an appropriate order of the court by which such receiver was
appointed.
A stockholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation or held by it
in a fiduciary capacity shall not be voted directly or indirectly, at any
meeting, and shall not be counted in determining the total number of outstanding
shares at any given time.
Section 11. Electronic Presence. Shareholders may participate in a
meeting of the shareholders by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time, and the participation by such
means shall constitute presence in person at a meeting.
Section 12. Informal Action by Stockholders. Any action required to be
taken at a meeting of the stockholders, or any other action which may be taken
at a meeting of the stockholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
stockholders entitled to vote with respect to the subject matter thereof.
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ARTICLE IV.
BOARD OF DIRECTORS
Section 1. General Powers. The business, affairs and property of the
corporation shall be managed by the Board of Directors in accordance with the
Articles of Incorporation, these Bylaws and the provisions of the Washington
Business Corporation Act not inconsistent with these Articles and Bylaws. In
addition to the powers and authorities expressly conferred upon them by these
Bylaws, the Board of Directors may exercise all such powers of the corporation
and do all such lawful acts and things except those acts that are required to be
exercised or done by the stockholders by statute, the Articles of Incorporation
or these Bylaws.
Section 2. Duties. A director shall perform the duties of a director,
including the duties as a member of any committee of the board upon which the
director may serve, in good faith, in a manner such director believes to be in
the best interests of the corporation, and with such care, including reasonable
inquiry, as an ordinarily prudent person in a like position would use under
similar circumstances.
In performing the duties of a director, a director shall be
entitled to rely on information, opinions, reports or statements, including
financial statements and other financial data, in each case prepared or
represented by:
(1) One or more officers or employees of the corporation whom the
director believes to be reliable and competent in the matter presented;
(2) Counsel, public accountants or other persons as to matters
which the director believes to be within such person's professional or expert
competence; or
(3 ) A committee of the board upon which the director does not
serve, duly designated in accordance with a provision in the Articles of
Incorporation or Bylaws, as to matters within its designated authority, which
committee the director believes to merit confidence; so long as, in any such
case, the director acts in good faith, after reasonable inquiry when the need
therefor is indicated by the circumstances and without knowledge that would
cause such reliance to be unwarranted.
Section 3. Number. The Board of Directors shall consist of one or more
members, and stockholders at each annual meeting preceding the election of
directors shall determine the number of directors to be elected for the ensuing
term of office; provided, however, the Board of Directors may increase the
maximum number at any time. The directors need not be stockholders or residents
of the
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State of Washington and shall be elected annually in the manner provided in
these Bylaws, and each director shall hold office until the annual meeting held
next after his election and his successor is qualified, or until his death, or
until he shall resign or shall be removed.
Section 4. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at the
same place as, the annual meeting of stockholders. The Board of Directors may
provide, by resolution, the time and place, either within or without the State
of Washington, for the holding of additional regular meetings without other
notice than such resolution.
Section 5. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the President, a Vice President or
Secretary or any two directors when and if there are three or more directors.
The person or persons authorized to call special meetings of the Board of
Directors may fix any place, either within or without the State of Washington,
as the place of holding any special meeting of the Board of Directors called by
them.
Section 6. Notice. Notice of any special meeting shall be given at least
two (2) days previous thereto by written notice delivered personally or mailed
to each director at his business address or by telegram. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
Section 7. Quorum and Adjournment. At all meetings of the Board, the
presence of a majority of the directors shall be requisite to and shall
constitute a quorum for the transaction of business, and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors. In the absence of a quorum, the directors present
at the time and place at which a meeting shall have been duly called may adjourn
the meeting from time to time and place to place until a quorum shall be
present.
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Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 9. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of the
directors shall be filled by the Board of Directors for a term of office
continuing on until the next election of directors by the stockholders.
Section 10. Compensation. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, for attendance at each meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity in receiving compensation therefor.
Section 11. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
Section 12. Electronic Presence. Except as may be otherwise restricted
by the Articles of Incorporation or by these Bylaws, members of the Board of
Directors or any committee designated by these Bylaws or appointed by the Board
of Directors may participate in a meeting of such board or committee by means of
a conference telephone or similar communications equipment by means of which all
persons participating can hear each other at the same time, and participation by
such means shall constitute presence in person at a meeting.
Section 13. Action Without Meeting. Whenever the vote of the directors
is required to be taken in connection with any corporate action, the meeting and
vote may be dispensed with if all the directors who would be entitled to vote if
such meeting were held shall consent in writing to such action being taken.
Such consent shall have the same effect as a unanimous vote.
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Section 14. Ratification of Contracts, Transactions and Other Acts of
the Board of Directors. Any contract, transaction or act of the corporation or
of the directors or any committee, which shall be ratified by a majority of a
quorum of the stockholders of the corporation at any annual meeting, or at any
special meeting called for such purposes, shall, insofar as permitted by law, be
as valid and as binding as though ratified by every stockholder of the
corporation.
Section 15. Personal Interest of a Director in Act of Board. No contract
or other transaction between the corporation and any other corporation and no
act of the corporation shall in any way be affected or invalidated by the fact
that any of the directors or officers of the corporation are pecuniarily or
otherwise interested in or are directors of such other corporation; any director
individually or any firm of which any director may be a member, may be a party
to, or may be pecuniarily or otherwise interested in, any contract or
transaction of the corporation; provided that the fact that he or such firm is
so interested shall be disclosed or shall have been known to the Board of
Directors or such members thereof as shall be present at any meeting of the
Board at which action shall be taken upon any such contract or transaction; and
any director of the corporation who is also a director or officer of such other
corporation or who is interested, may be counted in determining the existence of
a quorum at any meeting of the Board of Directors of the corporation which shall
authorize such contract or transaction, and may vote thereat to authorize any
such contract or transaction, with like force and effect as if he were not such
director of officer of such other corporation or not so interested.
Section 16. Dividends and Finance. The Board of Directors shall have
power to fix and determine and to vary from time to time, where not inconsistent
with the Articles of Incorporation of this corporation, the amount of the
working capital of the corporation, the use and disposition of any surplus or
net profits over and above the capital stock paid in, the date or dates for the
declaration and payment of dividends, the amount of any dividend, the amount of
any reserves necessary in their judgment before declaring any dividends among
its stockholders, and the amount of the net profits of the corporation from time
to time available for dividends.
ARTICLE V.
OFFICERS
Section 1. Designation; Term; Vacancies. The officers of the corporation
shall be a President, one or more Vice Presidents, a Secretary, a Treasurer and
such other officers as the Board of Directors may deem necessary from time to
time. Such officers shall have and perform the powers and duties usually
pertaining to their respective offices, the powers and duties respectively
prescribed
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by law and by these Bylaws and such additional powers and duties as may be
prescribed by the Board of Directors from time to time. The officers shall be
elected by the Board of Directors, and the President, Vice Presidents, Secretary
and Treasurer shall hold office until the regular annual meeting of the Board of
Directors following their election, or until their successors are elected and
qualified; provided that they, or any of them, may be removed at any time by the
affirmative vote of a majority of the whole board. All other officers, agents
and employees of the corporation shall hold office during the pleasure of the
board. Vacancies occurring among the officers of the corporation shall be filled
by the Board of Directors. Any two or more offices may be held by the same
person, except the offices of President and Secretary. However, when all of the
issued and outstanding stock of the corporation is owned by one shareholder, one
person may hold all or any combination of offices, including the offices of
President and Secretary.
Section 2. President. The President shall preside at all meetings of the
stockholders and, in the absence of a Chairman of the Board, at all meetings of
the Board of Directors at which he (unless some other meaning and intent is
apparent from the context, masculine, feminine and neuter words shall be used
interchangeably) may be present. Subject to the Board of Directors, he shall
have general charge of the entire business of the corporation. He may sign
certificates of stock and sign and seal bonds, debentures, contracts or other
obligations authorized by the Board and may, without previous authority of the
Board, make such contracts as the ordinary conduct of the corporation's business
requires. He shall have the usual powers and duties vested in the President of a
corporation. He shall have power to select and appoint all necessary officers
and employees of the corporation, except those selected by the Board of
Directors, and to remove all such officers and employees, except those selected
by the Board of Directors, and make new appointments to vacancies. He may
delegate any of his powers to a Vice President of the corporation. He shall at
all times be subject to the direction of the Board of Directors.
Section 3. Vice President. Each Vice President shall have the same
powers and duties as the President in the event of the latter's absence or
disability, and also such of the President's powers and duties as the President
may delegate to him from time to time, and shall have such other duties as may
be assigned to him by the Board of Directors.
Section 4. Secretary. The Secretary shall have custody of the seal of
the corporation and, when required by the Board of Directors or when any
instrument shall have been signed by the President or a Vice President, duly
authorized to sign the same, or when necessary to attest any proceedings of the
stockholders and directors, shall affix it to any instrument requiring the same
and shall attest the same with his signature; provided that the seal may
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be affixed by the President or Vice President or other officer of the
corporation to any document executed by either of them respectively on behalf of
the corporation which does not require the attestation of the Secretary. He
shall attend to the giving and serving of notices of meeting. He shall have
charge of such books and papers as properly belong to his office or as may be
committed to his care by the Board of Directors. He shall perform such other
duties as appertain to his office or as may be required by the Board of
Directors.
Section 5. Treasurer. The Treasurer shall have custody of such funds and
securities of the corporation as may come to his hands or be committed to his
care by the Board of Directors. Whenever necessary or proper, he shall endorse,
on behalf of the corporation, for collection, checks, notes or other
obligations, and shall deposit the same to the credit of the corporation in such
bank or banks or depositories as the Board of Directors or the President may
designate. He may sign receipts or vouchers for payments made to the
corporation, and the Board of Directors may require that such receipts or
vouchers shall also be signed by some other officer to be designated by them.
Whenever required by the Board of Directors, he shall render a statement of his
cash accounts and such other statements respecting the affairs of the
corporation as may be required. He shall keep proper and accurate books of
account. He shall perform all acts incident to the office of Treasurer, subject
to the control of the Board of Directors. At the time of electing anyone to the
office of Treasurer of the corporation, or thereafter, the Board of Directors
may waive any requirements of the statute that the Treasurer give a bond for
the faithful discharge of his duties.
Section 6. Assistant Officers. Each Assistant Officer shall be vested
with such powers and duties as may be delegated to him by the President or his
direct superior officer, and any act may be done or duty performed by an
Assistant Officer with like effect as though done or performed by the officer
for which he is an assistant, and shall have such other powers and perform such
other duties as may be assigned to him by the Board of Directors.
Section 7. Salaries. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
ARTICLE VI.
INDEMNIFICATION
Section l.
(a) Every person (and the heirs and personal representatives of such
person) who is or was a director or officer of the corporation or of any other
corporation in which he served as such at
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the request of the corporation and of which the corporation directly or
indirectly is a stockholder or creditor, or in which, or in the stocks, bonds,
securities, or other obligations of which, it is in anyway interested, may be
indemnified by the corporation in accordance with the provision of this Article
VI against any and all liability and reasonable expense (including, without
limitation, counsel-fees and disbursements, and amounts of judgment, fines or
penalties against, or amounts paid in settlement by, a director or officer) that
may be incurred by him in connection with or resulting from any claim, action,
suit, or proceeding, whether civil, criminal or administrative or in connection
with any appeal relating thereto, in which he may become involved, as a party or
otherwise or with which he may be threatened, by reason of his being or having
been a director or officer of the corporation or such other corporation, or by
reason of any action taken or omitted by him in his capacity as such director or
officer, whether or not he continues to be such at the time such liability or
expense shall have been incurred, provided that said person has not been
adjudged liable on the basis that personal benefit was improperly received by
him.
(b) Every person (and the heirs and personal representatives of such
person) referred to in paragraph (a), who has been wholly successful on the
merits with respect to any claim, action, suit or proceeding of the character
described in paragraph (a), shall be entitled to indemnification as of right.
(c) Except as provided in paragraph (b), any indemnification shall be
made:
(1) In the case of a claim, action, suit or proceedings other
than by or in the right of the corporation to procure a judgment in its favor,
only if the Board of Directors or the Executive Committee of such Board, acting
by a quorum consisting of directors who are not parties to such claim, action,
suit or proceeding, shall find, or independent legal counsel (who may be the
regular counsel of the corporation) shall render an opinion, that the director
or officer acted in good faith in what he reasonably believed to be the best
interests of the corporation or such other corporation, as the case may be, and,
in addition, in any criminal action or proceeding, had no reasonable cause to
believe that his conduct was unlawful; and
(2) In the case of a claim, action, suit or proceeding by or in
the right of the corporation to procure a judgment in its favor, only if the
Board of Directors or the Executive Committee of such Board, acting by a quorum
consisting of directors who are not parties of such claim, action, suit or
proceeding, shall find, or independent legal counsel (who may be the regular
counsel of the corporation) shall render an opinion, that the director or
officer acted in good faith in what he reasonably believed to be the best
interests of the corporation or such other corporation, as the case
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may be; provided, however, that no indemnification under this subsection (2)
shall be made with regard to (i) matters as to which any such director or
officer shall be finally adjudged to be liable for negligence or misconduct in
the performance of duty, or (ii) amounts paid, or expenses incurred, in
connection with the settlement of any such claim, action, suit or proceeding,
without approval of a court of competent jurisdiction.
For the purpose of subsection (1), the termination of any
claim, action, suit or proceeding, civil, criminal or administrative, by
judgment, settlement (either with or without court approval) or conviction, or
upon a plea of guilty or of nolo contendere, or its equivalent, shall not create
a presumption that a director or officer did not meet the standards of conduct
set forth in such subsection.
(d) Expenses incurred with respect to any claim, action, suit or
proceeding of the character described in paragraph (a) may be advanced by the
corporation prior to the final disposition thereof upon receipt of any
undertaking by or on behalf of the recipient to repay such amount unless it
shall be ultimately determined that he is entitled to indemnification hereunder.
The rights of indemnification provided in this Article VI shall be in addition
to any rights to which any such director, officer or other person may otherwise
be entitled by contract or as a matter of law. Each person who shall act as a
director or officer of the corporation or of any other corporation referred to
in paragraph (a) shall be deemed to be doing so in reliance upon the right of
indemnification provided for herein.
(e) The corporation may purchase and maintain insurance on behalf of any
person who is or was a director or officer of the corporation, or is or was
serving at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in such capacity, or arising
out of his status as such, whether or not the corporation would have the power
to indemnify him against such liability under the provisions of this Article.
ARTICLE VII.
COMMITTEES
Section 1. Executive Committee. The Board of Directors may appoint two or
more of their members as an-Executive Committee, which shall have and may
execute, to the full extent permitted by law, all of the powers of the Board of
Directors when the Board of Directors is not in session, except that no such
committee shall have the authority to: (1) declare dividends or distributions,
except at a rate or in a periodic amount determined by the Board of
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Directors, (2) approve or recommend to shareholders actions or proposals
required by statute to be approved by shareholders, (3) fill vacancies on the
Board of Directors or any committee thereof, (4) amend the Bylaws, (5) authorize
or approve the reacquisition of shares unless pursuant to general formula or
method specified by the Board of Directors, (6) fix compensation of any director
for serving on the Board of Directors or on any committee, (7) approve a plan of
merger, consolidation or exchange of shares not requiring shareholder approval,
(8) reduce earned or capital surplus, or (9) appoint other committees of the
Board of Directors or the members thereof. The Executive Committee shall elect
one of its members to act as Chairman thereof. Vacancies in the Executive
Committee shall be filled by the Board of Directors. Meetings of the Executive
Committee shall be held at any time and place on unanimous consent of all of the
members thereof, or which shall be fixed in a notice of meeting thereof signed
by the Chairman of the Executive Committee, given in person, by mail, or by
telegraph twenty-four (24) hours in advance of the meeting to all members of the
Executive Committee who have not signed the notice and who are not present at
the meeting. The Executive Committee shall keep regular minutes of its
proceedings and report the same to the Board of Directors from time to time.
During the temporary absence of a member of the Executive Committee, the
remaining members of the Executive Committee may appoint a member of the Board
of Directors to act in the place and stead of such member of the Executive
Committee temporarily absent, and the acts of such member of the Board of
Directors so appointed shall be of the same force and effect as if such member
had originally been appointed on such Executive Committee.
Section 2. Other Committees. The Board of Directors may also appoint such
other and further committees and subcommittees as they may determine, and
delegate such duties as may be determined and are not inconsistent with law.
ARTICLE VIII.
STOCK
Section 1. Certificates Representing Shares. The shares of the corporation
shall be represented by certificates signed by the President or a Vice President
and the Secretary or an Assistant Secretary of the corporation, and may be
sealed with the seal of the corporation or a facsimile thereof. The signatures
of the President or Vice President and the Secretary or Assistant Secretary upon
a certificate may be facsimiles if the certificate is countersigned by a
transfer agent, or registered by a registrar, other than the corporation itself
or an employee of the corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
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Every certificate representing shares issued by the corporation, if it
is authorized to issue shares of more than one class, shall set forth upon the
face or back of the certificate, or shall state that the corporation will
furnish to any stockholder upon request and without charge, a full statement of
the designations, preferences, limitations and relative rights of the shares of
each class authorized to be issued and, if the corporation is authorized to
issue any preferred or special class in series, the variations in the relative
rights and preferences between the shares of each such series so far as the same
have been fixed determined and the authority of the Board of Directors to fix
and determine the relative rights and preferences of subsequent series.
Each certificate representing shares shall state upon the face thereof:
(1) That the corporation is organized under the laws of this
state;
(2) The name of the person to whom issued;
(3) The number and class of shares, and the designation of the
series, if any, which such certificate represents; and
(4) The par value of each share represented by such certificate,
or a statement that the shares are without par value.
No certificate shall be issued for any share until such share is
fully paid.
Section 2. Certificate Identification and Transfer. All certificates for
shares shall be consecutively numbered or otherwise identified, and all evidence
of issue as provided in Section 1 above shall be entered on the stock transfer
books of the corporation. All certificates surrendered to the corporation for
transfer shall be cancelled, and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
cancelled, except that, in case of a lost, destroyed or mutilated certificate, a
new one may be issued therefor upon such terms and indemnity to the corporation
as the Board of Directors may prescribe.
Section 3. Transfer of Shares. Transfer of shares of the corporation shall
be made only on the stock transfer books of the corporation by the holder of the
record thereof or by his legal representative, who shall furnish proper evidence
of authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the corporation and the
transfer agent of the corporation, and on surrender for cancellation of the
certificate for such shares. The
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person in whose name shares stand on the books of the corporation shall be
deemed by the corporation to be the owner thereof for all purposes.
Section 4. Addresses of Stockholders. Every stockholder shall furnish
the corporation with an address to which notices of meetings and all other
notices may be served upon or mailed to him, and in default thereof, notices may
be addressed to him at his last known address or at the principal office of the
corporation.
ARTICLE IX.
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS
Section 1. Contracts. The Board of Directors or the Executive Committee
may authorize any officer or officers, fiscal agent or other agent or employee
of the corporation to enter into any contract or execute or deliver any
instrument in the name of or behalf of the corporation, and such authority may
be general or confined to specific instances; and, unless so authorized by the
Board of Directors, the Executive Committee or these Bylaws, no officer, fiscal
or other agent or employee of the corporation shall have any power or authority
to bind the corporation by any contract or engagement or to pledge its credit or
to render it liable for any purpose.
Section 2. Loans. Any officer or agent of the corporation hereafter
authorized by the Board of Directors or the Executive Committee may negotiate
loans and advances for the corporation from any bank, trust company or other
institution or from any firm, corporation or individual, and for such loans and
advances, when authorized by the Board of Directors, may make, execute and
deliver promissory notes or other evidence of indebtedness of the corporation,
and pledge, hypothecate or transfer, as security for the payment thereof,
securities or other property at any time held by the corporation. No loans shall
be contracted on behalf of the corporation, and no notes or other evidences of
the indebtedness shall be issued in its behalf unless and except as authorized
by the Board of Directors or the Executive Committee.
Section 3. Deposits. All funds of the corporation shall be deposited
from time to time to the credit of the corporation in such bank or trust
companies or with such bankers or other depositories in the United States or
elsewhere as the Board of Directors or the Executive Committee may approve.
Section 4. Checks, Drafts, Etc. All notes, drafts, acceptances, checks,
endorsements or other evidences of indebtedness shall be signed by such
individuals or agents as may be designated from time to time by resolution of
the Board of Directors or the Executive Committee for that purpose. Endorsements
for
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deposit to the credit of the corporation in any of its duly authorized
depositories may be made by an individual or agent who may be designated by
resolution of the Board of Directors or the Executive Committee for that
purpose.
ARTICLE X.
WAIVER OF NOTICE
Whenever any notice is required to be given to any stockholder or director
of the corporation under the provisions of these Bylaws or under the provisions
of the Articles of Incorporation or under the provisions of the Washington
Business Corporation Act, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE XI.
AMENDMENTS
The Board of Directors shall have the power to alter, amend or repeal
Bylaws, except with respect to Bylaws for which stockholder approval is required
by law; and, subject to the power of stockholders owning a majority of the stock
issued or outstanding and entitled to vote at any regular or special meeting of
stockholders, to change or repeal such Bylaws.
ARTICLE XII.
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of January
and end on the last day of December
N/5C14
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EXHIBIT 3.4
BYLAWS
OF
NORTHLAND CABLE NEWS, INC.
ARTICLE I
Principal Office
The principal office of the corporation shall be at such location as the
board of directors may designate from time to time. The corporation may have
such other offices, either within or without the state of Washington, as the
business of the corporation may require from time to time.
ARTICLE II
Shareholders' Meetings
Section 1. Annual Meetings. The annual meeting of the shareholders of
this corporation, for the purpose of election of directors and for such other
business as may come before it, shall be held at the principal office of the
corporation, or such other place as may be designated by the notice of the
meeting, within one hundred eighty (180) days of the end of the corporation's
fiscal year, at such a time as may be designated by the notice of the meeting.
Section 2. Special Meetings. Special meetings of the shareholders of
this corporation may be called at any time by the holders of sixty-six percent
(66%) of the voting shares of the corporation, or by the president, or by a
majority of the board of directors. No business shall be transacted at any
special meeting of shareholders except as is specified in the notice calling for
said meeting. The board of directors may designate any place as the place of any
special meeting.
Section 3. Notice of Meetings. Written notice of annual or special
meetings of shareholders stating the place, day, and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called, shall be given by the secretary or persons authorized to call the
meeting to each shareholder of record entitled to vote at the meeting and, if
and to the extent required by law, to each other shareholder of the corporation.
Such notice shall be given not less than ten (10) nor more than sixty (60) days
prior to the date of the meeting, except that notice of a meeting to act on an
amendment to the Articles of Incorporation, a plan of merger or share exchange,
a proposed sale, lease, exchange or other disposition of all or substantially
all of the assets of the corporation other than in the usual or regular course
of business, or the dissolution of corporation shall be given no fewer than
twenty (20) days nor more than sixty (60) days before the meeting date. Notice
may be transmitted by:
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mail, private carrier or personal delivery; telegraph or teletype; or telephone,
wire or wireless equipment which transmits a facsimile of the notice. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail addressed to the shareholder at his or her address as it appears on the
stock transfer books of the corporation.
Section 4. Waiver of Notice. Notice of the time, place, and purpose of
any meeting may be waived in writing (either before or after such meeting) and
will be waived by any shareholder by his or her attendance thereat in person or
by proxy, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting. Any shareholder so
waiving shall be bound by the proceedings of any such meeting in all respects as
if due notice thereof had been given.
Section 5. Quorum and Adjourned Meetings. A majority of the outstanding
shares of the corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders. A majority of the shares
represented at a meeting, even if less than a quorum, may adjourn the meeting
from time to time without further notice. At such reconvened meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. The
shareholders present at a duly organized meeting may continue to transact
business at such meeting and at any adjournment of such meeting (unless a new
record date is or must be set for the adjourned meeting pursuant to Section 9 of
this Article II), notwithstanding the withdrawal of enough shareholders from
either meeting to leave less than a quorum.
Section 6. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven (11) months from the date of its execution, unless otherwise provided in
the proxy.
Section 7. Voting Record. After fixing a record date for a shareholders'
meeting, the corporation shall prepare an alphabetical list of the names of all
shareholders on the record date who are entitled to notice of the shareholders'
meeting. The list shall be arranged by voting group, and within each voting
group by class or series of shares, and show the address of and number of shares
held by each shareholder. A shareholder, a shareholder's agent, or a
shareholder's attorney may inspect the shareholders' list, beginning ten (10)
days prior to the shareholders' meeting and continuing through the meeting, at
the corporation's principal office or at a place identified in the meeting
notice in the city where the meeting will be held, during regular business hours
and at the shareholder's expense. The shareholders' list shall be kept open for
inspection during such meeting or any adjournment.
Section 8. Voting of Shares. Except as otherwise provided in the
Articles of Incorporation or in these Bylaws, every shareholder of record shall
have the right at every
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shareholders' meeting to one vote for every share standing in his or her name on
the books of the corporation, and the affirmative vote of a majority of the
shares represented at a meeting and entitled to vote thereat shall be necessary
for the adoption of a motion or for the determination of all questions and
business which shall come before the meeting.
Section 9. Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, or any
adjournment thereof, or entitled to receive payment of any dividend, the board
of directors may fix in advance a record date for any such determination of
shareholders, such date to be not more than seventy (70) days prior to the date
on which the particular action requiring such determination of shareholders is
to be taken. If no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the day before the date on which
notice of the meeting is mailed or the date on which the resolution of the board
of directors declaring such dividend is adopted, as the case may be, shall be
the record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof, unless the board of directors fixes a new record date, which it must do
if the meeting is adjourned to a date more than one hundred twenty (120) days
after the date is fixed for the original meeting.
Section 10. Election of Directors. Each shareholder entitled to vote at
an election of directors may vote in person or by proxy the number of shares
owned by him or her for as many persons as there are directors to be elected and
for whose election he or she has a right to vote.
ARTICLE III
Directors
Section 1. General Powers. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the board of directors except as otherwise
provided by the laws under which this corporation is formed or in the Articles
of Incorporation.
Section 2. Number. The board shall be composed of three (3) directors,
provided that the number of directors may be increased or decreased from time to
time by amending this Section 2. No decrease in the number of directors shall
have the effect of shortening the term of any incumbent director.
Section 3. Tenure and Qualifications. Each director shall hold office
until the next annual meeting of shareholders and until his or her successor
shall have been elected and qualified. Directors need not be residents of the
state or shareholders of the corporation.
Section 4. Election. The directors shall be elected by the shareholders
at their annual meeting each year; and if, for any cause, the directors shall
not have been elected at an annual
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meeting, they may be elected at a special meeting of shareholders called for
that purpose in the manner provided by these Bylaws.
Section 5. Vacancies. Any vacancy occurring on the board may be filled
by the affirmative vote of a majority of the remaining directors though less
than a quorum of the board. A director elected to fill a vacancy due to
resignation or removal shall be elected for the unexpired term of his or her
predecessor in office. Any directorship to be filled by reason of an increase in
the number of directors shall be filled for a term extending only until the next
annual meeting of shareholders.
Section 6. Resignation. Any director may resign at any time by
delivering written notice to the board of directors, its chairperson, the
president or the secretary of the corporation. A resignation shall be effective
when the notice is delivered unless the notice specifies a later effective date.
Section 7. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, the entire board of directors, or any member
thereof, may be removed, with or without cause, by a vote of the holders of a
majority of shares then entitled to vote at an election of such directors.
Section 8. Meetings
(a) The annual meeting of the board of directors shall be held
immediately after the annual shareholders' meeting at the same place as the
annual shareholders' meeting or at such other place and at such time as may be
determined by the directors. No notice of the annual meeting of the board of
directors shall be necessary.
(b) Special meetings may be called at any time and place upon the
call of the president, secretary, or any two (2) directors; provided, however,
that in the event there is only one (1) director, he or she may call a special
meeting. Notice of the time and place of each special meeting shall be given by
the secretary, or the persons calling the meeting, by mail, private carrier,
radio, telegraph, telegram, facsimile transmission, personal communication by
telephone or otherwise at least two (2) days in advance of the time of the
meeting. The purpose of the meeting need not be given in the notice. Notice of
any special meeting may be waived in writing or by telegram (either before or
after such meeting) and will be waived by any director by attendance thereat.
Written notice shall be in a comprehensible form and effective at the earliest
of the following: (1) when dispatched by telegraph, teletype, or facsimile
equipment; or (ii) when received; or (iii) if mailed, five (5) days after its
deposit in the United States mail, as evidenced by the postmark if mailed with
first-class postage, prepaid and correctly addressed; or on the date shown on
the return receipt if sent by registered or certified mail, return receipt
requested, and the receipt is signed by or on behalf of the addressee.
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(c) Regular meetings of the board of directors shall be held at
such place and on such day and hour as shall from time to time be fixed by
resolution of the board of directors. No notice of regular meetings of the board
of directors shall be necessary.
(d) At any meeting of the board of directors, any business may be
transacted, and the board may exercise all of its powers.
Section 9. Quorum and Voting
(a) A majority of the directors presently in office shall
constitute a quorum, but a lesser number may adjourn any meeting from time to
time until a quorum is obtained, and no further notice thereof need be given.
(b) At each meeting of the board at which a quorum is present,
the act of a majority of the directors present at the meeting shall be the act
of the board of directors. The directors present at a duty organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough directors to leave less than a quorum.
Section 10. Compensation. By resolution of the board of directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the board of directors and may be paid a fixed sum for attendance at each
meeting of the board of directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 11. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors at which action an any corporate
matter is taken shall be presumed to have assented to the action taken unless:
(a) The director objects at the beginning of the meeting, or
promptly upon the director's arrival, to holding it or transacting business at
the meeting;
(b) The director's dissent or abstention from the action taken is
entered in the minutes of the meeting; or
(c) The director delivers written notice of the director's
dissent or abstention to the presiding officer of the meeting before its
adjournment or to the corporation within a reasonable time after adjournment of
the meeting.
The right of dissent or abstention is not available to a director who votes in
favor of the action taken.
Section 12. Committees. The board of directors, by resolution adopted by
a majority of the full board of directors, may designate from among its members
one or more committees, each of which must have two or more members and, to the
extent provided in such resolution, shall
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have and may exercise all the authority of the board of directors, except that
no such committee shall have the authority to: authorize or approve a
distribution except according to a general formula or method prescribed by the
board of directors; approve or propose to shareholders action that the
Washington Business Corporation Act requires to be approved by shareholders;
fill vacancies on the board of directors or on any of its committees; amend any
Articles of Incorporation not requiring shareholder approval; adopt, amend, or
repeal Bylaws; approve a plan of merger not requiring shareholder approval; or
authorize or approve the issuance or sale or contract for sale of shares, or
determine the designation and relative rights, preferences, and limitations of a
class or series of shares, except that the board of directors may authorize a
committee, or a senior executive officer of the corporation, to do so within
limits specifically prescribed by the board of directors.
ARTICLE IV
Special Measures for Corporate Action
Section 1. Actions by Written Consent. Any corporate action required or
permitted by the Articles of Incorporation, Bylaws, or the laws under which this
corporation is formed, to be voted upon or approved at a duly called meeting of
the directors, committee of directors, or shareholders may be accomplished
without a meeting if one or more unanimous written consents of the respective
directors or shareholders, setting forth the actions so taken, shall be signed,
either before or after the action taken, by all the directors, committee
members, or shareholders, as the case may be. Action taken by unanimous written
consent is effective when the last director or committee member signs the
consent, unless the consent specifies a later effective date. Action taken by
unanimous written consent of the shareholders is effective when all consents are
in possession of the corporation, unless the consent specifies a later effective
date.
Section 2. Meetings by Conference Telephone. Members of the board of
directors, members of a committee of directors, or shareholders may participate
in their respective meetings by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time. Participation in a meeting by such
means shall constitute presence in person at such meeting.
ARTICLE V
Officers
Section 1. Officers Designated. The officers of the corporation shall be
a president, one or more vice presidents (the number thereof to be determined by
the board of directors), a secretary, and a treasurer, each of whom shall be
elected by the board of directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the board of directors.
Any two or more offices may be held by the same person. The board of directors
may, in its discretion, elect a chairperson of the board of directors; and, if a
chairperson
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has been elected, the chairperson shall, when present, preside at all meetings
of the board of directors and the shareholders and shall have such other powers
as the board may prescribe.
Section 2. Election, Qualification and Term of Office. Each of the
officers shall be elected by the board of directors at each annual meeting of
the board of directors. Except as hereinafter provided, each of said officers
shall hold office from the date of his or her election until the next annual
meeting of the board of directors and until his or her successor shall have been
duly elected and qualified.
Section 3. Powers and Duties
(a) President. The president shall be the chief executive officer
of the corporation and, subject to the direction and control of the board of
directors, shall have general charge and supervision over its property,
business, and affairs. He or she shall, unless a chairperson of the board of
directors has been elected and is present, preside at meetings of the
shareholders and the board of directors.
(b) Vice President. In the absence of the president or in the
event of the president's inability to act, the senior vice president shall act
in the president's place and stead and shall have all the powers and authority
of the president, except as limited by resolution of the board of directors.
(c) Secretary. The secretary shall: (1) be responsible for
preparing minutes of the shareholders' and of the board of directors' meetings
and keeping all such minutes in one or more books provided for that purpose; (2)
see that all notices are duly given in accordance with the provisions of these
Bylaws or as required by law; (3) be custodian of the corporate records (4) keep
a register of the post office address of each shareholder which shall be
furnished to the secretary by such shareholder; (5) sign with the president, or
a vice president, certificates for shares of the corporation, the issuance of
which shall have been authorized by resolution of the board of directors; (6)
have general charge of the stock transfer books of the corporation; (7)
authenticate records of the corporation; and (8) in general perform all duties
incident to the office of secretary and such other duties as from time to time
may be assigned to him or her by the president or by the board of directors.
(d) Treasurer. Subject to the direction and control of the board
of directors, the treasurer shall have the custody, control, and disposition of
the funds and securities of the corporation and shall account for the same. At
the expiration of his or her term of office, the treasurer shall turn over to
his or her successor all property of the corporation in his or her possession.
Section 4. Assistant Secretaries and Assistant Treasurers. The assistant
secretaries, when authorized by the board of directors, may sign with the
president, or a vice president, certificates for shares of the corporation, the
issuance of which shall have been authorized by resolution of the board of
directors. The assistant treasurers shall, respectively, if required by the
board of
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directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the board of directors shall determine. The assistant
secretaries and assistant treasurers, in general, shall perform such duties as
shall be assigned to them by the secretary or the treasurer respectively, or by
the president or the board of directors.
Section S. Removal. The board of directors shall have the right to
remove any officer whenever in its judgment the best interests of the
corporation will be served thereby.
Section 6. Vacancies. The board of directors shall fill any office which
becomes vacant with a successor who shall hold office for the unexpired term and
until his or her successor shall have been duly elected and qualified.
Section 7. Salaries. The salaries of all officers of the corporation
shall be fixed by the board of directors.
ARTICLE VI
Share Certificates
Section 1. Issuance, Form and Execution of Certificates. No shares of
the corporation shall be issued unless authorized by the board. Such
authorization shall include the maximum number of shares to be issued, the
consideration to be received for each share, and a statement that the board has
determined that such consideration is adequate. Certificates for shares of the
corporation shall be in such form as is consistent with the provisions of the
Washington Business Corporation Act and shall state:
(a) The name of the corporation and that the corporation is
organized under the laws of this state;
(b) The name of the person to whom issued; and
(c) The number and class of shares and the designation of the
series, if any, which such certificate represents.
They shall be signed by the president or vice president and by the secretary of
the corporation. Certificates may be issued for fractional shares. No
certificate shall be issued for any share until the consideration established
for its issuance has been paid.
Section 2. Transfers. Shares may be transferred by delivery of the
certificate therefor, accompanied either by an assignment in writing on the back
of the certificate or by a written power of attorney to assign and transfer the
same, signed by the record holder of the certificate. The board of directors
may, by resolution, provide that beneficial owners of shares shall be deemed
holders of record for certain specified purposes. Except as otherwise
specifically
Bylaws of Northland Cable News, Inc.
Page 8
<PAGE> 9
provided in these Bylaws, no shares shall be transferred on the books of the
corporation until the outstanding certificate therefor has been surrendered to
the corporation.
Section 3. Loss or Destruction of Certificates. In case of loss or
destruction of any certificate of shares, another may be issued in its place
upon proof of such loss or destruction and upon the giving of a satisfactory
indemnity bond to the corporation. A new certificate may be issued without
requiring any bond, when in the judgment of the board of directors it is proper
to do so.
ARTICLE VII
Books and Records
Section 1. Books of Accounts, Minutes and Share Register. The
corporation shall keep as permanent records minutes of all meetings of its
shareholders and board of directors, a record of all actions taken by the
shareholders or board of directors without a meeting, and a record of all
actions taken by a committee of the board of directors exercising the authority
of the board of directors on behalf of the corporation. The corporation shall
maintain appropriate accounting records. The corporation or its agent shall
maintain a record of its shareholders, in a form that permits preparation of a
list of the names and addresses of all shareholders, in alphabetical order by
class of shares showing the number and class of shares held by each. The
corporation shall keep a copy of the following records at its principal office:
the Articles or Restated Articles of Incorporation and all amendments to them
currently in effect; the Bylaws or Restated Bylaws and all amendments to them
currently in effect; the minutes of all shareholders' meetings, and records of
all actions taken by shareholders without a meeting, for the past three years;
its financial statements for the past three years, including the balance sheets
and income statements prepared pursuant to Section 3 of this Article VII; a
written communications to shareholders generally within the past three years; a
list of the names and business addresses of its current directors and officers;
and its most recent annual report delivered to the Secretary of State of the
State of Washington.
Section 2. Copies of Resolutions. Any person dealing with the
corporation may rely upon a copy of any of the records of the proceedings,
resolutions, or votes of the board of directors or shareholders, when certified
by the president or secretary.
ARTICLE VIII
Corporate Seal
The board of directors may provide for a corporate seal.
Bylaws of Northland Cable News, Inc.
Page 9
<PAGE> 10
ARTICLE IX
Amendment of Bylaws
The power to alter, amend, or repeal these Bylaws and adopt new Bylaws
is vested in the board, subject to repeal or change by action of the
shareholders.
ARTICLE IX
Amendment of Bylaws
The power to alter, amend, or repeal these Bylaws and adopt new Bylaws
is vested in the board, subject to repeal or change by action of the
shareholders; provided that the power to adopt, amend, or repeal any provision
in these Bylaws relating to the size, powers, term, or composition of the board
is vested solely in the shareholders of the corporation.
ARTICLE X
Fiscal Year
The fiscal year of the corporation shall be the twelve (12) month period
ending on December 31 in each year.
CERTIFICATE OF ADOPTION
The undersigned, being the secretary of Northland Cable News, Inc.,
hereby certifies that the foregoing is a true and correct copy of the Bylaws
adopted by resolution of the Board of Directors of Northland Cable News, Inc. on
May 12, 1994.
/s/ JAMES A. PENNEY, SECRETARY
-----------------------------------
James A. Penney, Secretary
Bylaws of Northland Cable News, Inc,
Page 10
<PAGE> 1
EXHIBIT 4.1
CONFORMED COPY
================================================================================
NORTHLAND CABLE TELEVISION, INC.
10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
--------------------------------
INDENTURE
Dated as of November 12, 1997
--------------------------------
--------------------------------
HARRIS TRUST COMPANY
OF CALIFORNIA
--------------------------------
Trustee
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
<S> <C>
310 (a)................................................................. (1) 7.10
(a)(2)............................................................. 7.10
(a)(3)............................................................. N.A.
(a)(4)............................................................. N.A.
(a)(5)............................................................. 7.10
(b)................................................................ 7.03; 7.10
(c)................................................................ N.A.
311 (a)................................................................. 7.11
(b)................................................................ 7.11
(c)................................................................ N.A.
312 (a)................................................................. 2.05
(b)................................................................ 12.03
(c)................................................................ 12.03
313 (a)................................................................. 7.06
(b)(1)............................................................. N.A.
(b)(2)............................................................. 7.06; 7.07
(c)................................................................ 7.06; 12.02
(d)................................................................ 7.06
314 (a)................................................................. 4.03;12.02
(b)................................................................ N.A.
(c)(1)............................................................. 12.04
(c)(2)............................................................. 12.04
(c)(3)............................................................. N.A.
(d)................................................................ N.A.
(e)................................................................ 12.05
(f)................................................................ N.A.
315 (a)................................................................. 7.01
(b)................................................................ 7.05,12.02
(c)................................................................ 7.01
(d)................................................................ 7.01
(e)................................................................ 6.11
316 (a)(last sentence).................................................. 2.09
(a)(1)(A).......................................................... 6.05
(a)(1)(B).......................................................... 6.04
(a)(2)............................................................. N.A.
(b)................................................................ 6.07
(c)................................................................ 2.12
317 (a)(1).............................................................. 6.08
(a)(2)............................................................. 6.09
(b)................................................................ 2.04
318 (a)................................................................. 12.01
(b)................................................................ N.A.
(c)................................................................ 12.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE........................................1
Section 1.01. Definitions.................................................................1
Section 1.02. Other Definitions..........................................................13
Section 1.03. Incorporation by Reference of Trust Indenture Act..........................13
Section 1.04. Rules of Construction......................................................14
ARTICLE 2. THE NOTES........................................................................14
Section 2.01. Form and Dating............................................................14
Section 2.02. Execution and Authentication...............................................15
Section 2.03. Registrar and Paying Agent.................................................16
Section 2.04. Paying Agent to Hold Money in Trust........................................16
Section 2.05. Holder Lists...............................................................16
Section 2.06. Transfer and Exchange......................................................17
Section 2.07. Replacement Notes..........................................................28
Section 2.08. Outstanding Notes..........................................................29
Section 2.09. Treasury Notes.............................................................29
Section 2.10. Temporary Notes............................................................29
Section 2.11. Cancellation...............................................................30
Section 2.12. Defaulted Interest.........................................................30
ARTICLE 3. REDEMPTION AND PREPAYMENT........................................................30
Section 3.01. Notices to Trustee.........................................................30
Section 3.02. Selection of Notes to Be Redeemed..........................................30
Section 3.03. Notice of Redemption.......................................................31
Section 3.04. Effect of Notice of Redemption.............................................31
Section 3.05. Deposit of Redemption Price................................................31
Section 3.06. Notes Redeemed in Part.....................................................32
Section 3.07. Optional Redemption........................................................32
Section 3.08. Mandatory Redemption.......................................................32
Section 3.09. Offer to Purchase by Application of Excess Proceeds........................33
ARTICLE 4. COVENANTS........................................................................34
Section 4.01. Payment of Notes...........................................................34
Section 4.02. Maintenance of Office or Agency............................................34
Section 4.03. Reports....................................................................35
Section 4.04. Compliance Certificate.....................................................35
Section 4.05. Taxes......................................................................36
Section 4.06. Stay, Extension and Usury Laws.............................................36
Section 4.07. Restricted Payments........................................................36
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.............38
Section 4.09. Incurrence of Debt and Issuance of Preferred Stock.........................38
Section 4.10. Asset Sales................................................................40
Section 4.11. Transactions with Affiliates...............................................41
Section 4.12. Liens......................................................................42
Section 4.13. Special Repurchase Offer...................................................42
Section 4.14. Corporate Existence........................................................43
</TABLE>
i
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<TABLE>
<CAPTION>
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<S> <C>
Section 4.15. Offer to Repurchase Upon Change of Control.................................44
Section 4.16. Limitation on Incurrence of Senior Subordinated Debt.......................44
Section 4.17. Dividend and Other Payment Restrictions Affecting Subsidiaries.............44
Section 4.18. Additional Subsidiary Guarantees...........................................45
Section 4.19. Restriction on Preferred Stock of Subsidiaries.............................45
Section 4.20. Payments for Consent.......................................................45
ARTICLE 5. SUCCESSORS.......................................................................46
Section 5.01. Merger, Consolidation or Sale of Assets....................................46
Section 5.02. Successor Corporation Substituted..........................................46
ARTICLE 6. DEFAULTS AND REMEDIES............................................................46
Section 6.01. Events of Default..........................................................46
Section 6.02. Acceleration...............................................................48
Section 6.03. Other Remedies.............................................................49
Section 6.04. Waiver of Past Defaults....................................................49
Section 6.05. Control by Majority........................................................49
Section 6.06. Limitation on Suits........................................................49
Section 6.07. Rights of Holders of Notes to Receive Payment..............................50
Section 6.08. Collection Suit by Trustee.................................................50
Section 6.09. Trustee May File Proofs of Claim...........................................50
Section 6.10. Priorities.................................................................50
Section 6.11. Undertaking for Costs......................................................51
ARTICLE 7. TRUSTEE..........................................................................51
Section 7.01. Duties of Trustee..........................................................51
Section 7.02. Rights Of Trustee..........................................................52
Section 7.03. Individual Rights of Trustee...............................................53
Section 7.04. Trustee's Disclaimer.......................................................53
Section 7.05. Notice of Defaults.........................................................53
Section 7.06. Reports by Trustee to Holders of the Notes.................................53
Section 7.07. Compensation and Indemnity.................................................53
Section 7.08. Replacement of Trustee.....................................................54
Section 7.09. Successor Trustee by Merger, etc...........................................55
Section 7.10. Eligibility; Disqualification..............................................55
Section 7.11. Preferential Collection of Claims Against Company..........................56
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.........................................56
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...................56
Section 8.02. Legal Defeasance and Discharge.............................................56
Section 8.03. Covenant Defeasance........................................................56
Section 8.04. Conditions to Legal or Covenant Defeasance.................................57
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other
Miscellaneous Provisions.................................................................58
Section 8.06. Repayment to Company.......................................................58
Section 8.07. Reinstatement..............................................................59
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.................................................59
Section 9.01. Without Consent of Holders of Notes........................................59
Section 9.02. With Consent of Holders of Notes...........................................60
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
Section 9.03. Compliance with Trust Indenture Act........................................61
Section 9.04. Revocation and Effect of Consents..........................................61
Section 9.05. Notation on or Exchange of Notes...........................................61
Section 9.06. Trustee to Sign Amendments, etc............................................61
ARTICLE 10. SUBORDINATION...................................................................62
Section 10.01. Agreement to Subordinate..................................................62
Section 10.02. [Intentionally Omitted.]..................................................62
Section 10.03. Liquidation; Dissolution; Bankruptcy......................................62
Section 10.04. Default on Designated Senior Debt.........................................62
Section 10.05. Acceleration of Securities................................................63
Section 10.06. When Distribution Must Be Paid Over.......................................63
Section 10.07. Notice by Company.........................................................63
Section 10.08. Subrogation...............................................................64
Section 10.09. Relative Rights...........................................................64
Section 10.10. Subordination May Not Be Impaired by Company..............................64
Section 10.11. Distribution or Notice to Representative..................................64
Section 10.12. Rights of Trustee and Paying Agent........................................64
Section 10.13. Authorization to Effect Subordination.....................................65
Section 10.14. Amendments................................................................65
ARTICLE 11. SUBSIDIARY GUARANTEES...........................................................65
Section 11.01. Subsidiary Guarantees.....................................................65
Section 11.02. Limitation of Guarantor's Liability.......................................66
Section 11.03. Execution and Delivery of Subsidiary Guarantees...........................66
Section 11.04. Guarantors May Consolidate, etc., on Certain Terms........................67
Section 11.05. Releases Following Sale of Assets.........................................68
Section 11.06. "Trustee" to Include Paying Agent.........................................68
Section 11.07. Subordination of Subsidiary Guarantees....................................68
ARTICLE 12. MISCELLANEOUS...................................................................69
Section 12.01. Trust Indenture Act Controls..............................................69
Section 12.02. Notices...................................................................69
Section 12.03. Communication by Holders of Notes with Other Holders of Notes.............70
Section 12.04. Certificate and Opinion as to Conditions Precedent........................70
Section 12.05. Statements Required in Certificate or Opinion.............................70
Section 12.06. Rules by Trustee and Agents...............................................71
Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders..71
Section 12.08. Governing Law.............................................................71
Section 12.09. No Adverse Interpretation of Other Agreements.............................71
Section 12.10. Successors................................................................71
Section 12.11. Severability..............................................................71
Section 12.12. Counterpart Originals.....................................................71
Section 12.13. Table of Contents, Headings, etc..........................................72
</TABLE>
EXHIBITS
Exhibit A-1 FORM OF NOTE
iii
<PAGE> 6
Exhibit A-2 FORM OF REGULATION S TEMPORARY NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E FORM OF SUBSIDIARY GUARANTEE
iv
<PAGE> 7
INDENTURE dated as of November 12, 1997 among Northland Cable
Television, Inc., a Washington corporation (the "Company"), Northland Cable
News, Inc., a Washington corporation (the "Guarantor"), and Harris Trust Company
of California, as trustee (the "Trustee").
The Company, the Guarantor, and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 10 1/4% Series A Senior Subordinated Notes due 2007 (the "Series A Notes")
and the 10 1/4% Series B Senior Subordinated Notes due 2007 (the "Series B
Notes" and, together with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means the global note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with and registered in the name of the Depositary or its nominee that
will be issued in a denomination equal to the outstanding principal amount of
the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i) Debt of
any other Person existing at the time such other Person is merged with or into
or became a Subsidiary of such specified Person, including, without limitation,
Debt incurred in connection with, or in contemplation of, such other Person
merging with or into or becoming a Subsidiary of such specified Person, and (ii)
Debt secured by a Lien encumbering any asset acquired by such specified Person.
"Additional Interest" means all additional interest then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Note, the rules and procedures of
the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) by the Company or any
Subsidiary in any other Person, or any acquisition or purchase of Equity
Interests of any other Person by the Company or any Subsidiary, in either case
pursuant to which such Person shall become a Subsidiary or shall be
consolidated, merged with or into the Company or any Subsidiary or (ii) any
acquisition by the Company or any 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.
<PAGE> 8
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
of any assets or rights (including, without limitation, by way of a sale and
leaseback) other than in the ordinary course of business consistent with past
practices (provided that the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the Company and its Subsidiaries taken as
a whole will be governed by the provisions of Section 4.15 hereof and the
provisions of Article 5 hereof and not by Section 4.10 hereof, and (ii) the
issue or sale by the Company or any Subsidiary of Equity Interests of any of the
Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions (a) that have a fair
market value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Wholly Owned Subsidiary or by a Wholly Owned Subsidiary to the Company or
to another Wholly Owned Subsidiary, (ii) an issuance of Equity Interests by a
Wholly Owned Subsidiary to the Company or to another Wholly Owned Subsidiary and
(iii) a Restricted Payment that is permitted by Section 4.07 hereof will not be
deemed to be Asset Sales.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500 million and a Keefe Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper having
the highest rating obtainable from Moodys Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means the occurrence of any of the following: (i)
any Person other than a Related Party or any Person owned or controlled,
directly or indirectly, by any Related Party (an "Unrelated Person"), together
with any Affiliates thereof that are also Unrelated Persons, (A) acquires or
2
<PAGE> 9
acquire (whether through legal or beneficial ownership, by contract or
otherwise), directly or indirectly, the right to vote more than 45% of the total
voting power of all classes of Voting Stock of the either the Company or NTC or
(B) shall have elected, or caused to be elected, a sufficient number of its or
their nominees to the Board of Directors of the Company or NTC such that the
nominees so elected (regardless of when elected) shall collectively constitute a
majority of the Board of Directors of either the Company or NTC; (ii) the first
day on which NTC ceases to own a majority of the outstanding Equity Interests of
the Company, (iii) the adoption of a plan relating to the liquidation or
dissolution of the Company; (iv) the Company consolidates with, or merges with
or into, any Person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where the Voting Stock of the Company
outstanding immediately prior to such transaction is converted into or exchanged
for Voting Stock (other than Disqualified Stock) of the surviving or transferee
Person constituting a majority of the outstanding shares of such Voting Stock of
such surviving or transferee Person (immediately after giving effect to such
issuance). For purposes of this definition, "Person" includes any "group" as
that term is used in Section 13(d)(3) or 14(d)(2) of the Exchange Act, and
"beneficial ownership" shall have the meaning provided in Rule 13d-3 under the
Exchange Act.
"Company" means Northland Cable Television, Inc., a Washington
corporation, and any and all successors thereto.
"Consolidated Interest Expense" means, for any given period and Person,
the aggregate of the interest expense in respect of all Debt of such Person and
its Subsidiaries for such period, on a consolidated basis, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to such Person or a Wholly Owned Subsidiary thereof, (ii) the Net Income of
any Subsidiary shall be excluded to the extent that the declaration or payment
of dividends or similar distributions by that Subsidiary of that Net Income is
not at the date of determination permitted without any prior governmental
approval (that has not been obtained) or, 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 that Subsidiary or
its shareholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common shareholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year
3
<PAGE> 10
of such declaration and payment, but only to the extent of any cash received by
such Person upon issuance of such preferred stock, less (x) all write-ups (other
than write-ups resulting from foreign currency translations and write-ups of
tangible assets of a going concern business made within 12 months after the
acquisition of such business) subsequent to the Issue Date in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Consolidated Operating Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period: plus (i)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income); plus (ii) provision for taxes based on
income or profits of such Person and its Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income; plus (iii) Consolidated Interest Expense of such Person and its
Subsidiaries for such period, to the extent that any such expense was deducted
in computing such Consolidated Net Income; plus (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other noncash expenses of such Person and its Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income; minus (v) non-cash items
increasing such Consolidated Net Income for such period, in each case, on a
consolidated basis and determined in accordance with GAAP.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Agreements" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Senior Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time. Debt under Credit Agreements outstanding
on the date on which Notes are first issued and authenticated under this
Indenture shall be deemed to have been incurred on such date in reliance on the
exception provided by clause (i) of the definition of Permitted Debt.
"Debt" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense (including any deferred
management fees pursuant to the Management Agreement) or trade payable, if and
to the extent any of the foregoing indebtedness (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
The amount of any Debt outstanding as of any date shall be (i) the accreted
value thereof, in the case of any Debt that does not require current payments of
interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other Debt.
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<PAGE> 11
"Debt to Operating Cash Flow Ratio" means the ratio of (i) the Total
Consolidated Debt as of the date of calculation (the "Determination Date") to
(ii) four times the Pro Forma Consolidated Operating Cash Flow for the latest
fiscal quarter for which financial information is available immediately
preceding such Determination Date (the "Measurement Period"). For purposes of
calculating Consolidated Operating Cash Flow for the Measurement Period
immediately prior to the relevant Determination Date, if the Company or any
Subsidiary shall have in any manner (a) acquired (including through an Asset
Acquisition or the commencement of activities constituting such operating
business) or (b) disposed of (including by way of an Asset Sale or the
termination or discontinuance of activities constituting such operating
business) any operating business during such Measurement Period or after the end
of such period and on or prior to such Determination Date, such calculation will
be made on a pro forma basis in accordance with GAAP as if, in the case of an
Asset Acquisition or the commencement of activities constituting such operating
business, all such transactions had been consummated on the first day of such
Measurement Period and, in the case of an Asset Sale or termination or
discontinuance of activities constituting such operating business, all such
transactions had been consummated prior to the first day of such Measurement
Period.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A-1 hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Senior Debt" means (i) any Debt outstanding under the Senior
Credit Facility, (ii) any other Senior Debt permitted under this Indenture the
principal amount of which is $5.0 million or more and that has been designated
by the Company as "Designated Senior Debt."
"Disqualified Equity Interest" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable at the option of the holder thereof), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable, at the option of the holder thereof, in
whole or in part, or exchangeable into Debt on or prior to the earlier of the
maturity date of the Notes or the date on which no Notes remain outstanding.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
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<PAGE> 12
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant
to Section 2.06(f).
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Existing Debt" means up to $1.0 million in aggregate principal amount
of Debt of the Company and its Subsidiaries (other than Debt under the Senior
Credit Facility) in existence on the Issue Date, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A-1 hereto issued in accordance with Section 2.01, 2.06(b), 2.06(d) or
2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any Debt.
"Guarantors" means (i) Northland Cable News, Inc., a Washington
corporation, and (ii) any other Subsidiary that executes a Subsidiary Guarantee
in accordance with the provisions of this Indenture, and their respective
successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the Global Note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
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<PAGE> 13
"Indirect Participant" means a Person who holds a beneficial interest in
a Global Note through a Participant.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Debt or other obligations), advances or
capital contributions (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Debt, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of Section 4.07 hereof.
"Issue Date" means the date of first issuance of the Notes under this
Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Management Agreement" means that certain agreement dated as of August
23, 1994, as the same may from time to time be amended, by and between the
Company and NTC, relating to the retention by the Company of NTC as its managing
agent in connection with the overall affairs and operations of the Company's
systems.
"Net Cash Proceeds" means the aggregate cash proceeds received by the
Company or any Subsidiary in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of (i) the direct costs relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, (ii) taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements), amounts required to be applied to the repayment of Debt
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
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<PAGE> 14
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (A) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (B) the
disposition of any securities by such Person or any Subsidiary or the
extinguishment of any Debt of such Person or any Subsidiary and (ii) any
extraordinary or nonrecurring gain (but not loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain (but not loss).
"Non-U.S. Person" means a person who is not a U.S. Person.
"Note Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"NTC" means Northland Telecommunications Corporation, a Washington
corporation and parent company of the Company.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Debt.
"Offering" means the Offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, the Secretary or any Vice-President of
such Person, or any Guarantor, as applicable.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company (or
any Guarantor, if applicable), any Subsidiary of the Company or the Trustee.
"Pari Passu Debt" means (i) any Debt of the Company that is pari passu
in right of payment to the Notes and (ii) with respect to any Subsidiary
Guarantee of the Notes, Debt which ranks pari passu in right of payment to such
Subsidiary Guarantee.
"Participant" means, with respect to DTC, Euroclear or Cedel, a Person
who has an account with DTC, Euroclear or Cedel, respectively (and, with respect
to DTC, shall include Euroclear and Cedel).
"Permitted Investments" means (a) any Related Business Investment; (b)
any Investment in Cash Equivalents; (c) any Investment by the Company or any
Subsidiary of the Company in a Person, if as a result of such Investment (i)
such Person becomes a Wholly Owned Subsidiary of the Company that is engaged in
the same or a similar line of business as the Company and its Subsidiaries were
engaged in on the Issue Date or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of
the Company that is engaged in the same or a similar line of business as the
Company and its Subsidiaries were engaged in on the Issue Date; (d) any
Restricted Investment made as a result of the
8
<PAGE> 15
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with Section 4.10 hereof; (e) any acquisition of assets solely
in exchange for the issuance of Equity Interests (other than Disqualified Stock)
of the Company; and (f) other Investments in any Person (other than NTC or an
Affiliate of NTC that is not also a Subsidiary of the Company) having an
aggregate fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (f) that are at the time
outstanding, not to exceed $2.0 million.
"Permitted Junior Securities" means Equity Interests in the Company or
debt securities that are subordinated to all Senior Debt (and any debt
securities issued in exchange for Senior Debt) to substantially the same extent
as, or to a greater extent than, the Notes are subordinated to Senior Debt
pursuant to Article 10 of this Indenture.
"Permitted Refinancing Debt" means any Debt of the Company or any
Subsidiary issued in exchange for, or the net proceeds of which are used to
extend, refinance, renew, replace, defease or refund other Debt of the Company
or any Subsidiary; provided that: (i) the principal amount (or accreted value,
if applicable) of such Permitted Refinancing Debt does not exceed the principal
amount of (or accreted value, if applicable), plus accrued interest on, the Debt
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (ii) such
Permitted Refinancing Debt has a final maturity date later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Debt being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Debt being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Notes, such Permitted Refinancing Debt has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the Notes on terms at least as favorable to the Holders of
the Notes as those contained in the documentation governing the Debt being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Debt is incurred either by the Company or by the Subsidiary who is the obligor
on the Debt being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, limited liability
limited partnership, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Principal" means John S. Whetzell.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"pro forma" means, with respect to any calculation made or required to
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act.
"Pro Forma Consolidated Operating Cash Flow" of any Person means for any
period the Consolidated Operating Cash Flow of such Person for such period
calculated on a pro forma basis to give effect to any Asset Sale or acquisition
of assets not in the ordinary course of business (including acquisitions of
other Persons by merger, consolidation or purchase of Capital Stock) during such
period as if such Asset Sale or acquisition of assets had taken place on the
first day of such period. For purposes of making the computations referred to
pursuant to the provisions of Section 4.09 hereof, any Asset Sale or acquisition
of assets not in the ordinary course of business made by the Company, including
all mergers
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<PAGE> 16
and acquisitions subsequent to the last full fiscal quarter, shall be calculated
on a pro forma basis as if such Asset Sale or acquisition of assets had taken
place on the first day of such fiscal quarter.
"Public Equity Offering" means a public offering of any Equity Interests
(other than Disqualified Stock) of (i) the Company or (ii) NTC to the extent the
net proceeds thereof are contributed to the Company as a capital contribution,
that, in each case, results in the net proceeds to the Company of at least $25.0
million.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of November 12, 1997, by and among the Company, the Guarantor and the
other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note or
Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Business Investment" means (i) any capital expenditure or
Investment, in each case related to the business of the Company and its
Subsidiary as conducted on the Issue Date and as such business may thereafter
evolve in the fields of cable television systems, enhanced video services and
advanced telecommunications services, such as Internet access and network data
services, and telephony; and (ii) any Investment in any other Person primarily
engaged in the same business as provided in the foregoing subparagraph (i).
"Related Party" with respect to the Principal means (A) any controlling
shareholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) or trust,
corporation, partnership or other entity, the beneficiaries, shareholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"Representative" means this Indenture trustee or other trustee, agent or
representative for any Senior Debt.
"Responsible Officer" when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
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<PAGE> 17
officers 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 Broker-Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means that certain Credit Agreement dated
August 23, 1994, by and among the Company and The First National Bank of
Chicago, as lender and managing agent and the other lenders party thereto, as
the same shall be amended and restated as of the date of this Indenture,
providing for up to $100.0 million of credit borrowings, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Senior Debt" means (i) all Debt outstanding under Credit Agreements and
all Hedging Obligations with respect thereto, (ii) any other Debt permitted to
be incurred by the Company under the terms of this Indenture, unless the
instrument under which such Debt is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the Notes and (iii) all
Obligations with respect to the foregoing. Notwithstanding anything to the
contrary in the foregoing, Senior Debt will not include (w) any liability for
federal, state, local or other taxes owed or owing by the Company, (x) any Debt
of the Company to any Subsidiary or other Affiliate, (y) any trade payables or
Capital Lease Obligations or (z) any Debt that is incurred in violation of this
Indenture.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the Issue
Date.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Debt, the date on which such payment of interest or
principal was scheduled to be paid in the original
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<PAGE> 18
documentation governing such Debt, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subordinated Debt" means any Debt of the Company which is by its terms
subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (A) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (B)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means, individually and collectively, the
guarantees given by the Guarantors pursuant to Article 11 hereof, including a
notation in the Notes substantially in the form attached hereto as Exhibit E.
"Supplemental Credit Facility" means that certain Senior Credit Facility
described in a commitment letter from The First National Bank of Chicago dated
October 15, 1997, as lead agent and a lender, to the Company setting forth a
commitment for up to $115.0 of revolving credit borrowings, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time, to which Facility
the Company may elect to enter convert the Senior Credit Facility (in which
case, all references in this Indenture to the "Senior Credit Facility," from and
after the date of such election by the Company, shall be deemed to refer to the
Supplemental Credit Facility).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Total Consolidated Debt" means, as at the date of determination, an
amount equal to the aggregate amount of all such Debt and Disqualified Equity
Interests of the Company and its Subsidiaries outstanding as of such date of
determination.
"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent global Note in the form of
Exhibit A-1 attached hereto that bears the Global Note Legend and that has the
"Schedule of Exchanges of Interests in the Global Note" attached thereto, and
that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
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<PAGE> 19
"Weighted Average Life to Maturity" means, when applied to any Debt at
any date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding principal amount of
such Debt.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Term Defined in
Section
----------
<S> <C>
"Acquisition"..................................... 4.13
"Affiliate Transaction"........................... 4.11
"Asset Sale Offer"................................ 3.09
"Change of Control Offer"......................... 4.15
"Change of Control Payment"....................... 4.15
"Change of Control Payment Date".................. 4.15
"Covenant Defeasance"............................. 8.03
"DTC"............................................. 2.03
"Event of Default"................................ 6.01
"Excess Proceeds"................................. 4.10
"Incur"........................................... 4.09
"Legal Defeasance"................................ 8.02
"Offer Amount".................................... 3.09
"Offer Period".................................... 3.09
"Paying Agent".................................... 2.03
"Payment Blockage Notice"......................... 10.04
"Permitted Debt".................................. 4.09
"Purchase Date"................................... 3.09
"Registrar"....................................... 2.03
"Restricted Payments"............................. 4.07
"Special Repurchase Offer"........................ 4.13
"Special Repurchase Payment"...................... 4.13
"Special Repurchase Payment Date"................. 4.13
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes and the Subsidiary Guarantees;
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<PAGE> 20
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company or any Guarantor and any
successor obligor upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections
or rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibits A-1 or A-2 hereto. The notation on each
Note relating to the Subsidiary Guarantees shall be substantially in the form
set forth on Exhibit E, which is a part of this Indenture. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes (including the
Subsidiary Guarantees) shall constitute, and are hereby expressly made, a part
of this Indenture and the Company, the Guarantors, and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby. However, to the extent any provision of any
Note conflicts with the express provisions of this Indenture, the provisions of
this Indenture shall govern and be controlling.
Notes issued in global form shall be substantially in the form of
Exhibits A-1 or A-2 attached hereto (including the Global Note Legend and the
"Schedule of Exchanges in the Global Note" attached
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thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A-1 attached hereto (but without the Global Note Legend and without the
"Schedule of Exchanges of Interests in the Global Note" attached thereto). Each
Global Note shall represent such of the outstanding Notes as shall be specified
therein and each shall provide that it shall represent the aggregate principal
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate principal amount of outstanding Notes represented thereby may from
time to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding Notes
represented thereby shall be made by the Trustee or the Note Custodian, at the
direction of the Trustee, in accordance with instructions given by the Holder
thereof as required by Section 2.06 hereof.
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note, which shall be
deposited on behalf of the purchasers of the Notes represented thereby with the
Trustee, as custodian for the Depositary, and registered in the name of the
Depositary or the nominee of the Depositary for the accounts of designated
agents holding on behalf of Euroclear or Cedel Bank, duly executed by the
Company and authenticated by the Trustee as hereinafter provided. The Restricted
Period shall be terminated upon the receipt by the Trustee of (i) a written
certificate from the Depositary, together with copies of certificates from
Euroclear and Cedel Bank certifying that they have received certification of
non-United States beneficial ownership of 100% of the aggregate principal amount
of the Regulation S Temporary Global Note (except to the extent of any
beneficial owners thereof who acquired an interest therein during the Restricted
Period pursuant to another exemption from registration under the Securities Act
and who will take delivery of a beneficial ownership interest in a 144A Global
Note or an IAI Global Note bearing a Private Placement Legend, all as
contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate
from the Company. Following the termination of the Restricted Period, beneficial
interests in the Regulation S Temporary Global Note shall be exchanged for
beneficial interests in Regulation S Permanent Global Notes pursuant to the
Applicable Procedures. Simultaneously with the authentication of Regulation S
Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary
Global Note. The aggregate principal amount of the Regulation S Temporary Global
Note and the Regulation S Permanent Global Notes may from time to time be
increased or decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee, as the case may be, in connection with transfers of
interest as hereinafter provided.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes that are held by the
Agent Members through Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
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The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Notes for original issue in an aggregate principal amount
of up to $150,000,000. The aggregate principal amount of Notes outstanding at
any time may not exceed such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company and the Guarantors shall maintain an office or agency where
Notes may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Notes may be presented for payment
("Paying Agent"). The Registrar shall keep a register of the Notes and of their
transfer and exchange. The Company may appoint one or more co-registrars and one
or more additional paying agents. The term "Registrar" includes any co-registrar
and the term "Paying Agent" includes any additional paying agent. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company shall notify the Trustee in writing of the name and address of any Agent
not a party to this Indenture. If the Company fails to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company or any of its Guarantors may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest on the Notes, and will notify the
Trustee of any default by the Company or the Guarantors in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a Guarantor)
shall have no further liability for the money. If the Company or a Guarantor
acts as Paying Agent, it shall segregate and hold in a separate trust fund for
the benefit of the Holders all money held by it as Paying Agent. Upon any
bankruptcy or reorganization proceedings relating to the Company, the Trustee
shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company and/or the Guarantors shall furnish to the
Trustee at least seven Business Days before each interest payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of the Holders of Notes and the Company and the Guarantors shall otherwise
comply with TIA Section 312(a).
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SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation S Temporary Global Note be exchanged by the Company for
Definitive Notes prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required pursuant to Rule 903
under the Securities Act, it being understood that the Registrar shall have no
duty or obligation to verify that any such certificate received by it complies
with the requirements of such rule. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes (accompanied by a
notation of the Subsidiary Guarantees duly endorsed by the Guarantors) shall be
issued in such names as the Depositary shall instruct the Trustee. Global Notes
also may be exchanged or replaced, in whole or in part, as provided in Sections
2.07 and 2.11 hereof. Every Note authenticated and delivered in exchange for, or
in lieu of, a Global Note or any portion thereof, pursuant to Section 2.07 or
2.11 hereof, shall be authenticated and delivered in the form of, and shall be,
a Global Note. A Global Note may not be exchanged for another Note other than as
provided in this Section 2.06(a), however, beneficial interests in a Global Note
may be transferred and exchanged as provided in Section 2.06(b), (c) or (f)
hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest
in the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided,
however, that prior to the expiration of the Restricted Period transfers
of beneficial interests in the Regulation S Temporary Global Note may
not be made to a U.S. Person or for the account or benefit of a U.S.
Person (other than an Initial Purchaser). Beneficial interests in any
Unrestricted Global Note may be transferred only to Persons who take
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note. No written orders or instructions shall be required to be
delivered to the Registrar to effect the transfers described in this
Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of
beneficial interests (other than a transfer of a beneficial interest in
a Global Note to a Person who takes delivery thereof in the form of a
beneficial interest in the same Global Note), the transferor of such
beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or
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cause to be credited a beneficial interest in another Global Note in an
amount equal to the beneficial interest to be transferred or exchanged
and (2) instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited
with such increase or (B) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary to
the Registrar containing information regarding the Person in whose name
such Definitive Note shall be registered to effect the transfer or
exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar
of any certificates required pursuant to Rule 903 under the Securities
Act, it being understood that the Registrar shall have no duty or
obligation to verify that any such certificate received by it complies
with the requirements of such rule. Upon an Exchange Offer by the
Company in accordance with Section 2.06(f) hereof, the requirements of
this Section 2.06(b)(ii) shall be deemed to have been satisfied upon
receipt by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the
Restricted Global Notes. Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in Global Notes
contained in this Indenture, the Notes and otherwise applicable under
the Securities Act, the Trustee shall adjust the principal amount of the
relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of clause (ii) above and the Registrar
receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or
the Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor
must deliver (x) a certificate in the form of Exhibit B hereto,
including the certifications and certificates and Opinion Counsel
required by item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may be
exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note if the exchange or transfer complies with the requirements of
clause (ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in
the case of a transfer, is
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not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement;
or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such
beneficial interest for a beneficial interest in an
Unrestricted Global Note, a certificate from such holder
in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof;
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take delivery
thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder
in the form of Exhibit B hereto, including the
certifications in item (4) thereof; and
(3) in each such case set forth in this
subparagraph (D), an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange
or transfer is in compliance with the Securities Act and
that the restrictions on transfer contained herein and in
the Private Placement Legend are not required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an authentication order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of beneficial interests transferred pursuant to subparagraph
(B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged
for, or transferred to Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) If any holder of a beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Definitive Note
or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in
item (2)(a) thereof;
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(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other
than those listed in subparagraphs (B) through (D) above, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to
the Company or any of its Subsidiaries, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive Note issued
in exchange for a beneficial interest in a Restricted Global Note pursuant to
this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be
subject to all restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
(A) exchanged for a Definitive Note prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any
certificates required pursuant to Rule 903(c)(3)(B) under the Securities
Act or (B) transferred to a Person who takes delivery thereof in the
form of a Definitive Note prior to the conditions set forth in clause
(A) above or unless the transfer is pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 903 or
Rule 904.
(iii) Notwithstanding 2.06(c)(i) hereof, a holder of a beneficial
interest in a Restricted Global Note may exchange such beneficial
interest for an Unrestricted Definitive Note or may
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transfer such beneficial interest to a Person who takes delivery thereof
in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the case
of an exchange, or the transferee, in the case of a transfer, is
not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement;
or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such
beneficial interest for a Definitive Note that does not
bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit C hereto, including the
certifications in item (1)(b) thereof;
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take delivery
thereof in the form of a Definitive Note that does not
bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof; and
(3) in each such case set forth in this
subparagraph (D), an Opinion of Counsel in form reasonably
acceptable to the Company, to the effect that such
exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are not required in
order to maintain compliance with the Securities Act.
(iv) If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(iii) hereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h)
hereof, and the Company shall execute and the Trustee shall authenticate
and deliver to the Person designated in the instructions a Definitive
Note in the appropriate principal amount. Any Definitive Note issued in
exchange for a beneficial interest pursuant to this Section 2.06(c)(iv)
shall be registered in such name or names and in such authorized
denomination or denominations as the holder of such beneficial interest
shall instruct the Registrar through instructions from the Depositary
and the Participant or Indirect Participant. The Trustee shall deliver
such Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this section 2.06(c)(iv) shall not bear the Private
Placement Legend. A beneficial interest in an Unrestricted Global Note
cannot be exchanged for a
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Definitive Note bearing the Private Placement Legend or transferred to a
Person who takes delivery thereof in the form of a Definitive Note
bearing the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note
or to transfer such Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global
Note, then, upon receipt by the Registrar of the following
documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item
(2)(b) thereof;
(B) if such Definitive Note is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (1) thereof;
(C) if such Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (2) thereof;
(D) if such Definitive Note is being transferred pursuant
to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(a) thereof;
(E) if such Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other
than those listed in subparagraphs (B) through (D) above, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable;
(F) if such Definitive Note is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in
item (3)(b) thereof; or
(G) if such Definitive Note is being transferred pursuant
to an effective registration statement under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Definitive Note, increase or cause to be increased
the aggregate principal amount of, in the case of clause (A) above, the
appropriate Restricted Global Note, in the case of clause (B) above, the 144A
Global Note, in the case of clause (C) above, the Regulation S Global Note, and
in all other cases, the IAI Global Note.
(ii) A Holder of a Restricted Definitive Note may exchange such
Note for a beneficial interest in an Unrestricted Global Note or
transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note only if:
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(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, is not (1) a
broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement;
or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes
to exchange such Notes for a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder
in the form of Exhibit C hereto, including the
certifications in item (1)(c) thereof;
(2) if the Holder of such Definitive Notes proposes
to transfer such Notes to a Person who shall take delivery
thereof in the form of a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder
in the form of Exhibit B hereto, including the
certifications in item (4) thereof; and
(3) in each such case set forth in this
subparagraph (D), an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange
or transfer is in compliance with the Securities Act, that
the restrictions on transfer contained herein and in the
Private Placement Legend are not required in order to
maintain compliance with the Securities Act, and such
Definitive Notes are being exchanged or transferred in
compliance with any applicable blue sky securities laws of
any State of the United States.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) A Holder of an Unrestricted Definitive Note may exchange
such Note for a beneficial interest in an Unrestricted Global Note or
transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one
of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above
at a time when an Unrestricted Global Note has not yet been issued, the Company
shall issue and, upon receipt of an authentication order in accordance with
Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the principal amount of
beneficial interests transferred pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above.
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<PAGE> 30
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(e), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, pursuant to the provisions of this Section 2.06(e).
(i) Restricted Definitive Notes may be transferred to and
registered in the name of Persons who take delivery thereof if the
Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A
under the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or
Rule 904, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item
(2) thereof; and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities
Act, then the transferor must deliver (x) a certificate in the
form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof,
if applicable.
(ii) Any Restricted Definitive Note may be exchanged by the
Holder thereof for an Unrestricted Definitive Note or transferred to a
Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, is not (1) a
broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement;
or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive
Notes proposes to exchange such Notes for an Unrestricted
Definitive Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in
item (1)(a) thereof;
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<PAGE> 31
(2) if the Holder of such Restricted Definitive
Notes proposes to transfer such Notes to a Person who
shall take delivery thereof in the form of an Unrestricted
Definitive Note, a certificate from such Holder in the
form of Exhibit B hereto, including the certifications in
item (4) thereof; and
(3) in each such case set forth in this
subparagraph (D), an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange
or transfer is in compliance with the Securities Act, that
the restrictions on transfer contained herein and in the
Private Placement Legend are not required in order to
maintain compliance with the Securities Act, and such
Restricted Definitive Note is being exchanged or
transferred in compliance with any applicable blue sky
securities laws of any State of the United States.
(iii) A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request for such a
transfer, the Registrar shall register the Unrestricted Definitive Notes
pursuant to the instructions from the Holder thereof. Unrestricted
Definitive Notes cannot be exchanged for or transferred to Persons who
take delivery thereof in the form of a Restricted Definitive Note.
(f) Exchange Offer.
(i) Upon the occurrence of the Exchange Offer in accordance with
the Registration Rights Agreement, the Company shall issue and, upon
receipt of an authentication order in accordance with Section 2.02 and
an opinion in accordance with Section 2.06(f)(ii) hereof, the Trustee
shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the
beneficial interests in the Restricted Global Notes tendered for
acceptance by persons that are not (x) broker-dealers, (y) Persons
participating in the distribution of the Exchange Notes or (z) Persons
who are affiliates (as defined in Rule 144) of the Company and accepted
for exchange in the exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the
Restricted Definitive Notes accepted for exchange in the Exchange Offer.
Concurrent with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to
be reduced accordingly, and the Company shall execute and the Trustee
shall authenticate and deliver to the Persons designated by the Holders
of Definitive Notes so accepted Definitive Notes in the appropriate
principal amount.
(ii) Prior to the issuance of any Exchange Notes in the Exchange
Offer, upon the Trustee's request, the Trustee shall receive an opinion
from counsel for the Company with respect to the following matters:
(A) the Series B Notes have been duly authorized, executed
and authenticated in accordance with the provisions of the
Indenture and delivered in exchange for the Series A Notes in
accordance with the Indenture and the Exchange Offer and are
entitled to the benefits of the Indenture and will be valid and
binding obligations of the Company, enforceable in accordance
with their terms; and
(B) when the Series B Notes are executed and authenticated
in accordance with the provisions of the Indenture and delivered
in exchange for the Series A Notes in accordance with the
Indenture and Exchange Offer, the Subsidiary Guarantees endorsed
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<PAGE> 32
thereon will be entitled to the benefits of the Indenture and
will be the valid and binding obligations of the Guarantors,
enforceable in accordance with their terms.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (b) below, each
Global Note and each Definitive Note (and all Notes issued in
exchange therefor or substitution thereof) shall bear the legend
in substantially the following form:
"THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
THE NOTE EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE NOTE EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH NOTE MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (1) BY AN INITIAL PURCHASER (a) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), PURCHASING FOR ITS
OWN ACCOUNT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER
THE SECURITIES ACT, (b) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (c) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER
(IF APPLICABLE) OR IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (d) TO THE COMPANY, (e)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR (f) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND (2) BY
SUBSEQUENT PURCHASERS, AS SET FORTH IN (1)(a) THROUGH (e) ABOVE, AND IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THE NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY
OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALE OF THE SECURITY
EVIDENCED HEREBY."
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(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to
this Section 2.06 (and all Notes issued in exchange therefor or
substitution thereof) shall not bear the Private Placement
Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER
ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS
HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE,
(II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT
TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE
DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF
THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER
THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY
GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note, by the
Trustee or by the Depositary at the direction of the Trustee, to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note, by the Trustee or by the
Depositary at the direction of the Trustee, to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes
and Definitive Notes upon the Company's order or at the Registrar's
request.
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<PAGE> 34
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchange or
transfer pursuant to Sections 2.10, 3.06, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global
Notes or Definitive Notes surrendered upon such registration of transfer
or exchange.
(v) The Company shall not be required (A) to issue, to register
the transfer of or to exchange Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business
on the day of selection, (B) to register the transfer of or to exchange
any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part or (C) to register
the transfer of or to exchange a Note between a record date and the next
succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer
of any Note, the Trustee, any Agent and the Company may deem and treat
the Person in whose name any Note is registered as the absolute owner of
such Note for the purpose of receiving payment of principal of and
interest on such Notes and for all other purposes, and none of the
Trustee, any Agent or the Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes (in each case, accompanied by a notation of the Subsidiary
Guarantees duly endorsed by the Guarantors) in accordance with the
provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06
to effect a transfer or exchange may be submitted by facsimile.
Notwithstanding anything herein to the contrary, as to any
certifications and certificates delivered to the Registration pursuant to this
Section 2.06, the Registrar's duties shall be limited to confirming that any
such certifications and certificates delivered to it are in the form of Exhibits
B and C attached hereto. The Registrar shall not be responsible for confirming
the truth or accuracy of representations made in any such certifications or
certificates.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers of the Company, shall authenticate a
replacement Note (accompanied by a notation of the Subsidiary Guarantees duly
endorsed by the
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<PAGE> 35
Guarantors) if the Trustee's requirements are met. If required by the Trustee or
the Company, an indemnity bond must be supplied by the Holder that is sufficient
in the judgment of the Trustee and the Company to protect the Company, the
Trustee, any Agent and any authenticating agent from any loss that any of them
may suffer if a Note is replaced. The Company may charge for its expenses in
replacing a Note.
Every replacement Note is an additional obligation of the Company and
the Guarantors and shall be entitled to all of the benefits of this Indenture
equally and proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section as
not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, by any Guarantor, or by any Person directly or indirectly controlling
or controlled by or under direct or indirect common control with the Company or
any Guarantor, shall be considered as though not outstanding, except that for
the purposes of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Notes that a Trustee knows are so
owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes (accompanied by a notation of
the Subsidiary Guarantees duly endorsed by the Guarantors) upon a written order
of the Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes (accompanied by a notation
of the Subsidiary Guarantees duly endorsed by the Guarantors) in exchange for
temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
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SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company or any Guarantor defaults in a payment of interest on the
Notes, it shall pay the defaulted interest in any lawful manner plus, to the
extent lawful, interest payable on the defaulted interest, to the Persons who
are Holders on a subsequent special record date, in each case at the rate
provided in the Notes and in Section 4.01 hereof. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Note and the date of the proposed payment. The Company shall fix or cause
to be fixed each such special record date and payment date, provided that no
such special record date shall be less than 10 days prior to the related payment
date for such defaulted interest. At least 15 days before the special record
date, the Company (or, upon the written request of the Company, the Trustee in
the name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
pro rata basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate. In the event of partial redemption by lot, the
particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
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<PAGE> 37
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant
to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Notes to be redeemed.
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<PAGE> 38
If the Company complies with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note (accompanied by a
notation of the Subsidiary Guarantees duly endorsed by the Guarantors) equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to November 15, 2002. Thereafter, the Company shall have the option to
redeem the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon, if any, to the applicable redemption date, if redeemed during
the twelve-month period beginning on November 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................... 105.125%
2003........................................... 103.417%
2004........................................... 101.708%
2005 and thereafter............................ 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section 3.07,
at any time prior to November 15, 2000, the Company may redeem up to 30% of the
aggregate principal amount of the Notes issued under this Indenture with the Net
Cash Proceeds of a Public Equity Offering at a redemption price equal to 110.25%
of the principal amount thereof, plus accrued and unpaid interest thereon, if
any, to the redemption date; provided that at least 70% of the Notes remain
outstanding immediately after the occurrence of such redemption and that such
redemption occurs within 45 days of the date of the closing of such Public
Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.15 hereof, the Company
shall not be required to make mandatory redemption payments with respect to the
Notes.
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SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Notes (an "Asset Sale
Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the Address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
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(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes (accompanied by a notation of the Subsidiary Guarantees duly
endorsed by the Guarantors) equal in principal amount to the unpurchased portion
of the Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and
shall deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by the
Company for purchase, and the Company shall promptly issue a new Note, and the
Trustee, upon written request from the Company shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01 PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or any Guarantor
thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by
the Company in immediately available funds and designated for and sufficient to
pay all principal, premium, if any, and interest then due. The Company shall pay
all Additional Interest, if any, in the same manner on the dates and in the
amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Additional Interest (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar)
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where Notes may be surrendered for registration of transfer or for exchange and
where notices and demands to or upon the Company or the Guarantors in respect of
the Notes and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the 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.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; 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 Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.03.
SECTION 4.03 REPORTS.
(a) Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, the Company shall furnish or cause to be
furnished promptly to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the SEC on Form 8-K if
the Company were required to file such reports. In addition, whether or not
required by the rules and regulations of the SEC, the Company shall file a copy
of all such information and reports with the SEC for public availability (unless
the SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request.
The Company shall at all times comply with TIA Section 314(a).
(b) For so long as any Notes remain outstanding, the Company shall
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
SECTION 4.04 COMPLIANCE CERTIFICATE.
(a) The Company and the Guarantors shall deliver to the Trustee,
within 90 days after the end of each fiscal year, an Officers' Certificate
stating that a review of the activities of the Company and its Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether the Company or such
Guarantor, as the case may be, has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company,
or such Guarantor, as the case may be, has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and is not in
default in the performance or observance of any of the terms, provisions and
conditions of this Indenture (or, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default of which he or she
may have knowledge and what action the Company or such Guarantor, as the case
may be, is taking or proposes to take with respect thereto) and that to the best
of his or her knowledge no event has occurred and remains in existence by reason
of which payments on account of the principal of or interest, if any, on the
Notes is prohibited or if such event has occurred, a
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description of the event and what action the Company or such Guarantor, as the
case may be, is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article Four or Article Five hereof or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) Each of the Company and the Guarantors shall, so long as any of
the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer of
the Company or any Guarantor becoming aware of any Default or Event of Default,
an Officers' Certificate specifying such Default or Event of Default and what
action the Company is taking or proposes to take with respect thereto.
SECTION 4.05 TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
SECTION 4.06 STAY, EXTENSION AND USURY LAWS.
Each of the Company and the Guarantors covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and each of the
Company and the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
SECTION 4.07 RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any Subsidiary to, directly
or indirectly: (i) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any Subsidiary's Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company) or to the direct or indirect holders of the
Company's or any Subsidiary's Equity Interests in their capacity as such (other
than dividends or distributions made to the Company or a Wholly Owned Subsidiary
of the Company and dividends or distributions payable in Equity Interests (other
than Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value (including without limitation, in connection with
any merger or consolidation involving the Company) any Equity Interests of the
Company or any direct or indirect parent of the Company or other Affiliate of
the Company (other than any such Equity Interests owned by the Company or any
Wholly Owned Subsidiary of the Company); (iii) make any payment on or with
respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Debt that is subordinated to the Notes (other than
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Notes), except a payment of interest or principal at Stated Maturity; (iv) make
any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and (b) .the Company, immediately after
giving effect to such Restricted Payment, would have been permitted to incur at
least $1.00 of additional Debt pursuant to the Debt to Operating Cash Flow Ratio
test set forth in the first paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries after the
Issue Date (excluding Restricted Payments permitted by clause (ii) of the next
succeeding paragraph), is less than the sum of (i) the difference between (x)
100% of cumulative Consolidated Operating Cash Flow for the period (taken as one
accounting period) from the end of the first fiscal quarter during which the
Issue Date occurs to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available and (y) 140% of cumulative
Consolidated Interest Expense for the period (taken as one accounting period)
from the end of the first fiscal quarter during which the Issue Date occurs to
the end of the Company's most recently ended fiscal quarter for which internal
financial statements are available, plus (ii) 100% of the aggregate net cash
proceeds received by the Company from the issue or sale since the Issue Date of
Equity Interests of the Company (other than Disqualified Stock) or of
Disqualified Stock or debt securities of the Company that have been converted
into such Equity Interests (other than Equity Interests (or Disqualified Stock
or convertible debt securities) sold to a Subsidiary of the Company and other
than Disqualified Stock or convertible debt securities that have been converted
into Disqualified Stock), plus (iii) to the extent that any Restricted
Investment that was made after the Issue Date is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if any) and
(B) the initial amount of such Restricted Investment.
The foregoing provisions will not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Debt or Equity Interests of the Company in
exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause
(c)(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase
or other acquisition of subordinated Debt with the net cash proceeds from an
incurrence of Permitted Refinancing Debt; (iv) the payment of any dividend by a
Subsidiary of the Company to the holders of its Equity Interests on a pro rata
basis; (v) the payment for services rendered by affiliates, in the ordinary
course of the Company's business and consistent with past practices, pursuant to
the terms of those arrangements currently in effect on the Issue Date (including
extensions of such arrangements on terms substantially the same as those in
existence on the Issue Date), (vi) for such time that none of the officers of
the Company receive direct compensation for services rendered to, for or on
behalf of the Company other than as provided under the Management Agreement as
currently in effect on the Issue Date (including any extensions of such
agreement on terms substantially the same as those in existence on the Issue
Date), the payment of annual fees for management services to NTC not to exceed
in any fiscal year 5% of the Company's annual total revenues pursuant to the
terms of the Management Agreement as currently in effect on the Issue Date
(including any extensions of such agreement on terms substantially the same as
those in existence on the Issue Date); and (vii) the making and consummation of
(A) a Asset Sale
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Offer in accordance with the provisions of Sections 3.09 and 4.10 with any
Excess Proceeds or (B) a Change of Control Offer with respect to the Notes in
accordance with the provisions of Section 4.15.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $1.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the provisions of this Section
4.07 were computed, together with a copy of any fairness opinion or appraisal
required by this Indenture.
SECTION 4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any Subsidiary to, directly
or indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any Subsidiary to (i)(a) pay
dividends or make any other distributions to the Company or any Subsidiary (1)
on its Capital Stock or (2) with respect to any other interest or participation
in, or measured by, its profits, or (b) pay any indebtedness owed to the Company
or any Subsidiary, (ii) make loans or advances to the Company or any Subsidiary
or (iii) transfer any of its properties or assets to the Company or any
Subsidiary, except for such encumbrances or restrictions existing under or by
reason of (a) existing Debt as in effect on the Issue Date, (b) the Senior
Credit Facility as in effect as of the Issue Date, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Senior
Credit Facility as in effect on the Issue Date, (c) this Indenture and the
Notes, (d) applicable law, (e) any instrument governing Debt or Capital Stock of
a Person acquired by the Company or any Subsidiary as in effect at the time of
such acquisition (except to the extent such Debt was incurred in connection with
or in contemplation of such acquisition), 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, provided
that, in the case of Debt, such Debt was permitted by the terms of this
Indenture to be incurred, (f) customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (g) Capital Lease Obligations and purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on the property so acquired, or (h)
Permitted Refinancing Debt, provided that the restrictions contained in the
agreements governing such Permitted Refinancing Debt are no more restrictive
than those contained in the agreements governing the Debt being refinanced.
SECTION 4.09 INCURRENCE OF DEBT AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any Subsidiary to, directly
or indirectly, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable, contingently or otherwise (collectively,
"incur"), with respect to any Debt (including Acquired Debt) and that the
Company will not issue any Disqualified Stock and will not permit any Subsidiary
to issue any shares of preferred stock; provided, however, that if no Default or
Event of Default with respect to the Notes shall have occurred and be
continuing, or shall occur as a consequence of the incurrence of such Debt, the
Company or any Subsidiary may incur Debt (including Acquired Debt), and the
Company may issue Disqualified Stock and
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its Subsidiaries may issue shares of preferred stock if, at the time of such
incurrence or issuance and after giving effect to the incurrence of such Debt
(and any other Debt incurred since the end of the last full fiscal quarter or
fiscal year for which internal financial statements are available and the
application of the proceeds thereof), the Debt to Operating Cash Flow Ratio
would be less than or equal to 7.00 to 1.0, if such Debt is incurred or such
Disqualified Stock or preferred stock is issued on or prior to December 31,
1998, or would be less than or equal to 6.75 to 1.0, if such Debt is incurred or
such Disqualified Stock or preferred stock is issued on or prior to December 31,
2000, or would be less than or equal to 6.50 to 1.0, if such Debt is incurred or
such Disqualified Stock or preferred stock is issued thereafter; provided that
this covenant shall not apply to the incurrence of Debt by the Company so long
as all of the proceeds of such Debt are applied to the repurchase of outstanding
Notes by the Company pursuant to an offer to purchase Notes pursuant to (x) the
provisions of Section 3.07 or 4.13 hereof, or (y) a tender offer made to all
Holders of the Notes effected in accordance with all federal and state
securities laws, including, without limitation, Rule 14e-1 under the Exchange
Act and any other applicable federal or state regulations.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Debt (collectively, "Permitted
Debt"):
(i) the incurrence by the Company of Debt and letters of credit
(with letters of credit being deemed to have a principal amount equal to
the maximum potential liability of the Company and its Subsidiaries
thereunder) under Credit Agreements; provided that the aggregate
principal amount of all revolving credit Debt outstanding under all
Credit Agreements after giving effect to such incurrence, including all
Permitted Refinancing Debt incurred to refund, refinance or replace any
other Debt incurred pursuant to this clause (i), does not exceed an
amount equal to $100.0 million less the aggregate amount of all Net Cash
Proceeds of Asset Sales applied to repay any such Debt pursuant to
Section 4.10 hereof;
(ii) the incurrence by the Company and its Subsidiary of Existing
Debt;
(iii) the incurrence by the Company of Debt represented by the
Notes;
(iv) the incurrence by the Company or any of its Subsidiaries of
Debt represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction
or improvement of property, plant or equipment used in the business of
the Company or such Subsidiary, in an aggregate principal amount not to
exceed $3.0 million at any time outstanding;
(v) the incurrence by the Company or any Subsidiary of Permitted
Refinancing Debt in exchange for, or the net proceeds of which are used
to refund, refinance or replace Debt that was permitted by this
Indenture to be incurred;
(vi) the incurrence by the Company or any Subsidiary of
intercompany Debt between or among the Company and any of its Wholly
Owned Subsidiaries; provided, however, that (i) if the Company is the
obligor on such Debt, such Debt is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Notes and
(ii)(A) any subsequent issuance or transfer of Equity Interests that
results in any such Debt being held by a Person other than the Company
or a Wholly Owned Subsidiary and (B) any sale or other transfer of any
such Debt to a Person that is not either the Company or a Wholly Owned
Subsidiary shall be deemed, in each case, to constitute an incurrence of
such Debt by the Company or such Subsidiary, as the case may be;
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(vii) the incurrence by the Company or any Subsidiary of Hedging
Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Debt that is
permitted by the terms of this Indenture to be outstanding;
(viii) the guarantee by the Company of Debt of a Subsidiary of
the Company that was permitted to be incurred by another provision of
this covenant;
(ix) the guarantee by the Company or any of the Guarantors of
Debt of the Company or a Subsidiary of the Company that was permitted to
be incurred by another provision of this covenant; and
(x) the incurrence by the Company or any Subsidiary of additional
Debt in an aggregate principal amount (or accreted value, as applicable)
at any time outstanding, including all Permitted Refinancing Debt
incurred to refund, refinance or replace any other Debt incurred
pursuant to this clause (x), not to exceed $5.0 million.
For purposes of determining compliance with this covenant, in the event
that an item of Debt meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (x) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Debt in any manner that complies with
this covenant and such item of Debt will be treated as having been incurred
pursuant to only one of such clauses or pursuant to the first paragraph hereof.
Accrual of interest and the accretion of accreted value will not be deemed to be
an incurrence of Debt for purposes of this covenant.
SECTION 4.10 ASSET SALES.
The Company shall not, and shall not permit any Subsidiary to,
consummate an Asset Sale unless: (i) the Company (or such Subsidiary, as the
case may be) receives consideration at the time of such Asset Sale at least
equal to the fair market value (evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee) of the
assets or Equity Interests issued or sold or otherwise disposed of; and (ii) at
least 75% of the consideration therefor received by the Company or such
Subsidiary is in the form of (a) cash or Cash Equivalents or (b) properties and
capital assets (including franchises and licenses required to own and operate
such properties) to be used in the same lines of business being conducted by the
Company or any Subsidiary at such time, or Equity Interests in one or more
Persons which thereby become Wholly Owned Subsidiaries of the Company whose
assets consist primarily of such properties and capital assets; provided that
the amount of (x) any liabilities (as shown on the Company's or such
Subsidiary's most recent balance sheet) of the Company or any Subsidiary (other
than contingent liabilities and liabilities that are by their terms subordinated
to the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Company
or such Subsidiary from further liability and (y) any securities, notes or other
obligations received by the Company or any such Subsidiary from such transferee
that are immediately converted by the Company or such Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision.
Within 365 days after an Asset Sale, the Company may, at its option, (a)
apply such Net Cash Proceeds to repay Senior Debt (and to correspondingly reduce
commitments with respect thereto in the case of revolving borrowings), or (b)
commit in writing to apply such Net Cash Proceeds to a Related Business
Investment. Pending the final application of any such Net Cash Proceeds, the
Company may temporarily reduce Senior Debt outstanding under the Senior Credit
Facility or otherwise invest such Net Cash Proceeds in any manner that is not
prohibited by this Indenture. Any Net Cash Proceeds from Asset Sales
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that are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $5.0 million, the Company will be required to
make an offer to all Holders of the Notes (an "Asset Sale Offer") to purchase
the maximum principal amount of the Notes that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon, if any, to
the date of purchase, in accordance with the procedures set forth in this
Indenture. To the extent that the aggregate amount of the Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
may use any remaining Excess Proceeds for general corporate purposes. If the
aggregate principal amount of the Notes surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any Subsidiary to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction
taken as a whole is on terms that are no less favorable to the Company or the
relevant Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Subsidiary with an unrelated Person; (ii)
such Affiliate Transaction relates to and is in furtherance of the lines of
business the Company was engaged in on the Issue Date or as the Company's
business has thereafter evolved in the fields of cable television systems,
enhanced video services and advanced telecommunications services, such as
Internet access and network data services, and telephony; and (iii) the Company
delivers to the Trustee (A)(1) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $1.0 million prior to a Public Equity Offering, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clauses (i) and (ii) above and that such
Affiliate Transaction has been approved by the Board of Directors and (2) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million after the
consummation of a Public Equity Offering, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clauses (i) and (ii) above and that such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board of
Directors and (B) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $5.0
million, an opinion as to the fairness to the Holders of the Notes of such
Affiliate Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.
The provisions described in the foregoing paragraph shall not apply to
(u) the payment for services rendered by affiliates, in the ordinary course of
the Company's business and consistent with past practices, pursuant to the terms
of those arrangements currently in effect on the Issue Date (including
extensions of such arrangements on terms substantially the same as those in
existence on the Issue Date), (v) customary directors' fees, indemnification and
similar arrangements with directors and officers, (w) for such time that none of
the officers of the Company receive direct compensation for services rendered
to, for or on behalf of the Company other than as provided under the Management
Agreement as currently in effect on the Issue Date (including any extensions of
such agreement on terms substantially the same as those in existence on the
Issue Date), the payment of annual fees for management services to NTC not to
exceed in any fiscal year 5% of the Company's annual total revenues pursuant to
the terms of the Management Agreement as currently in effect on the Issue Date
(including any extensions of such agreement on terms substantially the same as
those in existence on the Issue Date); (x) any employment agreement entered into
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<PAGE> 48
by the Company or any Subsidiary in the ordinary course of business and
consistent with the past practice of the Company or such Subsidiary, (y)
transactions between or among the Company and/or its Subsidiaries and (z)
Restricted Payments that are permitted by Section 4.07 hereof.
SECTION 4.12 LIENS.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien that
secures obligations under any Pari Passu Debt or Subordinated Debt on any asset
or property of the Company or such Subsidiary, or any income or profits
therefrom, or assign or convey any right to receive income therefrom, unless the
Notes are equally and ratably secured with the obligations so secured or until
such time as such obligations are no longer secured by a Lien.
SECTION 4.13 SPECIAL REPURCHASE OFFER.
In the event the Company's pending acquisition of certain cable
television systems of InterMedia Partners of Carolina, L.P. and Robin Cable
Systems, L.P. (the "Acquisition") is not consummated by March 1, 1998, each
Holder of the Notes shall have the right to require the Company to repurchase
all or any part (equal to $1,000 or an integral multiple thereof) of such
Holder's Notes pursuant to the offer described below (the "Special Repurchase
Offer") at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest thereon, if any, to the date of
purchase (the "Special Repurchase Payment"). The Company shall mail a notice to
each Holder of the Notes no later than March 31, 1998 describing the reasons the
Acquisition was not consummated by such date and offering to repurchase Notes on
the date specified in such notice, which date shall be no earlier than 30 days
and no later than 60 days from the date such notice is mailed (the "Special
Repurchase Payment Date"), pursuant to the procedures required by this Indenture
and described in such notice. The Company shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with any Special Repurchase Offer.
On the Special Repurchase Payment Date, the Company shall, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Special Repurchase Offer, (ii) deposit with the Trustee an
amount equal to the Special Repurchase Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Trustee shall promptly mail to each Holder of the Notes so tendered
the Special Repurchase Payment for such Notes, and the Trustee shall promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note shall be in a principal
amount of $1,000 or an integral multiple thereof. The Company shall publicly
announce the results of the Special Repurchase Offer on or as soon as
practicable after the Special Repurchase Payment Date.
The Senior Credit Facility shall specifically permit the Company,
without first obtaining any consents or waivers, to make the Special Repurchase
Offer and to make the Special Repurchase Payment, whether through the drawing by
the Company of committed lines thereunder or otherwise. The Company shall
exercise or extend, on or before January 15, 1998, its commitment under the
Supplemental Credit Facility to have available for drawing an amount equal to
100% of the Special Repurchase Payment in the event all of the Notes are
tendered for repurchase.
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SECTION 4.14 CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, 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,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.15 OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, each Holder of the Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, the Company will mail
a notice to each Holder of the Notes describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Notes on the
date specified in such notice, which date shall be no earlier than 30 days and
no later than 90 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by this Indenture
and described in such notice. The Company will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Trustee an amount
equal to the Change of Control Payment in respect of all Notes or portions
thereof so tendered and (iii) deliver or cause to be delivered to the Trustee
the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of the Notes or portions thereof being purchased by
the Company. The Trustee will promptly mail to each Holder of the Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. Prior to complying
with the provisions of this Section 4.15, but in any event within 90 days
following a Change of Control, the Company shall either repay all outstanding
Senior Debt or obtain the requisite consents, if any, under all agreements
governing outstanding Senior Debt to permit the repurchase of the Notes required
by this Section 4.15. The Company shall publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
The Company shall not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Indenture applicable to a Change of Control Offer made by the Company
and purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
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SECTION 4.16 LIMITATION ON INCURRENCE OF SENIOR SUBORDINATED DEBT.
The Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Debt that is subordinate or junior in right of
payment to any Senior Debt and senior in any respect in right of payment to the
Notes and no Guarantor shall incur, create, issue, assume, guarantee or
otherwise become liable for any Debt that is subordinate or junior in right of
payment to any senior guarantees and senior in any respect in right of payment
to the Subsidiary Guarantees.
SECTION 4.17 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any Subsidiary to, directly
or indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any Subsidiary to (i)(a) pay
dividends or make any other distributions to the Company or any Subsidiary (1)
on its Capital Stock or (2) with respect to any other interest or participation
in, or measured by, its profits, or (b) pay any indebtedness owed to the Company
or any Subsidiary, (ii) make loans or advances to the Company or any Subsidiary
or (iii) transfer any of its properties or assets to the Company or any
Subsidiary, except for such encumbrances or restrictions existing under or by
reason of (a) existing Debt as in effect on the Issue Date, (b) the Senior
Credit Facility as in effect as of the Issue Date, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Senior
Credit Facility as in effect on the Issue Date, (c) this Indenture and the
Notes, (d) applicable law, (e) any instrument governing Debt or Capital Stock of
a Person acquired by the Company or any Subsidiary as in effect at the time of
such acquisition (except to the extent such Debt was incurred in connection with
or in contemplation of such acquisition), 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, provided
that, in the case of Debt, such Debt was permitted by the terms of this
Indenture to be incurred, (f) customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (g) Capital Lease Obligations and purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on the property so acquired, or (h)
Permitted Refinancing Debt, provided that the restrictions contained in the
agreements governing such Permitted Refinancing Debt are no more restrictive
than those contained in the agreements governing the Debt being refinanced.
SECTION 4.18 ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company or any Subsidiary shall acquire or create another
Subsidiary after the date of this Indenture, then such newly acquired or created
Subsidiary shall execute a Subsidiary Guarantee and deliver an opinion of
counsel, in accordance with the terms of this Indenture.
SECTION 4.19 RESTRICTION ON PREFERRED STOCK OF SUBSIDIARIES.
The Company shall not permit any Subsidiary to issue any preferred stock
(except preferred stock to the Company or a Subsidiary), or permit any Person
(other than the Company or a Subsidiary) to own or hold an interest in any
preferred stock unless the Company or such Subsidiary would be entitled to incur
Debt (other than Permitted Debt) under the Debt to Operating Cash Flow Ratio
test set forth in the first paragraph of Section 4.09 hereof in the aggregate
principal amount equal to the aggregate liquidation value of the preferred stock
to be issued.
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SECTION 4.20 PAYMENTS FOR CONSENT.
Neither the Company nor any Subsidiary shall, directly or indirectly,
pay or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Holder of any Notes for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of this Indenture or the
Notes unless such consideration is offered to be paid or is paid to all Holders
of the Notes that consent, waive or agree to amend in the time frame set forth
in the solicitation documents relating to such consent, waiver or agreement.
ARTICLE 5.
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Notes
and this Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction, no
Default or Event of Default exists; and (iv) except in the case of a merger of
the Company with or into a Wholly Owned Subsidiary of the Company, the Company
or the entity or Person formed by or surviving any such consolidation or merger
(if other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) would have Consolidated
Net Worth immediately after giving effect to the transaction equal to or greater
than the Consolidated Net Worth of the Company immediately preceding the
transaction and (B) immediately after giving pro forma effect thereto, would be
permitted to incur at least $1.00 of additional Debt pursuant to the Debt to
Operating Cash Flow Ratio test set forth in the first paragraph of Section 4.09
hereof.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" or the "Guarantor," as
the case may be, shall refer instead to the successor corporation and not to the
Company or the Guarantor, as the case may be), and may exercise every right and
power of the Company or the applicable Guarantor, as the case may be, under this
Indenture with the same effect as if such successor Person had been named as the
Company or the applicable Guarantor, as the case may be, herein; provided,
however, that the predecessor Company and the predecessor Subsidiaries that are
Guarantors shall not be relieved from the obligation to pay the principal of and
interest on the Notes except in the case of a sale of all of the Company's
assets that meets the requirements of Section 5.01 hereof.
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ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT.
Each of the following constitutes an "Event of Default":
(a) a default for 30 days in the payment when due of interest on the
Notes (whether or not prohibited by Article 10 hereof);
(b) a default in the payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by Article 10 hereof);
(c) the Company fails to comply with any of the provisions of Section
4.07, 4.09, 4.10, 4.13 or 4.15 hereof;
(d) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the Notes for
60 days after notice to the Company;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any Debt
for money borrowed by the Company or any of any Subsidiary (or the payment of
which is guaranteed by the Company or any Subsidiary), whether such Debt or
guarantee now exists, or is created after the Issue Date, which default results
in the acceleration of such Debt prior to its express maturity and, in each
case, the principal amount of any such Debt, together with the principal amount
of any other such Debt the maturity of which has been so accelerated, aggregates
$5.0 million or more;
(f) the Company or any Subsidiary fails to pay final judgments
aggregating in excess of $5.0 million, which judgments are not paid, discharged
or stayed for a period of 60 days;
(g) except as provided by this Indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor shall deny or disaffirm its obligations under
its Subsidiary Guarantee;
(h) the Company, any Guarantor or any of its Significant Subsidiaries or
any group of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
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(i) is for relief against the Company, any Guarantor or any of
its Significant Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary in an involuntary
case;
(ii) appoints a Custodian of the Company, any Guarantor or any of
its Significant Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company, any Guarantor or any
of its Significant Subsidiaries or any group of Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days.
SECTION 6.02 ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Guarantor, any Significant Subsidiary or any group of Significant Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Upon any such declaration, the Notes shall become due and payable
immediately. Notwithstanding the foregoing, if an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof occurs with respect to the Company, any
Significant Subsidiary or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary, all outstanding Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or premium that has become due solely because of the
acceleration) have been cured or waived.
If an Event of Default occurs on or after November 15, 2002 by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the Company
would have had to pay if the Company then had elected to redeem the Notes
pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to November 15,
2002 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then, upon acceleration of the
Notes, an additional premium shall also become and be immediately due and
payable in an amount, for each of the years beginning on November 15 of the
years set forth below, as set forth below (expressed as percentages of principal
amount):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1997................. 111.958%
1998................. 110.250%
1999................. 108.542%
2000................. 106.833%
</TABLE>
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2001................. 105.125%
SECTION 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium, if any, or interest on, the Notes
(including in connection with an offer to purchase) (provided, however, that the
Holders of a majority in aggregate principal amount of the then outstanding
Notes may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration). 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 impair any right
consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
SECTION 6.06 LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
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A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium, if any, and interest
on the Note, on or after the respective due dates expressed in the Note
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
or any of the Guarantors (or any other obligor upon the Notes), its creditors or
its property and shall be entitled and empowered to collect, receive and
distribute any money or other property payable or deliverable on any such claims
and any custodian 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 to
the Trustee any amount due to 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 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. 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 Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
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<PAGE> 56
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes for
principal, premium, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
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(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02 RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. 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 from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company or any Guarantor shall be
sufficient if signed by an Officer of the Company or any Guarantor.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
(g) Except for (i) a default under Section 6.01(a) or (b) hereof, or
(ii) any other event of which the Trustee has "actual knowledge" and which
event, with the giving of notice or the passage of time or both, would
constitute an Event of Default under this Indenture, the Trustee shall not be
deemed to have
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notice of any Default or Event of Default unless specifically notified in
writing of such event by the Company or the Holders of not less than 25% in
aggregate principal amount of the Notes then outstanding.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner
or pledge of Notes and may otherwise deal with the Company, any Guarantors, or
any Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest, as defined in TIA Section 310(b), it must eliminate such conflict
within 90 days, apply to the SEC for permission to continue as trustee or
resign. Any Agent may do the same with like rights and duties. The Trustee is
also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04 TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture, the Notes, or the Subsidiary
Guarantees, it shall not be accountable for the Company's use of the proceeds
from the Notes or any money paid to the Company or upon the Company's direction
under any provision of this Indenture, it shall not be responsible for the use
or application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA Section 313(a) (but if no event described in TIA
Section 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
Section 313(b)(2). The Trustee shall also transmit by mail all reports as
required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA Section 313(d). The Company
shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.07 COMPENSATION AND INDEMNITY.
The Company and the Guarantors shall pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable compensation for its
acceptance of this Indenture and services hereunder. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company and the Guarantors shall reimburse the Trustee promptly upon
request for all reasonable
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disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company and the Guarantors shall indemnify the Trustee against any
and all losses, liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of enforcing this Indenture against
the Company and the Guarantors (including this Section 7.07) and defending
itself against or investigating any claim (whether asserted by the Company, any
Guarantor, or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or willful misconduct. The Trustee shall notify the Company promptly
of any claim for which it may seek indemnity. Failure by the Trustee to so
notify the Company shall not relieve the Company and the Guarantors of their
obligations hereunder. The Company and the Guarantors shall defend the claim and
the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Company and the Guarantors shall pay the reasonable fees and
expenses of such counsel. The Company and the Guarantors need not pay for any
settlement made or default judgment taken against the Trustee without its
consent, which consent shall not be unreasonably withheld.
The obligations of the Company and the Guarantors under this Section
7.07 shall survive the satisfaction and discharge of this Indenture.
To secure the Company's and the Guarantors' payment obligations in this
Section, the Trustee shall have a Lien prior to the Notes on all money or
property held or collected by the Trustee, except that held in trust to pay
principal and interest on particular Notes. Such Lien shall survive the
satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section 313(b)(2) to
the extent applicable.
SECTION 7.08 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
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(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10, such Holder of a Note may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's and the Guarantors' obligations under
Section 7.07 hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation or
trust company organized and doing business under the laws of the United States
of America or of any state thereof that is authorized under such laws to
exercise corporate trustee power, that is subject to supervision or examination
by federal or state authorities and either (i) that has a combined capital and
surplus of at least $100 million as set forth in its most recent published
annual report of condition or (ii) is a wholly-owned subsidiary of a bank, a
trust company or a bank holding company that has a combined capital surplus of
at least $100 million as set forth in the most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
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ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and the Guarantors shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
deemed to have been discharged from its obligations with respect to all
outstanding Notes and Subsidiary Guarantees on the date the conditions set forth
below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal
Defeasance means that the Company and the Guarantors shall be deemed to have
paid and discharged the entire Debt represented by the outstanding Notes, which
shall thereafter be deemed to be "outstanding" only for the purposes of Section
8.05 hereof and the other Sections of this Indenture referred to in (a) and (b)
below, and to have satisfied all its other obligations under such Notes and this
Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.04 hereof, and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Notes when such payments are due, (b) the Company's
and the Guarantors' obligations with respect to such Notes under Article 2 and
Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of
the Trustee hereunder and the Company's and the Guarantors' obligations in
connection therewith and (d) this Article Eight. Subject to compliance with this
Article Eight, the Company may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and the Guarantors shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
released from its obligations under the covenants contained in Sections 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13 and 4.15 hereof with respect to the
outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "Outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "Outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01 hereof, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.01 hereof of
the option applicable to this Section 8.03 hereof, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, Sections 6.01(c) through
6.01(f) hereof shall not constitute Events of Default.
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SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
outstanding Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Debt all or a portion of the proceeds of which
will be used to defease the Notes pursuant to this Article Eight concurrently
with such incurrence) or insofar as Sections 6.01(g) or 6.01(h) hereof is
concerned, at any time in the period ending on the 91st day after the date of
deposit;
(e) such Legal 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 or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that on the day following the last day of the applicable
preference period under Bankruptcy Law following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) 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 over any other creditors of the Company or the
Guarantors or with the intent of defeating, hindering, delaying or defrauding
any other creditors of the Company or the Guarantors; and
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(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company and the Guarantors shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against the cash or
non-callable Government Securities deposited pursuant to Section 8.04 hereof 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 Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company or the Guarantors 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 the New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's and the Guarantors' obligations under this
Indenture, the Notes, and the Subsidiary Guarantees, as applicable, shall be
revived and reinstated as though no deposit
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had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the
Company or the Guarantors make any payment of principal, premium, if any, or
interest on any Note following the reinstatement of its obligations, the Company
and the Guarantors shall be subrogated to the rights of the Holders of such
Notes to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors, and the Trustee may amend or supplement this Indenture, the Notes,
or the Subsidiary Guarantees without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or a Guarantor's
obligations to the Holders of the Notes in the case of a merger or consolidation
pursuant to Article Five hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of the Board
of Directors of the Company and each of the Guarantors authorizing the execution
of any such amended or supplemental Indenture, and upon receipt by the Trustee
of the documents described in Section 7.02 hereof, the Trustee shall join with
the Company and each of the Guarantors in the execution of any amended or
supplemental Indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations that may be
therein contained, but the Trustee shall not be obligated to enter into such
amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company, the
Guarantors, and the Trustee may amend or supplement this Indenture (including
Sections 3.09, 4.10, 4.13 and 4.15 hereof), the Subsidiary Guarantees, and the
Notes with the consent of the Holders of at least a majority in principal amount
of the Notes then outstanding (including consents obtained in connection with a
tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and
6.07 hereof, any existing Default or Event of Default (other than a Default or
Event of Default in the payment of the principal of, premium, if any, or
interest on the Notes, except a payment default resulting from an acceleration
that has been rescinded) or compliance with any provision of this Indenture, the
Notes, or the Subsidiary Guarantees may be waived with the consent of
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the Holders of a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for the Notes).
Upon the request of the Company accompanied by a resolution of the Board
of Directors of the Company and each of the Guarantors authorizing the execution
of any such amended or supplemental Indenture, and upon the filing with the
Trustee of evidence satisfactory to the Trustee of the consent of the Holders of
Notes as aforesaid, and upon receipt by the Trustee of the documents described
in Section 7.02 hereof, the Trustee shall join with the Company and each of the
Guarantors in the execution of such amended or supplemental Indenture unless
such amended or supplemental Indenture affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise, in which case the Trustee may
in its discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected, an
amendment or waiver may not (with respect to any Notes held by a non-consenting
Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the
Notes, except as provided above with respect to Sections 3.09, 4.10, 4.13 and
4.15 hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal,
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
of the then outstanding Notes and a waiver of the payment default that resulted
from such acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal, premium, if any, or interest on the Notes; or
(g) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants contained in Section 3.09, 4.10, 4.13
or 4.15 hereof); or
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(h) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions.
In addition, any amendment to the provisions of Article 10 of this
Indenture (which relate to subordination) shall require the consent of the
Holders of at least 75% in aggregate principal amount of the Notes then
outstanding if such amendment would adversely affect the rights of Holders of
the Notes.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture, the Notes, or the
Subsidiary Guarantees shall be set forth in an amended or supplemental Indenture
that complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
(accompanied by a notation of the Subsidiary Guarantees duly endorsed by the
Guarantors) that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
and the Guarantors may not sign an amendment or supplemental Indenture until the
Board of Directors approves it. In executing any amended or supplemental
indenture, the Trustee shall be entitled to receive and (subject to Section
7.01) shall be fully protected in relying upon, an Officer's Certificate and an
Opinion of Counsel stating that the execution of such amended or supplemental
indenture is authorized or permitted by this Indenture.
ARTICLE 10.
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company and the Guarantors agree, and each Holder by accepting a
Note agrees, that the Debt evidenced by the Notes is subordinated in right of
payment, to the extent and in the manner provided in this Article 10, to the
prior payment in full of all Senior Debt (whether outstanding on the date
hereof or
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hereafter created, incurred, assumed or guaranteed), and that the subordination
is for the benefit of the holders of Senior Debt.
SECTION 10.02. [INTENTIONALLY OMITTED.]
SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company or any Guarantor in a
liquidation or dissolution of the Company or such Guarantor, or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or such Guarantor or its property, in an assignment for the benefit of
creditors or any marshaling of the Company's or such Guarantor's assets and
liabilities:
(1) holders of Senior Debt shall be entitled to receive payment
in full of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before Holders of the Notes
shall be entitled to receive any payment with respect to the Notes
(except that Holders may receive (i) Permitted Junior Securities and
(ii) payments and other distributions made from any defeasance trust
created pursuant to Section 8.01 hereof); and
(2) until all Obligations with respect to Senior Debt (as
provided in subsection (1) above) are paid in full, any distribution to
which Holders would be entitled but for this Article 10 shall be made to
holders of Senior Debt (except that Holders of Notes may receive (i)
Permitted Junior Securities and (ii) payments and other distributions
made from any defeasance trust created pursuant to Section 8.01 hereof),
as their interests may appear.
SECTION 10.04. DEFAULT ON DESIGNATED SENIOR DEBT.
The Company and the Guarantors may not make any payment or distribution
to the Trustee or any Holder in respect of Obligations with respect to the Notes
and may not acquire from the Trustee or any Holder any Notes for cash or
property (other than (i) Permitted Junior Securities and (ii) payments and other
distributions made from any defeasance trust created pursuant to Section 8.01
hereof) until all principal and other Obligations with respect to the Senior
Debt have been paid in full if:
(i) a default in the payment of any principal or other
Obligations with respect to Designated Senior Debt occurs and is
continuing beyond any applicable grace period in the agreement,
indenture or other document governing such Designated Senior Debt; or
(ii) any other default on Designated Senior Debt occurs and is
continuing that then permits holders of the Designated Senior Debt to
accelerate its maturity and the Trustee receives a notice of the default
(a "Payment Blockage Notice") from a Person who may give it pursuant to
Section 10.12 hereof. If the Trustee receives any such Payment Blockage
Notice, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section unless and until (i) at least 360 days shall
have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice and (ii) all scheduled payments of principal, premium,
if any, and interest on the Securities that have come due have been paid
in full in cash. No nonpayment default that existed or was continuing on
the date of delivery of any Payment Blockage Notice to the Trustee shall
be, or be made, the basis for a subsequent Payment Blockage Notice
unless such default shall have been waived for a period of not less than
90 days.
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The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.04(ii)
hereof, 179 days pass after notice is received if the maturity of such
Designated Senior Debt has not been accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
SECTION 10.05. ACCELERATION OF SECURITIES.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Debt of the acceleration.
SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes at a time when the Trustee or such Holder,
as applicable, has actual knowledge that such payment is prohibited by Section
10.04 hereof, such payment shall be held by the Trustee or such Holder, in trust
for the benefit of, and shall be paid forthwith over and delivered, upon written
request, to, the holders of Senior Debt as their interests may appear or their
Representative under the indenture or other agreement (if any) pursuant to which
Senior Debt may have been issued, as their respective interests may appear, for
application to the payment of all Obligations with respect to Senior Debt
remaining unpaid to the extent necessary to pay such Obligations in full in
accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
SECTION 10.07. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article 10, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article 10.
SECTION 10.08. SUBROGATION.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders of Notes shall be subrogated (equally and ratably with all other
Debt pari passu with the Notes) to the rights of holders of Senior Debt to
receive distributions applicable to Senior Debt to the extent that distributions
otherwise payable to the Holders of Notes have been applied to the payment of
Senior Debt. A distribution made
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under this Article 10 to holders of Senior Debt that otherwise would have been
made to Holders of Notes is not, as between the Company and Holders, a payment
by the Company on the Notes.
SECTION 10.09. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of Notes and
holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and creditors
of the Company other than their rights in relation to holders of Senior
Debt; or
(3) prevent the Trustee or any Holder of Notes from exercising
its available remedies upon a Default or Event of Default, subject to
the rights of holders and owners of Senior Debt to receive distributions
and payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the subordination of
the Debt evidenced by the Notes shall be impaired by any act or failure to act
by the Company or any Holder or by the failure of the Company or any Holder to
comply with this Indenture.
SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee and the Holders of Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders of Notes
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Debt of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 10.
SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
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The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Representative of the Designated Senior Debt is hereby
authorized to file an appropriate claim for and on behalf of the Holders of the
Notes.
SECTION 10.14. AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Debt.
ARTICLE 11.
SUBSIDIARY GUARANTEES
SECTION 11.01. SUBSIDIARY GUARANTEES.
Subject to the provisions of this Article 11, each of the Guarantors
hereby, jointly and severally, unconditionally guarantee to each Holder of a
Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Notes or the obligations of the Company hereunder or thereunder,
that: (a) the principal of, premium, if any, and interest on the Notes will be
promptly paid in full when due, whether at the maturity or interest payment or
mandatory redemption date, by acceleration, redemption or otherwise, and
interest on the overdue principal of, premium, if any, and interest on the
Notes, if any, if lawful, and all other obligations of the Company to the
Holders or the Trustee under this Indenture and the Notes will be promptly paid
in full or performed, all in accordance with the terms of this Indenture and the
Notes; and (b) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, that same will be promptly paid in full
when due or performed in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration or otherwise. Failing payment when
due of any amount so guaranteed or any performance so guaranteed for whatever
reason, the Guarantors will be jointly and severally obligated to pay the same
immediately. The Guarantors hereby agree that their obligations hereunder shall
be unconditional, irrespective of the validity, regularity or enforceability of
the Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions of
this Indenture and the Notes, the recovery of any judgment against the Company,
any action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a Guarantor. Each
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest, notice and all
demands whatsoever and covenant that the Subsidiary Guarantees will not be
discharged except by complete performance of the obligations contained in the
Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company or Guarantors, or any Custodian, Trustee, liquidator or
other similar official acting in relation to either the Company or Guarantors,
any amount paid by either to the Trustee or such Holder, these Subsidiary
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Guarantees, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor agrees that they shall not be entitled to any
right of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between the Guarantors, on the
one hand, and the Holders and the Trustee, on the other hand, (x) the maturity
of the obligations guaranteed hereby may be accelerated as provided in Article 6
hereof for the purposes of these Subsidiary Guarantees, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6 hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of these Subsidiary Guarantees. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under these Subsidiary Guarantees.
SECTION 11.02. LIMITATION OF GUARANTOR'S LIABILITY
Each Guarantor and, by its acceptance hereof, each Holder hereof, hereby
confirm that it is their intention that the Subsidiary Guarantee by such
Guarantor not constitute a fraudulent transfer or conveyance for purposes of the
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law to the extent applicable to the
Subsidiary Guarantees. To effectuate the foregoing intention, each such person
hereby irrevocably agrees that the obligation of such Guarantor under its
Subsidiary Guarantee under this Article 11 shall be limited to the maximum
amount as will, after giving effect to such maximum amount and all other
(contingent or otherwise) liabilities of such Guarantor that are relevant under
such laws, and after giving effect to any rights to contribution of such
Guarantor pursuant to any agreement providing for an equitable contribution
among such Guarantor and other Affiliates of the Company of payments made by
guarantees by such parties, result in the obligations of such Guarantor in
respect of such maximum amount not constituting a fraudulent conveyance. Each
Holder, by accepting the benefits hereof, confirms its intention that, in the
event of bankruptcy, reorganization or other similar proceeding of the Company
or any Guarantor in which concurrent claims are made upon such Guarantor
hereunder, to the extent such claims will not be fully satisfied, each such
claimant with a valid claim against the Company shall be entitled to a ratable
share of all payments by such Guarantor in respect of such concurrent claims.
SECTION 11.03. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.
To evidence the Subsidiary Guarantees set forth in Section 11.01 hereof,
each Guarantor hereby agrees that a notation of the Subsidiary Guarantees
substantially in the form of Exhibit E shall be endorsed by an officer of such
Guarantor on each Note authenticated and delivered by the Trustee and that this
Indenture shall be executed on behalf of such Guarantor by its President or one
of its Vice Presidents and attested to by an Officer.
Each Guarantor hereby agrees that the Subsidiary Guarantees set forth in
Section 11.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of the Subsidiary Guarantees.
If an officer or Officer whose signature is on this Indenture or on the
Subsidiary Guarantees no longer holds that office at the time the Trustee
authenticates the Note on which the Subsidiary Guarantees are endorsed, the
Subsidiary Guarantees shall be valid nevertheless.
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The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantees
set forth in this Indenture on behalf of the Guarantors.
SECTION 11.04. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
(a) Except as set forth in Articles 4 and 5 hereof, nothing contained in
this Indenture or in any of the Notes shall prevent any consolidation or merger
of a Guarantor with or into the Company or shall prevent any sale or conveyance
of the property of a Guarantor as an entirety or substantially as an entirety,
to the Company.
(b) Except as set forth in Articles 4 and 5 hereof, nothing contained in
this Indenture or in any of the Notes shall prevent any consolidation or merger
of a Guarantor with or into a corporation or corporations other than the Company
(whether or not affiliated with the Guarantor), or successive consolidations or
mergers in which a Guarantor or its successor or successors shall be a party or
parties, or shall prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety, to a corporation other than the
Company (whether or not affiliated with the Guarantor) authorized to acquire and
operate the same; provided, however, that with respect to such transaction, each
Guarantor hereby covenants and agrees that: (i) upon any such consolidation,
merger, sale or conveyance, the Subsidiary Guarantee endorsed on the Notes, and
the due and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed by such Guarantor, shall be
expressly assumed (in the event that the Guarantor is not the surviving
corporation in the merger), by supplemental indenture satisfactory in form to
the Trustee, executed and delivered to the Trustee, by the corporation formed by
such consolidation, or into which the Guarantor shall have been merged, or by
the corporation which shall have acquired such property; (ii) immediately after
giving effect to such transaction, no Default or Event of Default exists; (iii)
such Guarantor, or any Person formed by or surviving any such consolidation or
merger, would have Consolidated Net Worth immediately after giving effect to
such transaction equal to or greater than the Consolidated Net Worth of such
Guarantor immediately preceding the transaction; and (iv) the Company would be
permitted by virtue of the Company's pro forma Debt to Operating Cash Flow
Ratio, at the time of such transaction and immediately after giving pro forma
effect thereto, be permitted to incur at least $1.00 of additional Debt pursuant
to the Debt to Operating Cash Flow Ratio test set for in Section 4.09 hereof.
In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor corporation, by supplemental indenture, executed
and delivered to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantees endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Subsidiary Guarantees to be endorsed upon all of the
Notes issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee. All the Subsidiary Guarantees so issued
shall in all respects have the same legal rank and benefit under this Indenture
as the Subsidiary Guarantees theretofore and thereafter issued in accordance
with the terms of this Indenture as though all of such Subsidiary Guarantees had
been issued at the date of the execution hereof.
SECTION 11.05. RELEASES FOLLOWING SALE OF ASSETS.
Concurrently with any sale of assets (including, if applicable, all of
the capital stock of any Guarantor), any Liens in favor of the Trustee in the
assets sold thereby shall be released; provided that in the event of an Asset
Sale, the Net Proceeds from such sale or other disposition are treated in
accordance with the provisions of Section 4.10 hereof. If the assets sold in
such sale or other disposition include all or
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substantially all of the assets of any Guarantor or all of the capital stock of
any Guarantor, then such Guarantor (in the event of a sale or other disposition
of all of the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or substantially
all of the assets of a Guarantor) shall be released and relieved of its
obligations under its Subsidiary Guarantee or Section 11.04 hereof, as the case
may be; provided that in the event of an Asset Sale, the Net Proceeds from such
sale or other disposition are treated in accordance with the provisions of
Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the provisions of this
Indenture, including without limitation Section 4.10 hereof, the Trustee shall
execute any documents reasonably required in order to evidence the release of
any Guarantor from its obligations under its Subsidiary Guarantees. Any
Guarantor not released from its obligations under its Subsidiary Guarantee shall
remain liable for the full amount of principal of and interest on the Notes and
for the other obligations of any Guarantor under this Indenture as provided in
this Article 11.
SECTION 11.06. "TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article 11 shall in such case (unless the context shall
otherwise require) be construed as extending to and including such Paying Agent
within its meaning as fully and for all intents and purposes as if such Paying
Agent were named in this Article 11 in place of the Trustee.
SECTION 11.07. SUBORDINATION OF SUBSIDIARY GUARANTEES.
The obligations of each Guarantor under its Subsidiary Guarantee
pursuant to this Article 11 shall be junior and subordinated to the prior
payment in full of all Senior Debt of such Guarantor and the amounts for which
the Guarantors will be liable under the guarantees issued from time to time with
respect to Senior Debt on the same basis as the Notes are junior and
subordinated to Senior Debt. For the purposes of the foregoing sentence, the
Trustee and the Holders shall have the right to receive and/or retain payments
by any of the Guarantors only at such times as they may receive and/or retain
payments in respect of the Notes pursuant to this Indenture, including Article
11 hereof.
ARTICLE 12.
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company or the Trustee to the others
is duly given if in writing and delivered in Person or mailed by first class
mail (registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company:
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Northland Cable Television, Inc.
1201 Third Avenue, Suite 3600
Seattle, Washington 98101
Telecopier No.: (206) 623-9015
Attention: Vice President and General Counsel
With a copy to:
Cairncross & Hempelmann, P.S.
70th Floor, Columbia Center
701 Fifth Avenue
Seattle, Washington 98104-7016
Telecopier No.: (206) 587-2308
Attention: Scott T. Bell, Esq.
If to the Trustee:
Harris Trust Company of California
601 South Figueroa, Suite 4900
Los Angeles, California 90017
Telecopier No.: (213) 239-0631
Attention: Corporate Trust Department
The Company, any Guarantor, or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) 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 acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall mail
a copy to the Trustee and each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Guarantors, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
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SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or any Guarantor to the
Trustee to take any action under this Indenture, the Company or such Guarantors
shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 12.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA
Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she 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
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company or any Guarantor under the Notes, this
Indenture or the Subsidiary Guarantees or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes.
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
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SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture or the Subsidiary Guarantees.
SECTION 12.10. SUCCESSORS.
All agreements of the Company and the Guarantors in this Indenture, the
Notes and the Subsidiary Guarantees shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture, the Notes, or the Subsidiary
Guarantees 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 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
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SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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SIGNATURES
Dated as of November 12, 1997
NORTHLAND CABLE TELEVISION, INC.
By: /s/ GARY S. JONES
--------------------------------
Name: Gary S. Jones
Title: Chief Financial Officer
Attest:
/s/ JOHN S. WHETZELL
- --------------------------------
Name: John S. Whetzell
Title: President
NORTHLAND CABLE NEWS, INC.
By: /s/ GARY S. JONES
--------------------------------
Name: Gary S. Jones
Title: Chief Financial Officer
Attest:
/s/ JOHN S. WHETZELL
- --------------------------------
Name: John S. Whetzell
Title: President
HARRIS TRUST COMPANY OF CALIFORNIA
By: /s/ JOHN T. DELERAY
--------------------------------
Name: John T. Deleray
Title: Assistant Vice President
Attest:
/s/ JOHN A. CASTELLANOS
- --------------------------------
Name: John A. Castellanos
Title: Assistant Vice President
72
<PAGE> 79
EXHIBIT A-1
(Face of Note)
================================================================================
CUSIP/CINS ____________
10 1/4% [Series A] [Series B] Senior Subordinated Notes due 2007
No. ___ $__________
NORTHLAND CABLE TELEVISION, INC.
promises to pay to _________________________________________________
or registered assigns,
the principal sum of ________________________________________________
Dollars on November 15, 2007.
Interest Payment Dates: May 15 and November 15
Record Dates: May 1 and November 1
Dated:
Northland Cable Television, Inc.
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
This is one of the Notes
referred to in the
within-mentioned Indenture:
Harris Trust Company of California,
as Trustee
By: __________________________________
Authorized Signatory
================================================================================
A1-1
<PAGE> 80
(Back of Note)
10 1/4% [Series A] [Series B] Senior Subordinated Notes due 2007
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Northland Cable Television, Inc., a Washington corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 10 1/4% per annum from the date hereof until maturity and shall pay the
Additional Interest payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Additional
Interest semi-annually on May 15 and November 15 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be May 15, 1998. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Additional Interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) and Additional Interest to the Persons who are registered
Holders of Notes at the close of business on the May 1 or November 1 next
preceding the Interest Payment Date, even if such Notes are canceled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The Notes will
be payable as to principal, premium and Additional Interest, if any, and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Additional Interest may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Additional
Interest on, all Global Notes and all other Notes the Holders of which shall
have provided wire transfer instructions to the Company or the Paying Agent.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT AND REGISTRAR. Initially, Harris Trust Company of
California, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of the Guarantors may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of November 12, 1997 ("Indenture") between the Company, the Guarantors, and the
Trustee. 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 of
A1-2
<PAGE> 81
1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts with
the express provisions of the Indenture, the provisions of the indenture shall
govern and be controlling. The Notes are obligations of the Company limited to
$150.0 million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company shall not have the option to redeem the Notes prior to November 15,
2002. Thereafter, the Company shall have the option to redeem the Notes, in
whole or in part, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest thereon, if
any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on November 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002......................... 105.125%
2003......................... 103.417%
2004......................... 101.708%
2005 and thereafter.......... 100.000%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time prior to November 15, 2000, the Company may redeem up
to 30% of the aggregate principal amount of the Notes issued under this
Indenture with the Net Cash Proceeds of a Public Equity Offering at a redemption
price equal to 110.25% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the redemption date; provided that at least 70% of
the Notes remain outstanding immediately after the occurrence of such redemption
and that such redemption occurs within 45 days of the date of the closing of
such Public Equity Offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder setting forth the procedures governing the Change
of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales,
within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $5.0 million, the Company shall commence an offer to all Holders of
Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon, if any, to
the date of purchase in accordance with the procedures set forth in
A1-3
<PAGE> 82
the Indenture. To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
(or such Subsidiary) may use such deficiency for general corporate purposes. If
the aggregate principal amount of Notes surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Holders of Notes that are the subject of an offer
to purchase will receive an Asset Sale Offer from the Company prior to any
related purchase date and may elect to have such Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes.
(c) If the Acquisition is not consummated by March 1, 1998, each
Holder of the Notes shall have the right to require the Company to repurchase
all or any part (equal to $1,000 or an integral multiple thereof) of such
Holder's Notes (the "Special Repurchase Offer") pursuant to Section 4.13 of the
Indenture at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest thereon, if any, to the date of
purchase (the "Special Repurchase Payment"). The Company shall mail a notice to
each Holder of the Notes no later than March 31, 1998 describing the reasons the
Acquisition was not consummated by such date and offering to repurchase Notes on
the date specified in such notice, which date shall be no earlier than 30 days
and no later than 60 days from the date such notice is mailed (the "Special
Repurchase Payment Date"), pursuant to the procedures required by the Indenture.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture, the Notes, or the Subsidiary Guarantees may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes, and any existing default or compliance
with any provision of the Indenture or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes.
Without the consent of any Holder of a Note, the Indenture, the Notes or the
Subsidiary Guarantees may be amended or supplemented to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Company's
or a Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with the
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
A1-4
<PAGE> 83
12. DEFAULTS AND REMEDIES. Events of Default include: (i) a default for
30 days in the payment when due of interest on the Notes (whether or not
prohibited by Article 10 hereof); (ii) a default in the payment when due of the
principal of or premium, if any, on the Notes (whether or not prohibited by
Article 10 hereof); (iii) failure by the Company to comply with Section 4.07,
4.09, 4.10, 4.13 or 4.15 of the Indenture; (iv) failure by the Company for 60
days after notice to the Company to comply with certain other agreements in the
Indenture or the Notes; (v) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Debt for money borrowed by the Company or any of any Subsidiary
(or the payment of which is guaranteed by the Company or any Subsidiary),
whether such Debt or guarantee now exists, or is created after the Issue Date,
which default results in the acceleration of such Debt prior to its express
maturity and, in each case, the principal amount of any such Debt, together with
the principal amount of any other such Debt the maturity of which has been so
accelerated, aggregates $5.0 million or more; (vi) except as provided by this
Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to
be unenforceable or invalid or shall cease for any reason to be in full force
and effect or any Guarantor, or any Person acting on behalf of any Guarantor
shall deny or disaffirm its obligations under its Subsidiary Guarantee; and
(vii) certain events of bankruptcy or insolvency with respect to the Company or
any of its Significant Subsidiaries. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company or the Guarantors, as such, shall
not have any liability for any obligations of the Company or the Guarantors
under the Indenture, the Notes or the Subsidiary Guarantees or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. 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).
A1-5
<PAGE> 84
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of November 12, 1997, among the Company, the Guarantor, and
the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Northland Cable Television, Inc.
1201 Third Avenue, Suite 3600
Seattle, Washington 98101
Attention: Vice President and General Counsel
A1-6
<PAGE> 85
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
________________________________________________________________________________
Date: ___________________
Your Signature: __________________________________
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee: _____________________________
A1-7
<PAGE> 86
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10, 4.13 or 4.15 of the Indenture, check the box below:
[ ] Error! Switch argument not specified. Section 4.10
[ ] Error! Switch argument not specified. Section 4.13
[ ] Error! Switch argument not specified. Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10, Section 4.13 or Section 4.15 of the Indenture,
state the amount you elect to have purchased: $___________
Date: ______________________ Your Signature: _______________________________
(Sign exactly as your name
appears on the Note)
Tax Identification No.: _______________________
Signature Guarantee: __________________________
A1-8
<PAGE> 87
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of increase [at maturity] of Signature of
decrease in in Principal this Global Note authorized
Principal Amount Amount following such signatory of
[at maturity] of [at maturity] of decrease (or Trustee or Note
Date of Exchange this Global Note this Global Note increase) Custodian
- ---------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
</TABLE>
A1-9
<PAGE> 88
EXHIBIT A-2
(Face of Regulation S Temporary Global Notes)
================================================================================
CUSIP/CINS ____________
10 1/4% [Series A] [Series B] Senior Subordinated Notes due 2007
No. ___ $__________
NORTHLAND CABLE TELEVISION, INC.
promises to pay to _________________________________________________
or registered assigns,
the principal sum of ________________________________________________
Dollars on November 15, 2007.
Interest Payment Dates: May 15 and November 15
Record Dates: May 1 and November 1
Dated:
Northland Cable Television, Inc.
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
This is one of the Notes
referred to in the
within-mentioned Indenture:
Harris Trust Company of California,
as Trustee
By: __________________________________
Authorized Signatory
================================================================================
A2-1
<PAGE> 89
(Back of Regulation S Temporary Global Note)
10 1/4% [Series A] [Series B] Senior Subordinated Notes due 2007
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR 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. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("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 SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE 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.
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (the "SECURITIES ACT"), AND THE NOTE
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE
HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN OF RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
OF THE NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (1) ABOVE.
A2-2
<PAGE> 90
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Northland Cable Television, Inc., a Washington corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 10 1/4% per annum from the date hereof until maturity and shall pay the
Additional Interest payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Additional
Interest semi-annually on May 15 and November 15 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be May 15, 1998. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Additional Interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) and Additional Interest to the Persons who are registered
Holders of Notes at the close of business on the May 1 or November 1 next
preceding the Interest Payment Date, even if such Notes are canceled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The Notes will
be payable as to principal, premium and Additional Interest, if any, and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Additional Interest may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Additional
Interest on, all Global Notes and all other Notes the Holders of which shall
have provided wire transfer instructions to the Company or the Paying Agent.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT AND REGISTRAR. Initially, Harris Trust Company of
California, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of the Guarantors may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of November 12, 1997 ("Indenture") between the Company, the Guarantors, and the
Trustee. 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 of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the indenture shall govern and be
controlling. The Notes are obligations of the Company limited to $150.0 million
in aggregate principal amount.
5. OPTIONAL REDEMPTION.
A2-3
<PAGE> 91
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company shall not have the option to redeem the Notes prior to November 15,
2002. Thereafter, the Company shall have the option to redeem the Notes, in
whole or in part, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest thereon, if
any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on November 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002......................... 105.125%
2003......................... 103.417%
2004......................... 101.708%
2005 and thereafter.......... 100.000%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time prior to November 15, 2000, the Company may redeem up
to 30% of the aggregate principal amount of the Notes issued under this
Indenture with the Net Cash Proceeds of a Public Equity Offering at a redemption
price equal to 110.25% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the redemption date; provided that at least 70% of
the Notes remain outstanding immediately after the occurrence of such redemption
and that such redemption occurs within 45 days of the date of the closing of
such Public Equity Offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder setting forth the procedures governing the Change
of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales,
within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $5.0 million, the Company shall commence an offer to all Holders of
Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon, if any, to
the date of purchase in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company (or such
Subsidiary) may use such deficiency for general corporate purposes. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on
a pro rata basis. Holders of Notes that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Company prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
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(c) If the Acquisition is not consummated by March 1, 1998, each
Holder of the Notes shall have the right to require the Company to repurchase
all or any part (equal to $1,000 or an integral multiple thereof) of such
Holder's Notes (the "Special Repurchase Offer") pursuant to Section 4.13 of the
Indenture at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest thereon, if any, to the date of
purchase (the "Special Repurchase Payment"). The Company shall mail a notice to
each Holder of the Notes no later than March 31, 1998 describing the reasons the
Acquisition was not consummated by such date and offering to repurchase Notes on
the date specified in such notice, which date shall be no earlier than 30 days
and no later than 60 days from the date such notice is mailed (the "Special
Repurchase Payment Date"), pursuant to the procedures required by the Indenture.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture, the Notes, or the Subsidiary Guarantees may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes, and any existing default or compliance
with any provision of the Indenture or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes.
Without the consent of any Holder of a Note, the Indenture, the Notes or the
Subsidiary Guarantees may be amended or supplemented to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Company's
or a Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with the
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) a default for
30 days in the payment when due of interest on the Notes (whether or not
prohibited by Article 10 hereof); (ii) a default in the payment when due of the
principal of or premium, if any, on the Notes (whether or not prohibited by
Article 10 hereof); (iii) failure by the Company to comply with Section 4.07,
4.09, 4.10, 4.13 or 4.15 of the Indenture; (iv) failure by the Company for 60
days after notice to the Company to comply with certain other agreements in the
Indenture or the Notes; (v) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Debt for
A2-5
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money borrowed by the Company or any of any Subsidiary (or the payment of which
is guaranteed by the Company or any Subsidiary), whether such Debt or guarantee
now exists, or is created after the Issue Date, which default results in the
acceleration of such Debt prior to its express maturity and, in each case, the
principal amount of any such Debt, together with the principal amount of any
other such Debt the maturity of which has been so accelerated, aggregates $5.0
million or more; (vi) except as provided by this Indenture, any Subsidiary
Guarantee shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
Guarantor, or any Person acting on behalf of any Guarantor shall deny or
disaffirm its obligations under its Subsidiary Guarantee; and (vii) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Significant Subsidiaries. If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company or the Guarantors, as such, shall
not have any liability for any obligations of the Company or the Guarantors
under the Indenture, the Notes or the Subsidiary Guarantees or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. 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).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of November 12, 1997, among the Company, the Guarantor, and
the parties named on the signature pages thereof (the "Registration Rights
Agreement").
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<PAGE> 94
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Northland Cable Television, Inc.
1201 Third Avenue, Suite 3600
Seattle, Washington 98101
Attention: Vice President and General Counsel
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<PAGE> 95
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Debenture to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
________________________________________________________________________________
Date: ______________________
Your Signature: _________________________________
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee: ____________________________
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<PAGE> 96
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10, 4.13 or 4.15 of the Indenture, check the box below:
[ ]
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10, Section 4.13 or Section 4.15 of the Indenture,
state the amount you elect to have purchased: $___________
Date: ______________________ Your Signature: __________________________________
(Sign exactly as your name appears
on the face of this Note)
Tax Identification No.: _________________________
Signature Guarantee: ____________________________
A2-9
<PAGE> 97
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary Global
Note for an interest in another Global Note or of other Restricted Global Notes
for an interest in this Regulation S Temporary Global Note, have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of increase [at maturity] of Signature of
decrease in in Principal this Global Note authorized
Principal Amount Amount following such officer of
[at maturity] of [at maturity] of decrease (or Trustee or Note
Date of Exchange this Global Note this Global Note increase) Custodian
- ---------------- ---------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
</TABLE>
A2-10
<PAGE> 98
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Northland Cable Television, Inc.
1201 Third Avenue, Suite 3600
Seattle, Washington 98101
[Registrar address block]
Re: 10 1/4% Senior Subordinated Notes due 2007 of
Northland Cable Television, Inc.
Reference is hereby made to the Indenture, dated as of November 12, 1997
(the "Indenture"), among Northland Cable Television, Inc. as issuer (the
"Company"), Northland Cable News, Inc., as Guarantor, and Harris Trust Company
of California, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to __________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
REGULATION S TEMPORARY GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE
NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in
accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly,
the Transferor hereby further certifies that (i) the Transfer is not being made
to a person in the United States and (x) at the time the buy order was
originated, the Transferee was outside the United States or such Transferor and
any Person acting on its behalf reasonably believed and believes that the
Transferee was outside the United States or (y) the transaction was executed in,
on or through the facilities of a designated offshore securities market and
neither such Transferor nor any Person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States, (ii) no directed
selling efforts have been made in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the
transaction is not part of a plan or scheme to evade the registration
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<PAGE> 99
requirements of the Securities Act, and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Note, the
Regulation S Temporary Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION
OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that the Transfer complies with the transfer
restrictions applicable to beneficial interests in a Restricted Global Note or
Restricted Definitive Notes and the requirements of the exemption claimed, which
certification is supported by (1) a certificate executed by the Transferee in
the form of Exhibit D to the Indenture and (2) an Opinion of Counsel provided by
the Transferor or the Transferee (a copy of which the Transferor has attached to
this certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the IAI Global Note and/or the Definitive Notes and
in the Indenture and the Securities Act.
4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN
UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed
B-2
<PAGE> 100
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904 under
the Securities Act and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any state of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
________________________________________
[Insert Name of Transferor]
By: ____________________________________
Name:
Title:
Dated: __________________, ______
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<PAGE> 101
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (A) OR (B)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP _________), or
(ii) [ ] Regulation S Global Note (CUSIP ________), or
(iii) [ ] IAI Global Note (CUSIP ________); or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ________), or
(ii) [ ] Regulation S Global Note (CUSIP _________), or
(iii) [ ] IAI Global Note (CUSIP ________); or
(iv) [ ] Unrestricted Global Note (CUSIP ________); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
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<PAGE> 102
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Northland Cable Television, Inc.
1201 Third Avenue, Suite 3600
Seattle, Washington 98101
[Registrar address block]
Re: 10 1/4% Senior Subordinated Notes due 2007 of
Northland Cable Television, Inc.
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of November 12, 1997
(the "Indenture"), among Northland Cable Television, Inc. as issuer (the
"Company"), Northland Cable News, Inc., as Guarantor and Harris Trust Company of
California, as trustee. Capitalized terms used but not defined herein shall have
the meanings given to them in the Indenture.
_____________________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
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<PAGE> 103
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED
GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE]: [ ] 144A Global Note, [ ] Regulation S Global Note, [ ] IAI Global
Note with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any applicable
blue sky securities laws of any state of the United States. Upon consummation of
the proposed Exchange in accordance with the terms of the Indenture, the
beneficial interest issued will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the relevant Restricted
Global Note and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
________________________________________
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<PAGE> 104
[Insert Name of Owner]
By: ____________________________________
Name:
Title:
Dated: _________________, ______
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<PAGE> 105
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Northland Cable Television, Inc.
1201 Third Avenue, Suite 3600
Seattle, Washington 98101
[Registrar address block]
Re: 10 1/4% Senior Subordinated Notes due 2007 OF
Northland Cable Television, Inc.
Reference is hereby made to the Indenture, dated as of November 12, 1997
(the "Indenture"), among Northland Cable Television, Inc., as issuer (the
"Company"), Northland Cable News, Inc., as Guarantor, and Harris Trust Company
of California, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such transfer is in
compliance with the Securities Act, (D) outside the United States in accordance
with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the
provisions of Rule 144 under the Securities Act or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to provide
to any person purchasing the Definitive Note or beneficial interest in a Global
Note from us in a transaction meeting the requirements of clauses (A) through
(E) of this paragraph a notice advising such purchaser that resales thereof are
restricted as stated herein.
D-1
<PAGE> 106
3. We understand that, on any proposed resale of the Notes or beneficial
interest therein, we will be required to furnish to you and the Company such
certifications, legal opinions and other information as you and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect. We further understand that any subsequent
transfer by us of the Notes or beneficial interest therein acquired by us must
be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein purchased
by us for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
_________________________________________
[Insert Name of Accredited Investor]
By: _____________________________________
Name:
Title:
Dated: _________________, ______
D-2
<PAGE> 107
EXHIBIT E
FORM OF SUBSIDIARY GUARANTEE
____________________________, a __________________ corporation
(hereinafter referred to as the "Guarantor," which term includes any successor
or additional Guarantor under the Indenture (the "Indenture") referred to in the
Note upon which this notation is endorsed), (i) has unconditionally guaranteed
(a) the due and punctual payment of the principal of and interest on the Notes,
whether at maturity or interest payment date, by acceleration, call for
redemption or otherwise, (b) the due and punctual payment of interest on the
overdue principal of and (if lawful) interest on the Notes, (c) the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee, all in accordance with the terms set forth in the Indenture, and
(d) in case of any extension of time of payment or renewal of any Notes or any
of such other obligations, the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise and (ii) has agreed to pay any and
all costs and expenses (including reasonable attorneys' fees) incurred by the
Trustee or any Holder in enforcing any rights under this Subsidiary Guarantee.
No stockholder, officer, director or incorporator, as such, past,
present or future, of the Guarantor shall have any personal liability under this
Subsidiary Guarantee by reason of his or its status as such stockholder,
officer, director or incorporator.
This Subsidiary Guarantee shall be binding upon the Guarantor and its
successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
The obligations of the Guarantor to the Holders of Notes and to the
Trustee pursuant to the Subsidiary Guarantees and the Indenture are expressly
subordinated to the extent set forth in Article 10 of the Indenture and
reference is hereby made to such Indenture for the precise terms of such
subordination.
[NAME OF GUARANTOR]
By: _____________________________________
Name:
Title:
E-1
<PAGE> 1
EXHIBIT 10.1
NORTHLAND CABLE TELEVISION, INC.
AMENDED AND RESTATED
CREDIT AGREEMENT
This Agreement, dated as of November 12, 1997, is among NORTHLAND CABLE
TELEVISION, INC., the LENDERS and THE FIRST NATIONAL BANK OF CHICAGO, as Agent.
The parties hereto agree as follows:
WHEREAS, the Borrower (this and other capitalized terms shall have the
respective meanings set forth in Article I hereinbelow), the Agent, and certain
Lenders (the "Prior Lenders") have entered into that certain Credit Agreement
dated as of August 23, 1994, as heretofore amended (as so amended the "Prior
Agreement") pursuant to which the Prior Lenders agreed to make extensions of
credit available to the Borrower on the terms and conditions set forth therein;
and
WHEREAS, the Borrower, the Agent, and the Lenders party hereto desire to
amend the Prior Agreement in certain respects more fully described hereinafter;
and
WHEREAS, pursuant to the terms of this Agreement, on the Effective Date,
(i) all loans and other obligations of the Borrower to the Prior Lenders
outstanding as of such date shall be deemed to be loans and obligations
outstanding hereunder, and (ii) all provisions of this Agreement not previously
in effect shall become effective;
NOW, THEREFORE, in consideration of the undertakings set forth herein
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree that, effective upon the Effective
Date, the Prior Agreement is hereby amended and restated in its entirety to read
as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (i) acquires any going business or all or
substantially all of the assets of any firm, corporation or division thereof,
whether through purchase of assets, merger or otherwise or (ii) directly or
indirectly acquires (in one transaction or as the most recent transaction in a
series of transactions) at least a majority (in number of votes) of the
securities of a corporation which have ordinary voting power for the election of
directors (other than securities having such power only by reason of the
happening of a contingency) or a majority (by percentage or voting power) of the
outstanding partnership interests of a partnership or membership interests
<PAGE> 2
in a limited liability company.
"Advance" means a borrowing hereunder consisting of the aggregate amount
of the several Loans made by the applicable Lenders to the Borrower of the same
Type under the same Facility and, in the case of Eurodollar Advances, for the
same Interest Period.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"Agent" means The First National Bank of Chicago in its capacity as
agent for the Lenders pursuant to Article X, and not in its individual capacity
as a Lender, and any successor Agent appointed pursuant to Article X.
"Aggregate Commitment" means the Aggregate Facility A Commitment or the
Aggregate Facility B Commitment, as appropriate.
"Aggregate Facility A Commitment" means the aggregate of the Facility A
Commitments of all the Lenders (including amounts outstanding thereunder), as
reduced from time to time pursuant to the terms hereof.
"Aggregate Facility B Commitment" means the aggregate of the Facility B
Commitments of all the Lenders (including amounts outstanding thereunder), as
reduced from time to time pursuant to the terms hereof.
"Agreement" means this credit agreement, as it may be amended or
modified and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time, applied in a manner consistent with
that used in preparing the financial statements referred to in Section 5.4.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum
of Federal Funds Effective Rate for such day plus 1/2% per annum.
"Annualized Operating Cash Flow" means, as at any date of determination
thereof, the product of Operating Cash Flow for the most recently ended fiscal
quarter of the Borrower multiplied by four.
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"Applicable Margin" means, as appropriate, the applicable margin set
forth in Section 2.4.
"Arranger" means First Chicago Capital Markets, Inc., a Delaware
corporation, and its successors.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Authorized Officer" means any of John S. Whetzell, President of the
Borrower; Richard I. Clark, Vice President and Treasurer of the Borrower; Gary
S. Jones, Vice President of the Borrower; or such other officers of the Borrower
as the Borrower may designate in writing to the Agent from time to time, acting
singly.
"Borrower" means Northland Cable Television, Inc., a Washington
corporation and Wholly-Owned Subsidiary of NTC, and its successors and assigns.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.8.
"Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago and New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago for the conduct of substantially all of their
commercial lending activities.
"Capital Expenditures" means, for any period, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities and including that
portion of Capitalized Leases which is capitalized on the balance sheet of the
Borrower) by the Borrower and its Subsidiaries during that period that,
determined in accordance with Agreement Accounting Principles, are required to
be included in or reflected by the property, plant or equipment or similar fixed
asset accounts reflected in the balance sheet of the Borrower, but excluding
expenditures in respect of Permitted Acquisitions requiring the consent of the
Required Lenders that would otherwise be deemed "Capital Expenditures"
hereunder.
"Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of
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such Person under Capitalized Leases which would be shown as a liability on a
balance sheet of such Person prepared in accordance with Agreement Accounting
Principles.
"CATV Franchise" means, collectively, (i) any franchise, license,
permit, wire agreement or easement granted by any political jurisdiction or unit
or other franchising authority pursuant to which a Person has the right to
operate a CATV System, (ii) any pole attachment agreement or underground conduit
use agreement entered into in connection with the operation of any CATV System,
and (iii) any legislation, regulation, bill, ordinance, agreement or other
instrument or document setting forth all or any part of the terms of any FCC
License or franchise, license, permit, wire agreement or easement described in
clause (i) of this definition.
"CATV System" means a system owned by the Borrower or any Subsidiary
which transmits audio, video, digital or other signals or information by cable,
optical, antennae, microwave, or satellite means, to Persons who pay to receive
such transmissions.
"Change in Control" means (i) the acquisition by any Person, or two or
more Persons acting in concert, of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock
of NTC; or (ii) NTC shall cease to own, free and clear of all Liens or other
encumbrances, 100% of the outstanding shares of voting stock of the Borrower on
a fully diluted basis.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral" means, collectively, "Collateral" as defined in each of the
Collateral Documents.
"Collateral Documents" means, collectively, the Security Agreement, the
Pledge Agreement, any security agreement delivered by a Subsidiary pursuant to
Section 6.23.2, and all other agreements, instruments, or documents necessary to
effect the purposes of the Security Agreement, the Pledge Agreement, and such
other security agreement, including, without limitation, UCC-1 Financing
Statements suitable for filing in the appropriate jurisdictions.
"Commitment" means a Facility A Commitment or a Facility B Commitment,
as appropriate.
"Condemnation" is defined in Section 7.8.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or
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<PAGE> 5
provide funds for the payment of, or otherwise becomes or is contingently liable
upon, the obligation or liability of any other Person, or agrees to maintain the
net worth or working capital or other financial condition of any other Person,
or otherwise assures any creditor of such other Person against loss, including,
without limitation, any comfort letter, operating agreement, take-or-pay
contract, or application for a Letter of Credit.
"Conversion Balance" means the aggregate principal amount of Advances
outstanding under Facility B on the Conversion Date after giving effect to any
voluntary Advances repaid under Facility B on such date.
"Conversion Date" means March 31, 1998.
"Conversion/Continuation Notice" is defined in Section 2.9.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Corporate Base Rate" means a rate per annum equal to the corporate base
rate of interest announced by First Chicago from time to time, changing when and
as said corporate base rate changes.
"Cumulative Leakage Index" means the permitted index or range of
radiation leakage computed in accordance with the rules of the FCC and
applicable to CATV Systems.
"Debt" of a Person means such Person's (a) (i) indebtedness for borrowed
money (including accrued but unpaid interest that is due and owing), (ii)
guarantees, (iii) Letters of Credit, (iv) obligations under non-compete
agreements and (v) Capitalized Lease Obligations of such Person and its
Subsidiaries; but excluding (b) (i) intercompany debt and (ii) solely for
purposes of calculating compliance with Section 6.19, Indebtedness represented
by Subordinated Seller Notes.
"Default" means an event described in Article VII.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Effective Date" means the Business Day on which (a) the Borrower, the
Agent and the Lenders have executed this Agreement and (b) all conditions to the
effectiveness of this Agreement have been satisfied.
"Eurodollar Advance" means an Advance which bears interest at a
Eurodollar Rate.
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"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for
the relevant Interest Period, the rate determined by the Agent to be the rate at
which deposits in U.S. dollars are offered by First Chicago to first-class banks
in the London interbank market at approximately 11 a.m. (London time) two
Business Days prior to the first day of such Interest Period, in the approximate
amount of First Chicago's relevant Eurodollar Loan and having a maturity
approximately equal to such Interest Period.
"Eurodollar Loan" means a Loan which bears interest at a Eurodollar
Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base
Rate applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, if any,
plus (ii) the Applicable Margin. The Eurodollar Rate shall be rounded to the
next higher multiple of 1/16 of 1% if the rate is not such a multiple.
"Excess Cash Flow" means, for any fiscal year, (a) the sum of (i)
Operating Cash Flow for such fiscal year and (ii) cash and cash equivalents on
hand at the last day of the immediately preceding fiscal year (up to a maximum
of $500,000) minus (b) the sum of, without duplication, (i) Capital
Expenditures, (ii) payments of interest (including administrative fees payable
to the Agent and any commitment fee paid on the unused portion of the Aggregate
Commitment) and scheduled principal (exclusive of mandatory prepayments made for
Excess Cash Flow during such period), (iii) the increase, as of the last day of
such fiscal year from the last day of the immediately preceding fiscal year, in
the excess of current assets (less cash and short-term investments) over current
liabilities, (iv) taxes paid, and (vi) cash used for Acquisitions and associated
transaction costs, all calculated for such fiscal year for Borrower and its
Subsidiaries on a consolidated basis.
"FCC" means the Federal Communications Commission or any other
regulatory body which succeeds to the functions of the Federal Communications
Commission.
"FCC License" means any community antenna relay service, broadcast
auxiliary license, business radio, microwave or special safety radio service
license issued by the FCC pursuant to the Communications Act of 1934, as
amended.
"Facility" means Facility A or Facility B, as appropriate.
"Facility A" means a revolving credit facility in the amount of the
Aggregate Facility A Commitment utilized under this Agreement pursuant to
Section 2.1.1.
"Facility A Commitment" means, for each Lender, the obligation of such
Lender to make Loans under Facility A not exceeding the amount set forth
opposite its name on Schedule
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"1" hereto (but subject to Section 2.1.1) or as set forth in any Notice of
Assignment relating to any assignment that has become effective pursuant to
Section 12.3.2, as such amount may be modified from time to time pursuant to the
terms hereof.
"Facility A Lenders" means, collectively, Lenders having Facility A
Commitments.
"Facility A Note" means a promissory note, in substantially the form of
Exhibit "A" hereto, duly executed by the Borrower and payable to the order of a
Lender in the amount of its Facility A Commitment, including any amendment,
modification, renewal or replacement of such promissory note.
"Facility A Reduction Basis" means the amount of the Aggregate Facility
A Commitment on March 31, 1999 after giving effect to any voluntary reduction in
the Aggregate Facility A Commitment on such date.
"Facility A Termination Date" means December 31, 2005.
"Facility B" means a revolving credit facility (converting to a term
loan facility on the Conversion Date) in the amount of the Aggregate Facility B
Commitment utilized under this Agreement pursuant to Section 2.1.2.
"Facility B Commitment" means, for each Lender, the obligation of such
Lender to make term Loans under Facility B not exceeding the amount set forth
opposite its name on Schedule "1" hereto or as set forth in any Notice of
Assignment relating to any assignment that has become effective pursuant to
Section 12.3.2, as such amount may be modified from time to time pursuant to the
terms hereof.
"Facility B Lenders" means, collectively, Lenders having Facility B
Commitments.
"Facility B Note" means a promissory note, in substantially the form of
Exhibit "B" hereto, duly executed by the Borrower and payable to the order of a
Lender in the amount of its Facility B Commitment, including any amendment,
modification, renewal or replacement of such promissory note.
"Facility B Termination Date" means December 31, 2005.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized
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standing selected by the Agent in its sole discretion.
"First Chicago" means The First National Bank of Chicago in its
individual capacity, and its successors.
"Fixed Charge Coverage Ratio" means, at any date of determination
thereof, the ratio of (i)(a) the sum of (1) Operating Cash Flow for the period
of twelve consecutive complete calendar months ending on or most recently ended
prior to such date, plus (2) cash and cash equivalents on hand on the last day
of the most recently ended fiscal quarter (up to a maximum of $500,000), plus
(3) insurance proceeds used to acquire replacement Property in accordance with
Section 6.6, minus (b) the sum of taxes and Capital Expenditures during such
twelve-month period; to (ii) the payments of interest, fees (including
administrative fees payable to the Agent and any commitment fee paid on the
unused portion of the Aggregate Commitment but excluding any upfront and
structuring fees payable to the Agent or to any underwriters in connection with
the Senior Subordinated Notes) and scheduled principal with respect to
Indebtedness required to be made during such twelve-month period; all calculated
for the Borrower and its Subsidiaries on a consolidated basis.
"Floating Rate" means, for any day, a rate per annum equal to (i) the
Alternate Base Rate for such day plus (ii) the Applicable Margin, in each case
changing when and as the Alternate Base Rate changes.
"Floating Rate Advance" means an Advance which bears interest at the
Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at the Floating
Rate.
"Indebtedness" of a Person means such Person's (a) (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase price of
Property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (iii)
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from property now or hereafter owned or acquired by such
Person, (iv) obligations which are evidenced by notes, acceptances, or other
instruments, (v) Capitalized Lease Obligations, and (vi) Contingent Obligations;
but excluding (b) (i) intercompany debt and (ii) solely for purposes of
calculating compliance with Section 6.19, Indebtedness represented by
Subordinated Seller Notes.
"Interest Coverage Ratio" means, at any date of determination thereof,
the ratio of Operating Cash Flow to interest expense on Debt (including
administrative fees payable to the Agent and any commitment fee paid on the
unused portion of the Aggregate Commitment), all calculated for the most
recently ended fiscal quarter.
"Interest Period" means, with respect to a Eurodollar Advance, a period
of one, two, three, or, six months commencing on a Business Day selected by the
Borrower pursuant to this
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Agreement. Such Interest Period shall end on (but exclude) the day which
corresponds numerically to such date one, two, three, or six months thereafter,
provided, however, that if there is no such numerically corresponding day in
such next, second, third, or sixth succeeding month, such Interest Period shall
end on the last Business Day of such next, second, third, or sixth succeeding
month. If an Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall end on the next succeeding Business
Day, provided, however, that if said next succeeding Business Day falls in a new
calendar month, such Interest Period shall end on the immediately preceding
Business Day.
"Intermedia Acquisition" means the acquisition by the Borrower of cable
television subscribers in or near the communities of Aiken, Greenwood,
Wareshoals, Saluda, McCormick, and Edgefield, South Carolina pursuant to that
certain Asset Purchase Agreement by and between the Borrower as buyer and
Intermedia Partners of Carolina, L.P. and Robin Cable Systems, L.P. as sellers
dated as of August 27, 1997, as it may be amended from time to time.
"Investment" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business on terms customary in the trade), deposit
account or contribution of capital by such Person to any other Person or any
investment in, or purchase or other acquisition of, the stock, partnership
interests, notes, debentures or other securities of any other Person made by
such Person.
"Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Leverage Ratio" means the ratio of (i) Debt of the Borrower as at the
last day of any fiscal quarter of the Borrower to (ii) Annualized Operating Cash
Flow as of the end of such fiscal quarter.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
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"Loan" means, with respect to a Lender, such Lender's portion of any
Advance.
"Loan Documents" means this Agreement, the Notes, the Security Agreement
(and any agreements, instruments, or documents executed by the Borrower
necessary to effect the purposes of the Security Agreement) and the
Subordination Agreement.
"Management Fee Report" means a report substantially in the form of
Exhibit "I" hereto.
"Management Fees" means fees payable to NTC as permitted under Section
6.21.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Borrower or any Subsidiary to perform its obligations under the
Transaction Documents, (iii) the ability of NTC to perform its obligations under
the Pledge Agreement, or (iv) the validity or enforceability of any of the
Transaction Documents or the rights or remedies of the Agent or the Lenders
thereunder.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"NCN" means Northland Cable News, Inc., a Washington corporation and
Wholly-Owned Subsidiary of the Borrower, and its successors and assigns.
"NCN Documents" means the security agreement and guaranty of NCN
required under Section 6.23.2 and any agreements, instruments, or documents
executed by NCN necessary to effect the purposes of such security agreement.
"NTC" means Northland Telecommunications Corporation, a Washington
corporation, and its successors and assigns.
"Notes" means, collectively, the Facility A Notes and the Facility B
Notes, and "Note" means any one of the Facility A Notes or the Facility B Notes.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the Lenders
or to any Lender, the Agent or any indemnified party hereunder arising under the
Loan Documents.
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"Operating Cash Flow" means, for any period of determination thereof,
the sum of (a) pre-tax income or deficit, as the case may be (excluding
extraordinary gains and losses and gains and losses from sales of assets), (b)
interest expense, (c) depreciation and amortization, and (d) deferred Management
Fees, all calculated for the Borrower and its Subsidiaries for such period after
giving effect to any acquisitions and disposition of assets of the Borrower and
its Subsidiaries made during such period as if made on the first day of such
period.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last day of each March, June, September, and
December.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Permitted Acquisition" means, at any time of determination, any
Acquisition by the Borrower or any Subsidiary which has been approved or
consented to by (i) the board of directors or equivalent governing body of the
Person whose assets or equity interests are to be acquired and (ii) in the event
that the aggregate consideration for such Acquisition exceeds $2,000,000, the
Required Lenders.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or organization, or
any government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
"Pledge Agreement" means an amended and restated pledge agreement in
substantially the form of Exhibit "E" hereto, dated as of the date hereof, duly
executed and delivered to the Agent by NTC, as the same may be amended or
modified and in effect from time to time.
"Prior Agreement" is defined in the recitals to this Agreement.
"Prior Lenders" is defined in the recitals to this Agreement.
"Pro Forma Debt Service" means, at any date of determination thereof,
the aggregate amount of payments of interest (including administrative fees
payable to the Agent and any commitment fee to be paid on the unused portion of
the Aggregate Commitment) and principal (excluding payments of principal
required hereunder pursuant to Section 2.2.3) on Indebtedness required to be
made by the Borrower and its Subsidiaries during the period of twelve
consecutive complete calendar months commencing on the first day of the next
calendar month succeeding such date of determination. For purposes of this
ratio, pro forma interest on Debt shall be calculated at the Eurodollar Rate for
an Interest Period of three months in effect
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on the date of calculation.
"Pro Forma Debt Service Ratio" means, at any date of determination
thereof, the ratio of Annualized Operating Cash Flow to Pro Forma Debt Service,
in each case calculated as at such date of determination.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
"Purchasers" is defined in Section 12.3.1.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"Rentals" of a Person means the aggregate fixed amounts payable by such
Person under any lease of Property having an original term (including any
required renewals or any renewals at the option of the lessor or lessee) of one
year or more but does not include any amounts payable under Capitalized Leases
of such Person.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however,
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that a failure to meet the minimum funding standard of Section 412 of the Code
and of Section 302 of ERISA shall be a Reportable Event regardless of the
issuance of any such waiver of the notice requirement in accordance with either
Section 4043(a) of ERISA or Section 412(d) of the Code.
"Required Lenders" means Lenders in the aggregate having at least 66_%
of the Aggregate Commitments or, if a Default has occurred and is continuing or
if the Aggregate Commitments have been terminated, Lenders in the aggregate
holding at least 66_% of the aggregate unpaid principal amount of the
outstanding Advances.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Secured Obligations" means, collectively, (i) the Obligations and (ii)
all Rate Hedging Obligations owing to one or more Lenders.
"Security Agreement" means an amended and restated security agreement in
substantially the form of Exhibit "D" hereto, dated as of the date hereof, duly
executed and delivered to the Agent by the Borrower, as the same may be amended
or modified and in effect from time to time.
"Senior Debt" means, as at any date of determination, total Debt minus
any outstanding Debt that on its terms is subordinated to senior indebtedness.
"Senior Leverage Ratio" means, as at the last day of any fiscal quarter,
the ratio of (i) Senior Debt as at the last day of such fiscal quarter to (ii)
Annualized Operating Cash Flow for the fiscal quarter then ending.
"Senior Subordinated Notes" means those certain 10 1/4% Senior
Subordinated Notes issued by the Borrower in the aggregate amount of
$100,000,000 due 2007 under that certain Indenture of even date herewith among
the Borrower, NCN, and Harris Trust Company of California as trustee.
"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Subject Year" is defined in Section 2.2.3.
"Subordination Agreement" means an amended and restated subordination
agreement in
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substantially the form of Exhibit "F" hereto, dated as of the date hereof, duly
executed by the Borrower, NTC, and the Agent on behalf of the Lenders as the
same may be amended or modified and in effect from time to time.
"Subordinated Indebtedness" of a Person means any Indebtedness of such
Person the payment of which is subordinated to payment of the Obligations to the
written satisfaction of the Required Lenders.
"Subordinated Seller Notes" means subordinated notes evidencing
Subordinated Indebtedness issued to a seller in connection with a Permitted
Acquisition representing a holdback of not more than 5 percent of the aggregate
consideration for such Permitted Acquisition.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Subsidiary Guaranty" means a guaranty in substantially the form of
Exhibit "C" hereto, with appropriate insertions, duly executed and delivered to
the Agent by a Subsidiary in accordance with Section 6.23.2, as the same may be
amended or modified and in effect from time to time.
"Substantial Portion" means, with respect to the Property of the
Borrower and its Subsidiaries, Property which (i) represents more than 10% of
the consolidated assets (before depreciation and amortization) of the Borrower
and its Subsidiaries as would be shown in the consolidated financial statements
of the Borrower and its Subsidiaries as at the beginning of the twelve-month
period ending with the month in which such determination is made, or (ii) is
responsible for more than 10% of the consolidated net sales or of the
consolidated net income of the Borrower and its Subsidiaries as reflected in the
financial statements referred to in clause (i) above.
"Transaction Documents" means the Loan Documents, the Collateral
Documents, any Subsidiary Guaranty, and the Subordination Agreement.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a Floating Rate
Advance or Eurodollar Advance.
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"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested nonforfeitable benefits under all Single Employer Plans
exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, association, joint venture
or similar business organization 100% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II
THE CREDITS
2.1. Commitments
2.1.1. Facility A Commitment. From and including the Effective Date and
prior to the Facility A Termination Date, each Facility A Lender severally
agrees, on the terms and conditions set forth in this Agreement, to make Loans
to the Borrower under Facility A from time to time in amounts not to exceed in
the aggregate at any one time outstanding the amount of its Facility A
Commitment. Subject to the terms of this Agreement, the Borrower may borrow,
repay and reborrow under Facility A at any time prior to the Facility A
Termination Date. The Facility A Commitments to lend hereunder shall expire on
the Facility A Termination Date.
2.1.1. Facility B Commitment. From and including the Effective Date and
prior to the Conversion Date, each Facility B Lender severally agrees, on the
terms and conditions set forth in this Agreement, to make Loans to the Borrower
under Facility B from time to time in amounts not to exceed in the aggregate at
any one time outstanding the amount of its Facility B Commitment. Subject to the
terms of this Agreement, the Borrower may borrow, repay and reborrow under
Facility B at any time prior to the Conversion Date. The Facility B Commitments
to lend hereunder shall expire on the Conversion Date. Principal payments made
after the Conversion Date on Advances made under Facility B may not be
reborrowed.
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2.2. Required Payments; Termination.
2.2.1. Facility A. The outstanding balance of Advances made under Facility
A shall be payable in full on the Facility A Termination Date. The Borrower
shall also make such mandatory prepayments as may be required upon giving effect
to a reduction in the Aggregate Facility A Commitment pursuant to Section 2.5.3
so that the amount of Advances outstanding under Facility A at any time does not
exceed the Aggregate Facility A Commitment as in effect at such time.
2.2.2. Facility B. Installments of the Conversion Balance shall be payable
on each Payment Date commencing with March 31, 1998 through and including the
Facility B Termination Date. Each installment due on a Payment Date set forth
below shall be in an amount equal to the lesser of the amount set forth opposite
such Payment Date or the remaining balance of Advances outstanding under
Facility B.
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<TABLE>
<CAPTION>
PAYMENT DATE AMOUNT
------------ ------
<S> <C>
3/31/98 $250,000
6/30/98 $250,000
9/30/98 $250,000
12/31/98 $250,000
3/31/99 $562,500
6/30/99 $562,500
9/30/99 $562,500
12/31/99 $562,500
3/31/00 $750,000
6/30/00 $750,000
9/30/00 $750,000
12/31/00 $750,000
3/31/01 $1,750,000
6/30/01 $1,750,000
9/30/01 $1,750,000
12/31/01 $1,750,000
3/31/02 $2,750,000
6/30/02 $2,750,000
9/30/02 $2,750,000
12/31/02 $2,750,000
3/31/03 $3,687,500
6/30/03 $3,687,500
9/30/03 $3,687,500
12/31/03 $3,687,500
3/31/04 $4,500,000
6/30/04 $4,500,000
9/30/04 $4,500,000
12/31/04 $4,500,000
3/31/05 $4,500,000
6/30/05 $4,500,000
9/30/05 $4,500,000
Facility B Termination Date balance
</TABLE>
2.2.3. Mandatory Prepayments. In addition to the scheduled
installments due on Advances under the Facilities as set forth above, if
the Leverage Ratio as of December 31 of any year (a "Subject Year")
commencing with 1998 is greater than 5.0 to 1.0, the Borrower shall, on
or before April 1 of the following year, commencing April 1, 1999, make
a mandatory prepayment of Advances under Facility A and
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Facility B in an amount equal to 50% of the Excess Cash Flow, if
positive, for the Subject Year. Prepayments made under this Section
2.2.3 shall be applied first against installments due under Section
2.2.2 with respect to Facility B in the inverse order of maturity and
then against installments due under Section 2.2.1 and Section 2.5.3
with respect to Facility A in the inverse order of maturity.
2.2.4. Termination. All other unpaid Obligations shall be paid in
full by the Borrower on the earliest to occur of (i) the Facility A
Termination Date, (ii) the Facility B Termination Date, and (iii) the
date on which all Commitments have expired or been terminated and no
Advances are outstanding.
2.3. Ratable Loans. Each Advance hereunder shall consist of Loans made
under a Facility from the several Lenders ratably in proportion to the ratio
that their respective Commitments under such Facility bear to the Aggregate
Commitment under such Facility.
2.4. Types of Advances; Applicable Margin. Advances under either
Facility may be Floating Rate Advances or Eurodollar Advances, or a combination
thereof, selected by the Borrower in accordance with Sections 2.8 and 2.9. The
Applicable Margin shall be based on the Leverage Ratio in accordance with the
table below. The Leverage Ratio shall be determined from the financial
statements delivered by the Borrower pursuant to Sections 6.1 (i) and (ii). The
adjustment, if any, to the Applicable Margin shall be effective beginning on the
fifth Business Day after the delivery of such financial statements. Until
financial statements for the first quarter ending after the date hereof have
been delivered, the maximum Applicable Margin shall apply.
<TABLE>
<CAPTION>
APPLICABLE MARGIN
------------------------------
LEVERAGE RATIO FACILITY A & B
- --------------------------------- ------------------------------
Greater than
or equal to But less than Floating Eurodollar
- -------------------------------------------------------------------------
<S> <C> <C> <C>
6.5 - 1.750% 3.000%
6.0 6.5 1.500% 2.750%
5.5 6.0 1.250% 2.500%
5.0 5.5 1.000% 2.250%
4.5 5.0 0.750% 2.000%
4.0 4.5 0.500% 1.750%
3.5 4.0 0.250% 1.500%
3.0 3.5 0.000% 1.250%
- 3.0 0.000% 1.000%
</TABLE>
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2.5. Fees; Reductions in Aggregate Commitments.
2.5.1. Commitment Fees. The Borrower agrees to pay to the Agent for
the account of each Lender a commitment fee of .5% per annum on the
daily unborrowed portion of (i) such Lender's Facility A Commitment from
the date hereof to and including the Facility A Termination Date (or
such earlier date upon which the Aggregate Facility A Commitment has
been permanently cancelled) and (ii) such Lender's Facility B Commitment
from the date hereof to and including the Conversion Date (or such
earlier date upon which the Aggregate Facility B Commitment has been
permanently cancelled), in each case payable on each Payment Date
hereafter, on the Conversion Date, and on the Facility A Termination
Date. All accrued commitment fees under this Section 2.5.1 shall be
payable on the effective date of any termination of the obligations of
the Lenders to make Loans hereunder.
2.5.2. Agent's Fee. The Borrower agrees to pay to the Agent, for
its own account, such fees as the Borrower and the Agent may agree upon
from time to time.
2.5.3. Mandatory Facility A Reductions. The Aggregate Facility A
Commitment shall be permanently reduced quarterly on each Payment Date
commencing with March 31, 1999 through and including the Facility A
Termination Date. Each reduction in the Aggregate Facility A Commitment
on a Payment Date set forth below shall be in an amount equal to the
lesser of (i) the percentage of the Facility A Reduction Basis for each
Payment Date set forth below opposite such year and (ii) the
then-effective Aggregate Facility A Commitment.
<TABLE>
<CAPTION>
ANNUAL
YEAR % (EACH PAYMENT DATE) REDUCTION
---- --------------------- ---------
<S> <C> <C>
1999 0.75% 3.0%
2000 1.25% 5.0%
2001 1.75% 7.0%
2002 2.50% 10.0%
2003 3.75% 15.0%
2004 5.00% 20.0%
2005 10.00% 40.0%
</TABLE>
2.5.4. Voluntary Reductions. The Borrower may permanently reduce
any Aggregate Commitment in whole, or in part ratably among the
applicable Lenders in integral multiples of $500,000, upon at least
three Business Days' written notice to the Agent, which notice shall
specify the amount of any such reduction, provided, however, that the
amount of the Aggregate Commitment under a Facility may not be reduced
below the aggregate principal amount of the outstanding Advances under
such Facility.
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2.6. Minimum Amount of Each Advance. Each Eurodollar Advance shall be in
the minimum amount of $1,000,000 (and in multiples of $500,000 if in excess
thereof), and each Floating Rate Advance shall be in the minimum amount of
$500,000 (and in multiples of $500,000 if in excess thereof), provided, however,
that any Floating Rate Advance may be in the amount of the applicable unused
Aggregate Commitment.
2.7. Optional Principal Payments. The Borrower may from time to time
pay, without penalty or premium, all outstanding Floating Rate Advances, or, in
a minimum aggregate amount of $500,000 or any integral multiple of $500,000 in
excess thereof any portion of the outstanding Floating Rate Advances upon three
Business Days' prior written notice to the Agent. The Borrower may from time to
time pay, subject to the payment of any funding indemnification amounts required
by Section 3.4 but without penalty or premium, all outstanding Eurodollar
Advances, or, in a minimum aggregate amount of $1,000,000 or any integral
multiple of $500,000 in excess thereof, any portion of the outstanding
Eurodollar Advances upon three Business Days' prior notice to the Agent. The
Borrower may designate to which Facility any payment under this Section 2.7
shall apply. Principal payments made under this Section 2.7 on or after the
Conversion Date on Advances outstanding under Facility B shall be applied to
principal installments of Facility B payable under Section 2.2.2 in the inverse
order of maturity.
2.8. Method of Selecting Types and Interest Periods for New Advances.
The Borrower shall select the Type of Advance and, in the case of each
Eurodollar Advance, the Interest Period applicable to each Advance from time to
time. The Borrower shall give the Agent irrevocable notice (a "Borrowing
Notice") not later than 10:00 a.m. (Chicago time) at least one Business Day
before the Borrowing Date of each Floating Rate Advance and three Business Days
before the Borrowing Date for each Eurodollar Advance, specifying:
(i) the Facility under which such Advance is to be borrowed,
(ii) the Borrowing Date, which shall be a Business Day, of such
Advance,
(iii) the aggregate amount of such Advance,
(iv) the Type of Advance selected, and
(v) in the case of each Eurodollar Advance, the Interest Period
applicable thereto.
Not later than noon (Chicago time) on each Borrowing Date, each Lender shall
make available its Loan or Loans, in funds immediately available in Chicago to
the Agent at its address specified pursuant to Article XIII. The Agent will make
the funds so received from the Lenders available to the Borrower at the Agent's
aforesaid address.
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2.9. Conversion and Continuation of Outstanding Advances. Floating Rate
Advances shall continue as Floating Rate Advances unless and until such Floating
Rate Advances are converted into Eurodollar Advances. Each Eurodollar Advance
shall continue as a Eurodollar Advance until the end of the then applicable
Interest Period therefor, at which time such Eurodollar Advance shall be
automatically converted into a Floating Rate Advance unless the Borrower shall
have given the Agent a Conversion/Continuation Notice requesting that, at the
end of such Interest Period, such Eurodollar Advance either continue as a
Eurodollar Advance for the same or another Interest Period or be converted into
a Floating Rate Advance. Subject to the terms of Section 2.4 and Section 2.6,
the Borrower may elect from time to time to convert all or any part of an
Advance of any Type into any other Type or Types of Advances; provided that any
conversion of any Eurodollar Advance shall be made on, and only on, the last day
of the Interest Period applicable thereto. The Borrower shall give the Agent
irrevocable notice (a "Conversion/Continuation Notice") of each conversion of an
Advance or continuation of a Eurodollar Advance not later than 10:00 a.m.
(Chicago time) at least one Business Day, in the case of a conversion into a
Floating Rate Advance, or three Business Days, in the case of a conversion into
or continuation of a Eurodollar Advance, prior to the date of the requested
conversion or continuation, specifying:
(i) the requested date which shall be a Business Day, of such
conversion or continuation;
(ii) the aggregate amount and Type of the Advance which is to be
converted or continued; and
(iii) the amount and Type(s) of Advance(s) into which such Advance is
to be converted or continued and, in the case of a conversion
into or continuation of a Eurodollar Advance, the duration of
the Interest Period applicable thereto.
2.10. Changes in Interest Rate, Etc. Each Floating Rate Advance shall
bear interest on the outstanding principal amount thereof, for each day from and
including the date such Advance is made or is converted from a Eurodollar
Advance into a Floating Rate Advance pursuant to Section 2.9 to but excluding
the date it becomes due or is converted into a Eurodollar Advance pursuant to
Section 2.9 hereof, at a rate per annum equal to the Floating Rate for such day.
Changes in the rate of interest on that portion of any Advance maintained as a
Floating Rate Advance will take effect simultaneously with each change in the
Alternate Base Rate. Each Eurodollar Advance shall bear interest from and
including the first day of the Interest Period applicable thereto to (but not
including) the last day of such Interest Period at the interest rate determined
as applicable to such Eurodollar Advance. No Interest Period for Advances under
Facility A may end after the Facility A Termination Date and no Interest Period
for Advances under Facility B may end after the Facility B Termination Date. The
Borrower shall select Interest Periods so that it is not necessary to repay any
portion of a Eurodollar Advance prior to the last day of the applicable Interest
Period in order to make a mandatory repayment required pursuant to Section 2.2.
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2.11. Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.8 or 2.9, during the continuance of a Default or
Unmatured Default the Required Lenders may, at their option, by notice to the
Borrower (which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 8.2 requiring unanimous consent of the
Lenders to changes in interest rates), declare that no Advance may be made as,
converted into or continued as a Eurodollar Advance. If any Advance is not paid
at maturity, whether by acceleration or otherwise, the Required Lenders may, at
their option, by notice to the Borrower (which notice may be revoked at the
option of the Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders to changes in interest rates),
declare that (i) each Eurodollar Advance shall bear interest for the remainder
of the applicable Interest Period at the rate otherwise applicable to such
Interest Period plus 2% per annum and (ii) each Floating Rate Advance shall bear
interest at a rate per annum equal to the Floating Rate otherwise applicable to
the Floating Rate Advance plus 2% per annum.
2.12. Method of Payment. All payments of the Obligations hereunder shall
be made, without setoff, deduction, or counterclaim, in immediately available
funds to the Agent at the Agent's address specified pursuant to Article XIII, or
at any other Lending Installation of the Agent specified in writing by the Agent
to the Borrower, by noon (local time) on the date when due and shall be applied
ratably by the Agent among the Lenders to whom such Obligations are due. Each
payment delivered to the Agent for the account of any Lender shall be delivered
promptly by the Agent to such Lender in the same type of funds that the Agent
received at its address specified pursuant to Article XIII or at any Lending
Installation specified in a notice received by the Agent from such Lender. The
Agent is hereby authorized to charge the account of the Borrower maintained with
First Chicago for each payment of principal, interest and fees as it becomes due
hereunder.
2.13. Notes; Telephonic Notices. Each Lender is hereby authorized to
record the principal amount of each of its Loans and each repayment on the
schedule attached to its applicable Note, provided, however, that the failure to
so record (or any error in such recordation) shall not affect the Borrower's
obligations under such Note. The Borrower hereby authorizes the Lenders and the
Agent to extend, convert or continue Advances, effect selections of Types of
Advances and to transfer funds based on telephonic notices made by any
Authorized Officer. The Borrower agrees to deliver promptly to the Agent a
written confirmation, if such confirmation is requested by the Agent or any
Lender, of each telephonic notice signed by an Authorized Officer. If the
written confirmation differs in any material respect from the action taken by
the Agent and the Lenders, the records of the Agent and the Lenders shall govern
absent manifest error.
2.14. Interest Payment Dates; Interest and Fee Basis. Interest accrued
on each Floating Rate Advance shall be payable on each Payment Date, commencing
with the first such date to occur after the date hereof, and at maturity.
Interest accrued on each Eurodollar
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Advance shall be payable on the last day of its applicable Interest Period, on
any date on which the Eurodollar Advance is prepaid, whether by acceleration or
otherwise, and at maturity. Interest accrued on each Eurodollar Advance having
an Interest Period longer than three months shall also be payable on the last
day of each three-month interval during such Interest Period. Interest and
commitment fees shall be calculated for actual days elapsed on the basis of a
360-day year. Interest shall be payable for the day an Advance is made but not
for the day of any payment on the amount paid if payment is received prior to
noon (local time) at the place of payment. If any payment of principal of or
interest on an Advance shall become due on a day which is not a Business Day,
such payment shall be made on the next succeeding Business Day and, in the case
of a principal payment, such extension of time shall be included in computing
interest in connection with such payment.
2.15. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof but in any event before
the close of business on the day of such receipt, the Agent will notify each
affected Lender of the contents of each Aggregate Commitment reduction notice,
Borrowing Notice, Conversion/Continuation Notice, and repayment notice received
by it hereunder. The Agent will notify the Borrower and each affected Lender of
the interest rate applicable to each Eurodollar Advance promptly upon
determination of such interest rate and will give the Borrower and each Lender
prompt notice of each change in the Alternate Base Rate.
2.16. Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Notes shall be deemed held by each Lender for
the benefit of such Lending Installation. Each Lender may, by written or telex
notice to the Agent and the Borrower, designate a Lending Installation through
which Loans will be made by it and for whose account Loan payments are to be
made.
2.17. Non-Receipt of Funds by the Agent. Unless the Borrower or a
Lender, as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of any Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Agent, the recipient of such payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to (i) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day or (ii) in the case of payment by the
Borrower, the interest rate applicable to the relevant Loan.
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2.18. Withholding Tax Exemption. At least five Business Days prior to
the first date on which interest or fees are payable hereunder for the account
of any Lender, each Lender that is not incorporated under the laws of the United
States of America, or a state thereof, agrees that it will deliver to each of
the Borrower and the Agent two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, certifying in either case that such Lender is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes. Each Lender
which so delivers a Form 1001 or 4224 further undertakes to deliver to each of
the Borrower and the Agent two additional copies of such form (or a successor
form) on or before the date that such form expires (currently, three successive
calendar years for Form 1001 and one calendar year for Form 4224) or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent forms so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Borrower or the Agent, in
each case certifying that such Lender is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes, unless an event (including without limitation any change
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender advises the Borrower and the Agent that
it is not capable of receiving payments without any deduction or withholding of
United States federal income tax.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. Yield Protection. If after the date of this Agreement any law or
any governmental or quasi-governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law), or any interpretation
thereof, or the compliance of any Lender therewith,
(i) subjects any Lender or any applicable Lending Installation to
any tax, duty, charge or withholding on or from payments due
from the Borrower (excluding federal taxation of the overall net
income of any Lender or applicable Lending Installation), or
changes the basis of taxation of payments to any Lender in
respect of its Loans or other amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the account
of, or credit extended by, any Lender or any applicable Lending
Installation (other than reserves and assessments taken into
account in
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determining the interest rate applicable to Eurodollar
Advances), or
(iii) imposes any other condition the result of which is to increase
the cost to any Lender or any applicable Lending Installation of
making, funding or maintaining loans or reduces any amount
receivable by any Lender or any applicable Lending Installation
in connection with loans, or requires any Lender or any
applicable Lending Installation to make any payment calculated
by reference to the amount of loans held or interest received by
it, by an amount deemed material by such Lender,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an amount
received which such Lender determines is attributable to making, funding and
maintaining its Loans and its applicable Commitment.
3.2. Changes in Capital Adequacy Regulations. If a Lender determines the
amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such Lender
is increased as a result of a Change, then, within 15 days of demand by such
Lender, the Borrower shall pay such Lender the amount necessary to compensate
for any shortfall in the rate of return on the portion of such increased capital
which such Lender reasonably determines is attributable to this Agreement, its
Loans or its obligation to make Loans hereunder (after taking into account such
Lender's policies as to capital adequacy). "Change" means (i) any change after
the date of this Agreement in the Risk-Based Capital Guidelines or (ii) any
adoption of or change in any other law, governmental or quasi-governmental rule,
regulation, policy, guideline, interpretation, or directive (whether or not
having the force of law) after the date of this Agreement which affects the
amount of capital required or expected to be maintained by any Lender or any
Lending Installation or any corporation controlling any Lender. "Risk-Based
Capital Guidelines" means (i) the risk-based capital guidelines in effect in the
United States on the date of this Agreement, including transition rules, and
(ii) the corresponding capital regulations promulgated by regulatory authorities
outside the United States implementing the July 1988 report of the Basle
Committee on Banking Regulation and Supervisory Practices Entitled
"International Convergence of Capital Measurements and Capital Standards,"
including transition rules, and any amendments to such regulations adopted prior
to the date of this Agreement.
3.3. Availability of Types of Advances. If any Lender reasonably
determines that maintenance of its Eurodollar Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation, or directive,
whether or not having the force of law, or if the Required Lenders determine
that (i) deposits of a type and maturity appropriate to match fund Eurodollar
Advances are not available or (ii) the interest rate applicable to a Type of
Advance does not accurately reflect the cost of making or maintaining such
Advance, then the Agent shall suspend the availability of the affected Type of
Advance and require any Eurodollar
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Advances of the affected Type to be repaid. The Borrower shall not be required
to repay any Eurodollar Advance under this Section 3.3 prior to the last day of
the applicable Interest Period unless such delay in repayment would violate any
applicable law, rule, regulation, or directive, whether or not having the force
of law.
3.4. Funding Indemnification. If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Eurodollar
Advance is not made on the date specified by the Borrower for any reason other
than default by the Lenders, the Borrower will indemnify each affected Lender
for any loss or cost incurred by it resulting therefrom, including, without
limitation, any loss or cost in liquidating or employing deposits acquired to
fund or maintain the Eurodollar Advance.
3.5. Lender Statements; Survival of Indemnity. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Loans to reduce any liability of the Borrower to such
Lender under Sections 3.1 and 3.2 or to avoid the unavailability of a Type of
Advance under Section 3.3, so long as such designation is not disadvantageous to
such Lender. Each Lender shall deliver to the Agent and the Borrower a written
statement of such Lender as to the amount due, if any, under Sections 3.1, 3.2
or 3.4. Such written statement shall set forth in reasonable detail the
calculations upon which such Lender determined such amount and shall be final,
conclusive and binding on the Borrower in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a
Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar
Loan through the purchase of a deposit of the type and maturity corresponding to
the deposit used as a reference in determining the Eurodollar Rate applicable to
such Loan, whether in fact that is the case or not. Unless otherwise provided
herein, the amount specified in the written statement shall be payable on demand
after receipt by the Borrower of the written statement. The obligations of the
Borrower under Sections 3.1, 3.2 and 3.4 shall survive payment of the
Obligations and termination of this Agreement for up to one year.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Advance. The Lenders shall not be required to make the
initial Advance hereunder unless the Borrower has furnished to the Agent with
sufficient copies for the Lenders:
(i) Copies of the articles of incorporation of the Borrower,
together with all amendments, and a certificate of existence,
both certified by the appropriate
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governmental officer in its jurisdiction of incorporation.
(ii) Copies, certified by the Secretary or Assistant Secretary of the
Borrower, of its by-laws and of its Board of Directors'
resolutions (and resolutions of other bodies, if any are deemed
necessary by counsel for the Agent) authorizing the execution of
the Loan Documents.
(iii) An incumbency certificate, executed by the Secretary or
Assistant Secretary of the Borrower, which shall identify by
name and title and bear the signature of the officers of the
Borrower authorized to sign the Loan Documents and to make
borrowings hereunder, upon which certificate the Agent and the
Lenders shall be entitled to rely until informed of any change
in writing by the Borrower.
(iv) Copies of the articles of incorporation of NTC, together with
all amendments, and a certificate of existence, both certified
by the appropriate governmental officer in its jurisdiction of
incorporation.
(v) Copies, certified by the Secretary or Assistant Secretary of
NTC, of its by-laws and of its Board of Directors' resolutions
(and resolutions of other bodies, if any are deemed necessary by
counsel for the Agent) authorizing the execution of the Pledge
Agreement and any agreements, instruments, or documents executed
by NTC necessary to effect the purposes of the Pledge Agreement.
(vi) An incumbency certificate, executed by the Secretary or
Assistant Secretary of NTC, which shall identify by name and
title and bear the signature of the officers of NTC authorized
to sign the Pledge Agreement.
(vii) Copies of the articles of incorporation of NCN, together with
all amendments, and a certificate of existence, both certified
by the appropriate governmental officer in its jurisdiction of
incorporation.
(viii) Copies, certified by the Secretary or Assistant Secretary of
NCN, of its by-laws and of its Board of Directors' resolutions
(and resolutions of other bodies, if any are deemed necessary by
counsel for the Agent) authorizing the execution of the NCN
Documents.
(ix) An incumbency certificate, executed by the Secretary or
Assistant Secretary of NCN, which shall identify by name and
title and bear the signature of the officers of NCN authorized
to sign the NCN Documents.
(x) A certificate, signed by a senior financial officer of the
Borrower, stating
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that on the initial Borrowing Date no Default or Unmatured
Default has occurred and is continuing.
(xi) A written opinion of counsel to the Borrower, NTC, and NCN,
addressed to the Lenders in substantially the form of Exhibit
"G" hereto.
(xii) Notes payable to the order of each of the Lenders.
(xiii) The Security Agreement, together with all agreements,
instruments, and documents necessary to effect the purpose of
the Security Agreement under applicable law, including without
limitation duly executed UCC-1 financing statements describing
the security interest of the Agent on behalf of the Lenders in
the "Collateral" (as that term is defined in the Security
Agreement) and acceptable for filing in the appropriate public
offices in each jurisdiction which the Agent deems necessary or
advisable to perfect the security interest created thereby.
(xiv) The Pledge Agreement, together with (i) all stock certificates
representing the Pledged Stock (as defined therein), (ii) stock
powers duly executed in blank and (iii) duly executed UCC-1
financing statements describing the security interest of the
Agent on behalf of the Lenders in the "Collateral" (as that term
is defined in the Pledge Agreement) and acceptable for filing in
the appropriate public offices in each jurisdiction which the
Agent deems necessary or advisable to perfect the security
interest created thereby.
(xvi) A Subsidiary Guaranty duly executed and delivered to the Agent
by NCN.
(xvii) A security agreement duly executed and delivered to the Agent by
NCN as required pursuant to Section 6.23.2, together with all
agreements, instruments, and documents necessary to effect the
purpose of such security agreement under applicable law,
including without limitation duly executed UCC-1 financing
statements describing the security interest of the Agent on
behalf of the Lenders in the "Collateral" (as that term is
defined in such security agreement) and acceptable for filing in
the appropriate public offices in each jurisdiction which the
Agent deems necessary or advisable to perfect the security
interest created thereby.
(xviii) Evidence satisfactory to the Agent and its counsel that the
Agent is designated as loss payee on behalf of the Lenders on
all insurance policies on the Property of the Borrower, together
with any necessary documentation evidencing the assignment and
perfection of the Lenders' security interest therein.
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(xix) The insurance certificate described in Section 5.17.
(xx) The Subordination Agreement.
(xxi) A subscriber report in respect of each CATV System owned by the
Borrower and its Subsidiaries by region as of June 30, 1997.
(xxii) Evidence satisfactory to the Agent and its counsel that the
Borrower, NTC, and the Subsidiaries shall have made all filings
and registrations with, or obtained all material approvals,
orders, authorizations, franchises, consents, licenses,
certificates and permits (including, without limitation, all
CATV Franchises and FCC Licenses) from, the FCC, other federal,
state and local regulatory or governmental bodies and
authorities (including, without limitation, state and local
filing or recording offices), and other Persons which are or may
be required prerequisites to the validity, enforceability or
non-voidability of the Transaction Documents or the pledge of
the capital stock of the Borrower and the Subsidiaries or other
assets subject to the Liens created pursuant to the Collateral
Documents.
(xxiii) Copies of the most recent Cumulative Leakage Index reports for
the Borrower and its Subsidiaries, together with such other
reports on environmental matters as the Agent may request, each
of which shall be in form and substance satisfactory to the
Agent and the Lenders.
(xxiv) Evidence satisfactory to the Agent and its counsel that, prior
to or simultaneously with the occurrence of the Effective Date,
the Borrower shall have received the proceeds of the Senior
Subordinated Notes.
(xxv) Written money transfer instructions, in substantially the form
of Exhibit "K" hereto, addressed to the Agent and signed by an
Authorized Officer, together with such other related money
transfer authorizations as the Agent may have reasonably
requested.
(xxvi) Such other documents as any Lender or its counsel may have
reasonably requested.
4.2. Advances for Permitted Acquisitions. The Lenders shall not be
required to make any Advance hereunder the proceeds of which are or are to be
used in connection with a Permitted Acquisition unless, in addition to
satisfying the conditions set forth in Sections 4.1 and 4.3, the Borrower has
furnished to the Agent with sufficient copies for the Lenders:
(i) Copies, certified by the Secretary or Assistant Secretary of the
Borrower, of the agreements, instruments, and documents
governing such Permitted
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Acquisition (including the most recent financial statements of
the Acquisition candidate if available to the Borrower and
documents evidencing or governing any Subordinated Seller Notes
issued in connection with such Permitted Acquisition), which,
together with all other aspects of such Permitted Acquisition,
shall be in form and substance reasonably satisfactory to the
Agent.
(ii) Evidence satisfactory to the Agent and its counsel that all
material approvals, authorizations, filings, registrations,
consents, licenses, certificates and permits (including, without
limitation, transfer documents or orders with respect to all
affected CATV Franchises and FCC Licenses) in connection with
such Permitted Acquisition have been or shall be obtained or
made, as appropriate, from or with the FCC, other federal, state
and local regulatory or governmental bodies and authorities
(including, without limitation, state and local filing or
recording offices), and other Persons which are or may be
required prerequisites to the validity, enforceability or
non-voidability of the Transaction Documents or the pledge of
the capital stock of the Borrower and the Subsidiaries or other
assets subject to the Liens created pursuant to the Collateral
Documents.
(iii) Copies of the most recent Cumulative Leakage Index reports for
the assets being acquired in such Permitted Acquisition,
together with such other reports on environmental matters as the
Agent may request, each of which shall be in form and substance
satisfactory to the Agent and the Lenders.
(iv) Any documents required pursuant to Section 6.23.2.
(v) Such other documents related to such Permitted Acquisition as
any Lender or its counsel may have reasonably requested.
4.3. Each Advance. The Lenders shall not be required to make any Advance
(other than an Advance that, after giving effect thereto and to the application
of the proceeds thereof, does not increase the aggregate amount of outstanding
Advances), unless on the applicable Borrowing Date:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in Article V are
true and correct as of such Borrowing Date except to the extent
any such representation or warranty is stated to relate solely
to an earlier date, in which case such representation or
warranty shall be true and correct on and as of such earlier
date.
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(iii) The Borrower has delivered to the Agent a statement setting
forth the Leverage Ratio (after giving effect to the
contemplated Advance) as of such Borrowing Date.
(iv) All legal matters incident to the making of such Advance shall
be satisfactory to the Lenders and their counsel.
Each Borrowing Notice with respect to each such Advance shall constitute
a representation and warranty by the Borrower that the conditions contained in
Sections 4.3(i) and (ii) have been satisfied. Notwithstanding anything herein to
the contrary, in the event that the Leverage Ratio indicated in the statement
delivered pursuant to Section 4.3(iii) exceeds the applicable permitted Leverage
Ratio as set forth in Section 6.19.4, the Lenders shall not be obligated to make
the contemplated Advance. Any Lender may require a duly completed compliance
certificate in substantially the form of Exhibit "H" hereto (after giving effect
to the contemplated Advance) as a condition to making an Advance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
5.1. Corporate Existence and Standing. Each of the Borrower and its
Subsidiaries is a corporation duly incorporated and validly existing under the
laws of its jurisdiction of incorporation and has all requisite authority to
conduct its business in each jurisdiction in which its business is conducted.
5.2. Authorization and Validity. The Borrower has the corporate power
and authority and legal right to execute and deliver the Loan Documents and to
perform its obligations thereunder. The execution and delivery by the Borrower
of the Loan Documents and the performance of its obligations thereunder have
been duly authorized by proper corporate proceedings, and the Loan Documents
constitute legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally.
5.3. No Conflict; Government Consent. Neither the execution and delivery
by the Borrower of the Loan Documents, nor the consummation of the transactions
therein contemplated, nor compliance with the provisions thereof will violate
any law, rule, regulation, order, writ, judgment, injunction, decree or award
binding on the Borrower or any of its Subsidiaries or the Borrower's or any
Subsidiary's articles of incorporation or by-laws or
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the provisions of any indenture, instrument or agreement to which the Borrower
or any of its Subsidiaries is a party or is subject, or by which it, or its
Property, is bound, or conflict with or constitute a default thereunder, or
result in the creation or imposition of any Lien in, of or on the Property of
the Borrower or a Subsidiary pursuant to the terms of any such indenture,
instrument or agreement. No material order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, any of the Loan Documents. The execution and
delivery of the Transaction Documents does not constitute the transfer,
assignment or disposition in any manner, voluntarily or involuntarily, directly
or indirectly, of any license issued as of this date by the FCC in connection
with the operation of any of the CATV Systems, or the transfer of control of the
Borrower or any Subsidiary, within the meaning of Section 310(d) of the
Communications Act of 1934, as amended.
5.4. Financial Statements. The December 31, 1996 consolidated financial
statements of the Borrower and its Subsidiaries heretofore delivered to the
Lenders were prepared in accordance with generally accepted accounting
principles in effect on the date such statements were prepared and fairly
present the consolidated financial condition and operations of the Borrower and
its Subsidiaries at such date and the consolidated results of their operations
for the period then ended.
5.5. Material Adverse Change. Since December 31, 1996, there has been no
change in the business, Property, prospects, condition (financial or otherwise)
or results of operations of the Borrower and its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect.
5.6. Taxes. The Borrower and its Subsidiaries have filed all United
States federal tax returns and all other tax returns which are required to be
filed and have paid all taxes due pursuant to said returns or pursuant to any
assessment received by the Borrower or any of its Subsidiaries, except such
taxes, if any, as are being contested in good faith and as to which adequate
reserves have been provided. No tax liens have been filed and no claims are
being asserted with respect to any such taxes. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of any
taxes or other governmental charges are adequate.
5.7. Litigation and Contingencies. Except as set forth on Schedule "4"
hereto, there is no litigation, arbitration, governmental investigation,
proceeding or inquiry pending or, to the knowledge of any of their officers,
threatened against or affecting the Borrower or any of its Subsidiaries which
could reasonably be expected to have a Material Adverse Effect. Other than any
liability incident to such litigation, arbitration or proceedings, the Borrower
has no material contingent obligations with respect to any litigation,
arbitration, governmental investigation, proceeding or inquiry not provided for
or disclosed in the financial statements
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referred to in Section 5.4.
5.8. Subsidiaries. Schedule "2" hereto, as supplemented or modified by
the Borrower in writing from time to time, contains an accurate list of all of
the presently existing Subsidiaries of the Borrower, setting forth their
respective jurisdictions of incorporation and the percentage of their respective
capital stock owned by the Borrower or other Subsidiaries. All of the issued and
outstanding shares of capital stock of such Subsidiaries have been duly
authorized and issued and are fully paid and non-assessable.
5.9. ERISA. The Borrower has no Unfunded Liabilities. Neither the
Borrower nor any other member of the Controlled Group has incurred, or is
reasonably expected to incur, any withdrawal liability to Multiemployer Plans.
Each Plan complies in all material respects with all applicable requirements of
law and regulations, no Reportable Event has occurred with respect to any Plan,
neither the Borrower nor any other members of the Controlled Group has withdrawn
from any Plan or initiated steps to do so, and no steps have been taken to
reorganize or terminate any Plan.
5.10. Accuracy of Information. No information, exhibit or report
furnished by the Borrower or any of its Subsidiaries to the Agent or to any
Lender in connection with the negotiation of, or compliance with, the Loan
Documents contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein not
misleading.
5.11. Regulation U. Margin stock (as defined in Regulation U)
constitutes less than 25% of those assets of the Borrower and its Subsidiaries
which are subject to any limitation on sale, pledge, or other restriction
hereunder.
5.12. Material Agreements. Neither the Borrower nor any Subsidiary is a
party to any agreement or instrument or subject to any charter or other
corporate restriction under which non-defaulting performance could reasonably be
expected to have a Material Adverse Effect. Neither the Borrower nor any
Subsidiary is in default in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in (i) any agreement to which
it is a party, which default could reasonably be expected to have a Material
Adverse Effect or (ii) any agreement or instrument evidencing or governing
Indebtedness in excess of $100,000 in the aggregate.
5.13. Compliance With Laws, Etc. The Borrower and its Subsidiaries have
materially complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof, having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property (including, without
limitation, those relating to the Cumulative Leakage Index). The Borrower and
the Subsidiaries have obtained all material franchises, licenses, consents,
approvals and authorizations granted or issued by any public or governmental
body, agency or
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authority necessary and appropriate to operate the CATV Systems and all such
franchises, licenses, certificates, consents, approvals and authorizations are
in full force and effect. Neither the Borrower nor any Subsidiary has received
any notice to the effect that its operations are not in material compliance with
any of the requirements of applicable federal, state and local environmental,
health and safety statutes and regulations or the subject of any federal or
state investigation evaluating whether any remedial action is needed to respond
to a release of any toxic or hazardous waste or substance into the environment,
which non-compliance or remedial action could reasonably be expected to have a
Material Adverse Effect.
5.14. Ownership of Properties. Except as set forth on Schedule "3"
hereto, on the date of this Agreement, the Borrower and its Subsidiaries will
have good title, free of all Liens other than those permitted by Section 6.18,
to all of the Property and assets reflected in the financial statements as owned
by it.
5.15. Investment Company Act. Neither the Borrower nor any Subsidiary
thereof is an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
5.16. Public Utility Holding Company Act. Neither the Borrower nor any
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
5.17. Insurance. The certificate signed by the President or a senior
officer of the Borrower, that attests to the existence and adequacy of, and
summarizes, the property and casualty insurance program carried by the Borrower
and that has been furnished by the Borrower to the Agent and the Lenders, is
complete and accurate as of the date of this Agreement. This summary includes
the insurer's or insurers' name(s), policy number(s), expiration date(s),
amount(s) of coverage, type(s) of coverage, exclusion(s), and deductibles. This
summary also includes similar information, and describes any reserves, relating
to any self-insurance program that is in effect.
5.18. Solvency. (i) Immediately after the consummation of the
transactions contemplated by this Agreement and immediately following the making
of each Loan, if any, made on the date hereof and after giving effect to the
application of the proceeds of such Loans, (a) the fair value of the assets of
the Borrower and the Subsidiaries on a consolidated basis, at a fair valuation,
will exceed the debts and liabilities, subordinated, contingent or otherwise, of
the Borrower and the Subsidiaries on a consolidated basis; (b) the present fair
saleable value of the property of the Borrower and the Subsidiaries on a
consolidated basis will be greater than the amount that will be required to pay
the probable liability of the Borrower and the Subsidiaries on a consolidated
basis on their debts and other liabilities, subordinated, contingent or
otherwise, as such debts and other liabilities become absolute and matured; (c)
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the Borrower and the Subsidiaries on a consolidated basis will be able to pay
their debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; and (d) the Borrower and the
Subsidiaries on a consolidated basis will not have unreasonably small capital
with which to conduct the businesses in which they are engaged as such
businesses are now conducted and are proposed to be conducted after the date
hereof.
(ii) The Borrower does not intend to, or to permit any of its
Subsidiaries to, and does not believe that it or any of its Subsidiaries will,
incur debts beyond its ability to pay such debts as they mature, taking into
account the timing of and amounts of cash to be received by it or any such
Subsidiary and the timing of the amounts of cash to be payable on or in respect
of its Indebtedness or the Indebtedness of any such Subsidiary.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
6.1. Financial Reporting. The Borrower will maintain, for itself and
each Subsidiary, a system of accounting established and administered in
accordance with generally accepted accounting principles, and furnish to the
Lenders:
(i) Within 90 days after the close of each of its fiscal years, an
unqualified (except for qualifications relating to changes in
accounting principles or practices reflecting changes in
generally accepted principles of accounting and required or
approved by the Borrower's independent certified public
accountants) audit report certified by independent certified
public accountants, acceptable to the Lenders, prepared in
accordance with Agreement Accounting Principles on a
consolidated basis for itself and the Subsidiaries, including
balance sheets as of the end of such period, related profit and
loss and reconciliation of surplus statements, and a statement
of cash flows, accompanied by (a) any management letter prepared
by said accountants, and (b) a certificate of said accountants
that, in the course of their examination necessary for their
certification of the foregoing, they have obtained no knowledge
of any Default or Unmatured Default, or if, in the opinion of
such accountants, any Default or Unmatured Default shall exist,
stating the nature and status thereof.
(ii) Within 45 days after the close of each quarterly period of each
of its fiscal years, for itself and the Subsidiaries,
consolidated unaudited balance sheets
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as at the close of each such period and consolidated profit and
loss and reconciliation of surplus statements and a statement of
cash flows for the period from the beginning of such fiscal year
to the end of such quarter, subject to normal year-end audit
adjustments, and a Management Fee Report, all certified by a
senior financial officer.
(iii) Together with the financial statements required under Sections
6.1(i) and (ii), a compliance certificate in substantially the
form of Exhibit "H" hereto signed by a senior financial officer
showing the calculations necessary to determine compliance with
this Agreement and stating that no Default or Unmatured Default
exists, or if any Default or Unmatured Default exists, stating
the nature and status thereof.
(iv) As soon as available, but in any event within 30 days after the
beginning of each fiscal year of the Borrower, a copy of the
plan and forecast (including a projected consolidated income
statement and funds flow statement) of the Borrower for such
fiscal year.
(v) Within 270 days after the close of each fiscal year, a statement
of the Unfunded Liabilities of each Single Employer Plan, if
any, certified as correct by an actuary enrolled under ERISA.
(vi) As soon as possible and in any event within 10 days after the
Borrower knows that any Reportable Event has occurred with
respect to any Plan, a statement, signed by a senior financial
officer of the Borrower, describing said Reportable Event and
the action which the Borrower proposes to take with respect
thereto.
(vii) As soon as possible and in any event within 10 days after
receipt by the Borrower, a copy of (a) any notice or claim to
the effect that the Borrower or any of its Subsidiaries is or
may be liable to any Person as a result of the release by the
Borrower, any of its Subsidiaries, or any other Person of any
toxic or hazardous waste or substance into the environment, and
(b) any notice alleging any violation of any federal, state or
local environmental, health or safety law or regulation by the
Borrower or any of its Subsidiaries, which, in either case,
could reasonably be expected to have a Material Adverse Effect.
(viii) Promptly upon the furnishing thereof to the shareholders of the
Borrower, copies of all financial statements, reports and proxy
statements so furnished.
(ix) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular
reports which the Borrower or any of its Subsidiaries files with
the Securities and Exchange Commission.
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(x) Promptly upon the request of the Agent or any Lender, copies of
all material amendments or renewals of material franchises,
licenses, consents, approvals and authorizations granted or
issued by any public or governmental body, agency or authority
necessary and appropriate to operate the CATV Systems and of all
other material nonroutine communications between the Borrower or
any Subsidiary and the FCC or any other federal, state, or local
regulatory entity having jurisdiction over the Borrower or such
Subsidiary.
(xi) Such other information (including non-financial information) as
the Agent or any Lender may from time to time reasonably
request.
6.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary
to, use the proceeds of the Advances to refinance Indebtedness existing prior to
the effective date of this Agreement, for working capital purposes, to finance
the purchase of approximately 35,000 cable television subscribers and other
costs of the Intermedia Acquisition, for other general corporate purposes, to
make other Permitted Acquisitions, and to repay outstanding Advances. The
Borrower will not, nor will it permit any Subsidiary to, use any of the proceeds
of the Advances to purchase or carry any "margin stock" (as defined in
Regulation U) or to make any other Acquisition.
6.3. Notice of Default, Etc. The Borrower will, and will cause each
Subsidiary to, give prompt notice in writing to the Agent, which shall promptly
notify the Lenders, of the occurrence of (a) any Default or Unmatured Default
and of any other development, financial or otherwise, which could reasonably be
expected to have a Material Adverse Effect; (b) the receipt by the Borrower or
any Subsidiary of any notice from any federal, state or local governmental or
regulatory body or authority of the expiration without renewal, termination,
material modification or suspension of, or institution of any proceedings to
terminate, materially modify, or suspend, any CATV Franchise, FCC License or
other license granted by any governmental authority now or hereafter held by the
Borrower or any Subsidiary the lack of which could reasonably be expected to
have a Material Adverse Effect; or (c) any state or local statute, regulation or
ordinance or judicial or administrative order, or any federal judicial or
administrative order specifically addressed to the Borrower or any Subsidiary,
limiting or controlling the operations of the Borrower or any Subsidiary which
has been issued or adopted hereafter and which could reasonably be expected to
have a Material Adverse Effect on the operation of any of the CATV Systems.
6.4. Conduct of Business; Maintenance of Licenses. The Borrower will,
and will cause each Subsidiary to, (a) carry on and conduct the business of
owning and operating the CATV Systems in substantially the same manner and in
substantially the same fields of enterprise as it is presently conducted; (b) do
all things necessary to remain duly incorporated or organized, validly existing
and in good standing as a domestic corporation or partnership in its
jurisdiction of incorporation or organization and maintain all requisite
authority to conduct
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its business in each jurisdiction in which the failure to maintain such
authority could reasonably be expected to have a Material Adverse Effect; and
(c) do all things necessary to renew, extend and continue in effect all permits,
licenses and authorizations which may at any time and from time to time be
necessary to operate the CATV Systems in compliance with all applicable laws and
regulations, the failure to comply with which could reasonably be expected to
have a Material Adverse Effect.
6.5. Taxes. The Borrower will, and will cause each Subsidiary to, pay
when due all taxes, assessments and governmental charges and levies upon it or
its income, profits or Property, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been set aside.
6.6. Insurance. The Borrower will, and will cause each Subsidiary to,
maintain with financially sound and reputable insurance companies insurance on
all their Property in such amounts and covering such risks as is consistent with
sound business practice, and the Borrower will furnish to the Agent upon request
full information as to the insurance carried. The Borrower will take all actions
(including the execution of appropriate documentation) from time to time
reasonably requested by the Agent or any Lender in order to maintain the
assignment or perfection of the security interest of the Agent on behalf of the
Lenders therein. Unless a Default or Unmatured Default has occurred and is
continuing, the Borrower shall be entitled to receive the proceeds of any
insurance on the Property of the Borrower and its Subsidiaries provided and to
the extent that such insurance proceeds are used to acquire replacement Property
within the later to occur of (i) 120 days after the occurrence of the casualty
underlying the payment of such proceeds and (ii) 30 days after the receipt of
such insurance proceeds by the Borrower or a Subsidiary. The Borrower will
deliver to the Agent any insurance proceeds not used to acquire replacement
Property within the applicable period. The Lenders shall apply any insurance
proceeds they may receive to outstanding Obligations in the order set forth in
Section 2.7.
6.7. Compliance with Laws. The Borrower will, and will cause each
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject, including,
without limitation, all applicable rules and regulations of the FCC and any
other state or local regulatory or governmental authority.
6.8. Maintenance of Properties. The Borrower will, and will cause each
Subsidiary to, do all things necessary to maintain, preserve, protect and keep
its Property in good repair, working order and condition, and make all necessary
and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times.
6.9. Inspection. The Borrower will, and will cause each Subsidiary to,
permit the Lenders, by their respective representatives and agents, to inspect
any of the Property, corporate books and financial records of the Borrower and
each Subsidiary, to examine and
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make copies of the books of accounts and other financial records of the Borrower
and each Subsidiary, and to discuss the affairs, finances and accounts of the
Borrower and each Subsidiary with, and to be advised as to the same by, their
respective officers at such reasonable times and intervals as the Lenders may
designate.
6.10. Dividends. The Borrower will not, nor will it permit any
Subsidiary to, declare or pay any dividends on its capital stock (other than
dividends payable in its own capital stock) or redeem, repurchase or otherwise
acquire or retire any of its capital stock at any time outstanding, except that
any Subsidiary may declare and pay dividends to the Borrower or to a
Wholly-Owned Subsidiary.
6.11. Indebtedness. The Borrower will not, nor will it permit any
Subsidiary to, create, incur or suffer to exist any Indebtedness, except:
(i) The Loans.
(ii) Indebtedness existing on the date hereof and described in
Schedule "3" hereto.
(iii) Contingent Obligations permitted under Section 6.17.
(iv) Rate Hedging Obligations.
(v) Indebtedness of any Wholly-Owned Subsidiary to the Borrower.
(vi) Capitalized Lease Obligations not exceeding, in the aggregate
for the Borrower and the Subsidiaries, $500,000 at any one time
outstanding.
(vii) The Senior Subordinated Notes and any Subordinated Seller Notes.
(viii) Additional Indebtedness not exceeding, in the aggregate for the
Borrower and the Subsidiaries, $1,000,000 at any one time
outstanding.
6.12. Merger. The Borrower will not, nor will it permit any Subsidiary
to, merge or consolidate with or into any other Person, except that a Subsidiary
may merge with the Borrower or a Wholly-Owned Subsidiary.
6.13. Sale of Assets. The Borrower will not, nor will it permit any
Subsidiary to, lease, sell or otherwise dispose of its Property, to any other
Person except for (i) sales of equipment and inventory in the ordinary course of
business and upon fair and reasonable terms no less favorable to the Borrower or
such Subsidiary than the Borrower or such Subsidiary would obtain in a
comparable arms-length transaction; (ii) the sale or other disposition (other
than a sale or disposition described in the preceding clause (i) of this Section
6.13) of Property that is no longer used or useful in the business of the
Borrower or the disposing Subsidiary,
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provided that, within 30 days of any such sale or other disposition, the
Borrower or such Subsidiary, as appropriate, replaces such Property with
Property having substantially equivalent value, and (iii) leases, sales or other
dispositions of its Property that, together with all other Property of the
Borrower and its Subsidiaries previously leased, sold or disposed of as
permitted by this clause (iii) of this Section 6.13 during the twelve-month
period ending with the month in which any such lease, sale or other disposition
occurs, do not constitute a Substantial Portion of the Property of the Borrower
and its Subsidiaries.
6.14. Sale of Accounts. The Borrower will not, nor will it permit any
Subsidiary to, sell or otherwise dispose of any notes receivable or accounts
receivable, with or without recourse except in the ordinary course of business
on terms and conditions customary in the Borrower's or such Subsidiary's
industry.
6.15. Sale and Leaseback. The Borrower will not, nor will it permit any
Subsidiary to, sell or transfer any of its Property in order to concurrently or
subsequently lease as lessee such or similar Property.
6.16. Investments and Acquisitions. The Borrower will not, nor will it
permit any Subsidiary to, make or suffer to exist any Investments (including
without limitation, loans and advances to, and other Investments in,
Subsidiaries), or commitments therefor, or to create any Subsidiary or to become
or remain a partner in any partnership or joint venture, or to make any
Acquisition of any Person, except:
(i) Permitted Acquisitions.
(ii) Short-term obligations of, or fully guaranteed by, the United
States of America.
(iii) Commercial paper rated A-l or better by Standard & Poor's
Ratings Group or P-l or better by Moody's Investors Service,
Inc.
(iv) Demand deposit accounts maintained in the ordinary course of
business.
(v) Certificates of deposit issued by and time deposits with
commercial banks (whether domestic or foreign) having capital
and surplus in excess of $100,000,000.
(vi) Existing Investments in Subsidiaries and other Investments in
existence on the date hereof and described in Schedule "2"
hereto.
6.17. Contingent Obligations. The Borrower will not, nor will it permit
any Subsidiary to, make or suffer to exist any Contingent Obligation (including,
without limitation, any Contingent Obligation with respect to the obligations of
a Subsidiary), except (i) by
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endorsement of instruments for deposit or collection in the ordinary course of
business, (ii) franchise bonds, performance bonds, Letters of Credit required in
the ordinary course of business and similar bonds, indemnities, and sureties, in
each case not representing, securing, or otherwise involving Indebtedness for
borrower money, (iii) to the extent permitted under Section 6.11(vii), (iv)
Subsidiary Guaranties, (v) guaranties by Subsidiaries of Indebtedness of other
Subsidiaries, and (vi) guaranties by Subsidiaries of Indebtedness of the
Borrower which are subordinated to the Subsidiary Guaranties to the written
satisfaction of the Required Lenders which shall not be unreasonably withheld or
delayed.
6.18. Liens. The Borrower will not, nor will it permit any Subsidiary
to, create, incur, or suffer to exist any Lien in, of or on the Property of the
Borrower or any of its Subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges or levies
on its Property if the same shall not at the time be delinquent
or thereafter can be paid without penalty, or are being
contested in good faith and by appropriate proceedings and for
which adequate reserves in accordance with generally accepted
principles of accounting shall have been set aside on its books.
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary
course of business which secure payment of obligations not more
than 60 days past due or which are being contested in good faith
by appropriate proceedings and for which adequate reserves shall
have been set aside on its books.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or
other social security or retirement benefits, or similar
legislation.
(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar
character and which do not in any material way affect the
marketability of the same or interfere with the use thereof in
the business of the Borrower or the Subsidiaries.
(v) Liens existing on the date hereof and described in Schedule "3"
hereto.
(vi) Liens in favor of the Lenders granted pursuant to any Collateral
Document.
(vii) Liens securing additional Indebtedness not exceeding, in the
aggregate for the Borrower and the Subsidiaries, $1,000,000 at
any one time outstanding.
6.19. Financial Covenants.
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6.19.1. Interest Coverage Ratio. The Borrower will maintain, as
at the last day of each fiscal quarter ending during the periods set
forth below commencing with the fiscal quarter ending December 31, 1997,
an Interest Coverage Ratio of not less than the ratio set forth below
opposite each such period:
<TABLE>
<CAPTION>
PERIOD RATIO
---------------------------------------------
<S> <C>
Prior to 12/31/99 1.25:1
12/31/99 through 12/31/01 1.50:1
3/31/02 through 12/31/02 2.00:1
Thereafter 2.25:1
</TABLE>
6.19.2. Pro Forma Debt Service Ratio. The Borrower will
maintain, as at the last day of each fiscal quarter commencing with the
fiscal quarter ending December 31, 1997, a Pro Forma Debt Service Ratio
of not less than the ratio set forth below opposite each such period:
<TABLE>
<CAPTION>
PERIOD RATIO
---------------------------------------------
<S> <C>
Prior to 3/31/99 1.15:1
3/31/99 and thereafter 1.20:1
</TABLE>
6.19.3. Fixed Charge Coverage Ratio. The Borrower will
maintain, as at the last day of each fiscal quarter commencing with the
fiscal quarter ending December 31, 1997, a Fixed Charge Coverage Ratio
of not less than 1.05 to 1.0.
6.19.4. Leverage Ratio. The Borrower will maintain at all times
during each fiscal quarter ending during the periods set forth below, a
Leverage Ratio of not more than the ratio set forth below opposite each
such period:
<TABLE>
<CAPTION>
PERIOD RATIO
---------------------------------------------
<S> <C>
Through 12/31/98 7.00:1
1/1/99 through 12/31/99 6.75:1
1/1/00 through 12/31/00 6.25:1
1/1/01 through 12/31/01 5.75:1
1/1/02 through 12/31/02 5.00:1
1/1/03 through 12/31/03 4.50:1
Thereafter 4.00:1
</TABLE>
6.19.5. Senior Leverage Ratio. The Borrower will maintain at
all times during each fiscal quarter ending during the periods set forth
below, a Senior Leverage Ratio of not more than the ratio set forth
below opposite each such period:
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<TABLE>
<CAPTION>
PERIOD RATIO
---------------------------------------------
<S> <C>
Through 12/31/98 4.00:1
1/1/99 through 12/31/99 3.75:1
1/1/00 through 12/31/00 3.50:1
Thereafter 3.00:1
</TABLE>
6.20. Affiliates. The Borrower will not, and will not permit any
Subsidiary to, enter into any transaction (including, without limitation, the
purchase or sale of any Property or service) with, or make any payment or
transfer to, any Affiliate except in the ordinary course of business and
pursuant to the reasonable requirements of the Borrower's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to the Borrower or
such Subsidiary than the Borrower or such Subsidiary would obtain in a
comparable arms-length transaction.
6.21. Management Fees. The Borrower may pay Management Fees in cash in
the first two months of any fiscal quarter in an amount not in excess of 5% of
revenues for such month (as estimated by the Borrower in good faith). The
Borrower shall defer payment of Management Fees for the third month of any
fiscal quarter until it has delivered quarterly financial statements for such
fiscal quarter pursuant to Section 6.1(ii), at which time it shall reduce or
adjust Management Fees permitted to be paid as necessary to reflect differences
between actual and estimated revenues for prior months in accordance with the
actual revenues set forth in such financial statements. Notwithstanding anything
in this Section 6.21 to the contrary, no Management Fees may be paid if, before
or after giving effect thereto, a Default or Unmatured Default has occurred and
is continuing. Any such Management Fees which may not be so paid shall be
deferred; Management Fees so deferred may be paid only out of Excess Cash Flow
that is not payable to the Lenders and only so long as no Default or Unmatured
Default shall exist.
6.22. Subordinated and Other Indebtedness. The Borrower will not, and
will not permit any Subsidiary to, make any amendment or modification to the
indenture, note or other agreement evidencing or governing any Subordinated
Indebtedness, or directly or indirectly voluntarily prepay, defease or in
substance defease, purchase, redeem, retire or otherwise acquire, any
Subordinated Indebtedness or other Indebtedness.
6.23. Collateral Security; Further Assistance.
6.23.1. Grant of Security. As security for the payment of the
Secured Obligations, the Borrower shall cause to be granted to the Agent
on behalf of the Lenders a Lien on and security interest in all of the
following, whether now or hereafter existing or acquired: (i) all of the
outstanding stock of the Borrower and all proceeds thereof, all as more
specifically described in the Pledge Agreement; (ii) all of the
outstanding equity interests in any Subsidiary and all proceeds thereof;
and (iii) all other assets of the Borrower and all proceeds thereof, all
as more specifically described
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in and subject to the provisions of the Security Agreement.
6.23.2. Subsidiaries. The Borrower shall cause the Secured
Obligations to be and remain guarantied in writing by each Subsidiary
pursuant to a Subsidiary Guaranty in form and substance satisfactory to
the Required Lenders. As security for the payment of any Subsidiary's
guaranty of the Secured Obligations, the Borrower shall cause such
Subsidiary to grant to the Agent on behalf of the Lenders a Lien on and
security interest in all of the assets of such Subsidiary, whether now
or hereafter existing or acquired, and all proceeds thereof, all as more
specifically described in and subject to the provisions of a security
agreement substantially identical to the Security Agreement with
appropriate adjustments for such Subsidiary. Upon execution of a
Subsidiary Guaranty and security agreement by any Subsidiary created or
acquired after the date of this Agreement, the Borrower shall also cause
to be delivered to the Agent such items evidencing legal existence,
validity, power, and authorization (including, without limitation, an
opinion of counsel) comparable to the items required with respect to NCN
pursuant to Sections 4.1(vii), (viii), and (ix) as the Agent may
reasonably require.
6.23.3. Exercise of Rights. Notwithstanding any other provision
of the Transaction Documents, it is the intention of the parties hereto
that the security interests and Liens of the Agent in and on the
Collateral shall in all relevant aspects be subject to and governed by
the Communications Act of 1934 (as such act may be in effect from time
to time) or any successor statute or statutes thereto and the respective
rules and regulations thereunder, as well as any other federal, state,
or other law applicable to or having jurisdiction over the Borrower's or
any Subsidiary's industry or the Borrower or any Subsidiary, and that
nothing in this Agreement shall be construed to diminish the control
exercised by the Borrower except in accordance with the provisions of
such statutory requirements and rules and regulations and the terms and
conditions of this Agreement. In connection with any exercise by the
Agent or any Lender of its right and remedies under the Collateral
Documents, it may be necessary to obtain the prior consent or approval
of certain Persons, including but not limited to the FCC and other
applicable governmental authorities. Upon the exercise by the Agent or
the Lenders of any power, right, privilege or remedy pursuant to any
Collateral Document which requires any consent, approval, registration,
qualification or authorization of any Person, the Borrower will execute
and deliver, or will cause the execution and delivery of, all
applications, certificates, instruments, and other documents and papers
that the Agent or the Lenders may be required to obtain for such
consent, approval, registration, qualification or authorization. Without
limiting the generality of the foregoing, the Borrower will use its best
efforts to obtain from the appropriate Persons the necessary consents
and approvals, if any, for the effectuation of any sale or sales of
pledged interests under the Pledge Agreement upon the occurrence and
during the continuance of a Default; and for the exercise of any other
right or remedy of the Agent and Lenders under any Collateral Document.
The Agent and the
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Lenders will cooperate with the Borrower in preparing the filing with
any Persons of all requisite applications required to be obtained by
the Borrower under this Section 6.23.3.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
7.1. Any representation or warranty made or deemed made by or on behalf
of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or
in connection with this Agreement, any Loan, or any certificate or information
delivered in connection with this Agreement or any other Transaction Document
shall be materially false on the date as of which made.
7.2. Nonpayment of principal of any Note when due, or nonpayment of
interest upon any Note or of any commitment fee or other obligations under any
of the Loan Documents within five days after the same becomes due.
7.3. The breach by the Borrower of any of the terms or provisions of
Section 6.2, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16, 6.17, 6.18, 6.19, 6.20,
6.21, 6.22, or 6.23.
7.4. The breach by the Borrower (other than a breach which constitutes
a Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of
this Agreement which is not remedied within five days after written notice from
the Agent or any Lender.
7.5. Failure of the Borrower or any of its Subsidiaries or NTC to pay
any Indebtedness in the aggregate in excess of $100,000 when due; or the default
by the Borrower or any of its Subsidiaries or NTC in the performance of any
term, provision or condition contained in any agreement under which any
Indebtedness in the aggregate in excess of $100,000 was created or is governed,
or any other event shall occur or condition exist, the effect of which is to
cause, or to permit the holder or holders of such Indebtedness to cause, such
Indebtedness to become due prior to its stated maturity; or any Indebtedness of
the Borrower or any of its Subsidiaries or NTC in the aggregate in excess of
$100,000 shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled payment) prior to the stated maturity
thereof; or the Borrower or any of its Subsidiaries or NTC shall not pay, or
admit in writing its inability to pay, its debts generally as they become due.
7.6. The Borrower or any of its Subsidiaries or NTC shall (i) have an
order for
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<PAGE> 46
relief entered with respect to it under the Federal bankruptcy laws as now or
hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii)
apply for, seek, consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it or any
Substantial Portion of its Property, (iv) institute any proceeding seeking an
order for relief under the Federal bankruptcy laws as now or hereafter in effect
or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it, (v)
take any corporate action to authorize or effect any of the foregoing actions
set forth in this Section 7.6 or (vi) fail to contest in good faith any
appointment or proceeding described in Section 7.7.
7.7. Without the application, approval or consent of the Borrower or any
of its Subsidiaries, or NTC, a receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Borrower or any of its Subsidiaries
or NTC or any Substantial Portion of its Property, or a proceeding described in
Section 7.6(iv) shall be instituted against the Borrower or any of its
Subsidiaries or NTC and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of 60 consecutive
days.
7.8. Any court, government or governmental agency shall condemn, seize
or otherwise appropriate, or take custody or control of (each a "Condemnation"),
all or any portion of the Property of the Borrower and its Subsidiaries or NTC
which, when taken together with all other Property of the Borrower and its
Subsidiaries or NTC so condemned, seized, appropriated, or taken custody or
control of, during the twelve-month period ending with the month in which any
such Condemnation occurs, constitutes a Substantial Portion.
7.9. The Borrower or any of its Subsidiaries shall fail within 30 days
to pay, bond or otherwise discharge any judgment or order for the payment of
money in excess of $100,000, which is not stayed on appeal or otherwise being
appropriately contested in good faith.
7.10. The Borrower shall incur Unfunded Liabilities or any Reportable
Event shall occur in connection with any Plan.
7.11. The Borrower or any other member of the Controlled Group shall
have been notified by the sponsor of a Multiemployer Plan that it has incurred
withdrawal liability to such Multiemployer Plan.
7.12. The Borrower or any other member of the Controlled Group shall
have been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within the
meaning of Title IV of ERISA, if as a result of such reorganization or
termination the aggregate annual contributions of the Borrower and
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the other members of the Controlled Group (taken as a whole) to all
Multiemployer Plans which are then in reorganization or being terminated have
been or will be increased over the amounts contributed to such Multiemployer
Plans for the respective plan years of each such Multiemployer Plan immediately
preceding the plan year in which the reorganization or termination occurs.
7.13. The Borrower or any of its Subsidiaries shall be the subject of
any proceeding or investigation pertaining to the release by the Borrower or any
of its Subsidiaries, or any other Person of any toxic or hazardous waste or
substance into the environment, or any violation of any federal, state or local
environmental, health or safety law or regulation (including, without
limitation, those relating to the Cumulative Leakage Index), which, in either
case, could reasonably be expected to have a Material Adverse Effect.
7.14. Any Change in Control shall occur.
7.15. The occurrence of any "default," as defined in any Transaction
Document (other than this Agreement or the Notes) or the breach of any of the
terms or provisions of any Transaction Document (other than this Agreement or
the Notes), which default or breach continues beyond any period of grace therein
provided.
7.16. Nonpayment by the Borrower of any Rate Hedging Obligation beyond
any applicable grace period or the breach by the Borrower of any term, provision
or condition contained in any agreement, device or arrangement giving rise to
any Rate Hedging Obligation beyond any applicable grace period.
7.17. Any Collateral Document shall for any reason fail to create a
valid and perfected first priority security interest in any collateral purported
to be covered thereby, except as permitted by the terms of any Collateral
Document, or any Collateral Document shall fail to remain in full force or
effect or any action shall be taken to discontinue or to assert the invalidity
or unenforceability of any Collateral Document, or the Borrower or NTC, as
applicable, shall fail to comply with any of the terms or provisions of any
Collateral Document.
7.18. Any Subsidiary Guaranty shall fail to remain in full force or
effect or any action shall be taken to discontinue or to assert the invalidity
or unenforceability of any Subsidiary Guaranty, or any Subsidiary shall fail to
comply with any of the terms or provisions of any Subsidiary Guaranty to which
it is a party.
7.19. (a) Any license, authorization, consent or permit (including,
without limitation, any CATV Franchise or FCC License) necessary for the
ownership or essential for the operation by the Borrower or any Subsidiary of
any CATV System shall expire, and on or prior to such expiration, the same shall
not have been renewed or replaced by another license, authorization, consent or
permit authorizing substantially the same operations of such CATV
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System; or (b) any license, authorization, consent or permit (including, without
limitation, any CATV Franchise or FCC License) necessary for the ownership or
essential for the operation of any CATV System shall be cancelled, revoked,
terminated, rescinded, annulled, suspended or modified in a materially adverse
respect, or shall no longer be in full force and effect, or the grant or the
effectiveness thereof shall have been stayed, vacated, reversed or set aside,
and such action shall be no longer subject to further administrative or judicial
review; or (c) the FCC shall have issued any hearing designation order in any
non-comparative license renewal proceeding or any license revocation proceeding
involving any license necessary for the ownership or essential for the operation
of any CATV System; or (d) in any comparative (multiple applicant) license
renewal proceeding involving any license necessary for the ownership or
essential for the operation of any CATV System, any administrative law judge of
the FCC (or successor to the functions of an administrative law judge of the
FCC) shall have issued an initial decision to the effect that the Borrower or
any Subsidiary lacks the qualifications to own or operate such CATV System, and
such initial decision shall not have been timely appealed or shall otherwise
have become an order that is final and no longer subject to further
administrative or judicial review, (provided, however, that none of the
foregoing events described in clause (c) or (d) of this Section 7.18 shall
constitute a Default if, assuming the final and non-appealable loss by the
Borrower or any Subsidiary of any such license, authorization, consent or permit
at the conclusion of all legal proceedings incident thereto, such loss would not
materially adversely affect the value of the Collateral or the Borrower's or any
Subsidiary's ability to perform its obligations under the Transaction
Documents); or (e) any CATV System shall fail for any period of five consecutive
calendar days to operate or maintain any broadcast signal, and such failure is
not covered by business interruption insurance and the revenue stream derived
from the particular CATV System failing to so operate or maintain a broadcast
signal is material to the revenue stream of the Borrower and the Subsidiaries
taken as a whole; or (f) any CATV System shall fail for any period of five
consecutive calendar days to maintain a broadcast signal that is material to its
operations receivable without either material interference or the use of any
equipment other than ordinary consumer antennae and receivers, and such failure
is not covered by business interruption insurance and the revenue stream derived
from the particular CATV System failing to so operate or maintain a broadcast
signal is material to the revenue stream of the Borrower and the Subsidiaries
taken as a whole.
7.20. Twenty-five percent (25%) or more of the value of any class of
equity interests in the Borrower shall be held by "benefit plan investors"
within the meaning of 29 C.F.R. ss.2510.3-101(f).
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ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration. If any Default described in Section 7.6 or 7.7 occurs
with respect to the Borrower, the obligations of the Lenders to make Loans
hereunder shall automatically terminate and the Obligations shall immediately
become due and payable without any election or action on the part of the Agent
or any Lender. If any other Default occurs, the Required Lenders may terminate
or suspend the obligations of the Lenders to make Loans hereunder, or declare
the Obligations to be due and payable, or both, whereupon the Obligations shall
become immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which the Borrower hereby expressly waives.
If, within 14 days after acceleration of the maturity of the Obligations
or termination of the obligations of the Lenders to make Loans hereunder as a
result of any Default (other than any Default as described in Section 7.6 or 7.7
with respect to the Borrower) and before any judgment or decree for the payment
of the Obligations due shall have been obtained or entered, the Required Lenders
(in their sole discretion) shall so direct, the Agent shall, by notice to the
Borrower, rescind and annul such acceleration and/or termination.
8.2. Amendments. Subject to the provisions of this Article VIII, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Transaction Documents or
changing in any manner the rights of the Lenders or the Borrower hereunder or
waiving any Default hereunder; provided, however, that no such supplemental
agreement shall, without the consent of each Lender affected thereby:
(i) Extend the maturity of any Loan or Note or forgive all or any
portion of the principal amount thereof, or reduce the rate or
extend the time of payment of interest or fees thereon.
(ii) Reduce the percentage specified in the definition of Required
Lenders.
(iii) Extend the Conversion Date, the Facility A Termination Date or
the Facility B Termination Date, or reduce the amount or extend
the payment dates for, the mandatory payments required under
Section 2.2, or increase the amount of any Commitment of any
Lender hereunder, or permit the Borrower to assign its rights
under this Agreement.
(iv) Amend this Section 8.2.
(v) Except as provided in the Collateral Documents, release all or
substantially all
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of the Collateral or any Subsidiary Guaranty.
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. The Agent may waive payment
of the fee required under Section 12.3.2 without obtaining the consent of any
other party to this Agreement.
8.3. Preservation of Rights. No delay or omission of the Lenders or the
Agent to exercise any right under the Transaction Documents shall impair such
right or be construed to be a waiver of any Default or an acquiescence therein,
and the making of a Loan notwithstanding the existence of a Default or the
inability of the Borrower to satisfy the conditions precedent to such Loan shall
not constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Transaction Documents whatsoever shall be valid
unless in writing signed by the Lenders required pursuant to Section 8.2, and
then only to the extent in such writing specifically set forth. All remedies
contained in the Transaction Documents or by law afforded shall be cumulative
and all shall be available to the Agent and the Lenders until the Obligations
have been paid in full.
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. All representations and warranties of
the Borrower contained in this Agreement shall survive delivery of the Notes and
the making of the Loans herein contemplated. Except as otherwise provided in
this Agreement, no representations and warranties of the Borrower and no
obligations of the Borrower shall survive beyond the payment in full of the
Obligations.
9.2. Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, no Lender shall be obligated to extend credit to
the Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.3. Taxes. Any taxes (excluding federal income taxes on the overall net
income of any Lender) or other similar assessments or charges made by any
governmental or revenue authority in respect of the Transaction Documents shall
be paid by the Borrower, together with interest and penalties, if any.
9.4. Headings. Section headings in the Transaction Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Transaction Documents.
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9.5. Entire Agreement. The Transaction Documents embody the entire
agreement and understanding among the Borrower, NTC, NCN, the Agent and the
Lenders and supersede all prior agreements and understandings among the
Borrower, NTC, NCN, the Agent and the Lenders relating to the subject matter
thereof.
9.6. Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns, provided, however, that the parties
hereto expressly agree that the Arranger shall enjoy the benefits of the
provisions of Sections 9.7, 9.11 and 10.10 to the extent specifically set forth
therein and shall have the right to enforce such provisions on its own behalf
and in its own name to the same extent as if it were a party to this Agreement.
9.7. Expenses; Indemnification. The Borrower shall reimburse the Agent
and the Arranger for any costs, internal charges and out-of-pocket expenses
(including attorneys' fees and time charges of attorneys for the Agent, which
attorneys may be employees of the Agent) paid or incurred by the Agent or the
Arranger in connection with the preparation, negotiation, execution, delivery,
review, amendment, modification, and administration of the Transaction
Documents. The Borrower also agrees to reimburse the Agent, the Arranger, and
the Lenders for any costs, internal charges and out-of-pocket expenses
(including attorneys' fees and time charges of attorneys for the Agent, the
Arranger, and the Lenders, which attorneys may be employees of the Agent, the
Arranger, or the Lenders) paid or incurred by the Agent, the Arranger, or any
Lender in connection with the collection and enforcement of the Transaction
Documents. The Borrower further agrees to indemnify the Agent, the Arranger, and
each Lender, their respective directors, officers and employees against all
losses, claims, damages, penalties, judgments, liabilities and expenses
(including, without limitation, all expenses of litigation or preparation
therefor whether or not the Agent, the Arranger, or any Lender is a party
thereto) which any of them may pay or incur arising out of or relating to this
Agreement, the other Transaction Documents, the transactions contemplated hereby
or the direct or indirect application or proposed application of the proceeds of
any Loan hereunder. The obligations of the Borrower under this Section shall
survive the termination of this Agreement.
9.8. Numbers of Documents. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Lenders.
9.9. Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles, except that any calculation or
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determination which is to be made on a consolidated basis shall be made for the
Borrower and all its Subsidiaries, including those Subsidiaries, if any, which
are unconsolidated on the Borrower's audited financial statements.
9.10. Severability of Provisions. Any provision in any Transaction
Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Transaction Documents are
declared to be severable.
9.11. Nonliability of Lenders. The relationship between the Borrower and
the Lenders and the Agent shall be solely that of borrower and lender. Neither
the Agent, the Arranger, nor any Lender shall have any fiduciary
responsibilities to the Borrower. Neither the Agent nor any Lender undertakes
any responsibility to the Borrower to review or inform the Borrower of any
matter in connection with any phase of the Borrower's business or operations.
9.12. CHOICE OF LAW. THE TRANSACTION DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9.13. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF
ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE
AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY TRANSACTION DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN
CHICAGO, ILLINOIS.
9.14. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND
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EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY
TRANSACTION DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
9.15. Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from the Borrower pursuant to this Agreement in
confidence, except for disclosure (i) to other Lenders and their respective
Affiliates, (ii) to legal counsel, accountants, and other professional advisors
to that Lender or to a Transferee, (iii) to regulatory officials, (iv) to any
Person as requested pursuant to or as required by law, regulation, or legal
process, (v) to any Person in connection with any legal proceeding to which that
Lender is a party, (vi) permitted by Section 12.4, and (vii) of information
which has become public through no fault of that Lender.
9.16. Nonreliance. Each Lender hereby represents that it is not relying
on or looking to any margin stock (as defined in Regulation U) for the repayment
of the Loans provided for herein.
9.17. Compliance with Laws. The performance of this Agreement by the
Borrower shall be subject at all times to all laws, regulations and rules of the
United States of America, and any agency or instrumentality thereof, and of any
State, and any agency or instrumentality thereof. None of the Borrower, Agent or
Lenders shall be bound by any terms of this Agreement that are in conflict with
such law, regulations and rules.
9.18. Approval of Cable Authorities. Notwithstanding any provisions in
this Agreement to the contrary, no action shall be taken by the Agent or the
Lenders with respect to any items of the Collateral unless and until all
necessary requirements, if any, of the Communications Act of 1934, the Cable
Communications Policy Act of 1984 and the Cable Television Consumer Protection
and Competition Act of 1992 (in each case as it has been or may be amended from
time to time) and the respective rules and regulations thereunder, as well as
any other federal, state, or other law applicable to or having jurisdiction over
the cable television industry or the Borrower or any appropriate Subsidiary have
been fully satisfied with respect to such action and there have been obtained
such consents, approvals, and authorizations, if any, as may be required to be
obtained from the FCC and any other such governmental authority or utility or
telephone company under the terms of any franchise, license, or similar
operating right held by the Borrower or such Subsidiary and included in the
Collateral. It is the intention of the parties hereto that the security
interests and liens of the Agent in and on the Collateral shall in all relevant
aspects be subject to and governed by said statutes, rules, and regulations and
that nothing in this Agreement or any other Transaction Document shall be
construed to diminish the control exercised by the Borrower or any Subsidiary
except in accordance with the provisions of such statutory requirements and
rules and regulations and the terms and conditions of this Agreement and the
other Transaction
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Documents. Upon the Agent's request, the Borrower agrees that it will use its
best efforts to promptly obtain any and all governmental, regulatory, utility,
or telephone company consents, approvals, or authorizations referred to in this
Section 9.18.
9.19. Effect on Prior Agreement; Ratification. The Borrower, the Agent,
and the Lenders agree that, on the Effective Date, all indebtedness, liabilities
and obligations of the Borrower to the Prior Lenders outstanding under the Prior
Agreement and the promissory notes delivered under the Prior Agreement shall, to
the extent not paid on such date, be deemed to be Obligations outstanding under
this Agreement and under the Notes. Each Prior Lender party to this Agreement
shall, promptly after receipt of its Note under this Agreement, return to the
Borrower the promissory notes received by it in connection with the Prior
Agreement. The Borrower, the Agent, and the Lenders agree that (i) all terms and
conditions of the Prior Agreement which are amended and restated by this
Agreement shall remain effective until such amendment and restatement becomes
effective under this Agreement, (ii) the representations, warranties and
covenants set forth herein shall become effective concurrently with the
occurrence of the Effective Date, and (iii) as of the Effective Date, each
reference in any Transaction Document to the "Agreement" or "Credit Agreement"
shall be deemed to be a reference to the Prior Agreement as amended and restated
in the form of this Agreement.
ARTICLE X
THE AGENT
10.1. Appointment. The First National Bank of Chicago is hereby
appointed Agent hereunder and under each other Transaction Document, and each of
the Lenders irrevocably authorizes the Agent to act as the agent of such Lender.
The Agent agrees to act as such upon the express conditions contained in this
Article X. The Agent shall not have a fiduciary relationship in respect of the
Borrower or any Lender by reason of this Agreement.
10.2. Powers. The Agent shall have and may exercise such powers under
the Transaction Documents as are specifically delegated to the Agent by the
terms of each thereof, together with such powers as are reasonably incidental
thereto. The Agent shall have no implied duties to the Lenders, or any
obligation to the Lenders to take any action thereunder except any action
specifically provided by the Transaction Documents to be taken by the Agent.
10.3. General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Transaction Document or in connection herewith or therewith
except for its or their own gross negligence or willful
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misconduct.
10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor
any of its directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify (i) any statement, warranty
or representation made in connection with any Transaction Document or any
borrowing hereunder; (ii) the performance or observance of any of the covenants
or agreements of any obligor under any Transaction Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (iii) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered to the Agent; (iv) the validity,
effectiveness or genuineness of any Transaction Document or any other instrument
or writing furnished in connection therewith; or (v) the value, sufficiency,
creation, perfection or priority of any interest in any collateral security. The
Agent shall have no duty to disclose to the Lenders information that is not
required to be furnished by the Borrower to the Agent at such time, but is
voluntarily furnished by the Borrower to the Agent (either in its capacity as
Agent or in its individual capacity).
10.5. Action on Instructions of Lenders. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Transaction Document in accordance with written instructions signed by the
Required Lenders (or, if required by Section 8.2, each Lender affected thereby),
and such instructions and any action taken or failure to act pursuant thereto
shall be binding on all of the Lenders and on all holders of Notes. The Agent
shall be fully justified in failing or refusing to take any action hereunder and
under any other Transaction Document unless it shall first be indemnified to its
satisfaction by the Lenders pro rata against any and all liability, cost and
expense that it may incur by reason of taking or continuing to take any such
action.
10.6. Employment of Agents and Counsel. The Agent may execute any of its
duties as Agent hereunder and under any other Transaction Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Transaction Document.
10.7. Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
10.8. Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (i) for any
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amounts not reimbursed by the Borrower for which the Agent is entitled to
reimbursement by the Borrower under the Transaction Documents, (ii) for any
other expenses incurred by the Agent on behalf of the Lenders, in connection
with the preparation, execution, delivery, administration and enforcement of the
Transaction Documents and (iii) for any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of the
Transaction Documents or any other document delivered in connection therewith or
the transactions contemplated thereby, or the enforcement of any of the terms
thereof or of any such other documents, provided that no Lender shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the Agent. The obligations of the Lenders under this
Section 10.8 shall survive payment of the Obligations and termination of this
Agreement.
10.9. Rights as a Lender. In the event the Agent is a Lender, the Agent
shall have the same rights and powers hereunder and under any other Transaction
Document as any Lender and may exercise the same as though it were not the
Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a
Lender, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Transaction
Document, with the Borrower or any of its Subsidiaries in which the Borrower or
such Subsidiary is not restricted hereby from engaging with any other Person.
The Agent, in its individual capacity, is not obligated to remain a Lender.
10.10. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Arranger, or any other
Lender and based on the financial statements prepared by the Borrower and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other
Transaction Documents. Each Lender also acknowledges that it will, independently
and without reliance upon the Agent, the Arranger, or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Transaction Documents.
10.11. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. Upon any such resignation, the Required Lenders shall have
the right to appoint, on behalf of the Borrower and the Lenders and with the
consent of the Borrower (which shall not be unreasonably withheld), a successor
Agent. If no successor Agent shall have been so appointed by the Required
Lenders within thirty days after the resigning Agent's giving notice of its
intention to resign, then the resigning Agent may appoint, on behalf of the
Borrower and the Lenders, a successor Agent. If the Agent has
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resigned and no successor Agent has been appointed, the Lenders may perform all
the duties of the Agent hereunder and the Borrower shall make all payments in
respect of the Obligations to the applicable Lender and for all other purposes
shall deal directly with the Lenders. No successor Agent shall be deemed to be
appointed hereunder until such successor Agent has accepted the appointment. Any
such successor Agent shall be a commercial bank having capital and retained
earnings of at least $50,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning Agent. Upon the effectiveness of the resignation of the Agent,
the resigning Agent shall be discharged from its duties and obligations
hereunder and under the Transaction Documents. After the effectiveness of the
resignation of an Agent, the provisions of this Article X shall continue in
effect for the benefit of such Agent in respect of any actions taken or omitted
to be taken by it while it was acting as the Agent hereunder and under the other
Transaction Documents.
10.12. Agent's Fee. The Borrower agrees to pay to the Agent, for its own
account, the fees agreed to by the Borrower, the Agent, and the Arranger
pursuant to that certain letter agreement dated October 15, 1997, or as
otherwise agreed from time to time.
10.13. Execution of Collateral Documents. The Lenders hereby empower and
authorize the Agent to execute and deliver to the Borrower on their behalf the
Security Agreement and all related financing statements and any financing
statements, agreements, documents or instruments as shall be necessary or
appropriate to effect the purposes of the Security Agreement.
10.14. Collateral Releases. The Lenders hereby empower and authorize the
Agent to execute and deliver to the Borrower on their behalf any agreements,
documents or instruments as shall be necessary or appropriate to effect any
releases of Collateral which shall be permitted by the terms hereof or of any
other Transaction Document or which shall otherwise have been approved by the
Required Lenders (or, if required by the terms of Section 8.2, all of the
Lenders) in writing.
10.15. Delegation to Affiliates. The Borrower and the Lenders agree that
the Agent may delegate any of its duties under this Agreement to any of its
Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents
and employees) which performs duties in connection with this Agreement shall be
entitled to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under Articles IX and X.
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ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of, any rights of
the Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default or Unmatured Default occurs, any and all deposits
(including all account balances, whether provisional or final and whether or not
collected or available) and any other Indebtedness at any time held or owing by
any Lender to or for the credit or account of the Borrower may be offset and
applied toward the payment of the Obligations owing to such Lender, whether or
not the Obligations, or any part hereof, shall then be due.
11.2. Ratable Payments. If any Lender, whether by setoff or otherwise,
has payment made to it upon its Loans under any Facility (other than payments
received pursuant to Sections 3.1, 3.2, or 3.4) in a greater proportion than
that received by any other Lender under such Facility, such Lender agrees,
promptly upon demand, to purchase a portion of the Loans held by the other
Lenders under such Facility so that after such purchase each Lender will hold
its ratable proportion of Loans under such Facility. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Obligations or such amounts
which may be subject to setoff, such Lender agrees, promptly upon demand, to
take such action necessary such that all Lenders share in the benefits of such
collateral ratably in proportion to their Loans. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.
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ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders and their respective successors and assigns, except that (i) the
Borrower shall not have the right to assign its rights or obligations under the
Loan Documents and (ii) any assignment by any Lender must be made in compliance
with Section 12.3. Notwithstanding clause (ii) of this Section, any Lender may
at any time, without the consent of the Borrower or the Agent, assign all or any
portion of its rights under this Agreement and its Notes to a Federal Reserve
Bank; provided, however, that no such assignment shall release the transferor
Lender from its obligations hereunder. The Agent may treat the payee of any Note
as the owner thereof for all purposes hereof unless and until such payee
complies with Section 12.3 in the case of an assignment thereof or, in the case
of any other transfer, a written notice of the transfer is filed with the Agent.
Any assignee or transferee of a Note agrees by acceptance thereof to be bound by
all the terms and provisions of the Transaction Documents. Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or consent is the holder of any Note, shall be conclusive
and binding on any subsequent holder, transferee or assignee of such Note or of
any Note or Notes issued in exchange therefor.
12.2. Participations.
12.2.1 Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law,
at any time sell to one or more banks or other entities ("Participants")
participating interests in any Loan owing to such Lender, any Note held
by such Lender, any Commitment of such Lender or any other interest of
such Lender under the Transaction Documents, provided that any such sale
shall be at no cost to the Borrower. In the event of any such sale by a
Lender of participating interests to a Participant, such Lender's
obligations under the Transaction Documents shall remain unchanged, such
Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, such Lender shall remain the holder
of any such Note for all purposes under the Transaction Documents, all
amounts payable by the Borrower under this Agreement shall be determined
as if such Lender had not sold such participating interests, and the
Borrower and the Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations
under the Transaction Documents. The consent of the Borrower shall be
required prior to a participation becoming effective with respect to a
Participant which is not a Lender or an Affiliate thereof; provided,
however, that if a Default has occurred and is continuing, the consent
of the Borrower shall not be required. Such consent shall not be
unreasonably withheld or delayed.
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12.2.2. Voting Rights. Each Lender shall retain the sole right
to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Transaction Documents
other than any amendment, modification or waiver with respect to any
Loan or Commitment in which such Participant has an interest which
forgives principal, interest or fees or reduces the interest rate or
fees payable with respect to any such Loan or Commitment, postpones any
date fixed for any regularly-scheduled payment of principal of, or
interest or fees on, any such Loan or Commitment, or releases any
substantial portion of collateral, if any, securing any such Loan.
12.2.3. Benefit of Setoff. The Borrower agrees that each
Participant shall be deemed to have the right of setoff provided in
Section 11.1 in respect of its participating interest in amounts owing
under the Transaction Documents to the same extent as if the amount of
its participating interest were owing directly to it as a Lender under
the Transaction Documents, provided that each Lender shall retain the
right of setoff provided in Section 11.1 with respect to the amount of
participating interests sold to each Participant. The Lenders agree to
share with each Participant, and each Participant, by exercising the
right of setoff provided in Section 11.1, agrees to share with each
Lender, any amount received pursuant to the exercise of its right of
setoff, such amounts to be shared in accordance with Section 11.2 as if
each Participant were a Lender.
12.3. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any
time assign to one or more banks or other entities ("Purchasers") all or
any part of its rights and obligations under the Transaction Documents,
provided that (i) any such assignment shall be at no cost to the
Borrower, and (ii) unless such Lender assigns all of its rights and
obligations under the Transaction Documents to a Purchaser, each such
assignment shall be in a minimum amount of $5,000,000. Such assignment
shall be substantially in the form of Exhibit "J" hereto or in such
other form as may be agreed to by the parties thereto. The consents of
the Borrower and the Agent shall be required prior to an assignment
becoming effective with respect to a Purchaser which is not a Lender or
an Affiliate thereof; provided, however, that if a Default has occurred
and is continuing, the consent of the Borrower shall not be required.
Such consent shall not be unreasonably withheld or delayed.
12.3.2. Effect; Effective Date. Upon (i) delivery to the Agent
of a notice of assignment, substantially in the form attached as Exhibit
"1" to Exhibit "J" hereto (a "Notice of Assignment"), together with any
consents required by Section 12.3.1, and (ii) payment of a $4,000 fee to
the Agent for processing such assignment, such assignment shall become
effective on the effective date specified in such Notice of
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<PAGE> 61
Assignment. The Notice of Assignment shall contain a representation by
the Purchaser to the effect that none of the consideration used to make
the purchase of the Commitment and Loans under the applicable assignment
agreement are "plan assets" as defined under ERISA and that the rights
and interests of the Purchaser in and under the Loan Documents will not
be "plan assets" under ERISA. On and after the effective date of such
assignment, such Purchaser shall for all purposes be a Lender party to
this Agreement and any other Loan Document executed by the Lenders and
shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto,
and no further consent or action by the Borrower, the Lenders or the
Agent shall be required to release the transferor Lender with respect to
the percentage of the Aggregate Commitment and Loans assigned to such
Purchaser. Upon the consummation of any assignment to a Purchaser
pursuant to this Section 12.3.2, the transferor Lender, the Agent and
the Borrower shall make appropriate arrangements so that replacement
Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in each
case in principal amounts reflecting their Commitment, as adjusted
pursuant to such assignment.
12.4. Dissemination of Information. The consent of the Borrower shall be
required prior to disclosure by any Lender to any Participant or Purchaser or
any other Person acquiring an interest in the Loan Documents by operation of law
(each a "Transferee") other than a Lender or an Affiliate thereof and any
prospective Transferee other than a Lender or an Affiliate thereof any and all
information in such Lender's possession concerning the creditworthiness of the
Borrower and its Subsidiaries; provided that each such Transferee and
prospective Transferee agrees to be bound by Section 9.15 of this Agreement.
Such consent shall not be unreasonably withheld or delayed.
12.5. Tax Treatment. If any interest in any Loan Document is transferred
to any Transferee which is organized under the laws of any jurisdiction other
than the United States or any State thereof, the transferor Lender shall cause
such Transferee, concurrently with the effectiveness of such transfer, to comply
with the provisions of Section 2.18.
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ARTICLE XIII
NOTICES
13.1. Giving Notice. Except as otherwise permitted by Section 2.13 with
respect to borrowing notices, all notices and other communications provided to
any party hereto under this Agreement or any other Transaction Document shall be
in writing or by telex or by facsimile and addressed or delivered to such party
at its address set forth below its signature hereto or at such other address as
may be designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid, shall be deemed given when
received; any notice, if transmitted by telex or facsimile, shall be deemed
given when transmitted (answerback confirmed in the case of telexes).
13.2. Change of Address. The Borrower, the Agent and any Lender may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
ARTICLE XIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrower, the
Agent and the Lenders and each party has notified the Agent by telex or
telephone, that it has taken such action.
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IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have
executed this Agreement as of the date first above written.
NORTHLAND CABLE TELEVISION, INC.
By: _____________________________________
James A. Penney
Vice President
1201 Third Avenue
Suite 3600
Seattle, Washington 98101
Attention: John S. Whetzell
President
James A. Penney
Vice President
Telecopier: (206) 674-3950
THE FIRST NATIONAL BANK OF
CHICAGO, INDIVIDUALLY AND AS AGENT
By: _____________________________________
Ronna Prince
Vice President
One First National Plaza
Chicago, Illinois 60670
Attention: Communications Division
Telecopier: (312) 732-8587
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<PAGE> 1
EXHIBIT 10.2
OPERATING MANAGEMENT AGREEMENT
This Agreement is made and shall be deemed effective as of August 23,
1994, by and between NORTHLAND CABLE TELEVISION, INC., a Washington corporation
("NCTV") and NORTHLAND TELECOMMUNICATIONS CORPORATION, a Washington corporation
("NTC").
WHEREAS, NCTV owns and operates the cable television systems described
in Exhibit A attached hereto and incorporated herein by reference, which Exhibit
may be amended from time to time (collectively, the "Systems"); and
WHEREAS, NTC is the corporate parent of NCTV, as well as the corporate
parent of other entities affiliated with NCTV, and has significant experience in
the operation of cable television systems; and
WHEREAS, NCTV desires to engage the services of a managing agent to
supervise the affairs and operations of the Systems, and to share an office site
to conduct the administration of the Systems; and
WHEREAS, NTC is capable and willing to serve as such managing agent;
NOW, THEREFORE, in consideration of the agreements and covenants of the
parties contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree and
covenant as follows:
1. Managing Agent. NCTV hereby engages NTC, and NTC hereby agrees to
serve as the managing agent for NCTV in connection with the overall affairs and
operations of the Systems.
2. Term. NTC shall serve as said managing agent until such time as
either party shall terminate this Agreement upon thirty days' (30) written
notice to the other party.
3. Duties. As managing agent, NTC shall perform (in accordance with the
policies and procedures established from time to time by its wholly-owned
subsidiary, Northland Communications Corporation) the following for NCTV in
connection with its ownership of the Systems:
A. Supervise the affairs, management and operations of the
Systems.
B. Supervise the accounting and other financial books and
records of NCTV.
C. Select, employ, instruct, and generally supervise all
employees who work on the Systems.
Operating Management Agreement Page 1
<PAGE> 2
D. Oversee the fulfillment of various contractual obligations
undertaken by NCTV in connection with its ownership of the
Systems.
4. Other management services and activities. NCTV acknowledges that NTC
may provide management services to other cable systems and to provide a variety
of services to other companies as well as with respect to its own activities.
The parties hereby agree that all such services and activities, and income
derived therefrom, are permitted under this Agreement, provided the same shall
not unreasonably interfere with the performance of services rendered to NCTV.
5. Direct costs. Wherever possible NCTV is to pay all direct costs for the
operation of the Systems. Separate purchase orders are to be used for the
Systems and all operating equipment and materials to be used by the Systems will
be kept as physically segregated as reasonably possible from NTC's operating
equipment and materials. The following list represents those types of costs that
generally are to be paid directly by NCTV:
System maintenance; Travel expenses; Drop materials; Dues and
subscriptions; Pole and site rental; Marketing expenses; Lease
payments; Sales commissions; Copyright fees; Legal expenses; Franchise
fees; Billing expense - postage; Accounting services; Audit and tax
fees; Collection expenses; Insurance; Governmental fees and licenses;
Headquarters supplies and expenses; Satellite expense; Bank and service
charges; Pay television expense; Property taxes; Program guides;
Equipment usage charge (vehicles and other equipment); Office usage
charge (billing equipment and office rent); Systems utilities; Operating
salaries and benefits; Vehicle operating expenses; Administrative
salaries and benefits; Billing expense - processing; Direct office
postage; Office supplies; Telephone; Copying/printing; and Office
maintenance.
6. Management fees and payment terms. For its performance of the
management duties hereunder, NTC shall be entitled to receive from NCTV a fee
equal to 5% of NCTV's gross revenues (the "Management Fee"). NCTV shall pay NTC
the Management Fee in cash for the first two months of any fiscal quarter (and
in September 1994 only). Payment of the Management Fee shall be deferred for the
third month of any fiscal quarter (except for September 1994) until NCTV has
delivered to its lenders quarterly financial statements for such fiscal quarter
and has made such adjustments as necessary to reflect differences between actual
and estimated gross revenues for prior months in accordance with the actual
gross revenues set forth in such quarterly financial statements. The Management
Fee may
Operating Management Agreement Page 2
<PAGE> 3
be calculated based on estimated revenues as determined by NCTV in good faith.
Any differences between estimated and actual revenues shall be reflected as an
adjustment to the Management Fee paid for the third month of any quarter. No
Management Fee shall be payable to NTC if, before or after giving effect
thereto, NCTV has defaulted on, or has committed an unmatured default of, its
credit agreement with its lenders. Any such Management Fee which may not be paid
shall be deferred; the Management Fee so deferred shall be paid only as may be
permitted under NCTV's credit agreement with its lenders.
7. Bank accounts. NCTV will maintain separate Managers' Accounts and
separate depository accounts.
8. Assignment. This Agreement may not be assigned by either party hereto
without the prior written consent of the other party.
9. Miscellaneous. This Agreement contains the entire agreement between the
parties and no modification, extension, termination, or waiver of this Agreement
or any of the provisions hereof shall be binding upon the parties hereto unless
made in writing and signed by the parties hereto. The captions hereof are for
convenience only and shall not control or affect the meaning or construction of
any of the provisions of this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of Washington.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed as of the date first written above.
"NTC" NORTHLAND TELECOMMUNICATIONS CORPORATION
By /s/ JAMES A. PENNEY
----------------------------------
Its Vice President
--------------------------------
"NCTV" NORTHLAND CABLE TELEVISION, INC.
By /s/ JAMES A. PENNEY
----------------------------------
Its Vice President
--------------------------------
Operating Management Agreement Page 3
<PAGE> 4
REPLACEMENT EXHIBIT A
This is Replacement Exhibit A to that certain Operating Management
Agreement dated as of August 23, 1994 by and between Northland Cable Television,
Inc. and Northland Telecommunications Corporation.
OWNED CABLE TELEVISION SYSTEMS
CALIFORNIA
o The Oakhurst cable television system serves Oakhurst, Ahwanee, Bass lake
and Cedar Valley.
o The Coarsegold cable television system serves Coarsegold.
o The Fish Camp cable television system serves Fish Camp and nearby
unincorporated Madera County.
o The Mariposa cable television system serves Mariposa.
o The Lush Meadows cable television system serves Lush Meadows and nearby
unincorporated Mariposa County.
o The Yreka cable television system serves Yreka, Montague and nearby
unincorporated Siskiyou County.
GEORGIA
o The Statesboro cable television system serves Statesboro, Brooklet and
nearby unincorporated Bulloch County.
OREGON
o The Woodburn cable television system serves Woodburn, Hubbard, Gervais and
nearby unincorporated Marion County.
SOUTH CAROLINA
o The Liberty cable television system serves Liberty, Pickens, Norris, Six
Mile and nearby unincorporated Pickens County.
o The Seneca cable television system serves Seneca, Clemson, Central,
Pendleton, Walhalla, Westminster, West Union and nearby unincorporated
counties of Pickens, Anderson and Oconee.
o The "Five Points" cable television system serves unincorporated Oconee
County near Westminster.
TEXAS
o The Crockett cable television system serves Crockett.
o The Madisonville cable television system serves Madisonville and nearby
unincorporated Madison County.
o The Waterwood cable television system serves unincorporated San Jacinto
County known as Waterwood.
o The Stephenville cable television system serves Stephenville.
o The Dublin cable television system serves Dublin.
o The Hico cable television system serves Hico.
o The Marble Falls cable television system serves Marble Falls, Meadowlakes,
Horseshoe Bay (Burnet County and Llano County), Cottonwood Shores and Oak
Ridge Estates.
o The Burnet cable television system serves Burnet.
o The Kingsland cable television system serves Kingsland, Granite Shoals,
Lake L. B. Johnson (Burnet County and LIano County), Sunrise Beach and
Highland Haven.
o The Llano cable television system serves Llano.
Replacement Exhibit A
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<PAGE> 5
o The West Lake Buchanan cable television system serves West Lake Buchanan
and Inks Lake (Llano County and Burnet County).
o The Mexia cable television system serves Mexia, Lake Mexia, Tehuacana and
Groesbeck.
o The Coolidge cable television system serves Coolidge.
o The Fairfield cable television system serves Fairfield and Teague.
o The Wortham cable television system serves Wortham.
o The Jewett cable television system serves Jewett.
o The Buffalo system serves Buffalo.
o The Marlin system serves Marlin.
o The Navasota cable television system serves Navasota.
WASHINGTON
o The Bainbridge Island cable television system serves Bainbridge Island,
Suquamish, Indianola and Sandy Hook.
o The Moses Lake cable television system serves Moses Lake and nearby
unincorporated Grant County.
o The Ephrata cable television system serves Ephrata, Soap Lake and nearby
unincorporated Grant County.
o The Othello cable television system serves Othello and nearby
unincorporated Adams County.
o The Port Angeles cable television system serves Port Angeles and nearby
unincorporated Clallam County.
Replacement Exhibit A
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<PAGE> 1
EXHIBIT 10.3
ASSET PURCHASE AND SALE AGREEMENT
DATED AS OF AUGUST 27, 1997
BY AND BETWEEN
INTERMEDIA PARTNERS OF CAROLINA, L.P.
AND
ROBIN CABLE SYSTEMS, L.P.
AS SELLERS
AND
NORTHLAND CABLE TELEVISION, INC.
AS BUYER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE 1 Definitions.............................................................1
1.1 Accounts Payable........................................................1
1.2 Accounts Receivable.....................................................2
1.3 Affiliate...............................................................2
1.4 Agreement...............................................................2
1.5 Assumed Contracts.......................................................2
1.6 Assets..................................................................2
1.7 Authorities.............................................................2
1.8 Basic Subscriber........................................................2
1.9 Basic Subscriber Rate...................................................3
1.10 Business................................................................3
1.11 Business Day............................................................3
1.12 Code....................................................................3
1.13 Communications Act......................................................3
1.14 Contracts...............................................................3
1.15 Current Assets..........................................................3
1.16 Current Liabilities.....................................................4
1.17 Deferred Revenue........................................................4
1.18 Equipment...............................................................4
1.19 Excluded Assets.........................................................4
1.20 FCC.....................................................................4
1.21 Financial Statements....................................................4
1.22 Franchises..............................................................5
1.23 Franchise Areas.........................................................5
1.24 GAAP....................................................................5
1.25 Governmental Authority..................................................5
1.26 Governmental Permits....................................................5
1.27 Intangibles.............................................................5
1.28 Legal Rules.............................................................5
1.29 Necessary Consents......................................................5
1.30 Nonstandard Charges.....................................................6
1.31 Other Current Liabilities...............................................6
1.32 Prepaid Expenses........................................................6
1.33 Real Property...........................................................6
1.34 Required Consents.......................................................6
1.35 Rules and Regulations...................................................6
1.36 Signals.................................................................6
1.37 Subscriber..............................................................6
1.38 Subscriber Adjustment...................................................6
1.39 Systems.................................................................6
1.40 Taxes...................................................................7
1.41 Working Capital Adjustment..............................................7
1.42 Other Definitions.......................................................7
ARTICLE 2 Purchase and Sale.......................................................8
2.1 Purchase and Sale of Assets.............................................8
2.2 Assumed Obligations.....................................................8
2.3 Purchase Price and Payment..............................................8
2.4 Preliminary and Final Adjustments.......................................9
2.5 Disputed Liabilities.................................................. 10
2.6 Completion of Purchase and Sale....................................... 11
</TABLE>
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<TABLE>
<CAPTION>
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ARTICLE 3 Representations and Warranties of Sellers............................. 11
3.1 Organization and Qualification........................................ 11
3.2 Sellers' Authority.................................................... 11
3.3 Enforceability........................................................ 11
3.4 Approvals............................................................. 12
3.5 Compliance with Laws.................................................. 12
3.6 Compliance with Other Instruments..................................... 12
3.7 Complete System....................................................... 12
3.8 Title and Encumbrances................................................ 13
3.9 Cable Plant and Homes Passed.......................................... 13
3.10 Franchises............................................................ 13
3.11 Authorities........................................................... 14
3.12 Contracts............................................................. 14
3.13 Real Property......................................................... 14
3.14 Environmental Laws.................................................... 14
3.15 Carriage of Signals and Channel Capacity.............................. 15
3.16 FCC and Copyright..................................................... 15
3.17 Profit and Loss Statements............................................ 16
3.18 Litigation............................................................ 16
3.19 Employees and Employee Benefits....................................... 17
3.20 Commissions........................................................... 18
ARTICLE 4 Representations and Warranties of Buyer............................... 18
4.1 Organization and Qualification........................................ 18
4.2 Buyer Authority....................................................... 18
4.3 Enforceability........................................................ 18
4.4 Approvals............................................................. 19
4.5 Compliance with Other Instruments..................................... 19
4.6 Commissions........................................................... 19
ARTICLE 5 Covenants of Sellers.................................................. 19
5.1 Access to System...................................................... 19
5.2 Continuity and Maintenance of Operations.............................. 20
5.3 Compliance with Contracts and Laws.................................... 20
5.4 Adverse Changes....................................................... 20
5.5 Line Extensions and Rebuilds.......................................... 20
5.6 Taxes................................................................. 20
ARTICLE 6 Other Covenants....................................................... 21
6.1 Confidentiality....................................................... 21
6.2 HSR Notification...................................................... 22
6.3 Required Consents and Estoppel Certificates........................... 23
6.4 Franchise Transfer Expenses........................................... 23
6.5 Employee Matters...................................................... 23
ARTICLE 7 Conditions Precedent to Obligations of Buyer.......................... 27
7.1 Conditions Precedent.................................................. 27
7.2 Waiver................................................................ 27
ARTICLE 8 Conditions Precedent to Obligations of Sellers........................ 28
8.1 Conditions Precedent.................................................. 28
8.2 Waiver................................................................ 29
ARTICLE 9 Closing............................................................... 29
9.1 Closing............................................................... 29
</TABLE>
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<TABLE>
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<S> <C> <C>
9.2 Closing Documents..................................................... 29
ARTICLE 10 Indemnification....................................................... 31
10.1 Indemnification by Sellers............................................ 31
10.2 Indemnification by Buyer.............................................. 32
10.3 Notice and Right To Defend Third-Party Claims......................... 33
10.4 Notice and Right to Remediate......................................... 34
10.5 Mitigation............................................................ 35
10.6 Exclusive Remedy...................................................... 35
ARTICLE 11 Termination........................................................... 35
11.1 Termination Events.................................................... 35
11.2 Manner of Exercise.................................................... 36
11.3 Effect of Termination................................................. 36
ARTICLE 12 General............................................................... 36
12.1 Covenant Not To Sue and Nonrecourse to Partners....................... 36
12.2 Assignment............................................................ 37
12.3 Parties in Interest................................................... 38
12.4 Time of Essence....................................................... 38
12.5 Severability.......................................................... 38
12.6 Amendment............................................................. 38
12.7 Terms................................................................. 38
12.8 Headings.............................................................. 38
12.9 Entire Understanding; Schedules....................................... 38
12.10 Counterparts.......................................................... 38
12.11 Applicable Law........................................................ 39
12.12 Notices............................................................... 39
12.13 Further Acts.......................................................... 40
12.14 Expenses.............................................................. 40
12.15 Attorneys' Fees....................................................... 40
12.16 Judicial Proceedings.................................................. 40
</TABLE>
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<PAGE> 5
EXHIBITS
- --------
Exhibit A Escrow Agreement
Exhibit B Franchise Consent Form
Exhibit C Assignment, Assumption & Consent - Leases
Exhibit D Assignment, Assumption & Consent - Contracts
Exhibit E Receipt
Exhibit F Bill of Sale
Exhibit G FIRPTA Certificate
Exhibit H Certificate of Sellers
Exhibit I Opinion of Sellers' Counsel
Exhibit J Assumption Agreement
Exhibit K Opinion of Buyer's Counsel
Exhibit L Certificate of Buyer
Exhibit M Post-Closing Escrow Agreement
SCHEDULES
- ---------
Schedule 1 The Businesses (including Rate Schedules)
Schedule 0 Assumed Contracts
Schedule 1.18 Vehicles
Schedule 0 Excluded Assets
Schedule 0 Franchises
Schedule 0 Necessary Consents
Schedule 0 Required Consents
Schedule 2.3 Purchase Price Allocation
Schedule 0 Contracts and Instruments
Schedule 0 Real Property
Schedule 0 Environmental Disclosure
Schedule 0 Financial Statements
Schedule 0 Material Changes
Schedule 0 Litigation
Schedule 0 Employees and Employment Agreement
Schedule 0 Collective Agreements
Schedule 0 Employment Benefit Plans
Schedule 0(d) Sellers' Welfare Plans
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ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT is made as of August 27, 1997, by
and between INTERMEDIA PARTNERS OF CAROLINA, L.P., a California limited
partnership ("IP-Carolina"), and ROBIN CABLE SYSTEMS, L.P., a California limited
partnership ("RCS," and together with IP-Carolina, each referred to herein
individually as "Seller," and collectively as "Sellers"), and NORTHLAND CABLE
TELEVISION, INC. ("Buyer").
RECITALS
A. RCS, through its ownership and operation of various assets,
provides cable television and related services to subscribers located in the
vicinities of Aiken, Allendale, Barnwell, Bamberg, Edgefield, McCormick, Saluda
and Ware Shoals, South Carolina, including all franchised communities listed on
SCHEDULE 1 (the "A System").
B. IP-Carolina, through its ownership and operation of various
assets, provides cable television and related services to subscribers located in
the vicinity of Bennettsville, South Carolina, including all franchised
communities listed on SCHEDULE 1 (the "B System") and Greenwood, South Carolina,
including all franchised communities listed on SCHEDULE 1 (the "C System," and
together with the A System and the B System, the "Systems").
C. Sellers desire to sell to Buyer, and Buyer desires to purchase
from Sellers, subject to the terms and conditions contained in this Agreement,
substantially all of the assets, rights, privileges, interests, business and
properties owned, leased, held or utilized by Sellers to operate and maintain
the Systems.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, Sellers and Buyer
agree as follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms shall have the following
meanings:
1.1 Accounts Payable. The book value of all accounts payable of the
Systems relating to the conduct of the Businesses determined as of the Closing
Date in accordance with GAAP on a basis consistent with the application of such
principles in the preparation of the Financial Statements.
1.2 Accounts Receivable. All accounts receivable of the
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<PAGE> 7
Sellers representing amounts owed to the Sellers in connection with their
operation of the Businesses.
1.3 Affiliate. With respect to any person or entity, any other
person or entity owning a majority interest in or controlling such person or
entity, or owned or controlled by or under common ownership or control with such
person or entity, where "control" (and its corollaries) includes ownership of
interests representing a majority of total voting power in an entity, and
"ownership" (and its corollaries) includes ownership of a majority of the equity
interests in an entity.
1.4 Agreement. This Asset Purchase and Sale Agreement dated as of
August 27, 1997 between Sellers and Buyer, as the same may be amended from time
to time.
1.5 Assumed Contracts. All contracts of the Businesses as set forth
on SCHEDULE 0.
1.6 Assets. All of Sellers' right, title and interest in all
properties, privileges, rights, interests and claims, real and personal,
tangible and intangible, of every type and description that are owned, leased,
held for or used exclusively in the Businesses in which Sellers have any right,
title or interest or in which Sellers acquire any right, title or interest on or
before the Closing Date, including Governmental Permits, Intangibles, Contracts,
Equipment and Real Property, but excluding any Excluded Assets.
1.7 Authorities. Any and all approvals, consents, rights,
certificates, orders, franchises, determinations, permissions, licenses,
authorities or grants issued, noticed, declared, designated or promulgated by
any Governmental Authority; excluding, however, the Franchises.
1.8 Basic Subscriber. As of any date and for each Franchise Area
served by the Systems, without duplication, the aggregate of all of the
following which are receiving basic cable television service ("Basic Services")
provided by the Systems: (a) private residential customer accounts that are
billed by individual unit (regardless of whether such accounts are in single
family homes or in individually billed units in apartment houses and other
multi-unit buildings) (excluding Nonstandard Charges (as defined herein)) each
of which shall be counted as one "Basic Subscriber;" and (b) all commercial,
bulk-billed and other accounts not billed by individual unit, such as hotels,
motels, apartment houses and multi-family homes, provided that the number of
"Basic Subscribers" serviced by each such account shall be deemed to be an
amount equal to the quotient of (x) the aggregate monthly Basic Services revenue
and expanded basic cable television service revenue derived by the Systems from
such accounts (excluding any Nonstandard Charges), in each case for the last
calendar month preceding the date of such determination, divided by (y) the
Basic Subscriber Rate in effect on the date of such
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determination. Notwithstanding the foregoing, the term "Basic Subscriber" shall
not include any commercial, residential or other subscriber who (A) has not paid
for at least one (1) month of service, or (B) is more than sixty (60) days
delinquent from the date of billing on five dollars ($5.00) or more due to
either Seller.
1.9 Basic Subscriber Rate. For each Franchise Area, the monthly fees
and charges for the provision of both "basic service" and "expanded basic
service" (as such terms are customarily used in the cable television industry
and excluding any charges for additional outlets and installation fees and
revenues derived from the rental of converters, remote control devices and other
like charges for equipment) charged to customers served by the Systems, as of
the end of the last full month prior to the Closing Date.
1.10 Businesses. The individual cable television businesses conducted
by Sellers on the date of this Agreement through the Systems in the Franchise
Areas, as described on SCHEDULE 1.
1.11 Business Day. Any day other than Saturday, Sunday or a day on
which banking institutions in either San Francisco, California or New York, New
York are required or authorized to be closed.
1.12 Code. The Internal Revenue Code of 1986, as amended.
1.13 Communications Act. The Communications Act of 1934, as amended,
including, but not limited to, by the Cable Communication Policy Act of 1984 and
by the Cable Television Consumer Protection and Competition Act of 1992, and the
rules and regulations promulgated thereunder.
1.14 Contracts. Any and all leases of real and personal property,
private easements, rights-of-way, rights of access, contracts for easements,
pole line or pole attachment agreements, joint line agreements, underground
conduit agreements, wire or cable crossing agreements, contracts with
Subscribers, bulk and commercial service agreements relating to the Systems, and
any other agreements with third parties relating to the Systems.
1.15 Current Assets. The sum of (a) Accounts Receivable as of the
Closing Date which have not been outstanding for more than ninety (90) days, net
of any credit balances due to subscribers, and (b) Prepaid Expenses.
1.16 Current Liabilities. The sum of (a) Accounts Payable, (b)
Deferred Revenue, and (c) Other Current Liabilities.
1.17 Deferred Revenue. Liabilities to Subscribers
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representing advance billings for services to be performed by Buyer after the
Closing Date.
1.18 Equipment. All electronic devices, trunk and distribution
coaxial and optical fiber cable, amplifiers, power supplies, conduit, vaults and
pedestals, grounding and pole hardware, Subscriber's devices (including
converters, encoders, transformers behind television sets and fittings), headend
hardware (including origination, earth stations, transmission and distribution
system), test equipment, vehicles and other tangible personal property owned,
leased, used or held for use in the Businesses. SCHEDULE 1.18 lists each vehicle
owned, used or held for use in the Businesses.
1.19 Excluded Assets. All (a) insurance policies and rights and
claims thereunder; (b) bonds, letters of credit, surety instruments, notes and
other similar items; (c) cash and cash equivalents; (d) Sellers' rights under
any agreement governing or evidencing an obligation of any Seller for borrowed
money; (e) Sellers' rights under any contract, license, authorization, agreement
or commitment other than those creating or evidencing Assumed Contracts; (f)
claims, rights and interests in and to any refunds for federal, state or local
franchise, income or other taxes or fees (including, without limitation,
copyright fees) of any nature whatsoever relating to such taxes or fees payable
for taxable periods, or portions thereof, ending on or prior to the Closing
Date; (g) assets or properties owned by Sellers that are unrelated to the
Businesses; (h) assets of any Employee Plan or arrangement, except as expressly
provided in Section 0; (i) Sellers' names and all trademarks, servicemarks and
copyrights owned by Sellers; (j) Sellers' billing contracts; provided that
Sellers shall offer Buyer billing services related to the Businesses at Sellers'
actual cost at the time of providing such service, for a period of ninety (90)
days following the Closing, which period shall be extended at Buyer's option for
an additional thirty (30) days, and shall cooperate with Buyer to effect the
transition of billing services from Sellers' service provider to Buyer's service
provider; (k) programming and carriage agreements, except as described on
SCHEDULE 0; and (l) the assets described on SCHEDULE 0.
1.20 FCC. The Federal Communications Commission or any successor
agency.
1.21 Financial Statements. The financial statements attached as
SCHEDULE 0 and described in Section 0.
1.22 Franchises. The franchises set forth on SCHEDULE 0 hereof.
1.23 Franchise Areas. The areas in which Sellers are authorized to
provide cable television service under the Franchises, and the areas, if any,
served by the Systems in which Sellers provide cable television service without
a
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Franchise.
1.24 GAAP. Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
1.25 Governmental Authority. Any nation or government, any state,
province or other political subdivision thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
1.26 Governmental Permits. All franchises, approvals, authorizations,
permits, licenses, easements, registrations, qualifications, leases and similar
rights obtained from any Governmental Authority.
1.27 Intangibles. All intangible assets, including subscriber lists,
accounts receivable, claims (excluding any claims relating to Excluded Assets),
patents, copyrights and goodwill, if any, owned, used or held for use in the
Businesses.
1.28 Legal Rules. The requirements of all federal, state, municipal
or local laws, codes, statutes, ordinances, orders, judgments, decrees,
injunctions, franchises, determinations, approvals, rules, regulations, permits,
licenses, authorizations, certificates, notices, demand letters, circulars,
opinion letters and directions, of all Governmental Authorities.
1.29 Necessary Consents. All material franchises, licenses,
authorizations, approvals and consents required under Governmental Permits,
Contracts or otherwise for (a) Sellers to transfer the Assets and the Businesses
to Buyer, (b) Buyer to conduct the Businesses and to own, lease, use and operate
the Assets at the places and in the manner in which the Businesses are conducted
as of the date of this Agreement and on the Closing Date and (c) Buyer to assume
and perform the Governmental Permits and Contracts. SCHEDULE 0 sets forth all
Necessary Consents.
1.30 Nonstandard Charges. Any charges for taxes, second connects,
additional outlets, installation fees, deposits and other non-recurring items
and any charges for the rental of converters, remote control devices and other
like charges for equipment.
1.31 Other Current Liabilities. All current liabilities (including,
but not limited to, accrued vacation pay of
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employees of Sellers, subscriber security deposits and customer advance
payments, but excluding (i) Accounts Payable and (ii) Deferred Revenue) of the
Systems relating to the conduct of the Businesses determined as of the Closing
Date in accordance with GAAP on a basis consistent with the application of such
principles in the preparation of the Financial Statements.
1.32 Prepaid Expenses. The book value of prepaid expenses and
miscellaneous prepaids (in each case, only to the extent constituting a current
asset) of the Systems with respect to the Businesses determined as of the
Closing Date in accordance with GAAP on a basis consistent with the application
of such principles in the preparation of the Financial Statements, to the extent
that such prepaid expenses will accrue to the benefit of Buyer upon and after
the Closing Date.
1.33 Real Property1.33 Real Property. All assets consisting of
realty, including appurtenances, improvements and fixtures located on such
realty, and any other interests in real property, including fee interests in
Sellers' offices and headend sites and leasehold interests and easements,
licenses, rights-of-way or other real property rights used or held for use in
the Businesses, but excluding any Excluded Assets.
1.34 Required Consents. Those Necessary Consents which must be
obtained prior to Closing. SCHEDULE 0 sets forth all Required Consents.
1.35 Rules and Regulations. Rules and Regulations of the FCC, as in
effect from time to time.
1.36 Signals. The transmissions, except radio signals (whether
television, satellite or otherwise), of video programming or other information
that the Systems make available to all Subscribers generally.
1.37 Subscriber. A Basic Subscriber of the Systems.
1.38 Subscriber Adjustment. An amount equal to the product of (x)
$1,925 and (y) the difference between 47,000 and the actual number of Basic
Subscribers in the Systems as of the Closing Date if such difference is greater
than 470.
1.39 Systems. The individual cable television reception and
distribution systems operated in the conduct of the Businesses, each of which is
capable of being operated, without modification, as an independent system
without interconnections to other systems.
1.40 Taxes. Any and all governmental or quasi-governmental fees
(including, without limitation, license, filing and registration fees), taxes
(including, without limitation, income, gross receipts, franchise, sales, use,
property, real or personal, tangible or intangible taxes), interest
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equalization and stamp taxes, assessments, levies, imposts, duties, charges,
required contributions or withholdings of any kind or nature whatsoever,
together with any and all penalties, fines or interest thereon. For purposes of
determining any Tax cost or Tax benefit to any person, such amount will be the
actual cost or benefit recognized by such person at the time of actual payment
of the additional Tax or actual recognition of the Tax benefit. In the event
that any payment or other amount is required to be determined on an after-Tax
basis, such payment or other amount will initially be determined without regard
to any Tax cost or Tax benefit not actually recognized currently, and
appropriate adjustments will be made when and to the extent that such Tax cost
or Tax benefit is actually recognized.
1.41 Working Capital Adjustment. The number obtained by subtracting
(x) the sum of the Current Liabilities existing (as defined and determined in
accordance with GAAP) of Seller existing on the Closing Date which constitute
assumed Current Liabilities, from (y) the sum of the Current Assets (as defined
and determined in accordance with GAAP, except that inventory and cash shall not
be included as a current asset) of Sellers on the Closing Date which are
included within the Assets.
1.42 Other Definitions. In addition, the following terms have the
meanings given them in the following sections:
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Adjustment Time 0
Buyer's DC Plan 0
Buyer's Welfare Plans 0
CLI 0
Closing 0
Closing Date 0
COBRA 0
Copyright Act 0
Deposit 0
Employee Plans 0
Employment Transfer Date 0
Environmental Law 0
ERISA 0
ERISA Affiliate 0
Final Adjustments Report 0
Hazardous Substance 0
HSR Act 0
HSR Adjustment 0
Indemnifiable Damages 0
Indemnitee 0
Indemnitor 0
Lien 0
New Employees 0
Nonrecourse 0
Nontransferring Employees 0
Preliminary Adjustments Report 0
</TABLE>
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<TABLE>
<S> <C>
Prospective Employees 0
Purchase Price 0
Sellers' DC Plan 0
Sellers' Welfare Plans 0
Transaction Document 0
</TABLE>
ARTICLE 2
Purchase and Sale
2.1 Purchase and Sale of Assets. Subject to the terms and conditions
hereinafter set forth, Buyer hereby agrees to purchase from Sellers, and Sellers
hereby agree to sell to Buyer, the Assets. Sellers will retain, and Buyer hereby
does not purchase, the Excluded Assets.
2.2 Assumed Obligations. Concurrently with the purchase described in
Section 0 and subject to the terms and conditions hereinafter set forth, Buyer
shall assume and agree to pay when due, and perform, those obligations, but only
those obligations, that (i) constitute the Current Liabilities, (ii) arise on or
after the Closing Date under all Franchises and Assumed Contracts, or (iii)
arise out of its ownership and operation of the Assets after the Closing Date.
2.3 Purchase Price and Payment.
(a) The consideration to be paid for the Assets shall be ninety
million, four hundred seventy-five thousand dollars ($90,475,000) in cash
adjusted as hereinafter provided (the "Purchase Price"). SCHEDULE 2.3 sets forth
the manner in which the Purchase Price is to be allocated among the Assets.
Notwithstanding the foregoing, in the event that after the adjustments the
Purchase Price is less than eighty-five million, nine hundred fifty-one
thousand, two hundred and fifty dollars ($85,951,250), at Seller's option, this
Agreement may be terminated prior to Closing and, if so terminated, the parties
shall have no further rights or obligations hereunder, except for the respective
obligations of the parties under Sections 0, 12.1 and 0.
(b) On the Closing Date, the Purchase Price shall be:
(i) either
(A) decreased by the Working Capital Adjustment to
the extent it is a negative amount as of the Closing Date; or
(B) increased by the Working Capital Adjustment to
the extent it is a positive amount as of the Closing Date; and
(ii) either increased (up to a maximum of
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$4,523,750) or decreased, as the case may be, for the
Subscriber Adjustment, if any.
(c) To secure Buyer's obligations under this Agreement and the
agreement to be entered into in connection with the acquisition by Buyer of
cable systems located in Royston and Toccoa, Georgia, among others (the
"Royston/Toccoa Sale"), immediately upon execution of this Agreement, Buyer
shall either (i) deposit the amount of $1,000,000 into an escrow account, under
an escrow agreement, the form of which is attached hereto as EXHIBIT A (the
"Escrow Agreement"), or (ii) obtain an irrevocable letter of credit in favor of
the Seller in the amount of $1,000,000 issued by a financial institution
reasonably acceptable to the Seller (in either case, the "Deposit").
(d) All revenues and all expenses arising from the operations of the
Systems until 12:01 a.m. on the Closing Date (the "Adjustment Time") shall be
prorated between Buyer and Sellers as of the Adjustment Time in accordance with
GAAP on the principle that Sellers shall receive all revenues (other than with
respect to Accounts Receivable being purchased by Buyer hereunder) and shall be
responsible for all expenses, costs and liabilities allocable to the period
prior to the Adjustment Time and Buyer shall receive all revenues and shall be
responsible for all expenses, costs and liabilities allocable to the period
after the Adjustment Time.
2.4 Preliminary and Final Adjustments. Preliminary and final
adjustments to the Purchase Price will be determined as follows:
(a) At least ten (10) Business Days prior to the Closing Date,
Sellers will deliver to Buyer a report (the "Preliminary Adjustments Report"),
prepared in good faith and on a reasonable basis and in a manner consistent with
the Financial Statements, setting forth in reasonable detail a pro forma
determination as of the Closing Date of the adjustments and prorations set forth
in Section 0. The Preliminary Adjustments Report shall: (i) contain all
information reasonably necessary to determine such adjustments and prorations
and such other information as may be reasonably requested by Buyer; (ii) be
prepared in accordance with GAAP; and (iii) be certified by an authorized
officer of Sellers to be true, correct and complete as of the date thereof.
Within five (5) Business Days after receipt of such report, Buyer shall give
Sellers written notice of any objections. If Buyer makes any such objections,
the parties shall agree on the amount, if any, which is not in dispute within
two (2) Business Days after Sellers' receipt of Buyer's objections thereto. Any
undisputed amounts shall be paid by the party responsible therefor to the other
party upon the Closing, and the remaining disputed amounts shall be determined
in the Final Adjustments Report.
(b) Within sixty (60) days after the Closing Date, Buyer
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shall deliver to Sellers a report (the "Final Adjustments Report"), prepared in
good faith and on a reasonable basis and similarly certified by Buyer, setting
forth in reasonable detail the final determination of all adjustments that were
not calculated as of the Closing Date and containing any corrections to the
Preliminary Adjustments Report.
(c) Within fifteen (15) days after receipt of the Final Adjustments
Report, Sellers shall notify Buyer of its objections, if any. Any amount which
is not in dispute shall, within five (5) Business Days of the expiration of the
review period, be paid in cash by wire or interbank transfer in immediately
available funds as follows: (i) if the Purchase Price calculated based on the
Final Adjustments Report is greater than the Purchase Price calculated based on
the Preliminary Adjustments Report, Buyer shall pay such difference to Sellers,
or (ii) if the Purchase Price is less, Sellers shall pay such difference to
Buyer. In the event any payment required by this Section 0(c) or by Section
2.4(d) is not made when due, Sellers or Buyer, as appropriate, shall make the
payment required by this Section 0(c) with interest accruing from the date such
payment was due at a rate of ten percent (10%) per annum.
(d) Any disputed amounts will be determined within ninety (90) days
after the Closing Date by the San Francisco, California office of the accounting
firm of Price Waterhouse, whose determination will be conclusive. Sellers and
Buyer will bear equally the fees and expenses payable to such firm in connection
with such determination. The payment required after determination of all
disputed amounts will be made by the responsible party by wire transfer of
immediately available funds to the other party within three (3) Business Days
after the final determination.
2.5 Disputed Liabilities. If a proration or adjustment to the
Purchase Price is made in Buyer's favor for any liability assumed by Buyer but
is in good faith being contested by Sellers as of the Closing Date, and if Buyer
is relieved of this liability, Buyer shall pay to Sellers or its designee in
cash (by means of wire or interbank transfer in immediately available funds) an
amount equal to the portion of this liability so relieved within five (5)
Business Days after the date Buyer is relieved of this liability. In the event
any payment required by this Section 0 is not made by Buyer when due, Buyer
shall make the payment required by this Section 0 with interest accruing from
the date Buyer was relieved of such liability at a rate of ten percent (10%) per
annum.
2.6 Completion of Purchase and Sale. The purchase and sale of the
Assets shall be completed in accordance with Article 0 (the "Closing"). Within
five (5) Business Days of fulfillment of all conditions to Closing, Buyer and
Sellers shall mutually agree upon the date of Closing (the "Closing Date"),
which date shall not be later than December 31, 1997.
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The Closing shall take place in the offices of Pillsbury Madison & Sutro LLP,
235 Montgomery Street, San Francisco, California 94104.
ARTICLE 3
Representations and Warranties of Sellers
As a material inducement to Buyer to enter into this Agreement, each
Seller, severally and not jointly, represents and warrants to Buyer the
following:
3.1 Organization and Qualification. Each Seller is a limited
partnership duly organized, validly existing and in good standing under the laws
of California and has all requisite power and authority to own, lease and use
the Assets as they are currently owned, leased and used and to conduct the
Businesses as currently conducted. Each Seller is duly qualified or licensed to
do business and is in good standing under the laws of the State of South
Carolina.
3.2 Sellers' Authority. Each Seller has the partnership right,
power, legal capacity and authority to execute, deliver and (subject to the
receipt of the Necessary Consents) perform its obligations under this Agreement
and the documents, instruments and certificates to be executed and delivered by
Sellers pursuant to this Agreement. The execution and delivery of, and
performance of the obligations contained in, this Agreement by each Seller and
the transactions contemplated hereby have been, and all documents, instruments
and certificates have been or as of the Closing will be, duly authorized by all
necessary partnership action on the part of each Seller.
3.3 Enforceability. The terms and provisions of this Agreement and
all documents, instruments and certificates made or delivered from time to time
by Sellers hereunder and thereunder constitute valid and legally binding
obligations of Sellers, enforceable against Sellers in accordance with the terms
hereof and thereof, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting generally the
enforcement of creditors' rights and by general principles of equity.
3.4 Approvals. SCHEDULE 0 sets forth all Necessary Consents. Except
for the Necessary Consents and compliance with the HSR Act, the execution,
delivery and performance of this Agreement by Sellers does not require any
material consent which has not been made, given or otherwise accomplished.
3.5 Compliance with Laws. Each Seller is in material compliance with
all Legal Rules imposed by any Governmental Authority having jurisdiction over
Sellers, the Businesses, the Assets or the Systems, and of any jurisdiction in
which the
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Systems are being operated or conducted, including, but not limited to, the
Communications Act.
3.6 Compliance with Other Instruments.
(a) The execution and delivery of this Agreement and (subject to the
receipt of the Necessary Consents) the consummation of the transactions
contemplated hereunder do not and will not result in a breach or violation of
any term or provision of, or result in the imposition of any Lien upon any
Assets or any properties of Sellers pursuant to, or constitute a breach or
default (including any event that, with the passage of time or giving of notice,
or both, would become a breach or default) under the partnership agreement of
either Seller or under any material contract, agreement, Authority, Legal Rule,
license, lease, indenture, mortgage, loan agreement or note, as to which either
Seller is a party or by which any of the Assets may be affected, except for such
breaches or violations as would not have a material adverse effect on the
Businesses or materially impair the ability of either Seller to perform its
obligations under this Agreement.
(b) Each Seller has complied with all provisions of and is not in
breach or default (including any event that, with the passage of time or giving
of notice, or both, would become a breach or default) under its partnership
agreement or any contract, lease, instrument affecting any parcel of real
property, authority or franchise, or obligation to which it is a party or by
which it is or any of the Assets may be bound or affected, except for such
breaches or violations as would not have a material adverse effect on the
Businesses or materially impair the ability of Sellers to operate their
businesses as presently operated.
3.7 Complete System. The Assets constitute fully operational cable
television systems and include the assets, properties, franchises, licenses,
permits, consents, certificates, authorities, operating rights, leases,
easements, licenses, rights-of-way, contracts, agreements, commitments and
arrangements (excluding programming and carriage agreements) necessary to
operate and maintain the same as operated and maintained on the date hereof.
3.8 Title and Encumbrances. Sellers have good title to and
possession of all of the Assets, free and clear of all Liens, except for the
Permitted Liens. A "Lien" is any interest in property securing an obligation,
whether such interest is based on common law, statute or contract, and
including, but not limited to, any security interest or lien arising from a
mortgage, claim, encumbrance, pledge, charge, easement, servitude, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall also include reservations,
exceptions, covenants, conditions, restrictions, leases, subleases, licenses,
occupancy agreements, pledges, equities,
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<PAGE> 18
charges, assessments, covenants, reservations, defects in title, encroachments
and other burdens, and other title exceptions and encumbrances affecting
property of any nature, whether accrued or unaccrued, or absolute or contingent.
"Permitted Liens" are (a) Liens for taxes not yet due and payable; (b) any
carrier's, warehousemen's, mechanic's, materialmen's, repairmen's or other like
lien arising in the ordinary course of business; (c) easements, rights-of-way,
restrictions, minor encroachments and other similar nonmonetary encumbrances (i)
incurred in the ordinary course of business, and (ii) which do not render the
Asset subject thereto unusable for the purpose intended, materially detract from
the value of the Asset or interfere with the ordinary use of the Asset in the
ordinary course of business; and (d) in the case of real property leased to
Seller, the rights of the fee owner and any lien encumbering the fee interest in
such property.
3.9 Cable Plant and Homes Passed.
As of the Closing Date, the A System will pass no fewer than forty-eight
thousand three hundred (48,300) homes and will consist of no greater than eleven
hundred seventy (1,170) miles of cable plant, the B System will pass no fewer
than nine thousand ninety (9,090) homes and will consist of no greater than one
hundred eighty (180) miles of cable plant, and the C System shall pass no fewer
than twenty-three thousand seventy-five (23,075) homes and will consist of no
greater than four hundred ninety (490) miles of cable plant.
3.10 Franchises.
(a) SCHEDULE 0 lists each Franchise held by Sellers in connection
with the operation or maintenance of the Systems, and the coverage area serviced
thereby.
(b) To Sellers' knowledge, each Franchise is in full force and
effect and no proceeding to revoke, cancel, encumber or adversely affect in any
manner any such Franchise has been initiated or threatened, and Sellers are in
material compliance therewith.
3.11 Authorities. Sellers have all Authorities that are necessary to
carry on the business of the Systems as conducted on the date hereof, except for
such Authorities the failure of which to obtain would not have a material
adverse effect on the Systems. To Sellers' knowledge, each such Authority is in
full force and effect and no proceeding to revoke, cancel, encumber or adversely
affect in any manner any such Authority has been initiated or threatened, and
Sellers are in material compliance therewith.
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3.12 Contracts. SCHEDULE 0 lists all presently effective Contracts
that are material to the conduct of the Businesses as they are now conducted.
Copies of such Contracts as currently in effect have been, or prior to the
Closing will be, made available to Buyer. To Sellers' knowledge, each Contract
is in full force and effect and no action to revoke, cancel or adversely affect
in any manner any such Contract has been initiated or threatened, and Sellers
are in material compliance therewith.
3.13 Real Property.
SCHEDULE 0 contains a list of all Real Property owned in fee or leased
by Sellers which is used for headend equipment, microwave equipment and
satellite earth receiving stations and related facilities, tower and antenna
sites and office facilities in connection with the Systems.
3.14 Environmental Laws.
(a) Except as disclosed on SCHEDULE 0, to Sellers' Actual Knowledge:
(i) none of Sellers' operations on the Real Property is currently subject to any
judicial or administrative proceeding alleging the violation of an Environmental
Law; (ii) none of the Real Property is the subject of any investigation by any
Governmental Authority concerning any release of any Hazardous Substance on the
Real Property; (iii) Sellers have not filed any written notice under any
Environmental Law indicating past or present treatment, storage or disposal of a
hazardous waste on the Real Property or reporting a spill or release of a
Hazardous Substance into the environment from its operations on the Real
Property; (iv) Sellers have no material contingent liability in connection with
any release of any Hazardous Substance into the environment from the Real
Property; (v) no lien in favor of any Governmental Authority for (A) any
liability under Environmental Laws, or (B) damages arising from or costs
incurred in response to a release of any Hazardous Substance into the
environment has been filed or attached to any of the Real Property; and (vi) no
underground storage tanks are currently located on the Real Property and no
building or other structure on the Real Property contains friable asbestos.
(b) "Environmental Law" means a law, regulation, statute or
ordinance pertaining to land use, air, soil, surface water, groundwater
(including the protection, cleanup, removal, remediation or damage thereof)
including, without limitation, the following laws: (i) Clean Air Act (42 U.S.C.
ss. 7401, et seq.); (ii) Clean Water Act (33 U.S.C. ss. 1251, et seq.); (iii)
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901, et seq.); (iv)
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
ss. 9601, et seq.); (v) Safe Drinking Water Act (42 U.S.C. ss. 300f, et seq.);
and (vi) Toxic Substances Control Act (15 U.S.C. ss. 2601, et seq.).
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(c) "Hazardous Substance" means any matter that is designated or
regulated as a pollutant, contaminant or hazardous or toxic substance,
constituent or waste under any Environmental Law.
(d) "Sellers' Actual Knowledge" means that Robert J. Lewis or Rodney
M. Royse has current actual knowledge of the accuracy of such statement, without
any duty of investigation or inquiry.
3.15 Carriage of Signals and Channel Capacity. Sellers have the legal
right and authority, including (without limitation) all necessary authority from
the FCC and the requisite compulsory copyright license under section 111 of
Title 17 of the United States Code, as amended, and all rules and regulations
promulgated thereunder, as amended (the "Copyright Act"), to carry and use in
the conduct of the Businesses all of the Signals. Other than requests for
network nonduplication and syndex protection, no written notices have been
received by Sellers from the FCC or the United States Copyright Office
challenging or questioning the right of Sellers or the Systems to carry or
furnish any of the Signals.
3.16 FCC and Copyright.
(a) Sellers have Cumulative Leakage Index, as defined by the Rules
and Regulations ("CLI"), monitoring equipment which is required by the Rules and
Regulations, and have in connection with their CLI obligations under the Rules
and Regulations (i) maintained appropriate log books and other recordkeeping,
and (ii) filed all annual FCC Form 320s with the FCC.
(b) Sellers have made all material submissions (including, without
limitation, registration statements) required under the Communications Act.
Sellers have delivered to Buyer complete and correct copies of all reports and
filings made or filed pursuant to the Communications Act with respect to the
Systems, a completed and accurate Form 393, Form 1200 Series or other FCC rate
document for the Systems, and all notices alleging noncompliance with the
Communications Act or the Franchises. Sellers have made all material filings
required to be made with the FCC, including cable television registration
statements, annual reports and aeronautical frequency usage notices. Sellers
have all material FCC licenses necessary to operate the Systems and operate such
licensed facilities in conformance with the terms and conditions of such
licenses. The Systems are in compliance with all "must carry" requirements and
have received all retransmission consents.
(c) Sellers have deposited with the United States Copyright Office
all statements of account and other documents and instruments, and paid all
royalties, supplemental royalties, fees and other sums to the United States
Copyright
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Office required under the Copyright Act with respect to the business and
operations of the Systems as are required to obtain, hold and maintain the
compulsory copyright license for cable television systems prescribed in section
111 of the Copyright Act.
3.17 Profit and Loss Statements.
(a) The profit and loss statements with respect to the Systems
furnished by Sellers to Buyer as SCHEDULE 0, which shall include the profit and
loss statements for the year ended December 31, 1996 (the "Financial
Statements") (other than information described as estimated) are (i) true,
complete and correct in all material respects for the respective dates and
periods thereof, subject to changes resulting from normal audit and year-end
adjustments; and (ii) prepared in accordance with GAAP (provided that there are
no footnotes and accompanying balance sheets, statement of sources and uses of
funds or statements of stockholders' equity), in each case consistently applied
throughout the applicable period.
(b) Except as disclosed on SCHEDULE 0, since June 30, 1997, there
has been no material adverse change in the condition, financial or otherwise,
results of operations, revenues, expenses, gross operating profits, assets or
liabilities (contingent or otherwise) of the Businesses.
3.18 Litigation. Except as set forth on SCHEDULE 0, (a) there is no
material claim, grievance, action, proceeding or governmental investigation
pending or, to Sellers' knowledge, threatened against Sellers or affecting any
of the Assets or the Systems; and (b) there is no material outstanding or
unsatisfied judgment, order or decree to which either Seller is a party or which
involves the transactions contemplated herein.
3.19 Employees and Employee Benefits.
(a) Employment Agreements. SCHEDULE 0 sets forth a list of all
employees of the Systems as of June 30, 1997 and the position and base
compensation paid or payable to each such individual. Except as described on
SCHEDULE 0, neither Seller is a party to any written employment contract,
agreement, commitment or arrangement with any individual identified on
SCHEDULE 0.
(b) Collective Agreements. Except as described in SCHEDULE 0, (i)
neither Seller is party to or subject to any labor union or collective
bargaining agreement with respect to any employee of the Systems, (ii) neither
Seller is party to any labor or employment dispute as it relates to the Systems
and their employees, and (iii) to the knowledge of Sellers, no labor union or
bargaining agent holds bargaining rights with respect to any employee of the
Systems or has applied or indicated an intention to apply to be certified as the
bargaining agent of any employee of the Systems.
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(c) Employee Benefit Plans. SCHEDULE 0 lists each pension benefit,
welfare benefit, stock option, stock purchase, disability, vacation pay,
incentive bonus, severance pay, deferred compensation, supplemental income or
other employee benefit plan, policy or arrangement or agreement, including each
"employee benefit plan" within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), maintained by or
contributed to by the Sellers covering current or former employees of the
Systems or their dependents or survivors (collectively referred to as "Employee
Plans"). Sellers have provided or, upon Buyer's request, will provide or make
available to Buyer prior to the Closing Date complete, accurate and current
copies of the plan document(s) of each Employee Plan, summary plan descriptions
and other descriptive materials provided to employees and, in the case of an
Employee Plan intended to qualify under section 401(a) of the Code, a copy of
the most recent Internal Revenue Service determination letter of such Employee
Plan's qualified status.
(d) Employee Benefit Plan Compliance. No material liabilities, other
than for payment of benefits in the ordinary course, have been incurred with
respect to the Employee Plans. Having made due inquiry, Sellers:
(i) Know of no circumstances relating to an Employee Plan
intended to qualify under section 401(a) of the Code that would likely
be treated by the Internal Revenue Service as a disqualifying defect;
(ii) Know of no facts reasonably likely to result in any
material liability (whether or not asserted as of the date hereof) of
Sellers arising by virtue of any event, act or omission occurring prior
to the Closing Date with respect to any Employee Plan; and
(iii) Know of no liens under Code section 412(n) or ERISA
section 4069(a), nor liabilities under ERISA section 4069(a) or 4201(a),
in effect with respect to any Employee Plan that would have a material
adverse effect on the Assets, and know of no facts reasonably likely to
result in the assertion of any such liens or liabilities.
3.20 Commissions. Neither Seller has entered into an agreement,
commitment or obligation with regard to any brokerage commission or finder's fee
which would be payable by Buyer arising out of the execution, delivery or
performance of this Agreement or the transactions contemplated hereby. Sellers
have employed Daniels & Associates and will be responsible for their fees and
expenses.
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ARTICLE 4
Representations and Warranties of Buyer
As a material inducement to Sellers to enter into this Agreement, Buyer
represents and warrants to Sellers the following for the benefit of Sellers:
4.1 Organization and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington and, prior to Closing, will be authorized to transact business in all
states in which the Assets are located. Buyer has all necessary corporate power
and authority to own, lease and utilize its properties and assets and to engage
in the business or businesses in which it is presently engaged and in the places
where such property and assets are now owned, leased or utilized or as such
business is now conducted.
4.2 Buyer Authority. Buyer has the corporate right, power, legal
capacity and authority to execute, deliver and perform its obligations under
this Agreement and the documents, instruments and certificates to be executed
and delivered by Buyer pursuant to this Agreement. The execution, delivery and
performance of this Agreement by Buyer and the transactions contemplated hereby
have been, and all documents, instruments and certificates have been or as of
the Closing will be, duly authorized by all necessary corporate action on the
part of Buyer.
4.3 Enforceability. The terms and provisions of this Agreement and
all documents, instruments and certificates made or delivered from time to time
by Buyer hereunder and thereunder constitute valid and legally binding
obligations of Buyer enforceable against Buyer in accordance with the terms
hereof and thereof, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting generally the
enforcement of creditors' rights and by general principles of equity.
4.4 Approvals. Except for compliance with the HSR Act, the
execution, delivery and performance of this Agreement by Buyer and the
consummation by Buyer of the transactions contemplated hereby do not require any
material consent which consent has not been made, given or otherwise
accomplished and satisfactory evidence thereof has been delivered to Sellers.
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4.5 Compliance with Other Instruments.
(a) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereunder do not and will not
result in a breach or violation of any term or provision of Buyer's articles of
incorporation or bylaws or under any contract, agreement, Authority, Legal Rule,
license, lease, indenture, mortgage, loan agreement or note, as to which Buyer
is a party, except for such breaches or violations as would not materially
impair the ability of Buyer to perform its obligations under this Agreement.
(b) Buyer has complied with all provisions of and is not in breach
or default (including any event that, with the passage of time or giving of
notice, or both, would become a breach or default) under its articles of
incorporation or bylaws or any contract, lease, instrument affecting any parcel
of real property, authority or franchise, or obligation to which it is a party
or by which it is bound or affected, except for such breaches or defaults as
would not materially impair the ability of Buyer to operate the Businesses as
presently operated.
4.6 Commissions. Buyer has entered into no agreement, commitment or
obligation with regard to any brokerage commission or finder's fee which would
be payable by Sellers arising out of the execution, delivery or performance of
this Agreement or the transactions contemplated hereby.
ARTICLE 5
Covenants of Sellers
5.1 Access to System. Prior to the Closing Date, Sellers shall give
Buyer's employees and representatives, during normal business hours and with
reasonable prior notice, access to all of the properties, books, accounts,
records, contracts, agreements, commitments, arrangements and documents of or
relating to the Assets and the Systems, and shall permit the making of copies or
extracts thereof. Prior to the Closing Date, Sellers shall furnish to Buyer and
its representatives such existing documentation concerning the operation and
financial condition of the Assets and the Systems as Buyer or any such
representative shall reasonably request.
5.2 Continuity and Maintenance of Operations. Except as to actions
which Buyer has been advised and to which it has consented in writing and except
as specifically permitted or required by this Agreement or required by any Legal
Rule, Sellers shall from the date hereof to the Closing Date, operate the
Businesses in the ordinary course consistent with past practices, and use
reasonable efforts to preserve any beneficial business relationships with
customers, suppliers and others having business dealings with it that are
material to
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the Businesses and use reasonable efforts to keep available to Buyer the
services of present employees of the Systems.
5.3 Compliance with Contracts and Laws. From the date hereof to the
Closing Date, Sellers shall keep in full force and effect and shall comply in
all material respects with all Franchises, Authorities and material Contracts to
which it is a party or by which it or the Assets may be bound or affected and
which are material to the Businesses.
5.4 Adverse Changes. From the date hereof to the Closing Date,
Sellers shall promptly notify Buyer in writing of any material adverse
developments affecting the Systems which become known to Sellers, including,
without limitation: (a) any material adverse change in the condition, financial
or otherwise, of the Systems; (b) any damage, destruction or loss (whether or
not covered by insurance) materially adversely affecting any of the Assets or
the Systems; or (c) any material notice of violation, forfeiture or complaint
under any Franchise.
5.5 Line Extensions and Rebuilds. All line extensions made by
Sellers from the date hereof until the Closing Date shall be built and spaced to
operate at a minimum of 450 MHz. On the Closing Date, Buyer shall reimburse
Sellers for any and all rebuild expenditures incurred by Sellers and approved by
Buyer from the date hereof until the Closing Date.
5.6 Taxes.
(a) Sellers agree to timely file all sales or transfer tax returns
with respect to sales, including the sale of Assets hereunder, occurring on or
before the Closing Date, in connection with the Systems, and Sellers shall
timely pay all sales or transfer taxes applicable to the sales reported on such
tax returns, provided that Buyer cooperates, to the extent required, in the
preparation and execution of such tax returns and related filing.
(b) Sellers and Buyer shall cooperate fully as and to the extent
reasonably requested by the other party in connection with any audit, litigation
or other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. Sellers and Buyer agree (i) to retain all books and records with
respect to Tax matters pertinent to the Assets relating to all taxable periods
until the statute of limitations (including any extensions) as to any taxable
year that may be affected thereby shall have run, (ii) to abide by all record
retention agreements entered into with any Governmental Authority, and (iii) to
give the other party reasonable written notice prior
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to destroying or discarding any such books and records and, if one party so
requests, shall allow the requesting party to take possession of such books and
records proposed for destruction or discard.
(c) No new elections with respect to Taxes or any changes in current
elections with respect to Taxes affecting the Assets shall be made after the
date of this Agreement without the prior written consent of Buyer.
ARTICLE 6
Other Covenants
6.1 Confidentiality.
(a) Neither of the parties hereto shall make any public announcement
regarding the transactions contemplated in this Agreement without the prior
written consent of the other party, which consent shall not be unreasonably
withheld or delayed; provided, however, that either of the parties may at any
time make announcements which are required by applicable law so long as the
party so required to make an announcement promptly upon learning of such
requirement notifies the other party of such requirement and discusses with the
other party in good faith the exact wording of any such announcement.
(b) Each party shall keep strictly confidential any and all
information furnished to it or to its Affiliates, agents or representatives in
the course of negotiations relating to this Agreement or any transaction
contemplated by this Agreement, and the business and financial reviews and
investigation conducted by such party in connection with this Agreement. Each
party has instructed its officers, employees and other representatives having
access to such information of such party's obligation of confidentiality. If
this Agreement is terminated, each party shall promptly deliver to the other
party or certify as to the destruction of all originals and copies (including
all notes, extracts and computer disks) of documents, work papers and other
written material concerning or obtained from such other party or its agents,
employees or representatives in connection with such negotiations and business
and financial reviews and investigations, whether so obtained before or after
the execution hereof. Neither party shall use any information so obtained except
in connection with the transactions contemplated by this Agreement or disclose
or divulge such information to any other person, and each party will keep
confidential any information so obtained.
(c) Notwithstanding the foregoing, either party may disclose any
information which such party is obligated under this Section 0 to keep
confidential after consultation with the other party as follows:
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(i) to which the other party consents in writing;
(ii) to representatives, agents, consultants and attorneys of
the disclosing party who need to know such confidential information for
the purpose of assisting or advising such party, provided that the
disclosing party informs each such representative, agent, consultant and
attorney of the confidential nature of such information and requires
them to be bound by the provisions of this Section 6.1 prior to
disclosure;
(iii) to third parties whose consent or approval is required
for consummating the transactions contemplated herein;
(iv) in compliance with applicable Legal Rules; or
(v) in order to use such information as evidence in or in
connection with any pending or threatened litigation related to this
Agreement or any transaction contemplated hereunder;
but in each case only to the extent such disclosure is necessary in connection
with the purpose for which disclosure is permitted. The obligations of
confidentiality set forth herein shall not apply to information generally
available to the public or in the possession of the receiving party on a
non-confidential basis.
6.2 HSR Notification. As soon as practicable, if required by
applicable Legal Rules, Sellers and Buyer shall complete and file, or cause to
be completed and filed, any notification and report required to be filed under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). Each of the parties will take or cause to be taken any additional action
that may be necessary, proper or advisable, will cooperate to prevent
inconsistencies between their respective filings and will furnish to each other
such necessary information and reasonable assistance as the other may reasonably
request in connection with its preparation of necessary filings or submissions
under the HSR Act. Buyer, on the one hand, and Sellers, on the other hand, shall
use commercially reasonable efforts (including the filing of a request for early
termination) to obtain the early termination of the waiting period under the HSR
Act. Buyer and Sellers shall share equally all HSR filing fees and any other
fees to a governmental authority in connection with the transfer of the Assets.
6.3 Required Consents and Estoppel Certificates. Sellers will use
reasonable commercial efforts to obtain, as soon as possible, all the Required
Consents, in form and substance
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satisfactory to Buyer. Required Consents will be deemed to be satisfactory to
Buyer if they are similar in all material respects to the applicable form
attached as EXHIBIT B, C OR D. Sellers will provide copies of all correspondence
to or from, any parties in connection with the Required Consents. Buyer will
cooperate with Sellers to obtain all Required Consents. Buyer, on the one hand,
and Sellers, on the other hand, shall bear equally any costs or fees in
connection with obtaining the Required Consents.
6.4 Franchise Transfer Expenses.
Buyer and Sellers shall share equally all administrative fees and
expenses, if any, required by any Governmental Authority in connection with the
transfer to Buyer of all Franchises.
6.5 Employee Matters.
(a) Employment. SCHEDULE 0 sets forth a list of all employees of the
Systems as of June 30, 1997, showing then-current positions and rates of
compensation. At least forty-five (45) days prior to the Closing, Buyer shall
notify Sellers of the employees ("Prospective Employees") it intends to hire and
shall offer employment as of the Closing Date to all Prospective Employees for a
position with at least comparable responsibility. Prospective Employees who
accept Buyer's offer of employment and become employees of Buyer within six (6)
months of the Closing Date are referred to herein as "New Employees" and all
other employees of the Systems are referred to as "Nontransferring Employees."
Subject to the provisions of this Section 0 as to any particular benefit, Buyer
shall provide New Employees with compensation and employee benefits that are
substantially similar to those provided to similarly situated Buyer employees.
Buyer shall indemnify and hold Sellers and their Affiliates harmless from and
against all claims, expenses (including reasonable attorneys' fees), loss and
liability arising either (i) out of Sellers' submission of personnel records or
information to Buyer about the employees of the Systems, or (ii) with respect to
the New Employees' employment with Buyer after the Closing. Except as otherwise
specifically provided in this Agreement, Sellers and their Affiliates shall
indemnify and hold Buyer and its Affiliates harmless from and against all
claims, expenses (including reasonable attorneys' fees), loss and liability
arising out of the New Employees' and Nontransferring Employees' employment with
Sellers or their Affiliates prior to the Closing.
(b) Service Credit for New Employees. Subject to the provisions of
this Section as to any particular benefit, Buyer shall recognize all prior
service of New Employees with the Sellers and any Affiliate that is aggregated
with the Sellers under section 414(b), 414(c) or 414(m) of the Code ("ERISA
Affiliate") for tenure purposes, and for all benefit plan purposes, other than
benefit accrual under a defined benefit
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plan, at least to the extent recognized under the comparable Sellers employee
benefit plan as in effect on the Closing Date, but without regard to any
amendment increasing such service adopted or made effective less than twelve
(12) months prior to the Closing Date. On or before the Closing Date, Sellers
shall provide Buyer with a list setting forth the service accrued by each
Prospective Employee. Sellers agree that Buyer shall be under no obligation to
and shall not assume sponsorship of any Employee Plan.
(c) Qualified Defined Contribution Plan. Each Seller is currently a
participating company in the InterMedia Partners Tax-Deferred Savings Plan
("Sellers' DC Plan"). New Employees shall not accrue any further benefits under
the Sellers' DC Plan as of any date after the Closing (unless employed by either
Seller or its ERISA Affiliates).
Buyer is a participating company in the Northland Telecommunications
Corporation 401(k) Plan ("Buyer's DC Plan"). The account balances of New
Employees in the Sellers' DC Plan shall be transferred to the Buyer's DC Plan as
soon as reasonably practicable following the Closing in accordance with this
Subsection 0. Buyer represents and warrants that the Buyer's DC Plan and related
trust meet the requirements for qualification under section 401 and related
sections of the Code and shall continue to meet such requirements as of the date
of the transfer described in this Subsection 0. Prior to such transfer, but in
no event later than two (2) months after the Closing Date, Buyer shall provide
to Sellers satisfactory evidence that the Buyer's DC Plan complies with such
requirements, including copies of Buyer's DC Plan and the most recent
determination letter issued by the Internal Revenue Service (and any subsequent
determination letter application filed with the Internal Revenue Service).
As soon as reasonably practicable after the Closing and provision of
satisfactory evidence pursuant to this Subsection 0, the trustee of Sellers' DC
Plan shall transfer to the trustee of Buyer's DC Plan cash and/or assets,
including plan loan obligations, equal to the value of the account balances of
each New Employee under Sellers' DC Plan as of the last valuation date
immediately preceding the transfer date, which amount shall be credited to the
respective account or accounts under Buyer's DC Plan. The foregoing
notwithstanding, the amount to be so transferred with respect to any New
Employee shall be reduced by any withdrawals and other distributions made from
Sellers' DC Plan to the New Employee between such valuation date and such
transfer date.
Buyer agrees that once the transfers made herein have been made, the
sole and exclusive responsibility for providing the benefits accrued by the New
Employees under Sellers' DC Plan as of the transfer date and transferred to
Buyer's DC Plan shall be that of Buyer's DC Plan and Buyer.
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(d) Welfare Plans.Each New Employee shall be eligible for coverage
as of the later of the Closing Date or the date on which he or she becomes a New
Employee (the "Employment Transfer Date") under any medical, dental, vision,
prescription drug, life insurance and other welfare benefit plans (within the
meaning of section 3(1) of ERISA) maintained by Buyer for its employees
("Buyer's Welfare Plans"). Buyer agrees to (i) waive any waiting periods and
preexisting condition limitations in Buyer's Welfare Plans, except to the extent
coverage would have been denied or restricted on a similar basis under the
welfare benefit plans of Sellers for employees of the Systems ("Sellers' Welfare
Plans") and (ii) coordinate deductibles, maximum benefit restrictions and
"out-of-pocket" maximums so that (A) New Employees receive credit toward any
deductibles under Buyer's Welfare Plans for deductibles paid under the Sellers'
Welfare Plans during the coverage year of the Buyer's Welfare Plans in which the
Employment Transfer Date occurs and (B) New Employees receive credit for
eligible claims incurred under the Sellers' Welfare Plans during the coverage
year of the Buyer's Welfare Plans in which the Employment Transfer Date occurs
toward any "out-of-pocket" maximums under Buyer's Welfare Plans. As soon as
reasonably practicable after the Closing Date, Sellers shall prepare and deliver
to Buyer SCHEDULE 0, setting forth the information needed for Buyer to comply
with the preceding sentence. Sellers will pay or cause to be paid all eligible
unpaid claims incurred by New Employees prior to the Employment Transfer Date
and which are timely submitted for reimbursement in accordance with the Sellers'
Welfare Plans. Sellers will be responsible for providing continuation health
care ("COBRA") coverage as required by section 4980B of the Code and sections
601-608 of ERISA to or with respect to any of Sellers' employees who incurs a
"qualifying event" prior to the Employment Transfer Date, including a qualifying
event that occurs as a result of the transaction contemplated by this Agreement.
Buyer will be responsible for providing COBRA coverage to or with respect to any
New Employee who incurs a "qualifying event" after the Employment Transfer Date.
(e) Vacation. As of the Closing Date, Buyer shall assume Sellers'
liability for each New Employee's vacation pay for up to and including four
weeks of vacation accrued under the Sellers' vacation policy but not taken
before the Closing Date. The aggregate dollar value of the liabilities so
assumed by Buyer shall be an "Other Current Liability."
(f) Sick Leave. As of the Closing Date, Buyer shall assume Sellers'
liability for each New Employee's sick (short-term disability) days for up to
and including ten (10) days of sick leave accrued under the Sellers' sick leave
policy but not taken before the Closing Date. The aggregate dollar value of the
liabilities so assumed by Buyer shall be an "Other Current Liability."
(g) General. Sellers and Buyer shall give any notices
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required by law and take whatever other actions with respect to the plans
described in this Section as may be necessary to carry out the arrangements
described in this Section 0. Sellers and Buyer shall provide each other with
such plan documents and descriptions, employee data and other information as may
reasonably be required to carry out the arrangements described in this Section.
If any of the arrangements in this Section is determined by the Internal Revenue
Service or other applicable governmental authority, or by a court of competent
jurisdiction, to be prohibited by law, Sellers and Buyer shall modify such
arrangement to as closely as possible retain the intent of the parties, as
reflected herein, in a manner that is not so prohibited.
(h) No Third Party Beneficiaries. Except as set forth in Section
10.2, nothing in this Section 0 or elsewhere in this Agreement shall be deemed
to make any employee of Sellers a third party beneficiary of this Agreement.
6.6 Programming Services. As of the Closing and notwithstanding
anything to the contrary contained herein, Buyer shall have entered into
programming agreements with each of TV Land, Home Shopping Network and TV Food
which provide for carriage of such programming to those customers of the System
as are currently receiving such programming. In the event that, as of the
Closing Date, Buyer has not entered into such an agreement with TV Land, Buyer
shall pay Sellers forty thousand six hundred twenty-two dollars ($40,622) in
cash.
ARTICLE 7
Conditions Precedent to Obligations of Buyer
7.1 Conditions Precedent. The obligations of Buyer to consummate the
transactions contemplated on the Closing Date are subject to the satisfaction,
on or before the Closing Date, of all the following conditions:
(a) If required under applicable Legal Rules, all filings required
under the HSR Act shall have been made and the applicable waiting period shall
have expired or been earlier terminated without the receipt of any objection or
the commencement or threat of any litigation by a Governmental Authority of
competent jurisdiction to restrain the consummation of the transactions
contemplated by this Agreement.
(b) Sellers shall have performed and complied in all material
respects with all covenants, conditions and obligations required by this
Agreement to be performed or complied with by Sellers on or before the Closing
Date.
(c) All representations and warranties of Sellers, including,
without limitation, those made to the knowledge of
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Sellers, contained in this Agreement, shall be true, correct and complete in all
material respects on and as though made on the Closing Date.
(d) Each of the Franchises transferred pursuant to this Agreement
and listed on SCHEDULE 0 hereof shall have a term expiring no earlier than one
(1) year after the Closing Date.
(e) Sellers shall have obtained and delivered to Buyer all Required
Consents.
(f) As of the Closing Date, no action or proceeding shall be
completed, pending or threatened against Buyer or Seller that has or may result
in a judgment, decree or order that would prevent or make unlawful the
consummation of the transactions under this Agreement or have a material adverse
effect on the Systems and there shall be in effect no order restraining or
prohibiting the consummation of the transactions contemplated by this Agreement
nor any proceedings pending with respect thereto.
(g) Sellers shall have tendered to Buyer all documents which Sellers
are required by Section 0 to deliver to Buyer.
7.2 Waiver. Buyer may waive any or all of the conditions set forth
in Section 0 hereof in whole or in part; however, no such waiver of a condition
shall constitute a waiver by Buyer of any of its other rights or remedies under
this Agreement or otherwise at law or in equity if Sellers should be in default
of any of the covenants, agreements, representations or warranties of Sellers
under this Agreement.
ARTICLE 8
Conditions Precedent to Obligations of Sellers
8.1 Conditions Precedent. The obligations of Sellers to consummate
the transactions contemplated on the Closing Date are subject to the
satisfaction, on or before the Closing Date, of all the following conditions:
(a) If required under applicable Legal Rules, all filings required
under the HSR Act shall have been made and the applicable waiting period shall
have expired or been earlier terminated without the receipt of any objection or
the commencement or threat of any litigation by a Governmental Authority of
competent jurisdiction to restrain the consummation of the transactions
contemplated by this Agreement.
(b) Buyer shall have performed and complied in all material respects
with all covenants, conditions and obligations required by this Agreement to be
performed or complied with by Buyer on or before the Closing Date.
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(c) All representations and warranties made by Buyer, including,
without limitation, those made to the knowledge of Buyer, contained in this
Agreement shall be true, correct and complete in all material respects at and as
of the Closing Date as though made on such date.
(d) Sellers shall have obtained all Required Consents, provided that
this condition shall be deemed to be satisfied as to Sellers with respect to any
Required Consent if Buyer at or prior to Closing waives the requirement that
such consent be obtained prior to Closing.
(e) The closing of the Royston/Toccoa Sale shall have occurred or
will occur simultaneously with the Closing hereunder.
(f) As of the Closing Date, no action or proceeding shall be
completed, pending or threatened against Sellers or Buyer that has or is likely
to result in a judgment, decree or order that would prevent or make unlawful the
consummation of the transactions under this Agreement and there shall be in
effect no order restraining or prohibiting the consummation of the transactions
contemplated by this Agreement nor any proceedings pending with respect thereto.
(g) Buyer shall have tendered to Sellers the Purchase Price and all
documents which Buyer is required by Section 0(b) to deliver to Sellers.
8.2 Waiver. Sellers may waive any or all of such conditions set
forth in Section 8.1 hereof in whole or in part; however, no such waiver of a
condition shall constitute a waiver by Sellers of any of their other rights or
remedies under this Agreement or otherwise at law or in equity if Buyer should
be in default of any of the covenants, agreements, representations or warranties
made by Buyer under this Agreement.
ARTICLE 9
Closing
9.1 Closing. The Closing shall take place on the Closing Date at the
place set forth in Section 0. At the Closing, each of the parties shall take all
action and deliver all documents, instruments, certificates, agreements and
other items as required under this Agreement in order to perform, fulfill and
observe all covenants, conditions and agreements on its part to be performed,
fulfilled and observed at or prior to the Closing Date (and not theretofore
accomplished) and cause all conditions precedent to the other party's
obligations hereunder to be satisfied in full.
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9.2 Closing Documents.
(a) At the Closing, Sellers shall deliver to Buyer all of the
following:
(i) a certificate of each Seller that all appropriate action
authorizing the execution, performance and delivery of this Agreement
has been taken;
(ii) a copy of each instrument pursuant to which a
Governmental Authority or other person consents to the transfer of the
Franchise which it issued, substantially in the form of EXHIBIT B;
(iii) wire transfer instructions for the Purchase Price and a
receipt, substantially in the form of EXHIBIT E, for the Purchase Price;
(iv) a bill of sale, substantially in the form of EXHIBIT F;
(v) for each parcel of Real Property a deed in the form
customarily used in the jurisdiction where the real property is located;
(vi) Certification of Nonforeign Status for each Seller
pursuant to section 1.1445-2(b)(2) of the United States Treasury Income
Tax Regulations, substantially in the form of EXHIBIT G;
(vii) for each lease of real property listed on SCHEDULE 3.13
for which a consent is required, an assignment, assumption and consent,
if required, substantially in the form of EXHIBIT C, duly executed by
the relevant Seller and the third party, if any, whose consent is
required for the assignment of such lease;
(viii) for each Contract the assignment of which requires a
Required Consent, an assignment, assumption and consent substantially in
the form of EXHIBIT D, duly executed by the relevant Seller and the
third party to such Contract;
(ix) documents of title for any motor vehicles included
within the Assets;
(x) a certificate of each Seller, substantially in the form
of EXHIBIT H;
(xi) a written opinion dated the Closing Date, from Pillsbury
Madison & Sutro LLP, counsel to Sellers, in the form annexed hereto as
EXHIBIT I;
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(xii) all data, books and records which relate primarily to
the Systems and the Assets;
(xiii) a Certificate of Good Standing for each Seller certified
to by the Secretary of State of the State of California and a
Certificate of Qualification certified to by the Secretary of State of
the State of South Carolina;
(xiv) such other documents and certificates as Buyer may
reasonably request.
(b) At the Closing, Buyer shall deliver to Sellers the following
documents:
(i) a Certificate of Good Standing of Buyer certified to by
the Secretary of State of the State of Washington and a Certificate of
Qualification of Buyer certified to by the Secretary of State of the
State of South Carolina;
(ii) a Certificate of Buyer that all appropriate action
authorizing the execution, performance and delivery of this Agreement
has been taken;
(iii) an assumption agreement, substantially in the form of
EXHIBIT J and an executed counterpart of each assignment, assumption and
consent delivered by Sellers pursuant to and in accordance with Section
0 hereof;
(iv) a written opinion dated the Closing Date, from Buyer's
counsel, in the form annexed hereto as EXHIBIT K;
(v) a certificate of Buyer, substantially in the form of
EXHIBIT L;
(vi) a wire transfer of the Purchase Price pursuant to
instructions received from Sellers; and
(vii) such other documents and certificates as Sellers may
reasonably request.
ARTICLE 10
Indemnification
10.1 Indemnification by Sellers.
(a) Each Seller agrees severally, and for its own account only, to
indemnify Buyer and hold it harmless on an after-Tax basis, from any and all
losses, liabilities, claims, suits, proceedings, demands, judgments, damages,
expenses and costs,
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including, without limitation, counsel fees and disbursements, expert fees and
costs and expenses incurred in the investigation, defense or settlement of any
claims covered by this indemnity (in this Section 0, collectively, the
"Indemnifiable Damages") which Buyer may suffer or incur by reason of (i) the
inaccuracy of any representation or warranty of such Seller contained in this
Agreement; (ii) the breach by such Seller of any covenant made by it in any of
the Transaction Documents; (iii) the ownership, operation or transfer of the
Assets or the Systems on or prior to the Closing Date and any liabilities
relating to the Systems not assumed by Buyer, provided that in no case shall
this Subsection 0 apply to or include Indemnifiable Damages caused by, relating
to or arising under Environmental laws, including contamination of the Real
Property, which are intended to be covered by Subsection 0. The foregoing
obligation of Sellers shall be subject to and limited by each of the
qualifications set forth in this Article 0.
(b) Except as set forth in subparagraphs (i) and (ii) below or with
respect to bona fide and valid claims for which notice has been given within
twelve (12) months of the Closing Date, each representation, warranty and
covenant made by Sellers in this Agreement or pursuant hereto shall survive
until the date which is twelve (12) months following the Closing Date, and
thereafter all such representations, warranties and covenants shall be
extinguished:
(i) the representations, warranties and covenants made by
Sellers in Section 0 (Taxes) shall survive until the end of any
statutory limitation period with respect thereto; and
(ii) the representations, warranties and covenants made by
Sellers in the first sentence of Section 0 (title) shall survive
indefinitely.
(c) The indemnity obligations of Sellers hereunder shall not apply
(i) to the extent that Buyer is compensated for the same loss under Buyer's
insurance policies in the absence of any indemnity hereunder if the insurers
under such policy waive their rights of subrogation with respect thereto; (ii)
if the damages to Buyer do not exceed $500,000; and (iii) if such damages exceed
$500,000, the indemnity obligations hereunder shall only apply to that portion
of the damages that exceed such $500,000 threshold and thereafter losses shall
be paid up to a maximum of $9,750,000.
(d) Four hundred forty-four thousand and two hundred dollars
($444,200) of the Purchase Price shall be held in escrow pursuant to a mutually
acceptable form of escrow agreement, a form of which is attached hereto as
EXHIBIT M (the "Post-Closing Escrow Agreement") for a period of six (6) months
after the Closing as security for the indemnity obligations of Sellers
hereunder.
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10.2 Indemnification by Buyer.
(a) Buyer agrees to indemnify each Seller and its Affiliates,
directors, partners, agents and employees against and hold each of them harmless
on an after-Tax basis, from any and all Indemnifiable Damages which any such
indemnified party may suffer or incur by reason of or in connection with (i) the
inaccuracy of any representation or warranty of Buyer contained in this
Agreement or any document, certificate or agreement delivered pursuant hereto;
(ii) the breach by Buyer of any covenant made by it in any of the Transaction
Documents; (iii) the ownership and operation of the Assets after the Closing
Date; and (iv) any obligation or liability assumed by Buyer hereunder or under
any document, certificate or agreement delivered pursuant hereto. The foregoing
obligation of Buyer shall be subject to and limited by each of the
qualifications set forth below.
(b) Except as set forth in the next succeeding sentence, or with
respect to bona fide and valid claims for which notice has been given prior to
the date twelve (12) months from the Closing Date, each representation, warranty
and covenant made by Buyer in this Agreement or pursuant hereto and the
indemnity obligations set forth in this Section 0 shall survive until the date
twelve (12) months from the Closing Date, and thereafter all such
representations, warranties, covenants and indemnity obligations and any
liability thereunder shall be extinguished. The right of Sellers to assert
claims for Indemnifiable Damages arising out of the ownership or operation of
the Assets or the Systems after the Closing Date and any obligation or liability
assumed by Buyer hereunder or pursuant hereto shall survive indefinitely.
(c) The indemnity obligations of Buyer hereunder shall not apply (i)
to the extent that Sellers or any Affiliates are compensated for the same loss
under Sellers' or any Affiliate's insurance policies in the absence of any
indemnity hereunder if the insurers under such policy waive their rights of
subrogation with respect thereto; (ii) if the damages to Sellers or any
Affiliates do not exceed $500,000; and (iii) if such damages exceed $500,000,
the indemnity obligations hereunder shall only apply to that portion of the
damages that exceed such $500,000 threshold and thereafter losses shall be paid
up to a maximum of $9,750,000. Notwithstanding anything to the contrary
contained herein, the limitations set forth in this Section 10.2(c) shall not
apply with respect to any liability related to Section 6.6 hereof.
10.3 Notice and Right To Defend Third-Party Claims.
(a) Upon receipt of written notice of any claim, demand or
assessment or the commencement of any suit, action or proceeding in respect of
which indemnity may be sought on account of an indemnity agreement contained in
this Article,
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the party seeking indemnification (the "Indemnitee") shall promptly, but in no
event later than twenty (20) days prior to the date a response or answer thereto
is due (unless a response or answer is due within fewer than twenty (20) days
from the date of Indemnitee's receipt of notice thereof), inform the party
against whom indemnification is sought (the "Indemnitor") in writing thereof.
The failure, refusal or neglect of such Indemnitee to notify the Indemnitor
within the time period specified above of any such claim or action shall relieve
such Indemnitor from any liability which it may have to such Indemnitee in
connection therewith, if the effect of such failure, refusal or neglect is to
prejudice materially the rights of the Indemnitor in defending against the claim
or action.
(b) In case any claim, demand or assessment shall be asserted or
suit, action or proceeding commenced against an Indemnitee, and such Indemnitee
shall have timely and properly notified the Indemnitor of the commencement
thereof, the Indemnitor shall assume the defense, conduct or settlement thereof,
with counsel selected by the Indemnitor. After assumption of the defense,
conduct or settlement thereof, the Indemnitor will not be liable to the
Indemnitee for expenses incurred by Indemnitee in connection with the defense,
conduct or settlement thereof, except for such expenses as may be reasonably
required to enable the Indemnitor to take over such defense, conduct or
settlement.
(c) The Indemnitee will at its own expense cooperate with the
Indemnitor in connection with any such claim, make personnel, witnesses, books
and records relevant to the claim available to the Indemnitor at no cost, and
grant such authorizations or powers of attorney to the agents, representatives
and counsel of the Indemnitor as the Indemnitor may reasonably request in
connection with the defense or settlement of any such claim.
(d) Notwithstanding the foregoing in this Section 0, the Indemnitee
shall have the right to employ separate counsel in any such action, claim or
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be its fees and expenses unless (i) the Indemnitor has
agreed to pay such fees and expenses, (ii) the Indemnitor has failed to assume
the defense of such action, claim or proceeding or (iii) the named parties to
any such action, claim or proceeding (including any impleaded parties) include
both the Indemnitor and the Indemnitee and the Indemnitee has been advised by
counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the Indemnitor (in which
case, if the Indemnitee informs the Indemnitor in writing that it elects to
employ separate counsel at the expense of the Indemnitor, the Indemnitor shall
not have the right to assume the defense of such action, claim or proceeding on
behalf of the Indemnitee, it being understood, however, that the Indemnitor
shall not, in
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connection with any one such action, claim or proceeding or separate but
substantially similar or related actions, claims or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for the Indemnitee, which firm shall be designated in
writing by the Indemnitee).
10.4 Notice and Right to Remediate. Anything in this Agreement to the
contrary notwithstanding, Sellers shall have no obligation to indemnify Buyer
with respect to Indemnifiable Damages arising under Environmental Laws,
including damages due to any necessary investigation, remediation or cleanup of
Hazardous Substances at the Real Property, unless Buyer first gives Sellers an
option to conduct any necessary response or perform any required work and
Sellers refuse to do so. Such an option should be given with the written notice
required by Section 0, but in any case, shall be given prior to any Buyer
expenditure of what it considers to be Indemnifiable Damages. Sellers shall
respond to the option in writing within thirty (30) Business Days. If Sellers
exercise their option, Sellers shall perform all work in a safe and workmanlike
manner in compliance with all applicable Environmental Laws to the satisfaction
of the appropriate Governmental Authority. In addition, Sellers will afford
Buyer a reasonable opportunity to comment (at Buyer's sole expense) in advance
of Sellers' proposed responses or submissions to Governmental Authorities or
third parties relating to activities on the Property, including reports and
workplans, provided that such comment period does not delay or interfere with
Sellers' obligations to any third party. Sellers shall consider Buyer's comments
in good faith, but are under no obligation to accept or incorporate Buyer's
comments. Buyer, its representatives and agents will not make comments or
submissions to any Governmental Authority or third parties with respect to
environmental conditions as to which Sellers have exercised their option. Any
conflicts between Section 0 and this Section 0 shall be resolved in favor of
this Section 0.
10.5 Mitigation. Nothing herein contained shall affect a party's
legal duty to mitigate damages.
10.6 Exclusive Remedy. This Article 0 shall be the sole and exclusive
basis of any remedy that each party may have against the other party for an
inaccuracy or breach of a representation, warranty or covenant under this
Agreement or any agreement contemplated hereby, and each party hereby waives any
claim (other than under this Article 0) it may have against the other party with
respect to the inaccuracy or breach of any such representation, warranty or
covenant.
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ARTICLE 11
Termination
11.1 Termination Events. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
(a) at any time, by the mutual agreement of Buyer and Sellers;
(b) by either Buyer or Sellers, upon written notice to the other, if
the conditions to its obligations set forth in Sections 0 and 0, respectively,
shall not have been satisfied or waived on or before December 31, 1997 for any
reason other than a breach or default by such party of its respective covenants,
agreements, or other obligations hereunder, or any of its representations or
warranties herein not being true and accurate when made or when otherwise
required by this Agreement to be true and accurate;
(c) By Sellers, in the event that the Closing does not occur by
reason of breach or default by the Buyer under this Agreement and provided that
Sellers have not breached or defaulted hereunder and have performed or stand
ready, willing, and able to perform, their obligations under this Agreement in
all material respects;
(d) By the Buyer, in the event that the Closing does not occur by
reason of a breach or default by the Sellers under this Agreement and provided
that the Buyer has not breached or defaulted hereunder and has performed or
stands ready, willing, and able to perform, its obligations under this Agreement
in all material respects; or
(e) By Sellers in the event that the Closing does not occur because
the Purchase Price, as adjusted, is less than the threshold set forth in Section
2.3(a).
11.2 Manner of Exercise. In the event of the termination of this
Agreement by either Buyer or Sellers pursuant to this Article 0, notice thereof
shall forthwith be given to the other party and this Agreement shall terminate
and the transactions contemplated hereunder shall be abandoned without further
action by Buyer or Sellers.
11.3 Effect of Termination. In the event of the termination of this
Agreement pursuant to this Article 0 and prior to the Closing, all obligations
of the parties hereunder shall terminate, except for the respective obligations
of the parties under Sections 0 (Confidentiality) and 0 (Expenses); provided,
however, that no termination of this Agreement shall (a) relieve a defaulting or
breaching party from any liability to the other party or parties hereto for or
in respect of such
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default or (b) result in the rescission of any transaction theretofore
consummated hereunder. If this Agreement is terminated by Sellers in accordance
with Section 11.1(c) or by Buyer other than in accordance with Section 11.1,
Sellers shall be entitled to retain the Deposit.
ARTICLE 12
General
12.1 Covenant Not To Sue and Nonrecourse to Partners.
(a) Buyer agrees that notwithstanding any other provision in this
Agreement, any agreement, instrument, certificate or document entered into
pursuant to or in connection with this Agreement or the transactions
contemplated herein or therein (each a "Transaction Document") and any rule of
law or equity to the contrary, to the fullest extent permitted by law, Sellers'
obligations and liabilities under all Transaction Documents and in connection
with the transactions contemplated therein shall be nonrecourse to all direct
and indirect general and limited partners of Sellers.
(b) "Nonrecourse" means that the obligations and liabilities are
limited in recourse solely to the assets of Sellers (for those purposes, any
capital contribution obligations of the general and limited partners of Sellers
or any negative capital account balances of such partners shall not be deemed to
be assets of Sellers) and are not guaranteed directly or indirectly by, or the
primary obligations of, any general or limited partner of Sellers, and neither
Sellers nor any general or limited partner or any officer, director, partner,
employee or agent of Sellers or any general or limited partner of any successor
partnership, either directly or indirectly, shall be personally liable in any
respect (except to the extent of their respective interests in the assets of
Sellers) for any obligation or liability of Sellers under any Transaction
Document or any transaction contemplated therein.
(c) "Direct" partners include all general and limited partners of
Sellers, and "indirect" partners include all general and limited partners and
members of each direct partner and all general and limited partners and members
of each such indirect partner and all such further indirect partners and members
thereof and each such indirect partner.
(d) Buyer hereby covenants for itself, its successors and assigns
that it, its successors and assigns will not make, bring, claim, commence,
prosecute, maintain, cause or permit any action to be brought, commenced,
prosecuted, maintained, either at law or equity, in any court of the United
States or any state thereof against any direct or indirect member or general or
limited partner of Sellers or any officer, director, partner, employee or agent
of Sellers or any direct or indirect
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member or general or limited partner of Sellers for (i) the payment of any
amount or the performance of any obligation under any Transaction Document or
(ii) the satisfaction of any liability arising in connection with any such
payment or obligation or otherwise, including without limitation, liability
arising in law for tort (including, without limitation, for active and passive
negligence, negligent misrepresentation and fraud), equity (including, without
limitation, for indemnification and contribution) and contract (including,
without limitation, monetary damages for the breach of representation or
warranty or performance of any of the covenants or obligations contained in any
Transaction Document or with the transactions contemplated herein or therein).
12.2 Assignment. Neither Buyer nor Sellers may assign its rights and
obligations under, or grant a security interest in, this Agreement to any person
or entity other than an Affiliate of such party without the consent of the other
parties hereto.
12.3 Parties in Interest. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and permitted assigns of the parties hereto,
whether herein so expressed or not. Except as provided in Sections 0, 0 and 0,
no person other than Buyer and Sellers and their respective Affiliates may rely
upon any provision of this Agreement or any agreement, instrument, certificate
or document executed pursuant to this Agreement.
12.4 Time of Essence. Time is of the essence in each and every
provision in this Agreement.
12.5 Severability. Any provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining provisions of this Agreement or affecting the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
12.6 Amendment. Except as otherwise provided herein, Buyer and
Sellers may amend, modify or supplement this Agreement at any time, but only in
writing duly executed by all parties hereto.
12.7 Terms. Defined terms used herein are equally applicable to the
singular and plural forms as appropriate. Unless otherwise expressly stated
herein, references to Articles and Sections are to articles and sections of this
Agreement and references to parties, Exhibits and Schedules are to the parties,
and the exhibits and schedules attached, to this Agreement.
12.8 Headings. The headings preceding the text of
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Sections of this Agreement are for convenience only and shall not be deemed a
part hereof.
12.9 Entire Understanding; Schedules. The terms set forth in this
Agreement including its Schedules and Exhibits are intended by the parties as a
final, complete and exclusive expression of the terms of their agreement and may
not be contradicted, explained or supplemented by evidence of any prior
agreement, any contemporaneous oral agreement or any consistent additional
terms. The Schedules and Exhibits attached to this Agreement are made a part of
this Agreement. All documents or information disclosed in the Schedules are
intended to be disclosed for all purposes under this Agreement and will also be
deemed to be incorporated by reference in each Schedule to which they may be
relevant without further disclosure.
12.10 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
12.11 Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of California.
12.12 Notices. Any notice or demand desired or required to be given
hereunder shall be in writing and deemed given when personally delivered, sent
by telecopier, overnight courier or deposited in the mail, postage prepaid, sent
certified or registered, return receipt requested, and addressed as set forth
below or to such other address as either party shall have previously designated
by such a notice. Any notice so delivered personally or by telecopy shall be
deemed to be received on the date of delivery or transmission by telecopier; any
notice so sent by overnight courier shall be deemed to be received one (1)
Business Day after the date sent; and any notice so mailed shall be deemed to be
received on the date stamped on the receipt (rejection or other refusal to
accept or inability to deliver because of a change of address of which no notice
was given shall be deemed to be receipt of the notice).
If to Sellers:
235 Montgomery Street, Suite 420
San Francisco, CA 94104
Attention: Mr. Rodney M. Royse
Telephone: (415) 616-4600
Telecopier: (415) 397-3978
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<PAGE> 44
Copy to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attention: Gregg F. Vignos, Esq.
Telephone: (415) 983-1649
Telecopier: (415) 983-1200
If to Buyer:
Northland Cable Television, Inc.
1201 Third Avenue, Suite 3600
Seattle, WA 98101
Attention: Mr. John S. Whetzell
Telephone: (206) 674-3900
Telecopier: (206) 674-3950
Copy to:
Ryan Swanson & Cleveland
1201 Third Avenue
Suite 3400
Seattle, WA 98101
Attention: John E. Iverson, Esq.
Telephone: (206) 464-4224
Telecopy: (206) 583-0359
12.13 Further Acts. If, at any time before, on or after the Closing
Date, any further action by either party is necessary to carry out the purposes
of this Agreement, such party shall take all such necessary action or use such
party's reasonable best efforts to cause such action to be taken.
12.14 Expenses. Except as set forth in Sections 6.2, 6.3 and 6.4,
Sellers and Buyer shall each bear its own costs and expenses incurred in
connection with the negotiation, preparation or execution of this Agreement
(including, but not limited to, fees and expenses of attorneys, accountants,
brokers, consultants, finders and investment bankers), whether or not the
Closing occurs. In the event that one of the parties hereto breaches this
Agreement, however, and fails to consummate the transaction contemplated hereby,
such breaching party shall be responsible for all costs and expenses incurred by
the non-breaching party in connection herewith.
12.15 Attorneys' Fees. If any action or proceeding is commenced
between the parties with respect to the Transaction Documents, the prevailing
party shall be entitled to all fees and expenses incurred by it in connection
with such action or proceeding, including reasonable attorneys' fees.
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12.16 Judicial Proceedings. Each party consents to the jurisdiction
over it of the courts of the State of California in the City and County of San
Francisco, and of the United States Courts in the Northern District of
California and agrees that personal service of all process may be made by
registered or certified mail pursuant to the provisions of Section 0.
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IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement as of the date and year first above written.
SELLERS:
INTERMEDIA PARTNERS OF CAROLINA, L.P.
By: InterMedia Partners, a California
limited partnership
Its General Partner
By: InterMedia Capital Management, L.P.,
Its General Partner
By: InterMedia Management, Inc.
Its Managing General Partner
By: /s/ RODNEY M. ROYSE
---------------------------------
Rodney M. Royse
Vice President
ROBIN CABLE SYSTEMS, L.P.
By: MITGO CORP., Its general partner
By: /s/ RODNEY M. ROYSE
-----------------------------------
Rodney M. Royse
Attorney-In-Fact
BUYER:
NORTHLAND CABLE TELEVISION, INC.
By: /s/ JAMES A. PENNEY
-----------------------------------
Title: Vice President
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EXHIBIT 10.4
EXECUTION/CONFORMED COPY
NORTHLAND CABLE TELEVISION, INC.,
as Issuer
NORTHLAND CABLE NEWS, INC.,
as Guarantor
$100,000,000
10 1/4% Senior Subordinated Notes due 2007
Purchase Agreement
November 6, 1997
BANCAMERICA ROBERTSON STEPHENS
FIRST CHICAGO CAPITAL MARKETS, INC.
<PAGE> 2
$100,000,000
10 1/4% Senior Subordinated Notes due 2007
of
NORTHLAND CABLE TELEVISION, INC.
PURCHASE AGREEMENT
November 6, 1997
BANCAMERICA ROBERTSON STEPHENS
FIRST CHICAGO CAPITAL MARKETS, INC.
c/o BancAmerica Robertson Stephens
231 South LaSalle Street
Chicago, IL 60697
Dear Sirs:
Northland Cable Television, Inc., a Washington corporation (the
"Company"), proposes to issue and sell to BancAmerica Robertson Stephens and
First Chicago Capital Markets, Inc. (each, an "Initial Purchaser" and
collectively the "Initial Purchasers") $100,000,000 aggregate principal amount
of its 10 1/4% Senior Subordinated Notes due 2007 (the "Series A Notes"),
subject to the terms and conditions set forth herein. The Series A Notes are to
be issued pursuant to an indenture (the "Indenture") to be dated as of the
Closing Date (as defined below), among the Company, the Guarantor (as defined
below) and Harris Trust Company of California, as trustee (the "Trustee"). The
Series A Notes and the Series B Notes (as defined below) issuable in exchange
therefor are collectively referred to herein as the "Notes". The Notes will be
guaranteed (the "Subsidiary Guarantee") by Northland Cable News, Inc., a
Washington corporation (the "Guarantor"). Capitalized terms used but not defined
herein shall have the meanings given to such terms in the Indenture.
1. OFFERING MEMORANDUM. The Series A Notes will be offered and
sold to the Initial Purchasers pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"Securities Act"). The Company and the Guarantor have prepared a preliminary
offering memorandum dated October 22, 1997 (the "Preliminary Offering
Memorandum") and a final offering memorandum dated November 6, 1997 (the
"Offering Memorandum") relating to the Series A Notes and the Subsidiary
Guarantee.
Upon original issuance thereof, and until such time as the same is
no longer required pursuant to the Indenture, the Series A Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof, except for the Series B Notes) shall bear the following
legend:
<PAGE> 3
"THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THE NOTE EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(1) BY AN INITIAL PURCHASER (a) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT), PURCHASING FOR ITS OWN ACCOUNT IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (b)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT, (c) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 THEREUNDER (IF APPLICABLE) OR IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (d) TO
THE COMPANY, (e) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (f) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, AND (2) BY SUBSEQUENT PURCHASERS, AS SET FORTH IN (1)(a) THROUGH (e)
ABOVE, AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THE NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY
OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALE OF THE SECURITY EVIDENCED
HEREBY."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchasers, and the Initial Purchasers agree,
severally and not jointly, to purchase from the Company, the principal amounts
of Series A Notes set forth opposite the name of such Initial Purchaser on
Schedule A hereto at a purchase price equal to 97.125% of the principal amount
thereof (the "Purchase Price").
3. TERMS OF OFFERING. The Initial Purchasers have advised the
Company that the Initial Purchasers will make offers (the "Exempt Resales") of
the Series A Notes purchased hereunder on
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the terms set forth in the Offering Memorandum, as amended or supplemented,
solely to (i) persons whom the Initial Purchasers reasonably believe to be
"qualified institutional buyers" as defined in Rule 144A under the Securities
Act ("QIBs"), (ii) not more than ten other institutional "accredited investors,"
as defined in Rule 501(a) (1), (2), (3) or (7) under the Securities Act, that
make certain representations and agreements to the Company (each, an "Accredited
Institution"), and (iii) to persons permitted to purchase the Series A Notes in
offshore transactions in reliance upon Regulation S under the Securities Act
(each, a "Regulation S Purchaser") (such persons specified in clauses (i), (ii)
and (iii) being referred to herein as the "Eligible Purchasers"). The Initial
Purchasers will offer the Series A Notes to Eligible Purchasers initially at a
price equal to 100% of the principal amount thereof. Such price may be changed
at any time without notice.
Holders (including subsequent transferees) of the Series A Notes
will have the registration rights set forth in the registration rights agreement
(the "Registration Rights Agreement"), to be dated the Closing Date, in
substantially the form of Exhibit A hereto, for so long as such Series A Notes
constitute "Transfer Restricted Securities" (as defined in the Registration
Rights Agreement). Pursuant to the Registration Rights Agreement, the Company
and the Guarantor will agree to file with the Securities and Exchange Commission
(the "Commission") under the circumstances set forth therein, (i) a registration
statement under the Securities Act (the "Exchange Offer Registration Statement")
relating to the Company's 10 1/4% Series B Senior Subordinated Notes due 2007
(the "Series B Notes"), to be offered in exchange for the Series A Notes (such
offer to exchange being referred to as the "Exchange Offer") and the Subsidiary
Guarantee thereof and, in certain circumstances, (ii) a shelf registration
statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration
Statement" and, together with the Exchange Offer Registration Statement, the
"Registration Statements") relating to the resale by certain holders of the
Series A Notes and to use their best efforts to cause such Registration
Statements to be declared and remain effective and usable for the periods
specified in the Registration Rights Agreement and to consummate the Exchange
Offer. This Agreement, the Indenture, the Notes, the Subsidiary Guarantee and
the Registration Rights Agreement are hereinafter sometimes referred to
collectively as the "Operative Documents".
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the
Series A Notes shall be made at the offices of the Trustee in New York, New
York. Delivery of other documents called for by this Agreement and otherwise in
connection with the issuance, sale and delivery of the Notes shall be made at
the offices of Latham & Watkins, 505 Montgomery Street, Suite 1900, San
Francisco, California 94111, or such other location as may be mutually
acceptable. Such delivery and payment shall be made at 9:00 a.m. San Francisco
time, on November 12, 1997 or at such other time as shall be agreed upon by the
Initial Purchasers and the Company. The time and date of such delivery and the
payment are herein called the "Closing Date".
(b) One or more of the Series A Notes in definitive global
form, registered in the name of Cede & Co., as nominee of the Depository Trust
Company ("DTC"), having an aggregate principal amount corresponding to the
aggregate principal amount of the Series A Notes (collectively, the "Global
Note"), shall be delivered by the Company to the Initial Purchasers (or as the
Initial Purchasers direct) in each case with any transfer taxes thereon duly
paid by the Company against payment by the Initial Purchasers of the Purchase
Price thereof by wire transfer in same day funds to the order of the
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<PAGE> 5
Company. The Global Note shall be made available to the Initial Purchasers for
inspection not later than 9:30 a.m., San Francisco time, on the business day
immediately preceding the Closing Date.
5. AGREEMENTS OF THE COMPANY AND THE GUARANTOR. Each of the
Company and the Guarantor, jointly and severally, hereby agrees with each of the
Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing, (i) of the
issuance by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Series A Notes for offering
or sale in any jurisdiction designated by the Initial Purchasers pursuant to
Section 5(e) hereof, or the initiation of any proceeding by any state securities
commission or any other federal or state regulatory authority for such purpose
and (ii) of the happening of any event during the period referred to in Section
5(c) below that makes any statement of a material fact made in the Preliminary
Offering Memorandum or the Offering Memorandum untrue or that requires any
additions to or changes in the Preliminary Offering Memorandum or the Offering
Memorandum in order to make the statements therein not misleading. The Company
shall use its best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Series A Notes under any state
securities or Blue Sky laws and, if at any time any state securities commission
or other federal or state regulatory authority shall issue an order suspending
the qualification or exemption of any Series A Notes under any state securities
or Blue Sky laws, the Company shall use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
or supplements thereto, as the Initial Purchasers may reasonably request.
Subject to the Initial Purchasers' compliance with their representations and
warranties and agreements set forth in Section 7 hereof, the Company consents to
the use of the Preliminary Offering Memorandum and the Offering Memorandum, and
any amendments and supplements thereto required pursuant hereto, by the Initial
Purchasers in connection with Exempt Resales.
(c) During such period as in the opinion of counsel for the
Initial Purchasers an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchasers and in connection with
market-making activities of the Initial Purchasers for so long as any Series A
Notes are outstanding, (i) not to make any amendment or supplement to the
Offering Memorandum of which the Initial Purchasers shall not previously have
been advised or to which the Initial Purchasers shall reasonably object after
being so advised and (ii) to prepare promptly upon the Initial Purchasers'
reasonable request, any amendment or supplement to the Offering Memorandum which
may be necessary or advisable in connection with such Exempt Resales or such
market-making activities.
(d) If, during the period referred to in Section 5(c) above,
any event shall occur or condition shall exist as a result of which, in the
opinion of counsel to the Initial Purchasers, it becomes necessary to amend or
supplement the Offering Memorandum in order to make the statements therein, in
the light of the circumstances when such Offering Memorandum is delivered to an
Eligible Purchaser, not misleading, or if, in the opinion of counsel to the
Initial Purchasers, it is necessary to amend
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<PAGE> 6
or supplement the Offering Memorandum to comply with any applicable law,
forthwith to prepare an appropriate amendment or supplement to such Offering
Memorandum so that the statements therein, as so amended or supplemented, will
not, in the light of the circumstances when it is so delivered, be misleading,
or so that such Offering Memorandum will comply with applicable law, and to
furnish to the Initial Purchasers and such other persons as the Initial
Purchasers may designate such number of copies thereof as the Initial Purchasers
may reasonably request.
(e) Prior to the sale of all Series A Notes pursuant to
Exempt Resales as contemplated hereby, to cooperate with the Initial Purchasers
and counsel to the Initial Purchasers in connection with the registration or
qualification of the Series A Notes for offer and sale to the Initial Purchasers
and pursuant to Exempt Resales under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers may request and to continue such
qualification in effect so long as required for Exempt Resales and to file such
consents to service of process or other documents as may be necessary in order
to effect such registration or qualification; provided, however, that neither
the Company nor the Guarantor shall be required in connection therewith to
register or qualify as a foreign corporation in any jurisdiction in which it is
not now so qualified or to take any action that would subject it to general
consent to service of process or taxation other than as to matters and
transactions relating to the Preliminary Offering Memorandum, the Offering
Memorandum or Exempt Resales, in any jurisdiction in which it is not now so
subject.
(f) So long as the Notes are outstanding, whether or not
required by the rules and regulations of the Commission, the Company will
furnish or cause to be furnished promptly to the holders of the Notes (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if the Company were required to file
such reports. In addition, whether or not required by the rules and regulations
of the Commission, the Company shall file a copy of all such information and
reports with the Commission for public availability (unless the Commission will
not accept such a filing) and make such information available to the securities
analysts and prospective investors upon request. In addition, the Company shall,
for so long as any Notes remain outstanding, furnish to the holders of the Notes
and to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
(g) So long as Notes are outstanding, to furnish to the
Initial Purchasers as soon as available copies of all reports or other
communications furnished by the Company or the Guarantor to its security holders
or furnished to or filed with the Commission or any national securities exchange
on which any class of securities of the Company or the Guarantor is listed and
such other publicly available information concerning the Company and/or its
subsidiaries as the Initial Purchasers may reasonably request.
(h) So long as any of the Series A Notes remain outstanding
and during any period in which the Company and the Guarantor are not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to make available to any holder of Series A
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<PAGE> 7
Notes in connection with any sale thereof and any prospective purchaser of such
Series A Notes from such holder the information ("Rule 144A Information")
required by Rule 144A(d)(4) under the Securities Act.
(i) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of the obligations of the Company
and the Guarantor under this Agreement, including: (i) the fees, disbursements
and expenses of counsel to the Company and the Guarantor and accountants of the
Company and the Guarantor in connection with the sale and delivery of the Series
A Notes to the Initial Purchasers and pursuant to Exempt Resales, and all other
fees or expenses in connection with the preparation, printing, filing and
distribution of the Preliminary Offering Memorandum, the Offering Memorandum and
all amendments and supplements to any of the foregoing (including financial
statements) specified in Section 5(b) and 5(c) prior to or during the period
specified in Section 5(c), including the mailing and delivering of copies
thereof to the Initial Purchasers and persons designated by it in the quantities
specified herein, (ii) all costs and expenses related to the transfer and
delivery of the Series A Notes to the Initial Purchasers and pursuant to Exempt
Resales, including any transfer or other taxes payable thereon, (iii) all costs
of printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase, sale or
delivery of the Series A Notes, (iv) all expenses in connection with the
registration or qualification of the Series A Notes and the Subsidiary Guarantee
for offer and sale under the securities or Blue Sky laws of the several states
and all costs of printing or producing any preliminary and supplemental Blue Sky
memoranda in connection therewith (including the filing fees and fees and
disbursements of Latham & Watkins in connection with such registration or
qualification and memoranda relating thereto), (v) the cost of printing
certificates representing the Series A Notes and the Subsidiary Guarantee, (vi)
all expenses and listing fees in connection with the application for quotation
of the Series A Notes in the National Association of Securities Dealers, Inc.
("NASD") Automated Quotation System - PORTAL ("PORTAL"), (vii) the fees and
expenses of the Trustee and the Trustee's counsel in connection with the
Indenture, the Notes and the Subsidiary Guarantee, (viii) the costs and charges
of any transfer agent, registrar and/or depository (including DTC), (ix) any
fees charged by rating agencies for the rating of the Notes, (x) all costs and
expenses of the Exchange Offer and any Registration Statement, as set forth in
the Registration Rights Agreement and any legal opinions and other related
documentation delivered in connection with the consummation of the Exchange
Offer, and (xi) and all other costs and expenses incident to the performance of
the obligations of the Company and the Guarantor hereunder for which provision
is not otherwise made in this Section. Except as otherwise provided by or
contemplated by this Agreement, the Initial Purchasers shall pay all of their
own fees and expenses, including fees and expenses of their counsel, transfer
taxes, if any, upon resale of the Notes, and any other expense incurred by the
Initial Purchasers in connection with any offers or resales made by the Initial
Purchasers.
(j) To use its best efforts to effect the inclusion of the
Series A Notes in PORTAL and to maintain the listing of the Series A Notes on
PORTAL for so long as the Series A Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer
of the Notes, and to comply with all of its agreements set forth in the
representation letters of the Company and the Guarantor to DTC relating to the
approval of the Notes by DTC for "book-entry" transfer.
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<PAGE> 8
(l) During the period beginning on the date hereof and
continuing to and including the Closing Date, not to offer, sell, contract to
sell or otherwise transfer or dispose of any debt securities of the Company or
the Guarantor or any warrants, rights or options to purchase or otherwise
acquire debt securities of the Company or the Guarantor substantially similar to
the Notes and the Subsidiary Guarantee (other than (i) the Notes and the
Subsidiary Guarantee and (ii) commercial paper issued in the ordinary course of
business), without the prior written consent of the Initial Purchasers.
(m) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Securities
Act) that would be integrated with the sale of the Series A Notes to the Initial
Purchasers or pursuant to Exempt Resales in a manner that would require the
registration of any such sale of the Series A Notes under the Securities Act.
(n) Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of any
Notes.
(o) To cause the Exchange Offer to be made in the
appropriate form to permit Series B Notes and guarantees thereof by the
Guarantor registered pursuant to the Securities Act to be offered in exchange
for the Series A Notes and the Subsidiary Guarantee and to comply with all
applicable federal and state securities laws in connection with the Exchange
Offer.
(p) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(q) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by it prior
to the Closing Date and to satisfy all conditions precedent to the delivery of
the Series A Notes and the Subsidiary Guarantee.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND
THE GUARANTOR. As of the date hereof, each of the Company and the Guarantor,
jointly and severally, represents and warrants to, and agrees with, each of the
Initial Purchasers that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum do not, and any supplement or amendment to them will not, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchasers furnished to the Company in
writing by the Initial Purchasers expressly for use therein. No stop order
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting that
any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Securities Act, has been issued.
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<PAGE> 9
(b) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Preliminary Offering
Memorandum and the Offering Memorandum and to own, lease and operate its
properties, and each is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Effect").
(c) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights.
(d) The entities listed on Schedule B hereto are the only
subsidiaries, direct or indirect, of the Company. All of the outstanding shares
of capital stock of each of the Company's subsidiaries have been duly authorized
and validly issued and are fully paid and non-assessable, and are owned by the
Company, directly or indirectly through one or more subsidiaries, free and clear
of any security interest, claim, lien, encumbrance or adverse interest of any
nature (each, a "Lien"), except as such stock may be pledged pursuant to the
Senior Credit Facility (as defined in the Offering Memorandum).
(e) This Agreement has been duly authorized, executed and
delivered by the Company and the Guarantor.
(f) The Indenture has been duly authorized by the Company
and the Guarantor and, on the Closing Date, will have been validly executed and
delivered by the Company and the Guarantor. When the Indenture has been duly
executed and delivered by the Company and the Guarantor, the Indenture will be a
valid and binding agreement of the Company and the Guarantor, enforceable
against the Company and the Guarantor in accordance with its terms except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles of
general applicability. On the Closing Date, the Indenture will conform in all
material respects to the requirements of the Trust Indenture Act of 1939, as
amended (the "TIA" or "Trust Indenture Act"), and the rules and regulations of
the Commission applicable to an indenture which is qualified thereunder.
(g) The Series A Notes have been duly authorized and, on the
Closing Date, will have been validly executed and delivered by the Company. When
the Series A Notes have been issued, executed and authenticated in accordance
with the provisions of the Indenture and delivered to and paid for by the
Initial Purchasers in accordance with the terms of this Agreement, the Series A
Notes will be entitled to the benefits of the Indenture and will be valid and
binding obligations of the Company, enforceable in accordance with their terms
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the Series A
Notes will conform as to legal matters to the description thereof contained in
the Offering Memorandum.
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<PAGE> 10
(h) On the Closing Date, the Series B Notes will have been
duly authorized by the Company. When the Series B Notes are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Series B Notes will be entitled to the benefits of the Indenture
and will be the valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability.
(i) The Subsidiary Guarantee to be endorsed on the Series A
Notes by the Guarantor has been duly authorized by the Guarantor and, on the
Closing Date, will have been duly executed and delivered by the Guarantor. When
the Series A Notes have been issued, executed and authenticated in accordance
with the Indenture and delivered to and paid for by the Initial Purchasers in
accordance with the terms of this Agreement, the Subsidiary Guarantee of the
Guarantor endorsed thereon will be entitled to the benefits of the Indenture and
will be the valid and binding obligation of the Guarantor, enforceable against
the Guarantor in accordance with its terms, except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Subsidiary Guarantee to be endorsed on
the Series A Notes will conform as to legal matters to the description thereof
contained in the Offering Memorandum.
(j) The Subsidiary Guarantee to be endorsed on the Series B
Notes by the Guarantor has been duly authorized by the Guarantor and, when
issued, will have been duly executed and delivered by the Guarantor. When the
Series B Notes have been issued, executed and authenticated in accordance with
the terms of the Exchange Offer and the Indenture, the Subsidiary Guarantee of
the Guarantor endorsed thereon will be entitled to the benefits of the Indenture
and will be the valid and binding obligation of the Guarantor, enforceable
against the Guarantor in accordance with its terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability. When the Series B Notes are issued, authenticated and
delivered, the Subsidiary Guarantee to be endorsed on the Series B Notes will
conform as to legal matters to the description thereof in the Offering
Memorandum.
(k) All indebtedness of the Company and the Guarantor that
will be repaid with the proceeds of the issuance and sale of the Series A Notes
was incurred, and the indebtedness represented by the Series A Notes is being
incurred, for proper purposes and in good faith and each of the Company and the
Guarantor was, at the time of the incurrence of such indebtedness that will be
repaid with the proceeds of the issuance and sale of the Series A Notes, and
will be on the Closing Date (after giving effect to the application of the
proceeds from the issuance of the Series A Notes) solvent, and had at the time
of the incurrence of such indebtedness that will be repaid with the proceeds of
the issuance and sale of the Series A Notes and will have on the Closing Date
(after giving effect to the application of the proceeds from the issuance of the
Series A Notes) sufficient capital for carrying on their respective business and
were, at the time of the incurrence of such indebtedness that will be repaid
with the proceeds of the issuance and sale of the Series A Notes, and will be on
the Closing Date (after giving effect to the application of the proceeds from
the issuance of the Series A Notes) able to pay their respective debts as they
mature.
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(l) The Registration Rights Agreement has been duly
authorized by the Company and the Guarantor and, on the Closing Date, will have
been duly executed and delivered by the Company and the Guarantor. When the
Registration Rights Agreement has been duly executed and delivered, the
Registration Rights Agreement will be a valid and binding agreement of the
Company and the Guarantor, enforceable against the Company and the Guarantor in
accordance with its terms except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On the
Closing Date, the Registration Rights Agreement will conform as to legal matters
to the description thereof in the Offering Memorandum.
(m) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws or in default in the performance
of any obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument that is
material to the Company and its subsidiaries, taken as a whole, to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or their respective property is bound.
(n) The execution, delivery and performance of this
Agreement and the other Operative Documents by the Company and the Guarantor,
compliance by the Company and the Guarantor with all provisions hereof and
thereof and the consummation of the transactions contemplated hereby and thereby
will not (i) require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such as may
be required under the securities or Blue Sky laws of the various states), (ii)
conflict with or constitute a breach of any of the terms or provisions of, or a
default under, the charter or by-laws of the Company or any of its subsidiaries
or any indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company and its subsidiaries, taken as a
whole, to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries or their respective property is bound,
(iii) violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or agency having
jurisdiction over the Company, any of its subsidiaries or their respective
property, except for such violations or conflicts which, singly or in the
aggregate, would not have a Material Adverse Effect, or (iv) result in the
termination or revocation of any Authorization (as defined below) of the Company
or any of its subsidiaries or result in any other impairment of the rights of
the holder of any such Authorization, except for such terminations or
revocations which, singly or in the aggregate, would not have a Material Adverse
Effect.
(o) There are no legal or governmental proceedings pending
or threatened to which the Company or any of its subsidiaries is or could be a
party or to which any of their respective property is or could be subject, which
might result, singly or in the aggregate, in a Material Adverse Effect.
(p) Neither the Company nor any of its subsidiaries has
knowledge or has received notification of any violation of any foreign, federal,
state or local law or regulation relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws") or any provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules and
regulations promulgated thereunder, except for such violations which, singly or
in the aggregate, would not have a Material Adverse Effect.
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(q) The Company is not aware of, and the Company has not
received any notification of, any costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a Material Adverse Effect.
(r) Each of the Company and its subsidiaries has such
permits, licenses, consents, exemptions, franchises, authorizations and other
approvals (each, an "Authorization") of, and has made all filings with and
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including without limitation,
under any applicable Environmental Laws, as are necessary to own, lease, license
and operate its respective properties and to conduct its business, except where
the failure to have any such Authorization or to make any such filing or notice
would not, singly or in the aggregate, have a Material Adverse Effect. Each such
Authorization is valid and in full force and effect and each of the Company and
its subsidiaries is in compliance with all the terms and conditions thereof and
with the rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including, without
limitation, the receipt of any notice from any authority or governing body)
which allows or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the rights of
the holder of any such Authorization; and such Authorizations contain no
restrictions that are burdensome to the Company or any of its subsidiaries;
except where such failure to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, have a Material Adverse
Effect.
(s) The accountants, Arthur Andersen LLP and Price
Waterhouse LLP, that have certified the financial statements and supporting
schedules included in the Preliminary Offering Memorandum and the Offering
Memorandum are independent public accountants with respect to the Company and
the Guarantor, as required by the Securities Act and the Exchange Act. The
historical financial statements, together with related schedules and notes, set
forth in the Preliminary Offering Memorandum and the Offering Memorandum comply
as to form in all material respects with the requirements applicable to
registration statements on Form S-1 under the Securities Act.
(t) The historical financial statements, together with
related schedules and notes forming part of the Offering Memorandum (and any
amendment or supplement thereto), present fairly the consolidated financial
position, results of operations and changes in financial position of the Company
and its subsidiaries on the basis stated in the Offering Memorandum at the
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; and the other financial and
statistical information and data set forth in the Offering Memorandum (and any
amendment or supplement thereto) are, in all material respects, accurately
presented and prepared on a basis consistent with such financial statements and
the books and records of the Company.
(u) The pro forma financial statements included in the
Preliminary Offering Memorandum and the Offering Memorandum have been prepared
on a basis consistent with the historical
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<PAGE> 13
financial statements of the Company and its subsidiaries and give effect to
assumptions used in the preparation thereof on a reasonable basis and in good
faith and present fairly the historical and proposed transactions contemplated
by the Preliminary Offering Memorandum and the Offering Memorandum; and such pro
forma financial statements comply as to form in all material respects with the
requirements applicable to pro forma financial statements included in
registration statements on Form S-1 under the Securities Act. The other pro
forma financial and statistical information and data included in the Offering
Memorandum are, in all material respects, accurately presented and prepared on a
basis consistent with the pro forma financial statements.
(v) The Company is not and, after giving effect to the
offering and sale of the Series A Notes and the application of the net proceeds
thereof as described in the Offering Memorandum, will not be, an "investment
company," as such term is defined in the Investment Company Act of 1940, as
amended.
(w) Except for the Registration Rights Agreement, there are
no contracts, agreements or understandings between the Company or the Guarantor
and any person granting such person the right to require the Company or the
Guarantor to file a registration statement under the Securities Act with respect
to any securities of the Company or the Guarantor or to require the Company or
the Guarantor to include such securities with the Notes and Subsidiary Guarantee
registered pursuant to any Registration Statement.
(x) Neither the Company nor any of its subsidiaries nor any
agent thereof acting on the behalf of them has taken, and none of them will
take, any action that might cause this Agreement or the issuance or sale of the
Series A Notes to violate Regulation G (12 C.F.R. Part 207), Regulation T (12
C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R.
Part 224) of the Board of Governors of the Federal Reserve System.
(y) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there has not occurred any material adverse change
or any development involving a prospective material adverse change in the
condition, financial or otherwise, or the earnings, business, management or
operations of the Company and its subsidiaries, taken as a whole, (ii) there has
not been any material adverse change or any development involving a prospective
material adverse change in the capital stock or in the long-term debt of the
Company or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries has incurred any material liability or obligation, direct or
contingent.
(z) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, contains all the information specified in,
and meeting the requirements of, Rule 144A(d)(4) under the Securities Act.
(aa) When the Series A Notes and the Subsidiary Guarantee are
issued and delivered pursuant to this Agreement, neither the Series A Notes nor
the Subsidiary Guarantee will be of the same class (within the meaning of Rule
144A under the Securities Act) as any security of the Company
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<PAGE> 14
or the Guarantor that is listed on a national securities exchange registered
under Section 6 of the Exchange Act or that is quoted in a United States
automated inter-dealer quotation system.
(bb) No form of general solicitation or general advertising
(as defined in Regulation D under the Securities Act) was used by the Company,
the Guarantor or any of their respective representatives (other than the Initial
Purchasers, as to whom the Company and the Guarantor make no representation) in
connection with the offer and sale of the Series A Notes contemplated hereby,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising. No securities of the same
class as the Series A Notes have been issued and sold by the Company within the
six-month period immediately prior to the date hereof.
(cc) Prior to the effectiveness of any Registration
Statement, the Indenture is not required to be qualified under the TIA.
(dd) None of the Company, the Guarantor nor any of their
respective affiliates or any person acting on its or their behalf (other than
the Initial Purchasers, as to whom the Company and the Guarantor make no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S under the Securities Act ("Regulation S")
with respect to the Series A Notes or the Subsidiary Guarantee.
(ee) The Series A Notes offered and sold in reliance on
Regulation S have been and will be offered and sold only in offshore
transactions.
(ff) The sale of the Series A Notes pursuant to Regulation S
is not part of a plan or scheme to evade the registration provisions of the
Securities Act.
(gg) The Company, the Guarantor and their respective
affiliates and all persons acting on their behalf (other than the Initial
Purchasers, as to whom the Company and the Guarantor make no representation)
have complied with and will comply with the offering restrictions requirements
of Regulation S in connection with the offering of the Series A Notes outside
the United States and, in connection therewith, the Offering Memorandum will
contain the disclosure required by Rule 902(h).
(hh) The Series A Notes sold in reliance on Regulation S will
be represented upon issuance by a temporary global security that may not be
exchanged for definitive securities until the expiration of the 40-day
restricted period referred to in Rule 903(c)(3) of the Securities Act and only
upon certification of beneficial ownership of such Series A Notes by non-U.S.
persons or U.S. persons who purchased such Series A Notes in transactions that
were exempt from the registration requirements of the Securities Act.
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<PAGE> 15
(ii) No registration under the Securities Act of the Series A
Notes or the Subsidiary Guarantee is required for the sale of the Series A Notes
and the Subsidiary Guarantee to the Initial Purchasers as contemplated hereby or
for the Exempt Resales assuming the accuracy of the Initial Purchasers'
representations and warranties and agreements set forth in Section 7 hereof.
(jj) No "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under the
Securities Act (i) has imposed (or has informed the Company or the Guarantor
that it is considering imposing) any condition (financial or otherwise) on the
Company's or the Guarantor's retaining any rating assigned as of the date hereof
to the Company, the Guarantor or any securities of the Company or the Guarantor
or (ii) has indicated to the Company or the Guarantor that it is considering (a)
the downgrading, suspension or withdrawal of, or any review for a possible
change that does not indicate the direction of the possible change in, any
rating so assigned or (b) any change in the outlook for any rating of the
Company or the Guarantor.
(kk) Each certificate signed by any officer of the Company or
the Guarantor and delivered to the Initial Purchasers or counsel for the Initial
Purchasers shall be deemed to be a representation and warranty by the Company or
the Guarantor to the Initial Purchasers as to the matters covered thereby.
(ll) The information contained in the caption "Certain
Transactions" in the Offering Memorandum contains all of the information that is
required by Item 404 of Regulation S-K of the Securities Act if the Company were
required to comply with such Item and, to the extent such information
constitutes summaries of agreements, instruments, other documents or unwritten
understandings, such information is presented in a fair, complete and accurate
manner.
The Company acknowledges that the Initial Purchasers and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 9 hereof, counsel to the Company and the Guarantor and counsel to the
Initial Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
7. INITIAL PURCHASERS' REPRESENTATIONS AND WARRANTIES. Each of
the Initial Purchasers, severally and not jointly, represent and warrant to each
of the Company and the Guarantor, and agrees that:
(a) Such Initial Purchaser is either a QIB or an Accredited
Institution, in either case, with such knowledge and experience in financial and
business matters as is necessary in order to evaluate the merits and risks of an
investment in the Series A Notes.
(b) Such Initial Purchaser (A) is not acquiring the Series A
Notes with a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Notes in a transaction that would
violate the Securities Act or the securities laws of any state of the United
States or any other applicable jurisdiction and (B) will be reoffering and
reselling the Series A Notes only to (x) QIBs in reliance on the exemption from
the registration requirements of the Securities Act provided by Rule 144A, (y)
not more than ten Accredited Institutions that execute and deliver a letter
containing certain
14
<PAGE> 16
representations and agreements in the form attached as Annex A to the Offering
Memorandum, and (z) in offshore transactions in reliance upon Regulation S under
the Securities Act.
(c) Such Initial Purchaser agrees that no form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) has been or will be used by such Initial Purchaser or any of
its representatives in connection with the offer and sale of the Series A Notes
pursuant hereto, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection with
Exempt Resales, such Initial Purchaser will solicit offers to buy the Series A
Notes only from, and will offer to sell the Series A Notes only to, Eligible
Purchasers. Each Initial Purchaser further agrees that it will offer to sell the
Series A Notes only to, and will solicit offers to buy the Series A Notes only
from, (A) Eligible Purchasers that the Initial Purchaser reasonably believes are
QIBs, (B) Accredited Institutions who make the representations contained in, and
execute and return to the Initial Purchaser, a certificate in the form of Annex
A attached to the Offering Memorandum and (C) Regulation S Purchasers, in each
case, that agree that (x) the Series A Notes purchased by them may be resold,
pledged or otherwise transferred within the time period referred to under Rule
144(k) (taking into account the provisions of Rule 144(d) under the Securities
Act, if applicable) under the Securities Act, as in effect on the date of the
transfer of such Series A Notes, only (I) to the Company or any of its
subsidiaries, (II) to a person whom the seller reasonably believes is a QIB
purchasing for its own account or for the account of a QIB in a transaction
meeting the requirements of Rule 144A under the Securities Act, (III) in an
offshore transaction (as defined in Rule 902 under the Securities Act) meeting
the requirements of Rule 904 of the Securities Act, (IV) in a transaction
meeting the requirements of Rule 144 under the Securities Act, (V) to an
Accredited Institution that, prior to such transfer, furnishes the Trustee a
signed letter containing certain representations and agreements relating to the
registration of transfer of such Series A Note (the form of which is
substantially the same as Annex A to the Offering Memorandum) and an opinion of
counsel acceptable to the Company that such transfer is in compliance with the
Securities Act, (VI) in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
acceptable to the Company) or (VII) pursuant to an effective registration
statement and, in each case, in accordance with the applicable securities laws
of any state of the United States or any other applicable jurisdiction and (y)
they will deliver to each person to whom such Series A Notes or an interest
therein is transferred a notice substantially to the effect of the foregoing.
(e) None of such Initial Purchaser nor any of its affiliates
or any person acting on its or their behalf has engaged or will engage in any
directed selling efforts within the meaning of Regulation S with respect to the
Series A Notes or the Subsidiary Guarantee.
(f) The Series A Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S have been and will be
offered and sold only in offshore transactions (as defined in Rule 902 under the
Securities Act).
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<PAGE> 17
(g) The sale of the Series A Notes offered and sold by such
Initial Purchaser pursuant hereto in reliance on Regulation S is not part of a
plan or scheme to evade the registration provisions of the Securities Act.
(h) Such Initial Purchaser agrees that it has not offered or
sold and will not offer or sell the Series A Notes in the United States or to,
or for the benefit or account of, a U.S. Person (other than a distributor), in
each case, as defined in Rule 902 under the Securities Act (i) as part of its
distribution at any time and (ii) otherwise until 40 days after the later of the
commencement of the offering of the Series A Notes pursuant hereto and the
Closing Date, other than in accordance with Regulation S of the Securities Act
(or Rule 144A or to Accredited Institutions in transactions that are exempt from
the registration requirements of the Securities Act). Such Initial Purchaser
agrees that, during such 40-day restricted period, it will not cause any
advertisement with respect to the Series A Notes (including any "tombstone"
advertisement) to be published in any newspaper or periodical or posted in any
public place and will not issue any circular relating to the Series A Notes,
except such advertisements as are permitted by and include the statements
required by Regulation S.
(i) Such Initial Purchaser agrees that, at or prior to
confirmation of a sale of Series A Notes by it to any distributor, dealer or
person receiving a selling concession, fee or other remuneration during the
40-day restricted period referred to in Rule 903(c)(2) under the Securities Act,
it will send to such distributor, dealer or person receiving a selling
concession, fee or other remuneration a confirmation or notice to substantially
the following effect:
"The Series A Notes covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of your distribution at any time or
(ii) otherwise until 40 days after the later of the commencement of the
Offering and the Closing Date, except in either case in accordance with
Regulation S under the Securities Act (or Rule 144A or to Accredited
Institutions in transactions that are exempt from the registration
requirements of the Securities Act), and in connection with any subsequent
sale by you of the Series A Notes covered hereby in reliance on Regulation
S during the period referred to above to any distributor, dealer or person
receiving a selling concession, fee or other remuneration, you must
deliver a notice to substantially the foregoing effect. Terms used above
have the meanings assigned to them in Regulation S."
(j) Such Initial Purchaser agrees that the Series A Notes
sold in reliance on Regulation S will be represented upon issuance by a
temporary global security that may not be exchanged for definitive securities
until the expiration of the 40-day restricted period referred to in Rule
903(c)(3) of the Securities Act and only upon certification of beneficial
ownership of such Series A Notes by non-U.S. persons or U.S. persons who
purchased such Series A Notes in transactions that were exempt from the
registration requirements of the Securities Act.
(k) Such Initial Purchaser further represents and agrees
that (1) it has not offered or sold and will not offer or sell any Series A
Notes to persons in the United Kingdom prior to the expiration of the period of
six months from the issue date of the Series A Notes, except to persons whose
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<PAGE> 18
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their business 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 Series A Notes 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 issuance of the Series A Notes to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom the document may
otherwise lawfully be issued or passed on.
(l) Such Initial Purchaser agrees that it will not offer,
sell or deliver any of the Series A Notes in any jurisdiction outside the United
States 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 Series A Notes in
such jurisdictions. Such Initial Purchaser understands that no action has been
taken to permit a public offering in any jurisdiction outside the United States
where action would be required for such purpose.
The Initial Purchasers acknowledge that the Company and the
Guarantor and, for purposes of the opinions to be delivered to each Initial
Purchaser pursuant to Section 9 hereof, counsel to the Company and the Guarantor
and counsel to the Initial Purchasers will rely upon the accuracy and truth of
the foregoing representations and the Initial Purchasers hereby consent to such
reliance.
8. Indemnification.
(a) The Company and the Guarantor agree, jointly and
severally, to indemnify and hold harmless each Initial Purchaser, its directors,
its officers and each person, if any, who controls such Initial Purchaser within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages, liabilities and
judgments (including, without limitation, any legal or other expenses incurred
in connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments), as incurred, caused by any untrue statement or alleged untrue
statement of a material fact contained in the Offering Memorandum (or any
amendment or supplement thereto), the Preliminary Offering Memorandum or any
Rule 144A Information provided by the Company or the Guarantor to any holder or
prospective purchaser of Series A Notes pursuant to Section 5(h) or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any of the Initial Purchasers
furnished in writing to the Company by any of the Initial Purchasers.
(b) Each of the Initial Purchasers agrees, severally and not
jointly, to indemnify and hold harmless the Company and the Guarantor, and their
respective directors and officers and each person, if any, who controls (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) the Company or the Guarantor, to the same extent as the foregoing indemnity
from the Company and the Guarantor to the Initial Purchasers but only with
reference to information relating to
17
<PAGE> 19
such Initial Purchaser furnished in writing to the Company by such Initial
Purchaser expressly for use in the Preliminary Offering Memorandum or the
Offering Memorandum.
(c) In case any action shall be commenced involving any
person in respect of which indemnity may be sought pursuant to Section 8(a) or
8(b) (the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying party") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), the Initial Purchasers shall not
be required to assume the defense of such action pursuant to this Section 8(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of the Initial Purchasers). Any indemnified party shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred. Such
firm shall be designated in writing by BancAmerica Robertson Stephens, in the
case of the parties indemnified pursuant to Section 8(a), and by the Company, in
the case of parties indemnified pursuant to Section 8(b). The indemnifying party
shall indemnify and hold harmless the indemnified party from and against any and
all losses, claims, damages, liabilities and judgments by reason of any
settlement of any action (i) effected with its written consent or (ii) effected
without its written consent if the settlement is entered into more than twenty
business days after the indemnifying party shall have received a request from
the indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party shall
have failed to comply with such reimbursement request. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action 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 the
indemnified party.
(d) To the extent the indemnification provided for in this
Section 8 is unavailable to an indemnified party or insufficient in respect of
any losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims,
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<PAGE> 20
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Guarantor, on the
one hand, and the Initial Purchasers, on the other hand, from the offering of
the Series A Notes or (ii) if the allocation provided by clause 8(d)(i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Company and the Guarantor, on the one hand, and the
Initial Purchasers, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Guarantor, on the one hand, and the
Initial Purchasers, on the other hand, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Series A Notes
(before deducting expenses) received by the Company, and the total discounts and
commissions received by the Initial Purchasers bear to the total price to
investors of the Series A Notes, in each case as set forth in the table on the
cover page of the Offering Memorandum. The relative fault of the Company and the
Guarantor, on the one hand, and the Initial Purchasers, on the other hand, shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Guarantor,
on the one hand, or the Initial Purchasers, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Guarantor, and the Initial Purchasers agree that
it would not be just and equitable if contribution pursuant to this Section 8(d)
were determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses incurred
by such indemnified party in connection with investigating or defending any
matter, including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, the Initial Purchasers shall not be required to contribute any amount
in excess of the amount by which the total price of the Series A Notes purchased
by it were sold to investors in Exempt Resales exceeds the amount of any damages
which such Initial Purchaser have otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Initial Purchasers'
obligations to contribute pursuant to this Section 8(d) are several in
proportion to the respective principal amount of Series A Notes purchased by
each of the Initial Purchasers hereunder and not joint.
(e) The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations
of the Initial Purchasers to purchase the Series A Notes under this Agreement
are subject to the satisfaction of each of the following conditions:
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<PAGE> 21
(a) All the representations and warranties of the Company
and the Guarantor contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on and as of the Closing
Date.
(b) On or after the date hereof, (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any notice have
been given of any potential or intended downgrading, suspension or withdrawal
of, or of any review (or of any potential or intended review) for a possible
change that does not indicate the direction of the possible change in, any
rating of the Company or the Guarantor or any securities of the Company or the
Guarantor (including, without limitation, the placing of any of the foregoing
ratings on credit watch with negative or developing implications or under review
with an uncertain direction) by any "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under the
Securities Act, (ii) there shall not have occurred any change, nor shall notice
have been given of any potential or intended change, in the outlook for any
rating of the Company or the Guarantor by any such rating organization and (iii)
no such rating organization shall have given notice that it has assigned (or is
considering assigning) a lower rating to the Notes than that on which the Notes
were marketed.
(c) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there shall not have occurred any change or any
development involving a prospective change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Company
and its subsidiaries, taken as a whole, (ii) there shall not have been any
change or any development involving a prospective change in the capital stock or
in the long-term debt of the Company or any of its subsidiaries and (iii)
neither the Company nor any of its subsidiaries shall have incurred any
liability or obligation, direct or contingent, the effect of which, in any such
case described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Series A Notes on the terms and in the manner contemplated in the Offering
Memorandum.
(d) The Initial Purchasers shall have received on the
Closing Date a certificate dated the Closing Date, signed by the President and
the Chief Financial Officer of the Company, confirming the matters set forth in
Sections 9(a), 9(b) and 9(c).
(e) The Initial Purchasers shall have received on the
Closing Date an opinion (satisfactory to the Initial Purchasers and counsel for
the Initial Purchasers), dated the Closing Date, of Cairncross & Hempelmann,
P.S., counsel for the Company and the Guarantor, the form of which is attached
as Exhibit B hereto. The opinion of Cairncross & Hempelmann, P.S. shall be
rendered to the Initial Purchasers at the request of the Company and the
Guarantor and shall so state therein.
(f) The Initial Purchasers shall have received on the
Closing Date an opinion (satisfactory to the Initial Purchasers and counsel for
the Initial Purchasers), dated the Closing Date, of Haythe & Curley, special
counsel for the Company and the Guarantor, the form of which is attached as
Exhibit C hereto. The opinion of Haythe & Curley shall be rendered to the
Initial Purchasers at the request of the Company and the Guarantor and shall so
state therein.
20
<PAGE> 22
(g) The Initial Purchasers shall have received on the
Closing Date an opinion (satisfactory to the Initial Purchasers and counsel for
the Initial Purchasers), dated the Closing Date, of Cole, Raywid & Braverman,
regulatory counsel for the Company and the Guarantor, the form of which is
attached as Exhibit D hereto. The opinion of Cole, Raywid & Braverman shall be
rendered to the Initial Purchasers at the request of the Company and the
Guarantor and shall so state therein.
(h) The Initial Purchasers shall have received on the
Closing Date an opinion, dated the Closing Date, of Latham & Watkins, counsel
for the Initial Purchasers, in form and substance satisfactory to the Initial
Purchasers.
(i) The Initial Purchasers shall have received, at the time
this Agreement is executed and at the Closing Date, letters dated the date
hereof or the Closing Date, as the case may be, in form and substance
satisfactory to the Initial Purchasers from each of Arthur Andersen LLP and
Price Waterhouse LLP, independent public accountants, containing the information
and statements of the type ordinarily included in accountants' "comfort letters"
to the Initial Purchasers with respect to the financial statements and certain
financial information contained in the Offering Memorandum.
(j) The Series A Notes shall have been approved by the NASD
for trading and duly listed in PORTAL.
(k) The Initial Purchasers shall have received a
counterpart, conformed as executed, of the Indenture which shall have been
entered into by the Company, the Guarantor and the Trustee.
(l) The Company and the Guarantor shall have executed the
Registration Rights Agreement and the Initial Purchasers shall have received an
original copy thereof, duly executed by the Company and the Guarantor.
(m) The Company shall not have failed at or prior to the
Closing Date to perform or comply with any of the agreements herein contained
and required to be performed or complied with by the Company at or prior to the
Closing Date.
(n) The Company shall have amended or shall amend
simultaneously with the execution of this Agreement, the Credit Agreement dated
August 23, 1994, by and among the Company and The First National Bank of
Chicago, as lender and managing agent and the other lenders party thereto
providing for up to $100 million of credit borrowings, having terms
substantially similar to those described in the caption "Description of the
Senior Credit Facility" in the Offering Memorandum (the "Senior Credit
Facility").
(o) The Company shall have received a commitment letter from
The First National Bank of Chicago setting forth a commitment for the
Supplemental Credit Facility (as defined in the Offering Memorandum).
21
<PAGE> 23
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time prior to the Closing
Date by the Initial Purchasers by written notice to the Company if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or elsewhere that, in the Initial
Purchasers' judgment, is material and adverse and, in the Initial Purchasers'
judgment, makes it impracticable to market the Series A Notes on the terms and
in the manner contemplated in the Offering Memorandum, (ii) the suspension or
material limitation of trading in securities or other instruments on the New
York Stock Exchange, the American Stock Exchange, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or The
Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company or the Guarantor on any
exchange or in the over-the-counter market, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in your opinion
materially and adversely affects, or will materially and adversely affect, the
business, prospects, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole, (v) the declaration of a banking
moratorium by either federal or New York State authorities or (vi) the taking of
any action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in your opinion has a material adverse effect
on the financial markets in the United States.
If on the Closing Date any one or more of the Initial Purchasers
shall fail or refuse to purchase the Series A Notes which it or they have agreed
to purchase hereunder on such date and the aggregate principal amount of the
Series A Notes which such defaulting Initial Purchaser or Initial Purchasers, as
the case may be, agreed but failed or refused to purchase is not more than
one-tenth of the aggregate principal amount of the Series A Notes to be
purchased on such date by all Initial Purchasers, each non-defaulting Initial
Purchaser shall be obligated severally, in the proportion which the principal
amount of the Series A Notes set forth opposite its name in Schedule A bears to
the aggregate principal amount of the Series A Notes which all the
non-defaulting Initial Purchasers, as the case may be, have agreed to purchase,
or in such other proportion as you may specify, to purchase the Series A Notes
which such defaulting Initial Purchaser or Initial Purchasers, as the case may
be, agreed but failed or refused to purchase on such date; provided that in no
event shall the aggregate principal amount of the Series A Notes which any
Initial Purchaser has agreed to purchase pursuant to Section 2 hereof be
increased pursuant to this Section 10 by an amount in excess of one-ninth of
such principal amount of the Series A Notes without the written consent of such
Initial Purchaser. If on the Closing Date any Initial Purchaser or Initial
Purchasers shall fail or refuse to purchase the Series A Notes and the aggregate
principal amount of the Series A Notes with respect to which such default occurs
is more than one-tenth of the aggregate principal amount of the Series A Notes
to be purchased by all Initial Purchasers and arrangements satisfactory to the
Initial Purchasers and the Company for purchase of such the Series A Notes are
not made within 48 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Initial Purchaser and the
Company. In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Offering Memorandum or any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Initial Purchaser from liability in respect of any
default of any such Initial Purchaser under this Agreement.
22
<PAGE> 24
11. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company or the Guarantor,
to Northland Cable Television, Inc., 1201 Third Avenue, Suite 3600, Seattle,
Washington 98101, Attention: President and General Counsel, with a copy to:
Cairncross & Hempelmann, P.S., 70th Floor, Columbia Center, 701 Fifth Avenue,
Seattle, Washington 98104-7016, Attention: Scott T. Bell and (ii) if to the
Initial Purchasers, BancAmerica Robertson Stephens, 231 South LaSalle Street,
Chicago, Illinois 60697, Attention: High Yield Syndication (with a copy, which
shall not constitute notice, to Latham & Watkins, Attention: Gregory K. Miller),
or in any case to such other address as the person to be notified may have
requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company, the Guarantor
and the Initial Purchasers set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Series A Notes, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of the Initial
Purchasers, the officers or directors of the Initial Purchasers, any person
controlling the Initial Purchasers, the Company, the Guarantor, the officers or
directors of the Company or the Guarantor, or any person controlling the Company
or the Guarantor, (ii) acceptance of the Series A Notes and payment for them
hereunder and (iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on
behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10), the Company and the
Guarantor, jointly and severally, agree to reimburse the Initial Purchasers for
all out-of-pocket expenses (including the fees and disbursements of counsel)
incurred by them. Notwithstanding any termination of this Agreement, the Company
shall be liable for all expenses which it has agreed to pay pursuant to Section
5(i) hereof. The Company and the Guarantor also agree, jointly and severally, to
reimburse the Initial Purchasers and their officers, directors and each person,
if any, who controls such Initial Purchasers within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act for any and all fees and
expenses (including without limitation the fees and expenses of counsel)
incurred by them in connection with enforcing their rights under this Agreement
(including without limitation its rights under this Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Guarantor,
the Initial Purchasers, the Initial Purchasers' directors and officers, any
controlling persons referred to herein, the directors of the Company and the
Guarantor and their respective successors and assigns, all as and to the extent
provided in this Agreement, and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns" shall
not include a purchaser of any of the Series A Notes from any of the several
Initial Purchasers merely because of such purchase.
This Agreement shall be governed and construed in accordance with
the internal laws of the State of New York applicable to agreements made and to
be performed in such State.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
23
<PAGE> 25
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Guarantor and the Initial Purchasers.
Very truly yours,
NORTHLAND CABLE TELEVISION, INC.
By: /s/ GARY S. JONES
-----------------------------------
Name: Gary S. Jones
Title: Vice President
NORTHLAND CABLE NEWS, INC.
By: /s/ GARY S. JONES
-----------------------------------
Name: Gary S. Jones
Title: Vice President
24
<PAGE> 26
The foregoing Purchase Agreement is
hereby confirmed and accepted as of the
date first above written.
BANCAMERICA ROBERTSON STEPHENS
By: /s/ THOMAS J. McGRATH
--------------------------------
Name: Thomas J. McGrath
Title: Managing Director
FIRST CHICAGO CAPITAL MARKETS, INC.
By: /s/ ROBERT J. RISCHARD
--------------------------------
Name: Robert J. Rischard
Title: Director
<PAGE> 27
SCHEDULE A
<TABLE>
<CAPTION>
Principal Amount
Initial Purchaser of Notes
----------------- ----------------
<S> <C>
BancAmerica Robertson Stephens........................ $70,000,000
First Chicago Capital Markets, Inc.................... 30,000,000
Total......................................... $100,000,000
============
</TABLE>
S-1
<PAGE> 28
SCHEDULE B
Subsidiaries
Northland Cable News, Inc.
S-2
<PAGE> 29
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
A-1
<PAGE> 30
EXHIBIT B
Opinion of Cairncross & Hempelmann, P.S., counsel for the Company,
to be delivered pursuant to Section 9(e) of the Purchase Agreement. References
to the Offering Memorandum in this Exhibit B include any supplements thereto at
the Closing Date.
(i) each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its business as described
in the Offering Memorandum and to own, lease and operate its
properties;
(ii) each of the Company and its subsidiaries is duly
qualified and is in good standing as a foreign corporation
authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified
would not have a Material Adverse Effect;
(iii) all the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid, non-assessable and not subject to any preemptive or similar
rights;
(iv) all of the outstanding shares of capital stock of each
of the Company's subsidiaries have been duly authorized and validly
issued and are fully paid and non-assessable, and are owned by the
Company, free and clear of any Lien except as such stock may be
pledged pursuant to the Senior Credit Facility;
(v) the Series A Notes have been duly authorized and validly
executed by the Company;
(vi) the Subsidiary Guarantee has been duly authorized and
validly executed by the Guarantor;
(vii) this Agreement, the Indenture and the Registration
Rights Agreement has been duly authorized, executed and delivered by
the Company and the Guarantor;
(viii) the Series B Notes have been duly authorized by the
Company and the Subsidiary Guarantee to be endorsed on the Series B
Notes have been duly authorized by the Guarantor;
(ix) the statements under the captions "Risk Factors-Ranking
of Notes; Subordination," "Risk Factors-Competition; Litigation,"
"Risk Factors-Fraudulent Transfer Statutes," "Business-The
Acquisition," "Business-Industry Overview," "Business-Programming
and Subscriber Rates," "Business-Competition,"
"Business-Properties," "Business-Insurance," "Business-Litigation,"
"Management," "Certain Transactions," "Description of the Senior
Credit Facility," "Description of the Notes," "Certain U.S. Federal
Tax Considerations for Non-U.S. Holders," "Exchange Offer;
Registration Rights" and "Notice to Investors" in the Offering
Memorandum, insofar as such statements constitute a summary of the
legal matters, documents or legal
B-1
<PAGE> 31
proceedings referred to therein, fairly present in all material
respects such legal matters, documents and legal proceedings;
(x) neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws and, to the best of
such counsel's knowledge after due inquiry, neither the Company nor
any of its subsidiaries is in default in the performance of any
obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company and its subsidiaries,
taken as a whole, to which the Company or any of its subsidiaries is
a party or by which the Company or any of its subsidiaries or their
respective property is bound;
(xi) the execution, delivery and performance of this
Agreement and the other Operative Documents by the Company and the
Guarantor, compliance by the Company and the Guarantor with all
provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (i) require
any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except
such as may be required under the securities or Blue Sky laws of the
various states), (ii) conflict with or constitute a breach of any of
the terms or provisions of, or a default under, the charter or
by-laws of the Company or any of its subsidiaries or any indenture,
loan agreement, mortgage, lease or other agreement or instrument
that is material to the Company and its subsidiaries, taken as a
whole, to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or their respective
property is bound, (iii) violate or conflict with any applicable law
or any rule, regulation, judgment, order or decree of any court or
any governmental body or agency having jurisdiction over the
Company, any of its subsidiaries or their respective property,
except for such violations or conflicts which, singly or in the
aggregate, would not have a Material Adverse Effect, or (iv) result
in the termination or revocation of any Authorization of the Company
or any of its subsidiaries or result in any other impairment of the
rights of the holder of any such Authorization, except for such
terminations or revocations which, singly or in the aggregate, would
not have a Material Adverse Effect.
(xii) after due inquiry, such counsel does not know of any
legal or governmental proceedings pending or threatened to which the
Company or any of its subsidiaries is or could be a party or to
which any of their respective property is or could be subject, which
might result, singly or in the aggregate, in a Material Adverse
Effect.
(xiii) each of the Company and its subsidiaries has such
Authorizations of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including without
limitation, under any applicable Environmental Laws, as are
necessary to own, lease, license and operate its respective
properties and to conduct its business, except where the failure to
have any such Authorization or to make any such filing or notice
would not, singly or in the aggregate, have a Material Adverse
Effect. Each such Authorization is valid and in full force and
effect and each of the Company and its subsidiaries is in compliance
with all the terms and conditions thereof and with the rules and
regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred
(including the receipt of any notice from any authority or governing
body) which allows or, after notice or lapse of time or both, would
allow, revocation, suspension or termination of
B-2
<PAGE> 32
any such Authorization or results or, after notice or lapse of time
or both, would result in any other impairment of the rights of the
holder of any such Authorization; and such Authorizations contain no
restrictions that are burdensome to the Company or any of its
subsidiaries; except where such failure to be valid and in full
force and effect or to be in compliance, the occurrence of any such
event or the presence of any such restriction would not, singly or
in the aggregate, have a Material Adverse Effect;
(xiv) the Company is not and, after giving effect to the
offering and sale of the Series A Notes and the application of the
net proceeds thereof as described in the Offering Memorandum, will
not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended;
(xv) to the best of such counsel's knowledge after due
inquiry, there are no contracts, agreements or understandings
between the Company or the Guarantor and any person granting such
person the right to require the Company or the Guarantor to file a
registration statement under the Securities Act with respect to any
securities of the Company or the Guarantor or to require the Company
or the Guarantor to include such securities with the Notes and
Subsidiary Guarantee registered pursuant to any Registration
Statement;
(xvi) the Indenture complies as to form in all material
respects with the requirements of the TIA, and the rules and
regulations of the Commission applicable to an indenture which is
qualified thereunder. It is not necessary in connection with the
offer, sale and delivery of the Series A Notes to the Initial
Purchasers in the manner contemplated by this Agreement or in
connection with the Exempt Resales to qualify the Indenture under
the TIA.
(xvii) no registration under the Securities Act of the Series
A Notes is required for the sale of the Series A Notes to the
Initial Purchasers as contemplated by this Agreement or for the
Exempt Resales assuming that (i) each Initial Purchasers is a QIB,
an Accredited Institution or a Regulation S Purchaser, (ii) the
accuracy of, and compliance with, the Initial Purchasers'
representations and agreements contained in Section 7 of this
Agreement, (iii) the accuracy of the representations of the Company
and the Guarantor set forth in Sections 5(h) and 6(dd), (ee) and
(ff) of this Agreement and (iv) with respect to Accredited
Institutions, the accuracy of the representations made by each such
Accredited Institution as set forth in the letter of representation
executed by such Accredited Institution in the form of Annex A to
the Offering Memorandum.
(xviii) to such counsel's knowledge, the information contained
in the caption "Certain Transactions" in the Offering Memorandum
contains all of the information that is required by Item 404 of
Regulation S-K of the Securities Act if the Company was required to
comply with such Item and, to the extent such information
constitutes summaries of agreements, instruments, other documents or
unwritten understandings, such information is presented in a fair,
complete and accurate manner.
(xix) such counsel has no reason to believe that, as of the
date of the Offering Memorandum or as of the Closing Date, the
Offering Memorandum, as amended or supplemented, if applicable
(except for the financial statements and other financial data
included therein, as to which such counsel need not express any
belief) contains any untrue
B-3
<PAGE> 33
statement of a material fact or omits 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.
B-4
<PAGE> 34
EXHIBIT C
Opinion of Haythe & Curley, special counsel for the Company, to be
delivered pursuant to Section 9(f) of the Purchase Agreement. References to the
Offering Memorandum in this Exhibit C include any supplements thereto at the
Closing Date.
(i) the Series A Notes are entitled to the benefits of the
Indenture and will be valid and binding obligations of the Company,
enforceable in accordance with their terms except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (y) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(ii) The Subsidiary Guarantee is entitled to the benefits of
the Indenture and is the valid and binding obligation of the
Guarantor, enforceable in accordance with its terms except as (x)
the enforceability thereof may be limited by bankruptcy, insolvency
or similar laws affecting creditors' rights generally and (y) rights
of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(iii) the Indenture is a valid and binding agreement of the
Company and the Guarantor, enforceable against each of the Company
and the Guarantor in accordance with its terms except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (y) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(iv) The Registration Rights Agreement is a valid and binding
agreement of the Company and the Guarantor, enforceable against each
of the Company and the Guarantor in accordance with its terms,
except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (y) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability; and
(v) the Series B Notes, when duly executed and authenticated
in accordance with the provisions of the Indenture, will be entitled
to the benefits of the Indenture and will be valid and binding
obligations of the Company, enforceable in accordance with their
terms except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (y) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
C-1
<PAGE> 35
EXHIBIT D
Opinion of Cole, Raywid & Braverman, regulatory counsel for the
Company, to be delivered pursuant to Section 9(g) of the Purchase Agreement.
References to the Offering Memorandum in this Exhibit D include any supplements
thereto at the Closing Date.
(i) the statements under the captions "Risk
Factors-Non-Exclusive Franchises; Non-Renewal or Termination of
Franchises," "Risk Factors-Substantial Regulation in the Cable
Television Industry," "Legislation and Regulation,"
"Business-Programming and Subscriber Rates," and
"Business-Franchises," "Business-Competition" in the Offering
Memorandum, insofar as such statements constitute a summary of the
legal matters, documents or proceedings referred to therein, fairly
present in all material respects such legal matters, documents and
legal proceedings.
D-1
<PAGE> 1
EXHIBIT 10.5
CONFORMED COPY
REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
NORTHLAND CABLE TELEVISION, INC.,
as Issuer
and
NORTHLAND CABLE NEWS, INC.,
as Guarantor
and
BANCAMERICA ROBERTSON STEPHENS
FIRST CHICAGO CAPITAL MARKETS, INC.,
as Initial Purchasers
DATED AS OF NOVEMBER 12, 1997
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made
and entered into as of November 12, 1997, by and among Northland Cable
Television, Inc., a Washington corporation (the "Issuer"), Northland Cable News,
Inc., a Washington corporation and subsidiary of the Issuer (the "Guarantor"),
on the one hand, and BancAmerica Robertson Stephens and First Chicago Capital
Markets, Inc. (each an "Initial Purchaser" and, collectively, the "Initial
Purchasers"), on the other hand, each of whom has agreed to purchase the
Issuer's 10 1/4% Senior Subordinated Notes due 2007 (the "Initial Notes")
pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
as of November 6, 1997 (the "Purchase Agreement"), by and among the Issuer, the
Guarantor and the Initial Purchasers (i) for your benefit and for the benefit of
each other Initial Purchaser and (ii) for the benefit of the holders from time
to time of the Notes (including you and each other Initial Purchaser). In order
to induce the Initial Purchasers to purchase the Initial Notes, the Issuer has
agreed to provide the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the obligations of
the Initial Purchasers set forth in Section 9 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall
have the following meanings:
Additional Interest Payment Date: With respect to the Initial
Notes, each Interest Payment Date.
Broker-Dealer: Any broker or dealer registered under the
Exchange Act.
Broker-Dealer Transfer Restricted Securities: Exchange Notes
that are acquired by a Broker-Dealer in the Exchange Offer in exchange for
Initial Notes that such Broker-Dealer acquired for its own account as a result
of market making activities or other trading activites (other than Initial Notes
acquired directly from the Company or any of its affiliates).
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Securities Act of the Exchange Offer Registration
Statement relating to the Exchange Notes to be issued in the Exchange Offer,
(ii) the maintenance of such Registration Statement continuously effective and
the keeping of the Exchange Offer open for a period not less than the minimum
period required pursuant to Section 3(b) hereof, and (iii) the delivery by the
Issuer to the Registrar under the Indenture of Exchange Notes in the same
aggregate principal amount as the aggregate principal amount of Initial Notes
that were tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Initial Notes, each
Interest Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Notes: The 10 1/4% Senior Subordinated Notes due 2007,
of the same series under the Indenture as the Initial Notes, to be issued to
Holders in exchange for Transfer Restricted Securities pursuant to this
Agreement.
Exchange Offer: The registration by the Issuer under the
Securities Act of the Exchange Notes pursuant to a Registration Statement
pursuant to which the Issuer offers the Holders of all outstanding Transfer
Restricted Securities the opportunity to exchange all such outstanding Transfer
Restricted Securities held by such
2
<PAGE> 3
Holders for Exchange Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration
Statement relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Initial Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Securities Act, and to certain
institutional "accredited investors," as such term is defined in Rule 501(a)(1),
(2), (3) and (7) of Regulation D under the Securities Act ("Accredited
Institutions").
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of November 12, 1997, among
the Issuer and Harris Trust Company of California, as trustee (the "Trustee"),
pursuant to which the Notes are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms thereof.
Initial Purchaser: As defined in the preamble hereto.
Initial Notes: The 10 1/4% Senior Subordinated Notes due 2007,
of the same series under the Indenture as the Exchange Notes, for so long as
such securities constitute Transfer Restricted Securities.
Initial Placement: The issuance and sale by the Issuer of the
Initial Notes to the Initial Purchasers pursuant to the Purchase Agreement.
Interest Payment Date: As defined in the Indenture and the
Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Initial Notes and the Exchange Notes.
Person: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration Statement,
as amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date relating
to the Notes, each Person who is a Holder of Notes on the record date with
respect to the Interest Payment Date on which such Damages Payment Date shall
occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Issuer
and the Guarantor relating to (a) an offering of Exchange Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, which is filed pursuant
to the provisions of this Agreement, in each case, including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds
Broker-Dealer Transfer Restricted Securities.
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Securities Act: The Securities Act of 1933, as amended.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to
occur of (a) the date on which such Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the Holder thereof without complying with
the prospectus delivery requirements of the Securities Act, (b) the date on
which such Note has been effectively registered under the Securities Act and
disposed of in accordance with a Shelf Registration Statement and (c) the date
on which such Note is distributed to the public pursuant to Rule 144 under the
Securities Act or by a Broker-Dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including delivery of
the Prospectus contained therein).
Underwritten Registration or Underwritten Offering: A
registration in which securities of the Issuer are sold to an underwriter for
reoffering to the public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to
be a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in Section
6(a) below have been complied with), the Issuer and the Guarantor shall (i)
cause to be filed with the Commission as soon as practicable after the Closing
Date, but in no event later than 75 days after the Closing Date, a Registration
Statement under the Securities Act relating to the Exchange Notes and the
Exchange Offer, (ii) use its best efforts to cause such Registration Statement
to become effective at the earliest possible time, but in no event later than
150 days after the Closing Date, (iii) in connection with the foregoing, file
(A) all pre-effective amendments to such Registration Statement as may be
necessary in order to cause such Registration Statement to become effective, (B)
if applicable, a post-effective amendment to such Registration Statement
pursuant to Rule 430A under the Securities Act and (C) cause all necessary
filings in connection with the registration and qualification of the Exchange
Notes to be made under the Blue Sky laws of such jurisdictions as are necessary
to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of
such Registration Statement, commence the Exchange Offer. The Exchange Offer
shall be on the appropriate form permitting registration of the Exchange Notes
to be offered in exchange for the Transfer Restricted Securities and to permit
sales of Broker-Dealer Transfer Restricted Securities by Restricted
Broker-Dealers as contemplated by Section 3(c) below.
(b) The Issuer and the Guarantor shall cause the Exchange Offer
Registration Statement to be effective continuously and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 30 days after
the date notice of the Exchange Offer is mailed to the Holders. The Issuer and
the Guarantor shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Notes shall be
included in the Exchange Offer Registration Statement. The Issuer and the
Guarantor shall use its best efforts to cause the Exchange Offer to be
Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 180 days
after the Closing Date.
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(c) The Issuer shall indicate in a "Plan of Distribution" section
contained in the Prospectus forming a part of the Exchange Offer Registration
Statement that any Restricted Broker-Dealer who holds Initial Notes that are
Transfer Restricted Securities and that were acquired for its own account as a
result of market-making activities or other trading activities (other than
Transfer Restricted Securities acquired directly from the Issuer), may exchange
such Initial Notes pursuant to the Exchange Offer; however, such Broker-Dealer
may be deemed to be an "underwriter" within the meaning of the Securities Act
and must, therefore, deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of the Exchange Notes received by
such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement
may be satisfied by the delivery by such Broker-Dealer of the Prospectus
contained in the Exchange Offer Registration Statement. Such "Plan of
Distribution" section shall also contain all other information with respect to
such resales by Restricted Broker-Dealers that the Commission may require in
order to permit such resales pursuant thereto, but such "Plan of Distribution"
shall not name any such Broker-Dealer or disclose the amount of Notes held by
any such Broker-Dealer except to the extent required by the Commission as a
result of a change in policy after the date of this Agreement.
The Issuer and the Guarantor shall use their best efforts to
keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section 6(c) below to
the extent necessary to ensure that it is available for resales of Broker-Dealer
Transfer Restricted Securities acquired by Restricted Broker-Dealers for their
own accounts as a result of market-making activities or other trading
activities, and to ensure that it conforms with the requirements of this
Agreement, the Securities Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period ending on the earlier of
(i) 180 days from the date on which the Exchange Offer Registration Statement is
declared effective and (ii) the date on which a Restricted Broker-Dealer is no
longer required to deliver a prospectus in connection with market-making or
other trading activities.
The Issuer and the Guarantor shall provide sufficient copies of
the latest version of such Prospectus to Restricted Broker-Dealers promptly upon
request at any time during such 180-day (or shorter as provided in the foregoing
sentence) period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Issuer is not required to file an
Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a) below have been complied
with), (ii) for any reason the Exchange Offer is not Consummated within 180 days
after the Closing Date, or (iii) with respect to any Holder of Transfer
Restricted Securities (A) such Holder is prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) such Holder
may not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and that the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder, or (C) such Holder is a Broker-Dealer and holds Initial
Notes acquired directly from the Issuer or one of its affiliates, then, upon
such Holder's request, the Issuer and the Guarantor shall
(x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Securities Act, which may be an amendment to the
Exchange Offer Registration Statement (in either event, the "Shelf
Registration Statement") as soon as practicable but in any event on or
prior to 30 days after the Closing Date (such date being the "Shelf
Filing Deadline"), which Shelf Registration Statement shall provide for
resales of all Transfer Restricted Securities the Holders of which shall
have provided the information required pursuant to Section 4(b) hereof;
and
(y) use their best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before the
180th day after the Closing Date.
The Issuer and the Guarantor shall use their best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Notes by the Holders of
Transfer Restricted Securities entitled
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to the benefit of this Section 4(a), and to ensure that it conforms with the
requirements of this Agreement, the Securities Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of at
least two years following the effective date of such Shelf Registration
Statement (or shorter period that will terminate when all the Notes covered by
such Shelf Registration Statement have been sold pursuant to such Shelf
Registration Statement).
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Issuer in writing, within 10 business days after receipt of a request
therefor, such information as the Issuer may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. Each Holder as to which any Shelf Registration
Statement is being effected agrees to furnish promptly to the Issuer all
information required to be disclosed in order to make the information previously
furnished to the Issuer by such Holder not materially misleading.
SECTION 5. ADDITIONAL INTEREST
If (i) any of the Registration Statements required by this
Agreement is not filed with the Commission on or prior to the date specified for
such filing in this Agreement, (ii) any of such Registration Statements has not
been declared effective by the Commission on or prior to the date specified for
such effectiveness in this Agreement (the "Effectiveness Target Date"),
regardless of the reasonableness of any efforts made by or on behalf of the
Issuer to cause such Registration Statement to become effective), or (iii) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded immediately by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself immediately declared effective (each such event referred to in clauses
(i) through (iii), a "Registration Default"), the Issuer and the Guarantor,
jointly and severally, hereby agree that the interest rate borne by the Transfer
Restricted Securities shall be increased by 0.50% per annum during the 90-day
period immediately following the occurrence of any Registration Default and
shall increase by 0.25% per annum at the end of each subsequent 90-day period,
but in no event shall such increase exceed 2.00% per annum. Following the cure
of all Registration Defaults relating to any particular Transfer Restricted
Securities, the interest rate borne by the relevant Transfer Restricted
Securities will be reduced to the original interest rate borne by such Transfer
Restricted Securities; provided, however, that, if after any such reduction in
interest rate, a different Registration Default occurs, the interest rate borne
by the relevant Transfer Restricted Securities shall again be increased pursuant
to the foregoing provisions.
All obligations of the Issuer and the Guarantor set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such Note
shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Issuer and the Guarantor shall comply with all of the
provisions of Section 6(c) below, shall use their best efforts to effect such
exchange to permit the sale of Broker-Dealer Transfer Restricted Securities
being sold in accordance with the intended method or methods of distribution
thereof, and shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to the Issuer
there is a question as to whether the Exchange Offer is permitted by applicable
law, the Issuer and the Guarantor hereby agree to seek a no-action letter or
other favorable decision from the Commission allowing the Issuer and the
Guarantor to Consummate an Exchange Offer for such Initial Notes. The Issuer and
the Guarantor, each hereby agrees to pursue the issuance of such a decision to
the Commission staff level but shall not be required to take commercially
unreasonable action to effect a change of Commission policy. The Issuer and the
Guarantor hereby agree, however, to (A) participate in telephonic conferences
with the Commission, (B) deliver to the Commission staff an analysis prepared by
counsel to the Issuer setting forth the legal bases, if any, upon which such
counsel has concluded that such an Exchange
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Offer should be permitted and (C) diligently pursue a favorable resolution by
the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange
Offer pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Issuer, prior to
the Consummation thereof, a written representation to the Issuer and the
Guarantor (which may be contained in the letter of transmittal contemplated by
the Exchange Offer Registration Statement) to the effect that (A) it is not an
affiliate of the Issuer, (B) it is not engaged in, and does not intend to engage
in, and has no arrangement or understanding with any person to participate in, a
distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it
is acquiring the Exchange Notes in its ordinary course of business. In addition,
all such Holders of Transfer Restricted Securities shall otherwise cooperate in
the Issuer's preparations for the Exchange Offer. Each Holder hereby
acknowledges and agrees that any Broker-Dealer and any such Holder using the
Exchange Offer to participate in a distribution of the securities to be acquired
in the Exchange Offer (1) could not under Commission policy as in effect on the
date of this Agreement rely on the position of the Commission enunciated in
Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the Commission's letter
to Shearman & Sterling dated July 2, 1993, and similar no-action letters (which
may include any no-action letter obtained pursuant to clause (i) above), and (2)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction and that such a
secondary resale transaction should be covered by an effective registration
statement containing the selling security holder information required by Item
507 or 508, as applicable, of Regulation S-K if the resales are of Exchange
Notes obtained by such Holder in exchange for Initial Notes acquired by such
Holder directly from the Issuer.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Issuer and the Guarantor shall comply with all the
provisions of Section 6(c) below and shall use their best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being sold
in accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Issuer and the Guarantor will as expeditiously as possible
prepare and file with the Commission a Registration Statement relating to the
registration on any appropriate form under the Securities Act, which form shall
be available for the sale of the Transfer Restricted Securities in accordance
with the intended method or methods of distribution thereof.
(c) General Provisions. In connection with any Registration
Statement and any Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers), the
Issuer and the Guarantor shall:
(i) use their respective best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements (including, if required by the Securities Act or any
regulation thereunder, financial statements of the Guarantor) for the period
specified in Section 3 or 4 of this Agreement, as applicable; upon the
occurrence of any event that would cause any such Registration Statement or the
Prospectus contained therein (A) to contain a material misstatement or omission
or (B) not to be effective and usable for resale of Transfer Restricted
Securities during the period required by this Agreement, the Issuer and the
Guarantor shall file promptly an appropriate amendment to such Registration
Statement, in the case of clause (A), correcting any such misstatement or
omission, and, in the case of either clause (A) or (B), use its best efforts to
cause such amendment to be declared effective and such Registration Statement
and the related Prospectus to become usable for their intended purpose(s) as
soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments
and post-effective amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective for the applicable period set forth
in Section 3 or 4 hereof, as applicable, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Registration
Statement have been sold; cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act, and to comply fully with the applicable
provisions of Rules 424 and 430A under the Securities Act in a timely manner;
and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement during the
applicable period in accordance with
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the intended method or methods of distribution by the sellers thereof set forth
in such Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in writing,
(A) when the Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and, with respect to any Registration Statement or any
post-effective amendment thereto, when the same has become effective, (B) of any
request by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Securities
Act or of the suspension by any state securities commission of the qualification
of the Transfer Restricted Securities for offering or sale in any jurisdiction,
or the initiation of any proceeding for any of the preceding purposes, (D) of
the existence of any fact or the happening of any event that makes any statement
of a material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Issuer and
the Guarantor shall use their best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time;
(iv) furnish without charge to each of the Initial Purchasers
and each of the underwriter(s), if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or Prospectus
(including all documents incorporated by reference after the initial filing of
such Registration Statement), which documents will be subject to the review of
such Holders and underwriter(s), if any, for a period of at least five business
days, and the Issuer will not file any such Registration Statement or Prospectus
or any amendment or supplement to any such Registration Statement or Prospectus
(including all such documents incorporated by reference) to which an Initial
Purchaser of Transfer Restricted Securities covered by such Registration
Statement or the underwriter(s), if any, shall reasonably object in writing
within five business days after the receipt thereof (such objection to be deemed
timely made upon confirmation of telecopy transmission within such period). The
objection of an Initial Purchaser or underwriter, if any, shall be deemed to be
reasonable if such Registration Statement, amendment, Prospectus or supplement,
as applicable, as proposed to be filed, contains a material misstatement or
omission;
(v) promptly prior to the filing of any document that is to
be incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the Initial Purchasers and to the
underwriter(s), if any, make the Issuer's representatives and representatives of
the Guarantor available for discussion of such document and other customary due
diligence matters, and include such information in such document prior to the
filing thereof as such selling Holders or underwriter(s), if any, reasonably may
request;
(vi) make available at reasonable times for inspection by the
Initial Purchasers, any managing underwriter participating in any disposition
pursuant to such Registration Statement, and any attorney or accountant retained
by such selling Holders or any of the underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Issuer and the
Guarantor and cause the Issuer's and the Guarantor's officers, directors and
employees to supply all information reasonably requested by any such Holder,
underwriter, attorney or accountant in connection with such Registration
Statement subsequent to the filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or the
underwriter(s), if any, promptly incorporate in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if necessary,
such information as such selling Holders and underwriter(s), if any, may
reasonably request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer Restricted
Securities, information with respect to the principal amount of Transfer
Restricted Securities being sold to such underwriter(s), the purchase price
being paid therefor and any other terms of the offering of the Transfer
Restricted Securities to be sold in such offering; and make all required filings
of such Prospectus supplement or post-effective
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amendment as soon as practicable after the Issuer is notified of the matters to
be incorporated in such Prospectus supplement or post-effective amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of Notes
covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the Registration
Statement, as first filed with the Commission, and of each amendment thereto,
including financial statements and schedules, all documents incorporated by
reference therein and all exhibits (including exhibits incorporated therein by
reference);
(x) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as such Persons reasonably may request; the Issuer and the Guarantor hereby
consent to the use of the Prospectus and any amendment or supplement thereto by
each of the selling Holders and each of the underwriter(s), if any, in
connection with the offering and the sale of the Transfer Restricted Securities
covered by the Prospectus or any amendment or supplement thereto;
(xi) enter into, and cause the Guarantor to enter into, such
agreements (including an underwriting agreement), and make, and cause the
Guarantor to make, such representations and warranties, and take all such other
actions in connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to any Registration
Statement contemplated by this Agreement, all to such extent as may be requested
by any Initial Purchaser or by any Holder of Transfer Restricted Securities or
underwriter in connection with any sale or resale pursuant to any Registration
Statement contemplated by this Agreement; and whether or not an underwriting
agreement is entered into and whether or not the registration is an Underwritten
Registration, the Issuer and the Guarantor shall:
(A) furnish to each Initial Purchaser, each selling Holder
and each underwriter, if any, in such substance and scope as they may
request and as are customarily made by issuers to underwriters in
primary underwritten offerings, upon the date of the Consummation of the
Exchange Offer and, if applicable, the effectiveness of the Shelf
Registration Statement:
(1) a certificate, dated the date of Consummation of
the Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by (y) the
President or any Vice President and (z) a principal financial or
accounting officer of each of the Issuer and the Guarantor,
confirming, as of the date thereof, the matters set forth in
paragraphs (i), (ii) and (iii) of Section 9 of the Purchase
Agreement and such other matters as such parties may reasonably
request;
(2) an opinion, dated the date of Consummation of
the Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Issuer and the Guarantor, covering the matters set forth in
paragraphs (e) through (g) of Section 9 of the Purchase
Agreement and such other matter as such parties may reasonably
request, and in any event including a statement to the effect
that such counsel has participated in conferences with officers
and other representatives of the Issuer and the Guarantor,
representatives of the independent public accountants for the
Issuer and the Guarantor, the Initial Purchasers'
representatives and the Initial Purchasers' counsel in
connection with the preparation of such Registration Statement
and the related Prospectus and have considered the matters
required to be stated therein and the statements contained
therein, although such counsel has not independently verified
the accuracy, completeness or fairness of such statements; and
that such counsel advises that, on the basis of the foregoing
(relying as to materiality to a large extent upon facts provided
to such counsel by officers and other representatives of the
Issuer and the Guarantor and without independent check or
verification), no facts came to such counsel's attention that
caused such counsel to believe that the applicable Registration
Statement, at the time such Registration
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Statement or any post-effective amendment thereto became
effective, and, in the case of the Exchange Offer Registration
Statement, as of the date of Consummation, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus
contained in such Registration Statement as of its date and, in
the case of the opinion dated the date of Consummation of the
Exchange Offer, as of the date of Consummation, contained an
untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, such counsel may
state further that such counsel assumes no responsibility for,
and has not independently verified, the accuracy, completeness
or fairness of the financial statements, notes and schedules and
other financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date
of Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Issuer's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters by underwriters in connection with
primary underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to Section 9 of
the Purchase Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with clause
(A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Issuer and
the Guarantor pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Issuer
and the Guarantor contemplated in clause (A)(1) above cease to be true and
correct, the Issuer or the Guarantor shall so advise the Initial Purchasers and
the underwriter(s), if any, and each selling Holder promptly and, if requested
by such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with, and cause the Guarantor to cooperate with, the
selling Holders, the underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the Transfer Restricted
Securities under the securities or Blue Sky laws of such jurisdictions as the
selling Holders or underwriter(s) may request and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the Shelf Registration Statement;
provided, however, that neither the Issuer nor the Guarantor shall not be
required to register or qualify as a foreign corporation where it is not then so
qualified or to take any action that would subject it to the service of process
in suits or to taxation, other than as to matters and transactions relating to
the Registration Statement, in any jurisdiction where it is not then so subject;
(xiii) shall issue, upon the request of any Holder of Initial
Notes covered by the Shelf Registration Statement, Exchange Notes, having an
aggregate principal amount equal to the aggregate principal amount of Initial
Notes surrendered to the Issuer by such Holder in exchange therefor or being
sold by such Holder; such Exchange Notes to be registered in the name of such
Holder or in the name of the purchaser(s) of such Notes, as the case may be; in
return, the Initial Notes held by such Holder shall be surrendered to the Issuer
for cancellation;
(xiv) cooperate with, and cause the Guarantor to cooperate
with, the selling Holders and the underwriter(s), if any, to facilitate the
timely preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and enable such
Transfer Restricted Securities to be in such denominations and registered in
such names as the Holders or the underwriter(s), if any,
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may request at least two business days prior to any sale of Transfer Restricted
Securities made by such underwriter(s);
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof or the underwriter(s), if any, to
consummate the disposition of such Transfer Restricted Securities, subject to
the proviso contained in clause (viii) above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D)
above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration Statement and
provide the Trustee under the Indenture with printed certificates for the
Transfer Restricted Securities which are in a form eligible for deposit with the
Depositary Trust Issuer;
(xviii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is required
to be retained in accordance with the rules and regulations of the NASD, and use
its reasonable best efforts to cause such Registration Statement to become
effective and approved by such governmental agencies or authorities as may be
necessary to enable the Holders selling Transfer Restricted Securities to
consummate the disposition of such Transfer Restricted Securities;
(xix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally available
to its security holders, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited) for
the twelve-month period (A) commencing at the end of any fiscal quarter in which
Transfer Restricted Securities are sold to underwriters in a firm or best
efforts Underwritten Offering or (B) if not sold to underwriters in such an
offering, beginning with the first month of the Issuer's first fiscal quarter
commencing after the effective date of the Registration Statement;
(xx) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required by
this Agreement, and, in connection therewith, cooperate with, and cause the
Guarantor to cooperate with, the Trustee and the Holders of Notes to effect such
changes to the Indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute, and cause the
Guarantor to execute, and use its best efforts to cause the Trustee to execute,
all documents that may be required to effect such changes and all other forms
and documents required to be filed with the Commission to enable such Indenture
to be so qualified in a timely manner; and
(xxi) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of Section 13
and Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of any notice from the Issuer of the existence of
any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted Securities pursuant to
the applicable Registration Statement until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi)
hereof, or until it is advised in writing (the "Advice") by the Issuer that the
use of the Prospectus may be resumed, and has received copies of any additional
or supplemental filings that are incorporated by reference in the Prospectus. If
so directed by the Issuer, each Holder will deliver to the Issuer (at the
Issuer's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice. In the event
the Issuer shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each
11
<PAGE> 12
selling Holder covered by such Registration Statement shall have received the
copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xvi) hereof or shall have received the Advice; however, no such extension
shall be taken into account in determining whether Additional Interest is due
pursuant to Section 5 hereof or the amount of such Additional Interest, it being
agreed that the Issuer's option to suspend use of a Registration Statement
pursuant to this paragraph shall be treated as a Registration Default for
purposes of Section 5.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Issuer's or the Guarantor's
performance of or compliance with this Agreement will be borne by the Issuer or
the Guarantor, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made by any Initial Purchaser or Holder with the NASD (and,
if applicable, the fees and expenses of any "qualified independent underwriter"
and its counsel that may be required by the rules and regulations of the NASD));
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Exchange Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Issuer, the Guarantor and, subject
to Section 7(b) below, the Holders of Transfer Restricted Securities; and (v)
all fees and disbursements of independent certified public accountants of the
Issuer and the Guarantor (including the expenses of any special audit and
comfort letters required by or incident to such performance).
The Issuer will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Issuer or the Guarantor.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Issuer and the Guarantor
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities being tendered in the Exchange Offer and/or resold pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Latham & Watkins or such other counsel as may be chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Issuer agrees and the Guarantor, jointly and severally,
agree to indemnify and hold harmless (i) each Holder and (ii) each person, if
any, who controls (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) any Holder (any of the persons referred to in
this clause (ii) being hereinafter referred to as a "controlling person") and
(iii) the respective officers, directors, partners, employees, representatives
and agents of any Holder or any controlling person (any person referred to in
clause (i), (ii) or (iii) may hereinafter be referred to as an "Indemnified
Holder"), to the fullest extent lawful, from and against any and all losses,
claims, damages, liabilities, judgments, actions and expenses (including without
limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing, settling, compromising, paying or defending
any claim or action, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, including the reasonable fees and
expenses of counsel to any Indemnified Holder), joint or several, directly or
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or Prospectus (or any amendment or
supplement thereto), or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by an untrue statement or omission or alleged
untrue statement or omission that is made in reliance upon and in conformity
with information relating to any of the Holders furnished in writing to the
Issuer by any of the Holders expressly for use therein. This indemnity agreement
shall be in
12
<PAGE> 13
addition to any liability which the Issuer may otherwise have.
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against any
of the Indemnified Holders with respect to which indemnity may be sought against
the Issuer or the Guarantor, such Indemnified Holder (or the Indemnified Holder
controlled by such controlling person) shall promptly notify the Issuer and the
Guarantor in writing (provided, that the failure to give such notice shall not
relieve the Issuer or the Guarantor of their respective obligations pursuant to
this Agreement). Such Indemnified Holder shall have the right to employ its own
counsel in any such action and the fees and expenses of such counsel shall be
paid, as incurred, by the Issuer and the Guarantor (regardless of whether it is
ultimately determined that an Indemnified Holder is not entitled to
indemnification hereunder). The Issuer and the Guarantor shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for such Indemnified Holders, which firm shall be
designated by the Holders. The Issuer shall be liable for any settlement of any
such action or proceeding effected with the Issuer's prior written consent,
which consent shall not be withheld unreasonably, and the Issuer agrees to
indemnify and hold harmless any Indemnified Holder from and against any loss,
claim, damage, liability or expense by reason of any settlement of any action
effected with the written consent of the Issuer. The Issuer shall not, without
the prior written consent of each Indemnified Holder, settle or compromise or
consent to the entry of judgment in or otherwise seek to terminate any pending
or threatened action, claim, litigation or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not any
Indemnified Holder is a party thereto), unless such settlement, compromise,
consent or termination includes an unconditional release of each Indemnified
Holder from all liability arising out of such action, claim, litigation or
proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally
and not jointly, to indemnify and hold harmless the Issuer and the Guarantor and
their respective directors, officers of the Company who sign a Registration
Statement, and any person controlling (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) the Issuer and the respective
officers, directors, partners, employees, representatives and agents of each
such person, to the same extent as the foregoing indemnity from the Issuer and
the Guarantor to each of the Indemnified Holders, but only with respect to
claims and actions based on information relating to such Holder furnished in
writing by such Holder expressly for use in any Registration Statement. In case
any action or proceeding shall be brought against the Issuer or its directors or
officers or any such controlling person in respect of which indemnity may be
sought against a Holder of Transfer Restricted Securities, such Holder shall
have the rights and duties given the Issuer and the Issuer or its directors or
officers or such controlling person shall have the rights and duties given to
each Holder by the preceding paragraph. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities, judgments, actions or expenses
referred to therein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative benefits received by the Issuer on the one hand and the Holders on the
other hand from the Initial Placement (which in the case of the Issuer shall be
deemed to be equal to the total gross proceeds from the Initial Placement as set
forth on the cover page of the Offering Memorandum), the amount of Additional
Interest which did not become payable as a result of the filing of the
Registration Statement resulting in such losses, claims, damages, liabilities,
judgments actions or expenses, and such Registration Statement, or if such
allocation is not permitted by applicable law, the relative fault of the Issuer
on the one hand and of the Indemnified Holder on the other in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of the Issuer on the one hand and of the Indemnified Holder
on the other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Issuer or by the Indemnified Holder and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in the second paragraph of Section
8(a), any
13
<PAGE> 14
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim.
The Issuer, the Guarantor and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 8(c) were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or expenses referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, none of the Holders (and its related Indemnified
Holders) shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the total discount received by such Holder with respect
to the Initial Notes exceeds the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant to
this Section 8(c) are several in proportion to the respective principal amount
of Initial Notes held by each of the Holders hereunder and not joint.
SECTION 9. RULE 144A
The Issuer and the Guarantor each hereby agrees with each
Holder, for so long as any Transfer Restricted Securities remain outstanding, to
make available to any Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale thereof and any prospective purchaser of
such Transfer Restricted Securities from such Holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration
hereunder unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, lock-up letters and other documents
required under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the
Shelf Registration Statement who desire to do so may sell such Transfer
Restricted Securities in an Underwritten Offering. In any such Underwritten
Offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders of a majority
in aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Issuer.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Issuer and the Guarantor each agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and hereby agree to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. The Issuer will not, and will cause
the Guarantor not to, on or after the date of this Agreement enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Neither the Company nor the Guarantor has previously entered
into any agreement granting any registration rights with respect to its
securities to any Person. The rights granted to the Holders hereunder do not in
any way conflict with and are not
14
<PAGE> 15
inconsistent with the rights granted to the holders of the Issuer's securities
under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. Neither the Issuer nor the
Guarantor will not take any action, or permit any change to occur, with respect
to the Notes that would materially and adversely affect the ability of the
Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless the Issuer has obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered; provided that, with
respect to any matter that directly or indirectly affects the rights of any
Initial Purchaser hereunder, the Issuer shall obtain the written consent of each
such Initial Purchaser with respect to which such amendment, qualification,
supplement, waiver, consent or departure is to be effective.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records
of the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii) if to the Issuer or the Guarantor:
Northland Cable Television, Inc.
1501 Third Avenue, Suite 3600
Seattle, Washington 98101
Telecopier No.: (206) 674-3950
Attention: James A. Penney, Vice President and
General Counsel
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 acknowledged, if telecopied; and on
the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities from such Holder.
(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.
15
<PAGE> 16
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and 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. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Issuer with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
NORTHLAND CABLE TELEVISION, INC.
By: _______________________________________
Name:
Title:
NORTHLAND CABLE NEWS, INC.
By: _______________________________________
Name:
Title:
16
<PAGE> 17
The foregoing Registration Rights Agreement is hereby
confirmed and accepted as of the date first above written.
BANCAMERICA ROBERTSON STEPHENS
By: /s/ THOMAS J. McGRATH
-------------------------------------
Name: Thomas J. McGrath
Title: Managing Director
FIRST CHICAGO CAPITAL MARKETS, INC.
By: /s/ ROBERT J. RISCHARD
-------------------------------------
Name: Robert J. Rischard
Title: Director
17
<PAGE> 1
EXHIBIT 12.1
DEFICIENCY OF EARNINGS TO FIXED CHARGES
The deficiency of earnings to fixed charges for each of the years in
the five-year period ended December 31, 1996 and for the nine-month periods
ended September 30, 1997 and 1996 is presented below. Ratio of earnings to
fixed charges means the ratio of pretax income from continuing operations (with
certain adjustments described below) to the total of: (i) interest and (ii)
such portion of rental expense as can be demonstrated to be representative of
the interest factor in the particular case.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------ -------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------------------ -------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Historical:
EARNINGS BEFORE FIXED CHARGES:
Net (Loss) $(3,962) $(2,526) $(4,229) $(3,758) $ (385) $ (761) $2,023)
Add: Interest Expense $ 7,378 $ 5,884 $ 8,263 $ 7,215 $ 3,226 $ 2,592 $ 3,051
Interest factor in rental expense $ 142 $ 124 $ 145 $ 143 $ 71 $ 63 $ 61
EARNINGS BEFORE FIXED CHARGES $ 3,558 $ 3,482 $ 4,179 $ 3,600 $ 2,912 $ 1,894 $ 1,089
FIXED CHARGES:
Interest Expense $ 7,378 $ 5,884 $ 8,263 $ 7,215 $ 3,226 $ 2,592 $ 3,051
Interest factor in rental expense $ 142 $ 124 $ 145 $ 143 $ 71 $ 63 $ 61
TOTAL FIXED CHARGES $ 7,520 $ 6,008 $ 8,408 $ 7,358 $ 3,297 $ 2,655 $ 3,112
RATIO OF EARNINGS TO FIXED
CHARGES - - - - - - -
DEFICIENCY IN EARNINGS AVAILABLE TO
COVER FIXED CHARGES $(3,962) $(2,526) $(4,229) $(3,758) $ (385) $ (761) $(2,023)
</TABLE>
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of Northland Cable Television, Inc.
Northland Cable News, Inc.
Subsidiaries of Northland Cable News, Inc.
None.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm), as it relates to Northland Cable
Television, Inc., included in or made a part of this registration statement.
/s/ ARTHUR ANDERSEN LLP
Seattle, Washington
December 18, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus consisting part of this
Registration Statement on Form S-4 of Northland Cable Television, Inc. of our
reports dated October 10, 1997 relating to the financial statements of Aiken II
Cable Systems, a component of Robin Cable Systems, L.P., and the financial
statements of Greenwood Cable System a component of InterMedia Partners of
Carolina, L.P. which appear in such Prospectus. We also consent to the
references to us under the heading "Experts," "Summary Historical and Pro Forma
Consolidated Financial Data" and "Selected Historical and Pro Forma Consolidated
Financial Data" in such Prospectus. However, it should be noted that Price
Waterhouse LLP has not prepared or certified such "Summary Historical and Pro
Forma Consolidated Financial Data" or "Selected Historical and Pro Forma
Consolidated Financial Data."
PRICE WATERHOUSE LLP
San Francisco, California
December 23, 1997
<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
---------------------
HARRIS TRUST COMPANY OF CALIFORNIA
(Exact name of trustee as specified in its charter)
California 94-0304530
(State of incorporation (I.R.S. employer
if not a national bank) Identification No.)
601 South Figueroa Street, 49th Floor
Los Angeles, California 90017
(Address of principal executive offices)
John T. Deleray, Harris Trust Company of California
601 South Figueroa Street, 49th Floor
Los Angeles, California 90017
(213) 239-0674
(Name, address and telephone number for agent for service)
---------------------
NORTHLAND CABLE TELEVISION, INC.
(Exact name of obligor as specified in its charter)
Washington 91-1311836
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1201 Third Ave., Suite 3600
Seattle, Washington 98101
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (206) 674-3900
and Subsidiary Guarantor:
NORTHLAND CABLE NEWS, INC.
(Exact name of obligor as specified in its charter)
Washington 91-1638891
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1201 Third Ave., Suite 3600
Seattle, Washington 98101
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (206) 674-3900
---------------------
10-1/4% SENIOR SUBORDINATED NOTES DUE 2007
(Title of the indenture securities)
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervisory authority to which it
is subject.
Department of Financial Institutions Federal Reserve Bank of San Fancisco
111 Pine Street 101 Market Street
Suite 1100 San Francisco, California 94105
San Francisco, California 94104
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the Trustee, describe each
affiliation.
None.
<PAGE> 3
Item 16. List of Exhibits.
Exhibit T-1A. A copy of the articles of association of Trustee as
presently in effect: Restated Articles of Incorporation and
Amendment of February 9, 1994.
Exhibit T-1A is incorporated herein by reference to S.E.C.
File No. 33-54627 of the Registration Statement of FirstFed
Financial Corp. Exhibit T-1A.
Exhibit T-1B. A copy of the certificate of authority of the Trustee to
commence business, if not contained in the articles of
association: Certificate of Authorization to transact
business.
Exhibit T-1B is incorporated herein by reference to S.E.C.
File No. 333-2688 of the Registration Statement of Western
Wireless Corporation Exhibit T-1B.
Exhibit T-1C. A copy of the authorization of the Trustee to exercise
corporate trust powers, if such authorization is not contained
in the documents specified in paragraph (1) and (2) above:
Contained in Exhibits T-1A and T-1B above.
Exhibit T-1D. Copy of the existing bylaws of the Trustee or
instruments corresponding thereto: By-Laws of Harris Trust
Company of California as of April 27, 1995, as presently in
effect.
Exhibit T-1D is incorporated herein by reference to S.E.C.
File No. 333-2688 of the Registration Statement of Western
Wireless Corporation Exhibit T-1D.
Exhibit T-1E. A copy of each indenture referred to in Item 4, if obligor is
in default.
Not Applicable.
Exhibit T-1F. The consents of United States institutional trustees
required by Section 321 of the Act: Consent dated as of
January, 1994.
Exhibit T-1F is incorporated herein by reference to S.E.C.
File No. 33-69382 of the Registration Statement of Pacific
Gulf Properties, Inc. Exhibit T-1F.
Exhibit T-1G. A copy of the latest report of condition of the Trustee
published pursuant to law or the requirement of its
supervising or examining authority: Trust Company Consolidated
Report of Condition provided to the Department of Financial
Institutions for the period ending September 30, 1997.
Exhibit T-1H. A copy of any order pursuant to which the foreign
trustee is authorized to act as sole trustee under the
indentures qualified or to be qualified under the Act.
Not Applicable.
Exhibit T-1I. Foreign trustees are required to file a consent to service of
process on Forms F-X. Not Applicable.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Harris Trust Company of California, a corporation organized and
existing under the laws of California, has duly caused this Statement of
Eligibility and Qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Los Angeles, State of California,
on January __, 1998.
HARRIS TRUST COMPANY OF
CALIFORNIA
By______________________________
John T. Deleray
Assistant Vice President
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Harris Trust Company of California, a corporation organized and
existing under the laws of California, has duly caused this Statement of
Eligibility and Qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Los Angeles, State of California,
on January ___, 1998.
HARRIS TRUST COMPANY OF
CALIFORNIA
By /S/ JOHN T. DELERAY
---------------------------------
John T. Deleray
Assistant Vice President
<PAGE> 6
HARRIS TRUST COMPANY OF CALIFORNIA
- --------------------------------------------------------------------------------
City County State Zip Code
LOS ANGELES LOS ANGELES CALIFORNIA 90017
- --------------------------------------------------------------------------------
At the close of Business on (Date) State Banking Department Number
SEPTEMBER 30, 1997 642
- --------------------------------------------------------------------------------
Name and title of Person to Whom Area Code & Telephone Number
Inquiries may be Directed
M. CUSTER, FINANCIAL ANALYST 311-461-6164
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
-------------
1. Cash and due from ................................................................................. 89 1
-------------
2. U.S. Treasury securities .......................................................................... 752 2
-------------
3. Obligations of other U.S. Government agencies and corporations .................................... 3
-------------
4. Obligations of States and political subdivisions .................................................. 6166 4
-------------
5. (a) Other securities .............................................................................. 200 5
-------------
6. (a) Loans ......................................................................................... 6(a)
-------------
(b) Less: Reserve for possible loan losses ........................................................ 6(b)
-------------
(c) Loans (net) ................................................................................... 0 6(c)
-------------
7. (a) Bank premises, furniture and fixtures and other assets representing bank premises ............. 208 7(a)
-------------
(b) Capital leases included in 7(a) above ......................................................... 7(b)
-------------
8. Real estate owned other than bank premises ........................................................ 8
-------------
9. Investments in subsidiaries not consolidated ...................................................... 9
-------------
10. Other assets (complete schedule on reverse) ....................................................... 1251 10
-------------
11. TOTAL ASSETS ...................................................................................... 8666
-------------
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
-------------
12. Liabilities for borrowed money .................................................................... 12
-------------
13. Mortgage indebtedness ............................................................................. 13
-------------
14. Other liabilities ................................................................................. 697 14
-------------
15. TOTAL LIABILITIES ................................................................................. 697 15
-------------
- ------------------------------------------------------------------------------------------------------------------------------------
-------------
16. Capital notes and debentures ..................................................................... 16
-------------
- ------------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS EQUITY
-------------
17. Preferred stock .................................................................................. 17
-------------
(a) Number shares outstanding .................................................................... 17(a)
-------------
18. Common stock ..................................................................................... 2500 18
-------------
(a) Number shares authorized ..................................................................... 18(a)
-------------
(b) Number shares outstanding .................................................................... 18(b)
-------------
19. Surplus .......................................................................................... 2500 19
-------------
20. TOTAL CONTRIBUTED CAPITAL ........................................................................ 5000 20
-------------
21. Retained earnings and other capital reserves ..................................................... 2969 21
-------------
22. TOTAL SHAREHOLDERS EQUITY ........................................................................ 7969 22
-------------
23. TOTAL LIABILITIES AND CAPITAL ACCOUNTS ........................................................... 8666 23
-------------
- ------------------------------------------------------------------------------------------------------------------------------------
MEMORANDA
-------------
1. Assets deposited with State Treasurer to qualify for exercise of fiduciary powers (market value).. 250 M1
-------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
D. Certification
The undersigned,
- --------------------------------------------------------------------------------
Name Title
M. VALOISE DOUGLAS VC.P. & G.M.
- --------------------------------------------------------------------------------
and
- --------------------------------------------------------------------------------
Name Title
STEVEN ROTHBLOOM PRESIDENT & CHAIRMAN
- --------------------------------------------------------------------------------
of the above named trust company, each declares, for himself alone and not for
the other:
I have personal knowledge of the matters contained in this report and I
believe that each statement in said report is true. Each of the undersigned,
for himself alone and not for the other, certified under penalty of perjury
that the foregoing is true and correct.
- --------------------------------------------------------------------------------
Executed on At
- --------------------------------------------------------------------------------
Signature Signature
/s/ M. V. DOUGLAS /s/ STEVEN ROTHBLOOM
- --------------------------------------------------------------------------------
<PAGE> 7
SCHEDULE OF OTHER ASSETS
- --------------------------------------------------------------------------------
Description Amount
- --------------------------------------------------------------------------------
RECEIVABLES 755
- --------------------------------------------------------------------------------
GOODWILL 121
- --------------------------------------------------------------------------------
OTHER INTANGIBLES 269
- --------------------------------------------------------------------------------
DEFERRED TAXES 106
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total (Same as Item 1) 1251
================================================================================
SCHEDULE OF OTHER LIABILITIES
================================================================================
Description Amount
- --------------------------------------------------------------------------------
PAYABLES 349
- --------------------------------------------------------------------------------
ACCRUED EXPENSES 348
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total (Same as Item 1) 697
================================================================================
<PAGE> 8
<TABLE>
<CAPTION>
Harris Trust Company of California
- -----------------------------------------------------------------------------------------------------------------------
City County State Zip Code
Los Angeles Los Angeles California 90017
- -----------------------------------------------------------------------------------------------------------------------
At the close of business on (date) State Banking Department Number
September 30, 1997 06402
- -----------------------------------------------------------------------------------------------------------------------
Name and title of person to whom inquiries may be directed Area Code & Telephone Number
Esther Cervantes, Assistant Vice President (213) 239-0675
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A. ASSETS
Dollars in Thousands
--------------------------------
1. Investments
(a) U.S. Government & Agency Obligations............................................. 550970 1(a)
--------------------------------
(b) State, County & Municipal Obligations............................................ 0 1(b)
--------------------------------
(c) Other Obligations................................................................ 0 1(c)
--------------------------------
(d) Stocks (Common and Preferred).................................................... 0 1(d)
--------------------------------
(e) Mutual Funds..................................................................... 131740 1(e)
--------------------------------
(f) Real Estate...................................................................... 0 1(f)
--------------------------------
(g) Real Estate Loans................................................................ 0 1(g)
--------------------------------
(h) All Other Loans.................................................................. 0 1(h)
--------------------------------
(i) Miscellaneous.................................................................... 36449 1(i)
--------------------------------
2. Interest-bearing Deposits
--------------------------------
(a) Own Institution.................................................................. 2(a)
--------------------------------
(b) Other Federally Insured Financial Institutions................................... 100 2(b)
--------------------------------
3. Noninterest-Bearing Deposits
--------------------------------
(a) Own Institution.................................................................. 3(a)
--------------------------------
(b) Other Federally Insured Financial Institutions................................... 96 3(b)
--------------------------------
4. TOTAL ASSETS......................................................................... 719355 4
--------------------------------
_____________________________________________________________________________________________________________________________
B. LIABILITIES
5. Fiduciary Accounts
--------------------------------
(a) Court Trusts..................................................................... 0 5(a)
--------------------------------
(b) Personal Trusts.................................................................. 0 5(b)
--------------------------------
(c) Employee Benefit Trusts.......................................................... 0 5(c)
--------------------------------
(d) Collective Investment Funds (Total Market Value)................................. 0 5(d)
--------------------------------
6. SUBTOTAL (ITEMS (a) THROUGH (e))..................................................... 0 6
--------------------------------
--------------------------------
7. Local Agency Security Accounts....................................................... 0 7
--------------------------------
8. Corporate Accounts................................................................... 156796 8
--------------------------------
9. Agency, Safekeeping, Custodian, and Escrow Accounts.................................. 562379 9
--------------------------------
10. TOTAL LIABILITIES..................................................................... 719355 10
--------------------------------
_______________________________________________________________________________________________________________________
C. TRUST BUSINESS FOR WHICH SECURITIES ARE ON DEPOSIT WITH THE STATE TREASURER
Court Trusts Private Trusts
-------------------------------- --------------------------------
11. Trust Business...................................... 11
-------------------------------- --------------------------------
12. Less Real Estate.................................... 12
-------------------------------- --------------------------------
13. Trust Business on Which Security is Required........ 0 0 13
-------------------------------- --------------------------------
14. Amount of Security Required by Sections 1540 and
1541 of the Financial Code....................... 100 100 14
-------------------------------- --------------------------------
15. Market Value of Securities on Deposit with the
State Treasurer.................................. 125 125 15
-------------------------------- --------------------------------
16. Excess or Deficiency................................ 25 25 16
-------------------------------- --------------------------------
_____________________________________________________________________________________________________________________________
D. MISCELLANEOUS INFORMATION
--------------------------------
17. Total Number of Discretionary Accounts............................................... 0 17
--------------------------------
18. Overdrafts........................................................................... 0 18
--------------------------------
_____________________________________________________________________________________________________________________________
E. CERTIFICATION
The undersigned
- ------------------------------------------------------------------------------------------------------------------------------
Name Title
- ------------------------------------------------------------------------------------------------------------------------------
and
- ------------------------------------------------------------------------------------------------------------------------------
Name Title
- ------------------------------------------------------------------------------------------------------------------------------
of the above named bank, each declares, for himself alone and not for the other:
I have personal knowledge of the matters contained in this report and I believe that each statement in said report is true.
Each of the undersigned, for himself alone and not for the other, certified under penalty of perjury that the foregoing is
true and correct.
- ------------------------------------------------------------------------------------------------------------------------------
Executed on: at:
, California
- ------------------------------------------------------------------------------------------------------------------------------
Signature Signature
/s/ M. Valerie Douglas X
- ------------------------------------------------------------------------------------------------------------------------------
Form 203 (REV. 12/95)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
NORTHLAND CABLE TELEVISION, INC.
NORTHLAND CABLE NEWS, INC.
--------------
LETTER OF TRANSMITTAL
TO EXCHANGE 10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
--------------
Exchange Agent:
HARRIS TRUST AND SAVINGS BANK
By Registered or Certified Mail By Overnight Courier or Hand:
Harris Trust and Savings Bank Harris Trust and Savings Bank
c/o Harris Trust Company of New York c/o Harris Trust Company of New York
P.O. Box 1010 88 Pine Street
Wall Street Station 19th Floor
New York, NY 10268-1010 New York , NY 10005
By Facsimile:
(212) 701-7636
Confirm by Telephone:
(212) 701-7624
- --------------------------------------------------------------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN ONE LISTED ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
- --------------------------------------------------------------------------------
The undersigned acknowledges receipt of the Prospectus dated
___________, 1998 (the "Prospectus") of Northland Cable Television, Inc., a
Washington corporation, and Northland Cable News, Inc., a Washington
corporation, (collectively, the "Company"), and this Letter of Transmittal to
Exchange 10 1/4% Senior Subordinated Notes due 2007 which may be amended from
time to time (this "Letter"), which together constitute the Company's offer (the
"Exchange Offer") to exchange $1,000 in principal amount of its 10 1/4% Senior
Subordinated Notes due 2007 (the "Exchange Notes") for each $1,000 in principal
amount of its outstanding 10 1/4% Senior Subordinated Notes due 2007 (the
"Original Notes") that were issued and sold in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act").
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
All holders of Original Notes who wish to tender their Original Notes
must, prior to the Expiration Date: (1) complete, sign, date and deliver this
Letter, or a facsimile thereof, to the Exchange
<PAGE> 2
Agent, in person or to the address set forth above; and (2) tender his or her
Original Notes or, if a tender of Original Notes is to be made by book-entry
transfer to the account maintained by the Exchange Agent at The Depository Trust
Company (the "Book-Entry Transfer Facility"), confirm such book-entry transfer
(a "Book-Entry Confirmation"), in each case in accordance with the procedures
for tendering described in the Instructions to this Letter. Holders of Original
Notes whose certificates are not immediately available, or who are unable to
deliver their certificates or Book-Entry Confirmation and all other documents
required by this Letter to be delivered to the Exchange Agent on or prior to the
Expiration Date, must tender their Original Notes according to the guaranteed
delivery procedures set forth under the caption "The Exchange Offer-How to
Tender" in the Prospectus. (See Instruction 1).
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Original Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Company shall be deemed to have accepted for
exchange validly tendered Original Notes when, as and if the Company have given
written notice thereof to the Exchange Agent. The Instructions included with
this Letter must be followed in their entirety. Questions and requests for
assistance or for additional copies of the Prospectus or this Letter may be
directed to the Exchange Agent, at the address listed above, or James A. Penny
of Northland Cable Television, Inc., 1201 Third Avenue, Suite 3600, Seattle,
Washington 98101, at (206) 674-3900.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING
THE INSTRUCTIONS TO THIS LETTER, CAREFULLY
BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall
have the respective meanings ascribed to them in the Prospectus.
List in Box 1 below the Original Notes of which you are the holder. If
the space provided in Box 1 is inadequate, list the certificate numbers and
principal amount of Original Notes on a separate signed schedule and affix that
schedule to this Letter.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
BOX 1
TO BE COMPLETED BY ALL TENDERING HOLDERS
- --------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es)of Certificate Principal Amount of
Registered Holder(s) Number(s) Principal Amount of Original Notes Tendered
(Please fill in if blank) (1) Original Notes (2)
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Totals:
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Need not be completed if Original Notes are being tendered by book-entry
transfer.
(2) Unless otherwise indicated, the entire principal amount of Original Notes
represented by a certificate or Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered.
<PAGE> 3
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer,
the undersigned tenders to the Company the principal amount of Original Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
the Original Notes tendered with this Letter, the undersigned exchanges, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to the Original Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or
her agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Original Notes,
with full power of substitution, to: (a) deliver certificates for such Original
Notes; (b) deliver Original Notes and all accompanying evidence of transfer and
authenticity to or upon the order of the Company upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Company of the Original Notes
tendered under the Exchange Offer; and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Original Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, exchange, assign and transfer the Original Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned will, upon request, execute
and deliver any additional documents deemed by the Company to be necessary or
desirable to complete the assignment and transfer of the Original Notes
tendered.
The undersigned agrees that acceptance of any tendered Original Notes
by the Company and the issuance of Exchange Notes (together with the guarantee
of the Guarantor with respect thereto) in exchange therefor shall constitute
performance in full by the Company and the Guarantor of their respective
obligations under the Registration Rights Agreement and that, upon the issuance
of the Exchange Notes, the Company and the Guarantor will have no further
obligations or liabilities thereunder (except in certain limited circumstances).
By tendering Original Notes, the undersigned certifies (a) that it is not an
"Affiliate" of the Company, that it is not a broker-dealer that owns Original
Notes acquired directly from the Company or an Affiliate, that it is acquiring
the Exchange Notes acquired directly from the Company or an Affiliate, that it
is acquiring the Exchange Notes offered hereby in the ordinary course of the
undersigned's business and that the undersigned has no arrangement with any
person to participate in the distribution of such Exchange Notes; (b) that it is
an Affiliate of the Company or of any of the initial purchasers of the Original
Notes in the Offering and that it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable
to it; or (c) that it is a participating Broker-Dealer (as defined in the
Registration Rights Agreement) and that it will deliver a prospectus in
connection with any resale of the Exchange Notes. By tendering Original Notes
and executing this Letter of Transmittal, the undersigned further certifies that
it is not engaged in and does not intend to engage in a distribution of the
Exchange Notes.
The undersigned acknowledges that, if it is a broker-dealer that will
receive Exchange Notes for its own account, it will deliver a prospectus in
connection with any resale of such Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned understands that the Company may accept the
undersigned's tender by delivering written notice of acceptance to the Exchange
Agent, at which time the undersigned's right to withdraw such tender will
terminate.
<PAGE> 4
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned, and every obligation of the
undersigned under this Letter shall be binding upon the undersigned's heirs,
legal representatives, successors, assigns, executors and administrators.
Tenders may be withdrawn only in accordance with the procedures set forth in the
Instructions contained in this Letter.
Unless otherwise indicated under "Special Delivery Instructions"
below, the Exchange Agent will deliver Exchange Notes (and, if applicable, a
certificate for any Original Notes not tendered but represented by a certificate
also encompassing Original Notes which are tendered) to the undersigned at the
address set forth in Box 1.
The undersigned acknowledges that the Exchange Offer is subject to the
more detailed terms set forth in the Prospectus and, in case of any conflict
between the terms of the terms of the Prospectus and this Letter, the Prospectus
shall prevail.
[_] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:________________________________________
Account Number:_______________________________________________________
Transaction Code Number:______________________________________________
[_] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s):_______________________________________
Date of Execution of Notice of Guaranteed Delivery:___________________
Window Ticket Number (if available):__________________________________
Name of Institution which Guaranteed Delivery:________________________
<PAGE> 5
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
________________________________________________________________________________
BOX 2
PLEASE SIGN HERE
WHETHER OR NOT ORIGINAL NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
This box must be signed by registered holder(s) of Original Notes as
name(s) appear(s) on certificate(s) for Original Notes, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Letter. If signature is by a trustee, executor,
administrator, guardian, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person must set forth his or her full
title below. (See Instruction 3)
X______________________________________________________________________________
X______________________________________________________________________________
Signature(s) of Owner(s) or Authorized Signatory
Dated: ____________________, 1998
Name(s)________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (full title):_________________________________________________________
Address:_______________________________________________________________________
_______________________________________________________________________________
Area Code and Telephone No.: (____) _____________________
SIGNATURE GUARANTEE
(Certain Signatures Must be Guaranteed by an Eligible Institution
See Instruction 4 below)
________________________________________________________________________________
(Name of Eligible Institution Guaranteeing Signatures)
________________________________________________________________________________
(Address (including zip code) and Telephone Number (including area code))
Authorized Signature:__________________________________________________________
Capacity (full title):_________________________________________________________
Dated: ____________________, 1998
________________________________________________________________________________
<PAGE> 6
<TABLE>
____________________________________________________________________________________________________________________________
<S> <C> <C>
BOX 3
TO BE COMPLETED BY ALL TENDERING HOLDERS
PAYOR'S NAME: HARRIS TRUST AND SAVINGS BANK
____________________________________________________________________________________________________________________________
PART 1. Please provide the TIN of the Employer Identification or Social
person submitting this Letter of Security Number:
Transmittal in the box at right and
certify by signing and dating below.
(See Instruction 5) _____________________________________
SUBSTITUTE
FORM W-9
Department of the Treasury,
Internal Revenue Service
Payer's Request for Taxpayer
Identification Number (TIN)
____________________________________________________________________________________________________________________________
PART 2. Check the box if you are NOT subject to back-up withholding under the
provisions of Section 3406(a)(1)(C) of the Internal Revenue Code because (1) you
have not been notified that you are subject to back-up withholding as a result
of failure to report all interest or dividends or (2) the Internal Revenue
Service has notified you that you are no longer subject to back-up withholding. [__]
____________________________________________________________________________________________________________________________
PART 3. Check the box if you are awaiting your TIN [__]
____________________________________________________________________________________________________________________________
CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION
PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE
Signature: ________________________________ Date:______________
Name (Please Print)_____________________________________________
____________________________________________________________________________________________________________________________
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
_____________________________________________________________________________________________________________________________
<S> <C>
BOX 4 BOX 5
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 4) (See Instruction 4)
To be completed ONLY if certificates for Original Notes in To be completed ONLY if certificates for Original Notes in
a principal amount not exchanged, or Exchange Notes, are a principal amount not exchanged, or Exchange Notes, are
to be issued in the name of someone other than the person to be sent to someone other than the person whose
whose signature appears in Box 2, or if Original Notes signature appears in Box 2 or to an address other than
delivered by book-entry transfer which are not accepted that shown in Box 1.
for exchange are to be returned by credit to an account
maintained at the Book-Entry Transfer Facility other than
the account indicated above.
Issue and Deliver to: Mail to:
(check appropriate boxes) (check appropriate boxes)
[_] Original Notes not tendered [_] Original Notes not tendered
[_] Exchange Notes, to: [_] Exchange Notes, to:
Name:____________________________________________________ Name:____________________________________________________
(Please Print or Type Name(s)) (Please Print or Type Name(s))
Address:_________________________________________________ Address:_________________________________________________
Taxpayer I.D. Number_____________________________________
(PLEASE ALSO SIGN AND COMPLETE
SUBSTITUTE FORM W-9 AT BOX 3)
_____________________________________________________________________________________________________________________________
</TABLE>
INSTRUCTIONS
THE FOLLOWING INSTRUCTIONS FORM PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Original
Notes or a Book-Entry Confirmation, as the case may be, as well as a properly
completed and duly executed copy of this Letter (or a manually signed facsimile
thereof) and any other documents required by this Letter, must be received by
the Exchange Agent at its address set forth herein on or before the Expiration
Date. The method of delivery of this Letter, certificates for Original Notes or
a Book-Entry Confirmation, as the case may be, and any other required documents
is at the election and risk of the tendering holder, but except as otherwise
provided below, the delivery will be deemed made when actually received by the
Exchange Agent. If delivery is by mail, the use of registered mail with return
receipt requested, properly insured, is suggested.
If tendered Original Notes are registered in the name of the signer of
the Letter of Transmittal and the Exchange Notes to be issued in exchange
therefor are to be issued (and any untendered Original Notes are to be reissued)
in the name of the registered holder, the signature of such signer need not be
guaranteed. In any other case, the tendered Original Notes must be endorsed or
accompanied by written
<PAGE> 8
instruments of transfer in form satisfactory to the Company and duly executed by
the registered holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act. If the
Exchange Notes and/or Original Notes not exchanged are to be delivered to an
address other than that of the registered holder appearing on the note register
for the Original Notes, the signature on the Letter of Transmittal must be
guaranteed by an Eligible Institution.
Any beneficial owner whose Original Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Original Notes should contact such holder promptly and instruct such
holder to tender Original Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Original Notes himself, such beneficial
owner must, prior to completing and executing the Letter of Transmittal and
delivering such Original Notes, either make appropriate arrangements to register
ownership of the Original Notes in such beneficial owner's name or follow the
procedures described in the immediately preceding paragraph. The transfer of
record ownership may take considerable time.
The Exchange Agent will make a request to establish an account with
respect to the Original Notes at The Depository Trust Company (the "Book-Entry
Transfer Facility") for purposes of the Exchange Offer within two business days
after receipt of the Prospectus, and any financial institution that is a
participant in the Book-Entry Transfer Facility's systems may make book-entry
delivery of Original Notes by causing the Book-Entry Transfer Facility to
transfer such Original Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility in accordance with the Book-Entry Transfer Facility's
procedures for transfer. However, although delivery of Original Notes may be
effected through book-entry transfer at the Book-Entry Transfer Facility, this
Letter, with any required signature guarantees and any other required documents,
must, in any case, be transmitted to and received by the Exchange Agent at the
address on this Letter on or prior to the Expiration Date of the guaranteed
delivery procedures described below must be complied with.
The method of delivery of Original Notes and all other documents is at
the election and risk of the holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance be
obtained, and the mailing be made sufficiently in advance of the Expiration Date
to permit delivery to the Exchange Agent on or before the Expiration Date.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a holder pursuant to the Exchange Offer if the holder does not
provide his or her taxpayer identification number (social security number or
employer identification number, as applicable) and certify that such number is
correct. Each tendering holder should complete and sign the main signature form
and the Substitute Form W-9 included as part of the Letter of Transmittal, so as
to provide the information and certification necessary to avoid backup
withholding, unless an applicable exemption exists and is proved in a manner
satisfactory to the Company and the Exchange Agent.
If a holder desires to accept the Exchange Offer and time will not
permit a Letter of Transmittal or Original Notes to reach the Exchange Agent
before the Expiration Date, a tender may be effected if the Exchange Agent has
received at its office listed on the back cover hereof on or prior to the
Expiration Date a letter, telegram or facsimile transmission from an Eligible
Institution setting forth the name and address of the tendering holder, the
principal amount of the Original Notes being tendered, the names in which the
Original Notes are registered and, if possible, the certificate numbers of the
Original Notes to be tendered, and stating that the tender is being made thereby
and guaranteeing that within three New
<PAGE> 9
York Stock Exchange trading days after the date of execution of such letter,
telegram or facsimile transmission by the Eligible Institution, the Original
Notes, in proper form for transfer, will be delivered by such Eligible
Institution together with a properly completed and duly executed Letter of
Transmittal (and any other required documents). Unless Original Notes being
tendered by the above-described method (or a timely Book-Entry Confirmation) are
deposited with the Exchange Agent within the time period set forth above
(accompanied or preceded by a properly completed Letter of Transmittal and any
other required documents), the Company may, at its option, reject the tender.
Copies of a Notice of Guaranteed Delivery which may be used by Eligible
Institutions for the purposes described in this paragraph are available from the
Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Original Notes (or a timely Book-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Original Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) by an
Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Original Notes
(or a timely Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt), acceptance for exchange and withdrawal of tendered Original Notes will
be determined by the Company, whose determination will be final and binding. The
Company reserve the absolute right to reject any or all tenders that are not in
proper form or the acceptance for exchange of which, in the opinion of the
Company's counsel, may be unlawful. The Company also reserve the absolute right
to waive any of the conditions of the Exchange Offer or any defect or
irregularities in tenders of any particular holder whether or not similar
defects or irregularities are waived in the case of other holders. All tendering
holders, by execution of this Letter, waive any right to receive notice of
acceptance of their Original Notes. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the Letter of Transmittal and
the instructions thereto) will be final and binding.
Neither the Company, the Exchange Agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal
amount of any Original Note evidenced by a submitted certificate or by a
Book-Entry Confirmation is tendered, the tendering holder must fill in the
principal amount tendered in the fourth column of Box 1 above. All of the
Original Notes represented by a certificate or by a Book-Entry Confirmation
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. A certificate for Original Notes not tendered will be sent
to the holder, unless otherwise provided in Box 5, as soon as practicable after
the Expiration Date, in the event that less than the entire principal amount of
Original Notes represented by a submitted certificate is tendered (or, in the
case of Original Notes tendered by book-entry transfer, such non-exchanged
Original Notes will be credited to an account maintained by the holder with the
Book-Entry Transfer Facility).
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. For a withdrawal to be effective with
respect to the tender of Original Notes, a written or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address on this Letter prior to the Expiration Date. Any such notice of
withdrawal must specify the person named in this Letter as having tendered the
Original Notes to be withdrawn, the certificate numbers shown on the particular
certificates evidencing such Original Notes, the principal amount of Original
Notes represented by such certificates, a statement that such holder is
withdrawing his or her election to have such Original Notes exchanged, and the
name of the registered holder of such Original
<PAGE> 10
Notes, and must be signed by the holder in the same manner as the original
signature on this Letter (including any required signature guarantees) or be
accompanied by evidence satisfactory to the Company that the person withdrawing
the tender has succeeded to the beneficial ownership of the Original Notes being
withdrawn. The Exchange Agent will return the properly withdrawn Original Notes
promptly following receipt of notice of withdrawal. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by the Company, and such determination will be final and binding on
all parties.
3. SIGNATURES ON THIS LETTER; ASSIGNMENTS; GUARANTEE OF SIGNATURES. If
this Letter is signed by the holder(s) of Original Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the
certificate(s) for such Original Notes, without alteration, enlargement or any
change whatsoever.
If any of the Original Notes tendered hereby are owned by two or more
joint owners, all owners must sign this Letter. If any tendered Original Notes
are held in different names on several certificates, it will be necessary to
complete, sign and submit as many separate copies of this Letter as there are
names in which certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of the holder's Original Notes are tendered, and/or (ii)
untendered Original Notes, if any, are to be issued to the holder of record,
then the holder of record need not endorse any certificates for tendered
Original Notes, nor provide a separate bond power. In any other case, the holder
of record must transmit a separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and must submit proper evidence
satisfactory to the Company of their authority to so act, unless waived by the
Company.
Signatures on this Letter must be guaranteed by an Eligible
Institution, unless Original Notes are tendered: (i) by a holder who has not
completed the Box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter; or (ii) for the account of an Eligible
Institution. In the event that the signatures in this Letter or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by an eligible guarantor institution which is a member of The Securities
Transfer Agents Medallion Program (STAMP), The New York Stock Exchanges
Medallion Signature Program (MSP) or The Stock Exchanges Medallion Program
(SEMP). If Original Notes are registered in the name of a person other than the
signer of this Letter, the Original Notes surrendered for exchange must be
endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company, in its
discretion, duly executed by the registered holder with the signature thereon
guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Notes or certificates for Original Notes not exchanged are to be issued
or sent, if different from the name and address of the person signing this
Letter. In the case of issuance in a different name, the tax identification
number of the person named must also be indicated. Holders tendering Original
Notes by book-entry transfer may request that Original Notes not exchanged be
credited to such account maintained at the Book-Entry Transfer Facility as such
holder may designate.
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder whose tendered Original Notes are accepted for exchange must provide the
Exchange Agent (as payor) with his or her correct taxpayer identification number
("TIN"), which, in the case of a holder who is an
1
<PAGE> 11
individual, is his or her social security number. If the Exchange Agent is not
provided with the correct TIN, the holder may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, delivery to the holder of
the Exchange Notes pursuant to the Exchange Offer may be subject to back-up
withholding. If withholding results in overpayment of taxes, a refund may be
obtained. Certain holders (including, among others, all corporations and certain
foreign individuals) are not subject to these back-up withholding and reporting
requirements. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
Under federal income tax laws, payments that may be made by the Company
on account of Exchange Notes issued pursuant to the Exchange Offer may be
subject to back-up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W-9" referred to above, certifying that the TIN
provided is correct (or that the holder is awaiting a TIN) and that: (i) the
holder has not been notified by the Internal Revenue Service that he or she is
subject to back-up withholding as a result of failure to report all interest or
dividends; (ii) the Internal Revenue Service has notified the holder that he or
she is no longer subject to back-up withholding; or (iii) in accordance with the
Guidelines, such holder is exempt from back-up withholding. If the Original
Notes are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for information on which TIN to report.
6. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the transfer of Original Notes to it or its order pursuant to the
Exchange Offer. If, however, the Exchange Notes or certificates for Original
Notes not exchanged are to be delivered to, or are to be issued in the name of,
any person other than the record holder, or if tendered certificates are
recorded in the name of any person other than the person signing this Letter, or
if a transfer tax is imposed by any reason other than the transfer of Original
Notes to the Company or its order pursuant to the Exchange Offer, then the
amount of such transfer taxes (whether imposed on the record holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payment of taxes or exemption from taxes is not submitted with this Letter, the
amount of transfer taxes will be billed directly to the tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
7. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend or waive any of the specified conditions in the Exchange Offer in the case
of any Original Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Original Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above, for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the procedure for tendering, as well as requests for additional copies of the
Prospectus or this Letter, may be directed to the Exchange Agent.
IMPORTANT: This Letter (together with certificates representing
tendered Original Notes or a Book-Entry Confirmation and all other required
documents) must be received by the Exchange Agent on or before the Expiration
Date (as defined in the Prospectus).
<PAGE> 1
EXHIBIT 99.2
NORTHLAND CABLE TELEVISION, INC.
NORTHLAND CABLE NEWS, INC.
-------------
NOTICE OF GUARANTEED DELIVERY
TO TENDER FOR EXCHANGE 10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
-------------
________________________________________________________________________________
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON ______________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE")
________________________________________________________________________________
As set forth in the Prospectus dated ____________, 1998 (the
"Prospectus") of Northland Cable Television, Inc. and Northland Cable News, Inc.
(collectively, the "Company") under "The Exchange Offer-How to Tender" and in
the Letter of Transmittal to Exchange 10 1/4% Senior Subordinated Notes due 2007
(the "Letter of Transmittal"), this form or one substantially equivalent hereto
must be used to accept the Exchange Offer (as defined below) of the Company if:
(i) certificates for the above-referenced Notes (the "Original Notes") are not
immediately available, (ii) time will not permit all required documents to reach
the Exchange Agent (as defined below) on or prior to the Expiration Date or
(iii) the procedures for book-entry transfer cannot be completed on or prior to
the Expiration Date. Such form may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or letter to the Exchange Agent.
The Exchange Agent: HARRIS TRUST AND SAVINGS BANK
By Registered or Certified Mail By Overnight Courier or Hand:
Harris Trust and Savings Bank Harris Trust and Savings Bank
c/o Harris Trust Company of New York c/o Harris Trust Company of New York
P.O. Box 1010 88 Pine Street
Wall Street Station 19th Floor
New York, NY 10268-1010 New York , NY 10005
By Facsimile:
(212) 701-7636
Confirm by Telephone:
(212) 701-7624
________________________________________________________________________________
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMITTAL OF THIS INSTRUMENT TO A FACSIMILE OR TELEX NUMBER OTHER THAN AS SET
FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
________________________________________________________________________________
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
conditions set forth in the Prospectus and the Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which are hereby
acknowledged, the principal amount of Original Notes set forth below pursuant to
the guaranteed delivery procedures described in the Prospectus and the Letter of
Transmittal.
The undersigned understands and acknowledges that the Exchange Offer
will expire at 5:00 p.m., New York City Time, on _____________, 1998, unless
extended by the Company. With respect to the Exchange Offer, "Expiration Date"
means such time and date, or if the Exchange Offer is extended, the latest time
and date to which the Exchange Offer is so extended by the Company.
All authority herein conferred or agreed to be conferred by this Notice
of Guaranteed Delivery shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
________________________________________________________________________________
Certificate No.(s) For Original No Principal amount of Original Note(s)
Exchanged Exchanged:
(If available)
_____________________________ $___________________________
_____________________________ $___________________________
_____________________________ $___________________________
_____________________________ $___________________________
________________________________________________________________________________
<PAGE> 3
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Signature(s) of Owner(s) or Authorized Signatory
Dated:___________________________
Name(s)________________________________________________________________________
(Please Print)
Capacity (full title)__________________________________________________________
Address:_______________________________________________________________________
(Include Zip Code)
Area Code and Telephone No.: (____) __________________
If original notes will be delivered by book-entry transfer, provide The
Depository Trust Company ("DTC") Account No.:._________________________________
________________________________________________________________________________
<PAGE> 4
GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, hereby guarantees (a) that the above-named person(s) own(s)
the above-described securities tendered hereby within the meaning of Rule 10b-4
under the Securities Exchange Act of 1934, (b) that such tender of the
above-described securities complies with Rule 10b-4, and (c) that delivery of
such certificates pursuant to the procedure for book-entry transfer, in either
case with delivery of a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and any other required documents, is being
made within three New York Stock Exchange trading days after the date of
execution of the Notice of Guaranteed Delivery of the above-named person.
Name of Firm:__________________________________________________________________
Authorized Signature:__________________________________________________________
Capacity (full title):_________________________________________________________
Address:_______________________________________________________________________
Tele. No.: ( ) ______________________
Fax No.: ( ) ______________________
DO NOT SEND CERTIFICATES REPRESENTING NOTES WITH THIS NOTICE. NOTES SHOULD BE
SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL.
<PAGE> 1
EXHIBIT 99.3
NORTHLAND CABLE TELEVISION, INC.
NORTHLAND CABLE NEWS, INC.
-------------
OFFER TO EXCHANGE
$1,000 IN PRINCIPAL AMOUNT OF
10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
FOR
EACH $1,000 IN PRINCIPAL AMOUNT OF
OUTSTANDING 10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
THAT WERE ISSUED AND SOLD IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
-------------
________________________________________________________________________________
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON ___________________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE")
________________________________________________________________________________
To Securities Dealers, Commercial Banks
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated ____________,
1998 (as the same may be amended or supplemented from time to time (the
"Prospectus")) and a form of Letter of Transmittal (the "Letter of Transmittal")
relating to the offer (the "Exchange Offer") by Northland Cable Television, Inc.
and Northland Cable News, Inc. (collectively, the "Company") to exchange up to
$100,000,000 in aggregate principal amount of their 10 1/4% Senior Subordinated
Notes due 2007 (the "Exchange Notes") for up to $100,000,000 in aggregate
principal amount of their outstanding 10 1/4% Senior Secured Notes due 2007 that
were issued and sold in a transaction exempt from registration under the
Securities Act of 1933, as amended (the "Original Notes").
We are asking you to contact your clients for whom you hold Original
Notes registered in your name or in the name of your nominee. In addition, we
ask you to contact your clients who, to your knowledge, hold Original Notes
registered in their own name. The Company will not pay any fees or commissions
to any broker, dealer or other person in connection with the solicitation of
tenders pursuant to the Exchange Offer. You will, however, be reimbursed by the
Company for customary mailing and handling expenses incurred by you in
forwarding any of the enclosed materials to your clients. The Company will pay
all transfer taxes, if any, applicable to the tenderer of Original Notes to it
or its order, except as otherwise provided in the Prospectus and the Letter of
Transmittal.
Enclosed are copies of the following documents:
1. The Prospectus;
<PAGE> 2
2. A Letter of Transmittal for your use in connection with the exchange
of Original Notes and for the information of your clients (facsimile copies of
the Letter of Transmittal may be used to exchange Original Notes);
3. A form of letter that may be sent to your clients for whose accounts
you hold Original Notes registered in your name or the name of your nominee,
with space provided for obtaining the clients' instructions with regard to the
Exchange Offer;
4. A Notice of Guaranteed Delivery;
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. A return envelope addressed to Harris Trust and Savings Bank, the
Exchange Agent.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., New York City Time, on _____________________, 1998, unless extended (the
"Expiration Date"). Original Notes tendered pursuant to the Exchange Offer may
be withdrawn, subject to the procedures described in the Prospectus, at any time
prior to the Expiration Date.
To tender Original Notes, certificates for Original Notes or a
Book-Entry Confirmation, a duly executed and properly completed Letter of
Transmittal or a facsimile thereof, and any other required documents, must be
received by the Exchange Agent as provided in the Prospectus and the Letter of
Transmittal. Questions and requests for assistance with respect to the Exchange
Offer or for additional copies of the enclosed material may be directed to the
Exchange Agent at its address set forth in the Prospectus or at (212) 701-7624.
Very truly yours,
NORTHLAND CABLE TELEVISION, INC.
NORTHLAND CABLE NEWS, INC.
________________________________________________________________________________
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR ANY AFFILIATE
THEREOF, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR
THE ENCLOSED DOCUMENTS AND THE STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND
THE LETTER OF TRANSMITTAL.
________________________________________________________________________________
<PAGE> 1
EXHIBIT 99.4
NORTHLAND CABLE TELEVISION, INC.
NORTHLAND CABLE NEWS, INC.
-------------
OFFER TO EXCHANGE
$1,000 IN PRINCIPAL AMOUNT OF
10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
FOR
EACH $1,000 IN PRINCIPAL AMOUNT OF
OUTSTANDING 10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
THAT WERE ISSUED AND SOLD IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
-------------
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON ___________________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE")
- --------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration is a Prospectus dated ____________,
1998 (as the same may be amended or supplemented from time to time (the
"Prospectus")) and a form of Letter of Transmittal (the "Letter of Transmittal")
relating to the offer (the "Exchange Offer") by Northland Cable Television, Inc.
and Northland Cable News, Inc. (collectively, the "Company") to exchange up to
$100,000,000 in aggregate principal amount of their 10 1/4% Senior Subordinated
Notes due 2007 (the "Exchange Notes") for up to $100,000,000 in aggregate
principal amount of their outstanding 10 1/4% Senior Secured Notes due 2007 that
were issued and sold in a transaction exempt from registration under the
Securities Act of 1933, as amended (the "Original Notes").
The material is being forwarded to you as the beneficial owner of
Original Notes carried by us for your account or benefit but not registered in
your name. A tender of any Original Notes may be made only by us as the
registered holder and pursuant to your instructions. Therefore, the Company
urges beneficial owners of Original Notes registered in the name of a broker,
dealer, commercial bank, trust company or other nominee to contact such
registered holder promptly if they wish to tender Original Notes in the Exchange
Offer.
Accordingly, we request instructions as to whether you wish us to
tender any or all Original Notes, pursuant to the terms and conditions set forth
in the Prospectus and Letter of Transmittal. We urge you to read carefully the
Prospectus and Letter of Transmittal before instructing us to tender your
Original Notes.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender Original Notes on your behalf in accordance with
the provisions of the Exchange Offer. The
2
<PAGE> 2
Exchange Offer will expire at 5:00 p.m., New York City Time, on
_________________, 1998, unless extended (the "Expiration Date"). Original Notes
tendered pursuant to the Exchange Offer may be withdrawn, subject to the
procedures described in the Prospectus, at any time prior to the Expiration
Date.
Your attention is directed to the following:
1. The Exchange Offer is for the exchange of $1,000 in principal amount
of the Exchange Notes for each $1,000 in principal amount of the Original Notes,
of which $100,000,000 aggregate principal amount of the Original Notes was
outstanding as of ____________, 1998. The terms of the Exchange Notes are
substantially identical (including principal amount, interest rate, maturity,
security and ranking) to the terms of the Original Notes, except that the
Exchange Notes will generally be freely transferable by holders thereof (except
as provided in the Prospectus) and the holders of the Exchange Notes (as well as
remaining holders of any Original Notes) are not entitled to certain
registration rights and certain additional interest provisions which are
applicable to the Original Notes under a registration rights agreement dated as
of November 12, 1997 (the "Registration Rights Agreement") between the Company
and BancAmerica Robertson Stephens and First Chicago Capital Markets, Inc., as
initial purchasers.
2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS, SEE "THE
EXCHANGE OFFER-CONDITIONS TO THE EXCHANGE OFFER" IN THE PROSPECTUS.
3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m.,
New York City Time, on ________________, 1998, unless extended.
4. The Company have agreed to pay the expenses of the Exchange Offer
except as provided in the Prospectus and the Letter of Transmittal.
5. Any transfer taxes incident to the transfer of Original Notes from
the tendering holder to the Company will be paid by the Company, except as
provided in the Prospectus and the Letter of Transmittal.
The Exchange Offer is not being made to nor will exchange be accepted
from or on behalf of holders of Original Notes in any jurisdiction in which the
making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction.
If you wish to have us tender any or all of your Original Notes held by
us for your account or benefit, please so instruct us by completing, executing
and returning to us the instruction form that appears below. The accompanying
Letter of Transmittal is furnished to you for informational purposes only and
may not be used by you to tender Original Notes held by us and registered in our
name for your account or benefit.
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer of Northland Cable
Television, Inc. and Northland Cable News, Inc., including the Prospectus and
the Letter of Transmittal.
<PAGE> 3
This form will instruct you to exchange the aggregate principal amount
of Original Notes indicated below (or, if no aggregate principal amount is
indicated below, all Original Notes) held by you for the account or benefit of
the undersigned, pursuant to the terms and conditions set forth in the
Prospectus and Letter of Transmittal.
________________________________________________________________________________
Aggregate Principal Amount of Original SIGN HERE
Notes to be exchanged:
______________________________________
Signature(s)
______________________________________
$_______________** ______________________________________
Name(s) (please print)
______________________________________
______________________________________
Address (including zip code)
______________________________________
______________________________________
Area Code and Telephone No.
______________________________________
Taxpayer Identification or Social
Security Number
Dated:________________________________
_______________________________________________________________________________
** I (we) understand that if I (we) sign these instruction forms without
indicating an aggregate principal amount of Original Notes in the space above,
all Original Notes held by you for my (our) account will be exchanged.
