<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 12, 1998
REGISTRATION NO. 333-49357
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------
CLEVELAND INDIANS BASEBALL COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
OHIO 7941 34-1861303
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION) CLASSIFICATION CODE NUMBER)
</TABLE>
2401 ONTARIO STREET
CLEVELAND, OHIO 44115
(216) 420-4200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RICHARD E. JACOBS
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
CLEVELAND INDIANS BASEBALL COMPANY, INC.
2401 ONTARIO STREET
CLEVELAND, OHIO 44115
(216) 420-4200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES OF ALL CORRESPONDENCE TO:
<TABLE>
<S> <C>
EDWARD G. PTASZEK, JR. THOMAS F. MCKEE
Baker & Hostetler LLP Calfee, Halter & Griswold LLP
3200 National City Center 1400 McDonald Investment Center
1900 East Ninth Street 800 Superior Avenue
Cleveland, Ohio 44114-3485 Cleveland, Ohio 44114-2688
(216) 621-0200 (216) 622-8200
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------
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.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 12, 1998
PROSPECTUS
4,000,000 SHARES
CLEVELAND INDIANS BASEBALL COMPANY, INC.
LOGO
CLASS A COMMON SHARES
------------------
All of the 4,000,000 Class A Common Shares (the "Class A Common Shares")
offered hereby are being offered by Cleveland Indians Baseball Company, Inc.
(the "Company"). Although the Company will receive all of the proceeds of the
Offering, substantially all of the proceeds will be used to acquire partnership
interests in Cleveland Indians Baseball Company Limited Partnership from
entities controlled by Richard E. Jacobs, Chairman of the Board, President and
Chief Executive Officer of the Company, in connection with the transactions
described under the heading "Formation Transactions."
Prior to the Offering, there has been no public market for the Class A
Common Shares. It is currently anticipated that the initial public offering
price per Class A Common Share will be between $14.00 and $16.00. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price. The Class A Common Shares have been approved for
inclusion in the Nasdaq National Market under the symbol "CLEV," subject to
notice of issuance.
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON
SHARES.
------------------
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.
<TABLE>
<CAPTION>
=====================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) THE COMPANY(2)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................................... $ $ $
- ---------------------------------------------------------------------------------------------------------------------
Total(3)..................................... $ $ $
=====================================================================================================================
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the Securities Act of 1933.
See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $2,000,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
600,000 additional Class A Common Shares solely to cover over-allotments, if
any. If such option is exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to the Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------
The Class A Common Shares are offered by the Underwriters subject to
receipt and acceptance of the shares by them. The Underwriters reserve the right
to reject any order in whole or in part. It is expected that delivery of the
Class A Common Shares will be made against payment therefor at the offices of
McDonald & Company Securities, Inc. or through the facilities of the Depository
Trust Company on or about , 1998.
MCDONALD & COMPANY
SECURITIES, INC.
The date of this Prospectus is , 1998
<PAGE> 3
Photograph depicting a variety of Cleveland Indians players
and an "American League Champions and Division Champions" logo superimposed
on a background photograph of fans at Jacobs Field
JACOBS FIELD IS OWNED BY THE GATEWAY ECONOMIC DEVELOPMENT CORPORATION OF GREATER
CLEVELAND.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON SHARES,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information in this Prospectus assumes (i) no exercise of the Underwriters'
over-allotment option and (ii) completion of the transactions described under
the heading "Formation Transactions." Unless the context otherwise requires,
prior to completion of the Formation Transactions, references to the "Company"
throughout this Prospectus, including the financial information contained
herein, refer to the operations of Cleveland Indians Baseball Company Limited
Partnership (the "Partnership") and Ballpark Management Company ("Ballpark
Management"). After completion of the Formation Transactions, references to the
"Company" refer to the operations of Cleveland Indians Baseball Company, Inc.
and the Partnership.
The American League, and its member clubs, and the National League, and its
member clubs, are collectively referred to in this Prospectus as "MLB" or "Major
League Baseball." None of the Office of the Commissioner of Baseball, the
National League or any of its member clubs, or the American League or any of its
member clubs, or any of their respective owners, officers, directors, employees
or representatives make any representation or warranty, express or implied, as
to the accuracy or completeness of the information contained in, or assume any
liability for any inaccuracies in or omissions from, this Prospectus.
THE COMPANY
The Company has been organized to serve as the sole general partner of the
Partnership, which owns the 1997 American League Champion Cleveland Indians (the
"Indians" or the "Club") and manages Jacobs Field, the Indians' home ballpark.
Baseball has a long tradition in the City of Cleveland. The first
professional baseball game in Cleveland was played on June 2, 1869, when the
Cleveland Forest Citys played the Cincinnati Red Stockings. In 1901, the Club
became one of the charter members of the American League of Professional
Baseball Clubs (the "American League"). During the ensuing 20 years, the Indians
enjoyed great success, including a victory against the Brooklyn Dodgers in the
1920 World Series. During the 1940s and 1950s, the Indians were one of
baseball's consistently strong teams. The Indians won the American League
pennant twice (1948 and 1954), captured the World Series from the Boston Braves
in 1948, and finished second in the American League six times (1951-1953, 1955,
1956 and 1959). Unfortunately, the next 25 years of the Indians' history were
marked by financial instability, inattention to the Club's minor league system,
criticized player personnel decisions, poor on-field performance and some of the
worst attendance figures in Major League Baseball.
In 1986, Richard E. Jacobs and his brother David acquired control of the
Indians and began to execute a long-term strategy that has returned winning
baseball to Cleveland and has made the Cleveland Indians one of the premier
franchises in Major League Baseball. The Company's strategy is to maintain the
Indians' competitive position and to increase the long-term value of the
franchise. The elements of this strategy include dedication to a strong player
development system, effective player personnel management, attention to quality
and customer service and an integrated approach to marketing and licensing
arrangements. In the past three seasons, the Indians have won three American
League Central Division Championships and two American League Championships.
Under Mr. Jacobs' direction, the Indians were also instrumental in the planning
and development of the downtown sports complex that includes Jacobs Field.
The Company believes that the Club's recent on-field and financial
successes are largely attributable to the collaboration of a management team
that includes experienced and talented baseball and business executives. This
team is led by John Hart, Executive Vice President and General Manager, and
Dennis Lehman, Executive Vice President, Business, and includes a coaching staff
led by Mike Hargrove, Manager. Mr. Hart was named Major League Baseball
Executive of the Year in 1994 and 1995 by The Sporting News, a leading sports
publication, and Mr. Hargrove was named Manager of the Year by The Sporting News
in 1995.
Player development is a critical element of management's efforts to build
and maintain a strong franchise. The Company has established a strong minor
league organization through a consistent, system-wide approach to evaluating and
developing young players. The team's minor league organization was ranked the
best in Major League Baseball in a 1996 poll by The Sporting News. Among its
other player development efforts, the
3
<PAGE> 5
Company sponsors baseball programs in The Dominican Republic and Venezuela in
which coaches affiliated with the Club work to develop the skills of promising
young players in those countries. The Club's successful minor league
organization has provided the Indians with a pool of talented young players to
supplement its major league roster and to permit it to make opportune trades.
Effective player personnel management is the most visible element of the
Company's baseball strategy. The goal of the Company's player personnel
management efforts is to maintain a competitive team while limiting the
unpredictability in player salaries resulting from salary arbitration and free
agency. Management's confidence in its ability to identify promising young
players has permitted the Club to selectively enter into multi-year contracts
with players early in their careers. The Company also attempts to sign a nucleus
of experienced players to multi-year contracts. Finally, the Club has been
successful in trading for, or signing as free agents, talented players who can
fill roles on the roster made vacant by trades, retirements, injuries and losses
to the free agent market.
By building value for team sponsors and fans, the Company's business
executives leverage the Club's on-field product to enhance revenues. The
Company's control over various facets of its business, including advertising
signage and concessions at Jacobs Field, permits it to capitalize on the
Indians' popularity with sponsors and fans. Sponsors are offered a number of
advertising vehicles to maximize their exposure at Jacobs Field and their
association with the Club. Fans at Jacobs Field are offered a customer-focused
experience in an attractive, comfortable environment featuring a variety of
amenities, concessions and merchandise options and a courteous, well-trained
staff.
The successful execution of the Indians' long-term strategy has resulted in
strong revenues in recent years. The Club has sold out all tickets available for
public sale for each of the 1996, 1997 and 1998 regular seasons prior to Opening
Day. The Indians hold the Major League Baseball record for consecutive regular
season sell-outs, which stands at 229 through May 6, 1998. These strong
attendance figures provide the Club with a predictable ticket sale and premium
seating revenue base for the regular season and permit the Company to realize
high levels of merchandise and concession sales at Jacobs Field. The fan
interest evidenced by these attendance figures has also permitted the Club to
enhance revenues from other sources, such as local broadcast and cable
television, radio and advertising. However, the Company's management believes
that much of the Club's local revenue potential has been realized and that
future increases in the Club's revenues, operating income and net income, if
any, are likely to be substantially less than those realized over the past five
years. See "Risk Factors -- Limited Potential for Further Revenue and Earnings
Growth." Although the Company's revenues depend heavily on the Indians' on-field
performance, the predictability of the Club's ticket and premium seating sales
in recent years has allowed it to create a competitive, profitable team within
the framework of a Major League Baseball system that is confronted with
escalating player salaries and limited means for clubs to increase revenue.
Richard E. Jacobs is Chairman of the Board, President and Chief Executive
Officer of the Company. Upon completion of the Offering, the Company will own at
least a 51% general partnership interest in the Partnership, and Mr. Jacobs, as
the sole trustee of two family trusts (the "Jacobs family trusts"), will
beneficially own a 49% limited partnership interest in the Partnership, through
the trusts' ownership of Cleveland Baseball Corporation ("CBC"), the
pre-Offering general partner of the Partnership. In addition, Mr. Jacobs,
through the Jacobs family trusts, will beneficially own 2,281,667 Class B Common
Shares and 133,200 Class A Common Shares following the Offering which represents
99.88% of the total voting control of the Company. As a result, Mr. Jacobs will
be able to control all decisions regarding the Company requiring a shareholder
vote (other than certain charter amendments), including the election of the
entire Board of Directors. Following the Offering, each of the 6,043,334 limited
partnership Units in the Partnership held by CBC will be exchangeable for Class
A Common Shares on a one-for-one basis, subject to the right of the Company to
pay cash upon receiving notice of a proposed exchange. See "Formation
Transactions" and "The Partnership--Limited Partner Rights."
The Company is an Ohio corporation incorporated on March 17, 1998. The
Company's principal executive offices are located at 2401 Ontario Street,
Cleveland, Ohio 44115, and its telephone number is (216) 420-4200.
4
<PAGE> 6
THE OFFERING
<TABLE>
<C> <S>
Class A Common Shares offered................ 4,000,000 shares
Class A Common Shares to be outstanding after
the Offering(1)............................ 4,139,376 shares
Class B Common Shares to be outstanding after
the Offering............................... 2,283,957 shares
Aggregate Class A and Class B Common Shares
to be outstanding after the Offering(1).... 6,423,333 shares
Nasdaq National Market symbol................ CLEV
Use of proceeds.............................. To acquire the general
partnership interest
in the Partnership.
See "Formation
Transactions."
</TABLE>
- ---------------
(1) Excludes 6,043,334 Class A Common Shares reserved for issuance upon exchange
of limited partnership Units in the Partnership. See "The
Partnership -- Limited Partner Rights." Also excludes 700,000 Class A Common
Shares reserved for issuance under the Company's Stock Option Plan. See
"Management -- Stock Option Plan."
5
<PAGE> 7
SUMMARY FINANCIAL DATA
The following table sets forth certain historical and pro forma data for
the Partnership and Ballpark Management on a combined basis and should be read
in conjunction with the Combined Financial Statements of the Partnership and
Ballpark Management and the Notes thereto included elsewhere in this Prospectus.
For financial reporting purposes, the Company generally recognizes revenues
and expenses on a game-by-game basis. Because the Major League Baseball regular
season begins in late March or early April, the Company's first fiscal quarter,
which ends on March 31, generally includes limited revenues and reflects a loss
attributable to fixed costs of operations incurred during the quarter. The
revenue recognized in the first quarter ended March 31 consists primarily of
spring training and exhibition game revenues, merchandise sales and concession
and catering revenue. Generally, any post-season revenue will be recognized in
the fourth quarter.
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------ THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------------------------------- -----------------------------
1997 PRO
OCTOBER 31,(1)(2) ------------------- ACTUAL FORMA
----------------- PRO ------------------ --------
1993 1994(3) 1995(3) 1996 ACTUAL FORMA(4) 1997 1998 1998(4)
------- ------- ------- -------- -------- -------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
REVENUES:
Net ticket sales.............. $19,410 $23,182 $32,267 $ 45,658 $ 49,279 $49,279 $1,402 $ 1,093 $ 1,093
Local radio and television.... 6,316 5,568 9,667 13,631 17,014 17,014 -- 38 38
Concession and catering....... 2,367 6,969 11,872 14,726 14,095 14,095 110 20 20
Private suite and club seat
rental...................... -- 3,768 5,635 7,035 8,704 8,704 -- -- --
Advertising and promotion..... 1,597 3,998 5,742 6,891 8,754 8,754 -- -- --
Merchandise................... 2,548 8,513 15,024 14,683 17,449 17,449 1,043 1,432 1,432
Major Leagues Central Fund.... 17,585 3,943 6,633 12,369 15,505 15,505 -- -- --
Other......................... 3,602 3,579 2,979 3,002 3,365 3,365 648 675 675
Post-season................... -- -- 9,888 1,933 13,051 13,051 -- -- --
Benefit (provision) for
revenue sharing............. 658 (239) (2,056) (5,731) (7,186) (7,186) (204) (223) (223)
------- ------- ------- -------- -------- -------- ------- -------- --------
Total revenues.......... 54,083 59,281 97,651 114,197 140,030 140,030 2,999 3,035 3,035
------- ------- ------- -------- -------- -------- ------- -------- --------
OPERATING EXPENSES:
Major league team............. 21,898 26,389 38,904 53,420 66,125 66,125 1,512 2,430 2,430
Player development............ 7,931 7,198 8,298 8,735 11,146 11,146 2,436 2,484 2,484
Ballpark operations........... 5,148 6,259 9,071 10,389 10,965 10,965 1,844 1,973 1,973
Cost of merchandise sold...... 1,422 5,001 9,224 11,692 12,982 12,982 1,435 1,582 1,582
Administrative and general.... 5,983 8,702 9,769 9,275 10,292 11,342 2,271 2,473 2,736
Major Leagues Central Fund.... 3,747 3,559 1,498 4,146 4,938 4,938 260 303 303
Advertising and promotion..... 3,205 3,929 3,805 2,960 3,854 3,854 1,284 927 927
Post-season................... -- -- 5,457 1,309 6,252 6,252 -- -- --
Amortization of signing
bonuses and player
contracts................... 1,833 2,005 3,242 3,212 3,630 3,630 104 225 225
Depreciation and
amortization................ 1,338 1,275 1,361 1,326 1,629 1,629 385 397 397
------- ------- ------- -------- -------- -------- ------- -------- --------
Total operating
expenses.............. 52,505 64,317 90,629 106,464 131,813 132,863 11,531 12,794 13,057
------- ------- ------- -------- -------- -------- ------- -------- --------
OPERATING INCOME (LOSS)......... 1,578 (5,036) 7,022 7,733 8,217 7,167 (8,532) (9,759) (10,022)
OTHER INCOME (EXPENSE):
Interest income............... 1,260 1,375 1,658 3,855 4,672 2,649 1,231 1,948 1,353
Interest expense.............. (2,027) (1,310) (2,005) (2,045) (2,301) (2,301) (429) (661) (661)
Gain (loss) on player
transactions................ 47 85 71 616 2,696 2,696 -- (1,604) (1,604)
League expansion proceeds..... 3,000 -- -- -- 9,286 9,286 -- -- --
Minority interest............. -- -- -- -- -- (9,554) -- -- 5,358
------- ------- ------- -------- -------- -------- ------- -------- --------
Income (loss) before provision
for income taxes.............. 3,858 (4,886) 6,746 10,159 22,570 9,943 (7,730) (10,076) (5,576)
Provision (benefit) for income
taxes......................... -- -- -- -- -- 3,060 -- -- (1,729)
------- ------- ------- -------- -------- -------- ------- -------- --------
Net income (loss)............... $ 3,858 $(4,886) $6,746 $ 10,159 $ 22,570 $ 6,883 $(7,730) $(10,076) $ (3,847)
======= ======= ======= ======== ======== ======== ======= ======== ========
Pro forma net income (loss) per
share......................... $ 1.07 $ (0.60)
======== ========
</TABLE>
6
<PAGE> 8
<TABLE>
<CAPTION>
MARCH 31,
-------------------
OCTOBER 31,(1)(2) DECEMBER 31, PRO
----------------- ----------------------------- ACTUAL FORMA
1993 1994(3) 1995(3) 1996 1997 1998 1998(4)
------- ------- ------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Total current assets............................... $28,316 $21,719 $60,952 $ 60,228 $ 85,195 91,412 91,412
Total current liabilities.......................... 32,465 35,792 68,346 62,124 74,891 100,655 100,655
Total assets....................................... 47,441 43,032 79,991 87,272 118,152 125,037 129,737
Long-term obligations.............................. 26,538 25,671 26,182 33,458 45,811 50,708 50,708
Total shareholders' equity (deficit)............... (11,562) (18,431) (14,537) (8,310) (2,550) (26,326) (21,626)
</TABLE>
- ---------------
(1) Includes (a) the assets, liabilities and results of operations of the
Partnership as of October 31, 1993 and 1994 and for the years then ended and
(b) the assets, liabilities and results of operations of Ballpark Management
as of December 31, 1993 and 1994 and for the years then ended. The results
of operations of the Partnership for the two-month period ended December 31,
1994, which are not reflected in the above combined financial data, were as
follows (in thousands):
<TABLE>
<S> <C>
Revenues.................................. $ 578
Expenses.................................. 2,783
-------
Operating loss............................ (2,205)
Interest expense.......................... 271
-------
Net loss.................................. $(2,476)
=======
</TABLE>
(2) The Club did not commence play at Jacobs Field until the 1994 regular
season. As a result, the operations of Ballpark Management for the year
ended December 31, 1993 were insignificant.
(3) A players' strike during 1994 and 1995 resulted in the cancellation of 27
home games and 18 away games of the 1994 regular season, the entire 1994
post-season and nine home games and nine away games of the 1995 regular
season. The Major League Baseball regular season consists of 162 games, of
which 81 are scheduled to be played at home and 81 are scheduled to be
played on the road.
(4) Pro forma income statement data give effect to a March 1998 distribution by
the Partnership and the repayment of related party indebtedness (the
"Distribution"), the transactions described under the caption "Formation
Transactions" and the sale of 4,000,000 Class A Common Shares by the Company
pursuant to the Offering and the application of the estimated net proceeds
therefrom at an assumed initial public offering price of $15.00 per share,
as if such transactions had occurred on January 1, 1997. Pro forma balance
sheet data give effect to such transactions (other than the Distribution) as
if they had occurred on March 31, 1998. See "Formation Transactions," "Use
of Proceeds" and "Pro Forma Financial Data."
7
<PAGE> 9
RISK FACTORS
Prospective investors should consider carefully the following risk factors,
together with the other information contained in this Prospectus, in evaluating
an investment in the Class A Common Shares offered hereby. The following factors
and other information set forth in this Prospectus contain certain forward-
looking statements involving risks and uncertainties. The Company's actual
results may differ materially from the results anticipated in these
forward-looking statements as a result of certain factors set forth in this
section and elsewhere in this Prospectus.
CONTROL BY RICHARD E. JACOBS; VOTING RIGHTS
The Company has two classes of common shares comprised of Class A Common
Shares and Class B Common Shares (collectively, the "Common Shares"). Following
completion of the Formation Transactions and the Offering, Richard E. Jacobs
will control substantially all of the outstanding Class B Common Shares as sole
trustee of the Jacobs family trusts which own such shares of record. Although
Class A Common Shares and Class B Common Shares vote together on all matters
submitted to the shareholders for approval (other than certain charter
amendments), the Class A Common Shares are entitled to one vote per share, and
the Class B Common Shares are entitled to 10,000 votes per share. Consequently,
Mr. Jacobs, as the beneficial holder of 2,281,667 Class B Common Shares, will be
able to control the management and policies of the Company, including its
management of the Indians as general partner of the Partnership, the election of
the entire Board of Directors, any determination with respect to a sale of all
or substantially all of the assets of the Company or the Partnership and the
outcome of all other matters submitted to the shareholders for approval (other
than certain charter amendments). See "Management," "Certain Transactions" and
"Principal Shareholders."
OFFERING PROCEEDS TO BE USED TO PURCHASE PARTNERSHIP INTERESTS FROM RELATED
PARTIES
The Company intends to use the proceeds of the Offering to purchase its
general partnership interest in the Partnership and to engage in the other
transactions described under the caption "Formation Transactions." Substantially
all of the net proceeds from the Offering will be paid to CBC, which is owned by
the Jacobs family trusts. The terms of the Formation Transactions were not
negotiated on an arms'-length basis and no independent appraisals or other
valuations of the assets being transferred in connection with the Formation
Transactions have been obtained. Rather, the parties considered, among other
things, the result of operations, financial condition and cash flows of the
Company, an assessment of management, the Company's present state of
development, recent sales prices of other Major League Baseball franchises and
the current state of the economy in the United States and the Cleveland, Ohio,
metropolitan area. In effect, the value of the business and assets being
transferred will be based upon the overall value of the Company implied by the
initial public offering price per share. Accordingly, there can be no assurance
that this value does not exceed the value of the Company that would be reflected
in an arms'-length transaction.
LIMITED POTENTIAL FOR FURTHER REVENUE AND EARNINGS GROWTH
During the past five years, the Company has realized significant growth in
revenues, operating income and net income. Most of the Company's revenues are
derived from local sources. Gross revenues from national television and radio
contracts and Major League Baseball Properties royalties represented only
approximately 11.5% of the Company's revenues during 1997. Much of the Company's
growth has resulted from increased ticket sales, premium seating rents, food and
beverage concession sales, merchandise sales and local broadcasting revenues
(radio, broadcast television and cable television). Increases in the Company's
revenues have resulted primarily from the Indians' on-field performance and the
increased popularity of the Club among baseball fans in the region. Management
believes that much of the Indians' local revenue potential has already been
realized and that future increases in revenues, operating income and net income,
if any, are likely to be substantially less than those realized over the past
five years. Moreover, the revenue sharing rate, which applies to a club's net
local revenue and was 12% in 1997, will be 16% in 1998, 17% in 1999 and 20% in
2000. These increases in the revenue sharing rate may reduce the net local
revenue retained by the Company in future years, depending on the amount of the
Company's net local revenue relative to that of other MLB
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clubs. See "Management's Discussion and Analysis of Results of Operations and
Financial Condition" and "Major League Baseball -- Collective Bargaining
Agreement."
DISTRIBUTION AND REPAYMENT OF RELATED PARTY INDEBTEDNESS
The Partnership has borrowed an aggregate of $35.5 million under the Major
League Credit Facility. Substantially all of those funds have been loaned by the
Partnership to CBC, the pre-Offering general partner of the Partnership and an
affiliate of Mr. Jacobs. In March 1998, the Partnership distributed $49.2
million to its partners, and CBC repaid its $35.5 million debt to the
Partnership. These transactions have had the effect of allowing CBC to use cash
generated by the Partnership to repay its debt to the Partnership. The Company
will receive no benefit from the repayment of such indebtedness since the
Partnership will remain obligated, subject to the terms and conditions of the
Major League Credit Facility, to repay amounts borrowed thereunder without the
corresponding right to receive funds from CBC. Although the Company believes it
will be able to pay its current liabilities with cash flow from operations or
from other sources of credit available to the Company, there can be no assurance
that the distribution and loan repayment will not adversely affect the Company's
liquidity and financial condition. See "Certain Transactions" and "Management's
Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources."
DEPENDENCE ON COMPETITIVE SUCCESS OF THE INDIANS
The financial results of the Company and the franchise value of the Indians
are expected to depend in large part on the Indians continuing to achieve
on-field success. The team's recent successes have generated fan enthusiasm,
resulting in sustained ticket, premium seating, concession and merchandise sales
during the regular season and greater shares of local television and radio
audiences. Furthermore, success in the regular season has permitted
participation in post-season playoffs, which has provided the Company with
additional revenue and income. Poor on-field performance by the Indians is
likely to adversely affect revenue and income. There can be no assurance that
the Indians will perform well or qualify for post-season play in 1998 or
thereafter.
DEPENDENCE ON TALENTED PLAYERS
The success of the Indians will depend, in large part, upon their ability
to develop, obtain and retain talented players. The Indians compete with other
MLB baseball teams and teams in other countries for available players. There can
be no assurance that the Indians will be able to retain players upon expiration
of their contracts or identify and obtain new players of adequate talent to
replace players who retire or are injured, traded, released or lost to free
agency. Even if the Indians are able to retain or obtain players who have had
successful amateur or professional careers, there can be no assurance of the
quality of their performance for the Indians.
RISK OF INJURIES; ABSENCE OF INSURANCE
To the extent that financial results of the Company and its franchise value
are dependent on the Indians' competitive success, the likelihood of achieving
such success is substantially reduced by serious or untimely injuries to key
players. After the start of the season a player is entitled to receive his
salary even if the player dies or is unable to play as a result of injury
sustained during the term of his employment. In addition, players signed to
multi-year contracts are guaranteed the payment of their salaries whether or not
they are able to perform. These salaries represent significant financial
commitments for the Indians. As of December 31, 1997, the Company's commitments
under player and other employment contracts totalled $62.4 million, $54.4
million, $32.6 million, $23.1 million and $12.8 million for 1998, 1999, 2000,
2001 and 2002 and thereafter, respectively. The Company is generally insured
against having to pay salaries in the event of a player's death. The Company has
obtained disability insurance policies for substantially all of its players
under multi-year contracts. In the event of injuries sustained resulting in lost
services as defined in the policies, the policies provide for payment to the
Company of a portion of the player's salary for the remaining term of the
contract or until the player can resume playing. The Company's expenditures on
such insurance have risen substantially. The Company may choose not to obtain
(or may not be able to obtain) insurance in the future.
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In addition, player disability insurance policies usually exclude from coverage
pre-existing conditions. If an injured player is not insured, the Company will
be obligated to pay all of the injured player's salary. Replacement of an
injured player may result in an increase in salary expense for the Company.
EFFECT OF POST-SEASON PLAY ON REVENUES AND INCOME
The Company's revenue, operating income and cash flows in recent years have
benefited materially from the Indians' appearance and performance in post-season
play. In 1995 and 1997, the Indians' won the American League Championship and
appeared in the World Series, and the operating income generated from
post-season revenues accounted for the majority of the Company's operating
income in those years. The revenues and profitability derived from post-season
play are substantially dependent on the number of post-season games in which the
Indians participate and the number of those games played at Jacobs Field. In the
1995 post-season, the Indians appeared in 15 out of 19 potential post-season
games, and in 1997, the Indians played in 18 out of 19 potential post-season
games. Income from post-season play (after reduction for an allocable portion of
revenue sharing payments) contributed approximately $4.4 million and $5.7
million to the Company's operating income in 1995 and 1997, respectively. In
1997, this amount represented 79% of the Company's pro forma operating income.
In 1996, the Indians were eliminated from post-season play in the Division
Series, and appeared in only four out of 19 potential post-season games. Income
from post-season play contributed only $0.5 million to operating income during
1996. There can be no assurance that the Indians will appear in post-season play
in the future or that post-season revenues, operating income and cash flows will
be significant.
HISTORY OF LOSSES AND UNCERTAINTY OF FUTURE RESULTS
Although the Company has generated net income in the recent past, the
Company has also had periods of significant losses. For instance, for the fiscal
year ended October 31, 1994, the Company incurred operating and net losses of
$5.0 million and $4.9 million, respectively, although the Company believes that
these losses were attributable in part to the cancellation of a portion of the
1994 season because of the players' strike. See "-- Uncertainties Relating to
Labor Relations in Major League Baseball." During the recent periods of
earnings, the Indians have sold out all regular season games prior to the start
of the season and the team has had strong on-field performance. There can be no
assurance that the Company can sustain strong ticket sales and attendance or
that its recent profitability can be sustained on an ongoing basis. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and "Business--Business Operation -- Operations."
EFFECT OF BASEBALL DECISIONS ON FINANCIAL PERFORMANCE
Management's primary business objective is to increase the long-term value
of the Company. Management believes that maintaining the Indians' on-field
success is essential to the achievement of this objective. Accordingly, efforts
to improve the Company's revenues and income from period to period may be
secondary to actions that management believes will enhance long-term value. In
particular, maintaining the Indians' competitive position may require the
Company to take actions that could significantly increase expenses for a
particular period. These actions may include, among other things, trading for
highly compensated players, signing free agents or current players to new
contracts or engaging in salary arbitration with existing players. Any of these
actions could have a material adverse effect on the Company's financial
performance and could significantly affect the market price of the Class A
Common Shares. Furthermore, there can be no assurance that any actions taken by
management to increase the Company's long-term value will be successful.
The Commissioner and the President of the American League have the power
and authority to take actions that they deem to be in the best interests of
Major League Baseball, which may not necessarily be consistent with maximizing
value for the holders of Class A Common Shares. Certain of these decisions could
have a material adverse effect on the business, results of operations and
financial condition of the Company and on the market price of the Class A Common
Shares.
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UNCERTAINTIES OF INCREASES IN PLAYERS' SALARIES
Players' salaries in Major League Baseball have increased significantly
over the past several seasons. The Club's aggregate players' salaries have
increased from approximately $17.7 million during the 1993 season to
approximately $58.2 million during the 1997 season. The Company's baseball
executives expect players' salaries to continue to increase. Significant
increases in players' salaries could have a material adverse effect on the
Company's financial condition, results of operations, cash flows and franchise
value if the increases are not offset by adequate increases in revenue.
Moreover, to the extent that higher salaries must be paid in order to retain
talented players, the Company may be subject to the luxury tax imposed by the
Collective Bargaining Agreement. See "--Dependence on Talented Players" and
"Major League Baseball--Collective Bargaining Agreement--Luxury Tax."
LEGAL AND LEGISLATIVE CHALLENGES TO THE MLB ANTI-TRUST EXEMPTION
In 1922, a United States Supreme Court decision effectively exempted
professional baseball from the federal antitrust laws. Although the antitrust
exemption has been affirmed on several occasions by lower courts, such decisions
are based in part on reasoning suggesting that any reversal of professional
baseball's antitrust exemption should be a legislative matter. In addition, two
state courts and one federal district court have applied the exemption narrowly.
Pursuant to the Collective Bargaining Agreement, MLB clubs and the Players
Association have agreed to jointly request and cooperate in lobbying the
Congress to pass legislation that will clarify that MLB players are covered
under the antitrust laws (so that they have the same rights under the antitrust
laws as other professional athletes), together with a provision that makes it
clear that the passage of that legislation does not change the application of
the antitrust laws in any other context. The MLB clubs and the Major League
Baseball Players Association (the "Players Association") are working on a joint
proposal to propose to the Congress. The Company does not believe that
legislation enacted pursuant to the Collective Bargaining Agreement to limit the
antitrust exemption as it applies to labor matters will have a material effect
on the Company. However, any actions by the courts or legislators to limit
further the antitrust exemption could result in significant litigation expense
that would reduce net revenue produced at the league level and, consequently,
reduce payments to the Company and, if successful, could have a material adverse
effect on the Company and Major League Baseball. These effects could include,
among other things, the inability of Major League Baseball to restrict franchise
relocation, which could adversely affect franchise stability, and a change in
the relationship between MLB clubs and their minor league affiliates, which the
Company believes could result in a material change in the way MLB teams acquire
and develop players. See "Major League Baseball -- Restrictions on Operations"
and "The Company -- Team -- Player Development."
UNCERTAINTIES RELATING TO LABOR RELATIONS IN MAJOR LEAGUE BASEBALL
Relations between MLB clubs and their players have been contentious. During
the 1994 season, a players' strike resulted in the cancellation of a substantial
portion of the 1994 season, including the 1994 World Series, and the first few
weeks of the 1995 season and adversely affected the Company's results of
operations. See "Management's Discussion and Analysis of Results of Operations
and Financial Condition." In addition to the players' strike during 1994 and
1995, professional baseball has suffered five work stoppages ranging from two to
50 days since 1972. MLB clubs and the Players Association entered into a new
collective bargaining agreement (the "Collective Bargaining Agreement") that
became effective as of January 1, 1997 and, with respect to certain provisions,
was retroactive to the 1996 season. The agreement expires on the later of
October 31, 2000 or the day following the last game of the 2000 World Series,
except that the Players Association has the unilateral option to extend the
Collective Bargaining Agreement to October 31, 2001 or the day after the last
game of the 2001 World Series, whichever is later. MLB has also had disputes
with the labor union representing the major league umpires, which have resulted
in strikes and the need to use replacement umpires. There can be no assurance
that Major League Baseball will not experience labor relations difficulties in
the future which could have a material adverse effect on the Indians' franchise
value and the Company's financial condition or results of operations. See "Major
League Baseball--Collective Bargaining Agreement."
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DECLINE IN POPULARITY OF PROFESSIONAL BASEBALL
The popularity of professional sports, in general, and professional
baseball, in particular, is important to the results of operations of the
Company and the long-term franchise value of the Club. It is generally
recognized that the popularity of Major League Baseball, as evidenced by
attendance figures and television ratings, was adversely affected by the
players' strike that shortened the 1994 and 1995 seasons. Even if the Indians
franchise is successful, a substantial decline in the popularity of Major League
Baseball, whether as a result of future labor disputes, increases in the
popularity of other professional sports or the emergence of new spectator
sports, could have a material adverse effect on the Company and the price of the
Class A Common Shares.
MLB RESTRICTIONS ON THE COMPANY AND ITS SHAREHOLDERS
By virtue of the Indians' membership in the American League, the Company
and its personnel are bound by a number of rules, regulations, guidelines,
bulletins, directives, policies and agreements of the Commissioner, the American
League President, the MLB clubs collectively, the American League, MLB
committees, Major League Baseball Enterprises, Inc., Major League Baseball
Properties, Inc., Baseball Television, Inc. and any other entity owned by the
MLB clubs collectively, including, without limitation, the American League
Constitution, the Major League Agreement, the Major League Rules, the Collective
Bargaining Agreement, and national telecast and radio broadcast agreements
(each, as the same may now exist or be amended or adopted in the future, a
"Governing Document"). Any change to the Governing Documents will be binding
upon the Indians and their personnel, regardless of whether the Company agrees
or disagrees with such changes, and it is possible that any such change could
adversely affect the Company and the shareholders.
The Office of the Commissioner of Baseball (the "Commissioner") and the
President of the American League each have the exclusive power to interpret the
Governing Documents of MLB and the American League, respectively. In addition,
the Governing Documents provide that, as a party to the Major League Agreement
and as a member of the American League, the Company is precluded from resorting
to the courts to enforce or maintain rights or claims against any other club,
and that all disputes must be submitted to either the Commissioner or the
President of the American League for determination and such determination, when
rendered, is final and binding. See "Major League Baseball--MLB Governance."
The Governing Documents also contain provisions which may in certain
circumstances limit, restrict or require the actions of the Company or the
holders of the Class A Common Shares which may adversely affect the value of the
Class A Common Shares. Failure by the Company or a holder of Class A Common
Shares to comply with these restrictions may ultimately result in the
termination of the Club's membership in MLB, a forced sale of a shareholder's
interest in the Company or the repurchase of such interests by the Company. The
Governing Documents require that the Company submit to the Commissioner for his
approval, which may be withheld in his sole discretion, any agreement that might
affect control of the team prior to execution of that agreement. Furthermore,
the Governing Documents were designed to give MLB some control over the areas of
non-baseball business conducted by corporate club owners. To that end, the
Governing Documents intend that the Company be a single-purpose entity. If
management determines that it is beneficial to the Company to expand into other
businesses, the Governing Documents require that the expansion plan be reviewed
and approved by the Commissioner before being put into effect. There can be no
assurance that MLB or the American League will not adopt in the future different
or additional restrictions which could adversely affect the shareholders, the
market price of the Class A Common Shares and the franchise value of the Club.
See "Major League Baseball--Restrictions on Operations."
Because the American League is a nonprofit association, the Indians and
other members of the American League are generally jointly and severally liable
for the debts and obligations of the association. Also, the Company is a party
to various agreements entered into by all MLB clubs and will have obligations
under certain of these agreements in the event another club defaults. Any
failure of other clubs to pay their pro rata share of any such debt or
obligation could adversely affect the Company. The success of the American and
National Leagues and their members depends in part on the competitiveness of the
teams and their ability to
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maintain fiscally sound franchises. Certain franchises are encountering
financial difficulties, and there can be no assurance that the leagues and their
respective franchises will be able to operate on a fiscally stable and effective
basis.
Any of (i) the amendment of an existing, or the adoption of a new,
Governing Document, (ii) any modification to or extension of MLB's revenue
sharing or luxury tax arrangements by the MLB or (iii) future actions of the
Commissioner or the American League President could have a material adverse
effect on the franchise value of the Club or the market price of the Class A
Common Shares.
POSSIBILITY OF INCREASED COMPETITION AS A RESULT OF MLB EXPANSION
MLB has two new expansion teams that commenced play in the 1998 season.
Although there are no current plans to do so, MLB may also expand in the future.
Expansion affords MLB the opportunity to enter new markets, but it also
increases the competition for talented players among MLB teams. Generally,
expansion teams are permitted to select in an expansion draft certain
unprotected players from the rosters of the various MLB teams. There can be no
assurance that the Indians will be able to retain all of their key players
during future expansion drafts or that the rules regarding expansion drafts will
not change to the detriment of the Company. In addition, to the extent MLB teams
share equally in the revenue generated from national broadcast contracts, the
sale of MLB licensed merchandise and national corporate sponsorships, the
Company may receive less revenue from these sources as the result of expansion.
UNCERTAINTIES REGARDING RENEWAL OF MEDIA CONTRACTS
The Company has agreements with Fox Sports Ohio and WUAB for local
television broadcasts of the Indians preseason and regular season games which
expire in 1998 and 2001, respectively. The Company has agreements with Jacor
Broadcasting Corporation and other affiliates for the local radio broadcast of
all Indians games. The Jacor contract expires December 31, 1999, and the Company
has the option to renew the contract for an additional four years. There can be
no assurance that the Company will be able to renew the Fox Sports Ohio, WUAB,
Jacor and local affiliate agreements following their expiration on terms as
favorable as those in the current agreements.
The Company receives a pro rata share of the income MLB generates from
national broadcast and cable television contracts which expire between 2000 and
2002. There can be no assurance that MLB will be able to renew these contracts
following their expiration on terms as favorable as those in the current
agreements.
BUSINESS CONCENTRATION
Upon completion of the Offering, the only business of the Company will be
to own and operate the Indians, manage Jacobs Field and conduct related
activities. The Company's failure to (i) maintain a competitive baseball
franchise, (ii) continue to receive adequate revenue from its baseball
operations or (iii) operate the ballpark efficiently, could have a material
adverse effect on the Company's financial condition or results of operations
which may not be offset by operations from other businesses. Although the
Company intends to consider acquisitions of other businesses or properties,
there can be no assurance that any such acquisition will be completed. See
"-- Risks Relating to Expansion of Business and Acquisitions."
NEED FOR ADDITIONAL CAPITAL
The Company's operations may require capital infusions on an ongoing basis.
The Company intends to finance its future operations with cash flow from
operations and, if necessary, borrowings. The Company cannot predict whether it
can sustain cash flow levels sufficient to support its operations. Unless such
cash flow levels are sustained, the Company will require additional borrowings
or the sale of debt or equity securities, or some combination thereof, to
provide funding for its operations. The Company's ability to incur additional
indebtedness is limited by applicable provisions of the Governing Documents,
which limit the amount of debt that may be secured by the assets of, or
ownership interest in, a MLB club and require that the parties to any secured
loan that is approved execute an agreement limiting the rights of the lenders
and the club under certain circumstances, including, upon an event of default or
foreclosure. The issuance and sale of additional
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equity and debt securities requires MLB's prior written consent. As a condition
to MLB's consent to the sale of such securities, MLB may impose certain
conditions or limitations on the investor or lender, which may increase the cost
of such financing to the Company. If the Company does not generate sufficient
cash flow from its operations, or is unable to borrow or otherwise obtain
additional funds to finance its operations, the Company's financial condition
and results of operations could be adversely affected. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources."
SELF INSURANCE
The Company is self-insured for the first $500,000 of each workers'
compensation claim and, accordingly, establishes reserves for future claims and
payments. Effective January 1, 1998, the Company also implemented a medical
insurance program covering substantially all of its full-time employees. The
program provides employees with maximum lifetime benefits of $2.5 million, for
which the Company is self-insured and, accordingly, establishes reserves for
future claims and payments. The Company has only recently established this
program, and has less experience on which to base its judgments concerning
reserve levels than it does with respect to its workers' compensation program.
There can be no assurance that the Company's actual workers' compensation or
medical insurance claims will not exceed the amount of the Company's reserves.
COMPETITION
The Indians compete for entertainment and advertising dollars with other
sports and with other entertainment and recreational activities. During parts of
the baseball season, the Indians experience competition from professional
basketball (the Cleveland Cavaliers and the Cleveland Rockers) and professional
hockey (the Cleveland Lumberjacks). Moreover, the City of Cleveland is currently
in the process of building a new football-only stadium. If certain conditions
are met, the National Football League (the "NFL") is obligated to provide to the
City an NFL franchise by the fall of 1999. This team is expected to use the
established and popular name and heritage of the former Cleveland NFL franchise,
the Cleveland Browns, and will likely have loyal fan support from its inception.
The Indians also compete for attendance, broadcast audiences and advertising
revenue with a wide range of other entertainment and recreational activities
available in Northeast Ohio.
RISKS RELATING TO EXPANSION OF BUSINESS AND ACQUISITIONS
Although the Company is not presently engaged in negotiations to acquire
other businesses, it may consider making future acquisitions of sports-related
or non-sports-related businesses as well as commercial properties, including
properties which may be owned by Mr. Jacobs or his affiliates. The Company may
make such acquisitions with cash or with securities or a combination thereof. If
the Company makes any such acquisitions, various risks may be encountered,
including potential dilution to the Class A Common Shares then outstanding due
to the issuance of additional Common Shares (which may include Class B Common
Shares) in connection with the acquisitions, possible goodwill amortization,
diversion of management's attention, possible environmental and other regulatory
costs and unanticipated problems or liabilities, some or all of which could have
a material adverse effect on the Company's financial condition and results of
operations. In addition, transactions, including acquisitions, which would
result in the issuance of additional Common Shares (which may include Class B
Common Shares) may require the consent of MLB. There is no assurance that the
Company will be able to obtain such consent. See "--MLB Restrictions on the
Company and its Shareholders."
DEPENDENCE ON MANAGEMENT
For the foreseeable future, the Company will be materially dependent upon
the services of Mr. Jacobs, Chairman of the Board, President and Chief Executive
Officer; John Hart, Executive Vice President and General Manager; Dennis Lehman,
Executive Vice President, Business; Dan O'Dowd, Vice President, Baseball
Operations and Assistant General Manager; Jeff Overton, Vice President,
Marketing and Communications and Ken Stefanov, Vice President, Finance. The loss
of the services of any of these individuals could
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have a material adverse effect on the Company. See "Management--Directors and
Executive Officers." The Company does not carry key man life insurance on any of
its officers.
Mr. Jacobs is also Chairman of the Board and Chief Executive Officer of The
Richard E. Jacobs Group, a real estate management and development company.
Although Mr. Jacobs intends to devote a significant amount of time and attention
to the Company, his involvement in other current and future business endeavors
could divert his attention from the Company's business.
TRAVEL RELATED RISKS
The Club is scheduled to play 81 regular season road games each year.
Indians players and members of the coaching staff generally travel to away games
using charter air carriers. The Club's extensive travel schedule exposes it to
the risk of travel-related accidents. The Company maintains life insurance
coverage on its players in amounts sufficient to cover its contractual
obligations in the event of a player's death. The Company also maintains
additional life insurance in the amount of $2.0 million on each member of the
Club's 25-man roster which provides coverage in the event of a catastrophic
accident involving the team. Despite the existence of this insurance, a
catastrophic accident involving the Club would have a material adverse effect on
the Company's result of operations and financial condition.
NO PRIOR PUBLIC MARKET AND POSSIBLE VOLATILITY OF SHARE PRICE
Prior to the Offering, there has been no public market for the Class A
Common Shares. Although the Class A Common Shares have been approved for
inclusion in the Nasdaq National Market upon notice of issuance, there can be no
assurance that an active trading market will develop or be sustained following
the Offering. There can be no assurance that the price at which the Class A
Common Shares will trade in the public market subsequent to the Offering will
not be lower than the initial public offering price. The initial public offering
price for the Class A Common Shares will be determined by negotiations between
the Company and McDonald & Company Securities, Inc., as the Representative of
the Underwriters, based on factors described in this Prospectus. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price. Because there are no other public companies the
principal business of which is Major League Baseball, the Company and the
Representative were not able to use the market prices of securities of other
companies in the same industry as a basis for setting the initial public
offering price. The trading price of the Company's Class A Common Shares could
be subject to significant fluctuations in response to variations in quarterly
results, team performance and other factors. In addition, in recent years the
stock markets, in general have from time to time experienced significant price
and volume fluctuations, and the market for the shares of companies with a small
capitalization, in particular, have experienced extreme price fluctuations which
have often been unrelated to their operating performance.
ABSENCE OF DIVIDENDS
The Company does not intend to pay any cash dividends with respect to the
Class A Common Shares or the Class B Common Shares in the foreseeable future.
See "Dividend Policy."
DILUTION
Purchasers of the Class A Common Shares offered hereby will suffer
immediate and substantial dilution of $20.06 per share, assuming an initial
public offering price of $15.00 per share. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, of the 27,000,000 authorized Class A
Common Shares, 4,139,376 Class A Common Shares will be issued and outstanding.
Of these 4,139,376 Class A Common Shares, the 4,000,000 Class A Common Shares
purchased in this Offering by persons who are not "affiliates" of the Company
will be freely tradeable without restriction under the Securities Act of 1933,
as amended (the "Securities Act"). The Company believes that 139,376 Class A
Common Shares and the 2,283,957 Class B Common Shares that are convertible into
Class A Common Shares are considered "restricted securities"
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under the Securities Act and holders may not utilize Rule 144 until such shares
have been held for at least one year. For a description of Rule 144, see "Shares
Eligible for Future Sale." Each of the 6,043,334 limited partnership Units of
the Partnership held by CBC is exchangeable, beginning one year after the date
hereof, into one Class A Common Share. The Class A Common Shares issuable upon
such exchange will be restricted securities within the meaning of the Securities
Act. However, the Company has granted to CBC certain "piggy-back" registration
rights with respect to the Class A Common Shares issued in exchange for
Partnership Units.
Class A Common Shares issued upon the exercise of stock options will become
eligible for resale under Rule 144 one year subsequent to the date or dates that
the holders of such options exercise the same. Subsequent to the Offering, the
Company intends to file a registration statement on Form S-8 with respect to the
700,000 Class A Common Shares reserved for issuance pursuant to the Company's
Stock Option Plan. See "Management--Stock Option Plan." Upon registration, such
shares upon issuance would be freely tradeable by persons who are not
"affiliates" of the Company. In addition, "affiliates" of the Company could sell
such shares pursuant to Rule 144 under the Securities Act in compliance with the
manner of sale and volume limitations of Rule 144.
No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the Class A Common Shares prevailing from time to time. Sales of
substantial amounts of Class A Common Shares, or the perception that such sales
could occur, could adversely affect the prevailing market price for the Class A
Common Shares. See "Shares Eligible for Future Sale."
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FORMATION TRANSACTIONS
Prior to the Offering, the Indians' operations have been conducted by the
Partnership, and Jacobs Field has been managed by Ballpark Management. The
Company has entered into a Reorganization Agreement with CBC, the Partnership's
current general partner, MJC Baseball, Inc. ("MJC"), the Partnership's current
limited partner, Ballpark Management, the Partnership, the Jacobs family trusts
and Martin J. Cleary. Under the terms of the Reorganization Agreement, a number
of transactions will take place prior to or concurrently with the Offering.
These transactions will result in the Company becoming the sole general partner
and the owner of at least a 51% partnership interest in the Partnership and the
combination of the operations currently conducted by the Partnership and
Ballpark Management. This result will be accomplished through the following
transactions (assuming an initial public offering price of $15.00 per share and
no exercise of the Underwriters' over-allotment option):
- Merger of Ballpark Management and Partnership
Contribution. Ballpark Management will be merged into the Company (the
"Ballpark Management Merger"), and the Jacobs family trusts, as the sole
shareholders of Ballpark Management, will receive 2,281,667 Class B Common
Shares in exchange for their ownership interest in Ballpark Management.
After the Ballpark Management Merger, the Company will contribute Ballpark
Management's assets and liabilities to the Partnership for an approximate
19% general partnership interest in the Partnership.
- Merger of MJC. MJC will be merged into the Company (the "MJC
Merger"), and Mr. Cleary, as the sole shareholder of MJC, will receive
2,290 Class B Common Shares, 6,043 Class A Common Shares and $55,800 in
cash. As a result of the MJC Merger, the Company will succeed to MJC's
interest in the Partnership.
- Transfer of Partnership Interests and Amendment of Partnership
Agreement. CBC will transfer to the Company 3,996,000 of its Partnership
Units for $55,744,200 in cash. The Partnership Agreement will be amended
and restated to provide, among other things, that the Company will be the
Partnership's sole general partner and CBC will be its sole limited
partner.
- Purchase of Common Shares by Jacobs family trusts and Mr.
Cleary. The Jacobs family trusts and Mr. Cleary will acquire an aggregate
of 133,233 Class A Common Shares at $15.00 per share (in addition to the
100 Common Shares purchased by the Jacobs family trusts in connection with
the organization of the Company).
If the Underwriters' over-allotment is exercised in whole or in part, the
Company will purchase from CBC in the Formation Transactions a number of Units
in the Partnership equal to the number of Class A Common Shares sold pursuant to
the over-allotment option for a price per Unit equal to the initial public
offering per share, less the underwriting discount. The Reorganization
Agreement, which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part, provides that the transactions described above are
conditioned upon and will close prior to or concurrently with the completion of
the Offering.
CBC and Ballpark Management are controlled by Richard E. Jacobs, who as
trustee of the Jacobs family trusts beneficially owns all of the outstanding
capital stock of the Company prior to the Offering. MJC is owned by Martin J.
Cleary, a director of the Company. Accordingly, the terms of the transactions
contemplated by the Reorganization Agreement, including the amount of cash to be
issued in exchange for the partnership interests to be transferred to the
Company, the number of Common Shares to be issued in the Ballpark Management
Merger and the amount of cash and number of Common Shares to be issued in the
MJC Merger, were not negotiated on an arms'-length basis. In effect, the value
of the business and assets to be transferred will be based upon the overall
value of the Company implied by the initial public offering price per share. In
considering the value of the assets and business to be transferred, the parties
considered, among other things, the results of operations, financial condition
and cash flows of the Partnership and Ballpark Management, an assessment of the
management of the Partnership and Ballpark Management and the present state of
the Partnership and Ballpark Management's development, recent sales prices of
other Major League Baseball franchises and the current state of the economy in
the United States and the Cleveland, Ohio, metropolitan area. In determining the
number of Class B Common Shares issuable to the Jacobs family trusts
17
<PAGE> 19
and Mr. Cleary, the Company also considered the provisions of MLB's Ownership
Guidelines, which require that Mr. Jacobs (or a group of no more than 20
individuals) maintain at least a 10% economic interest in the Company and at
least 90% voting control of the Company at all times. Although the Company
believes that the terms of the transactions contemplated by the Reorganization
are fair to and in the best interests of the Company, no independent appraisals
or other valuations of such partnership interests, assets or businesses have
been or will be obtained.
Set forth below are charts reflecting the ownership of the Company, the
Partnership, Ballpark Management and CBC prior to and after the Formation
Transactions, assuming no exercise of the Underwriters' over-allotment option.
PRIOR TO THE FORMATION TRANSACTIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Richard E. Jacobs Martin J. Cleary
trustee of the Jacobs
family trusts
100% Owner 100% owner 100% owner 100% owner
Cleveland Indians Ballpark Management Cleveland Baseball MJC Baseball, Inc.
Baseball Company, Inc. Company (manages Corporation
Jacobs Field)
99.9% general 0.1% limited partner
Cleveland Indians Baseball
Company Limited Partnership
(owns the Cleveland Indians
franchise)
</TABLE>
AFTER THE FORMATION TRANSACTIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Richard E. Jacobs , Purchasers of Class A Martin J. Cleary
trustee of the Common Shares in the
Jacobs family trusts Offering
100% owner 3.2% Class A Common Shares 96.7% Class A 0.1% Class A Common Shares
99.9% Class B Common Common Shares 0.1% Class B Common Shares
Shares
Cleveland Baseball Cleveland Indians baseball
Corporation Company, Inc.
49% limited partner 51% general partner
Cleveland Indians Baseball
Company Limited Partnership
(owns the Cleveland
Indians franchise and
manages Jacobs Field)
</TABLE>
18
<PAGE> 20
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 4,000,000 Class A
Common Shares offered hereby are expected to be approximately $53.8 million
($62.2 million if the Underwriters' over-allotment option is exercised in full),
based on an assumed initial public offering price of $15.00 per share. In
addition, the Company will receive proceeds of $2.0 million from the sale of
Class A Common Shares to the Jacobs family trusts and Martin J. Cleary at $15.00
per share. Assuming no exercise of the Underwriters' over-allotment option, the
Company will acquire partnership interests in the Partnership from CBC and MJC
for $55.8 million in cash and will complete the rest of the Formation
Transactions as a result of which the Company will have an aggregate 51% general
partnership interest in the Partnership. If the Underwriters' over-allotment
option is exercised in full, the Company will use the net proceeds to purchase
additional partnership interests from CBC resulting in the Company having a 56%
general partnership interest in the Partnership.
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends on its Common
Shares in the foreseeable future, but intends instead to retain any future
earnings for reinvestment in its business. Any future determination to pay cash
dividends will be at the sole discretion of the Company's Board of Directors and
will be dependent upon, among other things, future earnings, capital
requirements, contractual restrictions, the general financial condition of the
Company, general business conditions and such other factors as the Company's
Board of Directors deems relevant.
DILUTION
The net tangible book value (deficit) of the Company at March 31, 1998 was
$(37.2) million or $(5.79) per share. After giving effect to the Formation
Transactions and the Offering and after deduction of estimated offering expenses
and the underwriting discount, the pro forma net tangible book value (deficit)
as of March 31, 1998 would have been approximately $(32.5) million or $(5.06)
per share. This represents an immediate dilution of net tangible book value to
new investors purchasing shares in the Offering of $20.06 per share. The
following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price............................................... $ 15.00
Net tangible book value (deficit) per share before the Offering(1)................ $ (5.79)
Increase in net tangible book value (deficit) per share attributable to the
Offering....................................................................... 0.73
---------
Pro forma net tangible book value (deficit) per share after the Offering............ (5.06)
---------
Dilution per share to new public investors.......................................... $ (20.06)
=========
</TABLE>
- ---------------
(1) Net tangible book value per share before the Offering is determined by
dividing net tangible book value (deficit) of the Company (tangible assets
of $114.2 million less liabilities) by the number of Class A and Class B
Common Shares outstanding after the Formation Transactions and the Offering.
19
<PAGE> 21
CAPITALIZATION
The following table sets forth the actual combined capitalization of the
Partnership and Ballpark Management at March 31, 1998 and on a pro forma basis
to give effect to the Formation Transactions and the Offering, as if such
transactions had occurred at March 31, 1998. This table should be read in
conjunction with the historical combined and pro forma financial information of
the Partnership and Ballpark Management included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------
HISTORICAL PRO FORMA
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt........................... $ -- $ --
======= ========
Long-term debt, excluding current maturities................ $35,500 $ 35,500
Shareholders' equity:
Preferred Shares, without par value; 1,000,000 shares
authorized; no shares issued and outstanding.......... -- --
Class A Common Shares, without par value, 27,000,000
shares authorized;
no shares issued and outstanding, actual; and
4,139,376 shares issued
and outstanding, pro forma(1)........................ -- 55,800(2)
Class B Common Shares, without par value, 3,000,000
shares authorized;
no shares issued or outstanding, actual; and
2,283,957 shares issued and
outstanding, pro forma............................... -- 2,898(3)
Additional paid-in capital.................................. -- 4,700(4)
Shareholders' deficit....................................... -- (85,024)(5)
Accumulated deficit......................................... (26,326) --
------- --------
Total accumulated deficit/shareholders' deficit............. (26,326) (21,626)
------- --------
Total capitalization........................................ $ 9,174 $ 13,874
======= ========
</TABLE>
- ---------------
(1) Excludes 6,043,334 Class A Common Shares reserved for issuance upon the
exchange of limited partnership Units in the Partnership. See "The
Partnership -- Limited Partner Rights." Also excludes 700,000 Class A Common
Shares reserved for issuance under the Company's Stock Option Plan. See
"Management -- Stock Option Plan."
(2) Represents the issuance of (i) 4,000,000 Class A Common Shares in the
Offering at an assumed initial public offering price of $15.00 per share for
total consideration of $60.0 million less underwriting discounts and
expenses of $6.2 million, (ii) 133,333 Class A Common Shares to the Jacobs
family trusts and Mr. Cleary at $15.00 per share and (iii) 6,043 Class A
Common Shares to Mr. Cleary in the MJC Merger. See "Formation Transactions."
(3) Represents the issuance of 2,281,667 Class B Common Shares in the Ballpark
Management Merger and 2,290 Class B Common Shares in the MJC Merger. See
"Formation Transactions."
(4) Represents deferred tax assets established in conjunction with, and as a
result of, the Formation Transactions and the Offering.
(5) Represents the reclassification of accumulated deficit after giving effect
to the application of the net proceeds from the Offering. See "Use of
Proceeds." Includes the entire deficit without allocation to minority
interest.
20
<PAGE> 22
SELECTED FINANCIAL DATA
The following table sets forth historical financial data for the Company as
of and for each of the years ended October 31, 1993 and 1994 and December 31,
1995, 1996 and 1997 and as of and for the three months ended March 31, 1997 and
1998 which should be read in conjunction with "Management's Discussion and
Analysis of Results of Operations and Financial Condition," the Combined
Financial Statements of the Partnership and Ballpark Management and related
Notes thereto, and other financial information included elsewhere herein. The
financial data as of December 31, 1996 and 1997 and for the years ended December
31, 1995, 1996 and 1997 are derived from the audited combined financial
statements of the Partnership and Ballpark Management. The data as of and for
the years ended October 31, 1993 and 1994 and as of and for the three months
ended March 31, 1997 and 1998 are derived from unaudited combined financial
statements of the Partnership and Ballpark Management, which in the opinion of
management include all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the information set forth therein.
For financial reporting purposes, the Company generally recognizes revenues
and expenses on a game-by-game basis. Because the Major League Baseball regular
season begins in late March or early April, the Company's first fiscal quarter,
which ends on March 31, generally includes limited revenues and reflects a loss
attributable to fixed costs of operations incurred during the quarter. The
revenue recognized in the first quarter ended March 31 consists primarily of
spring training and exhibition game revenues, merchandise sales and concession
and catering revenue. Generally, any post-season revenue will be recognized in
the fourth quarter.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
------------------------------------------------- ENDED
OCTOBER 31,(1)(2) DECEMBER 31, MARCH 31,
----------------- ----------------------------- ------------------
1993 1994(3) 1995(3) 1996 1997 1997 1998
------- ------- ------- -------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
REVENUES:
Net ticket sales.................................. $19,410 $23,182 $32,267 $ 45,658 $ 49,279 $1,402 $ 1,093
Local radio and television........................ 6,316 5,568 9,667 13,631 17,014 -- 38
Concession and catering........................... 2,367 6,969 11,872 14,726 14,095 110 20
Private suite and club seat rental................ -- 3,768 5,635 7,035 8,704 -- --
Advertising and promotion......................... 1,597 3,998 5,742 6,891 8,754 -- --
Merchandise....................................... 2,548 8,513 15,024 14,683 17,449 1,043 1,432
Major Leagues Central Fund........................ 17,585 3,943 6,633 12,369 15,505 -- --
Other............................................. 3,602 3,579 2,979 3,002 3,365 648 675
Post-season....................................... -- -- 9,888 1,933 13,051 -- --
Benefit (provision) for revenue sharing........... 658 (239) (2,056) (5,731) (7,186) (204) (223)
------- ------- ------- -------- -------- ------- --------
Total revenues.................................. 54,083 59,281 97,651 114,197 140,030 2,999 3,035
------- ------- ------- -------- -------- ------- --------
OPERATING EXPENSES:
Major league team................................. 21,898 26,389 38,904 53,420 66,125 1,512 2,430
Player development................................ 7,931 7,198 8,298 8,735 11,146 2,436 2,484
Ballpark operations............................... 5,148 6,259 9,071 10,389 10,965 1,844 1,973
Cost of merchandise sold.......................... 1,422 5,001 9,224 11,692 12,982 1,435 1,582
Administrative and general........................ 5,983 8,702 9,769 9,275 10,292 2,271 2,473
Major Leagues Central Fund........................ 3,747 3,559 1,498 4,146 4,938 260 303
Advertising and promotion......................... 3,205 3,929 3,805 2,960 3,854 1,284 927
Post-season....................................... -- -- 5,457 1,309 6,252 -- --
Amortization of signing bonuses and player
contracts....................................... 1,833 2,005 3,242 3,212 3,630 104 225
Depreciation and amortization..................... 1,338 1,275 1,361 1,326 1,629 385 397
------- ------- ------- -------- -------- ------- --------
Total operating expenses........................ 52,505 64,317 90,629 106,464 131,813 11,531 12,794
------- ------- ------- -------- -------- ------- --------
OPERATING INCOME (LOSS)............................. 1,578 (5,036) 7,022 7,733 8,217 (8,532) (9,759)
</TABLE>
21
<PAGE> 23
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
------------------------------------------------- ENDED
OCTOBER 31,(1)(2) DECEMBER 31, MARCH 31,
----------------- ----------------------------- ------------------
1993 1994(3) 1995(3) 1996 1997 1997 1998
------- ------- ------- -------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER INCOME (EXPENSE):
Interest income................................... 1,260 1,375 1,658 3,855 4,672 1,231 1,948
Interest expense.................................. (2,027) (1,310) (2,005) (2,045) (2,301) (429) (661)
Gain (loss) on player transactions................ 47 85 71 616 2,696 -- (1,604)
League expansion proceeds......................... 3,000 -- -- -- 9,286 -- --
------- ------- ------- -------- -------- ------- --------
Net income (loss)................................... $ 3,858 $(4,886) $6,746 $ 10,159 $ 22,570 $(7,730) $(10,076)
======= ======= ======= ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 31,(1)(2) DECEMBER 31, MARCH 31,
------------------- ----------------------------- ---------
1993 1994(3) 1995(3) 1996 1997 1998
-------- -------- -------- ------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Total current assets....................................... $ 28,316 $ 21,719 $ 60,952 $60,228 $ 85,195 $ 91,412
Total current liabilities.................................. 32,465 35,792 68,346 62,124 74,891 100,655
Total assets............................................... 47,441 43,032 79,991 87,272 118,152 125,037
Long-term obligations...................................... 26,538 25,671 26,182 33,458 45,811 50,708
Total shareholders' equity (deficit)....................... $(11,562) $(18,431) $(14,537) $(8,310) $ (2,550) $(26,326)
</TABLE>
- ---------------
(1) Includes (a) the assets, liabilities and results of operations of the
Partnership as of October 31, 1993 and 1994 and for the years then ended and
(b) the assets, liabilities and results of operations of Ballpark Management
as of December 31, 1993 and 1994 and for the years then ended. The results
of operations of the Partnership for the two-month period ended December 31,
1994 which are not reflected in the above combined financial data were as
follows (in thousands):
<TABLE>
<S> <C>
Revenues....................... $ 578
Expenses....................... 2,783
-------
Operating loss................. (2,205)
Interest expense............... 271
-------
Net loss....................... $(2,476)
=======
</TABLE>
(2) The Club did not commence play at Jacobs Field until the 1994 regular
season. As a result, the operations of Ballpark Management for the year
ended December 31, 1993 were insignificant.
(3) A players' strike during 1994 and 1995 resulted in the cancellation of 27
home games and 18 away games of the 1994 regular season, the entire 1994
post-season and nine home games and nine away games of the 1995 regular
season. A full Major League Baseball regular season consists of 162 games,
of which 81 are scheduled to be played at home and 81 are scheduled to be
played on the road.
22
<PAGE> 24
PRO FORMA FINANCIAL DATA
The following sets forth the Company's Unaudited Pro Forma Condensed
Consolidated Balance Sheet as of March 31, 1998 and Unaudited Pro Forma
Condensed Consolidated Statements of Income for the year ended December 31, 1997
and the three months ended March 31, 1998. The Unaudited Pro Forma Condensed
Consolidated Balance Sheet gives effect to the Formation Transactions, including
the consolidation by the Company, at cost, of its general partnership interest
in the Partnership, and the Offering as if such transactions had occurred at
March 31, 1998. The Unaudited Pro Forma Condensed Consolidated Statements of
Income give effect to such transactions and the Distribution as if they had
occurred on January 1, 1997. In Management's opinion, all adjustments necessary
to reflect the effects of the transactions described above have been made. The
Unaudited Pro Forma Condensed Consolidated Balance Sheet and Unaudited Pro Forma
Condensed Consolidated Statements of Income are not necessarily indicative of
what the Company's actual financial position as of March 31, 1998 and results of
operations for the year ended December 31, 1997 and the three months ended March
31, 1998 would have been, nor do they purport to represent the results of
operations for any future periods or the future financial position of the
Company. The pro forma financial information set forth below should be read in
conjunction with the Combined Financial Statements of the Partnership and
Ballpark Management and the Notes thereto and the Balance Sheet of the Company
and the Note thereto included elsewhere herein.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
THE PARTNERSHIP
AND BALLPARK
MANAGEMENT
THE COMPANY COMBINED ADJUSTMENTS PRO FORMA
----------- --------------- ----------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
ASSETS
CASH AND INVESTMENTS.............................. $ 65,936 $ (a) $ 65,936
OTHER CURRENT ASSETS.............................. 25,476 25,476
FIXED ASSETS, NET................................. 5,092 5,092
PREPAID SIGNING BONUSES AND PLAYER CONTRACTS...... 10,779 10,779
INTANGIBLE ASSETS................................. 10,850 10,850
OTHER ASSETS...................................... 6,904 4,700(b) 11,604
-------- --------- -------- --------
TOTAL......................................... $ 125,037 $ 4,700 $129,737
======== ========= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
DEFERRED REVENUE.................................. 73,261 73,261
OTHER CURRENT LIABILITIES......................... 27,394 27,394
LONG-TERM LIABILITIES............................. 50,708 50,708
SHAREHOLDERS' EQUITY (DEFICIT)
Class A Common Shares........................... $ 2 55,798(c) 55,800
Class B Common Shares........................... 2,898(d) 2,898
Additional paid-in capital...................... 4,700(b) 4,700
Shareholders' deficit........................... (85,024)(e) (85,024)
Accumulated equity (deficit).................... (26,326) 26,326(f)
Subscriptions receivable........................ (2) 2(g)
-------- --------- -------- --------
Total shareholders' equity (deficit).......... -- (26,326) 4,700 (21,626)
-------- --------- -------- --------
TOTAL......................................... $ -- $ 125,037 $ 4,700 $129,737
======== ========= ======== ========
</TABLE>
23
<PAGE> 25
- ---------------
(a) Reflects the net proceeds received from the Offering of the Class A Common
Shares of $55,800; the payment of $55,800 for the acquisition of the 51%
general partnership interest in the Partnership; the receipt of $2,000 from
the purchase of Common Shares by the Jacobs family trusts and Mr. Cleary and
the payment of expenses of the Offering estimated at $2,000.
(b) Reflects $21,400 of deferred tax assets resulting from the Formation
Transactions and the Offering offset by a $16,700 valuation allowance.
(c) Reflects the issuance of (i) 4,000,000 Class A Common Shares at an assumed
initial public offering price per share of $15.00 for a total consideration
of $60,000 less underwriting discounts and expenses of $6,200 and (ii) the
issuance of 133,233 Class A Common Shares to the Jacobs family trusts and
Mr. Cleary at $15.00 per share.
(d) Reflects issuance of 2,281,667 Class B Common Shares in the Ballpark
Management Merger based upon the net book value of the equity of Ballpark
Management Company.
(e) Reflects the application of the estimated net proceeds of the Offering of
$55,800 to purchase partnership interests from CBC and MJC. Such amounts are
offset by a reclassification of the balance of accumulated equity (deficit)
of the Partnership and Ballpark Management to shareholders' deficit of
($29,224) and Class B Common Shares of $2,898, respectively. As a result of
the Formation Transactions, CBC's ownership interest in the Partnership will
consist solely of limited partnership interests. As a limited partner, CBC
will not be obligated to fund any Partnership deficits. Accordingly, no
provision has been made for the establishment of a minority interest on the
pro forma balance sheet.
(f) Reflects the reclassification of accumulated equity (deficit) upon
completion of the Offering.
(g) Payment of subscription receivable.
(h) If the Underwriters' overallotment option is exercised in full, additional
partnership interests will be acquired by the Company resulting in an
increase to the Class A Common Shares and a decrease to Shareholders'
deficit of $8,400. As a result, the minority interest ownership percentage
of CBC in the Partnership will decrease to 44% from 49%.
24
<PAGE> 26
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, 1997 MARCH 31, 1998
----------------------------------------- -----------------------------------------
THE PARTNERSHIP THE PARTNERSHIP
AND BALLPARK AND BALLPARK
MANAGEMENT MANAGEMENT
COMBINED ADJUSTMENTS PRO FORMA COMBINED ADJUSTMENTS PRO FORMA
--------------- ----------- --------- --------------- ----------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Net ticket sales.............. $ 49,279 $ 49,279 $ 1,093 $ 1,093
Local radio and television.... 17,014 17,014 38 38
Concession and catering....... 14,095 14,095 20 20
Private suite and club seat
rental...................... 8,704 8,704 -- --
Advertising and promotion..... 8,754 8,754 -- --
Merchandise................... 17,449 17,449 1,432 1,432
Major Leagues Central Fund.... 15,505 15,505 -- --
Other......................... 3,365 3,365 675 675
Post-season................... 13,051 13,051 -- --
Provision for revenue
sharing..................... (7,186) (7,186) (223) (223)
-------- -------- -------- -------- ------- --------
Total revenues.............. 140,030 140,030 3,035 3,035
-------- -------- -------- -------- ------- --------
OPERATING EXPENSES:
Major league team............. 66,125 66,125 2,430 2,430
Player development............ 11,146 11,146 2,484 2,484
Ballpark operations........... 10,965 10,965 1,973 1,973
Cost of merchandise sold...... 12,982 12,982 1,582 1,582
Administrative and general.... 10,292 $ 1,050(a) 11,342 2,473 $ 263(a) 2,736
Major Leagues Central Fund.... 4,938 4,938 303 303
Advertising and promotion..... 3,854 3,854 927 927
Post-season................... 6,252 6,252 -- --
Amortization of signing
bonuses and player
contracts................... 3,630 3,630 225 225
Depreciation and
amortization................ 1,629 1,629 397 397
-------- -------- -------- -------- ------- --------
Total operating expenses.... 131,813 1,050 132,863 12,794 263 13,057
-------- -------- -------- -------- ------- --------
OPERATING INCOME (LOSS)......... 8,217 (1,050) 7,167 (9,759) (263) (10,022)
OTHER INCOME (EXPENSE):
Interest income
Affiliate................... 2,023 (2,023)(b) -- 595 (595)(b) --
Other....................... 2,649 2,649 1,353 1,353
Interest expense.............. (2,301) (2,301) (661) (661)
Gain (loss) on player
transactions................ 2,696 2,696 (1,604) (1,604)
League expansion proceeds..... 9,286 9,286 -- --
Minority interest............. (9,554)(c) (9,554) -- 5,358(c) 5,358
-------- -------- -------- -------- ------- --------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES.............. 22,570 (12,627) 9,943 (10,076) 4,500 (5,576)
-------- -------- -------- -------- ------- --------
PROVISION (BENEFIT) FOR INCOME
TAXES......................... 3,060(d) 3,060 -- (1,729)(d) (1,729)
-------- -------- -------- -------- ------- --------
NET INCOME (LOSS)............... $ 22,570 $(15,687) $ 6,883 $(10,076) $ 6,229 $ (3,847)
======== ======== ======== ======== ======= ========
PRO FORMA NET INCOME (LOSS) PER
SHARE......................... $ 1.07(e) $ (0.60)(e)
======== ========
</TABLE>
- ---------------
(a) Represents estimated additional costs associated with operating as a public
company.
(b) Represents a reduction in interest income as a result of CBC's repayment of
its $35,500 debt to the Partnership.
(c) Represents the 49% minority interest attributable to CBC's limited
partnership interest in the Partnership. Although CBC, as a limited partner,
will not be obligated to fund any Partnership deficits, it is anticipated
that the Company will generate income from operations for the 1998 year.
Accordingly, CBC's portion of the loss from operations for the 1998 quarter
has been allocated to minority interest.
(d) Reflects income tax effects, at the Company's 31% effective tax rate, of the
Partnership's 1997 and 1998 income after pro forma adjustments described in
notes (a), (b) and (c) above.
(e) Pro forma net income (loss) per share determined assuming 6,423,333 shares
outstanding.
25
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The Company derives substantially all of its revenue from (i) the sale of
tickets to home games, (ii) contracts with local broadcast organizations, (iii)
food and beverage concession sales, (iv) premium seating rents, (v) advertising
and promotional sales, (vi) merchandise sales and royalties, (vii) its
participation in the Major Leagues Central Fund and (viii) parking and ancillary
baseball related revenues. If the Indians qualify for post-season play,
incremental revenues will be earned from similar sources.
The Company's operations are seasonal, commencing with the Major League
Baseball spring training camp that opens in mid-February and ending in late
September or early October. If the Indians qualify for post-season playoffs, the
team can play until the end of October, the duration of participation contingent
on continued winning at each level of post-season play (the Division, League
Championship and World Series.) For financial reporting purposes, the Company
generally recognizes revenues and expenses on a game-by-game basis. Because the
Major League Baseball regular season begins in late March or early April, the
Company's first fiscal quarter, which ends on March 31, generally includes
limited revenues and reflects a loss attributable to fixed costs of operations
incurred during the quarter. The revenue recognized in the first quarter ended
March 31 primarily consists of spring training and exhibition game revenues,
merchandise sales and concession and catering revenue. Generally, any
post-season revenue will be recognized in the fourth quarter.
The Company receives a substantial portion of its receipts from the advance
sale of regular season tickets during the months of December and January, prior
to the commencement of the regular Major League Baseball season in late March or
early April. Season tickets and public single-game tickets are sold during this
time period. Jacobs Field paid attendance during the regular season approximates
3.4 million fans, of which 2.1 million are represented by season tickets.
The Major League Baseball regular season schedule consists of 162 games, of
which 81 are scheduled to be played at home and 81 are scheduled to be played on
the road. On August 12, 1994 the Players Association began a strike that did not
end until April 1, 1995. The strike resulted in the cancellation of 27 home
games and 18 away games during the 1994 regular season and the entire 1994
post-season. The 1995 baseball season was also shortened by nine home games and
nine away games as a result of the strike. The results of operations for 1994
and 1995 reflect the reduced number of games played.
During the 1995, 1996 and 1997 baseball seasons, the Indians participated
in post-season play. In 1995 and 1997, the Indians played a total of 15 games
and 18 games, respectively, in post-season play, advancing to the World Series
in both years. In 1996, the Indians played four post-season games, losing in the
first round (out of a possible three rounds.) The Indians derive additional
revenues and expenses from participation in post-season play that have been
presented separately in the 1995, 1996 and 1997 financial results.
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1998 COMPARED TO THE QUARTER ENDED MARCH 31, 1997
Revenues
Net ticket sales in the first quarter are comprised of net revenue from
spring training and exhibition games. Revenue from net ticket sales decreased
22%, or $0.3 million. The decrease in revenue is primarily due to revenues from
one exhibition game at Jacobs Field in 1997 that was not scheduled in 1998.
The local radio and television revenues in 1998 are attributable to radio
and advertising revenue for the regular season opener on March 31, 1998. In
1997, the regular season did not open until April 2, 1997.
Concession and catering income decreased 82%, or $0.1 million, primarily
attributable to income generated from the exhibition game at Jacobs Field in
1997 that was not scheduled in 1998.
Merchandise sales increased 37%, or $0.4 million. The increase is primarily
attributable to the Club's success in the 1997 post-season.
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Provision for revenue sharing increased 9%, or $20,000. The increase is
primarily attributable to the increase in the revenue sharing tax rate from 12%
in 1997 to 16% in 1998. This increase was offset by a decrease in net local
revenue as defined in the Collective Bargaining Agreement.
Expenses
Major league team operating costs increased 61%, or $0.9 million. The
increase is primarily attributable to a $0.3 million increase in player salaries
resulting from one regular season game played in the first quarter of 1998.
Additionally, player insurance increased by $0.3 million relating to increased
premiums attributable to extensions executed on several player contracts in the
second quarter of 1997. Major league coaching staff salaries increased by $0.1
million as a result of contractual increases. Other team expenses relating to
spring training, medical expenses, conditioning programs and travel costs
increased $0.2 million.
Ballpark operating expenses, which consist primarily of fixed costs such as
wages, supplies and utilities, remained relatively constant.
Cost of merchandise sold increased 10%, or $0.2 million. This increase is
primarily attributable to increased sales volume relating to the team's success
in the 1997 post-season.
Administrative and general expenses increased 9%, or $0.2 million,
primarily attributable to salary, payroll tax and benefits increases.
Advertising and promotion expense decreased 28%, or $0.4 million. This
decrease resulted from a $0.2 million reduction in promotional expense due to a
sponsor's payment for a promotional event in 1998 that was paid for by the
Company during 1997, as well as the elimination of $0.2 million in advertising
expenses associated with a 1997 retail advertising campaign.
Amortization of signing bonuses and player contracts is comprised of the
write-off of the net book value of the signing bonus and contract value of
player contracts disposed of, in transactions not involving a trade or sale, in
the first quarter.
Interest income increased 58%, or $0.7 million, due to $0.4 million from
increased funds from advance ticket sales and $0.2 million resulting from a
$12.2 million increase in the loan to the General Partner. On March 31, 1998,
the General Partner repaid its indebtedness to the Company.
Interest expense increased 54%, or $0.2 million, primarily attributable to
an increase of $12.2 million in the outstanding balance of the Major League
Credit Facility.
Loss on player transactions of $1.6 million is comprised of a $1.9 million
loss attributable to a February 1998 trade of one player, which included a
provision requiring the Company to pay approximately $1.9 million of the traded
player's salary payable during the 1998 season. The loss was partially offset by
the sale of one player's contract to a Japanese team resulting in a gain of
approximately $0.3 million.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenue
Revenue from net ticket sales increased 8%, or $3.6 million. Net ticket
sales revenue is comprised of gross ticket revenues from regular season games,
less City of Cleveland admissions tax and an American League assessment, plus
net revenues derived from spring training and exhibition games. Gross ticket
revenues from regular season ticket sales increased 10%, or $4.8 million. This
increase was primarily due to a 7% increase in the average ticket price coupled
with a 3% increase in paid attendance. Paid attendance in 1997 increased by
86,584 fans due to one less rainout in 1997 and additional seating capacity
added to Jacobs Field prior to the 1997 regular season. The gross ticket revenue
increase was offset in part by increased City of Cleveland admission taxes of
$1.0 million due to a rate increase which affected ticket sales after January 1,
1996.
Local radio and television revenue increased 25%, or $3.4 million. Radio
advertising sales increased $1.2 million as a result of increases in advertising
rates coupled with a significant increase in volume.
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Additionally, a three-year contract with the flagship radio station entered into
in 1997 includes an annual base rights fee of $0.8 million that was not included
in the prior contract. Local broadcast and cable television revenue increased
$1.8 million due to higher incentive and advertising revenue resulting from
increased television ratings. Offsetting these increases was a $0.4 million
decrease in video royalties in 1997.
Concession and catering income decreased 4%, or $0.6 million. This decrease
was primarily attributable to decreased consumer spending as a result of early
season cold weather and increased no-shows throughout the season.
Private suite and club seat rentals increased 24%, or $1.7 million. This
increase was primarily attributable to increases in rental revenues associated
with the renewal of 37 suites and 1,303 club seats between the 1996 and the 1997
seasons at an average price increase of 24% and 15%, respectively, and rental
income attributable to additional suite rentals leased on a per-game basis.
Advertising and promotion revenue rose 27%, or $1.9 million. The increase
was primarily due to a $1.2 million increase in print advertising and
promotional revenue and a $0.6 million increase in ballpark advertising signage.
Approximately $1.0 million was attributable to advertising rate increases and
$0.9 million was attributable to additional advertising volume with new and
existing advertisers. Internet advertising sales, new for 1997, were $0.1
million.
Merchandise sales increased 19%, or $2.8 million. The increase was
primarily attributable to the Club's success in the 1997 post-season.
Major Leagues Central Fund revenues increased 25%, or $3.1 million,
primarily as a result of negotiated contractual increases in national
broadcasting rights fees. Major Leagues Central Fund revenues are comprised
primarily of the Company's share of national television and radio broadcasting
fees.
Post-season revenues increased $11.1 million primarily due to the Indians'
appearance in 18 post-season games in 1997 compared to four in 1996. The
increase in post-season revenues was comprised of a $6.2 million increase in
ticket revenues, a $2.2 million increase in merchandise revenues, a $1.7 million
increase in concession revenues and a $1.0 million increase in other revenues.
Provision for revenue sharing increased 25%, or $1.5 million, primarily due
to the increase in net local revenue, as defined in the Collective Bargaining
Agreement. The increase resulted from the Company's significantly higher
post-season revenues, as well as increases in other revenue categories. The
revenue sharing rate under the Collective Bargaining Agreement was 12% in 1996
and 1997 and will be 16% in 1998, 17% in 1999 and 20% in 2000.
Expenses
Major league team operating costs, which consist primarily of players'
salaries, increased 24%, or $12.7 million. Player salaries were $9.7 million
higher primarily due to the signing of one player for $7.0 million as well as
existing player contractual increases and normal player roster changes. Team
operating costs in 1997 included for the first time a "payroll luxury tax" of
$2.1 million levied on the team under the terms of the Collective Bargaining
Agreement. Travel costs related to the 1997 regular season increased 19%, or
$0.3 million, due to general hotel and airfare increases, and three additional
road trips in 1997. Other team expenses, relating to spring training, equipment
and medical expenses, increased $0.6 million.
Player development costs increased 28%, or $2.4 million, primarily due to a
$1.1 million increase in workers' compensation costs, specifically related to
increased medical costs and claim volume. Scouting costs increased $0.5 million
due to increased payroll and travel costs associated with the hiring of
additional scouts. Player development costs associated with the Company's
various minor league affiliates, such as payroll, travel, equipment and
specialized development programs, increased $0.8 million.
Ballpark operating expenses increased 6%, or $0.6 million, primarily due to
a $0.4 million increase in credit card fees on ticket sales and increased
ballpark rent of $0.2 million.
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Cost of merchandise sold increased 11%, or $1.3 million, in part due to
increased sales volume and higher fixed expenses. Although sales increased 19%,
other fixed expenses associated with the merchandising operation, such as labor,
rent and supplies, increased by 14%, or $0.5 million, to meet the demand
experienced with the team's success in the 1997 post-season.
Administrative and general expenses increased 11%, or $1.0 million,
primarily due to front office salary increases and executive bonuses
attributable to performance of $0.8 million. Payroll taxes increased $0.2
million due to higher payroll levels in 1997.
Major Leagues Central Fund expenses allocated to the Company increased 19%,
or $0.8 million, primarily due to increased expenses associated with the
administration of the Office of the Commissioner and revenue sharing expenses
provided for in the Collective Bargaining Agreement.
Advertising and promotion expense increased 30%, or $0.9 million, resulting
from costs associated with a significant advertising campaign focused on
increasing merchandise sales.
Post-season expenses increased $4.9 million, primarily due to 14 more
post-season games played in 1997 than in 1996. This increase was comprised of
$1.4 million in ballpark operating costs, $1.3 million in general and
administrative costs, $1.2 million in merchandising costs, $0.8 million in team
costs and $0.2 million in advertising and promotion costs.
Amortization of signing bonuses and player contracts increased 13%, or $0.4
million, primarily due to the amortization of the cost associated with the
acquisition of one player in December 1996.
Depreciation and amortization increased 23%, or $0.3 million, primarily due
to a full year of depreciation incurred on capital expenditures associated with
retail expansion placed into service during 1996.
Interest income increased 21%, or $0.8 million, due to increases in the
loan to CBC of $12.2 million, funds from advance ticket sales and expansion
proceeds. The Company's loan to CBC generated interest income of $2.0 million in
1997. Repayment of CBC's indebtedness to the Company in March 1998 will result
in the elimination of this interest income in future periods.
Interest expense increased 13%, or $0.3 million, primarily attributable to
increases in the outstanding balance of the Major League Credit Facility.
Gain on player transactions increased $2.1 million, primarily due to a
December 1997 trade of one player, which included a provision for the Company to
receive $3.0 million in cash on or before September 1, 1998.
League expansion proceeds recognized in 1997 of $9.3 million represent the
Company's share of fees paid by two expansion groups to obtain expansion
franchises in Major League Baseball that began play in 1998. The Company had
three of its players selected by the expansion franchises in an expansion draft
conducted in November 1997. The unamortized cost of the players drafted was
insignificant.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995.
Revenue
Net ticket sales revenue increased 42%, or $13.4 million. Gross ticket
revenues increased $13.9 million, or 40%, primarily due to a 20% increase in the
average ticket price coupled with a 17% increase in paid attendance. Paid
attendance in 1996 increased by 475,421 fans due to eight fewer home games
played in 1995 as a result of the players' strike. The gross ticket revenue
increase was offset in part by increased City of Cleveland admissions taxes of
$1.0 million and increased American League assessment of $0.5 million. Net
revenues from spring training operations increased $1.0 million primarily due to
the affect of the players' strike on 1995 spring training.
Local radio and television revenue increased 41%, or $4.0 million,
primarily due to increased radio advertising sales during the regular season of
$1.7 million, local television contractual rights and incentive fees of $1.7
million due to a new three-year contract entered into in 1996 with the local
television rightsholder and $0.6 million of television advertising revenue.
These increases were the result of the success of the team in
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1995, including its first World Series appearance in 41 years. The 1995 radio
and television advertising sales were adversely affected by the players' strike
and the cancellation of the 1994 post-season.
Concession and catering income increased 24%, or $2.9 million, primarily
due to attendance increases of 17%, directly related to eight more home games
played in 1996 and an increase in average spending per attendee.
Private suite and club seat rentals increased 25%, or $1.4 million,
primarily due to rent credits of $0.8 million issued to private suite and club
seat holders in 1995 for the cancellation of nine home games because of the
players' strike. Rental revenue attributable to private party suites increased
$0.4 million and revenue associated with private restaurant memberships at the
Terrace Club increased $0.2 million, primarily due to a rate increase in the
annual membership fee in 1996.
Advertising and promotion revenue increased 20%, or $1.1 million, primarily
due to a ballpark advertising signage revenue increase of $0.8 million and a
print and promotion revenue increase of $0.3 million. These increases were
influenced by the team's success in 1995, offset by the negative impact on the
1995 selling season of the 1994 players' strike and the cancellation of the 1994
post-season.
Merchandise sales decreased by 2%, or $0.3 million, primarily due to
decreased consumer spending over an expanded retail store base following the
successful 1995 season.
Major Leagues Central Fund revenue increased 86%, or $5.7 million, due to
new national television contracts entered into in 1996 which extend through the
year 2000 and 2002. In 1995, MLB did not have a national television contract
that included a standard broadcast rights fee. Instead, MLB sold television time
directly to advertisers.
Post-season revenues decreased by $8.0 million due to the reduction in
post-season games played in 1996. The Indians appeared in 15 post-season games
in 1995 and only four in 1996, resulting in a $3.6 million decline in net ticket
sales; a $2.7 million decline in merchandise sales; a $1.0 million decline in
concession and catering revenue; a $0.3 million decrease in local radio and
television sponsorships; and a $0.3 million reduction in league championship
series participation distribution.
The Company's provision for revenue sharing increased 179% or $3.7 million.
The MLB revenue sharing arrangement, under which all net local revenue became
subject to a revenue sharing tax, was first implemented in 1996. Prior to 1996
in the American League, local revenue sharing was generally limited to ticket
receipts and local cable revenues. During 1995, the Company's provision for
revenue sharing was $2.1 million.
Expenses
Major league team expenses increased 37%, or $14.5 million, primarily due
to increases in major league roster salaries of $13.9 million. Players were paid
for a full season in 1996 as compared to only 89% of the season in 1995 as a
result of the players' strike, which accounted for $4.6 million of the increase.
The remainder of the increase was due to player contractual salary increases, as
well as certain player acquisitions. Player disability and life insurance
premiums also increased $0.6 million, which corresponded to the increases in
player salaries.
Player development expenses increased 5.3% or $0.4 million, primarily due
to the addition of four full-time scouting positions primarily focused on
operations in The Dominican Republic and Venezuela.
Ballpark operations expense increased 15%, or $1.3 million, primarily due
to increased rent expense of $0.7 million due to increased attendance in 1996.
Labor and ballpark supply costs associated with operating eight more home games
increased in 1996 due to increased staffing levels to meet higher per game
attendance.
Cost of merchandise sold increased 27%, or $2.5 million, despite a 2%, or
$0.3 million, decline in merchandise sales. The increase in cost of merchandise
sold resulted from an increase in unit sales and an increase of $1.2 million in
personnel, rent and administrative costs associated with a significant expansion
of
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retail operations. Gross margin for 1996 was 20% compared to 39% in 1995 due to
liquidation of excess inventory resulting from actual sales lagging
expectations.
Administrative and general expenses decreased 5%, or $0.5 million,
primarily due to decreases in certain expenses, such as legal fees and customer
service programs, that were incurred in 1995 because of the players' strike.
Major Leagues Central Fund expenses increased 177%, or $2.6 million,
primarily due to lower 1995 contributions to the Major League Baseball Players'
multiemployer benefit plan as a result of the players' strike and the effect of
revenue sharing expenses incurred in 1996 that did not apply in 1995.
Advertising and promotion expenses decreased by 22%, or $0.8 million,
primarily due to decreased telemarketing and selling expenses of $0.4 million in
1996. In addition, advertising expenses incurred in the fourth quarter of 1995
did not recur in 1996.
Post-season expenses decreased by $4.1 million due to the reduction in
number of post-season games in 1996 as noted above. The primary contributors to
the decline were a $1.4 million decrease in cost of merchandise sold; a $1.3
million reduction in administrative and general expenses; a $0.9 million
decrease in ballpark operating expenses; and a $0.5 million decrease in major
league team expenses.
Interest income increased 132%, or $2.2 million, due to increases in loans
to CBC of $15.8 million, funds from advance ticket sales and expansion proceeds.
Gain on player transactions increased $0.5 million due primarily to the
sale of one player to a Japanese league in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of cash historically has been cash provided
from operating activities. Operating activities generated cash of $31.1 million
in 1997. Increases in net income, deferred revenue, higher depreciation and
amortization, increases in deferred compensation, accounts payable and accrued
liabilities during 1997 accounted for the increase in cash provided by operating
activities. For the quarter ended March 31, 1998, cash provided from operating
activities totaled $21.0 million resulting from increases in deferred revenue
offset by a net loss from operations. Financing activities generated net cash of
$13.5 million in 1996, primarily as a result of contributions from CBC and
proceeds from the Major League Credit Facility. During 1997, financing
activities generated net cash of $7.4 million, as increases in the proceeds from
the Major League Credit Facility were offset in part by increased distributions
to CBC.
Principal uses of funds, in addition to working capital requirements,
include the acquisition of short-term investments, loans to CBC, expenditures
for the purchase of player contracts and signing bonuses, capital expenditures
and distributions to CBC. During 1996, 1997 and 1998, the Company made purchases
of short-term investments aggregating $23.0 million, $16.9 million and $6.0
million, respectively. During 1996 and 1997, the Company's loans to CBC
increased by $15.8 million and $12.2 million, respectively and during 1998,
loans to CBC of $35.5 million were repaid. During 1996, 1997 and 1998, the
Company made expenditures for the purchase of player contracts and signing
bonuses of $3.0 million, $5.0 million and $2.9 million, respectively. During the
quarter ended March 31, 1998, distributions to CBC and MJC totaled $49.2
million. The Company's working capital requirements are affected by certain
provisions in the Collective Bargaining Agreement, including minimum salary
levels for players, travel allowances, revenue sharing assessments and luxury
tax payments. The Company's obligations related to revenue sharing and the
luxury tax in future years will fluctuate depending on revenue and payroll
levels of the Company and other MLB teams.
The Company's operating characteristics are similar to those of many
service businesses. The Company does not have significant receivables or
inventories but has high levels of accounts payable and accrued liabilities.
Accordingly, the Company generally operates with minimal or negative working
capital. The Company does not believe that working capital is a meaningful
measure of its ability to meet its funding requirements. In that regard, the
majority of the Company's current liabilities at December 31, 1996 and 1997
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and at March 31, 1998 were deferred revenues. Deferred revenues consist
primarily of advance ticket sales, and the Company satisfies this liability by
playing its regular season home games.
An MLB trust is a party to a Revolving Credit Agreement with a bank (the
"Major League Credit Facility"), under the terms of which certain MLB clubs,
including the Indians, have the ability to obtain financing on a revolving
credit basis. The obligations under the Major League Credit Facility are
non-recourse to the Company, and the obligation to repay advances for the
benefit of the Company are secured by the rights of the Company to receive
revenues that are shared by various MLB clubs, including revenues from the Major
Leagues Central Fund and royalties from MLB Properties. In connection with the
Major League Credit Facility the Club has assigned its rights to receive its
share of revenues and royalties to the Indians Club Trust, a bankruptcy remote
entity. The facility expires on the earlier of April 17, 2001 or voluntary
termination by the MLB Trust. The interest rate on the amounts borrowed under
the facility, which is based upon LIBOR plus a program fee established by the
loan agreements, is currently 6.07%. During the term of the facility, the
Company pays interest only on the outstanding borrowings, in addition to various
other fixed fees of $123,000 annually. Unless the facility is renewed by the
parties, upon expiration, the outstanding borrowings convert into a four-year
term loan with a principal repayment schedule as follows: 15% in the first year,
20% in the second, 25% in the third and 40% in the fourth and final year. The
facility also provides that upon the expiration of the current Collective
Bargaining Agreement, and until a new agreement is entered into, the Club will
be required to maintain an interest contingency reserve equal to nine months'
interest expense at 2% above the then-applicable borrowing rate.
Until recently, the Company had historically borrowed the full amount
available to it under the Major League Credit Facility and in turn loaned the
proceeds of such borrowings to CBC. At December 31, 1997, the outstanding
principal amount of CBC's indebtedness to the Company was $35.5 million. In
March 1998, the Partnership distributed $49.2 million to its partners, and CBC
repaid its $35.5 million debt to the Partnership. These transactions had the
effect of allowing CBC to use cash generated by the Partnership to repay its
debt to the Partnership. The Company remains obligated to repay the amounts
borrowed under the credit facility. The Major League Credit Facility currently
provides the Company with an aggregate availability of $45.0 million, of which
$9.5 million was available for borrowing at April 30, 1998.
The Company also maintains a line of credit with KeyBank N.A. providing
aggregate availability of up to $9.0 million. Availability under the line of
credit is reduced to $2.0 million during the period from December 1 to February
28 of each year, and the line must be repaid in full for a period of 30
consecutive days during the term of the arrangement. Availability under this
line of credit is reduced by an outstanding $0.4 million standing letter of
credit associated with the Company's workers' compensation self-insurance
arrangement. Amounts outstanding under the line of credit bear interest at
either the bank's base rate or LIBOR plus 1.75%, and are guaranteed by Richard
E. Jacobs, individually and as trustee of the David H. Jacobs Marital Trust. The
line of credit matures on November 1, 1998, at which time the outstanding loan
balance may be converted to a four-year term note, subject to certain
conditions. At April 30, 1998, the Company had no borrowings under the line of
credit.
The Company's ability to incur additional indebtedness is limited by
applicable provisions of the Governing Documents, which limit the amount of debt
that may be secured by the assets of, or ownership interests in, an MLB club and
require that the parties to any secured loan that is approved execute an
agreement limiting the rights of the lenders and the club under certain
circumstances, including upon an event of default or foreclosure. The consent of
MLB is also required prior to the issuance of any additional debt or equity
securities by the Company. In addition, MLB clubs may not incur indebtedness in
an amount in excess of two-thirds of the value of their assets calculated in
accordance with MLB rules.
The Company has significant commitments under its contracts with players
and other personnel, aggregating $185.3 million, including $116.8 million
scheduled for payment in 1998 and 1999. These commitments represent amounts owed
to players under contracts, including multi-year contracts, which are
guaranteed, so long as the players fulfill their obligations under the
contracts. A portion of the Company's obligations under multi-year contracts are
generally covered by life and disability insurance policies. See Note 13 to the
Combined Financial Statements of the Partnership and Ballpark Management.
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The Company's capital expenditure budget for 1998 is approximately $1.9
million. Capital expenditures for the current year are anticipated to relate to
facility and equipment improvements.
The Company believes that it will generate sufficient cash flows from
operations, as supplemented by available borrowings, to meet debt service
requirements and to meet its short-term and long-term requirements for capital
and acquisition of player contracts, although no assurance can be given that it
will be able to do so or that it will be able to refinance the Major League
Credit Facility at maturity.
YEAR 2000 COMPLIANCE
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a
two-digit year is commonly referred to as the Year 2000 Compliance issue. As the
year 2000 approaches, such systems may be unable to accurately process certain
date-based information.
The Company is in the process of identifying and modifying all significant
hardware and software applications that will require modification to ensure Year
2000 Compliance. Internal and external resources are being used to make the
required modifications and test Year 2000 Compliance. The Company plans to
complete the testing and modification of all significant hardware and software
applications by June 30, 1999. The estimated cost to address Year 2000 issues is
not expected to have a material impact on the Company's business, operations or
financial condition.
In addition, the Company is communicating with external service providers
to ensure that the providers are taking the appropriate action to address Year
2000 issues. However, there can be no assurance that the systems of third
parties on which the Company's systems rely will convert, or that a conversion
that is incompatible with the Company's systems, would not have an adverse
effect on the Company's systems.
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BUSINESS
GENERAL
The Company has been organized to serve as the sole general partner of the
Partnership, which owns the 1997 American League Champion Cleveland Indians and
manages Jacobs Field, the Indians' home ballpark.
Baseball has a long tradition in the City of Cleveland. The first
professional baseball game in Cleveland was played on June 2, 1869, when the
Cleveland Forest Citys played the Cincinnati Red Stockings. In 1901, the Club
became one of the charter members of the American League. During the ensuing 20
years, the Indians enjoyed great success, including a victory against the
Brooklyn Dodgers in the 1920 World Series. During the 1940s and 1950s, the
Indians were one of baseball's consistently strong teams. The Indians won the
American League pennant twice (1948 and 1954), captured the World Series from
the Boston Braves in 1948, and finished second in the American League six times
(1951-1953, 1955, 1956 and 1959). Unfortunately, the next 25 years of the
Indians' history were marked by financial instability, inattention to the Club's
minor league system, criticized player personnel decisions, poor on-field
performance and some of the worst attendance figures in Major League Baseball.
In 1986, Richard E. Jacobs and his brother David acquired control of the
Indians and began to execute a long-term strategy that has returned winning
baseball to Cleveland and has made the Cleveland Indians one of the premier
franchises in Major League Baseball. The Company's strategy is to maintain the
Indians' competitive position and to increase the long-term value of the
franchise. The elements of this strategy include dedication to a strong player
development system, effective player personnel management, attention to quality
and customer service and an integrated approach to marketing and licensing
arrangements. In the past three seasons, the Indians have won three American
League Central Division Championships and two American League Championships.
Under Mr. Jacobs' direction, the Indians were also instrumental in the planning
and development of the downtown sports complex that includes Jacobs Field.
The Company believes that the Club's recent on-field and financial
successes are largely attributable to the collaboration of a management team
that includes experienced and talented baseball and business executives. This
team is led by John Hart, Executive Vice President and General Manager, and
Dennis Lehman, Executive Vice President, Business, and includes a coaching staff
led by Mike Hargrove, Manager. Mr. Hart was named Major League Baseball
Executive of the Year in 1994 and 1995 by The Sporting News and Mr. Hargrove was
named Manager of the Year by The Sporting News in 1995.
Player development is a critical element of management's efforts to build
and maintain a strong franchise. The Company has established a strong minor
league organization through a consistent, system-wide approach to evaluating and
developing young players. The team's minor league organization was ranked the
best in Major League Baseball in a 1996 poll by The Sporting News. Among its
other player development efforts, the Company sponsors baseball programs in The
Dominican Republic and Venezuela in which coaches affiliated with the Club work
to develop the skills of promising young players in those countries. The Club's
successful minor league organization has provided the Indians with a pool of
talented young players to supplement its major league roster and to permit it to
make opportune trades.
Effective player personnel management is the most visible element of the
Company's baseball strategy. The goal of the Company's player personnel
management efforts is to maintain a competitive team while limiting the
unpredictability in player salaries resulting from salary arbitration and free
agency. Management's confidence in its ability to identify promising young
players has permitted the Club to selectively enter into multi-year contracts
with players early in their careers. The Company also attempts to sign a nucleus
of experienced players to multi-year contracts. Finally, the Club has been
successful in trading for, or signing as free agents, talented players who can
fill roles on the roster made vacant by trades, retirements, injuries and losses
to the free agent market.
By building value for team sponsors and fans, the Company's business
executives leverage the Club's on-field product to enhance revenues. The
Company's control over various facets of its business, including advertising
signage and concessions at Jacobs Field, permits it to capitalize on the
Indians' popularity with sponsors and fans. Sponsors are offered a number of
advertising vehicles to maximize their exposure at Jacobs
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Field and their association with the Club. Fans at Jacobs Field are offered a
customer-focused experience in an attractive, comfortable environment featuring
a variety of amenities, concessions and merchandise options and a courteous,
well-trained staff.
The successful execution of the Indians' long-term strategy has resulted in
strong revenues in recent years. The Club has sold out all tickets available for
public sale for each of the 1996, 1997 and 1998 regular seasons prior to Opening
Day. The Indians hold the Major League Baseball record for consecutive regular
season sell-outs, which stands at 229 through May 6, 1998. These strong
attendance figures provide the Club with a predictable ticket sale and premium
seating revenue base for the regular season and permit the Company to realize
high levels of merchandise and concession sales at Jacobs Field. The fan
interest evidenced by these attendance figures has also permitted the Club to
enhance revenues from other sources, such as local broadcast and cable
television, radio and advertising. Although the Company's revenues from each of
these sources depend heavily on the Indians' on-field performance, the
predictability of the Club's ticket and premium seating sales in recent years
has allowed it to create a competitive, profitable team within the framework of
a Major League Baseball system that is confronted with escalating player
salaries and limited means for clubs to increase revenue.
RECENT TEAM PERFORMANCE
Through the end of the 1997 season, the Indians have the best record in the
American League since 1994. The following table shows the regular season
performance of the Indians in each of the last five seasons:
<TABLE>
<CAPTION>
WINNNING
WINS LOSSES PERCENTAGE
---- ------ ----------
<S> <C> <C> <C>
1997(1).............................. 86 75 .534
1996(1).............................. 99 62 .615
1995(2).............................. 100 44 .694
1994(2).............................. 66 47 .584
1993................................. 76 86 .469
--- --- ----
TOTAL................................ 427 314 .576
</TABLE>
- ---------------
(1) Total games fewer than 162 because of rain-outs that were not re-scheduled.
(2) Season shortened due to players' strike.
The Indians have competed in post-season play in each of the last three
seasons as American League Central Division champions. In 1996, the Indians lost
to the Baltimore Orioles three games to one in the best-of-five Division Series.
After winning the Division Series in each of 1995 and 1997, the Indians played
in the American League Championship Series and won the best-of-seven series in
six games against the Seattle Mariners in 1995 and in six games against the
Baltimore Orioles in 1997. The Indians lost to the Atlanta Braves in six games
in the 1995 World Series and lost to the Florida Marlins in seven games in the
1997 World Series.
BUSINESS OPERATIONS
OWNERSHIP AND MANAGEMENT
Richard E. Jacobs is entering his twelfth year as controlling owner of the
Club. Although Mr. Jacobs is actively involved in the Club's overall management
and strategy for success, he has assembled and relies on a talented team of
baseball and business executives to oversee both the on-field performance of the
team and the business of the franchise.
John Hart was named General Manager of the Indians in September 1991 and is
under contract through 2003 and for four additional years at the option of the
Indians. Mr. Hart joined the Club as a Special Assignment Scout during the 1989
season. He was the Director of Baseball Operations for the 1990 and 1991
seasons. Mr. Hart was named Major League Baseball Executive of the Year by The
Sporting News in 1994 and 1995.
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<PAGE> 37
Mike Hargrove is beginning his seventh season as Field Manager of the
Indians and is under contract through 1999 and for one additional year at the
option of the Indians. Mr. Hargrove joined the Indians in 1989 as the first base
coach and, prior to that, spent three seasons managing in the Indians' minor
league system. Mr. Hargrove was named Manager of the Year by The Sporting News
in 1995. Through the end of the 1997 season, his career record as the Indians'
Manager is 535 wins and 453 losses, a winning percentage of .541.
Dan O'Dowd is entering his eleventh season with the Indians. From 1992
through April 1998, he was the Club's Director, Baseball Operations and
Assistant General Manager. In April 1998, he was appointed Vice President,
Baseball Operations and Assistant General Manager. Mr. O'Dowd is under contract
through 2002 and for four additional years at the option of the Indians. Under
his leadership, the Indians' minor league organization has been rebuilt into one
of the best in professional baseball, posting the second best record in the
1990s among minor league systems while developing major league All-Stars such as
Jim Thome, Charlie Nagy and Manny Ramirez.
Mark Shapiro was named Director of Minor League Operations in 1993 and is
entering his seventh season with the Indians. Mr. Shapiro is under contract
through the 1999 season and for two additional years at the option of the
Indians. All aspects of the Indians player development and Latin American
operations report to Mr. Shapiro. During his tenure, the Club has implemented
its Winter Development Program, which aids in the transition of Indians
prospects to the major league environment. He has also implemented a system of
individual plans for every Indians minor league player.
Dennis Lehman is entering his eleventh season with the Club and sixth year
as its Executive Vice President, Business. Mr. Lehman brings 28 years of
baseball management experience to the team and is under contract through the
2002 season and for four additional years at the option of the Indians. Mr.
Lehman is responsible for all aspects of the Company's business, finance and
administrative operations. Mr. Lehman has been instrumental in implementing many
of the Company's innovative customer service training programs.
Jeff Overton is in his tenth season as Vice President, Marketing and
Communications for the Indians. Mr. Overton is under contract through 2002, with
a limited right by Mr. Overton to terminate his contract in 2000. Mr. Overton
has been successful in building a large season ticket base and in marketing
private suites and club seats at Jacobs Field. Mr. Overton is responsible for
managing the Company's advertising signage and media revenues. He is also
responsible for the public relations, community relations and advertising
departments of the organization.
Ken Stefanov is entering his eighth season with the Indians and fourth as
Vice President, Finance. Mr. Stefanov is under contract through the 1999 season
and for two additional years at the option of the Indians. As Chief Financial
Officer, Mr. Stefanov is responsible for all financial reporting, planning and
analysis. In addition, Mr. Stefanov oversees the Company's management
information systems. Under his leadership, the Indians have developed several
proprietary software programs designed to streamline operating expenses and
capture customer demographic information.
OPERATIONS
Ticket Sales. Jacobs Field has an annual paid capacity of approximately
3.4 million fans. During each of the past two seasons, season ticket sales have
accounted for approximately 2.1 million of that capacity. All available tickets
for home games for the 1996, 1997 and 1998 regular seasons were sold out prior
to Opening Day. The Indians hold the Major League Baseball record for
consecutive regular season sell-outs, which stands at 229 through May 6, 1998.
Ticket prices for regular season home games during the 1998 season range
from $6 to $26 per game and the average ticket price is $17.57. Revenue from
ticket sales is reduced by an 8% admissions tax imposed by the City of Cleveland
and by the American League assessment, which ranges from 2.5% to 3.5%. The
Company has a contract with TicketMaster, a national ticket outlet, pursuant to
which all single-game tickets,
36
<PAGE> 38
other than those sold at Jacobs Field, are sold. The following table shows
certain information relating to the regular season revenue generated by ticket
sales for the past five seasons:
<TABLE>
<CAPTION>
AVERAGE GROSS PAID
SEASON TICKET AVERAGE PAID AVERAGE GROSS TICKET REVENUE ATTENDANCE
SEASON EVENTS(1) HOLDER BASE ATTENDANCE PAID TICKET PRICE PER EVENT TOTAL
- --------------------- --------- ------------- ------------ ----------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1997................. 80 2,137,865 42,559 $15.73 $669,518 3,404,750
1996................. 79 2,125,239 42,002 14.67 616,145 3,318,166
1995(2).............. 71 1,539,449 40,039 12.25 490,669 2,842,745
1994(2).............. 51 1,032,710 39,121 11.98 468,785 1,995,174
1993................. 80 852,251 27,224 9.40 255,879 2,177,908
</TABLE>
- ---------------
(1) May differ from number of games played because traditional doubleheaders
count toward two games but only one paid event.
(2) Event figures for 1994 and 1995 reflect games missed due to players' strike.
Concessions, Catering and Merchandise Sales. Jacobs Field provides fans
with a wide array of food, beverage and merchandise items throughout the
ballpark. Traditional ballpark offerings, such as hot dogs, hamburgers, nachos,
popcorn, branded beer and soft drinks, are supplemented by less traditional
baseball fare, such as barbecued chicken and ribs, deli sandwiches, "Ballpark
Draft," a beer brewed by a Cleveland-based microbrewer exclusively for sale at
Jacobs Field, and a selection of premium beers from around the world. In
"KidsLand," a facility located behind Jacobs Field's right field foul line, fans
can purchase food items appealing to younger children, such as peanut butter and
jelly sandwiches. KidsLand also provides children with access to a variety of
toys and playground equipment, and Slider, the Indians' mascot, visits KidsLand
during each game. KidsLand is adjacent to a retail outlet devoted to selling
Indians-logo apparel and other merchandise for children. For large groups, the
Indians' offer pre-game parties in a picnic facility with food and beverage
service located behind the center field fence. Food, beverage and merchandise
vendors also offer a variety of products to fans at their seats. Fans with club
seat or private suite tickets may also purchase food, beverages and merchandise
in the Club Seat Lounge.
The Company has the exclusive right to operate all Jacobs Field
concessions, including private suite and club seat catering, and to receive all
concession revenues. The Company has a license agreement with an affiliate of
Sportservice Corporation ("Sportservice"), a national manager of event
concessions, to operate the food and beverage concession stands and roving
vendors in the ballpark during games. Sportservice has the right to make all
food and beverage concession sales at Jacobs Field, excluding catering, club
seat and Club Seat Lounge sales, private suite sales, restaurant sales or
merchandise sales. The Company has the exclusive right to determine pricing,
profit margins, brands, portions and quality of the products sold by
Sportservice, as well as the right to prohibit the sale of any product. The
Company has a similar agreement with an affiliate of Levy Restaurants, a
national restaurateur based in Chicago ("Levy"), to provide catering for private
functions and to provide concessions sales for club seats, the Club Seat Lounge,
private suites and the Terrace Club.
The Company strives to foster strong brand loyalty in Indians fans by
offering high-quality clothing items (caps, sweatshirts, jackets, jerseys and
shirts) and a wide variety of novelties at Jacobs Field and at six Indians Team
Shops located in Northeastern Ohio shopping malls. At Jacobs Field, the Company
operates a full-service Team Shop that is open during games and also has an
outside entrance which permits it to operate during normal retail hours
throughout the year. Jacobs Field also has merchandise and novelty stands
located throughout Jacobs Field, including KidsLand, that increases Jacobs
Field's attractiveness to families. The six Indians Team Shops also permit the
Club to extend its reach to communities in Northeastern Ohio outside of downtown
Cleveland.
Local Television and Radio. All Cleveland Indians games are broadcast on
local radio and through the Cleveland Indians Radio Network, a network of 37
stations in Ohio, Western New York, Western Pennsylvania and West Virginia that
purchase rights to the games from the Company. In 1998, 145 games are scheduled
to be televised locally or through local cable television stations. Radio
play-by-play and color commentary is provided by Tom Hamilton, who will be
joined for the first time in 1998 by former Indians
37
<PAGE> 39
coach Dave Nelson and Mike Hegan. Messrs. Nelson and Hegan replace long-time
Indians broadcaster Herb Score, who retired after the 1997 season. Television
play-by-play and color commentary are provided by Mike Hegan and Jack Corrigan
(when the games are broadcast on local television) and by former Indian Rick
Manning and John Sanders (when the games are broadcast on cable television). All
radio broadcast personalities are chosen by, and enter into contracts with, the
Indians. All television broadcast personalities are employed by the broadcast
stations, subject to approval by the Club.
In 1995, the Company renegotiated its contract with WUAB for the local
television broadcast of 70 of the Indians regular season games and up to six
pre-season games each year. The current contract with WUAB expires on October
31, 2001. The Company also has a contract with Fox Sports Ohio for the local
cable television broadcast of up to 80 Indians games during the regular season
and two pre-season games. The current contract with Fox Sports Ohio expires on
December 31, 1998. The Company and Fox Sports Ohio are currently negotiating a
new contract, and the Company is also in negotiations with another broadcaster.
The Company has a contract with Jacor Broadcasting Corporation pursuant to
which the Company is given radio air-time and sells, on its own behalf,
advertising in connection with the local radio broadcast of all regular and
post-season games. The contract with Jacor expires on December 31, 1999, and the
Company has the option to renew the contract for four additional years.
Advertising and Corporate Sponsorship. The Company's control over various
facets of its business, including advertising signage and concessions at Jacobs
Field, permits it to capitalize on the Indians' advertising value by offering
sponsors a variety of advertising vehicles. As a result of Jacobs Field's appeal
and the Indians success in recent years, most major advertisers are interested
in maximizing their advertising exposure at Jacobs Field and their association
with the Club. To capitalize on advertisers' demand, the Company typically
coordinates the sale of radio advertising with the sale of advertising at
locations in Jacobs Field, including space on the main scoreboard, ancillary
scoreboards, outfield walls and concourse signage. Advertising is also sold in
game programs and on the Club's internet website. The Company also licenses the
Club's name and logo in connection with corporate sponsorships and promotions
throughout Northeastern Ohio. The Company's marketing department works closely
with its sponsors and advertisers to customize integrated advertising and
corporate sponsorship packages that incorporate many or all of the Company's
available advertising outlets.
The Company also offers a number of promotional activities at Jacobs Field
in conjunction with Indians home games. Due to the high level of ticket sales in
recent years, these promotions are designed primarily to enhance fan enjoyment,
rather than to foster increased attendance. The Club has scheduled 18
promotional events for the 1998 season. These promotional events range from the
distribution to fans of premiums (such as calendars, baseball caps commemorating
the Indians' 1997 American League Championship, baseball cards and replica
uniform T-shirts) to theme oriented events, such as a two-day commemoration of
the Indians' 1948 World Series Championship. In keeping with the Club's
objective of attracting families to Jacobs Field, several promotional activities
focus on younger fans, with certain premiums distributed exclusively to fans age
14 and under.
Player Contracts and Salaries. Player salaries constitute the single
largest item of expense for the Club's operation. The Collective Bargaining
Agreement requires each team to enter into a uniform player contract with each
of its players and also establishes a minimum season salary of $170,000 for
major league service in 1998, generally payable in semi-monthly installments
during the season. Players who sustain injuries, or are terminated by the team
during the regular season, are generally entitled to all of their salaries so
long as they fulfill their obligations under the contracts. Player contracts may
be for single-year or multi-year terms. Generally, salaries payable pursuant to
multi-year contracts are guaranteed.
The Indians' aggregate 40-man roster payroll, including bonuses, for the
1997 season was $58.5 million. In 1997, aggregate team salaries in MLB ranged
from $12.2 million to $65.0 million. In addition to the salaries paid to its
players, the Company is obligated to pay its minor league players (who play for
the Indians' minor league affiliates) salaries pursuant to the terms of the
players' respective contracts, which are also governed by the Collective
Bargaining Agreement. Some players are signed to option agreements or "split"
contracts, giving the Club the right to move the player from the Indians major
league roster to that of a minor league
38
<PAGE> 40
affiliate team roster and back, the rate of pay being based on the number of
days the player plays in each league.
POSSIBLE ACQUISITIONS
As part of its strategy, the Company may consider acquisitions of
sports-related or non-sports-related businesses as well as commercial properties
that complement the Company's existing operations or that provide the Company
with the opportunity to leverage the capabilities of its management team. These
acquisitions may include businesses and properties owned by Mr. Jacobs or his
affiliates. The Company is not engaged in any negotiations to acquire any
business or property, and there can be no assurance that the Company will ever
acquire any business or property other than the Indians. In addition, see "Risk
Factors -- Risks Relating to Expansion of Business and Acquisitions" for a
discussion of certain risks associated with the Company's acquisition strategy.
TEAM
PLAYER PERSONNEL
The Indians player management strategy is to build a competitive team,
while managing their roster to reduce the uncertainties associated with salary
arbitration and free agency. Generally, a MLB player with more than three years
of major league service is eligible for binding salary arbitration, and a player
with more than six years of major league service is eligible for free agency.
The Club has not been to arbitration over a player's salary since 1991. Prior to
eligibility for arbitration, a player's salary may be established by the club,
subject to the MLB minimum. See "Major League Baseball -- Collective Bargaining
Agreement -- Salary Arbitration and MLB Free Agency."
The Indians' success in recent years is attributable to the Company's
player development efforts and effective player personnel management. In the
last three years, 14 Indians have been selected to the American League All-Star
team, six have received Gold Glove Awards and six have received Silver Slugger
Awards. The Indians have maintained a nucleus of talented players despite a
significant level of player turnover. Only nine members of the Indians' 1997
American League Championship team were members of the 1995 American League
Championship team.
MLB permits each team to have 40 players under contract but limits the
active roster to 25 players from Opening Day through August 31. From September 1
through the end of the season, each team is permitted an active roster of 40
players. The Indians currently have 40 players under contract for the 1998
season. Certain information with respect to each of those players as of May 11,
1998 is set forth below:
39
<PAGE> 41
<TABLE>
<CAPTION>
YEARS/DAYS
OF MLB SERVICE AS LAST SEASON CLUB
OF OPENING DAY(1) OF CONTRACT OPTION
----------------- ----------- ------
<S> <C> <C> <C>
PITCHERS
- --------
Paul Assenmacher........................................ 11/158 1999
Rich Batchelor.......................................... 0/140 1998
Dave Burba.............................................. 6/59 1999
Bartolo Colon........................................... 0/112 1998
Dwight Gooden........................................... 13/0 1999 2000
Mike Jackson............................................ 11/59 1998 1999
Steve Karsay(2)......................................... 3/48 1998
Rich Krivda............................................. 1/82 1998
Tom Martin.............................................. 1/0 1998
Michael Matthews........................................ 0/0 1998
Jose Mesa(3)............................................ 7/28 1998
Alvin Morman(2)......................................... 1/147 1998
Charles Nagy(3)......................................... 7/48 1998
Chad Ogea............................................... 3/38 1999 2000
Eric Plunk.............................................. 11/74 1999 2000
Jason Rakers............................................ 0/0 1998
Paul Shuey.............................................. 2/94 2000 2001
John Smiley............................................. 11/35 1999
Ron Villone(2).......................................... 2/85 1998
Jaret Wright............................................ 0/97 1998
CATCHERS
- ---------
Sandy Alomar Jr......................................... 8/47 1999 2000
Pat Borders(3).......................................... 10/0 1998
INFIELDERS
- ---------
David Bell(2)........................................... 2/64 1998
Jeff Branson(3)......................................... 5/141 1998
Russell Branyan......................................... 0/0 1998
Shawon Dunston(3)....................................... 12/93 1998
Travis Fryman........................................... 7/89 2002 2003
Richie Sexson........................................... 0/17 1998
Jim Thome............................................... 5/42 2001 2002
Omar Vizquel............................................ 8/130 2001 2002
Enrique Wilson.......................................... 0/17 1998
OUTFIELDERS
- -----------
Bruce Aven.............................................. 0/24 1998
Geronimo Berroa(3)...................................... 5/152 1998
Brian Giles............................................. 1/96 2001 2002
David Justice........................................... 8/00 2002 2003
Kenny Lofton............................................ 6/23 2000 2001
Scott Morgan............................................ 0/0 1998
Alexander Ramirez....................................... 0/29 1998
Manny Ramirez........................................... 4/33 1999 2000
Mark Whiten............................................. 7/26 1999
</TABLE>
- ---------------
(1) A player is credited with a day of major league service for each day of the
baseball season that he is on a club's active roster. A total of 172 days of
major league service constitutes a year of major league service.
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<PAGE> 42
See "Major League Baseball -- Collective Bargaining Agreement -- Salary
Arbitration and MLB Free Agency."
(2) Eligible for salary arbitration upon completion of the 1998 season
(assuming, in the case of David Bell, Alvin Morman and Ron Villone, the
player remains on the Club's active roster for the entire season).
(3) Eligible for free agency upon completion of the 1998 season (assuming, in
the case of Jeff Branson and Geronimo Berroa, the player remains on the
Club's active roster for the entire season).
PLAYER DEVELOPMENT
In the past decade, the Company has built a strong player development and
scouting system based on a consistently applied approach to player evaluation,
instruction and coaching. Since 1991, under the direction of General Manager
John Hart, the Indians' minor league organization has greatly improved and in
1996 was ranked the best in professional baseball in a poll conducted by The
Sporting News. Of the 40 players currently on the major league roster, 18 have
played in the Indians' minor league organization prior to their first major
league appearance. In addition to providing a source of talent for the Indians'
major league roster, the Club's player development efforts also enhance its
ability to obtain proven major league players in trades with other teams. The
Indians employ 28 full-time scouts and several part-time scouts in their player
development program. The scouts are evaluated in part by the success of the
prospects they find. The Club also uses independent scouts who are paid a
finders' fee for prospects.
The Club's player development efforts are based on a business-like approach
to the evaluation and development of player talent. The Club's staff of seasoned
scouts are trained to assess and evaluate player talent consistently throughout
the organization. In addition, the managerial and coaching staffs at all of the
Club's minor league affiliates use instructional principles that are applied
consistently at all levels of the Club's system. The Company believes that this
standardized approach to player development improves the chances of the most
talented minor league players succeeding at the major league level. The Club's
minor league system involves the establishment of an individual plan for every
player in the system. The plan is intended to cover all aspects of player
development, including mental and physical development and baseball
fundamentals. The Company's player development program also includes the Winter
Development Program, which brings minor league prospects to Cleveland in the
off-season to better prepare young players for the transition to the major
league level. Participants in the Winter Development Program receive intensive
instruction in various baseball skills and conditioning methods. In addition,
participants receive instruction in a number of off-field areas which the
Company believes are essential to their success in Major League Baseball. These
include seminars focusing on media and fan relations and financial planning.
Players from Puerto Rico and Latin American countries are an important
source of talent for the Indians and other MLB clubs. Players from countries
other than the United States and Canada are not part of the MLB Rule 4 draft,
and the Club can enter into contracts with these players subject to MLB rules.
See "Major League Baseball -- Major League Rules -- Signing Players." The
Indians sponsor baseball programs in The Dominican Republic and Venezuela in
which coaches affiliated with the Club work to develop the skills of promising
young players in those countries. The Indians have a full-time member of the
front office who is fluent in Spanish and who works closely with Latin American
prospects, the Club's minor league coaching staffs and other Indians personnel
in order to promote the development of these players. The Club provides these
prospects with instruction in the English language and assistance in adjusting
to cultural differences between the United States and their native countries.
The Indians also work with Club personnel in order to promote an understanding
of cultural differences and to prevent these differences from adversely
affecting player development.
The Indians are affiliated with seven minor league teams of which they own
two (the Burlington Indians and the Dominican Summer League Indians). No
revenues are derived from the club-owned affiliates. A large portion of the
expenses associated with all of the minor league teams, including player
salaries, are paid by the Club. MLB clubs are not permitted to be affiliated
with more than one Class AA and one Class AAA team. In the 1990s, the overall
record for the Club's minor league organization through the end of the 1997
season is
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<PAGE> 43
2,978 wins and 2,552 losses, a winning percentage of .539, placing it second
among the minor league organizations of all MLB clubs. The Indians' minor league
affiliates are as follows:
<TABLE>
<CAPTION>
TEAM CLASS LEAGUE LOCATION
---- ----- ------ --------
<S> <C> <C> <C>
Buffalo Bisons............... AAA International League Buffalo, New York
Akron Aeros.................. AA Eastern League Akron, Ohio
Columbus Redstixx............ A South Atlantic League Columbus, Georgia
Kinston Indians.............. A Carolina League Kinston, North Carolina
Watertown Indians............ A New York-Penn League Watertown, New York
Burlington Indians........... Rookie Appalachian League Burlington, North Carolina
Dominican Summer League
Indians.................... Rookie Dominican Summer League Santiago, Dominican Republic
</TABLE>
FACILITIES
DOWNTOWN SPORTS COMPLEX
The current home of the Indians is Jacobs Field, which is part of the
Gateway Sports and Entertainment Complex (the "Complex") in downtown Cleveland.
The Complex is the product of cooperation and planning among the Gateway
Economic Development Corporation of Greater Cleveland, an Ohio nonprofit
corporation ("Gateway"), the City of Cleveland (the "City"), Cuyahoga County,
Ohio (the "County"), the Cleveland Cavaliers (the "Cavs"), a National Basketball
Association franchise, and the Company. The Complex contains Jacobs Field, which
is leased to the Company, and Gund Arena, which is home of the Cavs, the
Cleveland Lumberjacks, a professional minor league hockey team, and the
Cleveland Rockers, a women's professional basketball team.
JACOBS FIELD
General. Jacobs Field, completed in 1994, was designed as a premier,
baseball-only facility offering a fan-friendly, intimate environment. Jacobs
Field combines modern stadium design and amenities with many features evoking
historic Major League Baseball ballparks. For example, Jacobs Field's outfield
dimensions are irregular, like many older ballparks, and it features a 19 foot
left field wall reminiscent of Fenway Park's "Green Monster." Jacobs Field also
has some of its own signature features, such as the "home run porch," an open
area located behind the left field foul pole available to fans who purchase
standing room only tickets. Jacobs Field also features a high-tech, electronic
left field scoreboard incorporating a large screen television that airs
highlights and promotional features during breaks in the on-field action. Fans
visiting concession and merchandise stands during the game can keep track of the
game by viewing one of the approximately 700 television monitors located
throughout Jacobs Field.
Private Suites and Party Suites. Jacobs Field has 132 private suites which
include a living area, wet bar and private bathroom, and covered seating with a
premium view of the game. Of the total suites, 98 are leased by the Company to
guests for four- and five-year terms, 24 are leased on a ten-year, prepaid basis
and ten suites are reserved for Club use. Depending on the size of the suite,
each leaseholder must purchase at least eight to 12 tickets, with the option to
purchase up to four additional tickets for each home game. Suite guests may
purchase a wide range of catered, buffet-style meals during each game. The lease
entitles suite guests access to the Club Seat Lounge, a full-scale bar and
lounge located inside the ballpark directly behind the club seats which contains
a full-service bar, food court and televisions providing a close-circuit
broadcast of the game. Jacobs Field also contains three party suites, each with
a seating capacity of 40, which are rented for single games.
Club Seats. Club seats offer larger seats, service of an extended menu of
concessions and access to the Club Seat Lounge. Like the private suites, club
seats are leased for various terms. A club seat lease gives the holder the right
to the club seat amenities, which include access to the Club Seat Lounge,
in-seat food and beverage service during the game and the right to buy a club
seat ticket for each home game.
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<PAGE> 44
The Terrace Club. Jacobs Field houses the Terrace Club, a full-service
restaurant with a windowed, terraced view of the playing field. Club members pay
an annual membership fee which entitles them to the right to book reservations
for meals before or during each game. The Terrace Club is open to the public for
lunch (except on days when the Indians have an afternoon home game). The Terrace
Club, as well as a catering service, is available for private parties.
Executive Offices. Jacobs Field also houses the Company's executive
offices.
CHAIN OF LAKES PARK
The Indians' spring training facility is located in Winter Haven, Florida,
and spring training home games are played at Chain of Lakes Park. The Indians
relocated spring training to Winter Haven in 1993, after more than 40 years in
Tucson, Arizona. In addition to providing the Indians with modern,
well-maintained training facilities, Winter Haven is located in proximity to the
spring training facilities of many other Major League clubs. This allows the
Indians' players to sharpen their skills against a wide variety of Major League
opponents, and enhances the Club's ability to assess the skills of the Indians'
players and minor league prospects. Winter Haven is located less than an hour's
drive from the cities of Tampa and Orlando, which facilitates visits to the
Indians' spring training facilities by Northeastern Ohio fans. Pitchers and
catchers report to spring training the third week of February and exhibition
games begin in late February and continue through the end of March. The Company
employs a full-time manager to oversee the operations of Chain of Lakes Park.
The facility is owned by the city of Winter Haven and is available to the
Company through October 31, 2003. The Company has four options to renew the use
agreement for five-year terms. Revenues derived from sources similar to those
derived at Jacobs Field, including ticket sales, concessions, advertising and
media rights, are allocated between the Company and Winter Haven.
OPERATING AGREEMENTS AND LEASES
Gateway Agreements. The Company and Gateway are parties to various
agreements relating to Jacobs Field. Gateway leases to the Company the ballpark
land and improvements pursuant to a Lease Agreement which excludes the baseball
playing field and improvements thereon. The playing field portion of Jacobs
Field is leased to the Company pursuant to a Ground Lease Agreement for which
the Company pays nominal rent. Management of the ballpark facility is governed
by a Management Agreement, while the rights and obligations of the parties
regarding the common areas of the Complex are governed by a Common Area
Maintenance Agreement. (The Lease Agreement, Ground Lease, Management Agreement
and Common Area Maintenance Agreement are collectively referred to as the
"Gateway Agreements.")
Under the Gateway Agreements, the Company has the exclusive right to use
the baseball facility to host Major League Baseball games and to conduct related
activities. The Company also has the right to sponsor special events at Jacobs
Field. The Company is obligated to play all of its home games, including playoff
games, at Jacobs Field and is prohibited from transferring the Indians franchise
to any location other than Jacobs Field or making any application to MLB for
approval of such a transfer.
Gateway is responsible for all routine maintenance and capital repairs of
the baseball facility under the Ground Lease. However, pursuant to the
Management Agreement, Gateway has assigned to the Company the responsibility to
perform routine maintenance and pay for all costs and expenses related thereto.
Gateway has retained responsibility for performance of and payment for all
capital repairs. Capital repairs include work required to repair, restore or
replace facility components, such as heating and air conditioning units,
carpeting, scoreboards, field lighting bulbs and worn-out seats.
The Management Agreement grants the Company the exclusive right to manage
and operate Jacobs Field for an annual fee. The fee is equal to the sum of (i)
one-third of any net main scoreboard advertising revenue in excess of $1,500,000
(adjusted each year for inflation) and (ii) one-quarter of any net special event
revenue. Fees paid to Gateway pursuant to the Management Agreement were $193,000
in 1997, $78,951 in 1996 and $79,000 in 1995. Under the Management Agreement,
the Company is entitled to the exclusive right to operate all ballpark
concessions, including operation of the Terrace Club and catering for the
private suites
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and club seats, and is entitled to all revenues therefrom. The Company also has
the exclusive right to sell and lease space for, and enter into agreements
regarding, advertising in and around Jacobs Field. Gateway has the right to
conduct special events at Jacobs Field if certain conditions are met, including
establishing to the satisfaction of the Company that the event would not render
the playing field unsuitable for the playing of baseball.
The Gateway Agreements (excluding the Ground Lease) terminate upon the
sooner of (i) the end of the year in which the 20th full season is played or
(ii) the retirement or discharge of all the stadium revenue bonds. The term of
the Ground Lease is for 40 years following the initial season. Following
termination of the Agreements, the Company must surrender the ballpark facility
to Gateway. The Ground Lease and the Lease Agreement do not provide for an
option by the Company to renew the agreement upon their expiration.
Nevertheless, the Company believes it will be able to enter into a new lease
agreement for the facility in 2014 under commercially reasonable and competitive
terms. Pursuant to the Ground Lease, the Company has a leasehold interest in the
playing field and the improvements thereon until the year 2034 and has received
assurances from the City and County that they will commence discussions with the
Company regarding a new lease agreement for Jacobs Field two years before the
current lease has expired.
Naming Rights Agreement. Gateway, the City, the County, the Company and
Mr. Jacobs entered into a Naming Rights Agreement regarding the naming of the
ballpark which expires in 2013. In March 1998, Mr. Jacobs assigned all of his
interests in the Naming Rights Agreement to the Company.
COMPETITION
The Indians compete with other sports, entertainment and recreational
activities for entertainment and advertising dollars. During portions of its
season, the Indians experience competition from professional basketball (the
Cavs and the Rockers) and professional minor league hockey (the Cleveland
Lumberjacks). Moreover, the City of Cleveland is currently building a new
football-only stadium. If certain conditions are met, the NFL will be obligated
to provide to the City an NFL franchise by the fall of 1999. This team is
expected to use the established and popular name and heritage of the former
Cleveland NFL franchise, the Cleveland Browns, and will likely have loyal fan
support from its inception. The Indians also compete for attendance and
advertising revenue with a wide range of other entertainment available in
Northeastern Ohio. The Indians compete with other MLB teams to obtain the
services of available players.
EMPLOYEES
As of March 31, 1998, the Company employed 321 baseball personnel
(including 228 players) and 126 non-baseball personnel on a full-time basis. The
Company also employs approximately 2,000 part-time personnel, including ushers,
novelty sales people, vendors and statisticians. At March 31, 1998,
approximately 750 of the Company's part-time employees, in addition to players
on the major league roster, were members of labor unions. The Company considers
relations with its employees to be good.
LITIGATION
The Company and MLB are involved in various lawsuits arising in the
ordinary course of business. Management does not believe that the outcome of
these matters will have a material adverse effect on the Company's financial
condition, results of operations and cash flows.
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MAJOR LEAGUE BASEBALL
TEAMS
Major League Baseball is comprised of 30 baseball clubs. The Arizona
Diamondbacks and the Tampa Bay Devil Rays are expansion clubs that are competing
for the first time in the 1998 season. MLB clubs belong to either the American
League or the National League. Each league currently has three divisions: the
East, West and Central. Beginning with the 1998 season, the clubs are aligned as
follows:
<TABLE>
<CAPTION>
AMERICAN LEAGUE
- ------------------------------------------------------------------------------------
AMERICAN LEAGUE EAST AMERICAN LEAGUE CENTRAL AMERICAN LEAGUE WEST
- --------------------- ----------------------- --------------------
<S> <C> <C>
Baltimore Orioles Chicago White Sox Anaheim Angels
Boston Red Sox Cleveland Indians Oakland Athletics
New York Yankees Detroit Tigers Seattle Mariners
Tampa Bay Devil Rays Kansas City Royals Texas Rangers
Toronto Blue Jays Minnesota Twins
</TABLE>
<TABLE>
<CAPTION>
NATIONAL LEAGUE
- ------------------------------------------------------------------------------------
NATIONAL LEAGUE EAST NATIONAL LEAGUE CENTRAL NATIONAL LEAGUE WEST
- --------------------- ----------------------- --------------------
<S> <C> <C>
Atlanta Braves Chicago Cubs Arizona Diamondbacks
Florida Marlins Cincinnati Reds Colorado Rockies
Montreal Expos Houston Astros Los Angeles Dodgers
New York Mets Milwaukee Brewers San Diego Padres
Philadelphia Phillies Pittsburgh Pirates San Francisco Giants
St. Louis Cardinals
</TABLE>
REGULAR SEASON AND POST-SEASON PLAY
During the regular season, which typically begins in early April and
extends to late September, each MLB team is scheduled to play a total of 162
games. Half of the games are played at home and half are played away. For the
most part, a club competes against other clubs in the same league during the
regular season. However, interleague play was introduced during the 1997 season
and each club played 15 games against teams from the corresponding division in
the other league (16 games for the Western Division in each league). Interleague
games for the 1998 season have been scheduled in a similar manner. Interleague
play is scheduled to expire after the 1998 season, unless further extended by
agreement of the clubs and the Players Association.
At the end of the regular season, four clubs from each league compete in
the Division Series. The clubs with the best season record in each division and
the club in each league with the best season record of the remaining clubs in
the respective league play a best-of-five series. The two winners of the
Division Series in each league then compete against each other in the League
Championship Series. Each League Championship Series is a best-of-seven series.
The resulting American League Champion and National League Champion play in the
World Series, which is a best-of-seven series.
MLB GOVERNANCE
The Major League Baseball clubs are organized into two leagues, the
American League, which has 14 members, and the National League of Professional
Baseball Clubs (the "National League"), which has 16 members. Each league is
governed by its own Constitution. The leagues and their members are parties to a
Major League Agreement, which establishes the Office of the Commissioner (the
"Commissioner") and governs matters concerning MLB clubs (including voting
rules, dispute resolution and administration). The members of each league elect
the Commissioner, whose functions include serving as the chief executive officer
of MLB, investigating complaints regarding MLB and regulating the conduct of
teams, owners, coaches and players. The Commissioner has the power to impose
sanctions, including fines and suspensions, for violations of MLB rules. The
Major League Agreement also establishes an Executive Council, consisting of the
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Commissioner, the presidents of each league and four team representatives from
each league, which has jurisdiction over various other matters, including the
promotion of baseball and investigations into possible changes in how the game
is played. Mr. Jacobs currently serves on the Executive Council.
The position of Commissioner has been vacant since September 1992. During
periods of vacancy, the Major League Agreement provides that the Executive
Council is responsible for discharging the duties of the Commissioner. During
this period, Allan H. "Bud" Selig, owner of the Milwaukee Brewers and Chairman
of the Executive Council, has performed the day-to-day duties otherwise
conducted by a sitting Commissioner.
Under the terms of the Major League Agreement, various levels of member
approval are required under certain circumstances, including in connection with
the sale or relocation of a member. The Major League Agreement provides that
members are prohibited from resorting to the courts to enforce or maintain
rights or claims against other members, and all disputes must be submitted to
the Commissioner for his determination, and such determination, when rendered,
is final and binding. However, courts have not always dismissed lawsuits filed
by members naming the leagues or their members as defendants. Accordingly, there
can be no assurance that the Company will not be named as a defendant in
lawsuits involving other MLB teams.
The Indians play in the American League and are subject to its
Constitution. The Constitution establishes a board of directors that generally
supervises and manages the affairs and business of the league. The board
consists of six league members and rotates membership, with two board members
retiring and two board members coming on each year. Each member serves on the
board for a three-year term and is off of the board for a four- or five-year
period before returning. The President of the American League has governance and
executive duties over the American League. The President is sole arbitrator over
disputes among American League members and has final and binding determination
regarding such matters. The current President of the American League is Gene A.
Budig.
RESTRICTIONS ON OPERATIONS
MLB requires that the Company submit to the Commissioner for approval,
which may be withheld in the Commissioner's sole discretion, any agreement that
might affect control of the team prior to execution of that agreement. Such
agreements specifically include loan agreements, ballpark leases, television and
radio rights agreements, concession agreements and any other agreement on any
subject with a potential duration of five years or more. These agreements cannot
be signed prior to the Commissioner's approval even if they, by their terms, are
subject to such approval. Furthermore, should the Company decide or be required
to relocate the Indians to another city, at least a 75% vote of the American
League members, and a majority vote of the members of the National League, must
be obtained. If the relocation is to a city located within the same geographic
area as an existing National League franchise, the minimum requisite affirmative
vote of the National League members increases to 75%. The Governing Documents
require that the Company be a single-purpose entity. Should management determine
that it is beneficial to the Company to expand into other business areas, the
expansion plan must be reviewed and approved by the Commissioner prior to being
put into effect. The Governing Documents limit the amount of debt that may be
secured by the assets of, or ownership interests in, an MLB club and require
that the parties to any secured loan that is approved execute an agreement
limiting the rights of the lenders and the club (or shareholder) under certain
circumstances, including upon an event of default or foreclosure. MLB or the
American League could in the future adopt different or additional restrictions
which could adversely affect the shareholders.
CONTROL REQUIREMENT AND OWNERSHIP RESTRICTIONS
The Ownership Guidelines require that Mr. Jacobs (or a group of no more
than 20 individuals) maintain at least a 10% economic interest in the Company
and at least 90% voting control of the Company at all times. Upon completion of
the Formation Transactions and the Offering, Mr. Jacobs' beneficial ownership of
Class B Common Shares will satisfy both the economic interest and voting control
requirements of the Ownership Guidelines. See "Risk Factors--Control by Richard
E. Jacobs; Voting Rights" and "Formation Transactions."
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Any transfer of a controlling interest in a club must be submitted for
review to an MLB ownership committee and requires approval by 75% of the members
of the American League and a majority of the members of the \National League. In
addition, each MLB club must designate an individual who is accountable to the
Office of the Commissioner for the Club's operation and its compliance with MLB
rules and who is responsible for and empowered to make all club decisions. This
requirement must be satisfied regardless of whether a club is owned in corporate
or partnership form, and a change in the designated person constitutes a control
interest transfer under the Governing Documents and, therefore, requires league
approval. Mr. Jacobs serves in this capacity for the Indians.
The Governing Documents contain limitations on the ownership by clubs and
their owners, shareholders, officers, directors and employees of stock and other
financial interests in other MLB clubs. In particular, any person acquiring more
than a 5% interest in a publicly-traded entity that owns a club must obtain
approval of the Commissioner before making such acquisition. To ensure the
Club's compliance with the Governing Documents, the Company's Amended and
Restated Articles of Incorporation provide that no person (other than Mr.
Jacobs) may beneficially own 5% or more of the Class A Common Shares without
first receiving written approval from the Office of the Commissioner. The
Amended and Articles of Incorporation also require any person owning 5% or more
of the Class A Common Shares to submit at the Company's request a statement
stating such information as the Company may request in order to ensure
compliance with the Articles of Incorporation and the Governing Documents.
Failure by a holder of Class A Common Shares to comply with these provisions may
result in a forced sale of such holder's interest or the repurchase of such
interest by the Company. The Company's Amended and Restated Articles of
Incorporation provide that the Company may redeem, at the lower of fair market
value or cost, shares held by any person or entity who becomes the owner of 5%
or more of the Company's shares without the approval of MLB. These provisions
will be summarized in a legend on each certificate issued evidencing Class A
Common Shares.
AMERICAN LEAGUE ASSESSMENTS
Each club in the American League is required to pay an annual assessment to
the American League based on gate receipts net of local ticket taxes, if any. In
recent years, the assessment has ranged from 2.5% to 3.5%. In 1997, the
assessment was 3.25%, and the Company paid $1.6 million to the American League.
POST-SEASON GATE RECEIPTS ALLOCATIONS
The Governing Documents and the Collective Bargaining Agreement govern the
allocation of gate receipts attributable to post-season play. The terms of the
allocation depend on whether the Players Association decides to exercise its
option to extend the Collective Bargaining Agreement for the 2001 season. If the
agreement is extended, 60% of the total gate receipts of the first three games
of the Division Series will be allocated to a players' pool. The remaining
receipts from those games, and 100% of the gate receipts from the fourth and
fifth games, if played, are split between the two competing teams net of the
applicable league assessment. If the Players Association's option is not
exercised, 80% (instead of 60%) of such receipts will be allocated to the
players' pool for the 1997 through 2000 seasons. Until it is known whether or
not the option is exercised, the amount representing the difference between 60%
and 80% of such receipts is distributed by MLB to each team annually on a pro
rata basis. Each team is obligated to maintain a fictional account for such
amount plus interest, and if the option is not exercised, each team will be
required to distribute the amount in that account to the Players Association
following the 2000 season. The Company has $96,922 allocated under the fictional
account as of the end of the 1997 season.
In the League Championship Series, 60% of the gate receipts of the first
four games are allocated to the players' pool and 40% of such receipts are
allocated to the competing teams. The gate receipts from the remaining games, if
any, are allocated according to each league. The American League allocates such
receipts equally between the competing teams, net of the American League
assessment. For the World Series, 60% of the gate receipts from the first four
games is paid to the players' pool, 15% is allocated to the Office of the
Commissioner and the remainder is split between the competing teams and their
respective leagues. Fifteen percent of gate receipts from the remaining games,
if any, are allocated to the Office of the Commissioner and the remainder is
divided in four equal shares among the competing teams and their respective
leagues.
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COLLECTIVE BARGAINING AGREEMENT
In the Fall of 1996, Major League Baseball Clubs and the Players
Association reached agreement with respect to a Collective Bargaining Agreement.
The Agreement became effective on January 1, 1997 and, with respect to certain
provisions, was retroactive to the 1996 season. The Agreement expires on the
later of October 31, 2000 or the day following the last game of the 2000 World
Series, except that the Players Association has the unilateral option to extend
the Agreement to October 31, 2001 or the day after the last game of the 2001
World Series, whichever is later. In addition, if antitrust legislation jointly
proposed by the MLB clubs and the Players Association is not enacted by December
31, 1998, the Agreement is extended until December 31, 2000 with the Players
Association retaining the one-year option to extend through October 31, 2001.
The Collective Bargaining Agreement introduced a new revenue sharing system and
implemented, for the first time, interleague play and a luxury tax on club
payrolls.
Revenue Sharing. The MLB clubs participate in a revenue sharing system,
which was significantly overhauled as part of the Collective Bargaining
Agreement. The revenue sharing system, which was retroactively effective for the
1996 season, is being phased in over a five-year period and will be fully
implemented in the 2000 season. The revenue sharing rate, which applies to a
club's net local revenue, was 12% in 1996 and 1997 and will be 16% in 1998, 17%
in 1999 and 20% in 2000. Net local revenue is defined in the Collective
Bargaining Agreement as all revenue received by a team or a related party
excluding any centrally-generated revenues of the club that are administered by
MLB, such as revenues from the Major Leagues Central Fund and MLB Properties. In
determining net local revenue, a club may deduct any expenses directly
attributable to stadium operations and certain other specified expenses. For
1998 and beyond, each club contributes the applicable percentage of its net
local revenue to a pool. Once the pool is accumulated, 75% of it is
re-distributed to the clubs equally on a pro rata basis. The remaining 25% is
distributed to teams whose total revenue was below the average revenue for all
clubs based on the extent to which that team's revenue was below the average.
The Florida Marlins and the Colorado Rockies, as expansion teams, were exempt
from the revenue sharing system for the 1996 and 1997 seasons, but both teams
will participate in revenue sharing for the 1998 season. The Tampa Bay Devil
Rays and the Arizona Diamondbacks are currently exempt from revenue sharing and
will not participate until the 2000 season. The Company was a payor under the
revenue sharing system for the 1997 season and estimates that its final
contribution will be $7.2 million.
Luxury Tax. The luxury tax first introduced in the Collective Bargaining
Agreement became effective at the beginning of the 1997 season. A club that has
an actual club payroll for a season above a specified threshold minimum for that
season may be subject to the luxury tax, but the threshold minimum is adjusted
so that no more than five teams are required to pay the luxury tax in any
season. The adjusted threshold minimum was $55.6 million for 1997, and, unless
further adjusted, will be $59.9 million for 1998 and $64.2 million for 1999.
Actual club payroll is determined by adding the total compensation cost
including cost of benefits, signing bonuses, performance bonuses and deferred
compensation for each player the club has under a major league contract.
Compensation amounts guaranteed under multi-year contracts are reported on the
basis of an average annual value. The luxury tax rate for 1997 and 1998 is 35%
and 34% for 1999. There is no luxury tax imposed in the 2000 season. The amount
that is taxed is the difference between a club's total actual payroll and the
threshold minimum. Proceeds collected from the luxury tax are used to fund
revenue sharing or the Industry Growth Fund, which has a stated objective of
promoting the growth of baseball throughout the world by enhancing fan interest
and increasing the sport's popularity. In 1997, the Indians paid $2.1 million
pursuant to the luxury tax.
Salary Arbitration and MLB Free Agency. Certain player rights provided in
the Collective Bargaining Agreement are determined by credited major league
service. A player is credited for a day of major league service for each day of
the baseball season that he is on a club's active roster. A total of 172 days of
major league service constitutes a year. Under the Collective Bargaining
Agreement, any club, or any player with a total of three or more (but less than
six) years of major league service, may submit the issue of that player's salary
to final and binding arbitration without the consent of the other party upon
expiration of his then current contract. Those players with more than two years
but less than three years of major league service are also
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eligible for arbitration if they fall within the top 17% of such players based
on major league service. When a player completes six years of major league
service and the term of his then current contract has expired, he becomes
eligible for free agency. An eligible player may elect to become a free agent
with respect to the following season by giving notice to the Players Association
within a 15-day period beginning on the later of October 15 or the day following
the last game of the World Series. Generally, once a player is a free agent, he
has the right to negotiate and contract with any MLB club subject to his former
team's right to offer, prior to December 7, to sign the free agent and arbitrate
the contract salary amount. If the former club does not offer to arbitrate or
the free agent does not accept the offer, the former club loses its rights to
negotiate with or sign the free agent until the succeeding May 1. Clubs are
compensated with draft choices if a ranking free agent signs with another club
prior to December 7 or after his former club's offer to arbitrate. Additionally,
a player who has at least three years of major league service and whose contract
is assigned outright to a minor league team or a player whose contract is being
assigned outright to a minor league team for the second or any subsequent time,
may reject the assignment and elect free agency. Prior to eligibility for
arbitration, a player's salary may be established by the club subject to the MLB
minimum base salary and maximum reduction rules.
MAJOR LEAGUE RULES
The MLB clubs operate under the Major League Rules (the "Rules"). The Rules
govern matters including drafting, signing and trading players, the minor league
system and team and player conduct.
MLB Draft System. Professional baseball conducts an annual draft of first
year players referred to as the "Rule 4" draft each June. Eligible players are
limited to those players who reside in the United States, Canada, Puerto Rico
and other United States territories or possessions and who have not previously
contracted with a major league or minor league club. A player eligible for the
draft may be signed only after the selection meeting. The draft is limited to 50
rounds. The order of selection is based on the prior season overall win-loss
record in the respective league excluding post-season games. Selections
alternate between American League and National League clubs. The first selection
is made by an American League club in odd-numbered years and by a National
League club in even-numbered years.
Signing Players. A club has the exclusive right to contract with the
players it selects in the Rule 4 draft for a period of one year following the
draft, subject to MLB's signing rules. If the drafting club has not signed the
player, he may be eligible for the next Rule 4 draft. Generally, a player who is
a high school student in the United States (including Puerto Rico and other
United States territories and possessions) or Canada is not eligible to enter
into a professional baseball contract during any period he is eligible to
participate in high school athletics. Generally, once a player has attended a
college class he is not eligible for selection in the draft again until he has
completed his junior year or has withdrawn from college and remained out of
college for a period of 120 days. A player who is not eligible for the draft
because he is not a resident of the United States or Canada must be 17 years of
age at the time of signing or will attain 17 years of age prior to the later of
September 1 or the last day of the season for which the player has contracted.
All player contracts for major league and minor league service are uniform
agreements and there is a minimum salary for each level of play. Major league
and minor league contracts can include certain additional provisions that
establish performance incentives and provide benefits to the player. Generally,
players selected by a club initially enter into a contract for minor league
service. After three or four seasons in the minor leagues, depending on the
player's age at the time he is drafted, if a player has not been put on a club's
major league team 40-man roster, he is eligible to be selected by another major
league club for its major league roster pursuant to the "Rule 5" draft. The Rule
5 draft is held each December. If a club selects a player in the Rule 5 draft,
the selecting club must keep the player on its active 25-man roster for the
entire next season. If the player is not kept on the active roster, the
selecting club must obtain waivers from all other MLB clubs and offer the player
back to his original team before the player may be assigned to a minor league
affiliate of the selecting club.
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Reserve System. Each MLB club is required to maintain and file with the
Commissioner a major league reserve list and a minor league reserve list for
each of its minor league affiliates. A player on a club's major league or minor
league reserve list is not eligible to play or negotiate with any other major
league or minor league club unless that player's contract has been terminated or
assigned. A club may reserve, and retain the rights to, a maximum of 40 players
for its major league club, 38 players for a Class AAA club, 37 players for a
Class AA club and 35 players for each Class A club and each Rookie League club.
From Opening Day until August 31 of each season, the maximum number of players
allowed on a major league active list is 25 and from September 1 until the end
of the season, the maximum number is 40.
Inactive Lists. Upon application to the Commissioner, a club may request
that a player unable to play because of injury or illness be placed on a
disabled list for a minimum period of 15 or 60 days based on the severity of the
ailment. Players on the 15-day list count against the reserve list, but not
against the active list, while players on the 60-day list do not count against
either the reserve or active list. Players may be put on the voluntarily
retired, restricted, disqualified or ineligible list and do not count against
the reserve or active lists. Players put on the suspended list by the
Commissioner count against both the active and reserve lists.
Termination of Player Contracts. A club may unconditionally release a
player from a major league contract at any time, subject to the player's
contractual right to termination pay, if the Club has received waivers of that
player's contract from all the other major league clubs. A waiver is permission
granted for certain assignments or unconditional release of a major league
player. Any other major league team may claim the player's contract for $1 if
unconditional release waivers are requested. Once claimed, a released player has
the option of terminating his contract or accepting the assignment to the major
league team claiming such player. If more than one team in the same league makes
a waiver claim, the contract will go to the club with the lowest standing in the
win-loss records. If claims are made by clubs in different leagues, the contract
will go to a club in the same league as the releasing club.
Assignment of Player Contracts. A team may assign a player's contract to
another major league club (for example, in connection with a trade with that
club) or a minor league club subject to certain rights of the player and other
clubs.
A player with at least five years of major league service may not be
assigned to a minor league club without his written consent. A player with at
least five years of major league service at the time of the assignment of his
contract and whose contract covers the next succeeding season, may elect, at the
conclusion of the season following the assignment, that his contract be assigned
to another major league club and he may specify not more than six clubs that are
unacceptable to him for such assignment. If the club fails to assign the
contract in accordance with the player's request, the player is eligible to
become a free agent. Once a player's contract has been assigned pursuant to that
player's request, he does not have the right to require another assignment or
become a free agent until he has completed another three years of service.
During the period beginning August 1 and ending on the last day of the season,
waivers from other clubs must be obtained prior to any assignment to another
major league club. A player with at least ten years of major league service, the
last five of which have been with one club, may not be assigned to any club
without his written consent.
A major league player's contract may be assigned to a minor league club
with options to recall that player for up to three seasons without obtaining
waivers. Waivers are required for an optional assignment to the minor leagues if
the player has three or more years of major league service. A club may only have
an optional agreement in place for a player for three seasons, and the maximum
number of optional agreements that any club can have in effect at one time is
16.
If a major league club proposes to remove a player from its 40-man roster
by making an outright assignment of that player's contract to a minor league
team or to cancel a right to recall a player under an existing optional
agreement, waivers are required. If a club is awarded the assignment of a
contract pursuant to that club making a waiver claim, the consideration to be
paid to the assignor club is established by agreement between the clubs, but may
not be less than $20,000.
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MLB PROPERTIES
Major League Baseball Properties ("MLB Properties") was established in 1966
and markets and manages the licensing of the names, logos, uniforms, mascots,
stadium names and other trademarks and intellectual property rights ("Marks") of
all MLB clubs, the American League, the National League, MLB and MLB's special
events (including All-Star and post-season games). Each club owns its own Marks
and has appointed MLB Properties as its exclusive agent to license its Marks.
Each club has the right to operate club-owned stores within a 200-mile radius of
the team's home field. All of the Company's Indians Team Shops are located
within the prescribed area. MLB Properties conducts licensing activities
worldwide and enters into agreements to permit use of the Marks with corporate
sponsors and manufacturers of retail products and media publishers and
producers. MLB Marks are incorporated into advertising campaigns, featured in
clothing and novelties and used in videos, motion pictures and print media. In
addition to promoting MLB and MLB clubs, the activities of MLB Properties
generate a significant amount of revenue. After payment of an agency commission
to MLB Properties, the net revenues are distributed equally among the MLB clubs.
MAJOR LEAGUES CENTRAL FUND
The Major Leagues Central Fund serves as a receipt and disbursement fund
for certain transactions that are shared by the 30 MLB clubs. The Major Leagues
Central Fund's primary sources of funds are national television (broadcast and
cable) and radio broadcasting revenue. The Major Leagues Central Fund's excess
of revenue over expenses is distributed to the clubs or used for specific
purposes, as approved by the clubs.
Currently, the Commissioner, as agent for the MLB clubs, has agreements
with each of Fox Broadcasting Company, Fox Sports Net and The National
Broadcasting Company, Inc. for the telecasting of Major League Baseball games
through the 2000 season and agreements with ESPN, Inc., and Turner Broadcasting
System, Inc. through the 2002 season. The agreements provide for the telecasting
of a specified number of regular season games, the All-Star Game, the Division
Series, the League Championship Series and the World Series.
MLB has an agreement with ESPN Radio for broadcasting Major League Baseball
games through the 2002 season. The agreement provides for the broadcasting of
regular season games, the All-Star Game and post-season games. In addition, MLB
clubs that have broadcast agreements with, or cable distribution through, cable
"superstations" are obligated to contribute a portion of the revenues derived
from those agreements to the Major Leagues Central Fund.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
directors, proposed directors and executive officers of the Company. The Board
of Directors currently consists of two members, Richard E. Jacobs and Martin J.
Cleary. The Company will expand the Board of Directors on or prior to completion
of the Offering to five members to include Robert W. Brown, M.D., Edward G.
Ptaszek, Jr. and William B. Summers, Jr. The directors named below have been or
will be elected to serve until the next annual meeting of shareholders or until
their successors are duly elected and qualified. Executive officers of the
Company serve at the pleasure of the Board of Directors, subject to the terms of
their employment agreements.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Richard E. Jacobs................... 72 Chairman of the Board,
President and Chief Executive Officer
John H. Hart........................ 49 Executive Vice President and General Manager
Dennis Lehman....................... 46 Executive Vice President, Business
Daniel J. O'Dowd.................... 38 Vice President, Baseball Operations and
Assistant General Manager
Jeffry L. Overton................... 41 Vice President, Marketing and Communications
Kenneth E. Stefanov................. 40 Vice President, Finance
David W. Pancoast................... 56 Secretary
Anthony W. Weigand.................. 60 Treasurer
Martin J. Cleary.................... 62 Director
Robert W. Brown, M.D................ 73 Proposed Director
Edward G. Ptaszek, Jr............... 47 Proposed Director
William B. Summers, Jr.............. 47 Proposed Director
</TABLE>
Biographical information with respect to the Company's executive officers,
other than Mr. Pancoast and Mr. Weigand, is set forth under the heading
"Business -- Business Operations -- Ownership and Management." Biographical
information concerning the Company's directors, proposed directors, Mr. Pancoast
and Mr. Weigand is set forth below.
Richard E. Jacobs is Chairman of the Board, President and Chief Executive
Officer of the Company. Mr. Jacobs has been Chairman of the Board, Chief
Executive Officer and President of CBC, the general partner of the Partnership,
and has been the controlling owner of the Indians since 1986. Mr. Jacobs is also
Chairman of the Board and Chief Executive Officer of The Richard E. Jacobs Group
Inc., a real estate management and development company ("The Jacobs Group").
Martin J. Cleary has been Vice Chairman of The Jacobs Group since January
1998. From 1981 to January 1998 he was President and Chief Operating Officer of
The Jacobs Group.
David W. Pancoast has been General Counsel and Secretary of The Jacobs
Group since 1992.
Anthony W. Weigand has been Vice President and Treasurer of The Jacobs
Group since 1975. From 1975 to December 1997 he was also Chief Financial Officer
of The Jacobs Group.
Robert W. (Bobby) Brown, M.D., has been retired since 1994. From 1984 to
1994 he served as President of the American League. Prior to serving as
President of the American League, Dr. Brown had a distinguished career as a
cardiologist. Dr. Brown is a former MLB player.
Edward G. Ptaszek, Jr. has been a partner with the law firm of Baker &
Hostetler LLP, Cleveland, Ohio since 1985. From 1978 to 1985 he was an associate
with the firm. Baker & Hostetler provides legal services to the Company.
William B. Summers, Jr. is the President and Chief Executive Officer of
McDonald & Company Investments, Inc. and is Chairman and Chief Executive Officer
of its wholly owned subsidiary, McDonald & Company Securities, Inc. Mr. Summers
has been President of McDonald & Company Investments, Inc. since
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<PAGE> 54
1989 and Chief Executive Officer since 1994. He served as President of McDonald
& Company Securities, Inc. from 1989 to 1995.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Upon completion of the Offering, the Company's Board of Directors will have
an Audit Committee. The Company's Audit Committee will make recommendations
concerning the engagement of independent public accountants, review with the
independent public accountants the plans and results of the audit engagement,
approve professional services provided by the independent public accountants,
review the independence of the independent public accountants, consider the
range of audit and nonaudit fees, review the independent public accountants'
letter of comments and management's responses, review the adequacy of the
Company's internal accounting controls and review major accounting or reporting
changes contemplated or made. The members of the Audit Committee will be Messrs.
Cleary, Ptaszek and Summers.
INDEMNIFICATION
The Company's Code of Regulations provides for the indemnification of
directors and officers of the Company to the maximum extent permitted by Ohio
law, and for the advancement of expenses incurred in connection with the defense
of any action, suit or proceeding that he was a party to by reason of the fact
that he is or was a director of the Company upon the receipt of an undertaking
to repay such amount unless it is ultimately determined that the director is
entitled to indemnification.
The Company has entered into indemnification agreements with each of its
directors and executive officers. These agreements generally: (i) confirm the
existing indemnity provided to them under the Company's Code of Regulations and
assure that this indemnity will continue to be provided; (ii) provide that if
the Company does not maintain directors' and officers' liability insurance, the
Company will, in effect, become a self-insurer of the coverage; (iii) provide
that, in addition, the directors and officers shall be indemnified to the
fullest extent permitted by law against all expenses (including legal fees),
judgments, fines, and settlement amounts paid or incurred by them in any action
or proceeding, including any action by or in the right of the Company, on
account of their service as a director, officer, employee, or agent of the
Company or at the request of the Company as a director, officer, employee,
trustee, fiduciary, manager, member or agent of another corporation,
partnership, trust, limited liability company, employee benefit plan or other
enterprise; and (iv) provide for the mandatory advancement of expenses to the
executive officer or director in connection with the defense of any proceedings,
provided the executive officer or director agrees to reimburse the Company for
that advancement if it is ultimately determined that the executive officer or
director is not entitled to indemnification for that proceeding under the
agreement. Coverage under the agreements is excluded: (A) on account of conduct
which is finally adjudged to be knowingly fraudulent, deliberately dishonest, or
willful misconduct; or (B) if a final court of adjudication shall determine that
such indemnification is not lawful; or (C) in respect of any suit in which
judgment is rendered for violation of Section 16(b) of the Securities Exchange
Act of 1934 or similar provisions of any federal, state, or local statutory law;
or (D) on account of any remuneration paid which is finally adjudged to have
been in violation of law; or (E) on account of conduct occurring prior to the
time the executive officer or director became an officer, director, employee, or
agent of the Company or its subsidiaries (but in no event earlier that the time
such entity became a subsidiary of the Company); or (F) with respect to
proceedings initiated or brought voluntarily by the executive officer or
director and not by way of defense, except for proceedings brought to enforce
rights under the indemnification agreement.
The Company maintains a directors' and officers' liability insurance policy
which insures the officers and directors of the Company from any claim arising
out of an alleged wrongful act by such persons in their respective capacities as
officers and directors of the Company.
COMPENSATION OF DIRECTORS
Each member of the Company's Board of Directors who is not also an employee
of the Company receives an annual fee of $15,000 for serving as a director of
the Company and a fee of $1,000 for each Board meeting
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<PAGE> 55
and committee meeting attended. The Company has established a Directors'
Deferred Compensation Plan pursuant to which each non-employee director may
elect to defer up to 100% of annual and meeting fees to be paid by the Company.
Amounts deferred are converted into units equivalent to the Class A Common
Shares such that the value of a participant's account will fluctuate based on
the market price of the Class A Common Shares. Directors who are also employees
of the Company do not receive any additional compensation for their services as
directors. The Company reimburses out-of-pocket expenses incurred by all
directors in connection with attending Board and committee meetings.
In connection with the Offering, the Company will grant to each
non-employee director options to purchase 15,000 Class A Common Shares at an
exercise price equal to the initial public offering price. The options will vest
in three equal annual increments beginning one year after the date of grant and
will expire ten years after the date of grant.
EXECUTIVE COMPENSATION
The following table sets forth the annual base salary expected to be paid
to the chief executive officer and the other four most highly compensated
executive officers of the Company (each a "Named Executive Officer") during
1998.
<TABLE>
<CAPTION>
NAME PRINCIPAL POSITION BASE SALARY
---- ------------------ -----------
<S> <C> <C>
Richard E. Jacobs.................... Chairman of the Board,
President and Chief Executive Officer $700,000
John H. Hart......................... Executive Vice President and General
Manager $600,000
Dennis Lehman........................ Executive Vice President, Business $300,000
Daniel J. O'Dowd..................... Vice President, Baseball Operations
and Assistant General Manager $300,000
Jeffry L. Overton.................... Vice President, Marketing and
Communications $225,000
</TABLE>
STOCK OPTION PLAN
The Company's Board of Directors has adopted a Long-Term Incentive Plan
(the "Stock Option Plan"). The purpose of the Stock Option Plan is to enable the
Company to attract, retain and reward key employees of the Company and its
affiliates and members of the Board of Directors of the Company and to
strengthen the mutuality of interest between such key employees and the
Company's shareholders. Grants of incentive or nonqualified share options,
restricted shares, share appreciation rights in tandem with options ("SARs"),
other share-based awards or any combination thereof, may be issued under the
Stock Option Plan to officers and key employees of the Company, including
employees of the Partnership, who are responsible for or contribute to the
management, growth or profitability of the business of the Company and its
affiliates. The Board of Directors administers the Stock Option Plan and is
responsible for determining the type, amount and timing of grants and awards.
The Company has reserved 700,000 Class A Common Shares for issuance under the
Stock Option Plan. No participant in the Stock Option Plan may be granted stock
options or other share awards in any calendar year for more than 100,000 shares.
The share limitations, shares reserved and the terms of outstanding awards will
be adjusted, as the Board of Directors deems appropriate, in the event of a
share dividend, split or other change in the corporate structure of the Company
affecting the shares.
The term of each option granted under the Stock Option Plan will not exceed
ten years from the date of grant. The Board of Directors may grant tandem SARs
to any person granted an option under the Stock Option Plan. Each tandem SAR
will represent the right to receive, in cash or shares as the Board of Directors
determines, a distribution in an amount equal to the excess of the fair market
value of the option shares (to which the SAR corresponds) on the date of
exercise over the exercise price for those shares. Each tandem SAR expires at
the same time as its corresponding option. The exercise of an option will result
in an immediate forfeiture of its corresponding SAR, and the exercise of an SAR
will cause an immediate forfeiture
54
<PAGE> 56
of its corresponding option. The Stock Option Plan provides that all options and
tandem SARs will become exercisable on a change in control (as defined in the
Stock Option Plan) of the Company.
The Board of Directors may award Common Shares under the Stock Option Plan
and may place restrictions on the transfer or defer the date of receipt of those
shares. Each award will specify any applicable restrictions or deferral date,
the duration of those restrictions, and the time at which the restrictions
lapse. Participants may be required to deposit shares with the Company during
the period of any restrictions.
The Stock Option Plan provides for vesting, exercise or forfeiture of
rights granted under the Stock Option Plan on death, disability, termination of
employment or a change of control. The Board of Directors may modify, suspend or
terminate the Stock Option Plan as long as it does not impair the rights of any
participant.
Upon completion of the Offering, the Company expects to grant to employees
of the Company options to purchase not more than 220,000 Class A Common Shares
with an exercise price equal to the initial public offering price, including
options for the Named Executive Officers as follows: Mr. Jacobs -- 0; Mr.
Hart -- 15,000; Mr. Lehman -- 15,000; Mr. O'Dowd -- 7,500; and Mr.
Overton -- 7,500. The Options will vest in three equal annual increments
beginning one year after the date of grant and will expire ten years from the
date of grant.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of Messrs.
Hart, O'Dowd, Lehman and Overton. The term of each agreement is described in
"Business -- Business Operations -- Ownership and Management." Pursuant to their
respective agreements, the executives agree to devote their full time and
efforts exclusively to the Company, agree not to engage in conduct which is
detrimental to the Company and agree to abide by and be subject to the
discipline of the Commissioner. The Company has the right to terminate an
executive prior to the expiration of that executive's agreement if the executive
fails to comply with the employment agreement or is fraudulent or dishonest in
the performance of his duties. If an executive is terminated without cause, the
agreements require the executive to seek and accept other comparable employment,
either from another club or another baseball or non-baseball employer, and the
amount received by the executive from such other employment, if obtained,
reduces the amount the executive is owed by the Company. By their terms, the
agreements are subject to and are governed by all applicable rules and
regulations of Major League Baseball and the American League.
Each agreement establishes an annual salary for each year of the term of
the agreement, including the option years. The salaries for each of the
executives for 1998 are set forth under "-- Executive Compensation." The
agreements provide for specified salary increases over the terms of the
agreements. In addition, the agreements provide for varying bonuses based on the
achievement of specified Company objectives. The agreements permit the
executives to elect to defer the payment of a portion of their salaries.
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<PAGE> 57
PRINCIPAL SHAREHOLDERS
The following table sets forth, upon completion of the Offering, certain
information regarding the beneficial ownership of each class of the Company's
Common Shares by each of the Company's (i) directors, proposed directors and
Named Executive Officers, (ii) each person who is known by the Company to
beneficially own five percent or more of the outstanding Class A Common Shares
or Class B Common Shares, and (iii) all of the directors, and executive officers
of the Company as a group.
<TABLE>
<CAPTION>
CLASS A COMMON SHARES CLASS B COMMON SHARES TOTAL
----------------------- ----------------------- PERCENTAGE
NUMBER OF PERCENT OF NUMBER OF PERCENT OF VOTING
NAME(1) SHARES CLASS SHARES CLASS CONTROL
------- --------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Richard E. Jacobs(2)................. 133,200 3.2 2,281,667 99.9 99.9
Martin J. Cleary..................... 6,176 * 2,290 * *
Robert W. Brown, M.D................. -- -- -- -- --
Edward G. Ptaszek, Jr................ -- -- -- -- --
William B. Summers, Jr............... -- -- -- -- --
John H. Hart......................... -- -- -- -- --
Dennis Lehman........................ -- -- -- -- --
Daniel J. O'Dowd..................... -- -- -- -- --
Jeffry L. Overton.................... -- -- -- -- --
All directors and executive officers
as a group (seven persons)......... 139,376 3.2 2,283,957 100.0 99.9
</TABLE>
- ---------------
* Less than one percent.
(1) Unless otherwise indicated, the listed beneficial owner has sole voting and
investment power over such shares. The table assumes no exercise of the
Underwriters' over-allotment option.
(2) Consists of shares held by Richard E. Jacobs as sole trustee under
Declaration of Trust dated April 23, 1987 (the "Richard Jacobs Trust"), and
as sole trustee of the David H. Jacobs Marital Trust (the "David Jacobs
Trust"). Of the shares listed, 75% are held by the Richard Jacobs Trust, of
which Mr. Jacobs is currently the sole beneficiary, and 25% are held by the
David Jacobs Trust, of which the heirs of David H. Jacobs are the
beneficiaries. Does not include 6,043,334 Class A Common Shares issuable to
CBC (of which the Jacobs family trusts are the sole shareholders) upon
exchange of limited partnership interests in the Partnership. See "The
Partnership -- Limited Partner Rights."
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<PAGE> 58
CERTAIN TRANSACTIONS
In connection with the formation of the Company in March 1998, the Jacobs
family trusts, of which Richard E. Jacobs is the sole trustee, acquired 100
Common Shares of the Company for a price of $1,500. Upon the amendment and
restatement of the Company's articles of incorporation to provide for two
classes of Common Shares, the 100 shares became 100 Class A Common Shares.
In connection with the Formation Transactions, the Jacobs family trusts
will receive 2,281,667 Class B Common Shares, 133,100 Class A Common Shares (in
addition to those described in the preceding paragraph) and $55.7 million in
cash, and Martin J. Cleary will receive 2,290 Class B Common Shares, 6,176 Class
A Common Shares and $55,800 in cash. Richard E. Jacobs, the sole trustee of the
Jacobs family trusts, is the Chairman of the Board, President and Chief
Executive Officer of the Company, and Mr. Cleary is a Director of the Company.
See "Formation Transactions."
As of the date of this Prospectus, the Partnership has borrowed an
aggregate of $35.5 million under the MLB Credit Facility. Substantially all of
those funds have been loaned to CBC. In March 1998, the Partnership distributed
$49.2 million to its partners and CBC repaid its $35.5 million debt to the
Partnership.
Mr. Jacobs is Chairman of the Board and Chief Executive Officer of The
Jacobs Group, a real estate development and management company, and Mr. Cleary,
a director of the Company, is Vice Chairman of The Jacobs Group. The Company has
paid The Jacobs Group for certain legal, accounting and administrative services
it provided to the Company. For the years ended December 31, 1995, 1996 and
1997, the aggregate amounts paid for these services were $327,000, $335,000 and
$267,000, respectively. In addition, during 1996, the Company paid $523,000 of
payroll and related taxes to Ballpark Services, Inc., a company controlled by
the Jacobs family trusts, for the provision of game day labor services. The
Company anticipates that The Jacobs Group will continue to provide to the
Company certain administrative services, including cash management, following
the Offering. The Company operates four Cleveland Indians Team Shops in shopping
malls owned and managed by The Jacobs Group. Pursuant to leases between the
Company and affiliates of The Jacobs Group, the Company paid $194,000, $213,000
and $554,000 in 1995, 1996 and 1997, respectively. The Company believes the
terms of its administrative services arrangements and its leases with The Jacobs
Group are at least as favorable as those that could be obtained from an
unrelated third party in an arms'-length transaction.
Mr. Jacobs, individually and as trustee of the David H. Jacobs Marital
Trust, is the guarantor of any outstanding amounts under the Company's line of
credit with KeyBank. The maximum amounts outstanding during 1995, 1996 and 1997
were $5.5 million, $0 and $0, respectively.
Edward G. Ptaszek, Jr., a proposed director of the Company, is a partner
with the law firm of Baker & Hostetler LLP. Baker & Hostetler has provided legal
services to the Company in the past and in connection with the Offering, and the
Company expects that the firm will continue to provide such services.
William B. Summers, Jr., a proposed director of the Company, is the
Chairman and Chief Executive Officer of McDonald & Company Securities, Inc., the
managing underwriter for the Offering. McDonald & Company Securities, Inc. has
provided investment services to the Company in the past, and the Company expects
the firm will provide such services to the Company in the future.
Following the Offering, all transactions between the Company and its
directors, officers or principal shareholders will require the prior approval of
the Audit Committee of the Board of Directors.
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<PAGE> 59
THE PARTNERSHIP
The following is a summary of the material terms of the Partnership
Agreement. This summary, including the descriptions of certain provisions set
forth elsewhere in this Prospectus, is qualified in its entirety by reference to
the Partnership Agreement, which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
ORGANIZATION AND MANAGEMENT
The Partnership is organized as an Ohio limited partnership pursuant to the
terms of the Partnership Agreement. The Company, as the sole general partner of
the Partnership (the "General Partner"), will have full, exclusive, and complete
responsibility and discretion in the management and control of the Partnership,
and the limited partner will have no authority to transact business for, or
participate in the management activities or decisions of, the Partnership. Any
decision for the Partnership, however, to make a general assignment for the
benefit of creditors, or to appoint or acquiesce in the appointment of a
custodian, receiver, or trustee for all or any part of the assets of the
Partnership, to take title to any property other than in the name of the
Partnership, to institute any proceeding for bankruptcy, to dissolve the
Partnership or to amend the Partnership Agreement, except to admit new limited
partners or to reflect changes in percentage interests in the Partnership, would
require the consent of the limited partner.
Upon completion of the Formation Transactions and the Offering, CBC will be
the sole limited partner of the Partnership.
TRANSFERABILITY OF INTERESTS
The Partnership Agreement provides that the General Partner may not
voluntarily withdraw from the Partnership, or transfer or assign its interest in
the Partnership, except with the consent of the limited partner, after a vote
amending the Partnership Agreement. CBC, as the limited partner, may transfer
its interests in the Partnership without the consent of the General Partner,
subject to certain limitations.
CAPITAL CONTRIBUTIONS
The Partnership Agreement provides that if the Partnership requires
additional funds at any time or from time to time in excess of funds available
to the Partnership from operations, borrowings or capital contributions, the
General Partner may borrow such funds from a financial institution or other
lender and lend such funds to the Partnership on the same terms and conditions
as are applicable to the General Partner's borrowing of such funds or, to the
extent that the General Partner does not borrow all the required funds, the
General Partner may make capital calls for such funds. The limited partner has
no obligation to make any additional capital contribution but the limited
partner's interest in the Partnership will be diluted if the General Partner
makes additional capital contributions pursuant to a capital call and the
limited partner does not.
LIMITED PARTNER RIGHTS
The limited partner is entitled to exchange all or a portion of its Units
in the Partnership for Class A Common Shares, although the Company has the right
to substitute cash for the shares. The limited partner rights permit CBC to
exchange each Unit owned by it for one Class A Common Share. This one-for-one
exchange ratio will be adjusted in the event of a stock split, stock dividend,
or other event having a dilutive or anti-dilutive effect on the limited partner
rights. If an exercise of the limited partner rights would result in CBC
receiving cash, the amount of the cash payment would be based upon the trading
price of the Class A Common Shares for the five trading days prior to exercise.
The limited partner rights may be exercised by CBC at any time commencing
one year after the date of this Prospectus, in whole or in part. The limited
partner rights will expire upon the termination of the Partnership if not
exercised prior to that date.
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<PAGE> 60
REGISTRATION RIGHTS
For a description of certain piggy-back registration rights held by CBC
with respect to Class A Common Shares it receives upon exercise of limited
partner rights, see "Shares Eligible for Future Sale."
TAX MATTERS
The General Partner will be the tax matters partner of the Partnership and,
as such, will have authority to make tax elections under the Internal Revenue
Code of 1986, as amended (the "Code"), on behalf of the Partnership.
ALLOCATION OF NET INCOME OR NET LOSS
The net income or net loss of the Partnership generally will be allocated
to the General Partner and the limited partner in accordance with their
respective percentage interests in the Partnership, subject to compliance with
the provisions of Section 704(b) of the Code and the Treasury Regulations
promulgated thereunder.
A number of special allocations will be made in respect of tax items of the
General Partner and the Partnership. Under Section 754 of the Code, the General
Partner will receive additional amortization attributable to the stepped-up
basis in the Partnership as a result of the General Partner's acquisition of
partnership interests for cash. See "Formation Transactions." Gain recognized by
the Partnership on the sale of Partnership assets which is unrealized gain
attributable to the period prior to the completion of the Offering will be
allocated entirely to the limited partner. Any excess gain recognized by the
Partnership on the sale of Partnership assets will be allocated in accordance
with the partners' percentage interests in the Partnership.
DISTRIBUTIONS
The Company, as the General Partner of the Partnership, is generally not
permitted to distribute any portion of Net Operating Cash Flow or Net Sales
Proceeds (in each case as defined in the Partnership Agreement). However, the
Company is required to cause the Partnership to distribute cash to the partners
on a quarterly basis an amount estimated to approximate the partners' federal,
state and local income taxes as a result of the Partnership's net income for
such period using certain assumptions specified in the Partnership Agreement. In
addition, the Company may cause the Partnership to make distributions to its
partners if, prior to the making of such distributions, the Board of Directors
of the Company shall have, (i) by resolution adopted by a majority of the
directors who are not affiliates of the limited partner, approved a cash
dividend on its Common Shares in an amount equal to the Company's share of such
distribution, or (ii) by resolution unanimously adopted by all of the directors
who are not affiliates of the limited partner, made a determination that it is
in the best interests of the General Partner's shareholders that the funds that
would be the subject of such distribution be used to meet existing obligations
of the General Partner or obligations anticipated to be incurred by the General
Partner within six months of the date of such distribution. All such
distributions will be made in accordance with the partners' percentage interests
in the Partnership.
OPERATIONS
Pursuant to the Partnership Agreement, the Partnership will assume and pay
when due, or reimburse the General Partner for payment of all costs and expenses
relating to the formation, continuity of existence, and operations of the
General Partner.
TERM
The Partnership will continue in full force and effect until ,
2048, or until sooner dissolved upon the dissolution or termination of the
General Partner (unless the limited partner elects to continue the Partnership),
the election of the General Partner and the limited partner to dissolve the
Partnership, or the sale or other disposition of all or substantially all the
assets of the Partnership.
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<PAGE> 61
DESCRIPTION OF CAPITAL SHARES
GENERAL
As of May 12, 1998, the Company's authorized capital shares consisted of
850 Common Shares, without par value, 100 of which were outstanding and owned by
the Jacobs family trusts. In anticipation of the Formation Transactions and the
Offering, the current shareholders of the Company will adopt Amended and
Restated Articles of Incorporation (the "Articles") to authorize 27,000,000
Class A Common Shares, without par value, 3,000,000 Class B Common Shares,
without par value, and 1,000,000 preferred shares, the terms of which will be
set by the Board of Directors upon issuance (the "Preferred Shares"). Upon the
effectiveness of the Articles, each of the 100 outstanding Common Shares will
become 100 Class A Common Shares.
COMMON SHARES
Upon completion of the Formation Transactions and the Offering, there will
be 4,139,376 Class A Common Shares outstanding (4,739,376 shares if the
Underwriters' over-allotment option is exercised in full) and 2,283,957 Class B
Common Shares outstanding. The Class A Common Shares and Class B Common Shares
are identical in all respects, except (i) that each Class A Common Share is
entitled to one vote and each Class B Common Share is entitled to 10,000 votes
and (ii) Class B Common Shares are subject to certain restrictions on transfer
described below. In the event of a liquidation, dissolution or winding up of the
Company, the holders of Class A Common Shares and Class B Common Shares are
entitled to share equally and ratably in the assets of the Company, if any,
remaining after paying all debts and liabilities of the Company. Subject to the
rights of holders of Preferred Shares, the holders of Class A and Class B Common
Shares are entitled to receive dividends, on a share-for-share basis if, as and
when declared by the Board of Directors out of funds legally available therefor,
subject to the Governing Documents. See "Dividend Policy." Beginning one year
after the date of this Prospectus, holders of Class B Common Shares are entitled
to exchange each Class B Common Share for one Class A Common Share at any time.
Holders of Common Shares have the right to cumulate their votes in the election
of directors. However, because of the voting control held by Mr. Jacobs, holders
of Class A Common Shares will not be able to impact the election of directors
even if they cumulate their votes.
The Class B Common Shares are not generally transferrable except (i) in
very limited instances to family members, trusts, other holders of Class B
Common Shares, charitable organizations and entities controlled by such persons
and (ii) in connection with a merger, consolidation or other transaction which
provides that all holders of Class A Common Shares will be entitled to receive
the same type and amount of consideration in respect of their shares as is
provided to the holders of Class B Common Shares. These restrictions are in
addition to those imposed by the Governing Documents. Any amendment to these
provisions requires, in addition to a vote of the holders of Class B and Class A
Common Shares voting together, the vote of a majority of the Class A Common
Shares, exclusive of any Class A Common Shares held by a holder of Class B
Common Shares or an affiliate of any such holder.
These restrictions on transfer are subject to a one-time exception that
will permit the holders of Class B Common Shares to transfer Class B Common
Shares to any person or group of persons (collectively, an "Acquiring Person")
in a transaction within three years following Mr. Jacobs' death. This exception
will not apply to any subsequent transfer by an Acquiring Person, and all Class
B Common Shares acquired by an Acquiring Person will be subject to the
restrictions on transfer described above. In addition, for a period of three
years following the date that an Acquiring Person first becomes the beneficial
owner of Class B Common Shares (the "Acquisition Date") neither the Acquiring
Person nor any affiliate of the Acquiring Person may make a tender offer for
Class A Common Shares or merge or consolidate with the Company, propose to
acquire or authorize the acquisition by the Acquiring Person or its affiliates
of substantially all the assets of the Company, or authorize or vote any Common
Shares in favor of an amendment to the Articles to effect any recapitalization,
reverse stock split or other similar transaction with respect to the Common
Shares which, if effected, would directly or indirectly increase the Acquiring
Person's beneficial ownership of Common Shares, unless in any such case, all
holders of Class A Common Shares receive or are entitled to receive for their
Class A Common Shares consideration having a value equal to the greater of: (i)
the average price per share that the Acquiring Person paid for the Common Shares
(or securities convertible into or exchangeable for
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<PAGE> 62
Common Shares) in connection with the transaction or series of transactions in
which the Acquiring Person became such; and (ii) the fair market value of a
Class A Common Share on the date prior to the public announcement of any of the
transactions described above (determined on the basis of the average closing
price of a Class A Common Share during the 20 trading days preceding the date of
such announcement).
The Governing Documents contain limitations on the ownership by clubs and
their owners, shareholders, officers, directors and employees of stock and other
financial interests in other MLB clubs. In particular, the Governing Documents
require that any person acquiring more than a 5% interest in a publicly-traded
entity that owns a club obtain approval of the Commissioner before making such
acquisition. To ensure the Club's compliance with the Governing Documents, the
Company's Amended and Restated Articles of Incorporation state that no person
(other than Mr. Jacobs) may beneficially own 5% or more of the Class A Common
Shares without first receiving written approval from the Office of the
Commissioner. The Company's Amended and Restated Articles of Incorporation also
require any person beneficially owning 5% or more of the Class A Common Shares
to submit at the Company's request a statement stating such information as the
Company may request in order to ensure compliance with the Amended and Restated
Articles of Incorporation and the Governing Documents. Failure by a holder of
Class A Common Shares to comply with these restrictions may result in a forced
sale of such holder's interest or the repurchase of such interests by the
Company. The Company's Articles of Incorporation provide that the Company may
redeem, at the lower of fair market value or cost, shares held by any person or
entity who becomes the owner of 5% or more of the Company's Class A Common
Shares without the approval of MLB. These restrictions will be contained in a
legend on each certificate issued evidencing Class A Common Shares.
All of the Common Shares to be issued in connection with the Formation
Transactions will be fully paid and nonassessable, and all of the shares of
Class A Common Shares offered hereby, when issued, will be fully paid and
nonassessable.
PREFERRED SHARES
The Board of Directors is authorized to issue, from time to time, without
further action by the shareholders, Preferred Shares in one or more classes or
series, and to fix or alter the designations, powers and preferences, and
relative, participating, optional or other rights, if any, and qualifications,
limitations or restrictions thereof, including, without limitation, dividend
rights (and whether dividends are cumulative), conversion rights, if any, rights
and terms of redemption (including sinking fund provisions, if any), redemption
price and liquidation preferences of any unissued shares or wholly unissued
series of Preferred Shares. In addition, the Board may establish the number of
shares constituting any such class or series and the designation thereof, and
increase or decrease the number of shares of any such class or series subsequent
to the issuance of shares of such class or series, but not below the number of
shares of such class or series then outstanding.
CERTAIN PROVISIONS OF OHIO LAW
Section 1701.59 of the Ohio Revised Code (the "Ohio Code") provides, with
certain limited exceptions, that a director shall be held liable in damages for
any action he takes or fails to take as a director only if it is proved by clear
and convincing evidence that his action or failure to act involved an act or
omission undertaken with deliberate intent to cause injury to the corporation or
with reckless disregard for its best interest. In addition, Section 1701.59 of
the Ohio Code provides that a director of an Ohio corporation, in determining
what he reasonably believes to be in the best interests of the corporation,
shall consider the interests of the corporation's shareholders and may consider,
in his discretion, any of the following: (i) the interests of the corporation's
employees, suppliers, creditors and customers; (ii) the economy of the State of
Ohio and the nation; (iii) community and societal considerations; and (iv) the
long-term as well as short-term interests of the corporation and its
shareholders, including the possibility that these interests may be best served
by the continued independence of the corporation.
The Ohio Code also authorizes Ohio corporations to indemnify officers and
directors from liability if the officer or director acted in good faith and in a
manner reasonably believed by the officer or director to be in or
61
<PAGE> 63
not opposed to the best interests of the corporation, and, with respect to any
criminal actions, if the officer or director had no reason to believe his action
was unlawful. In the case of an action by or on behalf of a corporation,
indemnification may not be made (i) if the person seeking indemnification is
adjudged liable for negligence or misconduct, unless the court in which such
action was brought determines such person is fairly and reasonably entitled to
indemnification or (ii) if liability asserted against such person concerns
certain unlawful distributions. The indemnification provisions of the Ohio Code
require indemnification if a director or officer has been successful on the
merits or otherwise in defense of any action, suit or proceeding that he was a
party to by reason of the fact that he is or was a director or officer of the
corporation. The indemnification authorized under Ohio law is not exclusive and
is in addition to any other rights granted to officers and directors under the
articles of incorporation or code of regulations of the corporation or any
agreement between officers and director and the corporation. A corporation may
purchase and maintain insurance or furnish similar protection on behalf of any
officer or director against any liability asserted against him and incurred by
him in his capacity, or arising out of the status, as an officer or director,
whether or not the corporation would have the power to indemnify him against
such liability under the Ohio Code.
Section 1707.041 of the Ohio Code regulates control bids for corporations
in Ohio having certain concentrations of Ohio shareholders and permits the Ohio
Division of Securities to suspend a control bid if certain information is not
provided to offerees. A control bid includes the purchase or offer to purchase
any equity security of the Company from a resident of Ohio if, after the
purchase of that security, the offeror would be directly or indirectly the
beneficial owner of more than 10% of any class of issued and outstanding equity
securities of the Company. Section 1707.043 of the Ohio Code, the so-called
"green mail disgorgement" statute, provides an Ohio corporation, or in certain
circumstances the shareholders of an Ohio corporation, the right to recover
profits realized under certain circumstances by persons who dispose of
securities of a corporation within 18 months of proposing to acquire such
corporation.
It is possible that the foregoing provisions will discourage other persons
from making a tender offer for or acquisition of substantial amounts of the
Company's Common Shares, or may delay changes in control or management of the
Company. The Company has elected in its Articles of Incorporation not to be
subject to Ohio's "Merger Moratorium" statute (Chapter 1704 of the Ohio Revised
Code) and its "Control Share Acquisition" statute (Section 1701.831 of the Ohio
Revised Code) in light of the control of the Company represented by the Class B
Common Shares and the Ownership Restrictions imposed by the Governing Documents.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Class A Common Shares is National
City Bank of Cleveland, Ohio.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, of the 27,000,000 authorized Class A
Common Shares, 4,139,376 Class A Common Shares will be issued and outstanding or
reserved for issuance pursuant to the exercise of presently exercisable stock
options. Of these 4,139,376 Class A Common Shares, the 4,000,000 shares
purchased in the Offering by persons who are not "affiliates" of the Company
will be freely tradeable, without restriction under the Securities Act. The
Company believes that the 139,376 Class A Common Shares and the 2,283,957 Class
B Common Shares to be issued to the Jacobs family trusts and Mr. Cleary in the
Formation Transactions will be considered "restricted securities" under the
Securities Act and the Jacobs family trusts and Mr. Cleary may not utilize Rule
144 until such shares have been held for at least one year. Each of the
6,043,334 limited partnership Units of the Partnership held by CBC is
exchangeable, beginning one year after the date hereof, into one Class A Common
Share. The Class A Common Shares issuable upon such exchange will be restricted
securities within the meaning of the Securities Act. However, the Company has
granted to CBC certain "piggy-back" registration rights with respect to the
Class A Common Shares issued in exchange for Partnership Units. These rights
permit CBC to include, at the cost of the Company, such Class A
62
<PAGE> 64
Common Shares in certain registration statements filed by the Company with
respect to Class A Common Shares.
The up to 700,000 Class A Common Shares reserved for issuance upon exercise
of options that may be granted pursuant to the Stock Option Plan will become
eligible for resale under Rule 144 one year subsequent to the date or dates that
the holders of such options exercise the same. Subsequent to the Offering,
however, the Company intends to file a registration statement on Form S-8 with
respect to the 700,000 Class A Common Shares reserved for issuance upon exercise
of options that may be granted pursuant to the Stock Option Plan.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned his or her shares for at
least one year, including an "affiliate," as that term is defined below, is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the then outstanding shares or the average
weekly trading volume of the then outstanding shares during the four calendar
weeks preceding each such sale. A person (or persons whose shares are
aggregated) who is not deemed an "affiliate" of the Company, and who has
beneficially owned shares for at least two years, is entitled to sell such
shares under Rule 144 without regard to the volume limitations described above.
As defined in Rule 144, an "affiliate" of an issuer is a person that directly or
indirectly, through the use of one or more intermediaries, controls, or is
controlled by, or is under the common control with, such issuer.
No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the Class A Common Shares prevailing from time to time. Sales of
substantial amounts of Class A Common Shares (including shares issued upon the
exercise of the outstanding stock options), or the perception that such sales
could occur, could adversely affect the prevailing market prices for the Class A
Common Shares.
The Company and the directors, proposed directors, executive officers and
current shareholders of the Company have agreed that they will not, directly or
indirectly, without the prior written consent of McDonald & Company Securities,
Inc., sell, offer to sell, contract to sell, grant any option for the sale,
transfer, distribute or otherwise dispose of (or publicly announce any intention
to do any of the foregoing) any Class A Common Shares, or any securities
convertible into, or exchangeable or exercisable for, Class A Common Shares, for
a period of 270 days from the date of this Prospectus, subject to certain
exceptions.
63
<PAGE> 65
UNDERWRITING
In the Underwriting Agreement, the Underwriters, represented by McDonald &
Company Securities, Inc. (the "Representative"), have agreed, severally, subject
to the terms and conditions therein set forth, to purchase from the Company, and
the Company has agreed to sell to them, the number of Class A Common Shares
totaling 4,000,000 shares, set forth opposite their respective names below. The
Underwriters are committed to take and pay for all shares if any shares are
purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
McDonald & Company Securities, Inc..........................
---------
Total............................................. 4,000,000
=========
</TABLE>
The Company has been advised by the Representative that the Underwriters
propose to offer the Class A Common Shares to the public at the public offering
price set forth on the cover page of this Prospectus. The Underwriters may allow
to certain selected dealers who are members of the National Association of
Securities Dealers, Inc. (the "NASD") a discount not exceeding $ per share,
and the Underwriters may allow, and such selected dealers may re-allow, a
discount not exceeding $ per share to other dealers who are members of the
NASD. After the Offering, the public offering price and the discount to dealers
may be changed by the Representative.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a maximum
of 600,000 Class A Common Shares at the public offering price, less the
underwriting discount, as set forth on the cover page of this Prospectus. The
Underwriters may exercise that option only to cover over-allotments in the sale
of the Class A Common Shares that the Underwriters have agreed to purchase. To
the extent that the Underwriters exercise such option, each of the Underwriters
will have a firm commitment, subject to certain conditions, to purchase the same
percentage of the option shares as the number of shares to be purchased and
offered by that Underwriter in the table above bears to the total.
The Company has agreed to indemnify the Underwriters against certain
liabilities which may be incurred in connection with the Offering, including
liabilities under the Securities Act of 1933.
The Company and the directors, proposed directors, executive officers and
current shareholders of the Company have agreed that they will not, directly or
indirectly, without the prior written consent of McDonald & Company Securities,
Inc., sell, offer to sell, contract to sell, grant any option for the sale,
transfer, distribute or otherwise dispose of (or publicly announce any intention
to do any of the foregoing) any Class A Common Shares, or any securities
convertible into or exchangeable for Class A Common Shares, for a period of 270
days from the date of this Prospectus, subject to certain exceptions.
The Representative has advised the Company that the Underwriters do not
intend to confirm sales of Class A Common Shares offered by this Prospectus to
any accounts over which they exercise discretionary authority. Class A Common
Shares will be offered in round lots (100 shares and multiples thereof) only.
In connection with the Offering and in compliance with applicable law, the
Underwriters may over-allot or effect transactions that stabilize, maintain, or
otherwise affect the market price of the Class A Common Shares at levels above
those that might otherwise prevail in the open market, including by entering
stabilizing bids, effecting syndicate covering transactions or imposing penalty
bids. A stabilizing bid means the placing of
64
<PAGE> 66
any bid, or the effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of a security. A syndicate covering transaction means the
placing of any bid on behalf of the underwriting syndicate or the effecting of
any purchase to reduce a short position created in connection with the Offering.
A penalty bid means an arrangement that permits McDonald & Company Securities,
Inc., as managing underwriter, to reclaim a selling concession from a syndicate
member in connection with the Offering when securities originally sold by the
syndicate member are purchased in stabilizing or syndicate covering
transactions. These transactions may be effected on the Nasdaq National Market
or otherwise. The Underwriters are not required to engage in any of these
activities. Any such activities, if commenced, may be discontinued at any time.
McDonald & Company Securities, Inc. is one of the Company's major
advertisers and has had a significant advertising relationship with the Company
since 1994. Its advertising expenditures include the purchase of advertising
signage at Jacobs Field, co-sponsorship of Indians' radio and television
broadcasts and sponsorship or co-sponsorship of a variety of advertising and
promotional activities involving the Indians.
Prior to the Offering, there has not been any public market for Class A
Common Shares. Consequently, the initial public offering price for the Class A
Common Shares included in the Offering will be determined by negotiations
between the Company and the Representative. Among the factors considered in
determining that price will be the history of and prospects for the Company's
business and the industry in which it competes, recent sales prices of Major
League Baseball franchises, an assessment of the Company's management and the
present state of the Company's development, the past and present revenues and
earnings of the Company, the prospects for growth of the Company's revenues and
earnings, and the current state of the economy in the United States and the
Cleveland, Ohio, metropolitan area. Since the Company will be one of a few
public companies dedicated primarily to professional sports, and the only
current public company the principal business of which is Major League Baseball,
the Company and the Representative were not able to use market prices of
securities of other companies in the same industry as a basis for setting the
initial public offering price.
EXPERTS
The combined financial statements of Cleveland Indians Baseball Company
Limited Partnership and Ballpark Management Company as of December 31, 1996 and
1997 and for each of the three years in the period ended December 31, 1997 and
the balance sheet of Cleveland Indians Baseball Company, Inc. as of March 31,
1998 included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein, and have been
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
VALIDITY OF SHARES
The validity of the issuance of the Class A Common Shares offered hereby
will be passed upon for the Company by Baker & Hostetler LLP, Cleveland, Ohio.
Certain legal matters will be passed upon for the Underwriters by Calfee, Halter
& Griswold LLP, Cleveland, Ohio. Edward G. Ptaszek, Jr., a proposed director of
the Company, is a Baker & Hostetler LLP partner.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (of which this Prospectus is a part) under the Securities Act with respect
to the Class A Common Shares offered hereby. This Prospectus does not contain
all of the information contained in the Registration Statement, certain portions
of which have been omitted as permitted by the rules and regulations of the
Commission, and reference is made to the Registration Statement and the exhibits
thereto for further information with respect to the Company and the Class A
Common Shares to which this Prospectus relates. Statements contained herein
concerning the provisions of any contract, agreement or other document are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement for a more
complete description of the matter involved, and each such statement is
qualified in its
65
<PAGE> 67
entirety by such reference. The Registration Statement, including the exhibits
and schedules filed therewith, may be inspected at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60606. Copies of these documents may be obtained, upon
payment of a duplication fee, by writing to the Commission. Please call the
Commission at 1-800-SEC-0330 for further information on the operation of the
public reference rooms. The Commission also maintains a Web site (address
http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements and quarterly reports for the first
three quarters of each fiscal year containing unaudited summary financial
information.
66
<PAGE> 68
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CLEVELAND INDIANS BASEBALL COMPANY, INC.
Independent Auditors' Report................................ F-2
Balance Sheet as of March 31, 1998.......................... F-3
Note to Balance Sheet....................................... F-4
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP AND
BALLPARK MANAGEMENT COMPANY
Independent Auditors' Report................................ F-5
Combined Balance Sheets as of December 31, 1996 and 1997 and
March 31, 1998 (unaudited)................................ F-6
Combined Statements of Income for the Years Ended December
31, 1995, 1996 and 1997 and the three months ended March
31, 1997 and 1998 (unaudited)............................. F-7
Combined Statements of Accumulated Equity (Deficit) for the
Years Ended December 31, 1995, 1996 and 1997 and three
months ended March 31, 1998 (unaudited)................... F-8
Combined Statements of Cash Flows for the Years Ended
December 31, 1995, 1996 and 1997 and the three months
ended March 31, 1997 and 1998 (unaudited)................. F-9
Notes to Combined Financial Statements for the Years Ended
December 31, 1995, 1996 and 1997 and three months ended
March 31, 1997 and 1998 (unaudited)....................... F-10
</TABLE>
F-1
<PAGE> 69
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Cleveland Indians Baseball Company, Inc.
Cleveland, Ohio
We have audited the accompanying balance sheet of Cleveland Indians
Baseball Company, Inc. as of March 31, 1998. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement 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 balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of Cleveland Indians Baseball Company, Inc. as
of March 31, 1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Cleveland, Ohio
April 1, 1998
F-2
<PAGE> 70
CLEVELAND INDIANS BASEBALL COMPANY, INC.
<TABLE>
<S> <C>
BALANCE SHEET
MARCH 31, 1998
ASSETS...................................................... $
====
LIABILITIES AND SHAREHOLDERS' EQUITY
COMMITMENTS AND CONTINGENCIES (Note 1)
SHAREHOLDERS' EQUITY:
Common shares, without par value; 850 shares authorized,
100 shares issued and outstanding...................... $1,500
Subscriptions receivable.................................. (1,500)
----
Total shareholders' equity.............................
----
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $
====
</TABLE>
See note to balance sheet.
F-3
<PAGE> 71
CLEVELAND INDIANS BASEBALL COMPANY, INC.
NOTE TO BALANCE SHEET
MARCH 31, 1998
1. ORGANIZATION
FORMATION, OFFERING AND USE OF PROCEEDS -- Cleveland Indians Baseball
Company, Inc. (the "Company"), is an Ohio corporation, incorporated on March 17,
1998. The Company has been organized to acquire the sole general partnership
interest of, and controlling interest in, Cleveland Indians Baseball Company
Limited Partnership, an Ohio limited partnership (the "Partnership"), through
several concurrent transactions, more fully described below, with the intent of
selling 4,000,000 Class A Common Shares to the public through an initial public
offering (the "Offering"). The following transactions are being contemplated:
- ISSUANCE OF COMMON STOCK PRIOR TO OFFERING -- The Company will issue and
sell 133,233 common shares to the original shareholders and Martin J. Cleary at
$15.00 per share.
- MERGERS OF BALLPARK MANAGEMENT COMPANY AND MJC BASEBALL, INC. -- Ballpark
Management Company ("Ballpark Management") and MJC Baseball, Inc. ("MJC") will
be merged with and into the Company.
- CONTRIBUTION OF BALLPARK MANAGEMENT ASSETS, BUSINESS AND CONTRACT RIGHTS
TO THE PARTNERSHIP -- Upon completion of the mergers described above, the
Company will contribute to the Partnership all of the assets, business, contract
rights and liabilities held by Ballpark Management immediately prior to the
mergers in exchange for partnership interests in the Partnership.
- PURCHASE OF ADDITIONAL GENERAL PARTNERSHIP INTERESTS -- Upon completion
of the contribution described above, the Company will purchase additional
general partnership interests from Cleveland Baseball Company ("CBC") with the
net proceeds of the Offering. Upon completion of the purchase, the Company will
be the sole general partner of the Partnership with at least a 51% interest in
the Partnership. Upon completion of the sale of partnership interests, CBC will
convert its remaining general partnership interest into a 49% limited
partnership interest in the Partnership.
AMENDMENT OF ARTICLES OF INCORPORATION -- In conjunction with the above
transactions, the Company will amend its Articles of Incorporation to authorize
preferred shares and two classes of common shares. The amendment will authorize
1,000,000 Preferred Shares, without par value, 27,000,000 Class A Common Shares,
without par value, and 3,000,000 Class B Common Shares, without par value. Each
Class A Common Share will entitle the holder to one vote and each Class B Common
Share will entitle the holder to 10,000 votes.
PARTNERSHIP AGREEMENT -- In accordance with the Limited Partnership
Agreement of the Partnership (the "Partnership Agreement"), all allocations of
distributions and profits and losses are to be made in proportion to the
percentage ownership interests of the respective partners.
As sole general partner of the Partnership, the Company will have the
exclusive authority under the Partnership Agreement to manage and conduct the
business of the Partnership, subject to certain limitations contained in the
Partnership Agreement.
EXCHANGE RIGHTS -- Pursuant to the Partnership Agreement, and subject to
certain limits, the limited partner will be granted rights to exchange all, or a
portion of, its limited partnership interests in the Partnership for Class A
Common Shares, subject to the right of the Company to substitute cash for
shares.
F-4
<PAGE> 72
INDEPENDENT AUDITORS' REPORT
To the Partners of Cleveland Indians Baseball Company Limited Partnership
and the Board of Directors of Ballpark Management Company
Cleveland, Ohio
We have audited the accompanying combined balance sheets of Cleveland
Indians Baseball Company Limited Partnership and Ballpark Management Company
(collectively the "Company") as of December 31, 1996 and 1997, and the combined
statements of income, accumulated equity (deficit) and cash flows for each of
the three years in the period ended December 31, 1997. These entities are under
common ownership and common management. These financial statements are the
responsibility of the management of the Company. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the combined financial position of Cleveland Indians Baseball Company
Limited Partnership and Ballpark Management Company as of December 31, 1996 and
1997, and the combined results of their operations and their combined cash flows
for each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Cleveland, Ohio
February 14, 1998
(March 31, 1998 as to Note 17)
F-5
<PAGE> 73
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- -----------
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................... $ 654 $ 3,732 $ 2,055
Investments............................................. 40,985 57,909 63,881
Receivables and accrued income.......................... 3,662 7,867 8,078
Merchandise inventories................................. 1,249 1,568 2,196
Prepaid expenses and other current assets............... 2,159 5,040 6,007
Deposit for grievance settlement (Note 12).............. 11,519 9,079 9,195
-------- -------- --------
Total current assets............................ 60,228 85,195 91,412
FIXED ASSETS:
Leasehold improvements, furniture and fixtures
and other equipment, at cost......................... 5,813 7,685 8,054
Less accumulated depreciation and amortization.......... 1,896 2,757 2,962
-------- -------- --------
Total fixed assets, net......................... 3,917 4,928 5,092
PREPAID SIGNING BONUSES AND PLAYER CONTRACTS
(Net of accumulated amortization)....................... 6,383 10,743 10,779
INTANGIBLE ASSETS (Net of accumulated amortization) (Note
3)...................................................... 11,745 11,048 10,850
OTHER ASSETS (Notes 9 and 11)............................. 4,999 6,238 6,904
-------- -------- --------
TOTAL..................................................... $ 87,272 $118,152 $125,037
======== ======== ========
LIABILITIES AND ACCUMULATED EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued liabilities (Note 6)....... $ 12,703 $ 16,941 $ 15,536
Deferred revenue........................................ 33,415 41,375 73,261
Current portion of long-term liabilities (Note 7)....... 416 7,496 2,663
Deferred expansion revenue (Note 8)..................... 4,071
Reserve for players' grievance damages (Note 12)........ 11,519 9,079 9,195
-------- -------- --------
Total current liabilities....................... 62,124 74,891 100,655
LONG-TERM LIABILITIES (Note 7)............................ 33,458 45,811 50,708
COMMITMENTS AND CONTINGENCIES (Notes 12 and 13)
ACCUMULATED EQUITY (DEFICIT):
Common shares, without par value (750 shares authorized,
100 shares issued and outstanding)................... -- -- --
Owners' Investment...................................... 15,037 32,950 (26,326)
Loan to general partner (Note 5)........................ (23,347) (35,500) --
-------- -------- --------
Total accumulated equity (deficit).............. (8,310) (2,550) (26,326)
-------- -------- --------
TOTAL..................................................... $ 87,272 $118,152 $125,037
======== ======== ========
</TABLE>
See notes to combined financial statements.
F-6
<PAGE> 74
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
COMBINED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------- -------------------
1995 1996 1997 1997 1998
------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Net ticket sales...................... $32,267 $45,658 $49,279 $ 1,402 $ 1,093
Local radio and television............ 9,667 13,631 17,014 38
Concession and catering (Note 10)..... 11,872 14,726 14,095 110 20
Private suite and club seat rentals... 5,635 7,035 8,704
Advertising and promotion............. 5,742 6,891 8,754
Merchandise........................... 15,024 14,683 17,449 1,043 1,432
Major Leagues Central Fund (Note 4)... 6,633 12,369 15,505
Other (primarily Major League Baseball
Properties)........................ 2,979 3,002 3,365 648 675
Post-season (Note 16)................. 9,888 1,933 13,051
Provision for revenue sharing (Note
15)................................ (2,056) (5,731) (7,186) (204) (223)
------- ------- ------- ------- --------
Total revenues................ 97,651 114,197 140,030 2,999 3,035
------- ------- ------- ------- --------
OPERATING EXPENSES:
Major league team (Note 15)........... 38,904 53,420 66,125 1,512 2,430
Player development (Note 14).......... 8,298 8,735 11,146 2,436 2,484
Ballpark operations................... 9,071 10,389 10,965 1,844 1,973
Cost of merchandise sold.............. 9,224 11,692 12,982 1,435 1,582
Administrative and general (Note
14)................................ 9,769 9,275 10,292 2,271 2,473
Major Leagues Central Fund (Note 4)... 1,498 4,146 4,938 260 303
Advertising and promotion............. 3,805 2,960 3,854 1,284 927
Post-season (Note 16)................. 5,457 1,309 6,252
Amortization of signing bonuses and
player contracts................... 3,242 3,212 3,630 104 225
Depreciation and amortization......... 1,361 1,326 1,629 385 397
------- ------- ------- ------- --------
Total operating expenses...... 90,629 106,464 131,813 11,531 12,794
------- ------- ------- ------- --------
OPERATING INCOME (LOSS)................. 7,022 7,733 8,217 (8,532) (9,759)
OTHER INCOME (EXPENSE):
Interest income (Note 5)
Affiliate (Note 5)................. 770 1,733 2,023 394 595
Other.............................. 888 2,122 2,649 837 1,353
Interest expense...................... (2,005) (2,045) (2,301) (429) (661)
Gain (loss) on player transactions.... 71 616 2,696 (1,604)
League expansion proceeds (Note 8).... 9,286
------- ------- ------- ------- --------
NET INCOME (LOSS)....................... $ 6,746 $10,159 $22,570 $(7,730) $(10,076)
======= ======= ======= ======= ========
</TABLE>
See notes to combined financial statements.
F-7
<PAGE> 75
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
COMBINED STATEMENTS OF ACCUMULATED EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OWNERS' LOAN TO ACCUMULATED
COMMON INVESTMENT GENERAL EQUITY
SHARES (DEFICIT) PARTNER (DEFICIT)
------- ---------- -------- -----------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1995....................... $ -- $ (7,168) $(10,615) $(17,783)
Distributions................................ -- (6,600) -- (6,600)
Repayment of loan to general partner......... -- -- 3,100 3,100
Net income................................... -- 6,746 -- 6,746
------- -------- -------- --------
BALANCE, December 31, 1995..................... -- (7,022) (7,515) (14,537)
Contributions................................ -- 13,900 -- 13,900
Distributions................................ -- (2,000) -- (2,000)
Loan to general partner...................... -- -- (15,832) (15,832)
Net income................................... -- 10,159 -- 10,159
------- -------- -------- --------
BALANCE, December 31, 1996..................... -- 15,037 (23,347) (8,310)
Distributions................................ -- (4,657) -- (4,657)
Loan to general partner...................... -- -- (12,153) (12,153)
Net income................................... -- 22,570 -- 22,570
------- -------- -------- --------
BALANCE, December 31, 1997..................... -- 32,950 (35,500) (2,550)
Distributions (unaudited).................... -- (49,200) -- (49,200)
Repayment of loan to general partner
(unaudited)............................... -- -- 35,500 35,500
Net loss (unaudited)......................... -- (10,076) -- (10,076)
------- -------- -------- --------
BALANCE, March 31, 1998 (unaudited)............ $ -- $(26,326) $ -- $(26,326)
======= ======== ======== ========
</TABLE>
See notes to combined financial statements.
F-8
<PAGE> 76
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------ -------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 6,746 $ 10,159 $ 22,570 $ (7,730) $(10,076)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 4,603 4,538 5,259 489 622
(Gain) loss on player transactions...................... (71) (616) (2,696) -- 1,604
League expansion proceeds............................... -- -- (9,286) -- --
(Increase) decrease in receivables and accrued income... (2,656) 868 (1,205) (8,804) (211)
Decrease (increase) in merchandise inventories.......... 220 (363) (319) (899) (628)
Decrease in prepaid expenses and other current assets... (542) (2,292) (781) (2,343) (967)
Decrease (increase) in other assets..................... 766 (999) 1,643 1,090 (666)
Increase (decrease) in accounts payable and accrued
liabilities........................................... 1,121 2,959 2,710 197 (1,058)
Increase (decrease) in deferred revenue................. 36,833 (10,556) 7,960 39,293 31,667
(Decrease) increase in deferred compensation............ (323) 2,854 4,981 285 614
Increase in long-term liabilities....................... 300 300 300 75 75
-------- -------- -------- -------- --------
Net cash provided by operating activities........... 46,997 6,852 31,136 21,653 20,976
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments, net................... (16,376) (23,021) (16,924) (20,236) (5,972)
Purchase of long-term investments......................... -- (2,227) (4,154) -- --
Expenditures for cash surrender value of life insurance... -- -- (900) -- --
Proceeds from sale of player contracts.................... 185 510 185 -- 363
Proceeds from expansion teams............................. 2,285 1,786 5,215 -- --
Capital expenditures...................................... (1,214) (2,701) (1,699) (437) (408)
Expenditures for the purchase of player contracts and
signing bonuses......................................... (1,754) (3,045) (5,028) (893) (2,936)
Decrease (increase) in loan to general partner............ 3,100 (15,832) (12,153) -- 35,500
-------- -------- -------- -------- --------
Net cash (used in) provided by investing
activities........................................ (13,774) (44,530) (35,458) (21,566) 26,547
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Major League Baseball Revolving Credit
Agreement............................................... -- 2,847 12,153 -- --
Principal payment on Major League Baseball Revolving
Credit Agreement........................................ (4,300) (1,200) -- -- --
Payment of debt issuance costs............................ -- -- (96) -- --
Proceeds from note payable borrowings..................... 3,500 360 -- -- --
Repayment of notes payable................................ (5,500) (360) -- -- --
Contributions from general partner........................ -- 13,900 -- -- --
Distributions to general partner.......................... (6,600) (2,000) (4,657) -- (49,200)
-------- -------- -------- -------- --------
Net cash (used in) provided by financing
activities........................................ (12,900) 13,547 7,400 -- (49,200)
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 20,323 (24,131) 3,078 87 (1,677)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 4,462 24,785 654 654 3,732
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 24,785 $ 654 $ 3,732 $ 741 $ 2,055
======== ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during the period for interest.................. $ 2,218 $ 2,026 $ 2,399 $ 429 $ 647
======== ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION:
Increase in receivables relating to player transactions... $ -- $ 169 $ 3,000 $ -- $ --
======== ======== ======== ======== ========
Increase in payables relating to player transactions...... $ 246 $ 230 $ 3,451 $ -- $ 1,967
======== ======== ======== ======== ========
</TABLE>
See notes to combined financial statements.
F-9
<PAGE> 77
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying combined financial statements include only those assets,
liabilities and results of operations which relate to the business of Cleveland
Indians Baseball Company Limited Partnership (the "Partnership") and Ballpark
Management Company ("Ballpark Management"). The Partnership, an Ohio limited
partnership, has been organized to acquire, own, maintain, operate and control
the membership of the Cleveland Indians Baseball Club (the "Indians") in the
American League of Professional Baseball Clubs ("American League"). Cleveland
Baseball Corporation ("CBC") (an Ohio corporation) is the 99.9% general partner
of the Partnership and MJC Baseball, Inc. ("MJC") is the 0.1% limited partner of
the Partnership. Ballpark Management (an Ohio Corporation) was formed for the
purpose of operating and managing a baseball facility ("Jacobs Field") under a
long-term management agreement with Gateway Economic Development Corporation of
Greater Cleveland ("Gateway"). Ballpark Management is an S Corporation owned by
the Jacobs family trusts. These entities are affiliated through common ownership
and common management and are collectively referred to as the "Company."
The combined financial statements as of March 31, 1998 and for the three
months ended March 31, 1997 and 1998, are unaudited; however, in the opinion of
Management, all adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation of these interim periods have been included.
The results for the interim periods ended March 31, 1997 and 1998, are not
necessarily indicative of the results to be obtained for the full fiscal year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Expense Recognition -- Revenue from ticket sales, radio and
television broadcasting and advertising and promotions generally are recorded at
the time the game, to which such proceeds relate, is played. Major league team
expenses, principally player compensation and game and post-season expenses, are
recorded as expense on the same basis. Accordingly, advance ticket sales,
payments on private suite and club seat rentals and payments for team and game
expenses not earned or incurred are recorded as deferred revenues, prepaid
signing bonuses and as a component of prepaid expenses and other. Such amounts
are amortized ratably as regular season games are played. Administrative and
general and advertising and promotional expenses are charged to operations as
incurred.
Ticket sales are presented net of local admission taxes of $1,972, $3,009
and $3,968 for the years ended December 31, 1995, 1996 and 1997, respectively,
and net of the American League's assessment of $1,150, $1,598 and $1,612 for the
years ended December 31, 1995, 1996 and 1997, respectively.
Cash Equivalents -- Cash equivalents consist primarily of highly liquid
investments with maturities of three months or less at date of purchase.
Investments -- The Company participates in a cash management arrangement,
along with other entities affiliated through common ownership. Through an
affiliate, cash is accumulated and invested in certificates of deposit, bankers'
acceptances, deposit notes and various debt securities. Included in the combined
balance sheets is the Company's proportionate share of investments. All
marketable securities are classified as available-for-sale and are available to
support current operations or to take advantage of other investment
opportunities. These securities are stated at estimated fair value based upon
market quotes. Unrealized gains
F-10
<PAGE> 78
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
and losses are computed on the basis of specific identification and are included
in equity. Due to the nature of the investments, there were no significant
differences between amortized cost and estimated fair value at December 31,
1997.
The following table presents the relative composition of investments by
category at December 31, 1997:
<TABLE>
<S> <C>
Certificates of deposit, bankers' acceptances and deposit
notes.................................................... 22%
U.S. government securities................................. 58
U.S. agency securities..................................... 12
Commercial paper........................................... 8
---
Total...................................................... 100%
===
</TABLE>
The relative contractual maturities at December 31, 1997 are as follows:
<TABLE>
<S> <C>
Due in one year or less.................................... 40%
Due after one year through five years...................... 50
Due after five years....................................... 10
---
Total...................................................... 100%
===
</TABLE>
During 1997, the investment policy was changed resulting in a change in the
composition of the portfolio. Prior to the change in the policy, the instruments
held were classified as held to maturity securities and carried at amortized
cost which approximates market.
Merchandise Inventories -- Inventories consist primarily of apparel and
novelty merchandise and are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
Fixed Assets -- Leasehold improvements, furniture and fixtures and other
equipment are stated at cost. Depreciation and amortization are provided by
using accelerated methods over the estimated useful lives of the assets which
range from 5 to 20 years. Leasehold improvements are being depreciated over the
original terms of the respective leases.
Prepaid Signing Bonuses and Player Contracts -- The basis of all major
league player contracts acquired and signing bonuses paid are amortized on a
straight-line basis over the term of the respective player's contract. Minor
league player contracts acquired and signing bonuses paid are amortized on a
straight-line basis over the estimated useful lives of the players, currently
estimated to be 4 to 5 years. For dispositions of players not involving a trade
or sale, whether by outright release, or expiration of all ownership rights, the
Company's policy is to write-off the net book value of the signing bonus and any
contract cost in the year of disposition. The Company accounts for trades of
players as like-kind exchanges, whereby the recorded basis of the acquired
player(s) is equal to the net book value of the traded player(s) (including
signing bonuses and any contract cost) plus or minus any cash consideration.
Gains or losses resulting from sales are recognized in
F-11
<PAGE> 79
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
the current period. Pre-paid signing bonuses and player contract costs consisted
of the following at December 31, 1996 and 1997 and March 31, 1998:
<TABLE>
<CAPTION>
DECEMBER 31
----------------- MARCH 31,
1996 1997 1998
------- ------- ---------
<S> <C> <C> <C>
Prepaid signing bonuses....................... $ 9,135 $14,928 $14,652
Player contract costs......................... 1,743 1,038 1,045
------- ------- -------
10,878 15,966 15,697
Less accumulated amortization................. 4,495 5,223 4,918
------- ------- -------
Total......................................... $ 6,383 $10,743 $10,779
======= ======= =======
</TABLE>
Membership in American League -- The membership in the American League
represents an allocation of the original purchase price of the franchise based
on an independent appraisal and is amortized using the straight-line method over
a 25-year period. Accumulated amortization of the membership was $6,138 and
$6,752 at December 31, 1996 and 1997 and $6,905 at March 31, 1998, respectively.
Deferred Lease and Other Costs -- Certain initial direct lease costs
associated with the leases of baseball facilities discussed in Note 9, primarily
legal and consulting services rendered to the Company during lease negotiations,
have been capitalized in the accompanying combined balance sheets. The costs are
being amortized on a straight-line basis over the original terms of the
respective leases. Accumulated amortization of the deferred lease costs was
$447, $601 and $641 at December 31, 1996 and 1997 and March 31, 1998,
respectively.
Deferred Expansion Revenue -- Proceeds received from expansion franchises
were deferred from recognition as revenue until substantial completion of
obligations under the expansion agreement.
Deferred Compensation -- Provisions of employment contracts of specific
players and front office personnel provide for the deferral of a portion of
their total compensation. The contracts generally provide that payments will
begin upon retirement from baseball. Compensation expense is accrued as earned.
Self Insurance -- The Company is substantially self-insured for losses
related to workers' compensation claims. Losses are accrued based upon the
Company's estimates of aggregate liability for claims incurred based on Company
experience and certain actuarial assumptions followed in the insurance industry.
Income Taxes -- No provision has been made for federal and state income
taxes since these taxes are the responsibility of the owners.
Fair Value of Financial Instruments -- The carrying values of cash and cash
equivalents, marketable securities, accounts receivable, mutual fund shares
included in other assets, accounts payable, accrued expenses and long-term
liabilities are equal to, or approximate, their fair values.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
F-12
<PAGE> 80
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
New Accounting Pronouncements -- During June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." During February 1998, the
Financial Accounting Standards Board issued SFAS No. 132, "Employer's
Disclosures about Pensions and Other Postretirement Benefits." SFAS No. 130
requires an enterprise to classify items of other comprehensive income by their
nature in a financial statement and display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. SFAS No. 131
requires a public enterprise to report financial and descriptive information
about its reportable operating segments such as a measure of segment profit or
loss, certain specific revenue and expense items and segment assets. SFAS No.
132 requires an enterprise to disclose certain information about their pension
and postretirement benefits, including a reconciliation of beginning and ending
balances of the benefit obligation, the funded status of the plans, and the
amount of net periodic benefit cost recognized. The Company is required to adopt
these statements for the year ending December 31, 1998. The Company does not
believe these statements will have a material impact on the combined financial
statements.
On January 1, 1998 the Company adopted SFAS No. 130. Such adoption had no
impact on the Company's financial statements as of and for the three months
ended March 31, 1998.
3. INTANGIBLE ASSETS
Intangible assets consisted of the following at December 31, 1996 and 1997
and March 31, 1998:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 1998
------- ------- ---------
<S> <C> <C> <C>
Membership in American League...................... $15,345 $15,345 $15,345
Deferred lease and other costs..................... 2,985 3,081 3,081
------- ------- -------
18,330 18,426 18,426
Less accumulated amortization...................... 6,585 7,378 7,576
------- ------- -------
Total.............................................. $11,745 $11,048 $10,850
======= ======= =======
</TABLE>
4. MAJOR LEAGUES CENTRAL FUND
The Major Leagues Central Fund ("MLCF") was established by the Commissioner
of Baseball to collect certain revenues and pay certain expenses that relate to
the operation of Major League Baseball ("MLB"). Substantially all of the net
revenues of the MLCF are distributed to the 28 major league baseball teams. The
principal component of MLCF revenue is national television and radio revenue.
The principal component of the MLCF expenses is the contribution to the Major
League Baseball Players' Benefit Plan (see Note 11). The remaining expenses are
for the Office of the Commissioner, the Major League Baseball Player Relations
Committee, Inc. and the MLCF operating and administrative costs.
5. LOAN TO GENERAL PARTNER
A loan to the general partner of $23,347 and $35,500 was outstanding at
December 31, 1996 and 1997, respectively. The note is payable upon demand and
interest accrues at rates consistent with the Company's borrowings under the
Major League Baseball Revolving Credit Agreement (see Note 7).
F-13
<PAGE> 81
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following at
December 31, 1996 and 1997 and March 31, 1998:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------- ---------
1996 1997 1998
------- ------- ---------
<S> <C> <C> <C>
Accrued player bonus/signing bonus..................... $ 1,324 $ 2,775 $ 1,000
Accounts payable....................................... 3,726 3,001 4,106
Accrued payroll and related benefits................... 1,882 3,839 2,170
Other accrued liabilities.............................. 5,771 7,326 8,260
------- ------- -------
Total.................................................. $12,703 $16,941 $15,536
======= ======= =======
</TABLE>
Other accrued liabilities include liabilities for revenue sharing, luxury
tax payments and other obligations.
7. LONG-TERM LIABILITIES
Long-term liabilities consisted of the following at December 31, 1996 and
1997 and March 31, 1998:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------- ---------
1996 1997 1998
------- ------- ---------
<S> <C> <C> <C>
Major League Baseball Revolving Credit Agreement....... $23,347 $35,500 $35,500
Deferred compensation (Note 11)........................ 7,308 12,197 12,810
Deferred revenue....................................... 1,434 1,524 1,298
Other.................................................. 1,785 4,086 3,763
------- ------- -------
33,874 53,307 53,371
Less current portion................................... 416 7,496 2,663
------- ------- -------
Total.................................................. $33,458 $45,811 $50,708
======= ======= =======
</TABLE>
Major League Baseball Revolving Credit Agreement -- In June of 1996, the
Company entered into a revolving credit facility ("facility") which replaced the
previous agreement arranged by MLB and funded by a bank group. The facility is
administered by a trust established by MLB. The trust has borrowings from the
syndicated lenders, the funds of which have been loaned to the participating
clubs. Commitment fees of .25% of the unused portion of the facility are
required. The interest rate is based upon the lender's Commercial Base Rate or
LIBOR plus .875% (LIBOR plus 1.125% in 1996) and was 6.75%, 6.78% and 6.78% at
December 31, 1996 and 1997 and March 31, 1998, respectively. Total credit
available of $25,000, $35,500 and $35,500 at December 31, 1996 and 1997 and
March 31, 1998, respectively, is reduced by a labor contingency reserve
sufficient to service nine months' interest expense as mandated by the
agreement. The facility contains various covenants of which the Company was in
compliance at December 31, 1996 and 1997. Additionally, MLB has represented to
the Company that the trust is in compliance with various covenants at December
31, 1996 and 1997. The Company's borrowings against the facility are secured by
its interest in, rights under, and funds from existing and future national
broadcasting contracts, rights under certain licensing contracts, and rights
under the Major League Agreements. Repayment terms under the facility are as
follows: $4,750 in 1998; $6,250 in 1999; and $24,500 in 2000.
At March 31, 1998 the current portion of the facility has been reflected as
a long term liability as a result of the re-negotiation of the terms of the
agreement in April 1998. The new terms of the agreement require
F-14
<PAGE> 82
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
interest only payments through April 2001 at which time the facility may convert
to a four year term loan with principal repayments on the outstanding balance as
follows: 15% in the first year, 20% in the second year, 25% in the third year
and 40% in the fourth year. The interest rate on the facility, based upon LIBOR
plus .35%, was 6.07% at April 17, 1998.
Deferred Revenue -- Deferred revenue includes club seat deposits which will
be applied against the final year payment or refunded in the final year of the
related club seat license agreements.
Line of Credit -- The Company has a line of credit agreement with a bank
that provides for borrowings up to $9,000 at either the bank's base lending rate
or LIBOR plus 1.75%. Availability is reduced to $2,000 during the period from
December 1 to February 28, and the line must be repaid in full for a period of
30 consecutive days throughout the term of the note. During 1996, this agreement
was amended to provide for an extension of the maturity date to November 1,
1998, at which time the outstanding loan balance may be converted to a four-year
term note, subject to certain terms and conditions. No borrowings on this line
were outstanding at December 31, 1996 and 1997 and March 31, 1998. The
principals of the general partner are guarantors on the note. Availability under
the line of credit was reduced by a $375 standby letter of credit at December
31, 1996 and 1997 and March 31, 1998 (see Note 13).
Scheduled maturities on long-term liabilities as of December 31, 1997 were
as follows:
<TABLE>
<S> <C>
Year ending December 31,
1998...................................................... $ 7,496
1999...................................................... 7,706
2000...................................................... 28,363
2001...................................................... 454
2002...................................................... 1,027
Thereafter................................................ 8,261
-------
Total..................................................... $53,307
=======
</TABLE>
8. LEAGUE EXPANSION PROCEEDS
In March 1995, the American and National Leagues and the 28 existing member
clubs signed an agreement to award expansion franchises to two expansion groups.
The expansion groups each paid a fee of $130,000 in installments from July of
1995 through November of 1997. In 1995, 1996 and 1997, the Company received
$2,285, $1,786 and $5,215, respectively, representing its share of the
installment payments. The Company recognized these fees as income upon
completion of the expansion draft in 1997.
9. LEASE, MANAGEMENT AND NAMING RIGHTS AGREEMENTS
Jacobs Field -- The Company is a party to a lease agreement (the
"Agreement") with Gateway for the construction and use of Jacobs Field. Jacobs
Field is owned by Gateway and leased to and operated by the Company.
The term of the Agreement is 20 years and commenced in April 1994, the date
the Company occupied Jacobs Field. There is no minimum annual lease payment
required, although the Company is liable for rental payments if certain paid
attendance levels are achieved, as defined in the Agreement. If paid attendance
is less than 1.85 million, then no rent is due. The Company incurred $1,303,
$1,634 and $2,144 in rent for 1995, 1996
F-15
<PAGE> 83
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
and 1997, respectively. Additionally, the Company has the ability under the
Agreement to offset certain capital expenditures incurred against rental
payments due to Gateway.
Under the terms of a related common area management agreement, the Company
receives one-third of all net revenues, as defined, generated from the common
areas. No revenues were received from common areas for the years ended December
31, 1995, 1996 and 1997.
Management Agreement -- Concurrent with entering into the Agreement, the
Company entered into a management agreement with Gateway to manage and operate
Jacobs Field and to market and license all premium seating, as defined. The term
of the management agreement coincides with that of the Agreement. Under the
terms of the management agreement, the Company has the exclusive right to
receive all ballpark related revenues, as defined. The annual management rights
fee payable to Gateway is based upon a share of net main scoreboard advertising
revenue in excess of a base amount as adjusted annually for increases in the
Consumer Price Index plus a share of net special event revenue, as defined in
the management agreement. The Company's management rights fee expense was $78,
$79 and $193 for the years ended December 31, 1995, 1996 and 1997, respectively.
Pursuant to the management agreement, the Company is required to market and
license all premium seating, as defined. Funds collected from premium seating
are remitted to a trustee to the extent of certain portions of Gateway's debt
service obligations. The Company is entitled to revenues in excess of the debt
service obligations, which cannot exceed $2,950 in a term year, as defined in
the management agreement. The Company acts in the capacity of an agent in
regards to the collection of these funds and, accordingly, has reflected only
that amount in excess of Gateway's debt service obligations as revenue in the
accompanying combined statements of income. The total funds collected and
remitted to the trustee in 1995, 1996 and 1997 in connection with the 1995, 1996
and 1997 baseball seasons were $2,505, $2,507 and $2,505, respectively.
Included in other assets at December 31, 1996 and 1997 are deposits for
long-term club seat rentals totaling $1,207 and $1,298, respectively,
representing restricted funds that will be applied against the final year
payment under the related club seat license agreement.
Additionally, as a result of the MLBPA strike during 1994 and 1995, the
Company provided rent credits to non-Founder private suite and club seat
licensees in the amount of $833 during 1995 based on 9 of the 81 home games
being canceled during the 1995 season. The credits were utilized to reduce
rental payments due to the Company for the 1996 season.
Naming Rights Agreement -- The Company and Richard E. Jacobs are parties to
an agreement with Gateway for the naming rights to the baseball facility. The
term of the naming rights agreement coincides with that of the Agreement. Under
the terms of the naming rights agreement, the parties are able to change the
name of the facility throughout the term of the agreement and have the exclusive
merchandising and use rights for the commercial exploitation of the baseball
facility name. Richard E. Jacobs has assigned to the Company all of his rights
under the naming rights agreement and any future revenue generated from the sale
or marketing of the baseball facility name. The Company is required to make
annual payments to Gateway of $400 annually through 2003 and $989 annually
thereafter through 2013. The payments are to be made from premium seating
revenue proceeds. The Company has recognized expense on a straight-line basis
over the term of the agreement.
Retail, Warehouse Space and Spring Training Facilities -- The Company has
entered into various agreements to lease retail, warehouse space and spring
training facilities. Rental expense under the provisions of these agreements was
$320, $403 and $970 inclusive of rental expense to related parties of $194, $213
and
F-16
<PAGE> 84
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
$554, for the years ended December 31, 1995, 1996 and 1997, respectively.
Additionally, the Company shares advertising, ticket, concession and parking
revenues with the City of Winter Haven, Florida, for the use of its spring
training facilities.
Future minimum annual commitments under the retail and warehouse space
leases, the spring training facilities lease and miscellaneous other leases are
as follows:
<TABLE>
<CAPTION>
THIRD-PARTY RELATED PARTY
LEASES LEASES TOTAL
----------- ------------- ------
<S> <C> <C> <C>
1998............................................. $ 580 $ 320 $ 900
1999............................................. 549 320 869
2000............................................. 313 320 633
2001............................................. 215 320 535
2002............................................. 21 261 282
Thereafter....................................... -- 895 895
------ ------ ------
Total............................................ $1,678 $2,436 $4,114
====== ====== ======
</TABLE>
10. CONCESSION AND CATERING AGREEMENTS
The Company and Cleveland Sportservice, Inc. ("Sportservice") have a
concession agreement granting Sportservice the exclusive rights to manage and
operate certain Jacobs Field food and beverage concession facilities. The
Company and D.B. Kaplan's Delicatessen Limited Partnership II ("Levy") have an
agreement, whereby Levy provides certain other food, beverage and catering
services at Jacobs Field. Pursuant to the terms of the concession and catering
agreements, the Company receives as a commission certain percentages of food and
beverage concession and catering sales at Jacobs Field. In addition, the Company
receives a percentage of the Sportservice and Levy fiscal year net profits
earned at Jacobs Field, as defined.
11. BENEFIT PLANS
Major League Baseball Players' Benefit Plan -- The Company's major league
baseball players and coaches are covered under the Major League Baseball
Players' Benefit Plan which is administered by the MLCF and represents a
multiemployer defined benefit plan. Payments to the Players' Benefit Plan are
made out of proceeds received by the MLCF (see Note 4). The Company's share of
the contribution to the plan was $293, $2,429 and $2,429 in 1995, 1996 and 1997,
respectively. The 1995 contribution was based upon an agreement between the
MLBPA and the Office of the Commissioner of Baseball that a reduced contribution
would be made for the 1995 strike-shortened season.
Major League Baseball Pension Plan for Non-Uniformed Personnel -- The
Company also participates in the Major League Baseball Pension Plan for
Non-Uniformed Personnel, which is administered by the Office of the Commissioner
of Baseball. The benefits are based on years of service and the employee's
compensation during the last five years of employment. The plan is a
single-employer defined benefit plan which covers substantially all employees of
the Company exclusive of major league players and coaches.
F-17
<PAGE> 85
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
Significant assumptions used in the non-uniformed plan actuarial valuation
were as follows:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Discount rate............................................ 7.5% 7.5% 7.0%
Expected rate of increase in compensation................ 5.5% 5.5% 5.5%
Expected long-term rate of return on assets.............. 9.0% 9.0% 9.0%
</TABLE>
Net periodic pension costs for the non-uniformed plan include the
following:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Service cost-benefits earned during the period........... $ 266 $ 469 $ 570
Interest cost on projected benefit obligation............ 192 265 283
Return on assets......................................... (341) (257) (529)
Amortization and deferral of gains and losses............ 160 67 325
----- ----- -----
Net periodic pension cost................................ $ 277 $ 544 $ 649
===== ===== =====
</TABLE>
The following table sets forth the plan's funded status and amounts
recognized in the combined balance sheets at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation................................. $ 2,297 $ 3,183
Nonvested benefit obligation.............................. 126 253
------- -------
Accumulated benefit obligation.............................. $ 2,423 $ 3,436
======= =======
Projected benefit obligation................................ $ 3,751 $ 5,039
Fair value of plan assets (primarily listed stocks)......... 2,431 3,043
------- -------
Projected benefit obligation in excess of plan assets....... 1,320 1,996
Unrecognized net transition obligation...................... (7) (7)
Unrecognized prior service cost............................. (31) (64)
Unrecognized net loss....................................... (155) (343)
------- -------
Accrued pension cost........................................ $ 1,127 $ 1,582
======= =======
</TABLE>
Deferred Compensation Plans -- The Company has nonqualified deferred
compensation programs which permit certain current and former players and
employees to annually elect (via individual contracts) to defer a portion of
their compensation, on a pre-tax basis. Certain amounts under deferred
compensation contracts earn a guaranteed rate of return while other amounts
deferred earn variable rates of return consistent with certain mutual fund
indices (see Note 2).
To assist in the funding of these plans, commencing in 1996 the Company
purchased partnership-owned annuity contracts and shares of mutual funds which
are consistent with the indices that certain of the contracts specify. The cash
surrender value of these policies and the market value of the mutual fund shares
included in non-current "other assets" totaled $3,494, $5,966 and $6,632 at
December 31, 1996 and 1997 and March 31, 1998, respectively, and $2,100 in
prepaid expenses and other current assets at December 31, 1997 and March 31,
1998. Gains and losses on investments directly offset the deferred compensation
liability.
F-18
<PAGE> 86
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
12. LEGAL MATTERS
During 1987 and 1988, two Arbitrators (Roberts and Nicolau) ruled that the
26 Major League Clubs (the "Clubs"), including the Company, violated Article
XVIII(H) of the Basic Agreement with the Major League Baseball Players
Association (the "Basic Agreement") by acting in concert with respect to those
players who became free agents following the 1985 and 1986 seasons. A similar
grievance alleging violation of Article XVIII(H) and certain other provisions of
the Basic Agreement was filed by the MLBPA with respect to players who became
free agents following the 1987 season. No further grievances were filed by the
MLBPA.
In August 1989, Arbitrator Roberts issued an interim award of $10,528,
representing his judgment of the aggregate amount by which salaries of
approximately 140 players were reduced in 1986 by reason of the contract
violation following the 1985 season. On October 31, 1989, the MLCF, on behalf of
the Clubs, deposited $10,528 in an interest-bearing escrow account, to be
distributed in accordance with Arbitrator Roberts' instructions in a subsequent
phase of the remedial proceedings. The Company's portion of the deposit was
$405.
In December 1990, the owners of the Clubs voted in favor of settling all
collusion claims for the sum of $280 million, plus the grant of "second look"
free agency rights to a group of 16 players, none of whom were employed by the
Company. For the years ended December 31, 1995, 1996 and 1997, the escrow
deposit earned interest of $16,968, $17,284 and $15,847, respectively. During
the years ended December 31, 1995, 1996 and 1997, $9,964, $-0- and $81,230,
respectively, was distributed to the players. The remaining balance will be
distributed in subsequent years.
The Company funded its remaining liability under the settlement of $10,361
in 1991 through reductions in the distributions from the MLCF and prior year
charges against operations. The funds withheld by the MLCF have been classified
as "deposit for grievance settlement" in the accompanying combined balance
sheets. The balance at December 31, 1996 and 1997 represents the net effect of
the Company's share of interest earned on the deposit and distributions made to
players since 1991. The interest and distributions made have been treated as
non-cash activities and have not been reflected in the combined statements of
income.
The Company is involved in various other legal proceedings and claims which
are incidental to its business. Management believes that they have meritorious
defenses and will vigorously defend themselves in these actions. Although the
ultimate disposition of these proceedings is not presently determinable,
management does not believe that such proceedings would have a material adverse
effect upon the financial condition, results of operations or cash flows of the
Company.
13. CONTINGENT LIABILITIES, COMMITMENTS AND OTHER CONTRACTS
Because the American League and MLB are non-profit associations, the
Indians and other members of MLB are generally jointly and severally liable for
the debts and obligations of the associations. Any failure of other members of
MLB to pay their pro rata share of any such debt or obligation could adversely
affect the Company.
Under the terms of working agreements, the Company is required to reimburse
various minor league clubs for certain expenses. Payments under these agreements
amounted to $1,078, $1,071 and $1,227, for the years ended December 31, 1995,
1996 and 1997, respectively.
F-19
<PAGE> 87
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
Employment contracts provide for, among other things, aggregate
compensation in future years as follows:
<TABLE>
<S> <C>
1998................................................. $ 62,381
1999................................................. 54,421
2000................................................. 32,593
2001................................................. 23,075
2002 and thereafter.................................. 12,825
--------
Total................................................ $185,295
========
</TABLE>
Certain player contracts require payments that are contingent upon playing
performance, length of employment with the Indians or attendance at a college
prescribed by the College Scholarship Plan. Payments under these contracts
amounted to $1,621, $1,467 and $1,664 for the years ended December 31, 1995,
1996 and 1997, respectively. The Company is contingently liable for payments
under these plans aggregating $8,400 at December 31, 1996 and $21,872 at
December 31, 1997. These amounts, which are not included in the accompanying
combined financial statements, relate to contracts in effect at December 31,
1997, or entered into thereafter through February 14, 1998, the date of the
auditors' report. The contracts are contingent upon continued employment with
the Company, but do guarantee payment in the event a player is unable to play
due to injury or death.
The Company has obtained disability insurance policies for substantially
all of its players under multi-year contracts. In the event of injuries
sustained resulting in lost services as defined in the policies, the policies
provide for payment to the Company of a portion of the player's salary for the
remaining term of the contract or until the player can resume playing.
The Company is substantially self-insured with respect to workers'
compensation in the State of Ohio and in connection therewith, maintains a $375
standby letter of credit with a bank in order to satisfy state deposit
requirements. The current letter of credit expires December 31, 1999.
14. RELATED PARTY TRANSACTIONS
Included in administrative and general expense for the years ended December
31, 1995, 1996 and 1997 are allocations of legal and accounting expenses from an
affiliate of $327, $335 and $267, respectively. Included in ballpark operations
expense during 1996 are $523 of payroll and related taxes for game day labor
services from an affiliate. Included in deferred lease costs at December 31,
1996 and 1997 are $1,423 of legal and consulting charges from an affiliate for
costs incurred in connection with the development of Jacobs Field.
15. COLLECTIVE BARGAINING AGREEMENT
In the Fall of 1996, MLB Owners and the MLBPA reached an agreement with
respect to a five-year Collective Bargaining Agreement. The agreement became
effective on January 1, 1997 and, with respect to certain provisions, was
retroactive to the 1996 season. The agreement expires on the later of October
31, 2000 or the day following the last game of the 2000 World Series; except
that, the MLBPA has the unilateral option to extend the agreement to October 31,
2001 or the day after the last game of the 2001 World Series, whichever is
later. The Collective Bargaining Agreement introduced a new revenue sharing
system and implemented for the first time a luxury tax on payrolls.
F-20
<PAGE> 88
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
Revenue Sharing -- Member clubs of MLB participate in a revenue sharing
system. The new revenue sharing system is being phased in over a five-year
period and will be fully implemented in the 2000 season. Under the system, each
club must contribute a portion, 12% in 1996 and 1997, of its net local revenue
to a revenue sharing pool. The revenue sharing rate will be 16% in 1998, 17% in
1999 and 20% in 2000 and thereafter. Net local revenue is defined in the
Collective Bargaining Agreement. Once the pool is accumulated, it is
re-distributed to the clubs on a basis defined in the Collective Bargaining
Agreement that disproportionately benefits clubs with below average revenue.
Prior to 1996, local revenue sharing was generally limited to ticket receipts
and local cable revenues, pursuant to which, the visiting club received a
percentage of net gate receipts and local cable television revenues on a per
game basis from the home team during the regular season. The 1995 combined
statement of income has been presented in a similar manner as those in 1996 and
1997 to reflect the comparable effects of the previous arrangement with other
clubs.
Luxury Tax -- The luxury tax became effective at the beginning of the 1997
season and is only assessed on the five clubs with the highest actual payroll,
as defined, above a specified threshold minimum for that season. The threshold
minimum was $55,600 for 1997, and will be $59,900 for 1998 and $64,200 for 1999.
If more than five teams have payrolls that exceed the threshold, the threshold
is increased so that only five teams are subject to the tax. The luxury tax rate
for 1997 and 1998 is 35% and for 1999 is 34%. There is no luxury tax imposed in
the 2000 season. The amount that is taxed is the difference between a club's
total actual payroll and the threshold minimum, as adjusted if necessary. In
1997, the Indians were assessed $2,065 pursuant to the luxury tax and have
included this amount in major league team expenses in the accompanying combined
statements of income.
16. POST-SEASON
During 1995, 1996 and 1997, the Indians advanced to post-season play and
participated in fifteen, four and eighteen post-season games, respectively. The
following table sets forth the revenues and expenses relating to the post-season
activity:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
REVENUES:
Net ticket sales..................................... $4,302 $ 695 $ 6,847
Local radio and television........................... 413 108 515
Concession and catering.............................. 1,473 446 2,114
Private suite rentals................................ 29 17 198
Merchandise.......................................... 2,991 282 2,507
League Championship Series distribution.............. 300 300
Other................................................ 380 385 570
------ ------ -------
Total revenues............................... 9,888 1,933 13,051
------ ------ -------
OPERATING EXPENSES:
Major league team.................................... 705 190 1,054
Ballpark operations.................................. 1,345 518 1,901
Cost of merchandise sold............................. 1,632 224 1,421
Administrative and general........................... 1,385 106 1,417
Advertising and promotion............................ 390 271 459
------ ------ -------
Total operating expenses..................... 5,457 1,309 6,252
------ ------ -------
$4,431 $ 624 $ 6,799
====== ====== =======
</TABLE>
F-21
<PAGE> 89
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
AND BALLPARK MANAGEMENT COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
17. SUBSEQUENT EVENT
On March 31, 1998, the Partnership made distributions totaling $49,200 to
its partners and CBC, its general partner, repaid its indebtedness of $35,500 to
the Partnership.
In addition, subsequent to year end, the Partnership, Ballpark Management
and their respective owners, CBC, MJC and the Jacobs family trusts are
reorganizing through several concurrent transactions, more fully described
below, with the intent of selling shares of a newly formed corporation,
Cleveland Indians Baseball Company, Inc. ("CIBC") to the public through an
initial public offering (the "Offering"). The net proceeds of the Offering will
be used to acquire the controlling general partnership interests in the
Partnership from CBC and MJC. The following Reorganization Transactions are
being contemplated:
Mergers of Ballpark Management and MJC -- Ballpark Management and MJC will
be merged with and into CIBC, with CIBC as the surviving corporation.
Contribution of Ballpark Management Assets, Business and Contract Rights to
the Partnership -- Upon completion of the mergers described above, CIBC will
contribute to the Partnership all of the assets, business, contract rights and
liabilities held by Ballpark Management immediately prior to the mergers in
exchange for additional partnership interests.
Sale of General Partnership Interests -- Upon completion of the
contribution described above, CIBC will purchase partnership interests from CBC
with proceeds generated from the Offering as a result of which CIBC will be the
sole general partner of the Partnership with at least a 51% interest in the
Partnership. Upon completion of the sale of partnership interests, CBC will
convert its remaining general partnership interests to a 49% limited partnership
interest in the Partnership. This limited partnership interest will be
exchangeable for Class A Common Shares of CIBC, subject to the right of CIBC to
substitute cash for shares.
F-22
<PAGE> 90
Photograph depicting the playing field, stands and scoreboard at Jacobs Field,
along with photographs of merchandise, fans and Company employees
<PAGE> 91
============================================================
NO DEALER, SALESMAN OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY CLASS A COMMON
SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION
IN NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 8
Formation Transactions.......................... 17
Use of Proceeds................................. 19
Dividend Policy................................. 19
Dilution........................................ 19
Capitalization.................................. 20
Selected Financial Data......................... 21
Pro Forma Financial Data........................ 23
Management's Discussion and Analysis of Results
of Operations and Financial Condition......... 26
Business........................................ 34
Major League Baseball........................... 45
Management...................................... 52
Principal Shareholders.......................... 56
Certain Transactions............................ 57
The Partnership................................. 58
Description of Capital Shares................... 60
Shares Eligible for Future Sale................. 62
Underwriting.................................... 64
Experts......................................... 65
Validity of Shares.............................. 65
Additional Information.......................... 65
Index to Financial Statements................... F-1
</TABLE>
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON SHARES, 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 ALLOTMENT OR
SUBSCRIPTIONS.
============================================================
============================================================
4,000,000 SHARES
LOGO
CLEVELAND INDIANS BASEBALL COMPANY, INC.
CLASS A
COMMON SHARES
---------------------
PROSPECTUS
---------------------
MCDONALD & COMPANY
SECURITIES, INC.
, 1998
============================================================
<PAGE> 92
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. Except
for the Commission registration fee, the NASD filing fee and the Nasdaq National
Market listing fee, all amounts are estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 21,712
The Nasdaq Stock Market Listing Fee......................... 65,000
National Association of Securities Dealers, Inc. Filing
Fee....................................................... 7,860
Blue Sky Fees and Expenses (including counsel fees)......... 5,000
Printing and Engraving Expenses............................. 650,000
Accounting Fees and Expenses................................ 665,000
Director and Officer Liability Insurance.................... 220,000
Legal Fees and Expenses..................................... 300,000
Transfer Agent's and Registrar's Fees and Expenses.......... 35,000
Miscellaneous............................................... 30,428
----------
Total............................................. $2,000,000
==========
</TABLE>
- ---------------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Ohio Revised Code (the "Code") authorizes Ohio corporations to
indemnify officers and directors from liability if the officer or director acted
in good faith and in a manner reasonably believed by the officer or director to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal actions, if the officer or director had no reason to believe his
action was unlawful. In the case of an action by or on behalf of a corporation,
indemnification may not be made (i) if the person seeking indemnification is
adjudged liable for negligence or misconduct, unless the court in which such
action was brought determines such person is fairly and reasonably entitled to
indemnification or (ii) if liability asserted against such person concerns
certain unlawful distributions. The indemnification provisions of the Ohio Code
require indemnification if a director or officer has been successful on the
merits or otherwise in defense of any action, suit or proceeding that he was a
party to by reason of the fact that he is or was a director or officer of the
corporation. The indemnification authorized under Ohio law is not exclusive and
is in addition to any other rights granted to officers and directors under the
articles of incorporation or code of regulations of the corporation or any
agreement between officers and directors and the corporation. A corporation may
purchase and maintain insurance or furnish similar protection on behalf of any
officer or director against any liability asserted against him and incurred by
him in his capacity, or arising out of the status, as an officer or director,
whether or not the corporation would have the power to indemnify him against
such liability under the Ohio Code.
The Registrant's Code of Regulations provides for the indemnification of
directors and officers of the Registrant to the maximum extent permitted by Ohio
law as authorized by the Board of Directors of the Registrant, for the
advancement of expenses incurred in connection with the defense of any action,
suit or proceeding that he was a party to by reason of the fact that he is or
was a director of the Registrant upon the receipt of an undertaking to repay
such amount unless it is ultimately determined that the director is entitled to
indemnification. The Code of Regulations authorizes the Registrant to purchase
and maintain insurance on behalf of any director, officer, employee or agent of
the Registrant against any liability asserted against them in such capacity or
arising out of their status as such, whether or not the Registrant would have
power to indemnify such officer, employee or agent against such liability under
the provisions of the Code of Regulations of the Registrant.
II-1
<PAGE> 93
The Company has entered into indemnification agreements with each of its
directors and executive officers. These agreements generally: (i) confirm the
existing indemnity provided to them under the Company's Code of Regulations and
assure that this indemnity will continue to be provided; (ii) provide that if
the Company does not maintain directors' and officers' liability insurance, the
Company will, in effect, become a self-insurer of the coverage; (iii) provide
that, in addition, the directors and officers shall be indemnified to the
fullest extent permitted by law against all expenses (including legal fees),
judgments, fines, and settlement amounts paid or incurred by them in any action
or proceeding, including any action by or in the right of the Company, on
account of their service as a director, officer, employee, or agent of the
Company or at the request of the Company as a director, officer, employee,
trustee, fiduciary, manager, member or agent of another corporation,
partnership, trust, limited liability company, employee benefit plan or other
enterprise; and (iv) provide for the mandatory advancement of expenses to the
executive officer or director in connection with the defense of any proceedings,
provided the executive officer or director agrees to reimburse the Company for
that advancement if it is ultimately determined that the executive officer or
director is not entitled to indemnification for that proceeding under the
agreement. Coverage under the agreements is excluded: (A) on account of conduct
which is finally adjudged to be knowingly fraudulent, deliberately dishonest, or
willful misconduct; or (B) if a final court of adjudication shall determine that
such indemnification is not lawful; or (C) in respect of any suit in which
judgment is rendered for violation of Section 16(b) of the Securities Exchange
Act of 1934 or similar provisions of any federal, state, or local statutory law;
or (D) on account of any remuneration paid which is finally adjudged to have
been in violation of law; or (E) on account of conduct occurring prior to the
time the executive officer or director became an officer, director, employee, or
agent of the Company or its subsidiaries (but in no event earlier that the time
such entity became a subsidiary of the Company); or (F) with respect to
proceedings initiated or brought voluntarily by the executive officer or
director and not by way of defense, except for proceedings brought to enforce
rights under the indemnification agreement.
The Registrant maintains a directors' and officers' liability insurance
policy which insures the officers and directors of the Registrant from any claim
arising out of an alleged wrongful act by such persons in their respective
capacities as officers and directors of the Registrant.
Reference is made to Section 10 of the Underwriting Agreement, a copy of
which is filed herewith as Exhibit 1.1, for information concerning
indemnification arrangements among the Registrant and the Underwriters.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with the formation of the Company, 100 Common Shares were
issued and sold to Richard E. Jacobs, Trustee Under Declaration of Trust dated
April 23, 1987 and Richard E. Jacobs, Trustee of the David H. Jacobs Marital
Trust (together, the "Trusts") on April 2, 1998 for $15.00 per share. Also on
such date, the Trusts and Martin J. Cleary, a director of the Company, agreed to
purchase 133,233 Class A Common Shares at $15.00 per share, payable concurrently
with the closing of the transactions contemplated by the Reorganization
Agreement filed as Exhibit 2.1 hereto. Further, pursuant to the Reorganization
Agreement, the Trusts and Mr. Cleary will receive Class A and Class B Common
Shares in connection with the Formation Transactions. The obligations of the
Trusts and Mr. Cleary to pay for the shares they have agreed to purchase and to
complete the Formation Transactions are not subject to any conditions other than
completion of the Offering. The Company relied upon the exemption from
registration contained in Section 4(2) of the Securities Act of 1933 for each of
the foregoing transactions.
II-2
<PAGE> 94
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS -- The following is a list of exhibits in this Registration
Statement.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
*1.1 Proposed Form of Underwriting Agreement.
2.1 Agreement and Plan of Reorganization dated April 2, 1998
among Cleveland Indians Baseball Company, Inc., Cleveland
Baseball Corporation, MJC Baseball, Inc., Ballpark
Management Company, Cleveland Indians Baseball Company
Limited Partnership, Richard E. Jacobs, Trustee Under
Declaration of Trust dated April 23, 1987, Richard E.
Jacobs, Trustee of the David H. Jacobs Marital Trust and
Martin J. Cleary.
*3.1 Amended and Restated Articles of Incorporation of the
Company.
3.2 Code of Regulations of the Company.
**4.1 Form of Share Certificate for Class A Common Shares.
**4.2 Form of Share Certificate for Class B Common Shares.
*5.1 Opinion of Baker & Hostetler LLP regarding the legality of
the Class A Common Shares being registered.
10.1 Basic Agreement between the American League, the National
League and the Players Association dated December 7, 1996
(the Collective Bargaining Agreement).
10.2 Lease Agreement between Gateway and the Partnership dated
July 3, 1991.
10.3 Ground Lease Agreement between Gateway and the Partnership
dated July 3, 1991.
10.4 Management Agreement between Gateway and Ballpark Management
dated July 3, 1991.
10.5 Common Area Maintenance Agreement between Gateway, the
Partnership and Ballpark Management dated July 31, 1991.
10.6 Amended and Restated Use Agreement by and between the City
of Winterhaven, Florida and the Partnership dated October
15, 1993, as amended.
*10.7 Club Trust Revolving Credit Agreement among Major League
Baseball Trust, Fleet Bank and the Club Trusts, dated April
17, 1998.
*10.8 Ratification Agreement among Indians Club Trust and Fleet
National Bank, dated April 17, 1998.
*10.9 Club Trust Pledge and Security Agreement between Indians
Club Trust and Major League Baseball Trust dated April 17,
1998.
10.10 Transfer Agreement between the Partnership and Indians Club
Trust, dated May 22, 1992.
10.11 Amendment and Confirmation of Transfer Agreement between the
Partnership and Indians Club Trust dated June 28, 1996.
10.12 Credit Agreement among the Partnership, Ballpark Management
and Key Bank, N.A. (formerly known as Society National Bank)
dated September 1, 1994, as amended.
*10.13 Cleveland Indians Baseball Company, Inc. Long-Term Incentive
Plan.
10.14 Form of Indemnification Agreement between the Company and
each of its Directors.
10.15 Form of Indemnification Agreement between the Company and
each of its executive officers.
*10.16 Second Amendment and Confirmation of Transfer Agreement
between the Partnership and Indians Club Trust, dated April
17, 1998.
*10.17 Form of First Amended and Restated Agreement of Limited
Partnership of the Partnership.
10.18 Second Amendment to the Club Trust Reducing Revolving Credit
Agreement and the Club Trust Pledge and Security Agreement
dated May 27, 1997.
*10.19 Cleveland Indians Baseball Company, Inc. Directors' Deferred
Compensation Plan.
*10.20 Employment Agreement between the Company and John Hart.
*10.21 Employment Agreement between the Company and Dennis Lehman.
*10.22 Employment Agreement between the Company and Daniel J.
O'Dowd.
*10.23 Employment Agreement between the Company and Jeff Overton.
*10.24 Employment Agreement between the Company and Ken Stefanov.
*23.1 Consent of Baker & Hostetler LLP (to be contained in Exhibit
5.1).
*23.2 Consent of Deloitte & Touche LLP.
24.1 Powers of Attorney.
*27.1 Financial Data Schedule.
</TABLE>
II-3
<PAGE> 95
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
99.1 Consent of Edward G. Ptaszek, Jr.
*99.2 Consent of Dr. Robert W. Brown.
*99.3 Consent of William B. Summers, Jr.
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
Not applicable.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriter
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-4
<PAGE> 96
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused Amendment No. 1 to this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of
Cleveland, State of Ohio, on the 12th day of May, 1998.
CLEVELAND INDIANS BASEBALL COMPANY, INC.
By: /s/ RICHARD E. JACOBS
-----------------------------------------
Richard E. Jacobs, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, Amendment No. 1
to this Registration Statement has been signed below by the following persons in
the capacities indicated on the 12th day of May, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
/s/ RICHARD E. JACOBS Chairman of the Board,
- ------------------------------------------------ President, Chief Executive
Richard E. Jacobs Officer and Director
(principal executive officer)
/s/ KENNETH E. STEFANOV Vice President, Finance
- ------------------------------------------------ (principal financial officer and
Kenneth E. Stefanov principal accounting officer)
/s/ MARTIN J. CLEARY Director
- ------------------------------------------------
Martin J. Cleary
</TABLE>
<PAGE> 97
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
*1.1 Proposed Form of Underwriting Agreement.
2.1 Agreement and Plan of Reorganization dated April 2, 1998
among Cleveland Indians Baseball Company, Inc., Cleveland
Baseball Corporation, MJC Baseball, Inc., Ballpark
Management Company, Cleveland Indians Baseball Company
Limited Partnership, Richard E. Jacobs, Trustee Under
Declaration of Trust dated April 23, 1987, Richard E.
Jacobs, Trustee of the David H. Jacobs Marital Trust and
Martin J. Cleary.
*3.1 Amended and Restated Articles of Incorporation of the
Company.
3.2 Code of Regulations of the Company.
**4.1 Form of Share Certificate for Class A Common Shares.
**4.2 Form of Share Certificate for Class B Common Shares.
*5.1 Opinion of Baker & Hostetler LLP regarding the legality of
the Class A Common Shares being registered.
10.1 Basic Agreement between the American League, the National
League and the Players Association dated December 7, 1996
(the Collective Bargaining Agreement).
10.2 Lease Agreement between Gateway and the Partnership dated
July 3, 1991.
10.3 Ground Lease Agreement between Gateway and the Partnership
dated July 3, 1991.
10.4 Management Agreement between Gateway and Ballpark Management
dated July 3, 1991.
10.5 Common Area Maintenance Agreement between Gateway, the
Partnership and Ballpark Management dated July 31, 1991.
10.6 Amended and Restated Use Agreement by and between the City
of Winterhaven, Florida and the Partnership dated October
15, 1993, as amended.
*10.7 Club Trust Revolving Credit Agreement among Major League
Baseball Trust, Fleet Bank and the Club Trusts, dated April
17, 1998.
*10.8 Ratification Agreement among Indians Club Trust and Fleet
National Bank, dated April 17, 1998.
*10.9 Club Trust Pledge and Security Agreement between Indians
Club Trust and Major League Baseball Trust dated April 17,
1998.
10.10 Transfer Agreement between the Partnership and Indians Club
Trust, dated May 22, 1992.
10.11 Amendment and Confirmation of Transfer Agreement between the
Partnership and Indians Club Trust dated June 28, 1996.
10.12 Credit Agreement among the Partnership, Ballpark Management
and Key Bank, N.A. (formerly known as Society National Bank)
dated September 1, 1994, as amended.
*10.13 Cleveland Indians Baseball Company, Inc. Long-Term Incentive
Plan.
10.14 Form of Indemnification Agreement between the Company and
each of its Directors.
10.15 Form of Indemnification Agreement between the Company and
each of its executive officers.
*10.16 Second Amendment and Confirmation of Transfer Agreement
between the Partnership and Indians Club Trust, dated April
17, 1998.
*10.17 Form of First Amended and Restated Agreement of Limited
Partnership of the Partnership.
10.18 Second Amendment to the Club Trust Reducing Revolving Credit
Agreement and the Club Trust Pledge and Security Agreement
dated May 27, 1997.
*10.19 Cleveland Indians Baseball Company, Inc. Directors' Deferred
Compensation Plan.
*10.20 Employment Agreement between the Company and John Hart.
*10.21 Employment Agreement between the Company and Dennis Lehman.
*10.22 Employment Agreement between the Company and Daniel J.
O'Dowd.
*10.23 Employment Agreement between the Company and Jeff Overton.
*10.24 Employment Agreement between the Company and Ken Stefanov.
*23.1 Consent of Baker & Hostetler LLP (to be contained in Exhibit
5.1).
*23.2 Consent of Deloitte & Touche LLP.
24.1 Powers of Attorney.
*27.1 Financial Data Schedule.
99.1 Consent of Edward G. Ptaszek, Jr.
*99.2 Consent of Dr. Robert W. Brown.
*99.3 Consent of William B. Summers, Jr.
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
<PAGE> 1
Exhibit 1.1
DRAFT
AS OF 5-12-98
CLEVELAND INDIANS BASEBALL COMPANY, INC.
4,000,000 Class A Common Shares*
UNDERWRITING AGREEMENT
----------------------
______________, 1998
McDonald & Company Securities, Inc.
As Representative of the Several Underwriters
c/o McDonald & Company Securities, Inc.
McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Dear Sirs:
1. INTRODUCTORY. Cleveland Indians Baseball Company, Inc., an
Ohio corporation (the "Company"), proposes to issue and sell 4,000,000 of its
Class A Common Shares, without par value (the "Common Shares"), which are
authorized but unissued, to the public through the underwriters named in
Schedule A annexed hereto (the "Underwriters") for whom you are acting as the
Representative. The 4,000,000 Common Shares to be purchased from the Company are
hereinafter referred to as the "Firm Stock." The Company also proposes to sell
to the Underwriters, at their option, an aggregate of not more than 600,000
additional Common Shares solely to cover over-allotments, which are hereinafter
referred to as the "Option Stock." The Firm Stock and the Option Stock are
hereinafter collectively referred to as the "Stock" and are more fully described
in the Registration Statement and the Prospectus (as hereinafter defined). The
Company hereby confirms its agreements, as set forth herein, with you, acting as
the Representative of the Underwriters.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each of the Underwriters that:
(a) The Company does not own or control, directly or
indirectly, any corporation, association or other entity. The Company has been
duly organized and is validly existing as a corporation in good standing under
the laws of Ohio with corporate power and
- ------------------
* Plus an option to purchase up to 600,000 additional shares to cover
over-allotments.
<PAGE> 2
authority to own and lease its properties and conduct its business as
described in the Prospectus (as hereinafter defined). Upon completion of the
transactions described under the heading "Formation Transactions" in the
Registration Statement (the "Formation Transactions"), except for Cleveland
Indians Baseball Company Limited Partnership (the "Baseball Partnership"), the
Company will not have any subsidiaries (as defined in Rule 1-02(x) of Regulation
S-X). The Baseball Partnership has been formed and is validly existing as a
partnership in good standing under the laws of Ohio with power and authority to
own and lease its properties and conduct its business. Each of the Company and
the Baseball Partnership is duly qualified to do business as a foreign
corporation or partnership, as the case may be, and is in good standing in all
jurisdictions (i) in which the conduct of business, as presently being
conducted, requires such qualification and (ii) in which the Company or the
Baseball Partnership owns or leases real property (except for those
jurisdictions in which the failure to so qualify will not in the aggregate have
a material adverse effect on the Company and the Baseball Partnership, taken as
a whole). Except as disclosed in the Registration Statement and except for the
partnership interest in the Baseball Partnership owned by the Company, neither
the Company nor the Baseball Partnership owns, directly or indirectly, any
equity securities or securities convertible into or exchangeable for equity
securities of any other corporation, partnership, joint venture, Massachusetts
or other business trust or any other business enterprise.
(b) This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Company.
(c) The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission"), in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the Rules and Regulations of
the Commission thereunder (as hereinafter defined), a registration statement on
Form S-1 (Registration No. 333-49357) including a preliminary prospectus
relating to the Company's Stock, and such amendments to such registration
statement as may have been required prior to the date hereof have been similarly
prepared and filed with the Commission. The registration statement as amended at
the time when it becomes effective, or, if applicable, as amended at the time
the most recent post-effective amendment to such registration statement filed
with the Commission prior to the execution and delivery of this Agreement became
effective (the "Effective Date"), and including information (if any) contained
in a prospectus subsequently filed with the Commission pursuant to Rule 424(b)
under the Act, and deemed to be part of the registration statement at the time
of effectiveness pursuant to Rule 430A under the Act is hereinafter referred to
as the "Registration Statement"; the prospectus in the form first used to
confirm sales of Stock, whether or not filed with the Commission pursuant to
Rule 424(b) under the Act is hereinafter referred to as the "Prospectus." If an
abbreviated registration statement is prepared and filed with the Commission in
accordance with Rule 462(b) under the Act (an "Abbreviated Registration
Statement"), the term "Registration Statement" as used in this Agreement
includes the Abbreviated Registration Statement.
(d) As of the Effective Date, and at all times subsequent thereto up to and
including the respective Closing Dates (as hereinafter defined) of the offering,
the Registration Statement and the Prospectus, and any amendments thereof or
supplements thereto,
-2-
<PAGE> 3
will contain all statements of material facts which are required to be stated
therein in accordance with the Act and the applicable rules, regulations and
interpretive releases of the Commission thereunder (the "Rules and
Regulations"), and will in all material respects conform to the requirements of
the Act and the Rules and Regulations; and neither the Registration Statement
nor the Prospectus, nor any amendment thereof or supplement thereto, will
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the Company makes no representations,
warranties or agreements as to information contained in the Registration
Statement or the Prospectus or any such amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company through you as the Representative specifically for use in the
preparation thereof.
(e) The Company's duly authorized, issued and outstanding capital stock is
as set forth under "Capitalization" in the Prospectus; all of the outstanding
shares of capital stock of the Company are duly authorized and validly issued,
fully paid and nonassessable, are free of any preemptive rights, rights of first
refusal or similar rights, were issued and sold in compliance with the
applicable Federal and state securities laws and conform in all material
respects to the description thereof in the Prospectus; except as set forth or
contemplated in the Prospectus, there are no outstanding options, warrants or
other rights calling for the issuance of, and there are no commitments, plans or
arrangements to issue any shares of capital stock of the Company or any security
convertible or exchangeable or exercisable for capital stock of the Company.
There are no holders of securities of the Company who, by reason of the filing
of the Registration Statement have the right (and have not waived such right) to
request the Company to include in the Registration Statement securities owned by
them, other than such rights as have been satisfied by the inclusion of
securities in the Registration Statement.
(f) The Common Shares of the Company conform in substance to all statements
in relation thereto contained in the Registration Statement and the Prospectus;
the Stock to be sold by the Company hereunder has been duly authorized and, when
issued and delivered pursuant to this Agreement, will be validly issued, fully
paid and nonassessable and will conform to the description thereof contained in
the Prospectus. All corporate action required to be taken for the issuance of
the Stock by the Company has been validly taken. No preemptive rights of
security holders of the Company exist with respect to the issuance and sale of
the Stock by the Company pursuant hereto.
(g) Upon completion of the Formation Transactions, all of the general
partner interests in the Baseball Partnership will be owned by the Company and
all of the limited partner interests in the Baseball Partnership will be owned
by Cleveland Baseball Corporation, an Ohio corporation, in each case free and
clear of all liens, encumbrances, equities, security interests or claims; and
there will be no outstanding options, warrants or other rights calling for the
issuance of, and there will be no commitments, plans or arrangements to issue,
any interests in the Baseball Partnership or any security convertible or
exchangeable or exercisable for interests in the Baseball Partnership.
-3-
<PAGE> 4
(h) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus up to and including the respective
Closing Dates (as hereinafter defined), except as set forth or contemplated in
the Prospectus, (i) there has not been and will not have been any change on a
pro forma basis or otherwise in the capital stock (or partnership interests in
the case of the Baseball Partnership) or funded debt of the Company and the
Baseball Partnership which is material or any material adverse change in the
business or the financial position or results of operations of the Company and
the Baseball Partnership, taken as a whole, and (ii) no loss or damage (whether
or not insured) to the property of the Company and the Baseball Partnership has
been sustained which materially and adversely affects the operations of the
Company and the Baseball Partnership taken as a whole.
(i) The consummation of the transactions herein contemplated and the
fulfillment of the terms hereof will not conflict with or result in a breach of
any of the terms and provisions of, or constitute a default under, the Articles
of Incorporation or the Code of Regulations of the Company, or the Certificate
of Limited Partnership or Partnership Agreement of the Baseball Partnership, or
any indenture, mortgage, deed of trust or other agreement or instrument to which
the Company or the Baseball Partnership is a party or by which the Company or
the Baseball Partnership is bound, or any order, rule or regulation applicable
to the Company or the Baseball Partnership of any court or of any federal or
state regulatory body or administrative agency or other governmental body having
jurisdiction over the Company or the Baseball Company or any of their
properties, or any rule, regulation, guideline, bulletin, directive, policy or
agreement pertaining to Major League Baseball, including, without limitation,
the American League Constitution, the Major League Agreement, the Major League
Rules, the MLB Collective Bargaining Agreement and Ownership Guidelines
(together, the "MLB Governing Documents").
(j) The balance sheet of the Company and the combined financial statements
of the Baseball Partnership and Ballpark Management Company ("Ballpark
Management") included in the Registration Statement and the Prospectus fairly
present the financial position and results of operations of the Company and the
combined financial position and results of operations of the Baseball
Partnership and Ballpark Management at the respective dates and for the
respective periods to which they apply, and such balance sheet and combined
financial statements have been prepared in conformity with generally accepted
accounting principles consistently applied throughout the periods involved. The
pro forma financial statements of the Company included in the Prospectus fairly
present the pro forma financial position and results of operations of the
Company and the Baseball Partnership at the dates and for the periods to which
they apply, and have been prepared to give effect to certain assumptions and
proposed transactions made on reasonable bases which are fully and accurately
described in the Prospectus, and the pro forma adjustments have been properly
applied on the bases described therein.
(k) Deloitte & Touche LLP, who have examined and expressed their opinion on
the balance sheet of the Company and the combined financial statements of the
Baseball Partnership and Ballpark Management referenced in their opinions set
forth in the
-4-
<PAGE> 5
Prospectus, are independent accountants within the meaning of the Act and the
Rules and Regulations.
(l) Upon completion of the Formation Transactions, the Company and the
Baseball Partnership will hold all necessary material authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials and bodies (collectively the "licenses") required for the
conduct of its business as described in the Prospectus, and all such licenses
will be valid and in full force and effect, and the Company and the Baseball
Partnership will be operating in compliance in all material respects with the
terms and provisions of such licenses and with all material laws, regulations,
orders and decrees applicable to the Company and the Baseball Partnership, and
their respective businesses and assets.
(m) Neither the Company nor the Baseball Partnership is in violation of any
applicable Federal, state or local laws, statutes, rules, regulations or
ordinances relating to public health, safety or the environment, including,
without limitation, relating to releases, discharges, emissions or disposal to
air, water, land or groundwater, to the withdrawal or use of groundwater, to the
use, handling or disposal of polychlorinated biphenyls (PCBs), asbestos or urea
formaldehyde, to the treatment, storage, disposal or management of hazardous
substances (including, without limitation, petroleum, crude oil or any fraction
thereof, or other hydrocarbons), pollutants or contaminants, to exposure to
toxic, hazardous or other controlled, prohibited or regulated substances, which
violation would have a material adverse effect on the business, condition
(financial or other) or results of operations of the Company and the Baseball
Partnership, taken as a whole, or which might materially and adversely affect
the consummation of the transactions contemplated by this Agreement. In
addition, and irrespective of such compliance, to the Company's knowledge,
neither the Company nor the Baseball Partnership is subject to any liabilities
for environmental remediation or clean-up, including any liability or class of
liability of the lessee under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or the Resource Conservation
and Recovery Act of 1976, as amended, which liability would have a material
adverse effect on the business, condition (financial or other) or results of
operations of the Company and the Baseball Partnership, taken as a whole, or
which might materially and adversely affect the consummation of the transactions
contemplated by this Agreement.
(n) There are no legal or governmental actions, suits or proceedings
pending or, to the knowledge of the Company, threatened to which the Company or
the Baseball Partnership, or any of their respective executive officers or
directors is a party or of which the business or property (including, without
limitation, any of the licenses referred to in (l) above) of the Company or the
Baseball Partnership or any of their respective employees is the subject which
could have a material adverse effect on the business, condition (financial or
other) or results of operations of the Company and the Baseball Partnership,
taken as a whole, except as set forth or contemplated in the Prospectus.
(o) The Company is not in violation of its Articles of Incorporation or its
Code of Regulations and the Baseball Partnership is not in violation of its
Certificate of
-5-
<PAGE> 6
Limited Partnership or Partnership Agreement, and no material default exists by
the Company or the Baseball Partnership in the due performance and observance of
any term, covenant or condition of any agreement material to the Company and the
Baseball Partnership to which the Company or the Baseball Partnership is a party
or by which the Company or the Baseball Partnership is bound.
(p) The Company and the Baseball Partnership have or, upon completion of
the Formation Transactions, will have good title to, or valid and enforceable
leasehold estates in, all properties and assets used for their businesses
(including the property described in the Prospectus as being owned, leased or
used by the Company), in each case free and clear of all liens, encumbrances and
defects other than those set forth or referred to in the Registration Statement
or Prospectus or those which do not materially affect the value of such property
or leasehold and do not materially interfere with the use made or proposed to be
made of such property or leasehold by the Company and the Baseball Partnership;
and all of the leases and subleases under which the Company and the Baseball
Partnership hold such properties are in full force and effect.
(q) Except as set forth or contemplated in the Prospectus, (i) upon
completion of the Formation Transactions, the Company and the Baseball
Partnership will own or possess, or will be able to acquire on reasonable terms,
the patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets, applications and other unpatented or unpatentable
proprietary or confidential information, systems or procedures), trademarks,
service marks, and trade names (collectively, "Proprietary Rights") used in or
necessary for the conduct of their businesses as now conducted and as proposed
to be conducted as described in the Prospectus; (ii) upon completion of the
Formation Transactions, the Company and the Baseball Partnership will have the
right to use all Proprietary Rights used in or necessary for the conduct of
their businesses without infringing the rights of any person or violating the
terms of any licensing or other agreement to which the Company or the Baseball
Partnership is a party, and to the knowledge of the Company no person is
infringing upon any Proprietary Right which the Company or the Baseball
Partnership has the sole and exclusive right to use which would have a material
adverse effect on the Company and the Baseball Partnership, taken as a whole;
(iii) no charges, claims or litigation have been asserted and remain pending or
to the knowledge of the Company have been threatened against the Company or the
Baseball Partnership and not withdrawn that contest the right of the Company or
the Baseball Partnership to use, or the validity of, any Proprietary Right or
challenging or questioning the validity or effectiveness of any license or
agreement pertaining thereto or asserting the misuse thereof, and, to the
Company's knowledge, no valid basis exists for the assertion of any such charge,
claim or litigation; (iv) upon completion of the Formation Transactions, all
licenses and other agreements to which the Company or the Baseball Partnership
will be a party relating to Proprietary Rights will be in full force and effect
and will constitute valid, binding and enforceable obligations of the Company or
the Baseball Partnership, and, to the Company's knowledge, the other respective
parties thereto, and, to the Company's knowledge, there will not be any defaults
thereunder which would have a material adverse effect on the Company and the
Baseball Partnership, taken as a whole, and no event will have occurred which
(whether by notice or lapse of time or both) would constitute such a default
under any license or other agreement affecting Proprietary Rights
-6-
<PAGE> 7
used in or necessary for the conduct of the businesses of the Company and the
Baseball Partnership by any party; and (v) the validity, continuation and
effectiveness of all such licenses and other agreements and the current terms
thereof will not be affected by the transactions contemplated by this Agreement.
(r) No approval, authorization, consent or other order of any public board
or body (other than in connection with or in compliance with the provisions of
the Act and the securities or Blue Sky laws of various jurisdictions) is legally
required for the sale of the Stock by the Company.
(s) The Common Shares have been registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended, and have been authorized for
inclusion in the Nasdaq National Market ("Nasdaq") subject to notice of issuance
or sale, as the case may be.
(t) The outstanding debt, the properties and the business of the Company
and the Baseball Partnership conform in all material respects to the description
thereof contained in the Registration Statement and the Prospectus.
(u) The Company and the Baseball Partnership have filed on a timely basis
all necessary federal, state, local and foreign income and franchise tax returns
required to be filed through the date hereof and have paid all taxes shown as
due thereon; and no tax deficiency has been asserted against the Company or the
Baseball Partnership that has not been satisfied, nor does the Company know of
any tax deficiency which is likely to be asserted against the Company or the
Baseball Partnership which if determined adversely to the Company or the
Baseball Partnership could materially adversely affect the business, prospects,
properties, assets, results of operations or condition (financial or otherwise)
of the Company and the Baseball Partnership, taken as a whole. All tax
liabilities are adequately provided for on the books of the Company.
(v) The Company and the Baseball Partnership each maintain insurance of the
types and in the amounts generally deemed adequate for their businesses,
including, but not limited to, insurance covering (i) personal injury claims and
(ii) real and personal property owned or leased by the Company and the Baseball
Partnership against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, all of which insurance is in full force and
effect.
(w) Except as set forth or contemplated in the Prospectus, to the best of
the Company's knowledge, no labor problem exists with its employees or is
threatened or imminent that could materially adversely affect the Company and
the Baseball Partnership, taken as a whole, and the Company is not aware of any
existing, threatened or imminent labor disturbance by the employees of any of
its principal suppliers, contractors or customers that could be expected to
materially adversely affect the business, prospects, properties, assets, results
of operation or condition (financial or other) of the Company and the Baseball
Partnership, taken as a whole.
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<PAGE> 8
(x) The Company has obtained the agreement of each of its executive
officers, directors and shareholders that, for a period of 270 days from the
date of the final prospectus, such persons will not, without the prior written
consent of McDonald & Company Securities, Inc., directly or indirectly sell,
offer to sell, grant any option for the sale of, or otherwise dispose of Common
Shares (including, without limitation, Common Shares which may be deemed to be
beneficially owned by such persons in accordance with the 1934 Act Regulations)
or any securities convertible into Common Shares (including, without limitation,
Class B Common Shares).
(y) Neither the Company nor any of its officers, directors or affiliates
(as defined in the Act and the Rules and Regulations), has taken or will take,
directly or indirectly, any action designed to stabilize or manipulate, or which
has constituted, or might in the future reasonably be expected to cause or
result in, stabilization or manipulation of, the price of the Stock of the
Company in order to facilitate the sale or resale of the Stock or otherwise.
(z) The Company's system of internal accounting controls is sufficient to
meet the broad objectives of internal accounting control insofar as those
objectives pertain to the prevention or detection of errors or irregularities in
amounts that would be material in relation to the Company's financial
statements; and, to the best of the Company's knowledge, neither the Company nor
any employee or agent of the Company or of the Baseball Partnership has made any
payment of funds of the Company or the Baseball Partnership or received or
retained any funds and no funds of the Company or the Baseball Partnership have
been set aside to be used for any payment in violation of any law, rule or
regulation.
(aa) Neither the Company nor the Baseball Partnership is, or upon
completion of the transactions contemplated in the Prospectus will be, required
to register as an "investment company" under the Investment Company Act of 1940,
as amended.
(bb) All contracts and documents which are required to be filed as exhibits
to the Registration Statement have been so filed.
3. SALE, PURCHASE AND DELIVERY OF STOCK. (a) On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company hereby agrees to sell to each
Underwriter, and each Underwriter, severally and not jointly, agrees to purchase
from the Company the respective number of shares of the Firm Stock set forth
opposite the Underwriter's name in Schedule A hereto, at a price of $______ per
share.
(b) The Company will deliver the Firm Stock to you for the respective
accounts of the several Underwriters at the office of McDonald & Company
Securities, Inc., McDonald Investment Center, 800 Superior Avenue, Cleveland,
Ohio 44114, at 10:00 a.m., Cleveland time, or to your designee at a specified
place at the same time, against payment of the purchase price at the place of
such Closing, by wire transfer in immediately available funds to the account
designated by the Company in writing on the third full business day after the
effective date of the Registration Statement (or, if the Firm Stock is priced
after 4:30 p.m.,
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<PAGE> 9
Cleveland time on the effective date of the Registration Statement, the fourth
full business day after the effective date of the Registration Statement), or at
such other time not later than seven full business days after such initial
public offering as shall be determined by agreement between you and the Company,
such time and place being herein referred to as the "Closing Date." The
certificates for the Firm Stock so to be delivered will be in such denominations
and registered in such names as you may specify to the Company at or before 3:00
p.m., Cleveland time, on the second full business day prior to the Closing Date.
Such certificates will be made available for checking and packaging at least 24
hours prior to the Closing Date.
(c) On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to 600,000 additional shares in the aggregate of the Option
Stock at the purchase price set forth in Section 3(a) hereof, for use solely in
covering any over-allotments made by the Underwriters in the sale and
distribution of the Firm Stock. The option granted hereunder may be exercised at
any time (but not more than once) within 30 days after the date the Registration
Statement becomes effective, upon written or telegraphic notice by the
Representative to the Company setting forth the aggregate number of shares of
the Option Stock as to which the Underwriters are exercising the option and the
time and place at which certificates will be delivered, such time (which, unless
otherwise determined by you and the Company, shall not be earlier than three nor
later than seven full business days after the exercise of said option) being
herein called the "Second Closing Date." The number of shares of the Option
Stock to be sold by the Company to each Underwriter and purchased by such
Underwriter from the Company shall be the same percentage of the total number of
shares of the Option Stock to be purchased by the several Underwriters on the
Second Closing Date as such Underwriter purchased of the total number of shares
of the Firm Stock, as adjusted by the Representative to avoid fractions and to
reflect any adjustment required by Section 13 hereof. The Company will deliver
certificates for the shares of the Option Stock being purchased by the several
Underwriters to you on the Second Closing Date at the place and time of such
Closing, or to your designee at a specified place at the same time, against
payment of the purchase price at the place of such Closing by wire transfer in
immediately available funds to an account designed by the Company in writing.
The certificates for the Option Stock so to be delivered will be in such
denominations and registered in such names as you may specify to the Company at
or before 3:00 P.M., Cleveland time, on the second full business day prior to
the Second Closing Date. Such certificates will be made available for checking
and packaging at least 24 hours prior to the Second Closing Date. The option
granted hereby may be cancelled by you as the Representative of the several
Underwriters, as to the shares of the Option Stock for which the option is
unexercised, at any time prior to the expiration of the 30-day period, upon
notice to the Company.
4. OFFERING BY UNDERWRITERS. Subject to the terms and
conditions hereof, the several Underwriters agree that (i) they will offer the
Stock to the public as set forth in the Prospectus as soon after the
Registration Statement becomes effective as may be practicable, but in no event
later than 5:00 p.m., Cleveland time, on the 15th business day subsequent to the
date that the Registration Statement becomes effective, and (ii) they will offer
and sell the Stock to the public only in those jurisdictions, and in such
amounts, where due qualification and/or
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<PAGE> 10
registration has been effected or an exemption from such qualification and/or
registration is available under the applicable securities or Blue Sky laws of
such jurisdiction; it being understood, however, that such agreement only covers
the initial sale of the Stock by the Underwriters and not any subsequent sale of
such Stock in any trading market which may develop after the public offering.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with each of
the Underwriters that:
(a) The Company will make every reasonable effort to cause the Registration
Statement to become effective and will advise you when it is effective under the
Act. The Company will not file any amendment to the Registration Statement, or
supplement to the Prospectus, of which you have not been previously advised and
furnished with a copy, or to which you have reasonably objected in writing.
(b) The Company will advise you promptly of any request of the Commission
for amendment of the Registration Statement or Prospectus or for additional
information and of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or of the institution of any
proceedings for that purpose of which it has knowledge, and the Company will
make every reasonable effort to prevent the issuance of any such stop order and
to obtain as soon as possible the lifting thereof, if issued.
(c) The Company will comply, to the best of its ability, with the Act so as
to permit the continuance of sales of and dealings in the Stock under the Act
for such period as may be required by the Act; whenever it is necessary to amend
or supplement the Prospectus to make the statements therein not misleading,
furnish, without charge to you as the Representatives, either amendments to the
Prospectus or supplemental information, so that the statements in the Prospectus
as so amended or supplemented will not be misleading; and file a post-effective
amendment to the Registration Statement whenever such an amendment may be
required and furnish, without charge to you, a reasonable number of copies of
any such amendment and related Prospectus.
(d) Not later than the 45th day following the end of the fiscal quarter
first occurring after the first anniversary of the Effective Date, the Company
will make generally available to its security holders and deliver to you an
earnings statement (which need not be audited) covering a period of at least 12
months beginning not earlier than the Effective Date which shall satisfy the
provisions of Section 11(a) of the Act or Rule 158 promulgated under the Act.
(e) The Company will furnish to you copies of the Registration Statement
(one of which will be signed and will include all exhibits thereto), each
preliminary prospectus, the Prospectus, all amendments of and supplements to
such documents, and all correspondence between the Commission and the Company or
its counsel or accountants relating thereto, in each case as soon as available
and in such quantities as you may reasonably request.
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<PAGE> 11
(f) For a period of three years from the date of the Prospectus, the
Company will deliver to you (i) within 90 days after the end of each fiscal
year, consolidated balance sheets, statements of income, statements of cash flow
and statements of changes in stockholders' equity of the Company and its
consolidated subsidiaries, if any, as at the end of and for such year and the
last preceding year, all in reasonable detail and certified by independent
accountants, (ii) within 45 days after the end of each of the first three
quarterly periods in each fiscal year, unaudited consolidated balance sheets and
statements of income, statements of cash flow and statements of changes in
stockholders' equity of the Company and its consolidated subsidiaries, if any,
as at the end of and for such period, all in reasonable detail, (iii) as soon as
available, all such proxy statements, financial statements and reports as the
Company shall send or make available to its stockholders or the stockholders or
partners, as the case may be, of any subsidiary any of whose stock or
partnership interests are owned by any person other than the Company or any
subsidiary, and (iv) copies of all annual or periodic reports as the Company or
any subsidiary shall file with the Commission as required by the Act, the
Exchange Act and any rules or regulations thereunder, which are available for
public inspection at the Commission, or any material reports filed in connection
with the Company's listing on any stock exchange.
(g) The Company will apply the net proceeds from the sale of the Stock sold
by it in the manner set forth in the Prospectus.
(h) If, at the time that the Registration Statement becomes effective, any
information shall have been omitted therefrom in reliance upon Rule 430A
promulgated under the Act, then promptly following the execution of this
Agreement, the Company will prepare, and file or transmit for filing with the
Commission in accordance with Rule 430A and Rule 424(b) promulgated under the
Act, copies of an amended Prospectus or, if required by such Rule 430A, a
post-effective amendment (including an amended Prospectus), containing all
information so omitted.
(i) The Company will file with Nasdaq all documents and notices required of
companies that have issued securities that are traded in the over-the-counter
market and quotations for which are reported by Nasdaq.
(j) The Company will cooperate with you and your counsel to qualify the
Stock for sale under the securities or Blue Sky laws of such jurisdictions
within the United States as you designate, including furnishing such information
and executing such instruments as may be required, and will continue such
qualifications for as long as necessary to complete the offering; provided,
however, the Company shall not be required to register or qualify as a foreign
corporation or as a dealer in securities nor, except as to matters and
transactions relating to the offer and sale of the Stock, consent to a service
of process in any jurisdiction.
(k) For a period of 270 days from the time of the initial public offering
of the Stock by the Underwriters, the Company will not publicly sell, except
with your prior written consent, any Common Shares or securities convertible
into Common Shares for cash,
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<PAGE> 12
except pursuant to the exercise of any outstanding stock options of the Company
that are described in the Prospectus.
(l) After the Closing Dates, the Company and the Baseball Partnership will
be in compliance with the financial record-keeping requirements and internal
accounting control requirements of Section 13(b)(2) of the Exchange Act.
6. PAYMENT OF EXPENSES. The Company will pay or cause to be paid all costs
and expenses incident to the performance of the obligations of the Company
hereunder, including, but not limited to, the reasonable fees and disbursements
of its counsel; the reasonable fees, costs and expenses of preparing, printing
and delivering the certificates for the Stock; the reasonable fees, costs and
expenses of the transfer agent and registrar for the Common Shares; the
reasonable fees and disbursements of its accountants; the filing fees and
reasonable expenses incurred in connection with the qualification, registration
or exemption of the Stock under state securities or Blue Sky laws and the fees
and disbursements of counsel for the Underwriters in connection with such
qualification, registration or exemption and the preparation and printing of the
preliminary and final Blue Sky Surveys; the filing fees and reasonable expenses
paid and incurred by the Underwriters, including fees and disbursements of
counsel for Underwriters, in connection with the review of the terms of the
underwriting arrangements by the NASD; the costs and expenses in connection with
the preparation, printing and filing of the Registration Statement (including
exhibits thereto) and the Prospectus and the furnishing to the Underwriters of
such copies of each preliminary and final Prospectus as the Underwriters may
reasonably require; and the costs and expenses in connection with the printing
of this Agreement, the Agreement Among Underwriters, the Selected Dealers
Agreement and other documents distributed to the Underwriters.
7. CONDITIONS OF THE OBLIGATION OF THE UNDERWRITERS. The obligations of the
several Underwriters to purchase and pay for the Firm Stock on the Closing Date
and the Option Stock on the Second Closing Date shall be subject to the
condition that the representations and warranties made by the Company herein are
true and correct as of the date hereof and as of the respective Closing Dates,
to the condition that the written statements of Company officers made pursuant
to the provisions hereof are true and correct, to the condition that the
Formation Transactions shall have been consummated, and to the performance by
the Company of their obligations hereunder and to the following additional
conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 P.M., Cleveland time, on the date of this Agreement, or at such later
time as shall have been consented to by you, and prior to each Closing Date no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been instituted or
shall be pending, or to the knowledge of the Company or you, shall be
contemplated by the Commission.
(b) You shall not have advised the Company that the Registration
Statement or Prospectus or any amendment thereof or supplement thereto contains
an untrue statement of fact which, in the reasonable opinion of Calfee, Halter &
Griswold LLP, counsel for
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<PAGE> 13
the Underwriters, is material, or omits to state a fact which, in the opinion of
such counsel, is material and is required to be stated therein or is necessary
to make the statements therein not misleading.
(c) You shall have received as of each Closing Date (or prior thereto as
indicated) the following:
(i) An opinion of Baker & Hostetler LLP, dated the respective Closing
Dates, to the effect that:
(aa) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of Ohio with all requisite
corporate power and authority to own its properties and conduct its business as
described in the Prospectus. The Baseball Partnership has been duly formed and
is validly existing as a partnership in full force and effect under the laws of
Ohio, with all requisite partnership power and authority to own and lease its
properties and conduct its business. The Company and the Baseball Partnership
are duly qualified to do business as a foreign corporation or partnership, as
the case may be, and are in good standing in all jurisdictions in which the
conduct of business, as presently being conducted, or the ownership or leasing
of its properties, requires such qualification (except for those jurisdictions
in which the failure to so qualify will not in the aggregate have a material
adverse effect on the Company and the Baseball Partnership, taken as a whole).
(bb) The authorized capital stock of the Company is as set forth
under "Capitalization" in the Prospectus; all issued and outstanding Common
Shares of the Company have been duly authorized and validly issued and are fully
paid and nonassessable, and are free of statutory preemptive rights of
stockholders or, to the best knowledge of such counsel, contractual preemptive
rights, rights of first refusal or similar contractual rights. Except as
described in the Prospectus, to the best knowledge of such counsel, there are no
outstanding options, warrants or other rights calling for the issuance of and
there are no commitments, plans or arrangements to issue any shares of capital
stock of the Company or any security convertible or exchangeable or exercisable
for capital stock of the Company, and, to the best knowledge of such counsel,
there are no holders of securities of the Company who, by reason of the filing
of the Registration Statement, have the right (and have not waived such right)
to request the Company to include in the Registration Statement securities owned
by them.
(cc) The Common Shares of the Company to be issued and sold by
the Company hereunder have been duly authorized, and, when issued, delivered and
paid for pursuant to this Agreement, will be validly issued, fully paid and
nonassessable. No statutory or, to the best knowledge of such counsel, any other
preemptive rights of security holders of the Company exist with respect to the
issuance and sale of the Stock by the Company pursuant to this Agreement. The
Common Shares of the Company conform to the description thereof contained in the
Prospectus and the certificates for the Common Shares of the Company (including
the Stock) are in due and legal form under Ohio law.
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<PAGE> 14
(dd) The Company has the corporate power and authority to enter
into and perform this Agreement, and to issue and deliver the Stock as provided
herein. The execution, delivery and performance of this Agreement by the Company
has been duly authorized by all necessary action of the Company. This Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
in accordance with its terms, except as rights to indemnity may be limited by
public policy and applicable federal or state securities laws and except as
enforcement thereof may be limited by bankruptcy, insolvency or other laws of
general application affecting the enforcement of creditors' rights or
limitations upon the availability of certain remedies that may be precluded by
general principles of equity.
(ee) Except as disclosed in the Registration Statement and except
for the partnership interest in the Baseball Partnership owned by the Company,
neither the Company nor the Baseball Partnership owns, directly or indirectly,
any shares of capital stock of any corporation or has any equity interest in any
firm, partnership, joint venture, association or other entity.
(ff) Upon completion of the Formation Transactions, all of the
general partner interests in the Baseball Partnership will be owned by the
Company and all of the limited partner interests in the Baseball Partnership
will be owned by Cleveland Baseball Corporation, an Ohio corporation, in each
case, to the best knowledge of such counsel, free and clear of all liens,
encumbrances, equities, security interests or claims; and, to the best knowledge
of such counsel, there are no outstanding options, warrants or other rights
calling for the issuance of, and there are no commitments, plans or arrangements
to issue, any interests in the Baseball Partnership or any security convertible
or exchangeable or exercisable for interests in the Baseball Partnership.
(gg) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or contemplated
under the Act. The Registration Statement and the Prospectus, and each amendment
thereof or supplement thereto (except for the financial statements and schedules
included therein as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Act and the Rules and
Regulations (except for the financial statements and schedules included therein
as to which such counsel need express no opinion); the statements in the
Prospectus under the captions "Business - Operating Agreements and Leases,"
"Major League Baseball - Collective Bargaining Agreement," "Management - Stock
Option Plan; - Employment Agreements" and "Description of Capital Shares," in
each case insofar as such statements constitute summaries of the legal matters,
documents or proceeding referred to therein, fairly present the information
called for by the Act with respect to such legal matters, documents and
proceedings and fairly summarize the matters referred to therein; and such
counsel does not know of any legal or governmental proceedings, pending or
threatened, which are required by the Act and the Rules and Regulations to be
described in the Prospectus and which are not described as so required, or of
any leases, contracts or other documents that are required by the Act and the
Rules and Regulations to be
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<PAGE> 15
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement and which are not described or filed as
so required.
(hh) The consummation of the transactions herein contemplated and
the fulfillment of the terms hereof do not result in a breach of any of the
terms and provisions of, or constitute a default under, any indenture, mortgage,
deed of trust or other agreement or instrument to which the Company or the
Baseball Partnership is a party and of which such counsel has knowledge, or the
Articles of Incorporation or Code of Regulations of the Company, or the
Certificate of Limited Partnership or partnership agreement of the Baseball
Partnership, or any of the MLB Governing Documents, or, to the knowledge of such
counsel, any approval, consent, order, rule or regulation applicable to the
Company or the Baseball Partnership of any court or of any federal or state
regulatory body or administrative agency or other governmental body having
jurisdiction over the Company or the Baseball Partnership or the properties of
any of them, except for such breaches or defaults as will not have a material
adverse effect on the consummation of the transactions herein contemplated and
the fulfillment of the terms hereof by the Company, except such as may be
required under the securities or Blue Sky laws of any jurisdiction as to which
such counsel need express no opinion.
(ii) The Company is not required to register as an "investment
company" under the Investment Company Act of 1940, as amended.
Such counsel shall also state that no facts have come to the
attention of such counsel which would lead such counsel to believe that either
the Registration Statement at the time it became effective and at the Closing
Date or the Second Closing Date, as the case may be, 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 as of the date thereof and as of the Closing Date or the
Second Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
belief or opinion with respect to the financial statements and schedules
included therein).
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent specified in
such opinion, if at all, upon an opinion or opinions of other counsel, familiar
with the applicable laws; and (B) as to matters of fact on certificates of
officers of the Company and certificates or other written statements of officers
of departments of various jurisdictions having custody of documents respecting
the corporate existence or good standing of the Company and the Baseball
Partnership. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel and,
in their opinion, you and they are justified in relying thereon.
(ii) Such opinion or opinions of Calfee, Halter & Griswold LLP,
counsel for the Underwriters, dated the respective Closing Dates, with respect
to the sufficiency of all corporate proceedings and other legal matters relating
to this Agreement, the
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<PAGE> 16
validity of the Stock, the Registration Statement, the Prospectus, and other
related matters as you may reasonably request, and the Company shall have
furnished to such counsel such documents as they may request for the purpose of
enabling them to pass upon such matters. In connection with such opinions, such
counsel may rely on representations or certificates of officers of the Company.
(iii) A certificate of the Company executed by the principal executive
officer and the principal financial and accounting officer of the Company, dated
each respective Closing Date, to the effect that:
(aa) The representations and warranties of the Company in Section
2 of this Agreement are true and correct as of each respective Closing Date, and
the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to each
respective Closing Date.
(bb) No stop order suspending the effectiveness of the
Registration Statement has been issued and, to the knowledge of the respective
signers of the certificate, no proceedings for that purpose have been instituted
or are pending or are contemplated under the Act.
(cc) The signers of the certificate have carefully examined the
Registration Statement and the Prospectus; no facts have come to their attention
which would lead them to believe that either the Registration Statement at the
time it became effective (or any amendment thereof or supplement thereto made
prior to the Closing Date or the Second Closing Date, as the case may be, as of
the date of such amendment or supplement) contained an untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus as of the date thereof (or any amendment thereof or supplement
thereto made prior to the Closing Date or the Second Closing Date, as the case
may be, as of the date of such amendment or supplement) contained an untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; since the latest
respective dates as of which information is given in the Registration Statement,
there has been no material adverse change in the financial position, business or
results of operations of the Company and its Subsidiaries, except as set forth
in or contemplated by the Prospectus; and since the Effective Date of the
Registration Statement there has occurred no event required to be set forth in
an amended or supplemented Prospectus which has not been set forth.
(iv) Letters from Deloitte & Touche LLP dated respectively the date of
this Agreement and each respective Closing Date, addressed to you and the
Company and in form and substance previously approved by you, with respect to
the financial statements and certain financial and statistical information
contained in the Registration Statement and the Prospectus.
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<PAGE> 17
(d) Prior to the Closing Date the Company shall have furnished to you
such further certificates and documents indicated in the Closing Memorandum
prepared by counsel for the Underwriters and furnished to the Company prior to
the date hereof.
(e) Prior to each Closing Date no stop orders suspending the
qualification of the Stock under the securities or Blue Sky laws of the states
in which the Stock is to be offered and sold shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending, or
to the knowledge of the Company or you, shall be contemplated by the applicable
state securities administrators.
If any condition of the Underwriters' obligations hereunder to be satisfied
prior to any Closing Date is not so satisfied, this Agreement may be terminated
by you prior to such Closing Date, by notice in writing or by telegram confirmed
in writing to the Company.
All such opinions, certificates, letters and documents furnished to you
pursuant to this Section 7 will be in compliance with the provisions hereof only
if they are in all material respects satisfactory to you and to Calfee, Halter &
Griswold LLP, counsel for the Underwriters, as to which both you and such
counsel shall act reasonably. The Company will furnish you with such executed
and conformed copies of such opinions, certificates, letters and documents as
you may request.
You, on behalf of the Underwriters, may waive in writing the compliance by
the Company of any one or more of the foregoing conditions or extend the time
for their performance.
8. REPRESENTATIONS OF THE UNDERWRITERS. Each of the Underwriters severally
represents and warrants to the Company that the information furnished to the
Company in writing by such Underwriters or by you expressly for use in the
preparation of the Registration Statement or the Prospectus does not, and any
amendments thereof or supplements thereto thus furnished will not, contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
Through you each Underwriter has furnished to the Company expressly for such
use, only those statements made in the last paragraph of the cover page of the
Prospectus and the statements relating to the terms of the offering by the
several Underwriters set forth in the first, second, sixth, and seventh
paragraphs under the caption "Underwriting" in the Prospectus.
9. TERMINATION OF AGREEMENT. This Agreement shall become effective: (i)
upon the execution and delivery hereof by the parties hereto; or (ii) if, at the
time this Agreement is executed and delivered, it is necessary for the
registration statement or a post-effective amendment thereto to be declared
effective before the offering of the Stock may commence, when notification of
the effectiveness of the registration statement or such post-effective amendment
has been released by the Commission. At any time before the happening of such
occurrence, the Company may, by notice to you, terminate this Agreement; and at
any time prior to such time, you, as the Representative of the several
Underwriters, may, by notice to the Company, terminate this Agreement.
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<PAGE> 18
This Agreement may also be terminated by you, as the Representative of the
several Underwriters, by notice to the Company on or after the Effective Date of
the Registration Statement and prior to each respective Closing Date, if at any
time during such period any of the following has occurred: (i) except as
disclosed in or contemplated by the Registration Statement, since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, any material adverse change or any development involving a
prospective material adverse change in or affecting the condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole or the earnings,
business affairs, management or business prospects of the Company and its
Subsidiaries taken as a whole, whether or not arising in the ordinary course of
business; (ii) any outbreak of hostilities or escalation in existing hostilities
anywhere in the world or other national or international calamity or crisis or
change in economic or political conditions, if the effect of such outbreak,
escalation, calamity, crisis or change on the financial markets in the United
States would, in your reasonable judgment, make it impracticable to offer for
sale or to enforce contracts made by the Underwriters for the resale of the
Stock agreed to be purchased hereunder; (iii) any general suspension of trading
in securities on the New York Stock Exchange or the American Stock Exchange or
the Nasdaq or any general limitation on prices for such trading or any general
restrictions on the distribution of securities, all to such a degree as would in
your reasonable judgment materially adversely affect the market for the Stock;
or (iv) a banking moratorium shall have been declared by either Federal, Ohio or
New York State authorities.
This Agreement may also be terminated as provided in Sections 7 and 11
hereof.
If this Agreement shall be terminated by you because of any failure on the
part of the Company to comply with any of the terms or to fulfill any of the
conditions of this Agreement, the Company shall pay, in addition to the costs
and expenses referred to in Section 6, all reasonable out-of-pocket expenses
incurred by the Underwriters in contemplation of the performance by them of
their obligations hereunder, including but not limited to the reasonable fees
and disbursements of counsel for the Underwriters, the Underwriters' reasonable
printing and traveling expenses and postage, telegraph and telephone charges
relating directly to the offering contemplated by the Prospectus, and also
including reasonable advertising expenses of the Representative incurred after
the Effective Date of the Registration Statement and so relating, it being
understood that such out-of-pocket expenses shall not include any compensation,
salaries or wages of the officers, partners or employees of any of the
Underwriters. Only such out-of-pocket expenses as shall be accounted for by the
Underwriters shall be paid to the Underwriters by the Company.
The Company shall not in any event be liable to the several Underwriters
for damages on account of loss of anticipated profits arising out of the
transactions contemplated by this Agreement.
10. INDEMNIFICATION. (a) The Company will indemnify and hold harmless each
Underwriter, and each person, if any, who controls each Underwriter within the
meaning of the Act, against any losses, claims, damages or liabilities, joint or
several, to which such
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<PAGE> 19
Underwriter or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based in whole or in part on any inaccuracy
in the representations and warranties of the Company contained herein or any
failure of the Company to perform its obligations hereunder, or arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any related preliminary prospectus
(if used prior to the Effective Date), the Prospectus or any amendment thereof
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and, subject to the
provisions of Section 10(c), will reimburse each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this Section 10(a) with respect to any
preliminary prospectus shall not inure to the benefit of any Underwriter or to
the benefit of any person controlling such Underwriter in respect of any loss,
claim, damage, liability or action asserted by a person who purchases shares of
the Stock from such Underwriter, if such Underwriter failed to send or give a
copy of the Prospectus (as the same may then be amended or supplemented) to such
person with or prior to written confirmation of the sale to such person; and
provided, further, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or omission or alleged omission made in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment thereof or supplement thereto in reliance upon or in conformity with
written information furnished to the Company by an Underwriter specifically for
use in the preparation thereof, as referred to in the last sentence of Section 8
hereof. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company, each
person, if any, who controls the Company within the meaning of the Act, each of
its directors, and each of its officers who have signed the Registration
Statement, against any losses, claims, damages or liabilities to which the
Company, or any such director or officer may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
any preliminary prospectus, the Prospectus, or any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus, the Prospectus or any amendment thereof
or supplement thereto in reliance upon or in conformity with written information
furnished to the Company by such Underwriter through you, as the Representative
of the Underwriters, specifically for use in the preparation thereof, as
referred to in the last sentence of Section 8 of this Agreement; and will
reimburse the Company and each such director or officer for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action. This indemnity
agreement will be in addition to any liability which the Underwriters may
otherwise have.
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<PAGE> 20
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify each party against whom indemnification is to be sought in
writing of the commencement thereof; but the omission so to notify an
indemnifying party will not relieve it from any liability which they may have to
any indemnified party otherwise than under this Section. In case any such action
is brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate in, and to the extent that it may wish, to assume the defense
thereof, with counsel approved by such indemnified party (which approval shall
not be unreasonably withheld), and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof. The indemnified party
shall have the right to employ its counsel in any such action, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment of counsel by such indemnified party has been
authorized in writing by the indemnifying parties, (ii) the named parties to any
such action include both the indemnifying party and the indemnified party, and
the indemnified party shall have reasonably concluded that there is an actual or
potential conflict of interest between the indemnifying parties and the
indemnified party in the conduct of the defense of such action (in which case
the indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party) or (iii) the indemnifying parties
shall not have employed counsel to assume the defense of such action within a
reasonable time after notice of the commencement thereof, in each of which cases
the reasonable fees and expenses of counsel shall be at the expense of the
indemnifying parties. In no event shall the indemnifying party or parties be
liable for the fees and expenses of more than one counsel for all indemnified
parties in connection with any one or separate but similar or related actions in
the same jurisdiction arising out of the same allegations or circumstances.
Anything in this Section to the contrary notwithstanding, no indemnifying party
shall, without the written consent of the indemnified party, such consent not to
be unreasonably withheld, effect the settlement or compromise of, or consent to
the entry to any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification may be sought hereunder (whether or
not the indemnified party is an actual or potential party to such action or
claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or failure to act, by or on behalf of any indemnified
party.
(d) In order to provide for contribution in circumstances in which the
indemnification provided for in this Section is for any reason held to be
unavailable from the Company or the Underwriters or is insufficient to hold
harmless a party indemnified hereunder, the Company and the Underwriters shall
contribute to the aggregate losses, claims, damages, liabilities and expenses of
the nature contemplated by such indemnification provisions (including any
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company, any
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<PAGE> 21
contribution received by the Company from persons, other than the Underwriters,
who may also be liable for contribution, including persons who control the
Company within the meaning of the Act, officers of the Company who signed the
Registration Statement and directors of the Company) to which the Company and
one or more of the Underwriters may be subject, in such proportions as is
appropriate to reflect the relative benefits received by the Company and the
Underwriters from the offering of the Stock or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in this Section,
in such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the
Underwriters 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 benefits received by the Company
and the Underwriters shall be deemed to be in the same proportion as (x) the
total proceeds from the offering (net of underwriting discounts and commissions
but before deducting expenses) received by the Company and (y) the underwriting
discounts and commissions received by the Underwriters, respectively, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault of the Company and of the Underwriters shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omissions or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 10(d) were determined by pro rata allocation even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this Section 10(d), (i) in no case
shall any Underwriter (except as may be provided in the Agreement Among
Underwriters) be liable or responsible for any amount in excess of the
underwriting discounts and commissions applicable to the Stock purchased by such
Underwriter hereunder and (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person, if any, who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 10(d), each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Act shall have
the same rights to contribution as such Underwriter, and each person, if any,
who controls the Company within the meaning of Section 15 of the Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to clauses (i) and (ii) of this Section 10(d). Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties
under this Section 10(d), notify such party or parties from whom contribution
may be sought, but the omission to so notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from any
obligation it or they may have under this Section 10(d) or otherwise. Anything
in this Section to the contrary notwithstanding, no party shall be liable,
without the written consent of such party, such consent not to be unreasonably
withheld, for any settlement or compromise of, or consent to the entry of any
judgment with respect to, any pending or threatened action or claim for
contribution which may be sought hereunder (whether or not such party is an
actual or
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<PAGE> 22
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of such party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or failure to act, by or on behalf of such
party.
11. DEFAULT OF THE UNDERWRITERS. If any Underwriter or
Underwriters default in their obligations to purchase the Stock hereunder and
arrangements satisfactory to you and the Company, evidenced by a writing or
writings signed by you and the Company, for the purchase of such Stock by other
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter and
the Company (except that the Company shall be liable for the expenses to be paid
by it pursuant to the provisions of Section 6), provided, however, that if the
number of shares of the Stock which all such defaulting Underwriters have agreed
but failed to purchase shall not exceed 10% of the number of shares of the Firm
Stock or the Option Stock, as the case may be, agreed to be purchased pursuant
to this Agreement (other than the shares agreed to be taken up hereunder which
the defaulting Underwriters failed to purchase) by all non-defaulting
Underwriters, the non-defaulting Underwriters shall be obligated proportionately
to take up and pay for the shares of the Firm Stock or the Option Stock which
such defaulting Underwriters failed to purchase.
If any such default occurs, either you or the Company shall
have the right to postpone the Closing Date for not more than seven business
days in order that the necessary changes in the Registration Statement,
Prospectus and any other documents, as well as any other arrangement, may be
effected. As used in this Agreement, the term "Underwriters" includes any person
substituted for an Underwriter under this Section. Nothing herein will relieve a
defaulting Underwriter from its liability to the other several Underwriters and
the Company for its default hereunder.
12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations and warranties of the
Company and the several Underwriters, set forth in or made pursuant to this
Agreement, will remain in full force and effect, regardless of any investigation
made by or on behalf of any Underwriter, the Company or any of its officers or
directors or any controlling person, and will survive delivery of and payment
for the Stock and, in the case of the agreements contained in Sections 6, 9 and
10 hereof, will survive any termination of this Agreement.
13. NOTICES. All communications hereunder will be in writing
and, if sent to the Underwriters, will be mailed, delivered or telegraphed and
confirmed to you at McDonald & Company Securities, Inc., McDonald Investment
Center, 800 Superior Avenue, Cleveland, Ohio 44114, Attention: Ralph M. Della
Ratta, Jr., with a copy to Calfee, Halter & Griswold LLP, 1400 McDonald
Investment Center, 800 Superior Avenue, Cleveland, Ohio 44114, Attention: Thomas
F. McKee, Esq., or if sent to the Company, will be mailed, delivered or
telegraphed and confirmed to the Company at 2401 Ontario Street, Cleveland, Ohio
44115, Attention: Dennis Lehman, Executive Vice President, with a copy to Baker
& Hostetler LLP, 3200 National City Center, 1900 East Ninth Street, Cleveland,
Ohio 44114, Attention: Edward G. Ptaszek, Jr., Esq.
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<PAGE> 23
14. SUCCESSORS, GOVERNING LAW. This Agreement will inure
solely to the benefit of and be binding upon the parties hereto and the officers
and directors and controlling persons referred to in Section 10 hereof and their
respective successors, assigns, heirs, executors and administrators, and no
other persons will have any right or obligation hereunder. This Agreement will
be governed by and construed in accordance with the laws of the State of Ohio,
without giving effect to the principles of conflicts of laws thereof.
15. EXECUTION IN COUNTERPARTS. This Agreement may be executed
by any one or more of the parties hereto in any number of counterparts, each of
which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument.
16. AUTHORITY OF THE REPRESENTATIVE. You represent and warrant
that you have been authorized by the several Underwriters to enter into this
Agreement on their behalf and to act for them in the manner hereinbefore
provided.
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<PAGE> 24
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us the enclosed copies hereof,
whereupon it will become a binding agreement by and between the Company and the
several Underwriters in accordance with its terms.
Very truly yours,
CLEVELAND INDIANS BASEBALL
COMPANY, INC.
By:
---------------------------------
Its:
--------------------------
The foregoing Agreement is hereby confirmed
and accepted by us in Cleveland, Ohio,
acting on our own behalf and as the
Representative of the several Underwriters
named on Schedule A annexed hereto, as of
the date first above written.
McDONALD & COMPANY SECURITIES, INC.
As Representative of the Several Underwriters
By:
----------------------------------------
Managing Director
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<PAGE> 25
SCHEDULE A
UNDERWRITERS
Number of Shares to
Underwriter be Purchased
----------- ------------
McDonald & Company Securities, Inc....................
Total ...............................................
A-1
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
----------------------------------------------
OF
--
CLEVELAND INDIANS BASEBALL COMPANY, INC.
----------------------------------------
FIRST: The name of the Corporation is Cleveland Indians Baseball Company, Inc.
SECOND: The place in the State of Ohio where the principal office of the
Corporation is located is Cleveland, Cuyahoga County.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be formed under Sections 1701.01 to 1701.98,
inclusive, of the Ohio Revised Code.
FOURTH: The number of shares which the Corporation is authorized to have
outstanding is thirty-one million (31,000,000), consisting of twenty-seven
million (27,000,000) Class A Common Shares, without par value ("Class A Common
Shares"), three million (3,000,000) Class B Common Shares, without par value
("Class B Common Shares" and, together with the Class A Common Shares, the
"Common Shares"), and one million (1,000,000) Preferred Shares. Each Common
Share issued and outstanding immediately prior to the filing of these Amended
and Restated Articles of Incorporation is and shall be changed, effective upon
that filing, into one (1) Class A Common Share.
DIVISION A: PREFERRED SHARES
The Preferred Shares shall have the following express terms:
Section 1. SERIES. The Preferred Shares may be issued from time to time
in one or more series. All Preferred Shares shall be of equal rank and shall be
identical, except in respect of the matters that may be fixed by the Board of
Directors as hereinafter provided, and each share of a series shall be identical
with all other shares of such series, except as to the dates from which
dividends shall accrue and be cumulative. Subject to the provisions of Sections
2 through 5, both inclusive, which provisions shall apply to all Preferred
Shares, the Board of Directors hereby is authorized to cause such shares to be
issued in one or more series and with respect to each such series to determine
and fix prior to the issuance thereof (and thereafter, to the extent provided in
paragraph (b) of this Section) the following:
(a) the designation of the series, which may be by distinguishing
number, letter or title;
(b) the authorized number of shares of the series, which number
the Board of Directors may (except when otherwise provided in the creation of
the series) increase or decrease from time to time before or after the issuance
thereof (but not below the number of shares thereof then outstanding);
<PAGE> 2
(c) the dividend rate or rates of the series, including the means
by which such rates may be established;
(d) the date or dates from which dividends shall accrue and be
cumulative and the dates on which and the period or periods for which dividends,
if declared, shall be payable, including the means by which such dates and
periods may be established;
(e) the redemption rights and price or prices, if any, for shares
of the series;
(f) the terms and amount of the sinking fund, if any, for the
purchase or redemption of shares of the series;
(g) the amounts payable on shares of the series in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation;
(h) whether the shares of the series shall be convertible into
any class of Common Shares or shares of any other class and, if so, the
conversion rate or rates or price or prices, any adjustments thereof and all
other terms and conditions upon which such conversion may be made; and
(i) restrictions (in addition to those set forth elsewhere in
these Amended and Restated Articles of Incorporation) on the issuance of shares
of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments to
these Amended and Restated Articles of Incorporation fixing, with respect to
each such series, the matters described in clauses (a) through (i), both
inclusive, of this Section 1 and is authorized to take such actions with respect
thereto as may be required by law in order to effect such amendments.
Section 2. DIVIDENDS.
(a) The holders of Preferred Shares of each series, in preference
to the holders of Common Shares and of any other class of shares ranking junior
to the Preferred Shares, shall be entitled to receive out of any funds legally
available therefor, if, when and as declared by the Board of Directors,
dividends in cash at the rate or rates for such series fixed in accordance with
the provisions of Section 1 above and no more, payable on the dates fixed for
such series. Such dividends shall accrue and be cumulative, in the case of
shares of each particular series, from and after the date or dates fixed with
respect to such series. No dividends shall be paid upon or declared or set apart
for any series of the Preferred Shares for any dividend period unless at the
same time a like proportionate dividend for the then current dividend period,
ratably in proportion to the respective annual dividend rates fixed therefor,
shall have been paid upon or declared or set apart for all Preferred Shares of
all series then issued and outstanding and entitled to receive such dividend.
(b) So long as any Preferred Shares shall be outstanding, no
dividend, except a dividend payable in Common Shares or other shares ranking
junior to the Preferred Shares, shall be paid or declared or any distribution be
made, except as aforesaid, in respect of the Common Shares or any other shares
ranking junior to the Preferred Shares, nor shall any Common Shares
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<PAGE> 3
or any other shares ranking junior to the Preferred Shares be purchased, retired
or otherwise acquired by the Corporation, except out of the proceeds of the sale
of Common Shares or other shares of the Corporation ranking junior to the
Preferred Shares received by the Corporation subsequent to the date of first
issuance of Preferred Shares of any series, unless:
(1) all accrued and unpaid dividends on Preferred Shares,
including the full dividend for all current dividend periods shall have been
declared and paid or a sum sufficient for payment therefor set apart; and
(2) there shall be no arrearages with respect to the redemption
of Preferred Shares of any series from any sinking fund provided for shares of
such series in accordance with the provisions of Section 1 of this Division A.
(c) The foregoing restrictions on the payment of dividends or other
distributions on, or on the purchase, redemption, retirement or other
acquisition of, Common Shares or any other shares ranking junior to the
Preferred Shares shall be inapplicable to (i) any payments in lieu of issuance
of fractional shares thereof, whether upon any merger, conversion, stock
dividend or otherwise, (ii) the conversion of Preferred Shares into Common
Shares, and (iii) the exercise by the Corporation of its rights pursuant to
Division C or any similar provisions hereafter contained in these Amended and
Restated Articles of Incorporation with respect to any other class or series of
shares hereafter created or authorized.
Section 3. REDEMPTION.
(a) Subject to the express terms of each series, the Corporation:
(1) may, from time to time at the option of the Board of
Directors, redeem all or any part of any redeemable series of Preferred Shares
at the time outstanding at the applicable redemption price for such series fixed
in accordance with Section 1 of this Division A; and
(2) shall, from time to time, make such redemptions of each
series of Preferred Shares as may be required to fulfill the requirements of any
sinking fund provided for shares of such series at the applicable sinking fund
redemption price fixed in accordance with Section 1 of this Division A;
and shall in each case pay all accrued and unpaid dividends to the redemption
date.
(b) (1) Notice of every such redemption shall be mailed, postage
prepaid, to the holders of record of the Preferred Shares to be redeemed at
their respective addresses then appearing on the books of the Corporation, not
less than seven (7) days nor more than sixty (60) days prior to the date fixed
for such redemption, or such other time prior thereto as the Board of Directors
shall fix for any series pursuant to Section 1 of this Division A prior to the
issuance thereof. At any time after notice as provided above has been deposited
in the mail, the Corporation may deposit the aggregate redemption price of
Preferred Shares to be redeemed, together with unpaid dividends thereon for the
then current dividend period to the redemption date, with any bank or trust
company in Cleveland, Ohio, or New York, New York, having capital and surplus of
not less than $100,000,000, named in such notice and direct that there be
Page 3
<PAGE> 4
paid to the respective holders of the Preferred Shares so to be redeemed amounts
equal to the redemption price of the Preferred Shares so to be redeemed together
with such accrued and unpaid dividends thereon for the then current dividend
period, on surrender of the share certificate or certificates held by such
holders; and upon the deposit of such notice in the mail and the making of such
deposit of money with such bank or trust company, such holders shall cease to be
shareholders with respect to such shares; and from and after the time such
notice shall have been so deposited and such deposit of money shall have been so
made, such holders shall have no rights or claim against the Corporation with
respect to such shares, except only the right to receive such money from such
bank or trust company without interest or to exercise before the redemption date
any unexpired privilege of conversion. If less than all of the outstanding
Preferred Shares are to be redeemed, the Corporation shall select by lot the
shares so to be redeemed in such manner as shall be prescribed by the Board of
Directors.
(2) If the holders of Preferred Shares which have been called for
redemption shall not within six (6) years after such deposit claim the amount
deposited for the redemption thereof, any such bank or trust company shall, upon
demand, pay over to the Corporation such unclaimed amounts and thereupon such
bank or trust company and the Corporation shall be relieved of all
responsibility in respect thereof and to such holders.
(c) Any Preferred Shares which are (1) redeemed by the Corporation
pursuant to this Section 3, (2) purchased and delivered in satisfaction of any
sinking fund requirement provided for shares of such series, (3) converted in
accordance with the express terms thereof, or (4) otherwise acquired by the
Corporation, shall resume the status of authorized but unissued Preferred Shares
without serial designation.
(d) Except in connection with the exercise of the Corporation's rights
pursuant to Division C or any similar provisions hereafter contained in these
Amended and Restated Articles of Incorporation, the Corporation may not purchase
or redeem (for sinking fund purposes or otherwise) less than all of the
Preferred Shares then outstanding except in accordance with a purchase offer
made to all holders of record of Preferred Shares, unless all unpaid dividends
on all Preferred Shares then outstanding shall have been paid or funds therefor
set apart and all accrued sinking fund obligations applicable thereto shall have
been complied with.
Section 4. LIQUIDATION.
(a) (1) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the holders of
Preferred Shares of any series shall be entitled to receive in full, out of the
assets of the Corporation, including its capital, before any amount shall be
paid or distributed among the holders of the Common Shares or any other shares
ranking junior to the Preferred Shares, the amounts fixed with respect to shares
of such series in accordance with Section 1 of this Division A, plus an amount
equal to all dividends declared and unpaid thereon. If the net assets of the
Corporation legally available therefor are insufficient to permit the payment
upon all outstanding Preferred Shares of the full preferential amount to which
they are respectively entitled, then such net assets shall be distributed
ratably upon all outstanding Preferred Shares in proportion to the full
preferential amount to which each such share is entitled.
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<PAGE> 5
(2) After payment to the holders of Preferred Shares of the full
preferential amounts as aforesaid, the holders of Preferred Shares, as such,
shall have no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or with any
other Corporation, the merger of any other Corporation into it, or the sale,
lease or conveyance of all or substantially all the assets of the Corporation,
shall not be deemed to be a dissolution, liquidation or winding up for purposes
of this Section.
Section 5. VOTING.
(a) The holders of Preferred Shares shall have no voting rights,
except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall not have fully
paid, or shall not have declared and set aside a sum sufficient for the payment
of, dividends on any series of Preferred Shares at the time outstanding, for a
number of dividend payment periods (whether or not consecutive) which in the
aggregate contain at least five hundred forty (540) days, the holders of all
series of such Preferred Shares, voting separately as a class, shall be entitled
to elect, as herein provided, two (2) members of the Board of Directors of the
Corporation; but the holders of the Preferred Shares shall not exercise such
special class voting rights except at meetings of such shareholders for the
election of directors at which the holders of not less than fifty percent (50%)
of the Preferred Shares are present in person or by proxy; and the special class
voting rights provided for in this paragraph when the same shall have become
vested shall remain so vested until the Corporation shall have fully paid, or
shall have set aside a sum sufficient for the payment of, dividends on such
Preferred Shares then outstanding for a number of consecutive dividend payment
periods which in the aggregate contain at least three hundred sixty (360) days,
whereupon the holders of the Preferred Shares shall be divested of their special
class voting rights in respect of subsequent elections of directors, subject to
the revesting of such special class voting rights in the event above specified
in this paragraph.
(2) On an event entitling holders of Preferred Shares to elect
two (2) directors as specified in paragraph (1) of this subsection 5(b), a
special meeting of such holders for the purpose of electing such directors shall
be called by the Secretary of the Corporation upon written request of, or may be
called by, the holders of record of at least ten percent (10%) of the Preferred
Shares of the affected series and notice thereof shall be given in the same
manner as that required for the annual meeting of shareholders; but the
Corporation shall not be required to call such special meeting if the annual
meeting of shareholders shall be called to be held within one hundred twenty
(120) days after the date of receipt of the foregoing written request from the
holders of Preferred Shares. At any meeting at which the holders of Preferred
Shares shall be entitled to elect directors, holders of fifty percent (50%) of
the Preferred Shares, present in person or by proxy, shall be sufficient to
constitute a quorum, and the vote of the holders of a majority of such shares so
present at any such meeting at which there shall be such a quorum shall be
sufficient to elect the members of the Board of Directors which the holders of
Preferred Shares are entitled to elect as herein provided. Notwithstanding any
provision of these Amended and Restated Articles of Incorporation or the Code of
Regulations of the Corporation or any action taken by the holders of any class
of shares fixing the number of directors of the
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Corporation, the two (2) directors who may be elected by the holders of
Preferred Shares pursuant to this subsection shall serve in addition to any
other directors then in office or proposed to be elected otherwise than pursuant
to this Subsection. Nothing in this Subsection shall prevent any change
otherwise permitted in the total number of or classifications of directors of
the Corporation nor require the resignation of any director elected otherwise
than pursuant to this Subsection. Notwithstanding any classification of the
other directors of the Corporation, the two (2) directors elected by the holders
of Preferred Shares, as provided in this Section 5, shall be elected annually
for terms expiring at the next succeeding annual meeting of shareholders.
(3) Upon any divesting of the special class voting rights of the
holders of the Preferred Shares in respect of elections of directors as provided
in this Subsection, the terms of office of all directors then in office elected
by such holders shall terminate immediately thereupon. If the office of any
director elected by such holders voting as a class becomes vacant by reason of
death, resignation, removal from office or otherwise, the remaining director
elected by such holders voting as a class may elect a successor who shall hold
office for the unexpired term in respect of which such vacancy occurred.
(c) The affirmative vote of the holders of at least a majority of the
Preferred Shares at the time outstanding, voting separately as a class, given in
person or by proxy either in writing or at a meeting called for the purpose,
shall be necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Amended and Restated
Articles of Incorporation or of the Code of Regulations of the Corporation which
affects adversely and materially the preferences or voting or other rights of
the holders of Preferred Shares which are set forth in these Amended and
Restated Articles of Incorporation; but neither an amendment of these Amended
and Restated Articles of Incorporation so as to authorize, create or change the
authorized or outstanding number of Preferred Shares or of any shares ranking on
a parity with or junior to the Preferred Shares nor an amendment of the Code of
Regulations so as to change the number or classification of directors of the
Corporation shall be deemed to affect adversely and materially preferences or
voting or other rights of the holders of Preferred Shares; or
(2) The authorization, creation or increase in the authorized
number of any shares, or any security convertible into shares, in either case
ranking prior to such Preferred Shares.
(d) If, and only to the extent, that (1) Preferred Shares are issued
in more than one series and (2) Ohio law permits the holders of a series of a
class of shares to vote separately as a class, the affirmative vote of the
holders of at least a majority of each series of the Preferred Shares at the
time outstanding, voting separately as a class, given in person or by proxy
either in writing or at a meeting called for the purpose of voting on such
matters, shall be required for any amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions of these Amended
and Restated Articles of Incorporation or of the Code of Regulations of the
Corporation which affects adversely and materially the preferences or voting or
other rights of the holders of such series which are set forth in these Amended
and Restated Articles of Incorporation; but neither an amendment of these
Amended and Restated Articles of Incorporation, so as to authorize, create or
change the authorized or outstanding number of
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Preferred Shares or of any shares remaining on a parity with or junior to the
Preferred Shares nor an amendment of the Code of Regulations so as to change the
number or classification of directors of the Corporation shall be deemed to
affect adversely and materially preferences or voting or other rights of the
holders of such series.
DIVISION B: COMMON SHARES
The Common Shares have the following express terms:
Section 1. VOTING RIGHTS AND POWERS. With respect to all matters upon
which shareholders are entitled to vote or to which shareholders are entitled to
take action in writing without a meeting and except as otherwise required by
statute, the holders of the outstanding Class A Common Shares and Class B Common
Shares shall vote together without regard to class, and every holder of any
outstanding Class A Common Shares shall be entitled to cast thereon one (1) vote
in person or by proxy for each Class A Common Share standing in such holder's
name, and every holder of any outstanding Class B Common Shares shall be
entitled to cast thereon ten thousand (10,000) votes in person or by proxy for
each Class B Common Share standing in such holder's name.
Section 2. DIVIDEND RIGHTS. The holders of Common Shares shall be
entitled to receive, when, as, and if declared by the Board of Directors of the
Corporation, out of the assets of the Corporation which are by law available
therefor, dividends or distributions payable in cash, in property or in
securities of the Corporation; provided, however, that no dividend or other
distribution may be declared or paid on the outstanding shares of one class of
Common Shares unless a dividend or other distribution, as the case may be, of
equal amount is declared or paid, as the case may be, on the outstanding shares
of the other class of Common Shares. The Corporation shall not subdivide (by
share split or otherwise) or combine or pay or declare any share dividend on the
outstanding shares of either class of Common Shares unless the outstanding
shares of the other class of Common Shares shall be proportionately subdivided
or combined or the holders of such other class shall receive a proportionate
share dividend. The Corporation may only issue or distribute Class A Common
Shares in connection with a subdivision, combination or share division in
respect of outstanding Class A Common Shares and may only issue or distribute
Class B Common Shares in connection with a subdivision, combination or share
dividend in respect of outstanding Class B Common Shares.
Section 3. CONVERSION OF CLASS B COMMON SHARES. Each Class B Common
Share may at any time be converted at the election of the holder thereof into
one (1) fully paid and nonassessable Class A Common Share. Any holder of Class B
Common Shares may elect to convert any or all of such shares at one time or from
time to time in such holder's discretion. Such right shall be exercised by the
surrender of the certificate representing each Class B Common Share to be
converted to the agent for the transfer of the Class B Common Shares at its
office, or to the Corporation at its principal executive offices, accompanied by
a written notice of the election by the holder thereof to convert and (if so
required by the transfer agent or by the Corporation) by instruments of
transfer, in form satisfactory to the transfer agent and to the Corporation,
duly executed by such holder or such holder's duly authorized attorney. The
issuance of a certificate or certificates for Class A Common Shares upon
conversion of Class B Common Shares shall be made without charge for any stamp
or other similar tax in respect of
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such issuance. As promptly as practicable after the surrender for conversion of
a certificate or certificates representing Class B Common Shares, the
Corporation will deliver or cause to be delivered at the office of the transfer
agent to, or upon the written order of, the holder of such certificate or
certificates, a certificate or certificates representing the number of Class A
Common Shares issuable upon such conversion, issued in such name or names as
such holder may direct. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of the surrender of the
certificate or certificates representing Class B Common Shares (but if on such
date the transfer books of the Corporation shall be closed, then immediately
prior to the close of business on the first date thereafter that said books
shall be open), and all rights of such holder arising from ownership of the
Class B Common Shares being converted shall cease at such time, and the person
or persons in whose name or names the certificate or certificates representing
Class A Common Shares are to be issued pursuant to such conversion shall be
treated for all purposes as having become the record holder or holders of such
Class A Common Shares at such time and shall have and may exercise all the
rights and powers appertaining thereto. No adjustments in respect of past cash
dividends shall be made upon the conversion of any Class B Common Share. The
Corporation shall at all times reserve and keep available, solely for the
purpose of issuance upon conversion of outstanding Class B Common Shares, such
number of Class A Common Shares as may be issuable upon conversion of all such
outstanding Class B Common Shares. The Corporation will endeavor to list Class A
Common Shares required to be delivered upon conversion prior to such delivery
upon any national securities exchange or national market system on which the
outstanding Class A Common Shares may be listed at the time of such delivery.
All Class A Common Shares which may be issued upon conversion of the Class B
Common Shares will, upon issuance, be validly issued, fully paid and
nonassessable. Class B Common Shares converted into Class A Common Shares, as
provided in this Section 3, shall become authorized but unissued Class B Common
Shares.
Section 4. OTHER RIGHTS. The provisions of Section 3 regarding the
voluntary conversion of Class B Common Shares into Class A Common Shares are in
addition to the provisions of Division C, Section 2 which provide for the
automatic conversion of Class B Common Shares into Class A Common Shares under
the circumstances provided therein. Except as otherwise required by Chapter 1701
of the Ohio Revised Code or as otherwise provided in these Amended and Restated
Articles of Incorporation (including Section 3 of this Division B) or the
Regulations of the Corporation, each Class A Common Share and Class B Common
Share shall have identical powers, preferences and rights, including rights in
liquidation.
DIVISION C: RESTRICTIONS ON TRANSFER OF COMMON SHARES
Section 1. DEFINITIONS. For purposes of this Division C of this
Article FOURTH, the following terms shall have the following meanings set
forth below:
"Beneficial Ownership" shall mean possession of the power to vote or
direct the vote or to dispose or direct the disposition of the Common Shares in
question, and a "Beneficial Owner" of Common Shares shall be the Person having
Beneficial Ownership thereof.
"Control" shall mean, with respect to a corporation, the power to elect
or appoint a majority of the board of directors or like governing body thereof,
and with respect to a
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partnership or limited liability company, the power to cause such partnership or
limited liability company to vote and dispose of Common Shares subject to a
proposed Transfer to such partnership or limited liability company.
"Effective Time" shall mean the date on which these Amended and
Restated Articles of Incorporation became effective pursuant to Section 1701.73
of the Ohio Revised Code.
"Equity Shares" shall mean the Class A Common Shares, the Class B
Common Shares and any class of Preferred Shares of the Corporation.
"Family Members" shall have the meaning set forth in Section 2(a)(1) of
this Division C.
"Holder" shall mean a holder of Class B Common Shares.
"Initial Public Offering" shall mean the sale of Class A Common Shares
pursuant to the Corporation's first effective registration statement for Class A
Common Shares filed under the Securities Act of 1933, as amended.
"Market Price" on any date shall mean the average of the Closing Price
for the five consecutive Trading Days ending on such date. The "Closing Price"
on any date shall mean the last sale price, regular way, or, in case no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices, regular way, in either case as reported on the Nasdaq National
Market or, if the applicable Equity Shares are not quoted on the Nasdaq National
Market, on the principal national securities exchange on which such Equity
Shares are listed or admitted to trading or, if the Equity Shares are not quoted
on the Nasdaq National Market or listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Board of Directors of the Corporation for the
purpose or, if such prices are not available, the fair market value set by, or
in a manner established by, the Board of Directors in good faith.
"Permitted Transferee" shall mean and include only such Persons as are
described in Sections 2(a)(1) through 2(a)(7) of this Division C.
"Person" shall mean an individual, corporation, partnership, limited
liability company, estate, trust, or other entity and also includes a "group" as
that term is used for purposes of Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended.
"Redemption Shares" shall have the meaning set forth in Section 3(a) of
this Division C below.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the applicable Equity Shares are listed or admitted
to trading is open for the transaction of business or, if those Equity Shares
are not listed or admitted to trading on any national securities exchange, shall
mean any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
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"Transfer" (as a noun) shall mean any sale, transfer, gift, assignment,
devise or other disposition of Equity Shares, whether voluntary or involuntary,
whether of record or beneficially and whether by operation of law or otherwise.
"Transfer" (as a verb) shall have the correlative meaning.
Section 2. LIMITATIONS ON TRANSFER OF CLASS B COMMON SHARES.
(a) Subject to the provisions of Section 2(i) of this Division C, no
Holder may Transfer, and the Corporation shall not register the Transfer of,
Class B Common Shares or any interest therein, except to a Permitted Transferee
of such person unless all Holders of Class A Common Shares receive or are
entitled to receive for their Class A Common Shares the same kind and amount of
consideration per share to be received by any Holder of Class B Common Shares in
connection with such Transfer. The term "Permitted Transferee" shall mean and
include only the persons described in Sections 2(a)(1) through 2(a)(7) below:
(1) In the case of a Holder who is a natural person and the
holder of record and beneficial owner of Class B Common Shares subject to a
proposed Transfer, "Permitted Transferee" means:
(A) The Holder, the spouse of such Holder, any lineal
descendant of a grandparent of such Holder, or any spouse of such
lineal descendant (herein collectively referred to as such
Holder's "Family Members");
(B) The trustee of a trust solely for the benefit of such
Holder or such Holder's Family Members, provided that such trust
may also grant a general or special power of appointment to one
or more of such Holder's Family Members and may permit trust
assets to be used to pay taxes, legacies and other obligations of
the trust or of the estates of one or more of such Holder's
Family Members payable by reason of the death of such Family
Members;
(C) The trustee of a trust which is not solely for the
benefit of such Holder or such Holder's Family Members so long as
such Holder or one or more of such Holder's Permitted Transferees
(determined under this Section 2(a)(1)), or both, possess the
power to vote or direct the vote of the Class B Common Shares
held by such trustee;
(D) A corporation, if control thereof is exercisable by
shareholders thereof consisting exclusively of, or a partnership
or limited liability company, if control thereof is exercisable
by partners or members thereof consisting exclusively of, the
Holder and his Permitted Transferees determined under this
Section; provided, however, that if for any reason, including
without limitation any change in the ownership or the voting
rights of the stock of such corporation, or in such partners or
partnership interests, or in such members or membership
interests, or otherwise, such corporation, partnership or limited
liability company would no longer qualify as a Permitted
Transferee of such Holder or his Permitted Transferees, all Class
B Common Shares then held by such corporation, partnership or
limited liability company shall immediately and automatically,
without further act or deed on the part of the Corporation
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or any other person, be converted into shares of Class A Common
Shares on a share-for-share basis, and stock certificates
formerly representing such Class B Common Shares shall thereupon
and thereafter be deemed to represent the like number of Shares
of Class A Common Shares;
(E) An organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended; or
(F) The executor, administrator or personal representative
of the estate of such Holder or the guardian or conservator of
such Holder adjudged disabled by a court of competent
Jurisdiction, acting in his capacity as such.
(2) In the case of a Holder holding the shares subject to a
proposed Transfer as trustee pursuant to a trust (other than a trust described
in Section 2(a)(3) below), "Permitted Transferee" means (A) the person who
established such trust, and (B) any Permitted Transferee of such person
determined pursuant to Section 2(a)(1) above.
(3) In the case of any Holder holding shares subject to a
proposed Transfer as trustee pursuant to a trust which was irrevocable as of the
Effective Time, "Permitted Transferee" means (A) any person to whom or for whose
benefit principal may be distributed either during or at the end of the term of
such trust whether by power of appointment or otherwise, and (B) any Permitted
Transferee of any such person determined pursuant to Section 2(a)(1) above.
(4) In the case of a Holder which is a partnership or a limited
liability company holding shares subject to a proposed Transfer, "Permitted
Transferee" means (A) any partner or member thereof owning more than ten percent
(10%) of the equity of such partnership or limited liability company as of the
Effective Time, and (B) any Permitted Transferee of such partner or member.
(5) In the case of a Holder which is a corporation (other than an
organization described in Section 2(a)(1)(E) above) holding shares subject to a
proposed Transfer, "Permitted Transferee" means (A) any Person owning more than
ten percent (10%) of the equity capital of such corporation as of the Effective
Time, (B) any Permitted Transferee of such Person, (C) the survivor of a merger
or consolidation of such corporation (provided that such surviving entity is
otherwise a Permitted Transferee determined pursuant to Section 2(a)(1) above),
or (D) any Person who transferred to such corporation the Class B Common Shares
that are the subject of the proposed Transfer.
(6) In the case of a Holder who is the executor, administrator or
personal representative of the estate of a deceased Holder, a guardian or
conservator of the estate of a disabled Holder, or a trustee of the estate of a
bankrupt or insolvent Holder, "Permitted Transferee" means a Permitted
Transferee of such deceased, disabled, bankrupt or insolvent Holder as
determined pursuant to this Section 2(a) of this Division C.
(7) In the case of any Holder, "Permitted Transferee" includes
any holder of record as of the Effective Time of any Class B Common Shares,
provided that if such holder of record is a corporation, control thereof is
exercisable, as of the date of a proposed
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Transfer, by shareholders consisting exclusively of Persons who would have been
Permitted Transferees of such corporation as of the Effective Time (an "Original
Holder"), provided that, in each case, if a transferee under this Section
2(a)(7) is a corporation, partnership or limited liability company, all of the
provisions of Section 2(a)(1)(D) of this Division C shall apply to such Person
and the shares transferred to such Person.
(b) Notwithstanding anything to the contrary set forth herein,
any holder of Class B Common Shares may pledge such shares to a pledgee pursuant
to a bona fide pledge of such shares as collateral security for indebtedness due
to the pledgee, provided that such shares may not be transferred to or
registered in the name of the pledgee unless such pledgee is a Permitted
Transferee. In the event of foreclosure or other similar action by the pledgee,
such pledged Class B Common Shares shall automatically, without any act or deed
on the part of the Corporation or any other Person, be converted into Class A
Common Shares on a share-for-share basis, unless within five (5) business days
after such foreclosure or other similar event such pledged shares are returned
to the pledgor or transferred to a Permitted Transferee of the pledgor.
(c) For purposes of this Section 2 of this Division C:
(1) The relationship of any Person that is derived by
or through legal adoption shall be considered a natural one.
(2) Each joint owner of Class B Common Shares shall
be deemed a Holder of such
shares.
(3) A minor for whom Class B Common Shares are held
pursuant to a Uniform Gifts to Minors Act or similar law shall be considered a
Holder of such shares.
(4) The giving of a proxy in connection with a
solicitation of proxies subject to the provisions of Section 14 of the
Securities Exchange Act of 1934 (or any successor provision thereof and the
rules and regulations promulgated thereunder shall not be deemed to constitute
the Transfer of an interest in the Class B Common Shares which are the subject
of such proxy.
(d) Any purported Transfer of Class B Common Shares other than
to a Permitted Transferee shall automatically, without any further act or deed
on the part of the Corporation or any other person, result in the conversion of
such shares into Class A Common Shares on a share-for-share basis, effective on
the date of such purported Transfer. The Corporation may, as a condition to
Transfer or registration of Transfer of Class B Common Shares to a purported
Permitted Transferee, require that the record holder establish to the
satisfaction of the Corporation, by filing with the Corporation or the transfer
agent an appropriate affidavit or certificate or such other proofs as the
Corporation may deem necessary, that such transferee is a Permitted Transferee.
(e) Anything in this Division C notwithstanding but subject to
the provisions of Section 2(i), no Class B Common Share may be held of record
but not beneficially by a broker or dealer in securities, a bank or voting
trustee or a nominee of any such, or otherwise held of record but not
beneficially by a nominee of the beneficial owner of such share other than by a
trustee of a trust which would be a Permitted Transferee pursuant to Section
2(a)(1)(B) or
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2(a)(1)(C) (any such form of prohibited holding being, referred to herein as
holding in "street" or nominee name); provided, however, that if any Person
establishes to the satisfaction of the Corporation in accordance with this
Section 2(e) that he is the beneficial owner of any such Class B Common Shares,
the Corporation shall issue such share in the name of such beneficial owner. Any
such beneficial owner who desires to have Class B Common Shares issued in his
name in the circumstances described in this Section 2(e) shall file an affidavit
or certificate with the Secretary of the Corporation setting forth the name and
address of such beneficial owner and certifying that he is the beneficial owner
of the Class B Common Shares in question.
(f) The Corporation shall note on all certificates
representing Class B Common Shares that there are restrictions on transfer and
registration of transfer to the extent imposed by this Section 2.
(g) The Board of Directors may, from time to time, establish,
amend or revoke practices and procedures and promulgate, amend or revoke rules
and regulations, in addition to those set forth in this Division C, regarding
the evidence necessary to establish entitlement of any transferee or purported
transferee of Class B Common Shares to be registered as a Permitted Transferee.
Should the transferee or purported transferee of any such share wish to contest
any decision of the Corporation on the question whether the transferee or
purported transferee has established entitlement to be registered as a Permitted
Transferee of Class B Common Shares, then the Board of Directors shall in its
sole discretion make the final determination.
(h) Notwithstanding the restrictions on Transfer set forth in
Section 2(a) of this Division C, a Holder of Class B Common Shares shall,
subject to the provisions of Section 3(a) of this Division C, be entitled to
Transfer Class B Common Shares to any Person (collectively, an "Acquiring
Person") in one or more transactions completed during the period beginning on
the date of Richard E. Jacobs' death and ending on the third anniversary of such
date. This exception will not apply to any subsequent Transfer by an Acquiring
Person, and all Class B Common Shares acquired by an Acquiring Person will be
subject to the restrictions on Transfer described above. In addition, for a
period of three (3) years following the date that an Acquiring Person first
becomes the beneficial owner of Class B Common Shares (the "Acquisition Date"),
neither the Acquiring Person nor any affiliate of the Acquiring Person may make
a tender offer for Class A Common Shares or merge or consolidate with the
Corporation, propose to acquire or authorize the acquisition by the Acquiring
Person or its affiliates of substantially all the assets of the Corporation, or
authorize or vote Common Shares of any class in favor of an amendment to these
Amended and Restated Articles of Incorporation to effect any recapitalization,
reverse stock split or other similar transaction with respect to the Common
Shares which, if effected, would directly or indirectly increase the Acquiring
Person's beneficial ownership of Common Shares, unless in any such case, all
holders of Class A Common Shares receive or are entitled to receive for their
Class A Common Shares consideration having a value equal to the greater of: (i)
the average price per share that the Acquiring Person paid for the Common Shares
(or securities convertible into or exchangeable for Common Shares) in connection
with the transaction or series of transactions in which the Acquiring Person
became such; and (ii) the market value of a Class A Common Share on the date
prior to the public announcement of any of the transactions described above
(determined on the basis of the average
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Closing Price of a Class A Common Share during the twenty (20) Trading Days
preceding the date of such announcement).
Section 3. OWNERSHIP RESTRICTION.
(a) Except as set forth in Section 3(g) below, no Person other
than (i) Richard E. Jacobs, (ii) any other Person who is the record or
beneficial owner of Common Shares on the Effective Date, and (iii) their
respective Permitted Transferees shall have Beneficial Ownership of outstanding
Equity Shares equal to or in excess of five percent (5%) of the number of
outstanding shares of any class of Equity Shares without first receiving written
approval from the Office of the Commissioner of Major League Baseball. The
number of Equity Shares as to which a Person has Beneficial Ownership that
causes such Person to equal or exceed such percentage are referred to herein as
"Redemption Shares."
(b) If the Corporation, or its designee, shall at any time
determine that a violation of Section 3(a) of this Division C has occurred or
that a Person intends to acquire or has attempted to acquire Beneficial
Ownership of any Equity Shares in violation of Section 3(a) of this Division C,
the Corporation shall take such action as it considers advisable to refuse to
give effect to or to prevent any Transfer or other transaction which has or will
cause such violation, including, but not limited to, refusing to give effect to
any Transfer or other transaction on the books of the Corporation or instituting
proceedings to enjoin such Transfer or other transaction.
(c) Any Person who acquires or attempts to acquire Equity
Shares in violation of Section 3(a) of this Division B shall immediately give
written notice to the Corporation of such event and shall provide to the
Corporation such other information as the Corporation may request.
(d) Each Person who is a Beneficial Owner of five percent (5%)
or more of the outstanding shares of any class of Equity Shares and each Person
(including the shareholder of record) who is holding Equity Shares for such a
Beneficial Owner shall, at the request of the Corporation, provide to the
Corporation a written statement or affidavit stating such information as the
Corporation may request in order to ensure compliance with the Ownership
Restriction set forth in this Section 3 of this Division C and applicable rules
of Major League Baseball.
(e) Redemption Shares shall be considered to have been offered
for sale to the Corporation, or its designee, on the date of the event that
created such Redemption Share status at a price per share equal to the lesser of
(i) the price per share in the event that created such Redemption Share status
(or, if such price is not readily determinable as in the case of a devise or
gift, the Market Price at the time of such event) and (ii) the Market Price on
the date the Corporation, or its designee, accepts such offer. The Corporation
shall have the right, directly or through its designee, to accept such offer for
a period of ninety (90) days after the later of (i) the date of the event which
created such Redemption Share status and (ii) the date the Corporation
determines in good faith that an event occurred that created such Redemption
Share status, if the Corporation does not receive a notice of such event.
(f) The Ownership Restriction set forth in Section 3(a) shall
not apply to the acquisition of Equity Shares by an underwriter in connection
with its participation in a firm
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commitment underwritten public offering of such shares for a period of 180 days
following the purchase by such underwriter of such shares.
(g) Nothing contained in this Division B shall limit the
authority of the Corporation to take such other action as it deems necessary or
advisable to protect the Corporation and the interests of its shareholders to
ensure compliance with the Ownership Restriction set forth in Section 3(a) of
this Division C.
(h) In the case of any ambiguity in the application of any
provision of this Division C, including any definition contained herein, the
Board of Directors shall have the power to determine the application of that
provision.
(i) Each certificate for Equity Shares shall bear a legend
substantially to the following effect:
"The [Class A Common Shares, Class B Common Shares, or
Preferred Shares] represented by this certificate are subject
to restrictions on transfer. No Person may beneficially own
[Class A Common Shares, Class B Common Shares, or Preferred
Shares] equal to or in excess of 5% of the number of
outstanding [Class A Common Shares, Class B Common Shares, or
Preferred Shares] of any class without the approval of the
Office of the Commissioner of Major League Baseball. Each
beneficial owner of 5% or more of the outstanding [Class A
Common Shares, Class B Common Shares, or Preferred Shares] is
required to furnish the Corporation such information as the
Corporation may request pursuant to Division C. Section 3(d)
of the Corporation's Amended and Restated Articles of
Incorporation. If the above limitation is violated, the [Class
A Common Shares, Class B Common Shares, or Preferred Shares]
represented hereby equal to or in excess of the limitation
shall be subject to redemption by the Corporation at the lower
of the original cost or Market Value, by operation of the
Corporation's Amended and Restated Articles of Incorporation.
All capitalized terms in this legend have the meanings defined
in the Corporation's Amended and Restated Articles of
Incorporation, as they may be amended from time to time, a
copy of which, including the restrictions on transfer, will be
sent without charge to each shareholder who so requests."
Page 15
<PAGE> 16
FIFTH: To the extent permitted by law, the Corporation, by action of its Board
of Directors, may purchase or otherwise acquire shares of any class issued by it
at such times, for such consideration and upon such terms and conditions as its
Board of Directors may determine.
SIXTH: Notwithstanding any provision of the Ohio Revised Code Sections 1701.01
to 1701.98, inclusive, now or hereafter in force, requiring for the
authorization or the taking of any action the vote or consent of the holders of
shares entitling them to exercise two-thirds or any other proportion of the
voting power of the Corporation or of any class or classes of shares thereof,
such action, unless otherwise expressly required by law or these Amended and
Restated Articles of Incorporation, may be authorized or taken by the vote or
consent of the holders of shares entitling them to exercise a majority of the
voting power of the Corporation or of such class or classes thereof; provided,
however, that any amendment to the provisions of Article Fourth, Division C,
Sections 1 or 2 of these Amended and Restated Articles of Incorporation or to
this proviso shall require for its authorization, in addition to such vote, the
affirmative vote or consent of the holders of Class A Common Shares entitling
them to exercise a majority of the voting power of the Class A Common Shares,
excluding from such vote (and from the determination of the majority of the
voting power of the Class A Common Shares) any Class A Common Shares
Beneficially Owned by a Beneficial Owner of Class B Common Shares and any
affiliate of such Beneficial Owner (as the term affiliate is defined in Rule
12b-2 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934).
SEVENTH: No holder of shares of the Corporation of any class shall be entitled
as such, as a matter of right, to subscribe for or purchase shares of any class,
now or hereafter authorized, or to subscribe for or purchase securities
convertible into or exchangeable for shares of the Corporation or to which shall
be attached or appertain any warrants or rights entitling the holder thereof to
subscribe for or purchase shares, except such rights or subscription or
purchase, if any, for such considerations and upon such terms and conditions as
its Board of Directors from time to time may determine.
EIGHTH: Any director or officer of the Corporation shall not be disqualified by
his office from dealing or contracting with the Corporation as a vendor,
purchaser, employee, agent, lessor, lessee or otherwise. No transaction,
contract or other act of the Corporation shall be void or voidable or in any way
affected or invalidated by reason of the fact that any director or officer, or
any firm or corporation in which such director or officer is a member or is a
shareholder, director or officer, is in any way interested in such transaction,
contract or other act provided the fact that such director, officer, firm or
corporation is so interested shall be disclosed or shall be known to the Board
of Directors or such members thereof as shall be present at any meeting of the
Board of Directors at which action upon any such transaction, contract or other
act shall be taken; nor shall any such director or officer be accountable or
responsible to the Corporation for or in respect of any such transaction,
contract or other act of the Corporation or for any gains or profits realized by
him by reason of the fact that he or any firm of which he is a member or any
corporation of which he is a shareholder, director or officer is interested in
such transaction contract or other act; and any such director may be counted in
determining the existence of a quorum at any meeting of the Board of Directors
of the Corporation which shall authorize or take action in respect of any
transaction, contract or other act, and may vote thereat to authorize, ratify or
approve any such transaction, contract or other act with like force and effect
as if he or
Page 16
<PAGE> 17
any firm of which he is a member or any corporation of which he is a
shareholder, director or officer were not interested in such transaction,
contract or other act.
NINTH: If any provision (or portion thereof) of these Amended and Restated
Articles of Incorporation shall be found to be invalid, prohibited, or
unenforceable for any reason, the remaining provisions (or portions thereof) of
these Amended and Restated Articles of Incorporation shall remain in full force
and effect, and shall be construed as if such invalid, prohibited, or
unenforceable provision had been stricken herefrom or otherwise rendered
inapplicable, it being the intent of the Corporation and its shareholders that
each such remaining provision (or portion thereof) of these Amended and Restated
Articles of Incorporation remain, to the fullest extent permitted by law,
applicable and enforceable as to all shareholders, notwithstanding any such
finding.
TENTH: The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Amended and Restated Articles of Incorporation, in
the manner now or hereafter prescribed herein or by statute, and all rights
conferred upon shareholders herein are granted subject to this reservation.
ELEVENTH: Chapter 1704 of the Ohio Revised Code does not apply to the
Corporation. Section 1701.83 of the Ohio Revised Code does not apply to control
share acquisitions of shares of the Corporation.
TWELFTH: These Amended and Restated Articles of Incorporation, as of their
effective date, supersede the existing Articles of Incorporation of the
Corporation.
Page 17
<PAGE> 1
Exhibit 5.1
[BAKER & HOSTETLER LLP LETTERHEAD]
May 12, 1998
Cleveland Indians Baseball Company, Inc.
2401 Ontario Street
Cleveland, Ohio 44115
Gentlemen:
As counsel for Cleveland Indians Baseball Company, Inc., an
Ohio corporation (the "Company"), we are familiar with the Company's
Registration Statement on Form S-1 (the "Registration Statement"), as amended,
filed with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), in connection with a proposed
public offering and sale of up to 4,600,000 Class A Common Shares, without par
value (the "Shares"), of the Company including 4,000,000 Shares to be issued and
sold to the Underwriters identified in the Registration Statement (the
"Underwritten Shares"), and up to an additional 600,000 Shares subject to an
over-allotment option granted to the Underwriters by the Company (the "Option
Shares").
In connection with the foregoing, we have examined (a) the
proposed Amended and Restated Articles of Incorporation (the "Articles") in the
form filed as an exhibit to the Registration Statement and the Code of
Regulations of the Company, (b) the proposed form of Underwriting Agreement
filed as an exhibit to the Registration Statement (the "Underwriting Agreement")
with respect to the Shares, and (c) such records of the corporate proceedings
of the Company and such other documents as we deemed necessary to render this
opinion.
Based upon such examination, we are of the opinion that, when
the Articles have been duly filed with the Ohio Secretary of State pursuant to
the Ohio Revised Code (in substantially the form filed as an exhibit to the
Registration Statement), the Shares will be duly authorized and, when issued and
sold pursuant to the duly executed Underwriting Agreement (in substantially the
form filed as an exhibit to the Registration Statement) and in the manner
contemplated by the Registration Statement, the Underwritten Shares and the
Option Shares will be legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1
to the Registration Statement and the reference to us under the caption
"Validity of Shares" in the Prospectus that is a part of the Registration
Statement. In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Act or
the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Baker & Hostetler LLP
Baker & Hostetler LLP
<PAGE> 1
Exhibit 10.7
================================================================================
CLUB TRUST REVOLVING CREDIT AGREEMENT
(the "Club Trust Credit Agreement")
among
MAJOR LEAGUE BASEBALL TRUST
and
FLEET NATIONAL BANK
and
CLUB TRUSTS DEEMED TO BE PARTIES HERETO
Dated as of April 17, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
PAGE
<TABLE>
<S> <C>
ARTICLE I
Definitions and Accounting Terms.........................................................................1
SECTION 1.01. Certain Defined Terms.....................................................................1
SECTION 1.02. Computation of Time Periods...............................................................1
SECTION 1.03. Accounting Terms..........................................................................1
ARTICLE II
Amounts and Terms of the Loans...........................................................................1
SECTION 2.01. The Club Trust Loans......................................................................1
SECTION 2.02. Making the Loans..........................................................................2
SECTION 2.03. Fees......................................................................................3
SECTION 2.04. Reduction of Maximum Available Amount.....................................................4
SECTION 2.05. Principal Repayment.......................................................................7
SECTION 2.06. Interest..................................................................................8
SECTION 2.07. Additional Interest......................................................................10
SECTION 2.08. Interest Rate Determination and Protection...............................................11
SECTION 2.09. Prepayments..............................................................................12
SECTION 2.10. Increased Costs..........................................................................14
SECTION 2.11. Illegality...............................................................................14
SECTION 2.12. Payments; Limited Recourse; No Cross Collateralization and
Computations....................................................................15
SECTION 2.13. Taxes....................................................................................18
SECTION 2.14. Additional Club Trusts; Creation of Additional Sub-Facilities............................23
ARTICLE III
Conditions of Lending...................................................................................26
SECTION 3.01. Condition Precedent to Initial Loans.....................................................26
SECTION 3.02. Conditions Precedent to Each Loan........................................................28
ARTICLE IV
Representations and Warranties..........................................................................30
SECTION 4.01. Representations and Warranties of each Club Trust........................................30
ARTICLE V
Covenants of the Club Trusts............................................................................31
SECTION 5.01. Affirmative Covenants....................................................................31
SECTION 5.02. Negative Covenants.......................................................................34
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI
Default.................................................................................................37
SECTION 6.01. Club Trust Events of Default.............................................................37
SECTION 6.02. Remedies.................................................................................41
ARTICLE VII
The Facilitating Agent..................................................................................41
SECTION 7.01. Authorization and Action.................................................................41
SECTION 7.02. Facilitating Agent's Reliance, etc. .....................................................42
SECTION 7.03. Indemnification..........................................................................42
SECTION 7.04. Successor Facilitating Agent.............................................................43
ARTICLE VIII
Miscellaneous...........................................................................................44
SECTION 8.01. Amendments, etc..........................................................................44
SECTION 8.02. Notices, etc.............................................................................45
SECTION 8.03. No Waiver; Remedies......................................................................47
SECTION 8.04. Costs and Expenses; Indemnification......................................................47
SECTION 8.05. Binding Effect; Third Party Beneficiary; Liquidity Funding
Event...........................................................................48
SECTION 8.06. The Register.............................................................................49
SECTION 8.07. Limitation of Liability..................................................................49
SECTION 8.08. Governing Law; Consent to Jurisdiction; Other Matters....................................50
SECTION 8.09. Execution in Counterparts................................................................50
ANNEX A Definitions
EXHIBIT A Club Trust Promissory Note
EXHIBIT B Form of Notice of Borrowing
EXHIBIT C Form of Club Trust Pledge and
Security Agreement
EXHIBIT D Form of Ratification Agreement
EXHIBIT E Form of Administration Agreement
SCHEDULE Schedule of Club Trusts, Participating Clubs and Maximum Available
Amounts
</TABLE>
ii
<PAGE> 4
CLUB TRUST REVOLVING CREDIT AGREEMENT
Dated as of April 17, 1998
MAJOR LEAGUE BASEBALL TRUST, a Delaware
business trust (the "MLB Trust"), FLEET NATIONAL
BANK, a national banking association ("Fleet"), as
facilitating agent (the "Facilitating Agent") for the
MLB Trust and the Club Trusts deemed to be parties
hereto as a result of the execution of a Ratification
Agreement.
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. Unless otherwise defined herein,
capitalized terms shall have the meanings set forth in Annex A hereto. In
addition, the interpretive guidelines set forth in such Annex A shall be
applicable to this Agreement.
SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
SECTION 1.03. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles.
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
SECTION 2.01. THE CLUB TRUST LOANS. The MLB Trust agrees, on the terms
and subject to the conditions hereinafter set forth, to make Loans to the Club
Trusts pursuant to this Agreement from time to time on any Monthly Settlement
Date during the period from the
<PAGE> 5
date hereof until the Revolver Termination Date in an amount with respect to
each Club Trust up to the Maximum Available Amount for such Club Trust and in an
aggregate amount not to exceed at any time the sum of all the outstanding
Maximum Available Amounts corresponding to the Club Trust Sub-Facilities
(initially, $405,000,000), as such amount shall be reduced pursuant to Section
2.04 and increased pursuant to Section 2.14 and 8.01 (the "Total Commitment");
PROVIDED, HOWEVER, that the aggregate amount of all Loans made to any particular
Club Trust shall not at any time exceed such Club Trust's Maximum Available
Amount under its Club Trust Sub-Facility (initially $45,000,000). Each Loan with
respect to a Club Trust shall be in a minimum of $1,000,000 and an integral
multiple of $500,000; PROVIDED, HOWEVER, that at any time any Loan(s) shall be
outstanding hereunder with respect to such Club Trust, such Loan(s) shall
aggregate at least $5,000,000. The Loans with respect to each Club Trust shall
be evidenced by a Club Trust Note. Each Club Trust Note shall be payable as set
forth in Section 2.05. Within the limits of the Commitment and its Maximum
Available Amount, and provided that all conditions set forth in Section 3.01 or
3.02, as the case may be, have been satisfied, each Club Trust may borrow,
prepay pursuant to Section 2.09 and reborrow under this Section 2.01.
SECTION 2.02. MAKING THE LOANS.
(a) Each Loan to a Club Trust shall be made on notice, given not later
than 12:00 noon (Boston time) on the third Business Day prior to the Monthly
Settlement Date of the proposed Loan, by the related Club Trust to the MLB Trust
and the Facilitating Agent. Any such notice of a Borrowing (a "Notice of
Borrowing") shall be by telecopier, telex or cable, confirmed immediately in
writing, in substantially the form of Exhibit B hereto, specifying therein (i)
the Club Trust with respect to which the Loan is requested, (ii) the related
Monthly Settlement Date of such Loan, (iii) the amount of such Loan and (iv) any
amount of such Loan which is to be subject to a LIBO Rate Option (which amount
shall be a minimum of $1,000,000 and an integral multiple of $500,000) and the
initial Interest Period (consistent with the provisions of Section 2.06(b)) for
any such amount which is to be subject to a LIBO Rate Option. On the date of
each Loan and upon fulfillment of the applicable conditions set forth in Article
III, the MLB Trust shall make available such Loan proceeds to the Club
2
<PAGE> 6
Trusts in their respective Distribution Accounts or such account as a Club Trust
Administrator shall designate in writing.
(b) Each Notice of Borrowing shall be irrevocable and binding on the
related Club Trust. Subject to the provisions of Section 2.12, each Club Trust
shall indemnify the MLB Trust against any loss, cost or expense incurred by the
MLB Trust as a result of any failure to fulfill, on or before the date specified
in such Notice of Borrowing for any related Loan, the applicable conditions
related to its Loan set forth in Article III, including any loss payable by the
MLB Trust to any Lender pursuant to MLB Credit Agreement because such related
Loan is not made on such date.
SECTION 2.03. FEES.
(a) Each Club Trust agrees to pay to the MLB Trust, prior to a
Liquidity Funding Event, a program fee payable in the amounts and on the dates
set forth in the Blue Keel Fee Letter.
(b) Each Club Trust agrees to pay to the MLB Trust an underwriting fee
payable in the amount and on the date set forth in the Underwriting Fee Letter.
(c) Each Club Trust agrees to pay to the MLB Trust a liquidity
commitment fee on the average daily unused portion of the Total Liquidity
Commitment attributable to such Club Trust from the date hereof until the
Termination Date at the rate of 1/4 of 1% per annum, payable in arrears on the
last day of each March, June, September and December during the term of the
Total Liquidity Commitment, commencing June 30, 1998, and ending on the
Termination Date (or, if any such day is not a Business Day, the immediately
following Business Day); PROVIDED, HOWEVER, that if within 270 days after any
Collective Bargaining Agreement Expiration Date, there does not occur a
subsequent Collective Bargaining Agreement Effective Date, then until a
subsequent Collective Bargaining Agreement Effective Date occurs, the liquidity
commitment fee shall be increased to 3/8 of 1% per annum; and, provided further,
that after a Liquidity Funding Event, such commitment fee shall continue to
3
<PAGE> 7
be paid and shall be paid to the MLB Trust on the average daily unused portion
of the Total Commitment attributable to such Club Trust.
(d) Each Club Trust agrees to pay to the MLB Trust a structuring fee
and an annual administrative fee payable in the amounts and on the dates set
forth in the Administrative Agent Fee Letter.
(e) All fees payable pursuant to this Section 2.03 shall be paid on the
date due in immediately available funds or fees shall be withheld by the MLB
Trust from any Loan if the Administrative Agent, in accordance with the terms of
the MLB Credit Agreement, shall have withheld such fees from the Club Trust
Related Advances made to the MLB Trust corresponding to such Loan. Once paid,
all fees shall be nonrefundable under all circumstances.
SECTION 2.04. REDUCTION OF MAXIMUM AVAILABLE AMOUNT.
(a) VOLUNTARY REDUCTIONS. Prior to the Termination Date, each Club
Trust shall have the right, upon at least three Business Days' prior notice to
the MLB Trust and the Facilitating Agent, to terminate in whole or reduce in
part the unused portion of the Maximum Available Amount under its Club Trust
Sub-Facility; PROVIDED that each partial reduction shall be in the aggregate
amount of $250,000 and integral multiples thereof; and PROVIDED FURTHER that
such Club Trust shall not be permitted prior to the Termination Date to reduce
its Maximum Available Amount below $5,000,000, unless the Maximum Available
Amount with respect to such Club Trust shall be reduced to zero. Any Club Trust
which shall have (i) reduced its Maximum Available Amount under its Sub-Facility
to zero, (ii) paid in full all other amounts owed by it hereunder and under its
Club Trust Pledge and Security Agreement and (iii) caused the agreement
with respect to the continuation of certain of its and its related Participating
Club's obligations to be delivered as contemplated in Section 11 of the related
Club Trust Pledge and Security Agreement shall be deemed no longer to be a party
to this Agreement.
4
<PAGE> 8
(b) REQUIRED REDUCTIONS.
(i) On each Reduction Date, unless the Lenders and the
Liquidity Banks unanimously consent to the contrary, all Revenues deposited into
the Collection Account pursuant to Section 7 of the MLB Pledge and Security
Agreement between January 1 and July 1 of the year in which such Reduction Date
occurs allocable to each Club Trust shall be transferred into the Debt Service
Account, held in escrow in the sub-account of such Club Trust for such period
and invested in Permitted Investments as provided in such Agreement, other than
amounts required to pay interest on such Club Trust's Loans and the related
Borrowings and fees in accordance with this Agreement and the MLB Credit
Agreement, which amounts shall be distributed to the Lenders in accordance with
the provision of Section 7 of the MLB Pledge and Security Agreement.
(ii) if as of July 1 of such calendar year, Annual National
Media Revenues are not greater than or equal to eighty percent (80%) of Base
Annual National Media Revenues, the Maximum Available Amount under each Club
Trust's Sub-Facility shall be reduced to the corresponding amounts set forth
below based on actual Annual National Media Revenues as of July 1 of such year:
<TABLE>
<CAPTION>
ANNUAL NATIONAL MEDIA REVENUES MAXIMUM AVAILABLE AMOUNT
- ------------------------------ ------------------------
<S> <C>
* 80% of Base Annual National Media Revenues $35,000,000
* 70% of Base Annual National Media Revenues $30,000,000
* 60% of Base Annual National Media Revenues $25,000,000
* 50% of Base Annual National Media Revenues $20,000,000
<FN>
* Less than
</TABLE>
(iii) from and after a Reduction Date, no Club Trust may
receive the proceeds of any Loans if such Loans, together with the Club Trust's
outstanding Loans (but
5
<PAGE> 9
excluding accrued interest not yet due thereon), would exceed the Maximum
Available Amount as reduced pursuant to Section 2.04(b)(ii) above.
(iv) Notwithstanding the provisions of Section 2.04(b)(ii), if
after any July 1 following the occurrence of a Reduction Date but prior to the
next Reduction Date, Annual National Media Revenues are restored to an amount
greater than the amount on such July 1 and greater than or equal to fifty
percent (50%) of Base Annual National Media Revenues, then (i) all amounts on
deposit in each Club Trust's sub-account of the Debt Service Account shall, to
the extent not required to be retained in such sub-account pursuant to the Debt
Service and Distribution Schedule then in effect, be transferred to such Club
Trust's Distribution Account, and (ii) each Club Trust's Maximum Available
Amount shall be restored to either (A) the amount specified in subsection
2.04(b)(ii) or (B), if Annual National Media Revenues are restored to an amount
greater than or equal to eighty percent (80%) of Base Annual National Media
Revenues, the amount otherwise in effect under this Agreement without giving
effect to Section 2.04(b)(ii).
(v) In addition to the foregoing, on and after any Collective
Bargaining Agreement Expiration Date but prior to a subsequent Collective
Bargaining Agreement Effective Date, the Maximum Available Amount under each
Club Trust's Sub-Facility shall be reduced, pursuant to a temporary reduction of
the unused portion of the MLB Trust's Total Commitment attributable to such Club
Trust, by an amount equal to the Labor Contingency Interest Reserve for such
Club Trust; PROVIDED, HOWEVER, that such Labor Contingency Interest Reserve
shall be eliminated and such Club Trust's Maximum Available Amount shall be
restored to the amount otherwise in effect under this Agreement without giving
effect to this Section 2.04(b)(ii) on and after any Collective Bargaining
Agreement Effective Date until the next Collective Bargaining Agreement
Expiration Date; and PROVIDED, FURTHER, that with respect to such a reduction
occurring on and after any Collective Bargaining Agreement Expiration Date, the
Labor Contingency Interest Reserve shall be established or reestablished as the
case may be by each Club Trust either (i) reducing its Maximum Available Amount
pursuant to a temporary reduction of the unused portion of the MLB Trust's Total
6
<PAGE> 10
Commitment attributable to such Club Trust or, (ii) if it does not have a
sufficient unused portion repaying (and not reborrowing) a corresponding amount
of unpaid principal of all outstanding Loans from the MLB Trust to such Club
Trust under its Club Trust Sub-Facility (in accordance with and subject to the
provisions of Section 2.12) ratably during the three-month period prior to the
applicable Collective Bargaining Agreement Expiration Date if projected revenues
from the National Media Contracts during such three-month period are sufficient
in the reasonable judgment of the Facilitating Agent to effect such a reduction
and if not, a period comprising a sufficient number of months in the reasonable
judgment of the Facilitating Agent to effect such a reduction prior to the
applicable Collective Bargaining Agreement Expiration Date.
(vi) In addition to the foregoing, if at any other time the
aggregate outstanding amount of all Loans from the MLB Trust to a Club Trust
exceeds the Maximum Available Amount under such Club Trust's Sub-Facility, such
Club Trust shall immediately repay the Loans in the amount of such excess.
SECTION 2.05. PRINCIPAL REPAYMENT. Following a Revolver Termination
Date, the MLB Trust shall no longer be obligated to make Loans and each Club
Trust shall repay the outstanding principal amount of all Loans from the MLB
Trust to such Club Trust under its Club Trust Sub-Facility (subject to the
provisions of Section 2.12) in the following manner.
(i) on January 10 of the first calendar year after the calendar year in
which the Revolver Termination Date occurs, such Club Trust shall repay an
amount equal to fifteen percent (15%) of the outstanding principal of all Loans
as of the Revolver Termination Date;
(ii) on January 10 of the second calendar year after the calendar year
in which the Revolver Termination Date occurs, such Club Trust shall repay an
amount equal to twenty percent (20%) of the outstanding principal of all Loans
as of the Revolver Termination Date;
7
<PAGE> 11
(iii) on January 10 of the third calendar year after the calendar year
in which the Revolver Termination Date occurs, such Club Trust shall repay an
amount equal to twenty-five percent (25%) of the outstanding principal of all
Loans as of the Revolver Termination Date; and
(iv) on the Final Payment Date, such Club Trust shall repay all
remaining outstanding principal of all Loans.
SECTION 2.06. INTEREST.
(a) ORDINARY INTEREST. Each Club Trust shall pay interest on the unpaid
principal amount of each Loan made to it by the MLB Trust from the date of such
Loan until such principal amount shall be paid in full at the interest rate or
rates determined pursuant to Section 2.08(a). Interest on each Loan (or portion
thereof) shall be payable quarterly in arrears on the last day of each March,
June, September and December, commencing June 30, 1998, and interest on each
LIBO Rate Portion of any Loan shall be payable on the last day of each Interest
Period and, if such Interest Period has a duration of six months, on the day
which is three months after the first day of such Interest Period and on the
last day of such Interest Period.
(b) INTEREST PERIODS. Subject to Section 2.02(a), Section 2.08(c) and
Section 2.10, any Administrator on behalf of the related Club Trust may (i)
request in any Notice of Borrowing delivered pursuant to Section 2.02(a) that
interest on the Loan requested in such Notice of Borrowing (or on a specified
principal amount thereof) be based on the LIBO Rate or (ii) request in any
Notice of Borrowing delivered pursuant to Section 2.02(a) that interest on any
then outstanding Loan (or on a specified principal amount thereof) be based on
the LIBO Rate, in each case for a period beginning on a Monthly Settlement Date
and ending on a day immediately preceding a Monthly Settlement Date (an
"Interest Period") for such Loan (or portion thereof) of one, three or six
months; PROVIDED, HOWEVER, that:
8
<PAGE> 12
(i) any Notice of Borrowing given on the Closing Date shall
satisfy the prior notice requirements set forth in Section 2.02(a) and the first
Interest Period shall run from the Closing Date through the applicable Monthly
Settlement Date.
(ii) if any Club Trust fails so to select the duration of any
Interest Period, the duration of such Interest Period shall be one month;
(iii) no more than three Interest Periods shall be outstanding
with respect to any Club Trust;
(iv) prior to a Liquidity Funding Event, no Interest Period
may extend beyond the Revolver Termination Date, and at all times, no Interest
Period may extend beyond the Final Payment Date;
(v) a Club Trust may not select any Interest Period which ends
after any principal repayment or reduction date unless, after giving effect to
such selection, the aggregate unpaid principal amount of Loans (or portions
thereof) with respect to such Club Trust which are not then subject to a LIBO
Rate Option, together with the appropriate unpaid principal amount of LIBO Rate
Portions of Loans having Interest Periods which end on or prior to such
principal repayment or reduction date shall be at least equal to the principal
amount of Loans with respect to such Club Trust due and payable on and prior to
such date;
(vi) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day;
PROVIDED that, if such extension would cause the last day of
such Interest Period to occur in the next following calendar month, the last day
of such Interest Period shall occur on the next preceding Business Day;
(vii) if any Club Trust (through its Administrator on behalf
of the Club Trust) shall not have delivered to the MLB Trust and the
Facilitating Agent, not later than
9
<PAGE> 13
12:00 noon (Boston time) on the third Business Day prior to the termination of
any Interest Period, a Notice of Borrowing requesting that interest on the LIBO
Rate Portion (or any portion thereof) corresponding to such Interest Period be
based on the LIBO Rate for a new Interest Period, then the interest on the
amount of such LIBO Rate Portion (or any portion thereof as to which such Club
Trust has not requested that interest be based on a LIBO Rate) shall be
calculated pursuant to Section 2.06(a)(i) of the MLB Credit Agreement following
termination of the applicable Interest Period and prior to a Liquidity Funding
Event, such Club Trust shall be deemed to have selected an Interest Period of
one month; and
PROVIDED, FURTHER, that in the case of a Business Interruption Event, the
selection of new Interest Periods for outstanding Loans shall continue to be
permitted.
(c) DEFAULT INTEREST. Each Club Trust shall pay interest on the unpaid
principal amount of each Loan made to such Club Trust that is not paid when due
and on the unpaid amount of all interest, fees and other amounts payable
hereunder that is not paid when due, payable on demand, at a rate per annum
equal at all times to (i) in the case of any amount of principal, 2% per annum
above the rate per annum required to be paid on such Loan immediately prior to
the date on which such amount became due and (ii) in the case of all other
amounts, 2% per annum above the Base Rate in effect from time to time; PROVIDED,
however, that in no event shall the amount contracted for and agreed to be paid
by any Club Trust under any provision of this Agreement or its Club Trust Note
exceed the highest lawful rate permissible under any law applicable thereto.
(d) BUSINESS INTERRUPTION EVENT INTEREST. Upon the occurrence of a
Business Interruption Event, each Club Trust shall pay interest on the unpaid
principal amount of each Loan at a rate per annum equal at all times to 2% per
annum above the rate per annum that would otherwise be required to be paid on
such Loan under this Agreement without giving effect to this Section 2.06(d);
PROVIDED, that following the earlier of the termination of the strike or dispute
which gave rise to a Business Interruption Event or the resumption of games
involving players of Major League Baseball and not replacement players, the
interest rate shall
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be restored to the rate that would otherwise be required under this Agreement
without giving effect to this Section 2.06(d).
SECTION 2.07. ADDITIONAL INTEREST. Each Club Trust shall pay to the MLB
Trust the amount of any additional interest required to be paid by the MLB Trust
to any Lender pursuant to Section 2.07 of the MLB Credit Agreement with respect
to the Club Trust Related Advances corresponding to the Loan(s) made by the MLB
Trust to such Club Trust under its Club Trust Sub-Facility. Such amounts shall
be paid to the MLB Trust at or prior to the time that the MLB Trust shall be
required to pay such amount to any Bank.
SECTION 2.08. INTEREST RATE DETERMINATION AND PROTECTION.
(a) The interest rate for each Club Trust's Loan under its Sub-Facility
shall be the interest rate or rates on the Club Trust Related Advances
corresponding to such Loan as determined pursuant to Section 2.06 of the MLB
Credit Agreement.
(b) The Facilitating Agent shall give prompt notice to the related Club
Trust of the applicable interest rate or rates determined by the Administrative
Agent under the MLB credit Agreement for purposes of Section 2.06.
(c) If, pursuant to Section 2.08(c) of the MLB Credit Agreement, the
Administrative Agent determines that the LIBO Rate for any Interest Period for
the Club Trust Related Advances which correspond to the Loans made to the Club
Trusts hereunder is not available, or if following a Liquidity Funding Event the
Required Lenders notify the MLB Trust that the LIBO Rate for any Interest Period
for the Club Trust Related Advances which correspond to the Loans made to the
Club Trusts hereunder will not adequately reflect the cost to such Required
Lenders of making, funding or maintaining their respective Club Trust Related
Advances for such Interest Period:
(i) the MLB Trust (or the Facilitating Agent on its behalf)
shall forthwith notify the Club Trusts of such event;
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(ii) consistent with this Section 2.08 and Section 2.08(c) of
the MLB Credit Agreement, the Lenders shall continue to make Club Trust Related
Advances in accordance with the other terms and conditions of this Agreement,
but the Base Rate shall be the applicable interest rate for each such Loan
hereunder from and after the last day of the then existing Interest Period
therefor; and
(iii) the LIBO Rate Option shall be suspended until reinstated
pursuant to paragraph (d) below.
(d) The LIBO Rate Option shall be reinstated upon notification by the
MLB Trust (or the Facilitating Agent on its behalf) to the Club Trusts that the
circumstances giving rise to the suspension of the LIBO Rate Option pursuant to
paragraph (c) above are no longer applicable.
SECTION 2.09. PREPAYMENTS.
(a) In addition to the required repayment of principal specified in
Section 2.05, with respect to each Club Trust, on any July 1 on which the
Maximum Available Amount under such Club Trust's Sub-Facility is reduced
pursuant to Section 2.04(b)(ii), principal in the amount equal to the excess, if
any, of (i) all outstanding Loans to such Club Trust under its Sub-Facility over
(ii) the Maximum Available Amount as so reduced shall be payable as set forth
hereunder and a "Club Trust Prepayment Event" with respect to such excess shall
be deemed to have occurred. Upon the occurrence of a Club Trust Prepayment
Event, all amounts held in escrow in the Debt Service Account (other than
amounts required to pay interest and fees) pursuant to Section 2.04 shall
immediately be applied by the Administrative Agent to repay such excess
principal and all Revenues allocable to such Club Trust deposited into the
Collection Account pursuant to Section 7 of the MLB Pledge and Security
Agreement between July 1 of such year and January 10 of the immediately
succeeding year (plus all interest earned on such amounts) shall be transferred
into the Debt Service Account and applied to repay such excess principal, after
the application of amounts required to pay interest on such Club Trust's Loans
and the related Borrowings and fees in accordance with
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this Agreement and the MLB Credit Agreement. If a Club Trust Prepayment Event
occurs and all excess principal with respect to any Club Trust's Loans is not
repaid in full by January 10 of the year immediately succeeding the year in
which such Club Trust Prepayment Event occurs so that such Club Trust's Loans
outstanding as of the end of such day do not exceed such Club Trust's Maximum
Available Amount as so reduced, it shall constitute a Club Trust Event of
Default with respect to such Club Trust pursuant to Section 6.01(a).
(b) Other than with respect to any prepayment pursuant to the
provisions of paragraph (c) below, each Club Trust may, upon at least three
Business Days' notice in the case of any LIBO Rate Loan and one Business Day's
notice in the case of any Base Rate Loan to the MLB Trust and the Facilitating
Agent stating the Club Trust with respect to which any such prepayment relates,
the proposed date and aggregate principal amount of each such prepayment, prepay
the Loan(s) under its Club Trust Sub-Facility in whole or ratably in part, and,
if such notice is given, the related Club Trust shall prepay the Loan(s) under
its Club Trust Sub-Facility in whole or ratably in part in the aggregate
principal amount designated in such notice, together with accrued interest to
the date of such prepayment on the principal amount prepaid; PROVIDED, HOWEVER,
that with respect to each Club Trust (i) each partial prepayment shall be in an
aggregate principal amount not less than $250,000, (ii) any prepayment of any
LIBO Rate Portion of any Club Trust's Loan(s) under its Club Trust Sub-Facility
shall be made on, and only on, the last day of an Interest Period for such LIBO
Rate Portion (PROVIDED, THAT prepayments may be made at other times as long as
all costs payable pursuant to Section 8.04(b) are paid) and (iii) no prepayment
shall be permitted pursuant to this Section 2.09 if, after giving effect to such
prepayment, the aggregate principal amount of Loans outstanding under such Club
Trust's Sub-Facility shall be less than $5,000,000, unless the amount of Loans
outstanding under such Club Trust Sub-Facility shall be reduced by such
prepayment to zero.
(c) In accordance with the provisions of Section 2.07 of each Club
Trust Agreement, each Club Trust may, upon at least three Business Days' notice
to the MLB Trust and the Facilitating Agent stating the Club Trust with respect
to which any such prepayment
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relates and the proposed date and aggregate principal amount of such prepayment,
prepay all of its Loans under its Club Trust Sub-Facility in whole, and, if such
notice is given, the related Club Trust shall prepay any and all Loans under its
Sub-Facility in whole, together with accrued interest to the date of such
prepayment on the principal amount prepaid. Any Club Trust which shall have (i)
made such a prepayment pursuant to this paragraph (c), (ii) paid in full all
other amounts owed by it hereunder and under its Club Trust Pledge and Security
Agreement and (iii) caused the agreement with respect to the continuation of
certain of its and its related Participating Club's obligations to be delivered
as contemplated in Section 11 of the related Club Trust Pledge and Security
Agreement shall be deemed no longer to be a party to this Agreement.
SECTION 2.10. INCREASED COSTS. Each Club Trust shall pay to the MLB
Trust the amount of any increased costs required to be paid by the MLB Trust to
any Lender or Liquidity Bank pursuant to Section 2.10 of the MLB Credit
Agreement with respect to the Club Trust Related Advances corresponding to the
Loan(s) made by the MLB Trust to such Club Trust under its Club Trust
Sub-Facility and its allocable portion of the Liquidity Commitment. Such amounts
shall be paid to the MLB Trust at or prior to the time that the MLB Trust shall
be required to pay such amount to any Lender or Liquidity Bank.
SECTION 2.11. ILLEGALITY.
(a) Notwithstanding any other provision of this Agreement but subject
to the provisions of this Section, if, pursuant to Section 2.11 of the MLB
Credit Agreement, any Lender shall notify the Administrative Agent that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for any Lender or its Lending Office to
perform its obligations thereunder to make, fund or maintain Club Trust Related
Advances subject to a LIBO Rate Option thereunder, (i) the obligation of the MLB
Trust to make Loans (or portions thereof) subject to a LIBO Rate Option under
any Club Trust Sub-Facility shall be suspended until the Administrative Agent
under the MLB Credit Agreement shall notify the MLB Trust and the Lenders that
the circumstances causing such suspension no longer
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exist (prompt notice of which will be given to the Club Trusts by the MLB Trust
(or the Facilitating Agent on its behalf)) and (ii) the Base Rate shall be the
applicable interest for all Loans unless such Club Trust, within five Business
Days of notice from the MLB Trust (or the Facilitating Agent on its behalf) of
the above described events, elects to prepay in full all Loans (or portions
thereof) subject to a LIBO Rate Option under its Club Trust Sub-Facility then
outstanding, together with interest accrued thereon.
(b) Upon the occurrence of the events specified in Section 2.11(a), the
MLB Trust shall continue to make Loans in accordance with the other terms and
conditions of this Agreement, but the Base Rate shall be the applicable interest
rate for each such Loan until the MLB Trust and the Club Trusts receive the
notice described in 2.11(a)(i) above.
SECTION 2.12. PAYMENTS; LIMITED RECOURSE; NO CROSS COLLATERALIZATION
AND COMPUTATIONS.
(a) Subject to the provisions of this Section, on any day on which any
amount is due hereunder or under the related Club Trust Pledge and Security
Agreement with respect to any Club Trust Sub-Facility or on which any Club Trust
in accordance with Section 2.09 elects to make a principal payment, subject to
the provisions of the MLB Pledge and Security Agreement, amounts on deposit in
the Debt Service Account attributable to the related Club Trust shall be
withdrawn from the Debt Service Account and such amounts shall be applied to
make actual or deemed distributions with respect thereto. Deemed distributions
consist of payments to the Lenders and the Liquidity Banks under MLB Credit
Agreement with respect to Club Trust Related Advances and related obligations
(including Secured Obligations) corresponding to the such Club Trust's
outstanding Loans, payment with respect to which will satisfy such Club's
payment obligation to the MLB Trust hereunder or under the MLB Trust Agreement.
(b) [Reserved].
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(c) Each Club Trust's obligations hereunder shall (subject to Section
2.12(d)) be satisfied solely by recourse to the assets of such Club Trust and
its related Club Trust Collateral and none of the Major League Clubs (except as
provided in any Transfer Agreement), the Commissioner, the National League or
the American League or any of their Affiliates shall be obligated with respect
thereto.
(d) (i) The assets of a particular Club Trust and its related Club
Trust Collateral shall be used solely to pay obligations attributable to such
Club Trust and in no event, except as provided in (iii) below, shall the Club
Trust Collateral of one Club Trust be used to pay any obligations attributable
to another Club Trust. Obligations hereunder or under the MLB Pledge and
Security Agreement not specifically attributable to a Club Trust shall be
allocated equally among the Club Trusts.
(ii) As further provided in paragraphs (e), (f) and (g) below,
the MLB Trust and the Facilitating Agent agree to account for all Loans under
the Club Trust Sub-Facilities, payments and the Club Trust Collateral so as to
prevent cross-collateralization between the assets and obligations attributable
to each of the Club Trusts. Except as permitted in (iii) below, any amounts
received by the MLB Trust in satisfaction of any obligations attributable to any
Club Trust from the assets of, or assets attributable to, another Club Trust
shall be deposited by the MLB Trust into the Debt Service Account and the
obligation previously satisfied by such deposited amounts shall be reinstated
effective as of the date on which such amount was incorrectly applied.
(iii) The assets attributable to a particular Club Trust or
Club Trusts and any other portion of the Club Trust Collateral attributable to
such Club Trust or Club Trusts may be used to the extent provided in this clause
(iii) to satisfy the obligations of any other Club Trust (A) if for any reason
any such other Club Trust receives less than its Pro Rata share of Revenues or
(B) if (x) such other Club Trust's related Participating Club is expelled or
withdraws from its respective League or Major League Baseball, as a whole, and
such other Club Trust's share of Revenues is reduced or eliminated and (y) the
American League or the
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National League, as appropriate, elects to allow a new Major League Club to
become a member of Major League Baseball. The amount permitted to be paid with
respect to the obligations of any such adversely affected Club Trust (x) in the
case of subclause (A), shall equal the incremental dollar increase in Revenues
allocated to the nonadversely affected Club Trusts as a result of such
nonadversely affected Club Trusts' Pro Rata share of Revenues being increased by
such reduction in or elimination of the adversely affected Club Trust's Pro Rata
share of Revenues and (y) in the case of subclause (B), shall equal any amounts
paid to the remaining Participating Clubs and included the Club Trusts' Rights
in connection with the addition of the next Major League Club following the
expulsion or withdrawal of such Club; PROVIDED, HOWEVER, that in the case of
each of the immediately preceding clause (x) and clause (y), in no event shall
the aggregate amounts paid by all nonadversely affected Club Trusts exceed the
amount of the obligations of the adversely affected Club Trust under the
Transaction Documents. The obligation of any nonadversely affected Club Trust or
Club Trusts to pay any amount on behalf of an adversely affected Club Trust or
Club Trusts shall be allocated Pro Rata based upon Maximum Available Amount
among the nonadversely affected Club Trusts.
(e) The MLB Trust shall maintain an account or accounts evidencing the
indebtedness of each Club Trust resulting from each Loan under such Club Trust's
Sub-Facility made by the MLB Trust to such Club Trust from time to time,
including the amounts of principal and interest payable and paid to the MLB
Trust from time to time under this Agreement, the Club Trust Pledge and Security
Agreement or the MLB Pledge and Security Agreement with respect to such Club
Trust.
(f) The Facilitating Agent shall maintain the Register pursuant to
Section 8.07 hereof in which Register shall be reported with respect to each
Club Trust and its Sub-Facility (i) each Loan hereunder made with respect to
such Club Trust and the amount of each such Loan, (ii) the Interest Period and
principal amount of each LIBO Rate Portion of each such Loan, (iii) the amount
of any principal or interest due and payable or to become due and payable with
respect to each such Loan and (iv) the amount of any sum received by the MLB
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Trust hereunder, under the Club Trust Pledge and Security Agreement or under the
MLB Pledge and Security Agreement from such Club Trust.
(g) The entries made in the accounts or the Register maintained
pursuant to paragraphs (e) and (f) of this Section 2.12 shall, to the extent
permitted by applicable law, be prima facie evidence of the existence and the
amounts of the obligations of each Club Trust with respect to each Loan therein
recorded; PROVIDED, HOWEVER, that the failure of the Facilitating Agent to
maintain any such accounts or such Register, as applicable, or any error therein
shall not in any manner affect the obligation of any Club Trust in accordance
with the terms hereof.
(h) It is the intent of the parties hereto that all computations of
interest on the Loans hereunder correspond to the calculation of interest on the
corresponding Club Trust Related Advances and that the calculation of fees
hereunder correspond to the calculation of fees under the MLB Credit Agreement.
Consistent with such intent, all computations of interest based on the LIBO Rate
shall be made by the Facilitating Agent on the basis of a year of 360 days, and
all computations of interest based on the Base Rate and of fees shall be made by
the Facilitating Agent on the basis of a year of 365 days, in each case for the
actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest, fees or additional interest are
payable. Each determination by the Facilitating Agent of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(i) Whenever any payment hereunder or under the Club Trust Notes shall
be stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest or any fee, as
the case may be; PROVIDED, HOWEVER, that if such extension would cause payment
to be made in the next following calendar month, such payment shall be made on
the next preceding Business Day.
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SECTION 2.13. TAXES.
(a) Any and all payments by each Club Trust hereunder or under the Club
Trust Notes shall be made, in accordance with Section 2.12, free and clear of
and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
EXCLUDING, in the case of each of the MLB Trust and the Facilitating Agent,
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which the MLB Trust or the Facilitating Agent (as
the case may be) is organized or any political subdivision thereof (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If any Club Trust shall
be required by law to deduct any Taxes from or in respect of, any sum payable
hereunder or under the Club Trust Notes to the MLB Trust or the Facilitating
Agent, (i) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under Section 2.13(a), (b) or (c)) the MLB Trust or the
Facilitating Agent (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (ii) such Club Trust shall
make such deductions and (iii) such Club Trust shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.
(b) In addition, each Club Trust agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under the Club
Trust Notes or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement, the Notes or any other Transaction Document
(hereinafter referred to as "Other Taxes").
(c) Each Club Trust will indemnify the MLB Trust and the Facilitating
Agent for the full amount of Taxes or Other Taxes which are attributable to such
Club Trust (including, without limitation, any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under Section 2.13(a), (b) or (c)) paid by
the MLB Trust or the Facilitating Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with
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respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. Such indemnification shall be made within 30 days from the
date the MLB Trust or the Facilitating Agent (as the case may be) makes written
demand therefor. If the MLB Trust or the Facilitating Agent shall become aware
or shall be notified by any Club Trust that it is entitled to receive a refund
in respect of Taxes or Other Taxes as to which it has been indemnified by such
Club Trust pursuant to Section 2.13(a), (b) or (c), it shall promptly notify
such Club Trust of the availability of such refund and shall, within 30 days
after receipt of a written request by any such Club Trust, apply for such refund
at the such Club Trust's expense. If the MLB Trust or the Facilitating Agent
receives a refund in respect of any Taxes or Other Taxes as to which it has been
indemnified by any Club Trust pursuant to Section 2.13(a), (b) or (c), it shall
promptly notify the appropriate Club Trust of such refund and shall, within 30
days after receipt of a written request by such Club Trust (or promptly upon
receipt, if such Club Trust has requested application for such refund pursuant
hereto), repay such refund to such Club Trust (to the extent of amounts that
have been paid by such Club Trust under Section 2.13(a), (b) or (c) with respect
to such refund), net of all out-of-pocket expenses (including the net amount of
taxes, if any, imposed on such MLB Trust or Facilitating Agent with respect to
such refund) of the MLB Trust or the Facilitating Agent, PROVIDED that each Club
Trust, upon the request of the MLB Trust or Facilitating Agent, agrees to return
such refund (plus penalties, interest or other charges) to the MLB Trust or
Facilitating Agent in the event the MLB Trust or the Facilitating Agent is
required to repay such refund to any person, including the relevant taxing
authority.
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes withheld by a Club Trust in respect of any payment to the MLB Trust or the
Facilitating Agent, each Club Trust will furnish to the Facilitating Agent, at
its address referred to in Section 8.02, the original or a certified copy of a
receipt evidencing payment thereof.
(e) (i) Each Club Trust, without duplication of any amounts paid or
indemnified pursuant to Section 2.13(a), (b) or (c), shall indemnify the MLB
Trust and the Facilitating Agent for any MLB Taxes required to be paid by the
MLB Trust or Facilitating Agent (as the
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case may be) to any Lender, Liquidity Bank, Bank Transferee, and the
Administrative Agent pursuant to Section 2.13 of the MLB Credit Agreement in an
amount equal to the sum of (x) the amount of MLB Taxes that are specifically
attributable to such Club Trust and (y) an amount equal to the product of (I)
the amount of MLB Taxes not specifically attributable to any Club Trust and (II)
the quotient of (A) the sum of the amount of the Loans made to such Club Trust
that is outstanding on each day in the period to which such MLB Taxes relate
divided by the number of days in such period divided by (B) the sum of the
amount of the Loans made to all the Club Trusts that is outstanding on each day
in the period to which such MLB Taxes relate divided by the number of days in
such period; PROVIDED, HOWEVER, that with respect to MLB Taxes described in
clause (y)(I) if (C) there are no Loans outstanding during any period to which
such MLB Taxes relate or (D) such MLB Taxes would have been imposed if none of
the Loans to any Club Trust were outstanding, then each such Club Trust shall
indemnify the MLB Trust and the Facilitating Agent in an amount equal to the
amount of such MLB Taxes divided by the number of Club Trusts parties to this
Agreement; PROVIDED FURTHER, HOWEVER, that if for any reason after the
application of the foregoing formulas to determine the amount that a Club Trust
must indemnify the MLB Trust and the Facilitating Agent with respect to MLB
Taxes, an amount of MLB Taxes has not been indemnified, then each such Club
Trust shall indemnify the MLB Trust and Facilitating Agent in an amount equal to
the amount of such MLB Taxes that has not been indemnified divided by the number
of Club Trusts parties to this Agreement; and PROVIDED FURTHER that no Club
Trust shall be responsible for the payment of any such amounts payable by any
other Club Trust. Any such MLB Taxes that are required to be indemnified by a
Club Trust shall be paid by such Club Trust at or prior to the time that the MLB
Trust or Facilitating Agent shall be required to pay such MLB Taxes. The
Facilitating Agent shall have the exclusive authority to apply and interpret the
provisions of this Section 2.13(e) to determine the amounts each Club Trust is
required to indemnify the MLB Trust or Facilitating Agent pursuant to this
Section 2.13(e).
(ii) If the MLB Trust or the Facilitating Agent shall become
aware that it is entitled to receive a refund in respect of MLB Taxes as to
which it has been indemnified by any Club Trust pursuant to this Section
2.13(e), it shall promptly notify the Club Trust(s) that
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made the related indemnity payment(s) of the availability of such refund and
shall, within 30 days after receipt of a written request by any such Club Trust,
apply or cause any Lender, Liquidity Bank, Bank Transferee or Administrative
Agent to apply for such refund at the expense of such Club Trust(s). If the MLB
Trust or the Facilitating Agent receives a refund in respect of any MLB Taxes as
to which it has been indemnified by any Club Trust(s) pursuant to this Section
2.13(e), it shall promptly notify the appropriate Club Trust(s) of such refund
and shall, within 30 days after receipt of a written request by such Club
Trust(s) (or promptly upon receipt, if such Club Trust has requested application
for such refund pursuant hereto), repay to such Club Trust an amount equal to
the product of (x) such refund, including any interest thereon, net of all
out-of-pocket expenses (including expenses incurred to apply for such refund and
the net amount of taxes, if any, imposed on the MLB Trust or the Facilitating
Agent in respect of such refund) of the MLB Trust or the Facilitating Agent, and
(y) the quotient of (I) the amount paid by such Club Trust and (II) the total
amounts paid by all the Club Trusts, each pursuant to this Section 2.13(e) with
respect to the MLB Taxes giving rise to such refund (excluding any expense
reimbursements paid to the MLB Trust or Facilitating Agent with respect to such
refund), plus an amount equal to any expense reimbursed by such Club Trust to
the MLB Trust or Facilitating Agent pursuant to this Section 2.13(e) to apply
for such refund which was deducted by the MLB Trust from the amount of such
refund as an out-of-pocket expense, PROVIDED that each Club Trust, upon request
of the MLB Trust or Facilitating Agent, agrees to return such refund (plus
penalties, interest or other charges) to the MLB Trust or Facilitating Agent in
the event the MLB Trust or the Facilitating Agent is required to repay such
refund to any person, including the relevant taxing authority.
(iii) This Section 2.13(e) is intended to equitably apportion
the burden of MLB Taxes among the Club Trusts and equitably apportion the
benefit of any refund received in respect of MLB Taxes. Each Club Trust, the MLB
Trust and the Facilitating Agent agree to negotiate in good faith to amend this
Section 2.13(e) to achieve the intent of this Section 2.13(e) if, as a result of
any unusual circumstances, pursuant to Section 2.13(e) the burden of MLB Taxes
is not equitably apportioned among the Club Trusts or the benefit of
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refunds of MLB Taxes are not equitably apportioned among the Club Trusts;
PROVIDED, HOWEVER, each Club Trust shall comply with this Section 2.13(e) until
any such amendment.
(f) Without prejudice to the survival of any other agreement of each
Club Trust hereunder, the agreements and obligations of each Club Trust
contained in this Section 2.13 shall survive the payment in full of principal
and interest hereunder and under the related Club Trust Note.
(g) If any Club Trust is required to pay any amount pursuant to this
Section 2.13 to any Lender, Liquidity Bank, Bank Transferee, Administrative
Agent, Facilitating Agent, taxing jurisdiction, or other third party, the
Administrative Agent shall have the power and authority (but not the duty) to
pay such amounts as specified in the MLB Pledge and Security Agreement.
SECTION 2.14. ADDITIONAL CLUB TRUSTS; CREATION OF ADDITIONAL
SUB-FACILITIES.
(a) Subsequent to the Closing Date, but prior to the Revolver
Termination Date, at any time upon sixty (60) days prior written notice to the
Administrative Agent, additional Club Trusts may be added as parties to this
Agreement and, in connection with any such addition, a Club Trust Sub-Facility
with respect to each such additional Club Trust shall be created hereunder. The
consent of the Club Trusts party hereto at the time of any such proposed
addition shall not be required in connection with such proposed addition;
PROVIDED, HOWEVER, that such proposed addition shall be subject to the
satisfaction of any conditions thereto established by the Administrative Agent
on behalf of the MLB Trust; and PROVIDED FURTHER, HOWEVER, that any proposed
addition shall be at a minimum subject to the satisfaction of the conditions
that:
(i) the Maximum Available Amount under such proposed Club
Trust's Club Trust Sub-Facility shall not exceed $45,000,000, subject to all
required reductions in any Club Trust's Maximum Available Amount pursuant to
Section 2.04(b));
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(ii) the Total Commitment and Total Liquidity Commitment shall
have been increased under and in accordance with the provisions of the MLB
Credit Agreement to make Club Trust Related Advances to the Borrower in an
amount equal to such proposed Club Trust's Maximum Available Amount under its
Sub-Facility;
(iii) no Club Trust Event of Default or event which would
constitute a Club Trust Event of Default but for the requirement that notice be
given or time elapse or both will result from the proposed addition of such Club
Trust and such Club Trust's related Participating Club must be entitled to, and
must have transferred to such Club Trust, a full Pro Rata Share of the Rights
and Revenues;
(iv) the representations and warranties contained in Section 3
of the MLB Pledge and Security Agreement and the representations and warranties
contained in Section 4.01 of this Agreement and Section 3 of the Club Trust
Pledge and Security Agreement with respect to such Club Trust will be true and
correct in all material respects as of the date of such proposed addition;
(v) subject to provisions of paragraph (c) below, such
proposed Club Trust shall have delivered to the MLB Trust and the Facilitating
Agent those items required to be delivered to them by a Club Trust and such Club
Trust shall have taken such actions as are required to be taken by a Club Trust
pursuant to Section 3.01;
(vi) the conditions under the MLB Credit Agreement to the
proposed addition of any Club Trust and the corresponding increase in the Total
Commitment thereunder to make Club Trust Related Advances and Total Liquidity
Commitment shall have been satisfied;
(vii) such proposed Club Trust shall have entered into a
Ratification Agreement;
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(viii) the MLB Trust and the Facilitating Agent shall have
received such other approvals, opinions or documents as the MLB Trust and
Facilitating Agent shall have reasonably requested; and
(ix) such proposed Club Trust shall be responsible for the
payment of its allocable share of all amounts payable by the MLB Trust to the
Lenders pursuant to Section 8.04(b) of the MLB Credit Agreement as a result of
any reallocation of the Club Trust Related Advances among the Lenders in
connection with the increase in the aggregate Club Trust Related Advances of the
Lenders related to the addition of such propose Club Trust.
(b) Following the addition of any such proposed Club Trust, (i) all
references herein or any Transaction Document to Club Trust, Participating Club,
Administrator, Maximum Available Amount and Club Trust Sub-Facility shall be
deemed to include such proposed Club Trust, its related Participating Club and
Administrator and, as appropriate, such proposed Club Trust's Maximum Available
Amount and Club Trust Sub-Facility and (ii) for all purposes such proposed Club
Trust shall be deemed to be a party to this Agreement.
(c) In connection with the addition of any proposed Club Trust whose
related Participating Club is located outside of the United States, the
Administrative Agent may, in addition to or in lieu of any Uniform Commercial
Code financing statements (and any related requests for information) required to
be delivered in connection with (i) the perfection of the ownership interest of
such proposed Club Trust in the Rights and Revenues contributed to it by such
proposed Club Trust's related Participating Club and (ii) the perfection of the
security interest created by such proposed Club Trust in the Club Trust
Collateral pursuant to its Club Trust Pledge and Security Agreement, require
such proposed Club Trust to deliver such other documents and/or any Opinion of
Counsel as the Administrative Agent may deem appropriate or necessary to assure
itself of such proposed Club Trust's perfected ownership interest in the Rights
and Revenues under the laws of such other jurisdiction. In addition, with
respect to any proposed Club Trust whose related Participating Club is located
outside of the United
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States, the Administrative Agent may require such proposed Club Trust to deliver
such other documents and/or any Opinion of Counsel necessary to assure itself of
the absence of any withholding tax imposed by such other jurisdiction with
respect to such proposed Club Trust's Rights and Revenues.
(d) As contemplated in and subject to the provisions of Section
8.01(b), this Agreement, the MLB Credit Agreement and the MLB Pledge and
Security Agreement may be amended to the extent necessary or desirable in the
sole judgment of the Administrative Agent in connection with the addition of a
proposed Club Trust.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. CONDITION PRECEDENT TO INITIAL LOANS. The obligation of
the MLB Trust to make its initial Loan to any Club Trust under its Sub-Facility
hereunder is subject to the condition precedent that the MLB Trust and the
Facilitating Agent shall have received on or before the day of the initial Loan
thereunder the following, each dated such day, in form and substance
satisfactory to the MLB Trust and the Facilitating Agent (except for the Club
Trust Note):
(a) A pledge and security agreement, duly executed by such Club Trust
and the MLB Trust in substantially the form of Exhibit C hereto (the "Club Trust
Pledge and Security Agreement"), together with (i) executed copies of proper
financing statements to be filed under the Uniform Commercial Code of all
jurisdictions that the MLB Trust may deem necessary or desirable in order to
perfect the ownership interest in the Rights and Revenues contributed by such
Club Trust's related Participating Club to such Club Trust and (ii) executed
copies of proper financing statements to be filed under the Uniform Commercial
Code of all jurisdictions that the MLB Trust may deem necessary or desirable in
order to perfect the security interests by such Club Trust in the Club Trust
Collateral pursuant to the Club Trust Pledge and Security Agreement.
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(b) A certificate of the Club Trustee certifying the names and true
signatures of their officers authorized to sign each Transaction Document to
which such Club Trust is a party and the other documents to be delivered
hereunder or thereunder.
(c) The list of Authorized officers for each Administrator.
(d) Certified copies of all corporate or partnership action taken by
such Club Trust's related Participating Club, including appropriate resolutions
authorizing the execution, delivery and performance of the Transaction Documents
to which it is a party and each other document delivered pursuant to such
documents.
(e) Copies of the Ratification Agreement executed by such Club Trust.
(f) A Certificate of such Club Trust's Administrator certifying that
(a) as of the date of such Club Trust's Ratification Agreement no event has
occurred and is continuing, or would result from any Loan under such Club
Trust's Sub-Facility or from the application of the proceeds therefrom on such
date, which constitutes a Club Trust Event of Default or would constitute a Club
Trust Event of Default but for the requirement that notice be given or time
elapse or both and (b) as of the date of the initial Loan, with respect to each
Club Trust in existence prior to the date of this Agreement, such Club Trust's
related Participating Club is Solvent, and with respect to each Club Trust
organized after the date of this Agreement, such Club Trust's related
Participating Club is Solvent prior to, and will be Solvent after giving effect
to, the transfer of the Rights and Revenues to such Club Trust and that such
Participating Club is receiving fair and reasonably equivalent value for the
transfer of the Rights and Revenues to its related Club Trust.
(g) The Club Trust Note with respect to the related Club Trust to the
order of the MLB Trust.
(h) Copies of the Transfer Agreement executed by such Club Trust.
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(i) The delivery of all collateral with respect to such Club Trust
under the Club Trust Pledge and Security Agreement (including the related Club
Trust Note) to the Administrative Agent for the benefit of all the Lenders and
the third party benefit of the Liquidity Banks under the MLB Credit Agreement.
(j) A favorable opinion of counsel to such Club Trust, substantially in
the form of Exhibit B to its Transfer Agreement and as to such other matters as
the MLB Trust and the Facilitating Agent may reasonably request.
(k) Copies of the Administration Agreement executed by such Club Trust.
(1) Copies of all documents, certificates and opinions delivered by
such Club Trust or its related Participating Club pursuant to the Transaction
Documents.
(m) Such other documents as the MLB Trust or the Facilitating Agent
shall reasonably request.
SECTION 3.02. CONDITIONS PRECEDENT TO EACH LOAN. The obligation of the
MLB Trust to make a Loan (including the initial Loan) under any Club Trust's
Sub-Facility shall be subject to the receipt by the MLB Trust of the Club Trust
Related Advances with respect to the related Club Trust necessary to make such
Loans and to the further conditions precedent that on the date of such Loan (i)
the following statements shall be true (and each of the giving of the applicable
Notice of Borrowing with respect to such Club Trust and the acceptance of the
Loan proceeds by such Club Trust shall constitute a representation and warranty
by such Club Trust that on the date of such Loan such statements are true):
(a) the representations and warranties contained in Section 3 of the
MLB Pledge and Security Agreement and the representations and warranties with
respect to such Club Trust contained in Section 4.01 of this Agreement and
Section 3 of the Club Trust Pledge and Security Agreement are correct in all
material respects on and as of the date of such Loan,
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before and after giving effect to such Loan and to the application of the
proceeds therefrom, as though made on and as of such date;
(b) no event has occurred and is continuing, or would result from such
Loan or from the application of the proceeds therefrom, which constitutes a Club
Trust Event of Default or would constitute a Club Trust Event of Default but for
the requirement that notice be given or time elapse or both;
(c) no Business Interruption Event has occurred and is continuing as
evidenced by a notice from the Facilitating Agent to the Club Trusts;
(d) except as provided in the Transaction Documents, none of the
Central Fund Custody Account, the MLB Properties Royalty Account, the Collection
Account or the Debt Service Account or Eligible Investments otherwise to the
credit of, the Central Fund Custody Account, the MLB Properties Royalty Account,
the Collection Account or the Debt Service Account shall be subject to any Lien,
writ, judgment, warrant of attachment, execution or other similar process;
PROVIDED, that with respect to the Central Fund Custody Account and the MLB
Properties Royalty Account, this restriction shall not apply to any Lien, writ,
judgment, warrant of attachment, execution or other similar process which (i)
attaches or relates solely to the interests of the non-Participating Clubs in
such accounts or (ii) relates only to the interests of a specific Club Trust in
such accounts and not the interests of the Club Trust requesting the Loan, all
of the Club Trusts or the MLB Trust in such accounts;
(e) the MLB Trust shall have received such evidence and instruments
(including stamped receipt Uniform Commercial Code release statements) as it or
the Facilitating Agent may request with respect to the release of any Lien
(other than any Lien created pursuant to the Transaction Documents) on the Club
Trust Collateral existing on the Closing Date as described in Schedule
3.02(b)(v) of the related Transfer Agreement; and
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(f) the MLB Trust and the Facilitating Agent shall have received from
such Club Trust such other approvals, opinions or documents as the MLB Trust and
the Facilitating Agent may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF EACH CLUB TRUST. Each
Club Trust represents and warrants to the MLB Trust as follows:
(a) Such Club Trust is a Delaware business trust duly organized,
validly existing and in good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by such Club Trust of each
Transaction Document to which it is or will be a party are within such Club
Trust's trust powers, have been duly authorized by all necessary trust action,
and do not contravene (i) such Club Trust's certificate of trust or the related
Club Trust Agreement or (ii) any law or any contractual restriction binding on
or affecting such Club Trust, and do not result in or require the creation of
any lien, security interest or other charge or encumbrance (other than pursuant
hereto or the related Club Trust Pledge and Security Agreement) upon or with
respect to any of its properties.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by such Club Trust of any
Transaction Document to which it is or will be a party.
(d) This Agreement is, and each other Transaction Document to which
such Club Trust will be a party when delivered hereunder will be, legal, valid
and binding obligations of such Club Trust enforceable against such Club Trust
in accordance with their respective terms,
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except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights in general and except as
such enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(e) There is no pending or, to the knowledge of such Club Trust,
threatened action or proceeding affecting such Club Trust or the related Club
Trust Collateral before any court, governmental agency or arbitrator, which may
materially adversely affect the financial condition or operations of such Club
Trust or the related Club Trust Collateral or which purports to affect the
legality, validity or enforceability of this Agreement or any Transaction
Document to which such Club Trust will be a party.
(f) Such Club Trust is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System),
and no proceeds of any Loan will be used to purchase or carry any margin stock
or to extend credit to others for the purpose of purchasing or carrying any
margin stock.
(g) The proceeds of each Loan are being used solely for the purpose of
(i) refinancing existing indebtedness under the Major League Baseball League
Wide Credit Facility, (ii) paying Transaction Costs and (iii) making
distributions for general corporate purposes of such Participating Club
including, without limitation, refinancing such Participating Club's existing
indebtedness (including indebtedness to Affiliates).
ARTICLE V
COVENANTS OF THE CLUB TRUSTS
SECTION 5.01. AFFIRMATIVE COVENANTS. So long as any Club Trust's Club
Trust Note shall remain unpaid or any Club Trust Secured Obligation of such Club
Trust hereunder shall be outstanding or the MLB Trust shall have any Commitment
under such Club Trust's
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Club Trust Sub-Facility, such Club Trust will, unless the MLB Trust shall
otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with all
applicable laws, rules, regulations and orders, such compliance to include,
without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its property except
to the extent contested in good faith.
(b) EXISTENCE. Keep in full effect its existence, rights and franchises
as a business trust under the laws of the State of Delaware and obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, any other Transaction Document and each other
instrument or agreement included in the Collateral.
(c) REPORTING REQUIREMENTS. Furnish to the MLB Trust, the Facilitating
Agent for distribution to the Lenders, the Liquidity Agent for distribution to
the Liquidity Banks and the Rating Agency:
(i) as soon as possible and in any event within five days
after the occurrence of each Club Trust Event of Default and each event which,
with the giving of notice or lapse of time, or both, would constitute a Club
Trust Event of Default, which is continuing on the date of such statement, a
statement of such Club Trust setting forth details of such Club Trust Event of
Default or other event and the action which such Club Trust has taken and
proposes to take with respect thereto;
(ii) promptly after the filing or receiving thereof, copies of
all reports and notices which such Club Trust files under ERISA with the
Internal Revenue Service or the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor or which such Club Trust receives from such corporation; and
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(iii) such other information respecting the condition or
operations, financial or otherwise, of such Club Trust as the MLB Trust or
Facilitating Agent may from time to time reasonably request.
(d) FINANCIAL STATEMENTS AND ANNUAL STATEMENT AS TO COMPLIANCE. Cause
to be delivered to the Facilitating Agent for distribution to the Lenders, the
Liquidity Agent for distribution to the Liquidity Banks and the Rating Agency,
within 120 days after the end of each fiscal year of such Club Trust (commencing
with the fiscal year 1998), a balance sheet of such Club Trust and the related
statement of income and cash flows audited upon by the Accountants, together
with a certificate of such accounting firm stating that:
(i) a review of the activities of such Club Trust during such
year and of performance under this Agreement and each other Transaction Document
has been made; and
(ii) based on such review, such Club Trust has fulfilled all
its obligations under this Agreement and each other Transaction Document
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to the Accountants and the
nature and status thereof.
(e) ADMINISTRATOR'S CERTIFICATE. Cause to be delivered to the
Facilitating Agent for distribution to the Lenders, the Liquidity Agent for
distribution to the Liquidity Banks and the Rating Agency, within 120 days after
the end of each fiscal year of such Club Trust (commencing with the fiscal year
1998), a certificate of an Authorized Officer of the such Club Trust's
Administrator stating that:
(i) a review of the activities of such Club Trust during such
year and of performance under this Agreement and each other Transaction Document
has been made; and
(ii) based on such review, such Club Trust has fulfilled all
its obligations under this Agreement and each other Transaction Document
throughout such year, or, if there
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has been a default in the fulfillment of any such obligation, specifying each
such default known to such Administrator and the nature and status thereof.
(f) PROTECTION OF COLLATERAL. In addition to any obligation under the
Club Trust Pledge and Security Agreement, from time to time execute and deliver
all such supplements and amendments to the Club Trust Pledge and Security
Agreement and all such financing statements, continuation statements,
instruments of further assurance and other instruments, and take such other
action reasonably requested by the MLB Trust and the Facilitating Agent
necessary or advisable to:
(i) maintain or preserve the lien and security interest (and
the priority thereof) of the Club Trust Pledge and Security Agreement and the
MLB Pledge and Security Agreement or carry out more effectively the purposes of
this Agreement and any other Transaction Document and the transactions
contemplated hereby or thereby;
(ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by the Club Trust Pledge and Security Agreement;
(iii) enforce any agreements included in the Club Trust
Collateral; or
(iv) preserve and defend title to and the rights of the MLB
Trust in the Club Trust Collateral against the claims of all persons and
parties.
Pursuant to the Transfer Agreement, the Club Trust Pledge and Security
Agreements and the MLB Pledge and Security Agreement, each Participating Club,
each Club Trust and the MLB Trust have designated the Administrative Agent as
its agent and attorney-in-fact to execute any financing statement, continuation
statement or other instrument required by such party pursuant to the Transfer
Agreement, the Club Trust Pledge and Security Agreement, the MLB Pledge and
Security Agreement or this Agreement, as appropriate.
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SECTION 5.02. NEGATIVE COVENANTS. So long as any Club Trust's Club
Trust Note shall remain unpaid or any obligation of such Club Trust shall be
outstanding or the MLB Trust shall have any Commitment under such Club Trust's
Club Trust Sub-Facility, such Club Trust will not, without the written consent
of the MLB Trust:
(a) DISPOSE OF COLLATERAL. Except as expressly permitted by this
Agreement or the Club Trust Pledge and Security Agreement, sell, transfer,
exchange or otherwise dispose of any of the properties or assets of such Club
Trust or the related Club Trust Collateral unless directed to do so by the
Administrative Agent (acting at the direction of or with the consent of all the
Lenders and all the Liquidity Banks);
(b) SECURITY INTEREST. (i) Permit the validity or effectiveness of the
Club Trust Pledge and Security Agreement to be impaired, or permit the lien of
the Club Trust Pledge and Security Agreement to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be released from
any covenants or obligations with respect to the obligations under this
Agreement or the Club Trust Pledge and Security Agreement except as may be
expressly permitted hereby or thereby, (ii) permit any lien, charge, excise,
claim, security interest, mortgage or other encumbrance (other than any Lien
under any Transaction Document) to be created on or extend to or otherwise arise
upon or burden the related Club Trust Collateral or any part thereof or any
interest therein or the proceeds thereof (other than tax liens and other liens
that arise by operation of law) or (iii) permit the lien of the Club Trust
Pledge and Security Agreement not to constitute a valid first priority (other
than with respect to any such tax or other lien or the lien of the MLB Pledge
and Security Agreement) security interest in the related Club Trust Collateral.
(c) NO OTHER ACTIVITY. Engage in any activity other than borrowing
amounts with respect to Loans in the manner contemplated by this Agreement, the
Club Trust Agreement or any other Transaction Document and activities reasonably
incidental thereto or otherwise contemplated by the Transaction Documents.
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(d) NO BORROWING. Issue, incur, assume, guarantee or otherwise become
liable, directly or indirectly, for any Debt (including, without limitation,
interest rate swap agreements, interest rate collar agreements, interest rate
futures contracts and interest rate option contracts) except for the Club Trust
Secured Obligations or any other obligation hereunder or under the Club Trust
Pledge and Security Agreement.
(e) GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except as
contemplated by this Agreement or any other Transaction Document, make any loan
or advance or credit to, or guarantee (directly or indirectly or by an
instrument having the effect of assuring another's payment or performance on any
obligation or capability of so doing or otherwise), endorse or otherwise become
contingently liable, directly or indirectly, in connection with the obligations,
stocks or dividends of, or own, purchase, repurchase or acquire (or agree
contingently to do so) any stock, obligations, assets or securities of, or any
other interest in, or make any capital contribution to, any other Person.
(f) CAPITAL EXPENDITURES. Make any expenditure (by long-term or
operating lease or otherwise) for capital assets (either realty or personalty).
(g) REMOVAL OF ADMINISTRATOR. Remove its Administrator without cause
and the written consent of the MLB Trust, the Facilitating Agent and the
Liquidity Agent, which consent shall not be unreasonably withheld.
(h) RESTRICTED PAYMENTS. Directly or indirectly, (i) pay any dividend
or make any distribution (by reduction of capital or otherwise), whether in
cash, property, securities or a combination thereof, to the Club Trustee or any
owner of a beneficial interest in such Club Trust or otherwise with respect to
any ownership or equity interest or security in or of such Club Trust, (ii)
redeem, purchase, retire or otherwise acquire for value any such ownership or
equity interest or security or (iii) set aside or otherwise segregate any
amounts for any such purpose; PROVIDED, HOWEVER, that the Club Trust may pay, or
cause to be paid, amounts to the Commissioner, the Club Trust Trustee and such
Club Trust's Administrator and such Club
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Trust may make, or cause to be made, distributions as permitted by, and to the
extent funds are available for such purpose under, the MLB Pledge and Security
Agreement and the related Club Trust Agreement.
(i) MERGERS, ETC. Merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) any or all of its assets (whether now owned or hereafter
acquired) to any Person except as permitted by the Club Trust Pledge and
Security Agreement.
(j) FEDERAL INCOME TAX. Take any action which might cause it to be
classified for Federal income tax purposes as an association taxable as a
corporation.
ARTICLE VI
DEFAULT
SECTION 6.01. CLUB TRUST EVENTS OF DEFAULT. The occurrence of any one
or more of the following events shall constitute a "Club Trust Event of Default"
with respect to the Sub-Facility of any Club Trust and any Loans made to such
Club Trust hereunder:
(a) default shall be made by such Club Trust in the payment of any
principal of any Loan outstanding under such Club Trust's Sub-Facility when and
as the same shall become due and payable, whether at the due date thereof or by
acceleration thereof or otherwise;
(b) default shall be made by such Club Trust in the payment of any
interest on any Loan outstanding under such Club Trust's Sub-Facility or any fee
or any other amount allocable to such Club Trust (other than an amount referred
to in paragraph (a) above) due hereunder, under any other Transaction Document
or under any other agreement with the MLB Trust with respect to such
Sub-Facility, when and as the same shall become due and payable, and such
default shall continue unremedied for a period of three days;
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(c) any representation or warranty made (or deemed made pursuant to
Section 3.02) by such Club Trust in or in connection with the execution and
delivery of this Agreement or any Transaction Document to which such Club Trust
is a party or the Loans hereunder or in any document, certificate, written
statement or report delivered to the MLB Trust, the Facilitating Agent, the
Administrative Agent, any Lender, the Liquidity Agent or any Liquidity Bank
pursuant to this Agreement or any Transaction Document executed by such Club
Trust, shall prove to have been false or misleading in any material respect when
so made, deemed made or furnished;
(d) default shall be made by such Club Trust in the due observance or
performance of any covenant or agreement of such Club Trust contained herein
(other than those specified in (a), (b) or (c) above or specified elsewhere in
this Section) or in any Transaction Document executed by such Club Trust, and
such default shall continue unremedied for a period of ten days after the giving
of written notice of such default to such Club Trust by the MLB Trust, which
notice shall be given by the MLB Trust at the request of the Facilitating Agent
(itself acting at the request, or with the consent of the Required Lenders) or
may be given by the MLB Trust with the consent of the Facilitating Agent (itself
acting at the request, or with the consent of the Required Lenders);
(e) default shall be made by such Club Trust's related Participating
Club in the due observance or performance of any covenant or agreement of such
Participating Club under its Transfer Agreement or any Transaction Document
executed by such Participating Club, and such default shall continue unremedied
for a period of ten days after the giving of written notice of such default to
such Participating Club by the MLB Trust, which notice shall be given by the MLB
Trust at the request of the Facilitating Agent (itself acting at the request, or
with the consent of the Required Lenders) or may be given by the MLB Trust with
the consent of the Facilitating Agent (itself acting at the request, or with the
consent of the Required Lenders);
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(f) the occurrence of any Bankruptcy Event with respect to such Club
Trust or its related Participating Club;
(g) any judgment, writ, warrant of attachment or execution or similar
process involving an amount in excess of $125,000 shall be issued or levied
against any of the properties of such Club Trust and such judgment, writ,
warrant of attachment or execution or similar process shall not be released,
vacated or fully bonded within 30 days of its issue or levy;
(h) the occurrence of any event of default under any interest rate swap
agreement, interest rate cap agreement , interest rate collar agreement,
interest rate futures contract, interest rate option contract or other similar
agreement or arrangement acceptable to the Administrative Agent entered into by
or obtained for the benefit of such Club Trust with an Agent Bank with respect
to the Loans under such Club Trust's Sub-Facility;
(i) any representation or warranty made by such Club Trust's related
Participating Club in or in connection with the execution and delivery of its
Transfer Agreement or any other Transaction Document executed by such
Participating Club or in any document, certificate, written statement or written
report delivered to such Club Trust, the MLB Trust, the Facilitating Agent, the
Administrative Agent, any Lender, the Liquidity Agent or any Liquidity Bank
pursuant to such Transfer Agreement or any Transaction Document shall prove to
have been false or misleading in any material respect when so made or furnished;
(j) the failure of such Club Trust at any time, to have a valid
unencumbered ownership interest (other than any Lien under the Transaction
Documents and other than tax liens and other liens that arise by the operation
of law) in the Club Trust Collateral (including the Rights and Revenues
contributed by the such Club Trust's related Participating Club to such Club
Trust pursuant to the related Transfer Agreement);
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(k) the failure of the MLB Trust at any time, to have a first priority
unencumbered security interest (other than any Lien under the Transaction
Documents and other than tax liens and other liens that arise by the operation
or law) in the Club Trust Collateral (including the Rights and Revenues) pledged
to the MLB Trust by such Club Trust pursuant to its Club Trust Pledge and
Security Agreement except as permitted by Section 5.02(b);
(1) the occurrence of any material adverse event with respect to such
Club Trust's related Participating Club, which event has or may have the effect
of reducing or delaying the receipt of Revenues by such Club Trust or otherwise
materially impairing the assets of such Club Trust or delaying payment of any
obligation of such Club Trust under its Club Trust Sub-Facility or Club Trust
Note or any obligation under such Club Trust's Club Trust Pledge and Security
Agreement; PROVIDED, HOWEVER, that a Business Interruption Event shall not
constitute a Club Trust Event of Default under this Section 6.01(1) so long as
such Club Trust makes all payments required to be made by it hereunder or under
any Transaction Document on a timely basis during such period;
(m) any accumulated funding deficiency, prohibited transaction,
reportable event, penalty, withdrawal liability, disqualification or termination
under (and as such words and phrases are defined in) ERISA or the Code, as
applicable, in respect of any Plan shall occur, or any action, suit or
proceeding involving or affecting any Plan or any assets of properties of any
Plan shall be adversely determined, that would have or has had (in the
reasonable judgment of the MLB Trust) a material and adverse effect on the
related Participating Club and its ERISA affiliates;
(n) the occurrence of (i) any Club Trust Event of Default under
Sections 6.01(b) or (c) of the MLB Credit Agreement with respect to such Club
Trust or (ii) any Event of Default under Section 6.02 of the MLB Credit
Agreement; or
(o) if as a result of an arbitration between a National Media Contract
Obligor and the Commissioner under any National Media Contract, an award is made
in favor of such
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National Media Contract Obligor and such award remains outstanding under any
material National Media Contract at the time such National Media Contract is
renewed or extended or a replacement contract is executed, and such renewal,
extension or replacement contract contains a provision which offsets future fees
payable under such renewal, extension or replacement contract in order to cause
the National Media Contract Obligor in whose favor the award was entered to be
paid the remaining balance of the award.
SECTION 6.02. REMEDIES. In the event that any Club Trust Event of
Default has occurred and is continuing, the MLB Trust shall at the request, or
may with the consent of the Facilitating Agent (itself acting at the request, or
with the consent of the Required Lenders) (a) declare its obligation to make
Loans under the Sub-Facility to any Club Trust that is the subject of the Club
Trust Event of Default to be terminated and (b) declare the Club Trust Note for
the Club Trust which is the subject of the Club Trust Event of Default, all
interest thereon and all other amounts payable hereunder to be forthwith due and
payable, whereupon such Club Trust Note, all such interest and all such amounts
shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are waived by such Club
Trust hereunder; PROVIDED, HOWEVER, that, in the event of an actual or deemed
entry of an order for relief with respect to any Club Trust under the Federal
Bankruptcy Code, (A) the obligation of the MLB Trust to make Loans to such Club
Trust under its Club Trust Sub-Facility shall automatically be terminated and
(B) the related Club Trust Note, all such interest and all such amounts shall
automatically become due and payable, without presentment, demand, protest or
any notice of any kind, all of which are hereby expressly waived by such Club
Trust.
ARTICLE VII
THE FACILITATING AGENT
SECTION 7.01. AUTHORIZATION AND ACTION. The MLB Trust hereby appoints
and authorizes the Facilitating Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement and the Transaction Documents
as are delegated to the
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Facilitating Agent by the terms hereof or thereof, as the case may be, together
with such powers as are reasonably incidental thereto.
SECTION 7.02. FACILITATING AGENT'S RELIANCE, ETC. Neither the
Facilitating Agent, nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement or any other Transaction Document, except
for its or their own gross negligence, willful misconduct or unlawful conduct
hereunder. Without limitation of the generality of the foregoing, the
Facilitating Agent: (a) may consult with legal counsel (including counsel for
the MLB Trust), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts; (b) makes no warranty or representation to MLB Trust and shall not be
responsible to the MLB Trust for any statements, warranties or representations
(whether written or oral) made in or in connection with this Agreement or any
other Transaction Document; (c) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or the Transaction Documents on the part of any
Club Trust or to inspect the property (including the books and records) of the
Club Trusts; (d) shall not be responsible to the MLB Trust for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement, any Transaction Document or any other instrument or document
furnished pursuant hereto; and (e) shall incur no liability under or in respect
of this Agreement or any Transaction Document by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier,
telegram, cable or telex) believed by it to be genuine and signed or sent by the
proper party or parties.
SECTION 7.03. INDEMNIFICATION. Subject to the provisions of Section
2.12, the MLB Trust agrees to indemnify the Facilitating Agent (to the extent
not reimbursed by the Club Trusts), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Facilitating Agent, in any way
42
<PAGE> 46
relating to or arising out of this Agreement, any Transaction Document or any
action taken or omitted by the Facilitating Agent under this agreement or any
Transaction Document; PROVIDED that the MLB Trust shall not be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Facilitating Agent's gross negligence, willful misconduct or unlawful conduct
hereunder. Without limitation of the foregoing, the MLB Trust agrees to
reimburse the Facilitating Agent (from equal and several assessments to each
Club Trust) promptly upon demand for any out-of-pocket expenses (including
counsel fees) incurred by the Facilitating Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
to the extent that the Facilitating Agent is not reimbursed for such expenses
directly or indirectly by the Club Trusts.
SECTION 7.04. SUCCESSOR FACILITATING AGENT. The Facilitating Agent may
resign at any time by giving written notice thereof to the MLB Trust and the
Club Trusts and the Facilitating Agent may be removed at any time with or
without cause by the MLB Trust. Upon any such resignation or removal, the MLB
Trust shall have the right to appoint a successor or Facilitating Agent. If no
such successor shall have been so appointed by the MLB Trust and shall have
accepted such appointment, within 30 days after the retiring Facilitating
Agent's giving of notice of resignation or the MLB Trust's removal of the
retiring Facilitating Agent, then the retiring Facilitating Agent may, on behalf
of the MLB Trust, appoint a successor Facilitating Agent, which shall be a
commercial bank organized under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Facilitating Agent
hereunder by a successor Facilitating Agent, such successor Facilitating Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Facilitating Agent, and the retiring
Facilitating Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring Facilitating Agent's resignation or removal
hereunder as Facilitating Agent, the provisions of this Article VII shall
43
<PAGE> 47
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Facilitating Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. AMENDMENTS, ETC.
(a) GENERAL AMENDMENTS, ETC. Subject to paragraph (b) with respect to
certain amendments, no amendment or waiver of any provision of this Agreement or
the Club Trust Notes, nor consent to any departure by any Club Trust therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the MLB Trust and the Facilitating Agent (at the request or with the consent
of the Required Lenders and the Required Liquidity Banks), and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given; PROVIDED, HOWEVER, that no amendment, waiver or consent
shall, unless in writing and signed by the Facilitating Agent (at the request or
with the consent of all of the Lenders and all the Liquidity Banks), in addition
to the MLB Trust, affect Section 2.04 or Section 2.05 of this Agreement, the
Revolver Termination Date or the rights or duties of the Facilitating Agent
under this Agreement or any Club Trust Note.
(b) CLUB TRUST CONSENT; ADDITIONAL CLUB TRUST RELATED AMENDMENTS. No
amendment of this Agreement shall be effective unless the same shall be in
writing and signed by a majority in number of the Club Trusts; PROVIDED,
HOWEVER, that no such amendment shall be effective to reduce the number of Club
Trusts required to consent to any such amendment, without the consent of all the
Club Trusts; PROVIDED, FURTHER, that no amendment to this Agreement to change
the Final Payment Date shall be effective without the consent of (i) all the
Club Trusts deemed to be parties hereto at the time of such proposed amendment
and (ii) all Clubs which are no longer Participating Clubs but which have (or
their related Club Trusts have) continuing obligations pursuant to Section
2.12(d)(iii) of this Agreement as contemplated by Section 11 of the related Club
Trust Pledge Agreements. Notwithstanding the foregoing, this Agreement, the MLB
Credit Agreement and the MLB
44
<PAGE> 48
Pledge and Security Agreement, to the extent necessary or appropriate in the
sole judgment of the Administrative Agent, may be amended (i) in case of this
Agreement, by action of only the Facilitating Agent acting at the direction of
the Administrative Agent, which direction shall be given by the Administrative
Agent with the consent of the Required Lenders and the Required Liquidity Banks,
or (ii) in the case of the MLB Credit Agreement or the MLB Pledge and Security
Agreement, by action of only the Administrative Agent with the consent of the
Required Lenders and Required Liquidity Banks in connection with any amendment
(i) to give effect to the addition of any additional Club Trust and the creation
of an additional Sub-Facility hereunder with respect to such addition pursuant
to Section 2.14 and to give effect to the corresponding increase in the Total
Commitment hereunder and Total Liquidity Commitment, and (ii) to give effect to
any increase in the Total Commitment hereunder and Total Liquidity Commitment as
a result of any increase in the Maximum Available Amount of any Club Trust under
its Club Trust Sub-Facility (which increase shall be subject to the conditions
determined by the Administrative Agent); PROVIDED, HOWEVER, that any such
amendment shall be subject to the condition that such amendment not have a
material adverse effect on the Club Trusts party hereto immediately prior to the
time of such amendment. Promptly following any amendment as provided in the
immediately preceding sentence, the Administrative Agent shall provide duplicate
copies of such amendments to the MLB Trust and the Club Trusts.
SECTION 8.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered, if to the MLB Trust, at its address at Wilmington Trust
Company, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration (facsimile number (302) 651-8882), with copies to
(a) the Commissioner at The Baseball Office of the Commissioner, 350 Park
Avenue, New York, N.Y. 10022, Attention: Jeffrey White (facsimile number (212)
888-8632), (b) Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, N.Y. 10019 Attention: Matthew Nimetz, Esq. (facsimile number
(212) 757-3990), (c) the Facilitating Agent, at its address at One Federal
Street, Boston, MA 02211, Attention: Patrick
45
<PAGE> 49
F. McAuliffe (facsimile number (617) 346- 0590), (d) the Liquidity Agent, at its
address at One Federal Street, Boston, MA 02211, Attention: Patrick F. McAuliffe
(facsimile number (617) 346-0590) and (e) Choate, Hall & Stewart, Exchange
Place, 53 State Street, Boston, MA 02109, Attention: Lyman G. Bullard, Jr., Esq.
(facsimile number (617) 248-4000); if to the Facilitating Agent, at its address
at One Federal Street, Boston, MA 02211, Attention: Patrick F. McAuliffe (617)
346-0590), with copies to (a) the Administrative Agent, at its address at One
Federal Street, Boston, MA 02211, Attention: John H. Molloy (facsimile number
(617) 346-0590), (b) the Liquidity Agent, at its address at One Federal Street,
Boston, MA 02211, Attention: Patrick F. McAuliffe (facsimile number (617)
346-0590), (c) Choate, Hall & Stewart, Exchange Place, 53 State Street, Boston,
MA 02109, Attention: Lyman G. Bullard, Jr., Esq. (facsimile number (617)
248-4000) and (d) Global Securitization Services, LLC, 25 West 43rd Street,
Suite 704, New York, N.Y. 10036, Attention: Kevin Burns (facsimile number (212)
302-8767); if to the Rating Agency, at its address at 55 East Munroe Street,
Suite 3800, Chicago, Illinois 60603, Attention: Joseph S. Tuczak (facsimile
number (312) 368-2069); if to any Club Trust, at its address at Wilmington Trust
Company, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration (facsimile number (302) 651-1576), with copies to
(a) its Administrator at the address set forth in the related Administration
Agreement, (b) the Commissioner at The Baseball Office of the Commissioner, 350
Park Avenue, New York, N.Y. 10022, Attention: Jeffrey White (facsimile number
(212) 888-8632), and (c) Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue
of the Americas, New York, N.Y. 10019 Attention: Matthew Nimetz, Esq. (facsimile
number (212) 757-3990); or, as to each party, at such other address as shall be
designated by such party in a written notice to the other parties. All such
notices and communications shall; when mailed, telecopied, telegraphed, telexed
or cabled, be effective either three days after being deposited in the mails or
when received, or when telecopied, delivered to the telegraph company, confirmed
by telex answerback or delivered to the cable company, respectively, except that
notices and communications to the Facilitating Agent pursuant to Article II or
VII shall not be effective until received by the Facilitating Agent.
46
<PAGE> 50
SECTION 8.03. NO WAIVER; REMEDIES. No failure on the part of the MLB
Trust or the Facilitating Agent to exercise, and no delay in exercising, any
right under any Transaction Document shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. COSTS AND EXPENSES; INDEMNIFICATION.
(a) Subject to the conditions that each Club Trust shall be responsible
for the payment of (x) all amounts specifically attributable solely to it and
(y) an equal portion of all amounts not attributable solely to any other Club
Trust, the Club Trusts are to equally pay on demand all costs and expenses of
the Facilitating Agent and the MLB Trust in connection with the preparation,
execution, delivery, administration, modification and amendment of the
Transaction Documents and the other documents to be delivered under the
Transaction Documents, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Facilitating Agent with respect
thereto. Subject to the same conditions set forth in the immediately preceding
sentence, each Club Trust further agrees to pay on demand all costs and expenses
of the MLB Trust and the Facilitating Agent, if any (including, without
limitation, reasonable counsel fees and expenses), in connection with the
enforcement against such Club Trust (whether through negotiations, legal
proceedings or otherwise) of the Transaction Documents and the other documents
to be delivered under the Transaction Documents, including, without limitation,
reasonable counsel fees and expenses in connection with the enforcement of
rights under this Section 8.04(a); PROVIDED, HOWEVER, that the costs and
expenses incurred solely with respect to any amendment contemplated in Section
8.01(b) shall be borne equally by the Club Trust(s) with respect to which such
amendment relates.
(b) If any payment of principal of the LIBO Rate Portion of any Loan
under a Club Trust Sub-Facility is made other than on the last day of an
Interest Period relating to such LIBO Rate Portion, as a result of a payment
pursuant to Section 2.09 or 2.11 or acceleration of the maturity of the Club
Trust Notes pursuant to Section 6.02 or for any other
47
<PAGE> 51
reason, the related Club Trust shall, upon demand by the MLB Trust (with a copy
of such demand to the Administrative Agent), pay to the Administrative Agent for
the account of the MLB Trust any amounts required to compensate the MLB Trust
for any additional losses, costs or expenses which it may reasonably incur as a
result of such payment, including, without limitation, any loss (including loss
of anticipated profits), cost or expense incurred by reason of the liquidation
or redeployment of deposits or other funds acquired to fund or maintain such
Loan.
(c) Subject to the restrictions on cross-collateralization contained in
the Transaction Documents (including Section 2.12(d) of the Club Trust Credit
Agreement), (i) each Club Trust hereby indemnifies and holds harmless each
Indemnified Party from and against all Liabilities arising from or relating to
such Club Trust or the Club Trust Collateral owned by such Club Trust and (ii)
all of the Club Trusts hereby ratably and severally indemnify and hold harmless
each Indemnified Party from and against all Liabilities arising in any other
manner, in each case other than any such Liability that arises out of the gross
negligence or willful misconduct of such Indemnified Party.
SECTION 8.05. BINDING EFFECT; THIRD PARTY BENEFICIARY; LIQUIDITY
FUNDING EVENT.
(a) This Agreement shall become effective (a) with respect to the MLB
Trust and the Facilitating Agent, when it shall have been executed by the MLB
Trust and the Facilitating Agent and (b) with respect to each Club Trust, when
such Club Trust shall have signed and the Administrative Agent shall have
accepted its Ratification Agreement and, thereafter, this Agreement shall be
binding upon and inure to the benefit of the MLB Trust, the Facilitating Agent
and each Club Trust party hereto and their respective successors and assigns,
except that none of the MLB Trust or the Club Trusts party hereto shall have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the other.
(b) Each Club Trust and the Facilitating Agent acknowledge and
agree that the Liquidity Agent is an intended third party beneficiary of this
Agreement. Each Club Trust
48
<PAGE> 52
and the Facilitating Agent further acknowledge and agree that, upon the
occurrence of a Liquidity Funding Event, the Liquidity Agent shall become the
Facilitating Agent hereunder and all references to the Facilitating Agent shall
be deemed to be references to the Liquidity Agent; PROVIDED, that the
indemnification provisions set forth in this Agreement shall continue to apply
to Blue Keel and its assignees following a Liquidity Funding Event.
SECTION 8.06. THE REGISTER. The Facilitating Agent shall maintain at
one of its offices in The City of Boston a register (the "Register") in which it
shall record the identity of each Club Trust, the Maximum Available Amount for
each Club Trust under its Sub-Facility, the principal amount of each Loan and
the Interest Period and principal amount of each LIBO Rate Portion of each
outstanding Loan under the related Club Trust Sub-Facility for each Club Trust.
The Facilitating Agent will make reasonable efforts to maintain the accuracy of
the Register and to promptly update the Register from time to time, as
necessary. The Register shall be available for inspection by the MLB Trust, each
Club Trust and its related Participating Club, at any reasonable time and from
time to time upon reasonable prior notice.
SECTION 8.07. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and delivered
by Wilmington Trust Company, not individually or personally but solely as
trustee of the MLB Trust under the MLB Trust Agreement, in the exercise of the
powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the MLB
Trust is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the MLB Trust, (c) except as Wilmington Trust Company shall
otherwise expressly agree, nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company, individually or personally,
to perform any covenant either expressly or implied contained herein, all such
liability, if any, being expressly waived by the Facilitating Agent, the
Administrative Agent and the Lenders and by any Person claiming by, through or
under any of them and (d) under no circumstances shall Wilmington Trust company
be personally liable for the payment of any indebtedness or expense of the MLB
Trust or be liable for the breach
49
<PAGE> 53
or failure of any obligation, representation, warranty or covenant made or
undertaken by the MLB Trust under this Agreement or the other Transaction
Documents.
SECTION 8.08. GOVERNING LAW; CONSENT TO JURISDICTION; OTHER MATTERS.
This Agreement and the Club Trust Notes shall be governed by, and construed in
accordance with, the laws of the State of New York without reference to its
choice of law provisions. Each Club Trust hereby submits to the extent effective
under applicable law to the jurisdiction and venue of the state and Federal
courts of New York and agrees that the MLB Trust may, at its option, enforce its
rights hereunder in such courts. To the extent permitted by applicable law, each
Club Trust hereby irrevocably waives the defense of an inconvenient forum to
maintenance of any action or proceeding by the MLB Trust in such courts. Each
Club Trust hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim arising out of or relating to this Agreement or any
other Transaction Document or any of the transactions contemplated hereby or
thereby.
SECTION 8.09. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original.
50
<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument by their respective officers thereunto duly
authorized, as of the date first above written.
MAJOR LEAGUE BASEBALL TRUST,
as Lender,
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as
MLB Trustee
By: /s/ David A. Vanaskey
-----------------------------------------
Name: David A. Vanaskey
Title: Assistant Vice President
FLEET NATIONAL BANK, as Facilitating Agent
By: /s/ Patrick F McAuliffe
-----------------------------------------
Patrick F. McAuliffe
Executive Vice President
Acknowledged and Accepted:
FLEET NATIONAL BANK, as Administrative
Agent
By: /s/ Patrick F. McAuliffe
------------------------------------
Patrick F. McAuliffe
Executive Vice President
<PAGE> 1
Exhibit 10.8
RATIFICATION AGREEMENT
----------------------
RATIFICATION AGREEMENT dated as of April 17, 1998 among INDIANS CLUB
TRUST, a Delaware business trust, and FLEET NATIONAL BANK, as Administrative
Agent under the Revolving Credit Agreement dated as of April 17, 1998 (the "MLB
Credit Agreement"), among Major League Baseball Trust, a Delaware business trust
(the "MLB Trust"), the certain Lenders party thereto and Fleet National Bank, as
Administrative Agent. Capitalized terms used but not defined herein shall have
the meaning assigned thereto in Annex A to the MLB Credit Agreement.
1. The Indians Club Trust desires to become a party to the
Club Trust Revolving Credit Agreement dated as of April 17, 1998 (the "Club
Trust Credit Agreement"), among MLB Trust, Fleet National Bank, as Facilitating
Agent and the Club Trusts deemed to be parties thereto, and upon acceptance
hereof by the Administrative Agent on behalf of the MLB Trust, has requested
that the MLB Trust make available to the Indians Club Trust a sub-facility
having an initial Maximum Available Amount of $45,000,000 (the "Club Trust
Sub-Facility"). As a condition precedent to the establishment of such Club Trust
Sub-Facility, the MLB Trust has required, among other things, that the Indians
Club Trust enter into this Ratification Agreement (this "Agreement") in order to
undertake expressly certain representations, warranties, covenants, agreements
and other rights and obligations of a Club Trust under and pursuant to the Club
Trust Credit Agreement and the MLB Credit Agreement. Accordingly, the Indians
Club Trust hereby agrees as follows with the MLB Trust and the Administrative
Agent (for the benefit of the Lenders and the Liquidity Banks): (i) the Indians
Club Trust hereby acknowledges and agrees and confirms that by its execution of
this Agreement the Indians Club Trust will be deemed to be a party to the Club
Trust Credit Agreement and, with respect to its Club Trust Sub-Facility, shall
be a Club Trust for all purposes of the Club Trust Credit Agreement and shall
have all of the obligations of a Club Trust thereunder as if it had executed the
Club Trust Credit Agreement. The Indians Club Trust hereby ratifies, as of the
date hereof, and agrees to be bound by all the terms, provisions and additions
contained in the Club Trust Credit Agreement including (i) the representations
and warranties of a Club Trust set forth in Section 4.01 thereof, (ii) all the
affirmative and negative covenants set forth in Sections 5.01 and 5.02 thereof
and (iii) the obligation to pay Club Trust Secured Obligations and, without
duplication and subject to the restrictions on cross-collateralization contained
in the Transaction Documents, Secured Obligations attributable to such Club
Trust, whether at the due date thereof or by acceleration thereof.
2. The Indians Club Trust hereby designates the following
address as its address for notices and other communications under the Club Trust
Credit Agreement (unless and until the Indians Club Trust shall have designated
another address, telecopy or other number in a notice complying with the
provisions of Section 8.02 of the Club Trust Credit Agreement to each other
party to such agreement):
<PAGE> 2
Indians Club Trust
c/o Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
With a copy to:
Cleveland Indians Baseball
Company, Limited Partnership
Jacobs Field, 2401 Ontario St.
Cleveland, OH 44115
Attention: Mr. Ken Stefanov
with a copy to:
Baker & Hostetler
1900 East Ninth Street, Suite 3200
Cleveland, OH 44114
Attention: Edward Ptaszek, Esq.
3. If Indians Club Trust is becoming a Club Trust on a date
other than the Closing Date, the Indians Club Trust hereby represents and
warrants that all the conditions precedent set forth in Section 2.14(a) of the
Club Trust Credit Agreement and Section 2.15(a) of the MLB Credit Agreement have
been satisfied as of the date hereof.
4. This Agreement may be executed in any number of
counterparts and by different 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.
5. It is expressly understood and agreed by the parties hereto
that (a) this Agreement is executed and delivered by Wilmington Trust Company,
not individually or personally but solely as trustee of the Indians Club Trust
under its Club Trust Agreement, in the exercise of the powers and authority
conferred and vested in it, (b) each of the representations, undertakings and
agreements herein made on the part of the Indians Club Trust is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Indians Club Trust, (c) except as Wilmington Trust Company shall
otherwise expressly agree, nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company, individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the Facilitating Agent, the
Administrative Agent and the Lenders and by any Person claiming by, through or
under any of them and (d) under no circumstances shall Wilmington Trust Company
be personally liable for the payment of any indebtedness or expense of the
Indians Club Trust or be liable
<PAGE> 3
for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Indians Club Trust under this Agreement or
the other Transaction Documents.
[Remainder of This Page Intentionally Left Blank and Signature Pages Follow]
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
INDIANS CLUB TRUST,
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Club Trustee,
By: /s/ David A. Vanaskey
-------------------------------
Name: David A. Vanaskey
Title Assistant Vice President
Acknowledged and Accepted:
FLEET NATIONAL BANK, as
Administrative Agent,
By: /s/ Patrick F. McAuliffe
-----------------------------
Patrick F. McAuliffe
Executive Vice President
<PAGE> 1
Exhibit 10.9
- --------------------------------------------------------------------------------
CLUB TRUST PLEDGE AND SECURITY AGREEMENT
(the "CLUB TRUST PLEDGE AND SECURITY AGREEMENT")
between
INDIANS CLUB TRUST
and
MAJOR LEAGUE BASEBALL TRUST
Dated as of April 17, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Definitions...........................................................................2
2. Pledge, Assignment and Grant of Security Interest; Consent to Assignment and
Enforcement...........................................................................2
3. General Representations, Warranties, Covenants and Agreements.........................3
4. Special Provisions Regarding Rights and Revenues......................................7
5. Special Provisions Regarding Certain Club Trust Collateral, Pledged
Collateral............................................................................8
6. Special Provisions Regarding Club Trust Assigned Documents............................8
7. Special Provisions Regarding Collection Account and Debt Service Account.............10
8. Power of Attorney....................................................................10
9. Remedies upon Club Trust Event of Default............................................11
10. Application of Proceeds..............................................................13
11. Continuing Agreement.................................................................13
12. Miscellaneous........................................................................14
13. Limitation of Liability..............................................................16
</TABLE>
Annex A -- Definitions
Schedule A -- Chief Executive Offices
Schedule B -- List of Accounts
<PAGE> 3
CLUB TRUST PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (the "Agreement" or the "Club Trust
Pledge and Security Agreement") dated as of April 17, 1998, by and between
INDIANS CLUB TRUST, a Delaware business trust (the "Indians Club Trust"), and
MAJOR LEAGUE BASEBALL TRUST, a Delaware business trust (the "MLB Trust").
W I T N E S S E T H:
WHEREAS the MLB Trust, Fleet National Bank, as Facilitating
Agent and the Club Trusts deemed to be parties thereto, have entered into a Club
Trust Revolving Credit Agreement dated as of April 17, 1998 (as modified or
amended from time to time, the "Club Trust Credit Agreement").
WHEREAS the Indians Club Trust has executed a Ratification
Agreement dated as of April 17, 1998, pursuant to which, upon its acceptance by
the Administrative Agent, such Club Trust will be deemed to be a party to the
Club Trust Credit Agreement.
WHEREAS the MLB Trust will make Loans to the Indians Club
Trust and each of the other Club Trusts deemed to be parties to the Club Trust
Credit Agreement under their respective Club Trust Sub-Facilities.
WHEREAS the assets of each Club Trust (including the Indians
Club Trust) consist primarily of the Rights and Revenues contributed by the
related Participating Club and the proceeds thereof.
WHEREAS, as a condition precedent to entering into the Club
Trust Credit Agreement, and the making of any Loans under a Club Trust's Club
Trust Sub-Facility, the MLB Trust has required, among other things, that each
Club Trust (including the Indians Club Trust) Grant to the MLB Trust a first
priority perfected lien on, security interest in and collateral assignment of
certain of the Club Trust's assets as collateral security for the Loans and
other obligations incurred by such Club Trust under its Sub-Facility.
WHEREAS, to acquire the funds necessary to make Loans to the
Club Trusts (including the Indians Club Trust), the MLB Trust has entered into a
Revolving Credit Agreement dated as of April 17, 1998 (as modified or amended
from time to time, the "MLB Credit Agreement"), among Fleet National Bank, as
Administrative Agent, the Lenders and the MLB Trust.
WHEREAS, as a condition precedent to entering into the MLB
Credit Agreement, the Lenders have required, among other things, that (a) the
MLB Trust pursuant to the MLB
<PAGE> 4
Pledge and Security Agreement Grant to the Administrative Agent a lien on,
security interest in and collateral assignment of, among other things, the
collateral pledged to the MLB Trust by the Club Trusts (including the Indians
Club Trust) as security for their Loans under their Club Trust Sub-Facilities
and (b) each of the Club Trusts consent to such collateral assignment to the
Administrative Agent.
WHEREAS the MLB Trust, the Club Trusts and the Lenders under
the MLB Credit Agreement wish to establish, pursuant to the MLB Pledge and
Security Agreement, the Collection Account and the Debt Service Account for the
benefit of the Lenders and the Liquidity Banks and for use in connection with
the administration of collections with respect to the Rights and Revenues and
other collateral thereunder.
NOW, THEREFORE, for and in consideration of the acceptance by
the MLB Trust of the Indians Club Trust, as a borrower under the Club Trust
Credit Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. Unless otherwise defined herein, capitalized
terms shall have the meanings set forth in Annex A hereto. In addition, the
interpretive guidelines set forth in such Annex A shall be applicable to this
Agreement.
2. PLEDGE, ASSIGNMENT AND GRANT OF SECURITY INTEREST; CONSENT
TO ASSIGNMENT AND ENFORCEMENT. (a) SECURITY INTEREST. To secure the prompt
payment and performance in full when due, whether by lapse of time, acceleration
or otherwise, of the Club Trust Secured Obligations and, without duplication and
subject to the restrictions on cross-collateralization contained in the
Transaction Documents (including Section 2.12(d) of the Club Trust Credit
Agreement), Secured Obligations attributable to the Indians Club Trust, the
Indians Club Trust hereby assigns and pledges to the MLB Trust and hereby Grants
to the MLB Trust a security interest in and a right to setoff against (and only
against the above-described obligations of such Club Trust), and acknowledges
and agrees that the MLB Trust (and, with respect to rights of setoff, each of
the Lenders under the MLB Credit Agreement) has and shall continue to have a
continuing security interest in and a right of setoff against, any and all
right, title and interest of the Indians Club Trust, whether now existing or
hereafter acquired or arising, in (all of which are herein called the "Club
Trust Collateral"):
(i) the Rights and Revenues transferred and assigned to the
Indians Club Trust by its related Participating Club pursuant to the
Transfer Agreement;
(ii) amounts on deposit from time to time in the Collection
Account and the Debt Service Account attributable to the Indians Club
Trust;
(iii) the Club Trust Assigned Documents;
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(iv) any and all other assets of the Indians Club Trust
(excluding amounts on deposit in the Indians Club Trust Distribution
Account; and
(v) all products and the proceeds of the foregoing items.
The Indians Club Trust acknowledges and agrees that, in applying the
law of any jurisdiction that has heretofore enacted or hereafter enacts all or
substantially all of the uniform revisions of Article 8 of the Uniform
Commercial Code, with new provisions added to Article 9 as contemplated by such
revision, all as approved in 1994 by the American Law Institute and the National
Conference of Commissioners on Uniform State Laws, the foregoing definitions of
Collateral and Pledged Collateral shall be deemed to include "investment
property", as applicable, as defined in such new provisions of Article 9, it
being the intent of the Indians Club Trust and the MLB Trust that such property
be included in the foregoing definition of Collateral, whether prior to or after
the effectiveness of such revision in any such jurisdiction.
(b) CONSENT TO ASSIGNMENT AND ENFORCEMENT. The Indians Club
Trust hereby acknowledges and consents to each of (i) the assignment to the
Administrative Agent pursuant to the MLB Pledge and Security Agreement of the
Grant of the MLB Trust's security interest hereunder in the Club Trust
Collateral and (ii) the delivery of any or all of the Club Trust Collateral to
the Administrative Agent. In connection with such assignment, the Indians Club
Trust acknowledges and agrees that the MLB Trust is the direct beneficiary of
certain rights and benefits hereunder and that, as the assignee pursuant to the
MLB Pledge and Security Agreement of the MLB Trust's rights hereunder, the
Administrative Agent is entitled to the benefits and protections of and may
enforce this Agreement as if it were a party thereto.
3. GENERAL REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. The Indians Club Trust hereby represents and warrants to, and
covenants and agrees with, the MLB Trust that:
(a) CLUB TRUST REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties as to the Rights and Revenues set forth below is
true and correct in all material respects as of the date hereof and as of the
date deemed made pursuant to the Club Trust Credit Agreement:
(i) MEMBERSHIP. The Indians Club Trust's related
Participating Club is a member in good standing of its League and Major
League Baseball.
(ii) COMPLIANCE The Indians Club Trust's related Participating
Club is in compliance with all requirements imposed by the
Commissioner, its League or Major League Baseball, except where the
failure to do so would not materially adversely affect the Rights and
Revenues transferred to the Indians Club Trust pursuant to the Transfer
Agreement and pledged to the MLB Trust pursuant to this Agreement; the
Indians Club Trust's related Participating Club is in compliance with
the terms of the Major League Agreement, the Central Fund Agreement,
its League Agreement, the MLB Agreements
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and each of the National Media Contracts, except where the failure to
do so would not materially adversely affect the Rights and Revenues
transferred to the Indians Club Trust pursuant to the Transfer
Agreement and pledged to the MLB Trust pursuant to this Agreement.
(iii) BOUND BY AGREEMENTS. With respect to the Indians Club
Trust's related Participating Club, all the provisions of the
constitutive documents of its League and the Major League Agreement,
including any amendments from time to time, all Commissioner
resolutions and all resolutions of the Executive Council, and rules or
policies as the Executive Council or the Commissioner may issue from
time to time that are within the issuing party's jurisdiction, are,
unless the same by their terms are not applicable to such Participating
Club, binding and enforceable against such Participating Club, except
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in
general and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in
equity).
(iv) NATIONAL MEDIA CONTRACTS. (A) To the best knowledge of
the Indians Club Trust, each National Media Contract is legally binding
and enforceable against the Obligor thereunder, in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect affecting the enforcement of creditors'
rights in general and except as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in
equity) (B) the Indians Club Trust is the owner of a Pro Rata interest
in each National Media Contract and such Pro Rata interest is not
subject to any prior Lien (other than the Lien of this Agreement or the
MLB Pledge and Security Agreement); (C) to the best knowledge of the
Indians Club Trust, no Bankruptcy Event has occurred or is threatened
with respect to the Obligor under any material National Media Contract;
and (D) the Indians Club Trust is entitled to receive a Pro Rata
portion of the Revenues from National Media Contracts payable from time
to time.
(v) VALID TRANSFER. The transfer and assignment by the Indians
Club Trust's related Participating Club pursuant to the Transfer
Agreement constituted a true transfer, by capital contribution, of its
Rights and Revenues from such Participating Club to the Indians Club
Trust such that such Participating Club retained no interest in, or any
risk with respect to, such Rights and Revenues and such that the
beneficial interest in and title to its Rights and Revenues will not be
part of the debtor's estate in the event of the filing of a bankruptcy
petition by or against such Participating Club under any bankruptcy
law. Immediately prior to such transfer and assignment, such
Participating Club had good and marketable title to all its Rights and
Revenues, free and clear of all Liens (other than the Liens, if any,
referred to on Schedule 3.02(b)(v) of the related Transfer Agreement),
and, immediately upon the transfer thereof, the Indians Club Trust had
good and marketable title to all such Rights and Revenues, free and
clear of all Liens (other than the Lien of this Agreement or the MLB
Pledge and Security Agreement or any Lien under any
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Transaction Document or the Liens, if any, referred to in Schedule
3.02(b)(v) of the related Transfer Agreement); and the transfer was
perfected under the UCC.
(vi) LAWFUL ASSIGNMENT. None of the Participating Club's
Rights or Revenues is subject to the laws of any jurisdiction under
which the transfer and assignment of such Rights or Revenues under the
Transfer Agreement, the Club Trust Credit Agreement, the MLB Credit
Agreement, the MLB Pledge and Security Agreement or this Agreement was
or is unlawful, void or voidable.
(vii) ALL FILINGS MADE. All filings (including UCC filings)
necessary in any jurisdiction to give the Indians Club Trust a first
perfected ownership interest in the Rights and Revenues have been made.
(b) LOCATION OF OFFICES AND BUSINESS. As of the date hereof
(and, except as noted on Schedule A, for the four months immediately preceding
the date hereof), each of the Club Trust's, the MLB Trust's, the Commissioner's
and MLB Properties' chief executive office and chief place of business is as
shown on Schedule A and each of the Indians Club Trust, the MLB Trust, the
Commissioner and MLB Properties has no executive offices or places of business
other than those listed on Schedule A.
(c) PRIORITY. The Club Trust Collateral and every part thereof
is and will be free and clear of all liens, charges, excises, claims, security
interests, mortgages or other encumbrances (including, without limitation,
statutory liens) of every kind, nature and description, whether voluntary or
involuntary, on the use thereof, except for (i) the security interest pursuant
to this Agreement, which interest pursuant to the MLB Pledge and Security
Agreement will be assigned to the Administrative Agent, (ii) the security
interest of the Administrative Agent, (iii) any lien, charge, excise, claim,
security interest, mortgage or other encumbrance and licenses permitted under
Section 5.02(b) of the Club Trust Credit Agreement (the items set forth in
clauses (i), (ii) and (iii) being, collectively, the "Permitted Liens") and (iv)
the Liens, if any, referred to in Schedule 3.02(b)(v) of the related Transfer
Agreement. The Indians Club Trust at the direction of the MLB Trust will warrant
and defend the Club Trust Collateral against any claims and demands (other than
the Permitted Liens) of all persons at any time claiming the same or any
interest in the Club Trust Collateral adverse to the MLB Trust, the
Administrative Agent, any Lender or any Liquidity Bank.
(d) PAYMENT OF TAXES AND CHARGES. The Indians Club Trust will
pay promptly when due all taxes, assessments and governmental charges and levies
upon or against the Club Trust Collateral, in each case before the same become
delinquent and before penalties accrue thereon, unless and to the extent the
same are being contested in good faith by appropriate proceedings.
(e) PRESERVATION OF THE COLLATERAL. The Indians Club Trust
will not waste or destroy the Collateral or any part thereof and will not be
negligent in the care or use of any Collateral.
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(f) DISPOSITION. The Indians Club Trust will not sell or
otherwise dispose of any portion of, or rights or interests in, the Club Trust
Collateral, except with the prior written consent of the MLB Trust, except for
(i) distributions to its beneficial owners and (ii) payments to the Club Trustee
pursuant to Article V and Article VIII of the Club Trust Agreement,
respectively.
(g) INSPECTION. The Indians Club Trust will allow, at all
times the MLB Trust, the Administrative Agent, any Lender, any Liquidity Bank or
their respective representatives free access to and right of inspection of the
Club Trust Collateral; PROVIDEd, HOWEVER, that, prior to any Club Trust Event of
Default or event which, with notice, the lapse of time or both, would result in
a Club Trust Event of Default hereunder, any such access or inspection shall
only be allowed during each party's normal business hours, as appropriate.
(h) OTHER FILING; PERFECTION OF SECURITY INTEREST. The Indians
Club Trust represents and warrants that (except as may be set forth on Schedule
3.04(b)(v) of the related Transfer Agreement) no filings which may be required
to be recorded or filed in order to perfect a security interest (other than any
which may be recorded in connection with or as contemplated by the Transaction
Documents) covering any of the Club Trust Collateral are on file in any public
office. The Indians Club Trust represents that this Agreement creates a valid
security interest in the Club Trust Collateral securing payment and performance
of the Club Trust Secured Obligations and, without duplication and subject to
the restrictions on cross-collateralization contained in the Transaction
Documents (including Section 2.12(d) of the Club Trust Credit Agreement), the
Secured Obligations attributable to the Indians Club Trust and that all filings
and other actions necessary to perfect such security interest have been taken;
PROVIDED, HOWEVER, that with respect to perfection, no representation or
warranty is made with respect to Club Trust Collateral requiring possession
thereof to perfect a security interest therein. The Indians Club Trust agrees to
execute and deliver to each of the MLB Trust and the Administrative Agent such
further agreements and assignments or other instruments and to do all such other
things as either of them may reasonably deem necessary or appropriate to assure
to either of them the security interest hereunder or under the MLB Pledge and
Security Agreement, respectively, including such financing statement or
statements or amendments thereof or supplements thereto or other instruments as
either of them may from time to time reasonably require in order to comply with
the UCC. The Indians Club Trust hereby agrees that a carbon, photographic or
other reproduction of this Agreement or any such financing statement is
sufficient for filing as a financing statement by the MLB Trust or the
Administrative Agent without notice thereof to it or any Participating Club
wherever the MLB Trust or the Administrative Agent in its sole discretion
desires to file the same. In the event that for any reason the law of any
jurisdiction other than New York and/or Delaware becomes or is applicable to the
Club Trust Collateral or any part thereof, or to any of the Club Trust Secured
Obligations or, without duplication and subject to the restrictions on
cross-collateralization contained in the Transaction Documents (including
Section 2.12(d) of the Club Trust Credit Agreement), the Secured Obligations
attributable to the Indians Club Trust agrees to execute and deliver to each of
the MLB Trust and the Administrative Agent such instruments and to do all such
other things as either of them in its sole discretion reasonably deems necessary
or
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appropriate to preserve, protect and enforce the ownership interest of the
Indians Club Trust in the Club Trust Collateral and the security interest of the
MLB Trust and the Administrative Agent therein under the law of such other
jurisdiction. If any Club Trust Collateral is in the possession or control of
(x) any of the Indians Club Trust's agents or (y) its related Participating Club
and either the MLB Trust or the Administrative Agent so requests, the Indians
Club Trust agrees to, and agrees to cause its related Participating Club to,
notify such agents in writing of the MLB Trust's and the Administrative Agent's
security interest therein and, upon the request of either of them, instruct them
to hold all such Club Trust Collateral for their account and subject to
instructions. The Indians Club Trust agrees to mark its books and records to
reflect its ownership interest in the Club Trust Collateral (other than the Club
Trust Note), as the same is encumbered by the security interest of the MLB Trust
and the Administrative Agent.
(i) ADVANCES BY SECURED PARTIES. On failure of the Indians
Club Trust or the Commissioner or MLB Properties or MLB Properties Canada on
behalf of the Indians Club Trust to perform any of the covenants and agreements
contained in the Transaction Documents, the MLB Trust may, at its option,
perform the same and in so doing may expend such sums as the MLB Trust may
reasonably deem advisable in the performance thereof, including, without
limitation, the payment of any taxes, liens and encumbrances, expenditures made
in defending against any adverse claim and all other expenditures which the MLB
Trust may be compelled to make by operation of law or which the MLB Trust may
make by agreement or otherwise for the protection of the security hereof. All
such sums and amounts so expended shall be repayable by the Indians Club Trust
immediately without notice or demand, shall constitute additional Club Trust
Secured Obligations and shall bear interest from the date said amounts are
expended at the rate per annum provided in Section 2.06(c) of the Club Trust
Credit Agreement (such rate per annum as so determined being hereinafter
referred to as the "Default Rate"). No such performance of any covenant or
agreement by the MLB Trust on behalf of the Indians Club Trust, the Commissioner
or MLB Properties, and no such advance or expenditure therefor, shall relieve
the Indians Club Trust of any default under the terms of this Agreement. The MLB
Trust, in making any payment hereby authorized, may do so according to any bill,
statement or estimate procured from the appropriate public office or holder of
the claim to be discharged without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien, title or claim. The MLB Trust, in performing any act
hereunder, shall be the judge in its reasonable discretion of whether the
Indians Club Trust, Commissioner or MLB Properties is required to perform the
same under the terms of this Agreement or any Transaction Document. Subject to
Section 2.12 of the Club Trust Credit Agreement, the Club Trust Credit Agreement
Administrative Agent is authorized to charge the Collection Account and the Debt
Service Account allocable to the defaulting Club Trust for amounts paid or
expended as described above pursuant to Section 7 of the MLB Pledge and Security
Agreement.
4. SPECIAL PROVISIONS REGARDING RIGHTS AND REVENUES. (a) CHIEF
EXECUTIVE OFFICE AND LOCATION OF COLLATERAL. The Indians Club Trust will not (i)
maintain a place of business at which any material portion of its assets or
operations is located or conducted or an executive office at a location other
than that specified on Schedule A without first providing to
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each of the MLB trust and the Administrative Agent, 30 days' prior written
notice of its intent to do so; (ii) establish or maintain an executive office or
place of business at which any material portion of the Club Trust Collateral is
located outside of the United States of America or otherwise permit any material
portion of the Club Trust Collateral to be located outside of the United States
of America (except as the Administrative Agent shall prior to any such time
expressly agree in writing); or (iii) keep, maintain or permit any material
portion of the Club Trust Collateral to be kept at locations other than as shown
on Schedule A hereto without first providing to each of the MLB Trust and the
Administrative Agent 30 days' prior written notice.
(b) CHIEF EXECUTIVE OFFICE. The Indians Club Trust will keep
all its books and records relating to the Collateral (including the Rights and
Revenues) only at its chief executive office, as specified on Schedule A.
Further, the Indians Club Trust will promptly inform the MLB Trust and the
Administrative Agent of any change in the identity or location of any Rights
and/or Revenues which might require new filings or other action to assure
continued perfection of the interests granted hereby.
5. SPECIAL PROVISIONS REGARDING CERTAIN CLUB TRUST COLLATERAL,
PLEDGED COLLATERAL. (a) DELIVERY. The Indians Club Trust from time to time shall
deliver to the MLB Trust (who will deliver the same to the Administrative Agent
pursuant to the MLB Pledge and Security Agreement) any Club Trust Collateral
requested to be delivered by the MLB Trust or the Administrative Agent and, as
appropriate, such collateral shall be in suitable form for transfer by delivery,
or shall be accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance satisfactory to the MLB Trust and the
Administrative Agent.
(b) PLEDGED COLLATERAL OBLIGATIONS. Each of the MLB Trust and
the Administrative Agent shall have no duty as to the collection or protection
of the Pledged Collateral attributable to the Indians Club Trust or any income
therefrom or as to the preservation of any rights pertaining thereto, beyond the
safe custody of any thereof actually in its possession. To the extent permitted
by law, the Indians Club Trust releases the MLB Trust and the Administrative
Agent from any claims, causes of action and demands at any time arising out of
or with respect to this Agreement, the Pledged Collateral attributable to the
Indians Club Trust and/or any actions taken or omitted to be taken by either of
them with respect thereto, and each of the Indians Club Trust and its related
Participating Club through the MLB Trust hereby agree to hold each of the MLB
Trust and the Administrative Agent harmless from and with respect to any and all
such claims, causes of action and demands other than those resulting from the
gross negligence, willful misconduct or unlawful conduct of the MLB Trust and
the Administrative Agent.
6. SPECIAL PROVISIONS REGARDING CLUB TRUST ASSIGNED DOCUMENTS.
(a) INDIANS CLUB TRUST REMAINS OBLIGATED. The assignment and security interest
Granted to the MLB Trust in the Assigned Documents attributable to the Indians
Club Trust (including the Transfer Agreement, the Club Trust Note and the Club
Trust Credit Agreement) pursuant to Section 2 hereof shall not relieve the
Indians Club Trust from the performance of any term, covenant, condition or
agreement on the Indians Club Trust's part to be performed or observed
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under or in respect of the Assigned Documents attributable to the Indians Club
Trust or from any liability to any Person under or in respect of the Assigned
Documents or impose any obligation on either of the MLB Trust or the
Administrative Agent to perform or observe any such term, covenant, condition or
agreement on the Indians Club Trust's part to be so performed or observed or
impose any liability on either of the MLB Trust or the Administrative Agent for
any act or omission on the part of the Indians Club Trust relative thereto or
for any breach of any representation or warranty on the part of the Indians Club
Trust contained in this Agreement or the Assigned Documents attributable to the
Indians Club Trust or made in connection herewith or therewith; and the Indians
Club Trust hereby agrees to indemnify and hold harmless each of the MLB Trust
and the Administrative Agent from and against any and all losses, liabilities
(including liabilities for penalties), claims, demands, actions, suits,
judgments, costs and expenses arising out of or resulting from the assignment
and security interest Granted pursuant to this Agreement by virtue of any act or
omission on the part of the Indians Club Trust, including the costs, expenses
and disbursements (including reasonable attorneys' fees and expenses) incurred
by either of the MLB Trust or the Administrative Agent in enforcing this
Agreement and the obligations of any Person under or in respect of the Assigned
Documents attributable to the Indians Club Trust.
(b) AMENDMENT OF ASSIGNED DOCUMENTS; WAIVERS. Without
intending in any manner to derogate from the absolute nature of the assignment
Granted to the MLB Trust by Section 2 hereof or the rights of the MLB Trust
hereunder, the Indians Club Trust agrees that it will not, without the prior
written consent of the Administrative Agent, amend, modify, supplement,
terminate or surrender, or agree to any amendment, modification, supplement,
termination or surrender of, the Assigned Documents attributable to it or waive
timely performance or observance by any Person of such Person's obligations, or
any default on the part of such Person, under or in respect of the Assigned
Documents. If any such amendment, modification, supplement or waiver shall be so
consented to by the Administrative Agent, the Indians Club Trust agrees,
promptly following a request by the Administrative Agent to do so, to execute
and deliver, in its own name and at its own expense, such agreements,
instruments, consents and other documents as the Administrative Agent may deem
necessary or appropriate in the circumstances.
(c) NOTICE OF DEFAULT UNDER ASSIGNED DOCUMENTS. The Indians
Club Trust agrees, at its own expense, to give each of the MLB Trust and the
Administrative Agent prompt written notice of each default on the part of any
Person in performing such Person's obligations under or in respect of the
Assigned Documents attributable to the Indians Club Trust coming to the Indians
Club Trust's attention.
(d) CUSTODY OF DOCUMENTS. Simultaneously with the execution
and delivery of this Agreement, the Indians Club Trust is delivering to the MLB
Trust a counterpart of each Assigned Document attributable to it (which
documents the MLB Trust will in turn deliver to the Administrative Agent
pursuant to the MLB Pledge and Security Agreement), which at all times shall be
retained in the custody and possession of the MLB Trust or Administrative Agent
until the termination of this Agreement. In addition, the MLB Trustee
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shall receive and retain (or deliver to the Administrative Agent pursuant to the
MLB Pledge and Security Agreement) a counterpart of any amendment, modification,
supplement or waiver made of or to any of such Assigned Documents and each other
related instrument, each of which counterparts shall be serially numbered.
7. SPECIAL PROVISIONS REGARDING COLLECTION ACCOUNT AND DEBT
SERVICE ACCOUNT. In addition to any other consent or agreement set forth herein,
the Indians Club Trust hereby consents to each of the provisions of Section 7 of
the MLB Pledge and Security Agreement with respect to each of the Collection
Account and the Debt Service Account, including the provisions with respect to
(i) the establishment of such accounts, (ii) the investment of amounts on
deposit in such accounts in Eligible Investments, (iii) the appointment of the
Administrative Agent as the attorney for the Indians Club Trust for the purpose
of making any withdrawal or ordering the transfer of funds on deposit in such
accounts pursuant to the terms of the MLB Pledge and Security Agreement and (iv)
the payment from amounts on deposit in such accounts of Club Trust Secured
Obligations and, without duplication and subject to the restrictions on
cross-collateralization contained in the Transaction Documents (including
Section 2.12(d) of the Club Trust Credit Agreement, Secured Obligations
attributable to such Indians Club Trust).
8. POWER OF ATTORNEY. In addition to any other powers of
attorney contained herein or in any other Transaction Documents, the Indians
Club Trust appoints the MLB Trust, its nominee or any other person whom the MLB
Trust may designate as its attorney-in-fact, with full power to endorse its name
on any checks, notes, acceptances, money orders, drafts or other forms of
payment or security that may come into the MLB Trust's possession, to sign its
name on claims, notices of assignment and on public records and to do all things
necessary to carry out this Agreement (including to effect the valid assignment
of the Assigned Documents attributable to the Indians Club Trust to the MLB
Trust in accordance with the provisions hereof). To the extent permitted by
applicable law, the Indians Club Trust hereby ratifies and approves all acts of
any such attorney and agrees that neither the MLB Trust nor any such attorney
will be liable for any acts or omissions or for any error of judgment or mistake
of fact or law other than such party's gross negligence, willful misconduct or
unlawful misconduct. The foregoing power of attorney, being coupled with an
interest, is irrevocable until such time as this Agreement shall terminate. The
MLB Trust may file one or more financing statements disclosing its security
interest in any or all of the Club Trust Collateral without any or all of the
Club Trust Collateral with any of the Indians Club Trust's or the Participating
Clubs' signatures appearing thereon. In addition, the Indians Club Trust hereby
grants the Administrative Agent, its nominee or any other person whom it may
designate as attorney-in-fact a power of attorney (a) to execute any financing
statement, or amendments and supplements to financing statements, on behalf of
the Indians Club Trust without notice thereof to the Indians Club Trust, which
power of attorney is coupled with an interest and is irrevocable until such time
as this Agreement shall terminate and (b) to take any of the above-mentioned
actions that otherwise may be performed by the MLB Trust. To the extent
permitted by applicable law, the Indians Club Trust hereby ratifies and approves
all acts of the Administrative Agent and any such attorney and agrees that
neither the Administrative Agent nor any such attorney will be liable for any
acts or
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omissions nor for any error of judgment or mistake of fact or law other than
such party's gross negligence, willful misconduct or unlawful misconduct.
9. REMEDIES UPON CLUB TRUST EVENT OF DEFAULT. (a) GENERAL
REMEDIES. Subject to Section 9(c), upon the occurrence and during the
continuation of any Club Trust Event of Default the MLB Trust shall have, in
addition to all other rights provided herein or by law, the rights and remedies
of a secured party under the UCC (regardless of whether the UCC is the law of
the jurisdiction where the rights or remedies are asserted and regardless of
whether the UCC applies to the affected Club Trust Collateral or portion
thereof), and further the MLB Trust may with the prior consent of and shall at
the direction of the Administrative Agent (itself acting with the consent or at
the direction of all the Lenders), without demand and without advertisement,
notice, hearing or process of law, all of which the Indians Club Trust (on its
own behalf and on behalf of its Participating Club) hereby waives, to the extent
permitted by law, at any time or times, sell and deliver Club Trust Collateral
held by or for it at public or private sale, for cash, upon credit or otherwise,
at such prices and upon such terms as the MLB Trust deems advisable, in its sole
discretion; provided that said disposition complies with any and all mandatory
legal requirements. In addition to all other sums due the MLB Trust, the Indians
Club Trust shall pay the MLB Trust all reasonable costs and expenses incurred by
the MLB Trust, including reasonable attorneys' fees and court costs, in
obtaining or liquidating the Club Trust Collateral, in enforcing payment of the
Club Trust Secured Obligations and, without duplication and subject to the
restriction on cross-collateralization contained in the Transaction Documents
(including Section 2.12(d) of the Club Trust Credit Agreement), the Secured
Obligations attributable to such Club Trust or in the prosecution or defense of
any action or proceeding by or against the MLB Trust, the Administrative Agent,
any Lender, any Liquidity Bank, the Club Trusts or the Participating Clubs
concerning any matter arising out of or connected with this Agreement, the Club
Trust Collateral or the Club Trust Secured Obligations, including, without
limitation, any of the foregoing arising in, arising under or related to a case
under the United States Bankruptcy Code. To the extent the rights of notice
cannot be legally waived hereunder, the Indians Club Trust agrees that any
requirement of reasonable notice shall be met if such notice is personally
served on or mailed, postage prepaid, to the Indians Club Trust in accordance
with Section 12(b) hereof at least 10 days before the time of sale or other
event giving rise to the requirement of such notice. The MLB Trust shall not be
obligated to make any sale or other disposition of the Club Trust Collateral
regardless of notice having been given. To the extent permitted by law, the MLB
Trust, the Administrative Agent, any Lender or any Liquidity Bank may be the
purchaser at any such sale. To the extent permitted by applicable law, the
Indians Club Trust hereby waives all its rights of redemption from any such
sale. Subject to the provisions of applicable law, the MLB Trust may postpone or
cause the postponement of the sale of all or any portion of the Club Trust
Collateral by announcement at the time and place of such sale, and such sale
may, without further notice, to the extent permitted by law, be made at the time
and place to which the sale was postponed or the MLB Trust may further postpone
such sale by announcement made at such time and place.
(b) NONEXCLUSIVE NATURE OF REMEDIES. Subject to Section 9(c),
failure by the MLB Trust to exercise any right, remedy or option under this
Agreement or any other
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Transaction Document or provided by law, or delay by the MLB Trust in exercising
the same, shall not operate as a waiver; no waiver hereunder shall be effective
unless it is in writing, signed by the party against whom such waiver is sought
to be enforced and then only to the extent specifically stated, which in the
case of the MLB Trust shall only be granted as provided in Section 12(a) hereof.
To the extent permitted by law, neither the MLB Trust nor any party acting as
attorney for the MLB Trust, shall be liable hereunder for any acts or omissions
or for any error of judgment or mistake of fact or law other than such party's
gross negligence, willful misconduct or unlawful conduct hereunder. The rights
and remedies of the MLB Trust under this Agreement shall be cumulative and not
exclusive of any other right or remedy which the MLB Trust may have.
(c) SALE OF RIGHTS AND REMEDIES. Notwithstanding any other
provision of this Section 9 or any provision of the UCC which conflicts with
this Section 9(c), that portion of the Club Trust Collateral consisting of the
Indians Club Trust's Rights and Revenues shall be permitted to be sold following
a Club Trust Event of Default ONLY subject to the provisions of this Section
9(c). The Rights and Revenues of the Indians Club Trust may be sold only for a
period of time sufficient for the purchaser thereof to recover an amount equal
to the sum of (i) such Club Trust's Secured Obligations and, without duplication
and subject to the restrictions on cross- collateralization contained in the
Transaction Documents (including Section 2.12(d) of the Club Trust Credit
Agreement), the Secured obligations attributable to such Club Trust and (ii) a
per annum rate of return on the sum set forth in clause (i) equal to the Default
Rate. At the point in time in which the purchaser of such Rights and Revenues
shall have received the amount to be paid to it pursuant to the immediately
preceding sentence, such Rights and Revenues shall automatically revert to the
Indians Club Trust. In connection with any sale of such Rights and Revenues, the
MLB Trust shall sell such Rights and Revenues pursuant to an agreement, which
among other things, shall (A) include a provision consistent with this Section
9(c) and (B) contain a provision pursuant to which the purchaser of such Rights
and Revenues acknowledges and agrees that its rights to receive payments from
collections with respect to the Rights and Revenues is subject to the provisions
of Section 7(d) of the MLB Pledge and Security Agreement (I.E., the Commissioner
shall be entitled to receive payments with respect to a pro rata portion of
Pension Contributions and Commissioner Expenses (subject to the limitations set
forth in Section 7(d) of the MLB Pledge and Security Agreement) from such
collections prior to any payments therefrom to the purchaser of such Rights and
Revenues).
(d) ADMINISTRATIVE AGENT ENFORCEMENT. In furtherance of the
provisions of Section 2(b), the Indians Club Trust acknowledges and agrees that,
pursuant to the provisions of the MLB Pledge and Security Agreement, the
Administrative Agent shall have the right to enforce and otherwise enjoy the
benefits of this Section 9 and each of provisions releasing the MLB Trust from
liability shall apply to the Administrative Agent, the Lenders and the Liquidity
Banks to the extent that the same would exculpate the MLB Trust from liability;
PROVIDED, HOWEVER, that it is understood and agreed that the Administrative
Agent shall not sell the Club Trust Collateral or any portion thereof, unless it
shall have obtained the prior written consent of all the Lenders to such sale or
any such sale shall be at the written direction of all the Lenders.
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<PAGE> 15
10. APPLICATION OF PROCEEDS. The proceeds of the Club Trust
Collateral or a portion at any time received by the MLB Trust upon the
occurrence and during the continuation of any Club Trust Event of Default
hereunder shall, when received by the MLB Trust (or the Administrative Agent) in
cash or its equivalent, be deposited in the Collection Account and applied by
the Administrative Agent, subject to Section 2.12 of each of the Club Trust
Credit Agreement and the MLB Credit Agreement, in reduction of the Club Trust
Secured Obligations and, without duplication and subject to the restrictions on
cross-collateralization contained in the Transaction Documents (including
Section 2.12(d) of the Club Trust Credit Agreement), the Secured Obligations
attributable to such Club Trust as provided for in the Club Trust Credit
Agreement and the MLB Credit Agreement, respectively, and Section 7(c) of the
MLB Pledge and Security Agreement. The Indians Club Trust shall remain liable to
the MLB Trust for any deficiency. However, none of the related Participating
Club or the MLB Trust, as beneficial owners of the Indians Club Trust, shall
have any liability with respect to any deficiency; PROVIDED, HOWEVER, that the
foregoing provisions shall not relieve the Indians Club Trust's related
Participating Club of any of its obligations to it under the Transfer Agreement.
11. CONTINUING AGREEMENT. This Agreement shall be a continuing
agreement in every respect and shall remain in full force and effect until all
of the Club Trust Secured Obligations and, without duplication and subject to
the restrictions on cross-collateralization contained in the Transaction
Documents (including Section 2.12(d) of the Club Trust Credit Agreement), all
Secured Obligations attributable to such Club Trust arising prior to the time of
the satisfaction of such Club Trust Secured Obligations have been fully paid and
satisfied and the Indians Club Trust shall have caused the related Participating
Club to deliver a letter, in form and substance satisfactory to the
Administrative Agent, on behalf of the Lenders and the Liquidity Banks, that
provides for the continuation for so long as there are any outstanding Secured
Obligations payable to the Lenders or the Liquidity Banks (other than any
Secured Obligations which arise subsequent to the Final Payment Date) of (i)
such Participating Club's obligations (x) pursuant to Section 5.02, 5.03 and
5.04 of the Transfer Agreement and (y) to play baseball, except for business
interruptions during a labor dispute or where prevented by force majeure and
(ii) such Participating Club related Club Trust's obligations pursuant to
Section 2.12(d)(iii) of each of the MLB Credit Agreement and the Club Trust
Credit Agreement; PROVIDED, HOWEVER, that if any Participating Club's Club Trust
shall have terminated in accordance with the provisions of such Club Trust's
Club Trust Agreement, then such Participating Club shall also deliver to the
Administrative Agent, on behalf of the Lenders and the Commissioner, a transfer
authorization, in form and substance satisfactory to the Administrative Agent,
authorizing the Commissioner, for as long as there are any outstanding Secured
Obligations payable to the Lenders or the Liquidity Banks (other than any
Secured Obligations which arise subsequent to the Final Payment Date as in
effect as of the date hereof) to transfer from the Central Fund Custody Account
to the Collection Account when and if such Participating Club has any obligation
to make any payment to the Lenders or the Liquidity Banks pursuant to Section
2.12(d)(iii) of the MLB Credit Agreement and the Club Trust Credit Agreement
amounts sufficient to satisfy such obligations; PROVIDED, FURTHER, that if any
Participating Club with a related Club Trust which has fully paid and satisfied
its Club Trust Secured Obligations and which has complied with the provisions of
this Section 11 sells all or
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<PAGE> 16
substantially all of its assets, stock or partnership interests while there are
any outstanding Secured Obligations payable to the Lenders or the Liquidity
Banks (other than any Secured Obligations which arise subsequent to the Final
Payment Date as in effect as of the date hereof), then if (i) at least eight
other Club Trusts and/or their related Participating Clubs remain obligated to
make payments to the Lenders or the Liquidity Banks pursuant to Section
2.12(d)(iii) of the MLB Credit Agreement and the Club Trust Credit Agreement,
such Participating Club and its related Club Trust shall be released from the
provisions of this Section 11 or (II) such Participating Club posts a letter of
credit for the benefit of the Administrative Agent on behalf of the Lenders and
the Liquidity Banks in the amount of the product of (a) the highest Maximum
Available Amount as of such date, multiplied by (b) a fraction, the numerator of
which is the Maximum Available Amount that such Participating Club's related
Club Trust would have had as of such date and the denominator of which is the
aggregate of all Club Trust's Maximum Available Amounts as of such date,
including such Participating Club's related Club Trust's Maximum Available
Amount, and with a financial institution and in such form reasonably acceptable
to the Administrative Agent, the Lenders and the Liquidity Banks agree to
proceed solely against such Letter of Credit to satisfy any obligations of such
Participating Club and its related Club Trust under Section 2.12(d)(iii) of the
MLB Credit Agreement and Club Trust Credit Agreement. Upon such termination of
this Agreement, the MLB Trust shall, upon the request and at the expense of the
Indians Club Trust, forthwith release all its Liens and security interests
hereunder. Notwithstanding the foregoing, all releases and indemnities provided
hereunder shall survive termination of this Agreement.
12. MISCELLANEOUS. (a) This Agreement and the provisions
hereof may be waived, amended, modified, changed, discharged or terminated only
by an instrument in writing signed by the MLB Trust and the Indians Club Trust,
which in the case of the MLB Trust shall only he provided at the direction of
the Administrative Agent. This Agreement shall create a continuing security
interest in the Club Trust Collateral and shall be binding upon the MLB Trust
and Indians Club Trusts and their successors and assigns; PROVIDED, HOWEVER,
that none of the Indians Club Trust or the MLB Trust may assign its rights or
delegate its duties hereunder without the Administrative Agent's prior written
consent. To the extent permitted by law, the Indians Club Trust (on its own
behalf and its Participating Club through the MLB Trust) hereby releases each of
the MLB Trust and the Administrative Agent from any liability for any act or
omission relating to the Club Trust Collateral or this Agreement (including
actions by the Administrative Agent as attorney in connection with purchasing
Eligible Investments pursuant to Sections 7(b) of the MLB Pledge and Security
Agreement), except for any liability arising from such party's gross negligence,
willful misconduct or unlawful conduct.
(b) All communications provided for herein shall be in
writing, except as otherwise specifically provided for hereinabove, and shall be
given in accordance with Section 8.02 of the Club Trust Credit Agreement, if to
the MLB Trust, at Wilmington Trust Company, 1100 North Market Street,
Wilmington, Delaware 19890, Attention: Corporate Trust Administration (facsimile
number (302) 651-8882); with copies to (a) Administrative Agent, at Fleet
National Bank, One Federal Street, Boston, Massachusetts 02211, Attention:
Patrick F. McAuliffe; (facsimile number (617) 346-0590); (b) Choate, Hall &
Stewart, Exchange Place, 53
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<PAGE> 17
State Street, Boston, Massachusetts 02109, Attention: Lyman G. Bullard, Jr.,
Esq. (facsimile number (617) 248-4000); (c) the Commissioner, at The Baseball
Office of the Commissioner, 350 Park Avenue, New York, N.Y. 10022, Attention:
Jeffrey White (facsimile number (212) 888- 8632); (d) Paul, Weiss, Rifkind,
Wharton & Garrison, 1285 Avenue of the Americas, New York, N.Y. 10019,
Attention: Matthew Nimetz, Esq. (facsimile number (212) 373-2042); and if to the
Indians Club Trust, at Wilmington Trust Company, 1100 North Market Street,
Wilmington, Delaware 19890, Attention: Corporate Trust Administration (facsimile
number (302 651-1576); with copies to (a) Administrative Agent, at Fleet
National Bank, One Federal Street, Boston, Massachusetts 02211, Attention:
Patrick F. McAuliffe, (facsimile number (617) 346-0590); (b) Choate, Hall &
Stewart, Exchange Place, 53 State Street, Boston, Massachusetts 02109,
Attention: Lyman G. Bullard, Jr., Esq. (facsimile number (617) 248-4000); (c)
the Commissioner, at the Baseball Office of the Commissioner, 350 Park Avenue,
New York, N.Y. 10022, Attention: Jeffrey White (facsimile number (212)
888-8632); and (d) Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, N.Y. 10019, Attention: Matthew Nimetz, Esq. (facsimile
number (212) 373-2042).
(c) Notwithstanding any right that the Administrative Agent
may have to enforce this Agreement pursuant to the terms hereof or the MLB
Pledge and Security Agreement, no Lender or Liquidity Bank shall have the right
to institute any suit, action or proceeding in equity or at law for the
foreclosure of this Agreement, for the execution of any trust or power hereof,
for the appointment of a receiver or for the enforcement of any other remedy
under or upon this Agreement; it being understood and intended that no one or
more of the Lenders or Liquidity Banks shall have any right in any manner
whatsoever to affect, disturb or prejudice any lien, security interest,
assignment, pledge or other encumbrance created pursuant to this Agreement by
its or their action or to enforce any right hereunder and that all proceedings
at law or in equity shall be instituted and maintained by the Administrative
Agent in the manner provided for herein and in the MLB Pledge and Security
Agreement and for the ratable benefit of the Lenders and the ratable benefit of
the Liquidity Banks.
(d) In the event that any provision hereof shall be deemed to
be invalid by reason of the operation of any law or by reason of the
interpretation placed thereon by any court, this Agreement shall be construed as
not containing such provision with respect to any jurisdiction where such law or
interpretation is operative, and the invalidity of such provision shall not
affect the validity of any remaining provisions hereof, and any and all other
provisions hereof which are otherwise lawful and valid shall remain in full
force and effect.
(e) THIS AGREEMENT AND ALL MATTERS RELATING HERETO SHALL,
EXCEPT TO THE EXTENT OTHERWISE REQUIRED BY APPLICABLE LAW, BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. THE INDIANS CLUB TRUST HEREBY
SUBMITS TO THE EXTENT EFFECTIVE UNDER APPLICABLE LAW TO THE JURISDICTION AND
VENUE OF THE STATE AND FEDERAL COURTS OF NEW YORK AND AGREES THAT THE MLB TRUST
MAY, AT ITS OPTION, ENFORCE ITS RIGHTS HEREUNDER IN SUCH COURTS.
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<PAGE> 18
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE INDIANS CLUB TRUST HEREBY
IRREVOCABLY WAIVES THE DEFENSE OF AN INCONVENIENT FORUM TO MAINTENANCE OF ANY
ACTION OR PROCEEDING BY THE MLB TRUST IN SUCH COURTS. THE INDIANS CLUB TRUST
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
(f) The headings in this instrument are for convenience of
reference only and shall not limit or otherwise affect the meaning of any
provision hereof.
(g) This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each
constituting an original, but all constituting together one and the same
instrument.
(h) Except as to the Commissioner and Administrative Agent, on
behalf of the Lenders and the Liquidity Banks, no third-party beneficiary rights
are intended or conferred hereunder.
(i) All rights and remedies of the MLB Trust or the
Administrative Agent hereunder are subject to such limitations as may be imposed
by applicable law.
13. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and delivered
by Wilmington Trust Company, not individually or personally but solely as
trustee of the MLB Trust under the MLB Trust Agreement and solely as trustee of
the Indians Club Trust under its Club Trust Agreement, in the exercise of the
powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the MLB
Trust or Indians Club Trust, as the case may be, is made and intended not as
personal representations, undertakings and agreements by Wilmington Trust
Company but is made and intended for the purpose for binding only the MLB Trust
or the Indians Club Trust, as the case may be, (c) except as Wilmington Trust
Company shall otherwise expressly agree, nothing herein contained shall be
construed as creating any liability on Wilmington Trust Company, individually or
personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the Facilitating
Agent, the Administrative Agent, the Lenders and the Liquidity Banks and by any
Person claiming by, through or under any of them and (d) under no circumstances
shall Wilmington Trust Company be personally liable for the payment of any
indebtedness or expense of the MLB Trust or Indians Club Trust, as the case may
be, or be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by the MLB Trust, as the case may be,
under this Agreement or the other Transaction Documents.
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<PAGE> 19
SIGNATURE PAGE FOR CLUB TRUST PLEDGE AND SECURITY AGREEMENT
INDIANS CLUB TRUST
IN WITNESS WHEREOF, each of the MLB Trust and the Indians Club
Trust and the Administrative Agent has caused this Agreement to be duly executed
as of the date first above written.
INDIANS CLUB TRUST,
By: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Club Trustee,
By: /s/ David A. Vanaskey
----------------------------------
Name David A. Vanaskey
Title Assistant Vice President
MAJOR LEAGUE BASEBALL CLUB TRUST,
By: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
MLB Trustee,
By: /s/ David A. Vanaskey
----------------------------------
Name David A. Vanaskey
Title Assistant Vice President
FLEET NATIONAL BANK
as Administrative Agent for the
Banks,
By: /s/ Patrick F. McAuliffe
----------------------------------
Patrick F. McAuliffe
Executive Vice President
<PAGE> 1
Exhibit 10.13
CLEVELAND INDIANS BASEBALL COMPANY, INC.
LONG-TERM INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the Cleveland Indians Baseball Company, Inc.
Long-Term Incentive Plan (the "Plan") is to enable Cleveland Indians Baseball
Company, Inc. (the "Company") to attract, retain and reward key employees of the
Company and of its Affiliates and members of the Board of Directors of the
Company and to strengthen the mutuality of interests between such key employees
and the Company's shareholders by offering such key employees equity or
equity-based incentives.
For purposes of the Plan, the following terms shall be defined
as set forth below:
(a) "Affiliate" means Cleveland Indians Baseball Company
Limited Partnership and any entity (other than the Company and
its Subsidiaries) that is designated by the Board as a
participating employer under the Plan.
(b) "Award" means any award of Stock Options, Restricted
Shares, Share Appreciation Rights under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" has the meaning set forth in Section
8(b).
(e) "Change in Control Price" has the meaning set-forth in
Section 8(c).
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
(g) "Committee" means the Committee referred to in Section 2
of the Plan.
(h) "Company" means Cleveland Indians Baseball Company, Inc.,
an Ohio corporation, or any successor corporation.
(i) "Disability" means disability as determined under
procedures established by the Committee for purposes of the
Plan.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(k) "Fair Market Value" means, as of any date, the mean
between the highest and lowest quoted selling price, regular
way, of the Shares on such date on the Nasdaq National Market
(or any successor thereto), if no such sale of the Shares
occurs on the Nasdaq National Market (or any successor
thereto) on such date, then such mean price on the next
preceding day on which the Shares were traded. If the Shares
are no longer traded on the Nasdaq National Market (or any
<PAGE> 2
successor thereto), then the Fair Market Value of the Shares
shall be determined by the Committee in good faith.
(l) "Incentive Stock Option" means any Stock Option intended
to be and designated as an "Incentive Stock Option" within the
meaning of Section 422 of the Code or any successor section
thereto.
(m) "Non-Qualified Stock Option" means any Stock Option that
is not an Incentive Stock Option.
(n) "Other Share-Based Award" means an award granted pursuant
to Section 8 that is valued, in whole or in part, by reference
to, or is otherwise based on, Shares.
(o) "Plan" means the Cleveland Indians Baseball Company, Inc.
Long-Term Incentive Plan, as amended from time to time.
(p) "Restricted Shares" means an award of shares that is
granted pursuant to Section 6 and is subject to restrictions.
(q) "Section 16 Participant" means a participant under the
Plan who is then subject to Section 16 of the Exchange Act.
(r) "Shares" mean, the Class A Common Shares, without par
value, of the Company.
(s) "Share Appreciation Right" means an award of a right to
receive an amount from the Company that is granted pursuant to
Section 7.
(t) "Stock Option" or "Option" means any option to purchase
Shares (including Restricted Shares, if the Committee so
determines) that is granted pursuant to Section 5.
(u) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with
the Company if each of the corporations (other than the last
corporation in the unbroken chain) owns stock possessing 50%
or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Compensation Committee
of the Board (the "Committee"). The Committee shall consist of three or more
directors of the Company, as designated by the Board from time to time. Such
directors shall be appointed by the Board and shall serve as the Committee at
the pleasure of the Board. The functions of the Committee specified in the Plan
shall be exercised by the Board if and to the extent that no Committee exists
which has the authority to so administer the Plan.
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<PAGE> 3
The Committee shall have full power to interpret and
administer the Plan and full authority to select the individuals to whom Awards
will be granted and to determine the type and amount of Awards to be granted to
each participant, the consideration, if any, to be paid for such Awards, the
timing of such Awards, the terms and conditions of Awards granted under the
Plan, the terms and conditions of the related agreements which will be entered
into with participants and to certify that any performance goals are satisfied.
As to the selection of and grant of Awards to participants who are not Section
16 Participants, the Committee may delegate its responsibilities to members of
the Company's management consistent with applicable law.
The Committee shall have the authority to adopt, alter and
repeal such rules, guidelines and practices governing the Plan as it shall, from
time to time, deem advisable; to interpret the terms and provisions of the Plan
and any Award issued under the Plan (and any agreements relating thereto); to
direct employees of the Company or other advisors to prepare such materials or
perform such analyses as the Committee deems necessary or appropriate; and
otherwise to supervise the administration of the Plan.
Any interpretation and administration of the Plan by the
Committee, and all actions and determinations of the Committee, shall be final,
binding and conclusive on the Company, its shareholders, Subsidiaries,
Affiliates, all participants in the Plan, their respective legal
representatives, successors and assigns, and all persons claiming under or
through any of them. No member of the Board or of the Committee shall incur any
liability for any action taken or omitted, or any determination made, in good
faith in connection with the Plan.
SECTION 3. SHARES SUBJECT TO THE PLAN.
(a) Aggregate Shares Subject to the Plan. Subject to
adjustment as provided below in Section 3(c), the total number
of Shares reserved and available for Awards under the Plan is
700,000. Any Shares issued hereunder may consist, in whole
or in part, of authorized and unissued shares or treasury
shares.
(b) Forfeiture or Termination of Awards of Shares. If any
Shares subject to any Award granted hereunder are forfeited or
an Award otherwise terminates or expires without the issuance
of Shares, the Shares subject to such Award shall again be
available for distribution in connection with future Awards
under the Plan as set forth in Section 3(a), unless the
participant who had been awarded such forfeited Shares or the
expired or terminated Award has theretofore received dividends
or other benefits of ownership with respect to such Shares.
For purposes hereof, a participant shall not be deemed to have
received a benefit of ownership with respect to such Shares by
the exercise of voting rights or the accumulation of dividends
which are not realized because of the forfeiture of such
Shares or the expiration or termination of the related Award
without issuance of such Shares.
(c) Adjustment. In the event of any merger, reorganization,
consolidation, recapitalization, share dividend, share split,
combination of shares or other change in corporate structure
of the Company affecting the Shares, the Committee, in its
discretion, shall make an appropriate adjustment in the number
of shares reserved
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<PAGE> 4
for issuance under the Plan, in the number and kind and option
price of shares subject to outstanding options granted under the
Plan (both in the aggregate and as to each participant), in the
number and kind of shares (both in the aggregate and as to each
participant) subject to Restricted Share Awards and any other
outstanding Awards granted under the Plan.
(d) Annual Award Limit. No participant may be granted Stock
Options or Awards under the Plan with respect to an aggregate of
more than 100,000 Shares (subject to adjustment as provided in
Section 3(c) hereof) during any calendar year.
SECTION 4. ELIGIBILITY.
Officers, directors and other key employees of the Company and
its Subsidiaries and Affiliates (including Cleveland Indians Baseball Company
Limited Partnership), if any, who, in the discretion of the Committee, are
responsible for or contribute to the management, growth or profitability of the
business of the Company or its Subsidiaries or Affiliates, if any, are eligible
to be granted Awards under the Plan.
SECTION 5. STOCK OPTIONS.
(a) Grant. Stock Options may be granted alone, in addition to or
in tandem with other Awards granted under the Plan or cash awards
made outside the Plan. The Committee shall determine the
individuals to whom, and the time or times at which, grants of
Stock Options will be made, the number of Shares purchasable
under each Stock Option and the other terms and conditions of the
Stock Option in addition to those set forth in Sections 5(b) and
5(c). Any Stock Option granted under the Plan shall be in such
form as the Committee may from time to time approve.
Stock Options granted under the Plan may be of two
types which shall be indicated in the Option Agreement evidencing
such options: (i) Incentive Stock Options and (ii) Non-Qualified
Stock Options. Subject to Section 5(c) hereof, the Committee
shall have the authority to grant to any participant Incentive
Stock Options, Non-Qualified Stock Options or both types of Stock
Options.
(b) Terms and Conditions. Options granted under the Plan shall be
evidenced by Option Agreements, shall be subject to the following
terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem desirable:
(1) Option Price. The option price per share of
Shares purchasable under a Non-Qualified Stock Option or an
Incentive Stock Option shall be determined by the Committee at
the time of grant and in the case of an Incentive Stock Option
shall be not less than 100% of the Fair Market Value of the
Shares at the date of grant (110% of the Fair Market Value of the
Shares at the date of grant in the case of a participant who at
the date of grant owns Shares possessing more than ten percent of
the total combined voting power of all classes of stock of
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<PAGE> 5
the Company or its parent or Subsidiary corporations, as
determined under Section 424(d), (e) and (f) of the Code).
(2) Option Term. The term of each Stock Option
shall be fixed by the Committee and may not exceed ten years from
the date the Option is granted (or, with respect to an Incentive
Stock Option, five years in the case of a participant who at the
date of grant owns Shares possessing more than ten percent of the
total combined voting power of all classes of stock of the
Company or its parent or subsidiary corporations (as determined
under Section 424(d), (e) and (f) of the Code)).
(3) Exercise. Stock Options shall be exercisable
at such time or times and subject to such terms and conditions as
shall be determined by the Committee at or after grant. If any
Stock Option is exercisable only in installments or only after
specified exercise dates, the Committee may waive, in whole on in
part, such installment exercise provisions, and may accelerate
any exercise date or dates, at any time at or after grant based
on such factors as the Committee shall determine, in its sole
discretion.
(4) Method of Exercise. Subject to any installment
exercise provisions that apply with respect to such Stock Option,
Stock Options may be exercised in whole or in part, at any time
during the option period, by giving to the Company written notice
of exercise specifying the number of Shares to be purchased.
Such notice shall be accompanied by payment in
full of the option price of the Shares for which the Option is
exercised in cash or by the delivery of Shares having a Fair
Market Value on the date of exercise equal to the exercise price.
Stock Options may also be exercised in any other matter approved
by the Committee (either with respect to (i) the exercise of a
particular Stock Option or (ii) the exercise of Stock Options
generally), including, but not limited to, so-called net or
cash-less exercises.
No Shares shall be issued pursuant to an exercise
of an Option until full payment has been made. A participant will
not have rights to dividends or any other rights of a shareholder
with respect to any Shares subject to an Option unless and until
the participant has given written notice of exercise, has paid in
full for such Shares, has given, if requested, the representation
described in Section 11 and such Shares have been issued to him.
(5) Non-Transferability of Options. No Stock
Option is transferable by the participant other than by will or
by the laws of descent and distribution, and all Stock Options
shall be exercisable, during the participant's lifetime, only by
the participant or, subject to Sections 5(b)(3) and 5(c), by the
participant's authorized legal representative if the participant
is unable to exercise an option as a result of the participant's
Disability; provided, however, that if so provided in the
instrument evidencing the Option, the Committee may permit any
optionee to transfer the Option during his lifetime to one or
more members of his family, to
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<PAGE> 6
one or more trusts for the benefit of one or more members of his
family or to one or more entities owned solely by family members,
provided that no consideration is paid for the transfer and that
such transfer would not result in the loss of any exemption under
Rule 16b-3 for any Option that the Committee does not permit to
be so transferred. The transferee of an Option shall be subject
to all restrictions, terms, and conditions applicable to the
Option prior to its transfer, except that the Option shall not be
further transferable inter vivos by the transferee. The Committee
may impose on any transferable Option and on the Common Shares to
be issued upon the exercise of the Option such limitations and
conditions as the Committee deems appropriate.
(6) Termination by Death. Subject to Sections
5(b)(3) and 5(c), if any participant's employment by the Company
or any Subsidiary or Affiliate terminates by reason of death, any
Stock Option held by such participant may thereafter be
exercised, to the extent such Option was exercisable at the time
of death or would have become exercisable within one year from
the time of death had the participant continued to fulfill all
conditions of the Option during such period (or on such
accelerated basis as the Committee may determine at or after
grant), by the estate of the participant (acting through its
fiduciary), for a period of one year (or such other period as the
Committee may specify at or grant) from the date of such death.
The balance of the Stock Option shall be forfeited.
(7) Termination by Reason of Disability. Subject
to Sections 5(b)(3) and 5(c), if a participant's employment by
the Company or any Subsidiary or Affiliate terminates by reason
of Disability, any Stock Option held by such participant may
thereafter be exercised, to the extent such Option was
exercisable at the time of termination or would have become
exercisable within one year from the time of termination had the
participant continued to fulfill all conditions of the Option
during such period (or on such accelerated basis as the Committee
may determine at or after grant), by the participant or by the
participant's duly authorized legal representative if the
participant is unable to exercise the Option as a result of the
participant's Disability, for a period of one year (or such other
period as the Committee may specify at or after grant), from the
date of such termination of employment; provided, however, that
in no event may any such Option be exercised prior to six months
and one day from the date of grant; and provided, further, that
if the participant dies within such one-year period (or such
other period as the Committee shall specify at or after grant),
any unexercised Stock Option held by such participant shall
thereafter be exercisable by the estate of the participant
(acting though its fiduciary) to the same extent to which it was
exercisable at the time of death for a period of one year from
the date of such termination of employment. The balance of the
Stock Option shall be forfeited.
(8) Other Termination. Unless otherwise determined
by the Committee at or after the time of granting any Stock
Option, if a participant's employment by the Company or any
Subsidiary or Affiliate is terminated for any reason other than
death or Disability, all Stock Options held by such participant
that were previously exercisable shall continue to be
exercisable until, and
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shall terminate, 90 days after the date of such termination. All
Stock Options that were not previously exercisable prior to
the date employment terminates shall terminate on the date
employment terminates.
(c) Incentive Stock Options. Notwithstanding Sections 5(b)(6) and
(7), an Incentive Stock Option shall be exercisable by (i) a
participant's authorized legal representative (if the participant
is unable to exercise the Incentive Stock Option as a result of
the participant's Disability) only if, and to the extent,
permitted by Section 422 of the Code and (ii) by the
participant's estate, in the case of death, or authorized legal
representative, in the case of Disability, no later than 10 years
from the date the Incentive Stock Option was granted (in addition
to any other restrictions or limitations which may apply).
Anything in the Plan to the contrary notwithstanding, no term or
provision of the Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be exercised, so as to
disqualify the Plan under Section 422 of the Code, or, without
the consent of the participants affected, to disqualify any
Incentive Stock Option under such Section 422 or any successor
section thereto.
(d) Buyout Provisions. The Committee may at any time buy out for
a payment in cash, Shares or Restricted Shares an option
previously granted, based on such terms and conditions as the
Committee shall establish and agree upon with the participant,
provided that no such transaction involving a Section 16
Participant shall be structured or effected in a manner that
would violate, or result in any liability on the part of the
participant under, Section 16 of the Exchange Act or the rules
and regulations promulgated thereunder.
SECTION 6. RESTRICTED SHARES.
(a) Grant. Restricted Shares may be issued alone, in addition to
or in tandem with other Awards under the Plan or cash awards made
outside of the Plan. The Committee shall determine the
individuals to whom, and the time or times at which, grants of
Restricted Shares will be made, the number of Restricted Shares
to be awarded to each participant, the price (if any) to be paid
by the participant (subject to Section 6(b)), the date or dates
upon which Restricted Share Awards will vest and the period or
periods within which such Restricted Share Awards may be subject
to forfeiture, and the other terms and conditions of such Awards
in addition to those set forth in Section 6(b). The Committee may
condition the grant of Restricted Shares upon the attainment of
specified performance goals or such other factors as the
Committee may determine in its sole discretion.
(b) Terms and Conditions. Restricted Shares awarded under the
Plan shall be subject to the following terms and conditions and
shall contain such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee
shall deem desirable. A participant who receives a Restricted
Share Award shall not have any rights with respect to such Award,
unless and until such participant has executed an agreement
evidencing the Award in the form
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approved from time to time by the Committee and has delivered a
fully executed copy thereof to the Company, and has otherwise
complied with the applicable terms and conditions of such Award.
(1) The purchase price (if any) for Restricted
Shares shall be determined by the Committee at the time of grant.
(2) Awards of Restricted Shares must be accepted
by executing a Restricted Share Award agreement and paying any
price required under Section 6(b)(1).
(3) Each participant receiving a Restricted Share
Award shall be issued a stock certificate in respect of such
Restricted Shares. Such certificate shall be registered in the
name of such participant, and shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable to
such Award.
(4) The Committee may require that the stock
certificates evidencing such Restricted Shares be held in custody
by the Company until the restrictions thereon shall have lapsed,
and that, as a condition of any Restricted Shares Award the
participant shall have delivered to the Company a stock power,
endorsed in blank, relating to the Shares covered by such Award.
(5) Subject to the provisions of this Plan and the
Restricted Share Award agreement, during a period set by the
committee commencing with the date of such Award (the
"Restriction Period"), the participant shall not be permitted to
sell, transfer, pledge, assign or otherwise encumber the
Restricted Shares awarded under the Plan. Subject to these
limitations, the Committee, in its sole discretion, may provide
for the lapse of such restrictions in installments and may
accelerate or waive such restrictions, in whole or in part, based
on service, performance or such other factors and criteria as the
Committee may determine, in its sole discretion.
(6) Except as provided in this Section 6(b)(6),
Section 6(b)(5) and Section 6(b)(7), the participant shall have,
with respect to the Restricted Shares awarded, all of the rights
of a shareholder of the Company, including the right to vote the
Shares, and the right to receive any dividends. The Committee, in
its sole discretion, as determined at the time of award, may
permit or require the payment of cash dividends to be deferred
and, if the Committee so determines, reinvested, subject to
Section 11, in additional Restricted Shares to the extent Shares
are available under Section 3, or otherwise reinvested. Unless
the Committee or Board determines otherwise, share dividends
issued with respect to Restricted Shares shall be treated as
additional Restricted Shares that are subject to the same
restrictions and other terms and conditions that apply to the
Shares with respect to which such dividends are issued.
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(7) No Restricted Shares shall be transferable by
a participant other than by will or by the laws of descent and
distribution.
(8) Unless otherwise determined by the Committee
at or after the time of granting any Restricted Shares, if a
participant's employment by the Company or any Subsidiary or
Affiliate terminates by reason of death, any Restricted Shares
held by such participant shall thereupon vest and all
restrictions thereon shall lapse, to the extent such Restricted
Shares would have become vested or no longer subject to
restriction within one year from the time of death had the
participant continued to fulfill all of the conditions of the
Restricted Share Award during such period (or on such accelerated
basis as the Committee may determine at or after grant). The
balance of the Restricted Shares shall be forfeited.
(9) Unless otherwise determined by the Committee
at or after the time of granting any Restricted Shares, if a
participant's employment by the Company or any Subsidiary or
Affiliate terminates by reason of Disability, any Restricted
Shares held by such participant shall thereupon vest and all
restrictions thereon shall lapse, to the extent such Restricted
Shares would have become vested or no longer subject to
restriction within one year from the time of termination had the
participant continued to fulfill all of the conditions of the
Restricted Share Award during such period (or on such accelerated
basis as the Committee may determine at or after grant). The
balance of the Restricted Shares shall be forfeited.
(10) Unless otherwise determined by the Committee
at or after the time of granting any Restricted Shares, if a
participant's employment by the Company or any Subsidiary or
Affiliate terminates for any reason other than death or
Disability, the Restricted Shares held by such participant which
are unvested or subject to restriction at the time of termination
shall thereupon be forfeited.
(c) Minimum Value Provisions. In order to better ensure that
award payments actually reflect the performance of the Company
and service of the participant, the Committee may provide in its
sole discretion for a tandem performance-based or other award
designed to guarantee a minimum value, payable in cash or Shares
to the recipient of a Restricted Share Award, subject to such
performance, future service, deferral and other terms and
conditions as may be specified by the Committee.
SECTION 7. SHARE APPRECIATION RIGHTS.
(a) Grant. Share Appreciation Rights may be granted in connection
with all or any part of an Option, either concurrently with the
grant of the Option or, if the Option is a Non-Qualified Stock
Option, by an amendment to the Option at any time thereafter
during the term of the Option. Share Appreciation Rights may be
exercised in whole or in part at such times under such conditions
as may be specified by the Committee in the participant's Option
Agreement.
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(b) Terms and Conditions. The following terms and conditions will
apply to all Share Appreciation Rights:
(1) Share Appreciation Rights shall entitle the
participant, upon exercise of all or any part of the Share
Appreciation Rights, to surrender to the Company unexercised that
portion of the underlying Option relating to the same number of
Shares as is covered by the Share Appreciation Rights (or the
portion of the Share Appreciation Rights so exercised) and to
receive in exchange from the Company an amount (paid as provided
in Section 7(b)(5)) equal to the excess of (x) the Fair Market
Value, on the date of exercise, of the Shares covered by the
surrendered portion of the underlying Option over (y) the
exercise price of the Shares covered by the surrendered portion
of the underlying Option. The Committee may limit the amount that
the participant will be entitled to receive upon surrender of a
Share Appreciation Right.
(2) Upon the exercise of the Share Appreciation
Right and surrender of the related portion of the underlying
Option, the Option, to the extent surrendered, will not
thereafter be exercisable. The underlying Option may provide that
such Share Appreciation Rights will be payable solely in cash.
The terms of the underlying Option shall provide a method by
which an alternative fair market value of the Shares on the date
of exercise shall be calculated based on one of the following:
(x) the closing price of the Shares on the quotation system or
national exchange on which they are then traded on the business
day immediately preceding the day of exercise; (y) the highest
closing price of the Shares on the quotation system or national
exchange on which they have been traded, during the 90 days
immediately preceding the Change in Control; or (z) the greater
of (x) and (y).
(3) In addition to any further conditions upon
exercise that may be imposed by the Committee, the Share
Appreciation Rights shall be exercisable only to the extent that
the related Option is exercisable, and each Share Appreciation
Right will expire no later than the date on which the related
Option expires. A Share Appreciation Right may only be exercised
at a time when the Fair Market Value of the Shares covered by the
Share Appreciation Right exceeds the exercise price of the Shares
covered by the underlying Option.
(4) Share Appreciation Rights may be exercised by
the participant's giving written notice of the exercise to the
Company, stating the number of Share Appreciation Rights he has
elected to exercise and surrendering the portion of the
underlying Option relating to the same number of Shares as the
number of Share Appreciation Rights elected to be exercised.
(5) The manner in which the Company's obligation
arising upon the exercise of the Share Appreciation Right will be
paid will be determined by the Committee and shall be set forth
in the participant's Option Agreement. The Committee may provide
for payment in Shares or cash, or a fixed combination of Shares
or cash, or the Committee may reserve the right to determine the
manner
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of payment at the time the Share Appreciation Right is exercised.
Shares issued upon the exercise of a Share Appreciation Right
will be valued at their Fair Market Value on the date of
exercise.
SECTION 8. CHANGE IN CONTROL PROVISION.
(a) Impact of Event. At any time during the 365 days
commencing with the date of a "Change in Control" as defined in Section
8(b), a majority of the "Continuing Directors" as defined in Section
8(d) (or one of the two Continuing Directors if only two Continuing
Directors are then serving on the Board of Directors or the sole
Continuing Director if only one Continuing Director is then serving on
the Board of Directors) may cause one or more of the following
provisions to take effect as stated and as of the date set forth in a
Written Action (the "Written Action") adopted to that effect (that
date, the "Accelerated Vesting Date") and if there are no Continuing
Directors, the following provisions will automatically take effect:
(1) Any Stock Options awarded under the Plan not
previously exercisable shall become fully exercisable;
(2) Any Share Appreciation Rights shall become
immediately exercisable;
(3) The restrictions applicable to any Restricted
Shares shall lapse and such shares and awards shall be deemed
fully vested; and
(4) The value of all outstanding Awards, in each
case to the extent vested or exercisable, shall, unless otherwise
determined by the Committee in its sole discretion at or after
grant but prior to any Change in Control or Potential Change in
Control, be paid to the participant in cash in exchange for the
surrender of those Awards on the basis of the "Change in Control
Price" as defined in Section 8(c) as of the Accelerated Vesting
Date;
but the provisions of Sections 8(a)(1) through (3) shall not apply with
respect to Awards granted to any Section 16 Participant which have been
held by such participant for less than six months and one day as of the
Accelerated Vesting Date.
(b) Definition of Change in Control. For purposes of Section
9(a), a "Change in Control" means the occurrence of any of the
following: (i) the Board or shareholders of the Company approve a
consolidation or merger that results in the shareholders of the
Company immediately prior to the transaction giving rise to the
consolidation or merger owning less than 50% of the total
combined voting power of all classes of stock entitled to vote of
the surviving entity immediately after the consummation of the
transaction giving rise to the merger or consolidation; (ii) the
Board or shareholders of the Company approve the sale of
substantially all of the assets of the Company or the liquidation
or dissolution of the Company; (iii) any person or other entity
(other than the Company or a Subsidiary or any Company employee
benefit plan (including any trustee of any such plan acting in
its capacity as trustee)) purchases any Shares (or securities
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convertible into Shares) pursuant to a tender or exchange offer
without the prior consent of the Board of Directors, or becomes
the beneficial owner of securities of the Company representing
25% or more of the voting power of the Company's outstanding
securities; or (iv) during any two-year period, individuals who
at the beginning of such period constitute the entire Board of
Directors cease to constitute a majority of the Board of
Directors, unless the election or the nomination for election of
each new director is approved by at least two-thirds of the
directors then still in office who were directors at the
beginning of that period.
(c) Change in Control Price. For purposes of this Section 8,
"Change in Control Price" means the greater of: (a) the highest
price per share paid in any transaction reported on the Nasdaq
National Market (or, if the Shares are not then traded on the
Nasdaq National Market, the highest price paid as reported for
any national exchange on which the Shares are then traded) or
paid or offered in any bona fide transaction related to a Change
in Control, at any time during the 60-day period immediately
preceding the occurrence of the Change in Control, and (b) the
highest price per share paid in any transaction reported on the
Nasdaq National Market (or, if the Shares are not then traded on
the Nasdaq National Market, the highest price paid as reported
for any national exchange on which the Shares are then traded),
at any time during the 60-day period immediately preceding the
date on which the Continuing Directors execute a Written Action
relating to that Change in Control as determined by the
Committee.
(d) Definition of Continuing Director. For purposes of this
Section 8, a "Continuing Director" means an individual who was a
member of the Board of Directors immediately prior to the date of
a Change in Control and is a member of the Board of Directors at
the time a Written Action relating to that Change in Control is
taken.
SECTION 9. AMENDMENTS AND TERMINATION.
The Board may at any time, in its sole discretion, amend, alter
or discontinue the Plan, but no such amendment, alteration or discontinuation
shall be made which would impair the rights of a participant under an Award
theretofore granted, without the participant's consent. The Company shall
submit to the shareholders of the Company for their approval any amendments to
the Plan which are required by Section 16 of the Exchange Act or the rules and
regulations thereunder, or Section 162(m) of the Code, to be approved by the
shareholders.
The Committee may at any time, in its sole discretion, amend the
terms of any Award, but no such amendment shall be made which would impair the
rights of a participant under an Award theretofore granted, without the
participant's consent; nor shall any such amendment be made which would make the
applicable exemptions provided by Rule 16b-3 under the Exchange Act unavailable
to any Section 16 Participant holding the Award without the participant's
consent.
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Subject to the above provisions, the Board shall have all
necessary authority to amend the Plan to make into account changes in applicable
securities and tax laws and accounting rules, as well as other developments.
SECTION 10. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for
incentive and deferred compensation. With respect to any payments not yet made
to a participant by the Company, nothing contained herein shall give any such
participant any rights that are greater than those of a general creditor of the
Company.
SECTION 11. GENERAL PROVISIONS.
(a) The Committee may require each participant acquiring Shares
pursuant to an Award under the Plan to represent to and agree
with the Company in writing that the participant is acquiring the
Shares without a view to distribution thereof. The certificates
for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer.
All Shares or other securities delivered under the
Plan shall be subject to such stop-transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Shares is then
listed, and any applicable federal or state securities laws, and
the Committee may cause a legend or legends to be put on any
certificates for such shares to make appropriate reference to
such restrictions.
(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject
to shareholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable
only in specific cases.
(c) Neither the adoption of the Plan, nor its operation, nor any
document describing, implementing or referring to the Plan, or
any part thereof, shall confer upon any participant under the
Plan any right to continue in the employ, or as a director, of
the Company or any Subsidiary or Affiliate, or shall in any way
affect the right and power of the Company or any Subsidiary or
Affiliate to terminate the employment, or service as a director,
of any participant under the Plan at any time with or without
assigning a reason therefor, to the same extent as the Company or
any Subsidiary or Affiliate might have done if the Plan had not
been adopted.
(d) For purposes of this Plan, a transfer of a participant
between the Company and its Subsidiaries and Affiliates shall not
be deemed a termination of employment.
(e) No later than the date as of which an amount first becomes
includable in the gross income of the participant for federal
income tax purposes with respect to
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any award under the Plan, the participant shall pay to the
Company, or make arrangements satisfactory to the Committee
regarding the payment, of, any federal, state or local taxes or
other items of any kind required by law to be withheld with
respect to such amount. Subject to the following sentence, unless
otherwise determined by the Committee, withholding obligations
may be settled with Shares, including unrestricted Shares
previously owned by the participant or Shares that are part of
the Award that gives rise to the withholding requirement.
Notwithstanding the foregoing, any election by a Section 16
Participant to settle such tax withholding obligation with Shares
that is part of such Award shall be subject to approval by the
Committee, in its sole discretion, if such approval is required
to exempt such election from Section 16(b) of the Exchange Act.
The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and
its Subsidiaries and Affiliates shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the participant.
(f) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Shares (at the time of any
dividend payment shall only be permissible if sufficient Shares
are available under Section 3 for such reinvestment (taking into
account then outstanding Stock Options).
(g) The Plan, all Awards made and actions taken thereunder and
any agreements relating thereto shall be governed by and
construed in accordance with the laws of the State of Ohio.
(h) All agreements entered into with participants pursuant to the
Plan shall be subject to the Plan.
(i) The provisions of Awards need not be the same with respect to
each participant.
SECTION 139. TERM OF PLAN.
No Award shall be granted pursuant to the Plan on or after 10
MAY 13, 2008, but Awards granted prior to such date may extend beyond that date.
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Exhibit 10.16
SECOND AMENDMENT AND CONFIRMATION OF TRANSFER AGREEMENT
-------------------------------------------------------
This SECOND AMENDMENT AND CONFIRMATION OF TRANSFER
AGREEMENT is dated as of April 17, 1998, by and between Cleveland Indians
Baseball Company, Limited Partnership, an Ohio limited partnership (the
"Transferor"), and Indians Club Trust, a Delaware business trust (the
"Transferee"), and amends and confirms that certain Transfer Agreement dated as
of May 22, 1992 between the Transferor and the Transferee (as amended by
Amendment No. 1 thereto dated as of December 20, 1993, as further amended on
June 28, 1996, and as further amended from time to time, the "Transfer
Agreement"). Capitalized terms used herein and not otherwise defined shall have
the same meanings herein as in Annex A referred to below.
W I T N E S S E T H:
--------------------
WHEREAS, by execution of the Transfer Agreement and the Assignment
dated the date thereof (the "Original Assignment"), the Transferor has
bargained, sold, transferred, assigned, set over and otherwise conveyed to the
Transferee the Rights and Revenues; and
WHEREAS, concurrently with the execution of the Transfer Agreement and
the Original Assignment, the Transferee incurred certain indebtedness for
borrowed money (the "Existing Indebtedness") and, in connection therewith,
granted certain liens on the Rights and Revenues as collateral security for such
Existing Indebtedness; and
WHEREAS, as of the date hereof, the Transferee and certain other
parties thereto are entering into the Club Trust Credit Agreement and the MLB
Credit Agreement pursuant to which the Lenders will make certain loans for the
benefit of the Transferee (collectively, the "MLB Credit Agreement Loans"),
certain proceeds of which MLB Credit Agreement Loans will be used by the
Transferee to refinance the Existing Indebtedness; and
WHEREAS, the Transferee and the MLB Trust have entered into the MLB
Pledge and Security Agreement dated the date hereof pursuant to which, among
other things, the Transferee has granted to the Administrative Agent for the
benefit of the Lenders and the Liquidity Banks a lien on the Rights and
Revenues, as such terms are defined in Annex A attached to the MLB Credit
Agreement (such Annex A attached to the MLB Credit Agreement being referred to
herein as the "Annex A"), as collateral security for the MLB Credit Agreement
Loans; and
WHEREAS, it is a condition precedent to the obligations of the Lenders
to enter into the Club Trust Credit Agreement and the MLB Credit Agreement, and
to make the MLB Credit Agreement Loans for the benefit of the Transferee
pursuant thereto, that the Transferor execute this Second Amendment and
Confirmation of Transfer Agreement and the form of Confirmatory Assignment
attached hereto as Exhibit A, and deliver certain other documents in the forms
attached hereto;
<PAGE> 2
NOW THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. ACKNOWLEDGMENT OF MLB CREDIT AGREEMENT AND MLB PLEDGE AND SECURITY
AGREEMENT; ASSIGNMENT. The Transferor acknowledges that, as of the date hereof,
the Transferee, the Lenders and the other parties thereto have entered into the
MLB Credit Agreement and MLB Pledge and Security Agreement. The Transferor
acknowledges that the Lenders have been induced to enter into said Agreements
by, among other things, (i) the representations, warranties and covenants of the
Transferor set forth in the Transfer Agreement and in this Second Amendment and
Confirmation thereof and (ii) the liens on the Rights and Revenues (as such
terms are defined in Annex A) granted to the Administrative Agent for the
benefit of the Lenders and the Liquidity Banks by the Transferee pursuant to the
MLB Pledge and Security Agreement. The Transferor has reviewed Annex A to the
MLB Credit Agreement, and is familiar with the definitional provisions contained
therein. It is the intention of the Transferor and the Transferee that all
Rights and Revenues (as such terms are defined in Annex A) were bargained, sold,
transferred, assigned, set over and otherwise conveyed from the Transferor to
the Transferee pursuant to the Transfer Agreement. Accordingly, by way of
confirming such transfer and transferring any assets constituting Rights and
Revenues (as defined in Annex A) which were not transferred pursuant to the
Transfer Agreement and the Original Assignment, the Transferor and the
Transferee will execute, at or before the Closing, a Confirmatory Assignment in
the form of Exhibit A hereto.
2. CONFIRMATION OF REPRESENTATIONS AND WARRANTIES OF TRANSFEREE AND
TRANSFEROR. The Transferee confirms that the representations and warranties set
forth in Section 3.01 of the Transfer Agreement are true and correct in all
material respects as of the date hereof. The Transferor confirms that the
representations and warranties set forth in Section 3.02 of the Transfer
Agreement and the information contained in Schedule 3.02(a)(x) as amended on the
date hereof is true and correct in all material respects as of the date hereof
except for the representations and warranties in Sections 3.02(b)(iv), (v), (vi)
and (vii) which were true and correct in all material respects as of May 20,
1992.
3. VOTING. The Transferor acknowledges and agrees that the MLB Trust,
the Administrative Agent and the Lenders are entering into the MLB Credit
Agreement and the MLB Pledge and Security Agreement in reliance upon, among
other things, the covenants of the Transferor set forth herein and in the
Transfer Agreement including, without limitation, the provisions of Section 5.05
of the Transfer Agreement.
4. EFFECTIVENESS. This Second Amendment and Confirmation of Transfer
Agreement shall become effective upon satisfaction of the following conditions:
2
<PAGE> 3
(a) The Transferee and the Administrative Agent shall have received the
following documents (each in form and substance satisfactory to the
Administrative Agent in it its sole discretion):
(i) An executed copy of this Second Amendment and Confirmation
of Transfer Agreement;
(ii) Executed Uniform Commercial Code financing statements
filed or to be filed in each jurisdiction determined by the
Administrative Agent, executed by (x) any party holding a lien on the
Rights and/or Revenues and (y) by the Transferor (or, as necessary, the
Commissioner), as seller and debtor, and naming the Transferee, as
purchaser and secured party, meeting the requirements of the laws of
each such jurisdiction, and as is necessary to maintain the
Transferee's perfected ownership status of the Rights and Revenues; and
(iii) Such other documents as Transferee or the Administrative
Agent may reasonably request.
5. TRANSACTION DOCUMENT. This Second Amendment and Confirmation and any
other document and certificate delivered in connection herewith shall be a
Transaction Document for all purposes.
6. NOTICES. All notice hereunder shall be given in accordance with the
provisions of Section 6.05 of the Transfer Agreement as amended hereby.
7. APPLICABLE LAW. THIS SECOND AMENDMENT AND CONFIRMATION OF TRANSFER
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUT REFERENCE TO ITS CHOICE OF LAW PROVISIONS.
8. CONFIRMATION; NO NOVATION. Except as expressly set forth herein,
this Second Amendment and Confirmation of Transfer Agreement shall not by
implication or otherwise limit, impair, constitute a waiver of, or otherwise
affect the rights and remedies of either party under the Transfer Agreement, nor
alter, modify, amend or in any way affect any of the terms, conditions,
obligations, covenants or agreements contained in the Transfer Agreement, all of
which are ratified and affirmed in all respects and shall continue in full force
and effect. This Second Amendment and Confirmation of Transfer Agreement shall
apply and be effective only with respect to the provisions of the Transfer
Agreement specifically referred to herein.
9. COUNTERPARTS. This Second Amendment and Confirmation of Transfer
Agreement may be executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together shall constitute but
one contract.
3
<PAGE> 4
10. HEADINGS. Section headings used herein are for convenience of
reference only, are not part of this Second Amendment and Confirmation of
Transfer Agreement and are not to affect the construction of, or to be taken
into consideration in interpreting, this Second Amendment and Confirmation of
Transfer Agreement.
[Remainder of This Page Intentionally Left Blank and Signature Pages Follow]
4
<PAGE> 5
SIGNATURE PAGE FOR SECOND AMENDMENT AND CONFIRMATION OF TRANSFER AGREEMENT
CLEVELAND INDIANS
EXECUTED as a sealed instrument as of the date first above written.
TRANSFEROR:
CLEVELAND INDIANS BASEBALL
COMPANY, LIMITED PARTNERSHIP
By: Cleveland Indians Baseball
Corporation, its general partner
By: /s/ Richard E. Jacobs
-------------------------------
Richard E. Jacobs
Chairman, Chief Executive Officer and
President
Acknowledged and Agreed:
TRANSFEREE:
INDIANS CLUB TRUST
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as
Club Trustee
By: /s/ David A. Vanaskey
-------------------------------
David A. Vanaskey
Assistant Vice President
FLEET NATIONAL BANK, as Administrative Agent
By: /s/ Patrick F. McAuliffe
-------------------------------
Patrick F. McAuliffe
Executive Vice President
OFFICE OF THE COMMISSIONER OF BASEBALL,
on its own behalf and as Agent for the
Transferor under the Central Fund Agreement
By: /s/ Jeffrey White
-------------------------------
Jeffrey White
Chief Financial Officer
<PAGE> 1
Exhibit 10.17
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
Dated as of _______________, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS, ETC.....................................................1
1.1 DEFINITIONS............................................................1
1.2 EXHIBITS..............................................................15
ARTICLE 11 ORGANIZATION ......................................................15
2.1 CONTINUATION .........................................................15
2.2 NAME .................................................................16
2.3 CHARACTER OF THE BUSINESS ............................................16
2.4 LOCATION OF THE PRINCIPAL PLACE OF BUSINESS ..........................16
2.5 REGISTERED AGENT AND REGISTERED OFFICE ...............................17
ARTICLE III TERM..............................................................17
ARTICLE IV CONTRIBUTIONS TO CAPITAL...........................................18
4.1 CAPITAL CONTRIBUTIONS.................................................18
4.2 ADDITIONAL CAPITAL CONTRIBUTIONS......................................18
4.4 PARTNER GUARANTEES....................................................20
4.5 NO THIRD PARTY BENEFICIARY............................................21
4.6 NO INTEREST; NO RETURN; NO ADDITIONAL REQUIRED CAPITAL CONTRIBUTION ..21
ARTICLE V CONDITIONS .........................................................22
5.1 GENERAL PARTNER CONDITIONS ...........................................22
ARTICLE VI ALLOCATIONS OF NET INCOME OR NET LOSS AND OTHER TAX AND
ACCOUNTING MATTERS...................................23
6.1 ALLOCATIONS...........................................................23
6.2 DISTRIBUTIONS.........................................................23
6.3 BOOKS OF ACCOUNT......................................................24
6.4 REPORTS...............................................................24
6.5 AUDITS................................................................25
6.6 TAX ELECTIONS AND RETURNS.............................................25
6.7 TAX MATTERS PARTNER...................................................25
6.8 RESTRICTED DISTRIBUTIONS..............................................26
6.9 WITHHOLDING...........................................................27
ARTICLE VII RIGHTS, DUTIES AND RESTRICTIONS OF THE GENERAL PARTNER ...........27
7.1 EXPENDITURES BY PARTNERSHIP...........................................27
7.2 POWERS AND DUTIES OF GENERAL PARTNER..................................28
7.3 MAJOR DECISIONS.......................................................31
7.4 ACTIONS WITH RESPECT TO CERTAIN DOCUMENTS.............................31
7.5 TITLE HOLDER..........................................................31
7.6 COMPENSATION OF THE GENERAL PARTNER...................................32
7.7 WAIVER AND INDEMNIFICATION............................................32
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ARTICLE VIII DISSOLUTION, LIQUIDATION AND TERMINATION ........................33
8.1 ACCOUNTING ..........................................................33
8.2 DISTRIBUTION ON DISSOLUTION .........................................33
8.3 TIMING REQUIREMENTS .................................................34
8.4 SALE OF PARTNERSHIP ASSETS ..........................................34
8.5 DISTRIBUTIONS IN KIND ...............................................35
8.6 DOCUMENTATION OF LIQUIDATION ........................................35
8.7 LIABILITY OF THE LIQUIDATING TRUSTEE ................................35
8.8 CREDITING OF GAIN (LOSS) ON LIQUIDATION .............................36
ARTICLE IX TRANSFER OF PARTNERSHIP INTERESTS..................................37
9.1 GENERAL PARTNER TRANSFER.............................................37
9.2 TRANSFERS By LIMITED PARTNERS........................................37
9.3 RESTRICTIONS ON TRANSFER.............................................38
9.4 REGISTRATION RIGHTS..................................................39
ARTICLE X RIGHTS AND OBLIGATIONS OF BE LIMITED PARTNERS.......................40
10.1 NO PARTICIPATION IN MANAGEMENT.......................................40
ARTICLE XI GRANT OF RIGHTS TO LIMITED PARTNER.................................41
11.1 GRANT OF RIGHTS......................................................41
11.2 TERMS OF RIGHTS......................................................42
11.3 REISSUANCE OR REALLOCATION OF PARTNERSHIP UNITS......................42
ARTICLE XII LIMITED PARTNER REPRESENTATIVES AND WARRANTIES....................42
12.1 REPRESENTATIONS AND WARRANTIES OF THE LIMITED PARTNER................42
ARTICLE XIII GENERAL PARTNER REPRESENTATIONS AND WARRANTIES...................43
13.1 REPRESENTATIONS AND WARRANTIES OF THE LIMITED PARTNER................43
ARTICLE XIV GENERAL PROVISIONS................................................43
14.1 NOTICES..............................................................43
14.2 SUCCESSORS...........................................................44
14.3 EFFECT AND INTERPRETATION............................................44
14.4 COUNTER..............................................................44
14.5 PARTNERS NOT AGENTS..................................................44
14.6 ENTIRE UNDERSTANDING.................................................44
14.7 AMENDMENTS...........................................................44
14.8 SEVERABILITY.........................................................45
14.9 TRUST PROVISION......................................................45
14.10 PRONOUNS AND HEADINGS................................................45
14.11 ASSURANCES...........................................................46
14.12 POWER OF ATTORNEY....................................................46
14.13 DURATION OF POWER....................................................47
Exhibit A - Allocations and Other Tax Matters
Exhibit B - Partnership Interests
Exhibit C - Terms of Limited Partners Registration Rights
Page ii
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Exhibit D - Rights Terms
Page iii
<PAGE> 5
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF CLEVELAND INDIANS BASEBALL COMPANY LIMITED PARTNERSHIP
THIS FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP is made and entered into as of the ______ day of ____________, 1998,
by and among the undersigned parties.
WITNESSETH:
-----------
WHEREAS, Cleveland Indians Baseball Company Limited
Partnership, an Ohio limited partnership (the "Partnership"), was formed by the
filing for record of a Certificate of Limited Partnership, dated as of November
10, 1986, with the Cuyahoga County Recorder pursuant to and in accordance with
Chapter 1782 of the Ohio Revised Code (the "Original Certificate");
WHEREAS, the undersigned desire to continue the Partnership as
a limited partnership and to amend and restate in its entirety the Limited
Partnership Agreement of the Partnership, dated as of November 10, 1986 (the
"Original Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto, intending legally to be bound, hereby agree as follows:
ARTICLE I
DEFINITIONS, ETC.
-----------------
1.1 DEFINITIONS. Except as otherwise herein expressly provided
or unless the context otherwise requires, the following terms and phrases shall
have the meanings set forth below whenever used in this Agreement and the
Exhibits hereto:
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"ACCOUNTANTS" shall mean Deloitte & Touche LLP or such other
firm or firms of independent certified public accountants selected by the
General Partner on behalf of the Partnership to audit the books and records of
the Partnership and to prepare statements and reports in connection therewith.
"ACT" shall mean Chapter 1782 of the Ohio Revised Code, as the
same may hereafter be amended from time to time.
"ADDITIONAL CAPITAL CONTRIBUTIONS" shall have the meaning set
forth in Section
"ADDITIONAL UNITS" shall have the meaning set forth in Section
4.3 hereof.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" shall mean, with respect to
any Partner, the deficit balance, if any, in such Partner's Capital Account as
of the end of any relevant taxable year and after giving effect to the following
adjustments:
(a) credit to such Capital Account any amounts which
such Partner is obligated or treated as obligated to restore
with respect to any deficit balance in such Capital Account
pursuant to Section 1.704-l(b)(2)(ii)(c) of the Regulations,
or is deemed to be obligated to restore with respect to any
deficit balance pursuant to the penultimate sentence of each
of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Regulations; and
(b) debit to such Capital Account the items described
in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the
Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the requirements of the alternate test for economic effect contained
in Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
"ADMINISTRATIVE EXPENSES" shall mean all administrative and
operating costs and expenses incurred by the Partnership and all General Partner
Expenses.
"AFFILIATE" shall mean, with respect to any Partner (or to any
other Person, the affiliates of whom are relevant for purposes of any of the
provisions of this Agreement), (i) such Partner's spouse, parents, descendants,
brothers and sisters; (ii) any trust for the benefit of any
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Person referred to in the preceding clause (i); or (iii) any Entity which,
directly or indirectly through one or more intermediaries, Controls, is
Controlled by or is under common Control with, any Person referred to in the
preceding clauses (i) and (ii).
"AGREEMENT" shall mean this First Amended and Restated Agreement
of Limited Partnership, as originally executed and as amended, modified,
supplemented or restated from time to time, as the context requires.
"ARTICLES" shall mean the Amended and Restated Articles of
Incorporation of the General Partner, as amended, modified, supplemented or
restated from time to time.
"AUDITED FINANCIAL STATEMENTS" shall mean financial statements
(balance sheets, statements of income, statements of partners' equity and
statements of cash flows) prepared in accordance with GAAP and accompanied by an
independent auditor's opinion.
"BALLPARK MANAGEMENT ASSETS" shall mean the assets, business,
contract rights and liabilities of Ballpark Management Company, an Ohio
corporation, immediately prior to the merger of Ballpark Management Company into
the General Partner pursuant to the Reorganization Agreement.
"BANKRUPTCY" shall mean, with respect to any Partner, (i) the
commencement by such Partner of any proceeding seeking relief as to such Partner
as debtor or bankrupt under any provision or chapter of the Bankruptcy Code or
any other federal or state law relating to insolvency, bankruptcy or similar
reorganization; (ii) an adjudication that such Partner is insolvent or bankrupt;
(iii) the entry of an order for relief under the Bankruptcy Code with respect to
such Partner; (iv) the filing of any such petition or the commencement of any
such case or proceeding against such Partner, unless such petition and the case
or proceeding initiated thereby are dismissed within ninety (90) days from the
date of such filing; (v) the filing of an answer by such Partner admitting the
allegations of any such petition; (vi) the appointment of a
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<PAGE> 8
trustee, receiver or custodian for all or substantially all of the assets of
such Partner, unless such appointment is vacated or dismissed within ninety (90)
days from the date of such appointment but not less than five (5) days before
the proposed sale of any assets of such Partner; (vii) the insolvency of such
Partner or the execution by such Partner of a general assignment for the benefit
of creditors; (viii) the convening by such Partner of a meeting of its
creditors, or any class thereof, for purposes of effecting a moratorium upon or
extension or composition of its debts; (ix) the failure of such Partner to pay
its debts as they mature; (x) the levy, attachment, execution or other seizure
of substantially all of the assets of such Partner where such seizure is not
discharged within thirty (30) days thereafter; or (xi) the admission by such
Partner in writing of its inability to pay its debts as they mature or that it
is generally not paying its debts as they become due. The term "bankruptcy," as
defined in this Agreement and as used herein, is intended and shall be deemed to
supersede and replace the events of withdrawal described in Sections 1782.23(D)
and (E) of the Act.
"BANKRUPTCY CODE" shall mean the United States Bankruptcy
Code, as amended, 11 U.S.C. Sections 101 ET SEQ., and as hereafter amended
from time to time.
"CBC" shall mean Cleveland Baseball Corporation, an Ohio
corporation.
"CAPITAL ACCOUNT" shall mean, with respect to any Partner, the
separate account as determined for Federal income tax purposes that the
Partnership shall establish and maintain for such Partner. The Capital Account
of any Partner shall be maintained in accordance with Exhibit A hereto.
"CAPITAL CALL" shall have the meaning set forth in Section
4.2.
"CAPITAL CONTRIBUTION" shall mean, with respect to any Partner,
the amount of money and the Gross Asset Value of any asset other than money
contributed to the capital of the Partnership with respect to the Partnership
Interest held by such Partner (net of all liabilities
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secured by such asset or that the Partnership is considered to assume or take
subject to under Section 752 of the Code).
"CERTIFICATE" shall mean the First Amended and Restated
Certificate of Limited Partnership for the Partnership of even date herewith, as
filed with the office of the Secretary of State of the State of Ohio, as it may
be amended from time to time in accordance with the terms of this Agreement and
the Act.
"CLASS A COMMON SHARES" shall mean the Class A Common Shares,
without par value, of the General Partner.
"CLASS B COMMON SHARES" shall mean the Class B Common Shares,
without par value, of the General Partner.
"CLOSING PRICE" on any date shall mean, with respect to the
Class A Common Shares, the last sale price, regular way, or, in case no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices, regular way, in either case as reported on the Nasdaq National
Market or, if the applicable Equity Shares are not quoted on the Nasdaq National
Market, on the principal national securities exchange on which such Equity
Shares are listed or admitted to trading of, if the Equity Shares are not quoted
on the NASDAQ National Market or listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Board of Directors of the General Partner for
the purpose or, if such prices are not available, the fair market value set by,
or in a manner established by, the Board of Directors of the General Partner in
good faith.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMMON SHARES" shall mean the Class A Common Shares and the
Class B Common Shares.
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"COMPLETION OF THE OFFERING" shall mean the closing of the
first sale of Class A Common Shares in the Offering.
"CONSENT OF THE LIMITED PARTNERS" means the written consent of
the Limited Partner or, if there is more than one Limited Partner, the written
consent of a Majority-In-Interest of the Limited Partners, which shall be
obtained prior to the taking of any action for which it is required by this
Agreement and may be given or withheld by the Limited Partner or a
Majority-In-Interest of the Limited Partners, as the case may be, in their sole
and absolute discretion.
"CONTRIBUTION DATE" shall have the meaning set forth in
Section 4.2(b) hereof.
"CONTROL" shall mean the ability, whether by the direct or
indirect ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation, to select the
managing partner of a partnership, or otherwise to select, or have the power to
remove and then select, a majority of those persons exercising governing
authority over an Entity. In the case of a limited partnership, the sole general
partner, all of the general partners to the extent each has equal management
control and authority, or the managing general partner or managing general
partners thereof shall be deemed to have control of such partnership and, in the
case of a trust, any trustee thereof or any Person having the right to select
any such trustee shall be deemed to have control of such trust.
"CORPORATE HEADQUARTERS" shall mean the General Partner's
offices located at 2401 Ontario Street, Cleveland, Ohio.
"CURRENT PER SHARE MARKET PRICE" on any date shall mean the
average of the Closing Price for the five (5) consecutive Trading Days ending on
such date.
"DEMAND NOTICE" shall have the meaning set forth in Section
14.2 hereof.
"DEPRECIATION" shall mean, with respect to any asset of the
Partnership for any taxable year or other period, the depreciation, depletion or
amortization, as the case may be,
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allowed or allowable for Federal income tax purposes in respect of such asset
for such taxable year or other period.
"ENTITY" shall mean any general partnership, limited
partnership, joint venture, corporation, limited liability company, trust,
business trust, cooperative or association.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended (or any corresponding provisions of succeeding laws).
"EXCHANGE RIGHTS" shall have the meaning set forth in Section
9.2 hereof.
"FORMATION TRANSACTIONS" shall mean the transactions
contemplated by the Reorganization Agreement and described in the Registration
Statement under the heading "Formation Transactions."
"FUNDING LOAN" shall mean any borrowing or refinancing of debt
by or on behalf of the General Partner from any lender (including the Limited
Partner) for the purpose of advancing the Funding Loan Proceeds to the
Partnership as a loan pursuant to Section 4.3(b) hereof.
"FUNDING NOTICE" shall have the meaning set forth in Section
4.3(b) hereof
"FUNDING LOAN PROCEEDS" shall mean the net cash proceeds
received by the General Partner in connection with any Funding Loan, after
deduction of all costs and expenses incurred by the General Partner in
connection with such Funding Loan.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"GAIN FROM SALE" shall mean the gain recognized for Federal
income tax purposes upon the sale or other taxable disposition of any asset of
the Partnership.
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"GENERAL PARTNER" shall mean Cleveland Indians Baseball Company,
Inc., an Ohio corporation, its duly admitted successors and assigns and any
other Person who is a general partner of the Partnership at the time of
reference thereto.
"GENERAL PARTNER EXPENSES" shall mean (i) costs and expenses
relating to the formation and continuity of existence of the General Partner,
including all taxes (excluding taxes based on income and state and local
franchise taxes), fees and assessments associated therewith, any and all
accounting, administration and legal expenses of the General Partner, and any
and all costs, expenses or fees payable to any director, officer or employee of
the General Partner or such subsidiaries, including, without limitation, costs
of indemnification, (ii) costs and expenses relating to any offer or
registration of securities by the General Partner and all statements, reports,
fees and expenses incidental thereto, including, without limitation,
underwriting discounts and selling commissions applicable to any such offer of
securities and any costs and expenses associated with any claims made by any
holder of such securities or any underwriters or placement agents thereof, (iii)
costs and expenses associated with the preparation and filing of any periodic
reports by the General Partner under Federal, state or local laws or
regulations, including filings with the SEC, (iv) costs and expenses associated
with compliance by the General Partner with laws, rules and regulations
promulgated by any regulatory body, including the SEC, and (v) all other
operating or administrative costs of the General Partner incurred in the
ordinary course of its business on behalf of the Partnership.
"GENERAL PARTNER LOAN" shall have the meaning set forth in
Section 4.3(b) hereof.
"GROSS ASSET VALUE" shall mean, with respect to any asset of
the Partnership, such asset's adjusted basis for Federal income tax purposes,
except as follows:
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(a) the initial Gross Asset Value of any asset contributed by
a Partner to the Partnership shall be the fair market value thereof as
initially agreed to by the General Partner and the contributing
Partner;
(b) if the General Partner reasonably determines that an
adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners, such as in the case of a sale, distribution
or liquidation of the Partnership, the Gross Asset Values of all
Partnership assets shall be adjusted to equal their respective gross
fair market values, as reasonably determined by the General Partner, as
of the following times:
(i) a Capital Contribution (other than a DE MINIMIS
Capital Contribution) to the Partnership by a new or existing
Limited Partner as consideration for a Partnership Interest;
(ii) the distribution by the Partnership to a Partner
of more than a DE MINIMIS amount of Partnership property as
consideration for the redemption of a Partnership Interest as
provided in Section 1.704-l(b)(2)(iv)(e) of the Regulations;
and
(iii) the liquidation of the Partnership within the
meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations;
(c) the Gross Asset Values of Partnership assets distributed
to any Partner shall be the gross fair market values of such assets
(taking Section 7701(g) of the Code into account) as reasonably
determined by the General Partner as of the date of distribution; and
(d) the Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Sections 734(b) or 743 (b) of the
Code, but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Section
1.704-1(b)(2)(iv)(m) of the Regulations (see Exhibit
B hereto); provided, however, that Gross Asset Values shall not be
adjusted pursuant to this paragraph to the extent that the
General Partner reasonably determines that an adjustment pursuant to
paragraph (b) above is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment
pursuant to this paragraph (d).
"LIEN" shall mean any liens, security interests, mortgages,
deeds of trust, charges, claims, encumbrances, pledges, options, rights of first
offer or first refusal and any other rights or interests of others of any kind
or nature, actual or contingent, or other similar encumbrances of any nature
whatsoever.
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"LIMITED PARTNER" shall mean CBC in its capacity as a limited
partner of the Partnership, its duly admitted successors and assigns as a
limited partner hereof, or any Person who is a limited partner of the
Partnership at the time of reference thereto.
"LIQUIDATING TRUSTEE" shall mean such individual or Entity as is
selected as the Liquidating Trustee hereunder by the General Partner or by a
court or other judicial proceeding, which individual or Entity may include an
Affiliate of the General Partner and who agrees in writing to be bound by the
terms of this Agreement. The Liquidating Trustee shall be empowered to give and
receive notices, reports and payments in connection with the dissolution,
liquidation and/or winding-up of the Partnership and shall hold and exercise
such other rights and powers as are necessary or required to permit all parties
to deal with the Liquidating Trustee in connection with the dissolution,
liquidation and/or winding-up of the Partnership.
"LOSS FROM SALE" shall mean the loss recognized for Federal
income tax purposes upon the sale or other taxable disposition of an asset of
the Partnership.
"MAJOR DECISIONS" shall have the meaning set forth in Section
7.3 hereof.
"MAJORITY-IN-INTEREST OF THE LIMITED PARTNERS" shall mean, if
there is more than one Limited Partner, Limited Partners who hold in the
aggregate more than fifty percent (50%) of the Percentage Interests then
allocable to and held by the Limited Partners and shall mean the Limited
Partner if there is only one Limited Partner.
"MINIMUM GAIN ATTRIBUTABLE TO PARTNER NONRECOURSE DEBT" shall
mean partner nonrecourse debt minimum gain" as determined in accordance with
Regulation section 1.704-2(i)(2).
"MJC" shall mean MJC Baseball, Inc., an Ohio corporation.
"MLB RULES" shall mean all rules, regulations, guidelines,
bulletins, directives, policies and agreements by virtue of the membership of
the Cleveland Indians in the American
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League of Professional Baseball Clubs and Major League Baseball, including the
American League Constitution, the Major League Agreement, and the Collective
Bargaining Agreement among Major League Baseball clubs and the Major League
Baseball Players Association.
"NET FINANCING PROCEEDS" shall mean the cash proceeds received
by the Partnership in connection with any borrowing or refinancing of borrowing
by or on behalf of the Partnership (whether or not secured), after deduction of
all costs and expenses incurred by the Partnership in connection with such
borrowing, and after deduction of that portion of such proceeds used to repay
any other indebtedness of the Partnership, or any interest or prepayment premium
thereon.
"NET INCOME OR NET LOSS" shall mean, for each taxable year or
other applicable period, an amount equal to the Partnership's net income or net
loss for such year or period as determined for Federal income tax purposes in
accordance with Section 703(a) of the Code (for this purpose, all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(i) of the Code shall be included in such net income or net loss).
"NET OPERATING CASH FLOW" shall mean, with respect to any fiscal
period of the Partnership, Net Income or Net Loss before depreciation,
amortization of financing and other costs, other non-cash items, gains or losses
on sales of assets and investments in marketable securities.
"NET SALE PROCEEDS" means the cash proceeds received by the
Partnership in connection with a sale of any asset by or on behalf of the
Partnership, or payable specifically out of the proceeds of such sale
(including, without limitation, any repayment of any indebtedness required to be
repaid as a result of such sale or which the General Partner elects to repay out
of the proceeds of such sale, together with accrued interest and premium, if
any, thereon and any
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sales commissions or other costs and expenses due and payable to any Person in
connection with a sale, including to a Partner or its Affiliates).
"NONCONTRIBUTING Partner" shall have the meaning set forth in
Section 4.2(b).
"NONRECOURSE DEDUCTIONS" shall have the meaning set forth in
Sections 1.704-2(b)(1) and (c) of the Regulations.
"NONRECOURSE Liabilities" shall have the meaning set forth in
Section 1.7042(b)(3) of the Regulations.
"OFFERING" shall mean the initial public offering of Class A
Common Shares as contemplated by the Registration Statement.
"ORIGINAL AGREEMENT" shall have the meaning ascribed in the
recitals of this Agreement.
"ORIGINAL CERTIFICATE" shall have the meaning ascribed in the
recitals of this Agreement.
"OWNERSHIP RESTRICTIONS" shall mean the restrictions on ownership
set forth in Article Fourth, Division C, Section 3 of the Articles.
"PARTNER Nonrecourse DEBT" shall have the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
"PARTNER NONRECOURSE DEDUCTIONS" shall have the meaning set forth
in Section 1.704-2(i)(2) of the Regulations.
"PARTNERS" shall mean the General Partner and the Limited
Partner, their duly admitted successors or assigns and any other Person who in a
partner of the Partnership at the time of reference thereto.
"PARTNERSHIP" shall mean the limited partnership hereby
constituted, as such limited partnership may from time to time be
re-constituted.
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"PARTNERSHIP INTEREST" shall mean the ownership interest of a
Partner in the Partnership from time to time, including such Partner's
Partnership Units and such Partner's Capital Account.
"PARTNERSHIP MINIMUM Gain" shall have the meaning set forth in
Section 1.704-2(b)(2) of the Regulations.
"PARTNERSHIP UNIT" shall mean an interest in the Partnership as
a Partner, measured in units. As of the date of this Agreement, there are
12,333,333 Partnership Units outstanding. The initial allocation of Partnership
Units to the Partners is as set forth on the attached Exhibit B.
"PERCENTAGE INTEREST" shall mean, with respect to any Partner,
the percentage ownership interest of such Partner in the Partnership which shall
be calculated by dividing the number of Units held by a Partner by the total
number of outstanding Partnership Units. The initial Percentage Interest of each
Partner is as set forth opposite its name on attached Exhibit B.
"PERSON" shall mean any individual or Entity.
"REORGANIZATION AGREEMENT" shall mean the Agreement and Plan of
Reorganization dated as of April 2, 1998 among the General Partner, CBC, MJC,
Ballpark Management, the Partnership, Richard E. Jacobs, Trustee under
Declaration of Trust dated April 23, 1987, and Richard E. Jacobs, Trustee of the
David H. Jacobs Marital Trust, pursuant to which the Formation Transactions were
effected.
"REGISTRATION STATEMENT" shall mean the Registration Statement on
Form S-1, Registration No. 333-49357 (including the prospectuses contained
therein), heretofore filed by the General Partner with the SEC, and any
amendments at any time made thereto (including post-effective amendments),
pursuant to which the General Partner proposes to offer and sell certain of its
Class A Common Shares.
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"REGULATIONS" shall mean the final or temporary Federal income
tax regulations promulgated under the Code, as such regulations may be amended
or adopted from time to time (including corresponding provisions of succeeding
regulations).
"REGISTRABLE SECURITIES" shall have the meaning set forth in
Section 9.5(a) hereof.
"REQUIRED FUNDS" shall have the meaning set forth in Section
4.2(b) hereof.
"RIGHTS" shall have the meaning set forth in Section 11.1
hereof.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SUBSTITUTED LIMITED PARTNER" means any Person who (i) is
permitted to become a Limited Partner pursuant to Section 9.2 and 9.3 and (ii)
agrees in writing to be bound by the terms of this Agreement by execution of a
copy of this Agreement or by another written undertaking acceptable to the
General Partner.
"THIRD PARTY" or "THIRD PARTIES" shall mean a Person or Persons
who is or are neither a Partner or Partners nor an Affiliate or Affiliates of a
Partner or Partners.
"THIRD PARTY FINANCING" shall mean financing or refinancing
obtained from a Third Party by the Partnership.
"TRADING DAY" shall mean a day on which the principal national
securities exchange or quotation system on which the Common Shares are listed or
admitted to trading is open for the transaction of business or, if the Class A
Common Shares are not listed or admitted to trading on any national securities
exchange or quotation, shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
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"TRANSFER" as a noun, shall mean any direct or indirect sale,
assignment, conveyance, pledge, hypothecation, gift, encumbrance or other
transfer, and as a verb, shall mean to sell, assign, convey, pledge,
hypothecate, give, encumber or otherwise transfer.
1.2 EXHIBITS. References to an "Exhibit" are, unless otherwise
specified, to one of the Exhibits attached to this Agreement, and references to
an "Article" or a "Section" are, unless otherwise specified, to one of the
Articles or Sections of this Agreement. Exhibits A, (Partnership Interests), B
(Allocations), C (Registration Rights), D (Exchange Rights), attached hereto and
referred to herein, are hereby incorporated herein by reference.
ARTICLE II
ORGANIZATION
------------
2.1 CONTINUATION. The parties hereto, each of whom represents to
the others that it is a Partner, do hereby agree that the Partnership is a
limited partnership continued pursuant to the provisions of the Act, and all
other pertinent laws of the State of Ohio, for the purposes and upon the terms
and conditions hereinafter set forth. The Partners agree (i) that the rights and
liabilities of the Partners shall be as provided in the Act except as otherwise
herein expressly provided and (ii) that the Original Agreement is superseded in
its entirety by this Agreement and that the business of the Partnership shall be
continued pursuant to the Act and the provisions hereof. Promptly upon the
execution and delivery hereof, the General Partner shall cause the Certificate
and such other notice, instrument, document, or certificate as may be required
by applicable law, and which may be necessary to enable the Partnership to
conduct its business, and to own its properties, under the Partnership name, to
be filed or recorded in all appropriate public offices.
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2.2 NAME. The name of the Partnership shall be "Cleveland Indians
Baseball Company Limited Partnership."
2.3 CHARACTER OF THE BUSINESS. The purpose of the Partnership
shall be to hold, own, operate, manage, and sell the membership of the Cleveland
Indians Baseball Club in the American League of Professional Baseball Clubs and
all assets, business and rights related or incidental thereto; to acquire, hold,
own, develop, construct, improve, maintain, operate, sell, lease, Transfer,
encumber, convey, exchange, and otherwise dispose of or deal with real and
personal property of all kinds; to enter into mortgage loans and notes and lines
of credit with lenders, in such principal amounts and under such terms and
conditions as shall be acceptable to the General Partner; to execute purchase
money notes; to issue securities; to borrow money and to make and issue notes,
debentures, obligations and evidences of indebtedness of all kinds, whether
secured by mortgage, pledge or otherwise, and to secure the same by mortgage,
pledge or otherwise; to make, enter into, perform and carry out any
arrangements, contracts, franchises, concessions and/or agreements of every kind
for any lawful purpose, without limit as to amount or otherwise, with any
corporation, association, partnership, firm, trustee, syndicate, individual
and/or any political or governmental division or subdivision, domestic or
foreign; to acquire, hold title to, own, operate, sell or transfer the assets of
the Partnership or any part thereof and generally to make and perform agreements
and contracts of every kind and description and to do any and all things
necessary or incidental to the foregoing.
2.4 LOCATION OF THE PRINCIPAL PLACE OF BUSINESS. The location of
the principal place of business of the Partnership shall be at 2401 Ontario
Street, Cleveland, Ohio 44115, or such other location as shall be selected from
time to time by the General Partner in its sole discretion.
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2.5 REGISTERED AGENT AND REGISTERED Office. The agent for service
of process of the Partnership pursuant to the requirements of Section 1782.04
shall be the General Partner, 2401 Ontario Street, Cleveland, Ohio 44115, or
such other Person as the General Partner may select in its sole discretion.
ARTICLE III
TERM
----
3.1 COMMENCEMENT. The Partnership commenced business as a limited
partnership upon the filing of the Original Certificate with the Cuyahoga County
Recorder. The Partnership has filed a Certificate of Limited Partnership with
the Ohio Secretary of State as required by Section 1782.63(A)(1) of the Ohio
Revised Code.
3.2 DISSOLUTION. The Partnership shall be dissolved upon the
occurrence of the earliest of the following events:
(a) The withdrawal, removal or Bankruptcy of the
General Partner or assignment by the General Partner of its
entire interest in the Partnership or the occurrence of any other
event that results in the General Partner ceasing to be a general
partner of the Partnership under the Act; provided, however, that
the Partnership shall not be dissolved and required to be
wound up in connection with any of the events specified in this
clause (a) if (i) at the time of the occurrence of such
event there is at least one remaining general partner of the
Partnership who is hereby authorized to and does carry on the
business of the Partnership, or (ii) within ninety (90) days
after the occurrence of such event, all remaining Partners agree
in writing to continue the business of the Partnership and to the
appointment, effective as of the date of such event, if required,
of one or more successor general partners of the Partnership;
(b) The election to dissolve the Partnership made
in writing by the General Partner with the Consent of the Limited
Partners;
(c) The sale or other disposition of all or
substantially all the assets of the Partnership unless the
General Partner, with the Consent of the Limited Partners, elects
to continue the Partnership business for the purposes of the
receipt and the collection of indebtedness or the collection of
any other consideration to be received in exchange for the assets
of the Partnership;
(d) The entry of a decree of judicial dissolution
under the Act; or
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(e) ,2048
-------- ---
ARTICLE IV
CONTRIBUTIONS TO CAPITAL
------------------------
4.1 CAPITAL CONTRIBUTIONS. In connection with the formation of
the Partnership, CBC, as the original general partner of the Partnership, and
MJC, as the original limited partner of the Partnership, contributed to the
capital of the Partnership as reflected on the books and records of the
Partnership. In connection with the Formation Transactions contemplated by the
Reorganization Agreement, the Company has contributed to the Partnership the
Ballpark Management Assets in exchange for 2,281,667 Units representing an 18.5%
Percentage Interest in the Partnership. The Partners agree that the fair market
value of the Ballpark Management Assets is an amount equal to the number of
Partnership Units issued to the General Partner in exchange for the Ballpark
Management Assets Multiplied by the initial public offering price per share of
the Class A Common Shares in the Offering.
4.2 ADDITIONAL CAPITAL CONTRIBUTIONS. (a) In the event additional
funds (over and above the Capital Contributions made by the Partners pursuant to
Section 4.1) are required or desired to carry on the business and purposes of
the Partnership, and to the extent the General Partner determines that the
Partnership should not borrow such additional funds pursuant to Section 4.3, the
General Partner, in its sole discretion, may call for capital contributions (a
"Capital Call") from the Partners. In such event, the General Partner shall make
an Additional Capital Contribution in an amount equal to the total amount of the
Capital Call multiplied by the General Partner's Percentage Interest. The
Limited Partner may, but shall not be required to, make an Additional Capital
Contribution as hereinafter provided.
(b) A written request for an Additional Capital Contribution
shall be issued to the Limited Partner in proportion to its Percentage Interest
in the Partnership, which request shall
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specify the date, which shall not be less than twenty (20) days from the date
of such request, upon which such Additional Capital Contribution is to be made
(the "Contribution Date"). In the event of the failure of the Limited Partner to
make its Additional Capital Contribution ("Noncontributing Partner"), the
General Partner may, but shall not be obligated to, contribute to the
Partnership all or any portion of the Additional Capital Contribution of the
Noncontributing Partner. Additional Partnership Units shall be issued to each
Partner making an Additional Capital Contribution. The number of Partnership
Units issued to each Partner shall equal the amount of the Additional Capital
Contribution divided by the Current Per Share Market Price of the Class A Common
Shares. Exhibit B to this Agreement may be amended by the General Partner to
reflect the issuance of additional Partnership Units pursuant to this Section
4.2.
4.3 ADDITIONAL Funds. (a) In addition to funds obtained by the
Partnership pursuant to Section 4.2, the Partnership may obtain funds ("Required
Funds") which it considers necessary to meet the needs and obligations and
requirements of the Partnership, or to maintain adequate working capital or to
repay Partnership indebtedness, and to carry out the Partnership's purposes,
from the proceeds of Third Party Financing, in each case pursuant to such terms,
provisions, and conditions and in such manner (including the engagement of
brokers and/or investment bankers to assist in providing such financing) and
amounts as the General Partner shall determine in its sole discretion.
(b) To the extent the General Partner borrows all or any portion
of the Required Funds by entering into a Funding Loan, the General Partner
shall, on the Funding Date, lend (the "General Partner Loan") to the Partnership
the Funding Loan Proceeds on the same terms and conditions, to the extent
permitted by applicable law, including interest rate, repayment schedule, costs
and expenses, as shall be applicable with respect to or incurred in connection
with the Funding Loan.
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(c) Notwithstanding the foregoing, Limited Partners shall have
the right, but not the obligation to make a loan of all or any portion of the
Required Funds to the Partnership upon such terms as are approved by the General
Partner in its sole and absolute discretion.
4.4 PARTNER GUARANTEES. Notwithstanding anything else to the
contrary in this Agreement, the General Partner shall no less than ninety (90)
days prior to the end of each calendar year, beginning in 1998, cause the
Accountants to prepare and provide to the Limited Partner, a study analyzing
each refinancing, reduction (other than scheduled periodic amortization of
principal) of debt or other event that occurred during that year that reduced
the amount of any nonrecourse liabilities of the Partnership that a Limited
Partner or any of its Affiliates may include in the tax basis of their
Partnership Interests. Upon receipt of such study, the Limited Partner shall
inform the General Partner of any action it desires to take in order to increase
the "economic risk of loss" (within the meaning of Section 1.752-2 of the
Regulations) that it has with respect to liabilities of the Partnership,
including the guaranty of debt of the Partnership. The General Partner shall
permit the Limited Partner to take the requested action unless and until the
General Partner shall in good faith determine that any such action is reasonably
likely to reduce the portion of the Partnership's distributions to the General
Partner that represent a return of capital for Federal income tax purposes for
such year or would otherwise have an adverse effect on the tax position of the
General Partner.
4.5 No THIRD PARTY BENEFICIARY. No creditor or other third party
having dealings with the Partnership shall have the right to enforce the right
(there being no obligation) of any Partner to make Capital Contributions or
loans or to pursue any other right or remedy hereunder or at law or in equity,
it being understood and agreed that the provisions of this Agreement shall be
solely for the benefit of, and may be enforced solely by, the parties hereto and
their respective successors and assigns. None of the rights of the Partners
herein set forth
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(there being no obligation) to make Capital Contributions or loans to the
Partnership shall be deemed an asset of the Partnership for any purpose by any
creditor or other third party, nor may such rights or obligations be sold,
Transferred, or assigned by the Partnership or pledged or encumbered by the
Partnership to secure any debt or other obligation of the Partnership or of any
of the Partners.
4.6 NO INTEREST; NO RETURN; NO ADDITIONAL REQUIRED CAPITAL
CONTRIBUTION. No Partner shall be entitled to interest on its Capital
Contribution or on that Partner's Capital Account. Except as provided herein or
by law, no Partner shall have any right to demand or receive the return of its
Capital Contribution from the Partnership. No Partner shall be obligated to make
any additional Capital Contribution to the Partnership.
ARTICLE V
CONDITIONS
----------
5.1 GENERAL PARTNER CONDITIONS. The obligation of the General
Partner to consummate the transactions contemplated herein is subject to
fulfillment of all of the following conditions on or prior to the date hereof:
(a) All consents, waivers, approvals and
authorizations required for the consummation of the transactions
contemplated hereby shall have been obtained;
(b) All of the representations and warranties of
the Limited Partner shall be true and correct as of the date
hereof; and
(c) The Registration Statement shall have become
effective under the provisions of the Securities Act of 1933, as
amended, and no stop order or other administrative proceeding
shall have been entered or instituted with respect thereto as of
the date hereof.
5.2 LIMITED PARTNER CONDITIONS. The obligation of the Limited
Partner to consummate the transactions contemplated herein is subject to the
fulfillment of all of the following conditions on or prior to the date hereof:
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(a) All consents, waivers, approvals and authorizations
required for the consummation of the transactions contemplated hereby
shall have been obtained;
(b) All of the representations and warranties of the General
Partner shall be true and correct as of the date hereof; and
(c) The Registration Statement shall have become effective
under the provisions of the Securities Act of 1933, as amended, and no
stop order or other administrative proceeding shall have been entered
or instituted with respect thereto as of the date hereof.
ARTICLE VI
ALLOCATIONS OF NET INCOME OR NET LOSS
-------------------------------------
AND OTHER TAX AND ACCOUNTING MATTERS
------------------------------------
6.1 ALLOCATIONS. The Net Income or Net Loss and/or other
Partnership items shall be allocated among the Partners pursuant to the
provisions of Exhibit A hereto.
6.2 DISTRIBUTIONS. The General Partner shall only permit the
Partnership to distribute to the Partners any portion of Net Operating Cash Flow
or any portion of Net Sales Proceeds as follows: (i) the General Partner shall
cause the Partnership to distribute in cash to the Partners, at such times
during each year as may be determined by the General Partner, an amount equal
to the aggregate estimated Federal, state and local income tax liability of the
Partners as a result of the Net Income for such year allocated to the Partners,
calculated as if (A) all of the Partners were natural persons resident in the
City of Cleveland in the State of Ohio; (B) all of the Partners were taxed at
the maximum rates provided under applicable Federal and State of Ohio income tax
laws; (C) allocations from the Partnership were the sole source of income and
loss for the Partners for such year; and (D) all allocations of losses from the
Partnership for all periods commencing after the date hereof had been carried
forward and applied to reduce the Partners' tax liability with respect to
Partnership income allocated in each successive year (to the extent not
previously offset against allocations of Partnership income), to the extent
permitted under applicable tax law; it being understood that all such
distributions shall
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be determined and made without regard to any available or applied tax credits
and otherwise without regard to the tax status, profile or other tax liability
of the Partners; and (ii) the General Partner may cause the Partnership to make
distributions to the Partners in addition to those required by clause (i) if,
prior to the making of such distributions, the Board of Directors of the General
Partner shall have (X) by resolution adopted by a majority of the directors who
are not Affiliates of the Limited Partner, approved a cash dividend on its
Common Shares in an amount equal to the General Partner's share of such
distribution or (Y) by resolution unanimously adopted by all of the directors
who are not Affiliates of the Limited Partner, made a determination that it
is in the best interests of the General Partner's shareholders that the funds
that would be the subject of such distribution be used to meet existing
obligations of the General Partner or obligations anticipated to be incurred by
the General Partner within six months of the date of such distribution. All such
distributions shall be made in accordance with the Partners' Percentage
Interests.
6.3 BOOKS OF ACCOUNT. At all times during the continuance of
the Partnership, the General Partner shall maintain or cause to be maintained
full, true, complete and correct books of account in accordance with GAAP
wherein shall be entered particulars of all monies, goods, or effects belonging
to or owing to or by the Partnership, or paid, received, sold or purchased in
the course of the Partnership's business, and all of such other transactions,
matters and things relating to the business of the Partnership as are usually
entered in books of account kept by persons engaged in a business of a like kind
and character. In addition, the Partnership shall keep all records as required
to be kept pursuant to the Act. The books and records of account shall be kept
at the principal office of the Partnership, and the Limited Partner shall at all
reasonable times have access to such books and records, and have the right to
inspect the same for any purpose reasonably related to the Limited Partner's
interest as a limited partner of the Partnership.
6.4 REPORTS. The General Partner shall cause to be submitted
to the Limited Partner promptly upon receipt of the same from the Accountants
and in no event later than April 1 of each year, copies of Audited Financial
Statements for the Partnership for the
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immediately preceding taxable year, together with the reports thereon, and all
supplementary schedules and information prepared by the Accountants.
6.5 AUDITS. Not less frequently than annually, the books and
records of the Partnership shall be audited by the Accountants.
6.6 TAX ELECTIONS AND RETURNS. All elections required or
permitted to be made by the Partnership under any applicable tax law shall be
made by the General Partner in its sole discretion; provided, however, the
General Partner shall, if requested by a transferee, file an election on behalf
of the Partnership pursuant to Section 754 of the Code to adjust the basis of
the Partnership property in the case of a Transfer of a Partnership Interest,
including Transfers made in connection with the exercise of Rights made in
accordance with the provisions of the Agreement. The Partnership's taxable year
shall be a calendar year. The basis on which the Partnership's books of account
are kept for Federal income tax purposes shall be determined by the General
Partner. The General Partner shall be responsible for preparing and filing all
Federal and state tax returns for the Partnership on a timely basis and
furnishing copies thereof to the Partners, together with required Partnership
schedules showing allocations of tax items, all within the period of time
prescribed by law.
6.7 TAX MATTERS PARTNER. The General Partner is hereby
designated as the Tax Matters Partner within the meaning of Section 6231(a)(7)
of the Code for the Partnership; provided, however, (i) in exercising its
authority as Tax Matters Partner it shall be limited by the provisions of this
Agreement affecting tax aspects of the Partnership; (ii) the General Partner
shall consult in good faith with the Limited Partner regarding the filing of a
Code Section 6227(b) administrative adjustment request with respect to the
Partnership before filing such request, it being understood, however, that the
provisions hereof shall not be construed to limit the ability of any Partner,
including the General Partner, to file an administrative
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adjustment request on its own behalf pursuant to Section 6227(a) of the Code;
(iii) the General Partner shall consult in good faith with the Limited Partner
regarding the filing of a petition for judicial review of an administrative
adjustment request under Section 6228 of the Code, or a petition for judicial
review of a final partnership administrative judgment under Section 6226 of the
Code relating to the Partnership before filing such petition; (iv) the General
Partner shall give prompt notice to the Limited Partner of the receipt of any
written notice that the Internal Revenue Service or any state or local taxing
authority intends to examine Partnership income tax returns for any year, and
the General Partner shall consult in good faith with the Limited Partner
regarding the handling of any such examination, (v) the General Partner shall
consult in good faith with the Limited Partner concerning the appeal of any
adjustments proposed as a result of any examination referred to in clause (iv),
(vi) the General Partner shall give prompt notice to the Limited Partner of the
receipt of written notice of the beginning of an administrative proceeding at
the Partnership level relating to the Partnership under Section 6223 of the
Code, receipt of written notice of the final Partnership administrative
adjustment relating to the Partnership pursuant to Section 6223 of the Code, and
receipt of any request from the Internal Revenue Service for waiver of any
applicable statute of limitations with respect to the filing of any tax return
by the Partnership; and (vii) the General Partner shall promptly notify the
Limited Partner if the General Partner does not intend to file for judicial
review with respect to the Partnership.
6.8 RESTRICTED DISTRIBUTIONS. Notwithstanding any provision to
the contrary contained in this Agreement, the Partnership, and the General
Partner on behalf of the Partnership, shall not make a distribution to any
Partner on account of its interest in the Partnership if such distribution would
violate Section 1782.87 of the Act or other applicable law.
6.9 WITHHOLDING. Each Partner hereby authorizes the Partnership
to withhold from or pay on behalf of or with respect to such Partner any amount
of Federal, state, local, or
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foreign taxes that the General Partner determines the Partnership is required
to withhold or pay with respect to any amount distributable or allocable to such
Partner pursuant to this Agreement, including, without limitation, any taxes
required to be withheld or paid by the Partnership pursuant to Sections 1441,
1442, 1445, or 1446 of the Code. Any amount paid on behalf of or with respect to
a Partner shall constitute a loan by the Partnership to such Partner, which loan
shall be due within fifteen (15) days after repayment is demanded of the
Partner in question, and may be repaid through withholding of subsequent
distributions to such Partner. Any amounts payable by a Limited Partner
hereunder shall bear interest at the lesser of (i) the base rate on corporate
loans at large United States money center commercial banks, as published from
time to time in THE WALL STREET JOURNAL, or (ii) the maximum lawful rate of
interest on such obligation, such interest to accrue from the date such amount
is due (i.e., fifteen (15) days after demand) until such amount is paid in
full. To the extent the payment or accrual of withholding tax results in a
Federal, state or local tax credit to the Partnership, such credit shall be
allocated to the Partner to whose distribution the tax is attributable.
ARTICLE VII
RIGHTS, DUTIES AND RESTRICTIONS OF THE GENERAL PARTNER
------------------------------------------------------
7.1 EXPENDITURES BY PARTNERSHIP. The General Partner is hereby
authorized to pay compensation for accounting, administrative, legal, technical,
management and other services rendered to the Partnership. All of the aforesaid
expenditures shall be made on behalf of the Partnership, and the General Partner
shall be entitled to reimbursement by the Partnership for any expenditures
incurred by it on behalf of the Partnership which shall be made other than out
of the funds of the Partnership. The Partnership shall also assume, and pay when
due, all Administrative Expenses, including General Partner Expenses.
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7.2 POWERS AND DUTIES OF GENERAL PARTNER. The General Partner
shall be responsible for the management of the Partnership's business and
affairs. Except as otherwise herein expressly provided, and subject to the
limitations contained in Section 7.3 hereof with respect to Major Decisions, the
General Partner shall have, and is hereby granted, full and complete power,
authority and discretion to take such action for and on behalf of the
Partnership and in its name as the General Partner shall, in its sole and
absolute discretion, deem necessary or appropriate to carry out the purposes for
which the Partnership was organized. Except as otherwise expressly provided
herein, and subject to Section 7.3 hereof, the General Partner shall have the
right, power and authority:
(a) To manage, control, invest, reinvest, acquire by
purchase, lease or otherwise, sell, contract to purchase or
sell, grant, obtain, or exercise options to purchase, options
to sell or conversion rights, assign, Transfer, convey,
deliver, endorse, exchange, pledge, mortgage, abandon,
improve, repair, maintain, insure, lease for any term and
otherwise deal with any and all property, real and personal,
of whatsoever kind and nature, and wheresoever situated, in
furtherance of the business or purposes of the Partnership;
(b) To employ, engage or contract with or dismiss from
employment or engagement Persons to the extent deemed
necessary by the General Partner for the operation and
management of the Partnership business and to elect or appoint
Persons to, and remove Persons from, such offices and
positions as the General Partner may determine;
(c) To enter into, make, amend, perform and carry out
or cancel and rescind, contracts and other obligations,
including, without limitation, guarantees and indemnity
agreements for any purpose pertaining to the business of the
Partnership; and to loan money to, borrow money from and
engage in transactions with Affiliates of the Partnership or
any other Person;
(d) To borrow money, procure loans and advances from
any Person for Partnership purposes, and to apply for and
secure, from any Person, credit or accommodations; to contract
liabilities and obligations, direct or contingent and of every
kind and nature with or without security; and to repay,
discharge, settle, adjust, compromise, or liquidate any such
loan, advance, credit, obligation or liability;
(e) To pledge, hypothecate, mortgage, assign, deposit,
deliver, enter into sale and leaseback or lease and leaseback
arrangements or otherwise give as security or as additional or
substitute security, or for sale or other disposition any and
all Partnership assets, tangible or intangible, including, but
not limited to, real
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estate and beneficial interests in land trusts, and to make
substitutions thereof, and to receive any proceeds thereof
upon the release or surrender thereof; to sign, execute and
deliver any and all assignments, deeds and other contracts and
instruments in writing; to authorize, give, make, procure,
accept and receive moneys, payments, property, notices,
demands, vouchers, receipts, releases, compromises and
adjustments; to waive notices, demands, protests and authorize
and execute waivers of every kind and nature; to enter into,
make, execute, deliver and receive written agreements,
undertakings and instruments of every kind and nature; to give
oral instructions and make oral agreements; and generally to
do any and all other acts and things incidental to any of the
foregoing or with reference to any dealings or transactions
which the General Partner may deem necessary, proper or
advisable to effect or accomplish any of the foregoing or to
carry out the business and purposes of the Partnership;
(f) To acquire and enter into any contract of insurance
which the General Partner deems necessary or appropriate for
the protection of the Partnership, for the conservation of the
Partnership's assets or for any purpose convenient or
beneficial to the Partnership;
(g) To conduct any and all banking transactions on
behalf of the Partnership; to adjust and settle checking,
savings, and other accounts with such institutions as the
General Partner shall deem appropriate; to draw, sign,
execute, accept, endorse, guarantee, deliver, receive and pay
any checks, drafts, bills of exchange, acceptances, notes,
obligations, undertakings and other instruments for or
relating to the payment of money in, into, or from any account
in the Partnership's name; to execute, procure, consent to and
authorize extensions and renewals of any of the foregoing; to
make deposits into and withdrawals from the Partnership's bank
accounts and to negotiate or discount commercial paper,
acceptances, negotiable instruments, bills of exchange and
dollar drafts;
(h) To demand, sue for, receive, and otherwise take
steps to collect or recover all debts, rents, proceeds,
interests, dividends, goods, chattels, income from property,
damages and all other property, to which the Partnership may
be entitled or which are or may become due the Partnership
from any Person, to commence, prosecute or enforce, or to
defend, answer or oppose, contest and abandon all legal
proceedings in which the Partnership is or may hereafter be
interested; and to settle, compromise or submit to arbitration
any accounts, debts, claims, disputes and matters which may
arise between the Partnership and any other Person and to
grant an extension of time for the payment or satisfaction
thereof on any terms, with or without security;
(i) To make arrangements for financing, including the
taking of all action deemed necessary or appropriate by the
General Partner to cause any approved loans to be closed;
(j) To take all reasonable measures necessary to insure
compliance by the Partnership with applicable arrangements,
and other contractual obligations and arrangements entered
into by the Partnership from time to time in accordance
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with the provisions of this Agreement, including periodic
reports as required to be submitted to lenders and using all
due diligence to insure that the Partnership is in compliance
with its contractual obligations;
(k) To maintain the Partnership's books and records;
(1) To prepare and deliver, or cause to be prepared and
delivered by the Partnership's Accountants, all financial and
other reports with respect to the operations of the
Partnership and all Federal and state tax returns and reports;
(m) To act in any state or nation in which the
Partnership may lawfully act, for itself or as principal,
agent or representative for any person with respect to any
business of the Partnership;
(n) To become a partner or member in, and perform the
obligations of a partner or member of, any general or limited
partnership or limited liability company;
(o) To apply for, register, obtain, purchase or
otherwise acquire trademarks, trade names, labels and designs
relating to or useful in connection with any business of the
Partnership, and to use, exercise, develop and license the use
of the same;
(p) To pay or reimburse any and all actual fees, costs
and expenses incurred in the formation and organization of the
Partnership;
(q) To do all acts which are necessary, customary or
appropriate for the protection and preservation of the
Partnership's assets, including the establishment of reserves;
(r) To cause the Partnership to merge with, or
consolidate into, another business entity (as defined in
Section 1782.01(C) of the Act); and in accordance with Section
1782.431 of the Act, notwithstanding anything to the contrary
contained in this Agreement, an agreement of merger or
consolidation approved by the General Partner may (i) effect
any amendment to this Agreement, or (ii) effect the adoption
of a new partnership agreement for the Partnership if it is
the surviving or resulting limited partnership in the merger
or consolidation; any amendment to this Agreement or adoption
of a new partnership agreement made pursuant to the foregoing
sentence shall be effective at the effective time or date of
the merger or consolidation. The provisions of this Subsection
7.2(r) shall not be construed to limit the accomplishment of a
merger or of any of the matters referred to herein by any
other means otherwise permitted by law; and
(s) In general, to exercise all of the general rights,
privileges and powers permitted to be had and exercised by a
general partner of an Ohio limited partnership under the Act.
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7.3 MAJOR DECISIONS. The General Partner shall not, without the
Consent of the Limited Partners, undertake any of the following actions on
behalf of the Partnership (the "Major Decisions"):
(a) Amend, modify or terminate this Agreement other
than pursuant to Section 14.7 hereof.
(b) Make a general assignments for the benefit of
creditors or appoint or acquiesce in the appointment of a
custodian, receiver or trustee for all or any part of the
assets of the Partnership.
(c) Take title to any personal or real property, other
than in the name of the Partnership.
(d) Institute any proceeding for Bankruptcy on behalf
of the Partnership.
7.4 ACTIONS WITH RESPECT TO CERTAIN DOCUMENTS. Notwithstanding
the provisions of Section 7.3 hereof to the contrary, whenever the consent,
agreement, authorization or approval of the Partnership is required under any
agreement to which a Limited Partner or its Affiliate is a party in interest
other than in such Limited Partner's capacity as a Limited Partner of the
Partnership, the Consent of such Limited Partner shall not be required.
7.5 TITLE HOLDER. To the extent allowable under applicable law,
title to all or any part of the assets of the Partnership may be held in the
name of the Partnership or in the name of any other Person, the beneficial
interest in which shall at all times be vested in the Partnership. Any such
title holder shall perform any and all of its respective functions to the extent
and upon such terms and conditions an may be determined from time to time by the
General Partner, consistent with the business purposes of the Partnership.
7.6 COMPENSATION OF THE GENERAL PARTNER. The General Partner
shall not be entitled to any compensation for services rendered to the
Partnership solely in its capacity as General Partner, except with respect to
reimbursement for those costs and expenses constituting Administrative Expenses.
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<PAGE> 35
7.7 WAIVER AND INDEMNIFICATION. (a) Neither the General Partner
nor any Person acting on its behalf, pursuant hereto, shall be liable,
responsible or accountable in damages or otherwise to the Partnership or to any
Partner for any acts or omissions performed or omitted to be performed by them
within the scope of the authority conferred upon the General Partner by this
Agreement and the Act; provided that the General Partner's or such other
Person's conduct or omission to act was taken in good faith and in the belief
that such conduct or omission was in the best interests of the Partnership and,
provided further, that the General Partner or such other Person shall not be
guilty of fraud, misconduct or negligence. The Partnership shall, and hereby
does, to the fullest extent permitted by applicable law, indemnify and hold
harmless the General Partner and its Affiliates and any individual acting on
their behalf, including their respective officers and directors, from any loss,
damage, claim or liability, including, but not limited to, reasonable attorneys'
fees and expenses, incurred by them by reason of any act performed by them in
accordance with the standards set forth above or in enforcing the provisions of
this indemnity; provided, however, that no Partner shall have any personal
liability with respect to the foregoing indemnification, any such
indemnification to be satisfied solely out of the assets of the Partnership.
(b) Any Person entitled to indemnification under this Agreement
shall be entitled to receive, upon application therefor, advances to cover the
costs of defending any proceeding against such Person; provided, however, that
such advances shall be repaid to the Partnership, without interest, if such
Person is found by a court of competent jurisdiction upon entry of a final
judgment not to be entitled to such indemnification. All rights of the
indemnitee hereunder shall survive the dissolution of the Partnership; provided,
however, that a claim for indemnification under this Agreement must be made by
or on behalf of the Person seeking indemnification prior to the time the
Partnership is terminated hereunder. The indemnification
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rights contained in this Agreement shall be cumulative of, and in addition to,
any and all rights, remedies and recourse to which the Person seeking
indemnification shall be entitled, whether at law or at equity. Indemnification
pursuant to this Agreement shall be made solely and entirely from the assets of
the Partnership and no Partner shall be liable therefor.
ARTICLE VIII
DISSOLUTION, LIQUIDATION AND TERMINATION
----------------------------------------
8.1 ACCOUNTING. In the event of the dissolution, liquidation and
termination of the Partnership, a proper accounting (which shall be certified)
shall be made of the Capital Account of each Partner and of the Net Profits or
Net Losses of the Partnership from the date of the last previous accounting to
the date of dissolution. Financial statements presenting such accounting shall
include a report of a certified public accountant selected by the Liquidating
Trustee.
8.2 DISTRIBUTION ON DISSOLUTION. In the event of the
dissolution of the Partnership for any reason, the assets of the Partnership
shall be liquidated for distribution in the following rank and order;
(a) To creditors of the Partnership, other than
Partners who are creditors, to the extent otherwise permitted
by law, in satisfaction of the liabilities of the Partnership
(whether by payment or the making of reasonable provision for
payment thereof);
(b) To Partners who are creditors of the Partnership,
to the extent otherwise permitted by law, in satisfaction of
the liabilities of the Partnership (whether by payment or the
making of reasonable provision for payment thereof);
(c) To establish a reserve, as provided by the
Liquidating Trustee, to provide for contingent liabilities, if
any; and
(d) Except as otherwise required by the terms of any
outstanding Partnership Interests, to the Partners in
accordance with the positive balances in their Capital
Accounts after giving effect to all contributions,
distributions and allocations for all periods, including the
period in which such distribution occurs (other than those
adjustments made pursuant to this Section 8.2(d) and Section
8.3 hereof).
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8.3 TIMING REQUIREMENTS. In the event that the Partnership is
"liquidated" within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations, any and all distributions to the Partners pursuant to Section
8.2(d) hereof shall be made no later than the later to occur of (i) the last day
of the taxable year of the Partnership in which such liquidation occurs or (ii)
ninety (90) days after the date of such liquidation.
8.4 SALE OF PARTNERSHIP ASSETS. In the event of the liquidation
of the Partnership's assets in accordance with the terms of this Agreement, the
Liquidating Trustee may sell Partnership assets on the best terms and conditions
as the Liquidating Trustee in good faith believes are reasonably available at
the time and under the circumstances and on a nonrecourse basis to the Limited
Partner. The liquidation of the Partnership shall not be deemed finally
completed until the Partnership shall have received cash payments in full with
respect to obligations such as notes, installment sale contracts or other
similar receivables received by the Partnership in connection with the sale of
Partnership assets and all obligations of the Partnership have been satisfied.
The Liquidating Trustee shall continue to act to enforce all of the rights of
the Partnership pursuant to any such obligations until such obligations are paid
in full or otherwise satisfied.
8.5 DISTRIBUTIONS IN KIND. In the event that it becomes
necessary to make a distribution of property of the Partnership in kind, the
Liquidating Trustee may, with the Consent of the Limited Partners, to the extent
permitted by applicable law and MLB Rules, Transfer and convey such property to
the distributees as tenants in common, subject to any liabilities attached
thereto, so as to vest in the distributees undivided interests in the whole of
such property in proportion to their respective rights to share in the proceeds
of the sale of such property (other than as a creditor) in accordance with the
provisions of Section 8.2 hereof.
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8.6 DOCUMENTATION OF LIQUIDATION. Upon the completion of the
dissolution and liquidation of the Partnership, the Partnership shall terminate
and the Liquidating Trustee shall have the authority to execute and record any
and all documents or instruments required to effect the dissolution, liquidation
and termination of the Partnership.
8.7 LIABILITY OF THE LIQUIDATING TRUSTEE. The Liquidating
Trustee shall be indemnified and held harmless by the Partnership from and
against any and all claims, demands, liabilities, costs, damages and causes of
action of any nature whatsoever arising out of or whatsoever arising out of or
incidental to the Liquidating Trustee in taking any action authorized under or
within the scope of this Agreement; provided, however, that the Liquidating
Trustee shall not be entitled to indemnification, and shall not be held
harmless, where the claim, demand, liability, cost, damage or cause of action
at issue arose out of:
(a) A matter entirely unrelated to the Liquidating
Trustee's action or conduct pursuant to the provisions of this
Agreement; or
(b) The proven misconduct or gross negligence of the
Liquidating Trustee.
8.8 CREDITING OF GAIN (LOSS) ON LIQUIDATION. (a) GAIN FROM SALE.
Any Gain from Sale realized by the Partnership upon the sale or other
disposition of the assets of the Partnership pursuant to the termination and
liquidation of the Partnership shall be credited to the Capital Accounts of the
Partners (after crediting or charging, thereto, as the case may be, the
appropriate portion of all Net Profit and Net Loss of the Partnership for the
then current year in accordance with Section 1 of Exhibit A and all amounts to
be distributed for such year under Sections 6.2 and 8.2 of the Agreement) as
follows and in the following order of priority:
(i) If the Capital Account of any Partner
shall have a negative balance, Gain From Sale first
shall be credited to such Partner until the balance
thereof equals zero. If the Capital Accounts of more
than one Partner shall have a negative balance, Gain
From Sale shall be credited to all such Partners with
negative balances in the proportion which the
negative balance of such Partner bears to the
negative balances of all such
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Partners, until the balances of the Capital
Accounts of all such Partners shall equal zero; and
(ii) In the event the Capital Account of any
Partner shall have a positive balance, Gain From Sale
next shall be credited to the Partners to the extent
necessary to make the positive balance of each
Partner's Capital Account proportionate (in
accordance with the Percentage Interests in the
Partnership) to the positive balance, if any, of the
Partner with the highest positive balance in his
Capital Account at such time; and
(iii) The remaining balance of Gain From
Sale, if any, shall be credited to the Partners in
accordance with the Percentage Interests of the
Partners in the Partnership.
(b) LOSS FROM Sale. Any Loss From Sale incurred by the
Partnership upon the sale or other disposition of the assets of the Partnership
pursuant to the termination and liquidation of the Partnership shall be charged
to the Capital Accounts of the Partners (after crediting or charging thereto, as
the case may be, the appropriate portion of all Net Profit and Net Loss of the
Partnership for the then current taxable year in accordance with Section 1 of
Exhibit A and all amounts to be distributed for such year in accordance with
Sections 6.2 and 8.2 of this Agreement) as follows and in the following order of
priority:
(i) If the Capital Account of any Partner
shall have a positive balance, Loss From Sale first
shall be charged to such Partner until the balance
thereof equals zero. If the Capital Accounts of more
than one Partner shall have a positive balance, Loss
From Sale shall be charged to all such Partners with
positive balances in the proportion which the
positive balance of such Partner bears to the
positive balances of all such Partners, until the
Capital Accounts of all such Partners shall equal
zero;
(ii) In the event the Capital Account of any
Partner shall have a negative balance, Loss From Sale
next shall be charged to the Capital Accounts of the
Partners to the extent necessary to make the negative
balance of each Partner's Capital Account
proportionate (in accordance with the Percentage
Interests in the Partnership) to the negative balance
of the Capital Account of the Partner with the
greatest negative balance in his capital Account at
such time; and
(iii) The remaining balance of Loss From
Sale, if any, shall be charged to the Capital
Accounts of the Partners in accordance with the
Percentage Interests in the Partnership.
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ARTICLE IX
TRANSFER OF PARTNERSHIP INTERESTS
---------------------------------
9.1 GENERAL PARTNER TRANSFER. The General Partner shall not
withdraw from the Partnership and shall not sell, assign, pledge, encumber or
otherwise Transfer all or any portion of its Partnership Interest except
pursuant to a statutory merger or consolidation wherein all obligations and
liabilities of the transferor General Partner are assumed by a successor
corporation or other Entity by operation of law.
9.2 TRANSFERS BY LIMITED PARTNERS. Each Limited Partner shall,
subject to the provisions of this Section 9.2 and Section 9.3 hereof, have the
right, without the consent of the General Partner, to Transfer all or a portion
of its Partnership Interest to any Person, whether or not in connection with the
exercise of a Limited Partner's Rights. It is a condition to any Transfer
otherwise permitted hereunder that the transferee assumes by operation of law
or express agreement all of the obligations of the transferor Limited Partner
under this Agreement with respect to such transferred Partnership Interest,
other than the obligation of the transferor Limited Partner to return amounts
wrongfully distributed to him, and no such Transfer (other than pursuant to a
statutory merger or consolidation wherein all obligations and liabilities of the
transferee Partner are assumed by a successor corporation by operation of law)
shall relieve the transferee Partner of its obligations arising prior to the
date of such Transfer under this Agreement without the approval of the General
Partner, in its reasonable discretion. Upon such Transfer, the transferee shall
be admitted as a Substituted Limited Partner and shall succeed to all of the
rights, including rights with respect to the Rights, of the transferor Limited
Partner under this Agreement in the place and stead of such transferee Limited
Partner; provided, however, that notwithstanding the foregoing, any transferee
of any transferred Partnership Interest shall be subject to any and all
ownership limitations contained in the Articles from time to time
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applicable to Persons and/or their Affiliates which may limit or restrict such
transferee's ability to exercise the Rights (as defined in Exhibit D hereto).
Unless admitted as a Substituted Limited Partner, no transferee, whether by a
voluntary Transfer, by operation of law or otherwise, shall have rights
hereunder, other than to receive such portion of the distributions made by the
Partnership as are allocable to the Partnership Interest transferred, such other
rights being retained by the transferee Partner until such Transferee is
admitted as a substituted Limited Partner.
9.3 RESTRICTIONS ON TRANSFER. In addition to any other
restrictions on Transfer herein contained, in no event may any Transfer or
assignment of a Partnership Interest by any Partner be made (i) to any person or
entity who lacks the legal right, power or capacity to own a Partnership
Interest; (ii) in violation of any provision of any mortgage or trust deed (or
the note or bond secured thereby) constituting a Lien against any assets of the
Partnership or any part thereof, or other instrument, document or agreement to
which the Partnership is a party or otherwise bound; (iii) in violation of
applicable law; (iv) of any component portion of a Partnership Interest, such as
the Capital Account, or rights to Net Operating Cash Flow or Net Sales Proceeds,
separate and part from all other components of a Partnership Interest; (v) in
the event such Transfer would violate MLB Rules; (vi) if such Transfer would
cause a termination of the Partnership for Federal income tax purposes within
the meaning of Section 708(b) of the Code; (vii) if such Transfer would, in the
opinion of counsel to the Partnership, cause the Partnership to cease to be
classified as a partnership for Federal income tax purposes; (viii) if such
Transfer would cause the Partnership to become, with respect to any employee
benefit plan subject to Title 1 of ERISA, a "party-in-interest" (as defined in
section 3(14) of ERISA) or a "disqualified person" (as defined in Section
4975(c) of the Code); (ix) if such Transfer would, in the opinion of counsel to
the Partnership, cause any portion of the assets of the Partnership to
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constitute assets of any employee benefit plan pursuant to Department of Labor
Regulations Section 2510.2-101; or (x) to a lender to the Partnership or any
person who is related (within the meaning of Section 1.752-4(b) of the
Regulations) to any lender to the Partnership whose loan constitutes a
"nonrecourse liability" (within the meaning of Section 1.752-1(a)(2) of the
Regulations) without the consent of the General Partner, in its sole and
absolute discretion, unless the Partners' basis for tax purposes would not be
reduced as a result of such Transfer.
9.4 REGISTRATION RIGHTS. The Limited Partner shall have the
registration rights set forth in Exhibit C.
ARTICLE X
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
----------------------------------------------
10.1 NO PARTICIPATION IN MANAGEMENT. The Limited Partner shall
not take part in the management of the Partnership's business, transact any
business in the Partnership's name or have the power to sign documents for or
otherwise bind the Partnership; provided, however, that the foregoing shall not
be deemed to limit the ability of a Limited Partner who is an officer, director
or employee of the Partnership or any Affiliate thereof to act in such capacity.
10.2 BANKRUPTCY OF A LIMITED PARTNER. The Bankruptcy of any
Limited Partner shall not cause a dissolution of the Partnership, but the rights
of such Limited Partner to share in the Net Income or Net Loss of the
Partnership and to receive distributions of Partnership funds shall, on the
happening of such event, devolve on its successors or assigns, subject to the
terms and conditions of this Agreement, and the Partnership shall continue as a
limited partnership. However, in no event shall such assignee(s) become a
Substituted Limited Partner, except in accordance with Article IX hereof.
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10.3 NO WITHDRAWAL. No Limited Partner may withdraw from the
Partnership without the prior written consent of the General Partner, other than
as expressly provided in this Agreement.
10.4 DUTIES AND Conflicts. The General Partner recognizes that
the Limited Partner and its Affiliates have or may have other business
interests, activities and investments, some of which may be in conflict or
competition with the business of the Partnership, and that such Persons are
entitled to carry on such other business interests, activities and investments.
The Limited Partner and its Affiliates may engage in or possess an interest in
any other business or venture of any kind, independently or with others, on
their own behalf or on behalf of other entities with which they are affiliated
or associated, and such Persons may engage in any activities, whether or not
competitive with the Partnership, without any obligation to offer any interest
in such activities to the Partnership or to any Partner. Neither the Partnership
nor any Partner shall have any right, by virtue of this Agreement, in or to such
activities, or the income or profits derived therefrom, and the pursuit of such
activities, even if competitive with the business of the Partnership, shall not
be deemed wrongful or improper.
10.5 LIMITATION ON LIABILITY. No Limited Partner shall, solely
in its capacity as a Limited Partner, except as otherwise provided in the Act,
be personally liable for any of the debts, obligations or undertakings of the
Partnership beyond its obligation to make its initial capital contribution.
ARTICLE XI
GRANT OF RIGHTS TO LIMITED PARTNER
----------------------------------
11.1 GRANT OF RIGHTS. The General Partner, in its capacity as a
Partner and not on behalf of the Partnership, does hereby grant to the Limited
Partner and the Limited Partner does hereby accept the right, but not the
obligation (hereinafter such right sometimes referred to
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as the "Rights"), to exchange all or a portion of its Partnership Units for
Class A Common Shares on the terms and subject to the conditions and
restrictions contained in Exhibit D hereto. The Rights granted hereunder may be
exercised by the Limited Partner and any successor or assign of the Limited
Partner which becomes a Substituted Limited Partner pursuant to Section 9.2, on
the terms and subject to the conditions and restrictions contained in Exhibit D
hereto, upon delivery to the General Partner of an Exchange Exercise Notice in
the form of Schedule 2 attached to Exhibit D, which notice shall specify the
Partnership Units to be exchanged or sold by the Limited Partner. Once
delivered, the Exercise Notice shall be irrevocable, subject to payment by the
General Partner of the Purchase Price in respect of such Partnership Units in
accordance with the terms hereof
11.2 TERMS OF RIGHTS. The terms and provisions applicable to
the Rights shall be as set forth in attached Exhibit D.
11.3 REISSUANCE OR REALLOCATION OF PARTNERSHIP UNITS. Any
Partnership Units acquired by the General Partner pursuant to an exercise by any
Limited Partner of the Rights shall be deemed to be acquired by the General
Partner. The General Partner shall amend Exhibit A hereto to reflect each such
exchange of Partnership Units and each corresponding recalculation of the
Partnership Units of the Partners.
ARTICLE XII
LIMITED PARTNER REPRESENTATIONS AND WARRANTIES
----------------------------------------------
12.1 REPRESENTATIONS AND WARRANTIES OF THE LIMITED Partner.
The Limited Partner represents and warrants to the Partnership and the
General Partner as follows:
(a) ORGANIZATION. The Limited Partner is duly
incorporated, validly existing and in good standing under the
laws of the State of Ohio.
(b) DUE AUTHORIZATION: BINDING AGREEMENT, The
execution, delivery and performance of this Agreement by the
Limited Partner has been duly and
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validly authorized by all necessary action of the Limited
Partner. This Agreement has been duly executed and delivered
by the Limited Partner, or an authorized representative of the
Limited Partner, and constitutes a valid and legally binding
obligation of the Limited Partner, enforceable against the
Limited Partner in accordance with the terms hereof.
(c) CONSENTS AND APPROVALS. No consent, waiver,
approval or authorization of, or filing, registration or
qualification with, or notice to, any governmental unit or any
other person is required to be made, obtained or given by the
Limited Partner in connection with the execution, delivery and
performance of this Agreement other than consents, waivers,
approvals or authorizations which have been obtained prior to
the date hereof
ARTICLE XIII
GENERAL PARTNER REPRESENTATIONS AND WARRANTIES
----------------------------------------------
13.1 REPRESENTATIONS AND WARRANTIES OF THE GENERAL PARTNER.
The General Partner represents and warrants to the Partnership and the Limited
Partner as follows:
(a) ORGANIZATION. The General Partner is duly
incorporated, validly existing and in good standing under the
laws of the State of Ohio.
(b) DUE AUTHORIZATION: BINDING AGREEMENT. The
execution, delivery and performance of this Agreement by the
General Partner has been duly and validly authorized by all
necessary action of the General Partner. This Agreement has
been duly executed and delivered by the General Partner, or an
authorized representative of the General Partner, and
constitutes a valid and legally binding obligation of the
General Partner, enforceable against the General Partner in
accordance with the terms hereof.
(c) CONSENTS AND APPROVALS. No consent, waiver,
approval or authorization of, or filing, registration or
qualification with, or notice to, any governmental unit or any
other person is required to be made, obtained or given by the
General Partner in connection with the execution, delivery and
performance of this Agreement other than consents, waivers,
approvals or authorizations which have been obtained prior to
the date hereof.
ARTICLE XIV
GENERAL PROVISIONS
------------------
14.1 NOTICES. All notices, offers or other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and may be personally served, telecopied or sent by United States mail and shall
be deemed to have been given when delivered in person, upon receipt of telecopy
or three (3) business days after deposit in United
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States; mail, registered or certified, postage prepaid, and properly addressed,
by or to the appropriate party. For purposes of this Section 14.1, the
addresses of the parties hereto shall be as set forth on a signature page
hereof. The address of any party hereto may be changed by a notice in writing
given in accordance with the provisions hereof.
14.2 SUCCESSORS. This Agreement and all the terms and
provisions hereof shall be binding upon and shall inure to the benefit of all
Partners, and their legal representatives, heirs, successors and permitted
assigns, except as expressly herein otherwise provided.
14.3 EFFECT AND INTERPRETATION. This Agreement shall be governed
by and construed in conformity with the laws of the State of Ohio.
14.4 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.
14.5 PARTNERS NOT AGENTS. Nothing contained herein shall be
construed to constitute any Partner the agent of another Partner, except as
specifically provided herein, or in any manner to limit the Partners in the
carrying on of their own respective businesses or activities, except as
specifically provided herein.
14.6 ENTIRE UNDERSTANDING. This Agreement constitutes the entire
agreement and understanding among the Partners and supersedes any prior
understandings and/or written or oral agreements among them respecting the
subject matter within.
14.7 AMENDMENTS. This Agreement may not be amended, and no
provision benefiting the General Partner may be waived, except by a written
instrument signed by the General Partner and a Majority-In-Interest of the
Limited Partners. Notwithstanding the preceding sentence, the General Partner
may amend this Agreement without the approval of the Limited Partner (i) to cure
any ambiguity, to correct or supplement any provisions herein which may be
inconsistent with any other provisions herein, or to make any other provisions
with
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respect to matters or questions arising under this Agreement which will not be
inconsistent with the provisions of this Agreement, or (ii) to reflect a change
in the number, of Partnership Units owned by a Partner (including to reflect the
issuance of additional Partnership Units pursuant to Section 4.2) and each
Partner's Percentage Interest in accordance with the provisions of this
Agreement.
14.8 SEVERABILITY. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid by a court of competent jurisdiction, the remainder of this Agreement,
or the application of such provision to persons or circumstances other than
those to which it is held invalid by such court, shall not be affected thereby.
14.9 TRUST PROVISION. This Agreement, if executed by the trustee
of a trust, is executed solely as such trustee and not in an individual
capacity. Nothing herein contained shall create any liability on, or require the
performance of any covenant by, any such trustee individually, nor shall
anything contained herein subject the individual real or personal property of
any trustee to any liability.
14.10 PRONOUNS AND HEADINGS. As used herein, all pronouns shall
include the masculine, feminine and neuter, and all defined terms shall include
the singular and plural thereof wherever the context and facts require such
construction. The headings, titles and subtitles herein are inserted for
convenience of reference only and are to be ignored in any construction of the
provisions hereof. Any references in this Agreement to "including" shall be
deemed to mean "including without limitation."
14.11 ASSURANCES. Each of the Partners shall hereafter execute
and deliver such further instruments and do such further acts and things as may
be required or useful to carry out the intent and purpose of this Agreement and
as are not inconsistent with the terms hereof.
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14.12 POWER OF ATTORNEY. (a) The Limited Partner and each
assignee of such Limited Partner hereby constitutes and appoints the General
Partner, any Liquidating Trustee, and authorized officers and attorneys-in-fact
of each, and each of those acting singly, in each case with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full power
and attorney in its name, place and stead to:
(i) execute, swear to, seal, acknowledge, deliver, file
and record in the appropriate public offices (a) all
certificates, documents and other instruments (including,
without limitation, this Agreement and the Certificate and all
amendments or restatements thereof) that the General Partner
or the Liquidating Trustee deems appropriate or necessary to
form, qualify or continue the existence or qualification of
the Partnership as a limited partnership (or a partnership in
which the limited partners have limited liability to the
extent provided by applicable law) in the State of Ohio and in
all other jurisdiction in which the Partnership may or plans
to conduct business or own property; (b) all instruments that
the General Partner deems appropriate or necessary to reflect
any amendment, change, modification or restatement of this
Agreement as permitted in and in accordance with its terms;
(c) all conveyances and other instruments or documents that
the General Partner deems appropriate or necessary to reflect
the dissolution and liquidation of the Partnership pursuant to
the terms of this Agreement, including, without limitation,
a certificate of cancellation; (d) all instruments relating to
the admission, withdrawal, removal or substitution of any
Partner pursuant to, or other events described in, Articles IV
or IX hereof or the Capital Contribution of any Partner; and
(e) all certificates, documents and other instruments relating
to the determination of the rights, preferences and privileges
of Partnership Interests; and
(ii) execute, swear to, seal, acknowledge and file all
ballots, consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and absolute
discretion of the General Partner, to make, evidence, give,
confirm or ratify any vote, consent, approval, agreement or
other action which is made or given by the Partners hereunder
or is consistent with the terms of this Agreement or
appropriate or necessary, in the sole discretion of the
General Partner, to effectuate the terms or intent of this
Agreement.
(b) Nothing contained herein shall be construed as authorizing
the General Partner to amend this Agreement except in accordance with Section
14.7 hereof, or as may be otherwise expressly provided for in this Agreement.
14.13 DURATION OF POWER. The power of attorney granted in
Section 14.12 is hereby declared to be irrevocable and coupled with an interest
in recognition of the fact that each
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of the Partners will be relying upon the power of the General Partner to act as
contemplated by this Agreement in any filing or other action by it on behalf of
the Partnership, and it shall: (i) survive the transfer of all or any portion of
the Limited Partner's or Assignee's Partnership Interests; (ii) survive the
death, incapacity, bankruptcy or insolvency of the Limited Partner; and (iii)
extend to the Limited Partner's or Assignee's heirs, successor, assigns and
personal representatives. The Limited Partner and each such Assignee hereby
agrees to be bound by any action taken by the General Partner, acting in good
faith pursuant to such power of attorney; and the Limited Partner and each such
Assignee hereby waives any and all defenses which may be available to contest,
negate or disaffirm the action of the General Partner, taken in good faith
under such power of attorney. The Limited Partner and each such Assignee shall
execute and deliver to the General Partner or the Liquidating Trustee, within
fifteen (15) days after receipt of the General Partner's or Liquidating
Trustee's request therefor, such further designation, powers of attorney and
other instruments as the General Partner or the Liquidating Trustee, as the case
may be, deems necessary to effectuate this Agreement and the purposes of the
Partnership.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed as of the date and year first
above written.
GENERAL PARTNER:
----------------
CLEVELAND INDIANS BASEBALL
COMPANY, INC., an Ohio corporation
By:
-------------------------------
Richard E. Jacobs, President
Address: 2401 Ontario Street
Cleveland, Ohio 44115
Attention: President
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LIMITED PARTNER:
----------------
CLEVELAND BASEBALL
CORPORATION, an Ohio corporation
By:
-------------------------------
Richard E. Jacobs, President
Address: 2401 Ontario Street
Cleveland, Ohio 44115
Attention: President
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EXHIBIT A
ALLOCATIONS AND OTHER TAX MATTERS
---------------------------------
1. CAPITAL ACCOUNTS. (a) There shall be established for each
Partner on the books of the Partnership a capital account (a "Capital Account"),
which shall be maintained and adjusted as provided in this Exhibit A. The
Capital Account of a Partner shall be credited with the amount of all cash
Capital Contributions by such Partner to the Partnership and the fair market
value of any property contributed by such Partner to the Partnership (net of any
liabilities secured by such property that the Partnership is considered to
assume or take subject to under Section 752 of the Code). The Capital Account of
a Partner shall be increased by the amount of any Net Income (or items of gross
income) allocated to such Partner pursuant to this Exhibit A, and decreased by
(i) the amount of any Net Loss (or items of loss or deduction) allocated to such
Partner pursuant to this Exhibit A and (ii) the amount of any cash distributed
to such Partner pursuant to Article VI of this Agreement, and (iii) the fair
market value of any asset distributed in kind to such Partner (net of all
liabilities secured by such asset or that the Partnership is considered to
assume or take subject to under Section 752 of the Code). The Capital Account of
the Partner also shall be adjusted appropriately to reflect any other adjustment
required pursuant to Regulation Section 1.704-1 or 1.704-2.
(b) Upon the occurrence of any event specified in Regulation
Section 1.704-1(b)(2)(iv)(f), the General Partner may cause the
Capital Accounts of the Partners to be adjusted to reflect the fair
market value of the Partnership's assets at such time (as determined by
the General Partner in its sole discretion) in accordance with such
Regulation; provided, however, that the General Partner shall cause the
Capital Account of the Partners to be so adjusted in connection with
any admission of additional Limited Partners pursuant to Section 4.6
subsequent to the admission of Limited Partners pursuant to Section
4.2. In the event that the Capital Accounts of the Partners are
adjusted pursuant to this Section l(b) of Exhibit A in connection with
any such subsequent admission of Limited Partners, then,
notwithstanding Section 2(a) of this Exhibit A, the Net Income or Net
Loss inherent in the Partnership's assets at that time shall be
specially allocated among the Partners as required to cause the Capital
Accounts of the Partners to be proportionate to their adjusted
Percentage Interests.
(c) In the event that any interest in the Partnership is
Transferred, the transferee of such interest shall succeed to the
portion of the transferor's Capital Account attributable to such
interest and the portion of the transferor's Minimum Gain attributable
thereto.
2. ALLOCATIONS.
(a) NET INCOME AND LOSSES. The Net Income or Net Loss of the
Partnership for each Fiscal Year (or other period) shall be allocated
to the Partners pro rata in proportion to their respective Percentage
Interests.
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<PAGE> 52
(b) CODE SECTION 704(b) ALLOCATIONS. Notwithstanding Section
2(a) of this Exhibit A, special allocations of Net Income, Net Loss or
specific items of income, gain, loss or deduction may be required for
any Fiscal Year (or other period) as follows:
(1) MINIMUM GAIN CHARGEBACK. The Partnership shall
allocate items of Partnership income and gain among the
Partners at such times and in such amounts as necessary to
satisfy the minimum gain chargeback requirements of Regulation
Sections 1.704-2(f) and 1.704-2(i)(4).
(2) ALLOCATION OF DEDUCTIONS ATTRIBUTABLE TO PARTNER
NONRECOURSE LIABILITIES. Any nonrecourse deductions
attributable to a Partner Nonrecourse Liability shall be
allocated among the Partners that bear the economic risk of
loss for such Partner Nonrecourse Liability based upon the
ratios in which such Partners share such economic risk of loss
in accordance with Regulation Sections 1.704-2(c),
1.704-2(i)(2) and 1.704-2(j)(1).
(3) QUALIFIED INCOME OFFSET. The Partnership shall
specially allocate Net Loss and items of income and gain when
and to the extent required to satisfy the "qualified income
offset" provisions of Regulation Section 1.704-1(b)(2)(ii)(d).
3. ALLOCATIONS OF NET INCOME AND NET LOSSES FOR FEDERAL INCOME
TAX PURPOSES. The Partnership's ordinary income and losses and capital gains and
losses as determined for Federal income tax purposes (and each item of income,
gain, loss and deduction entering into the computation thereof) for each Fiscal
Year (or portion thereof) shall be allocated to the Partners in the same manner
as the corresponding "book" items are allocated pursuant to Section 2 of this
Exhibit A for such Fiscal Year (or portion thereof). Notwithstanding the
foregoing sentence, Federal income tax items relating to any Section 704(c)
Property shall be allocated among the Partners in accordance with Section 704(c)
of the Code or Regulation Section 1.704-1(b)(2)(iv)(g) to take into account
the difference between the fair market value and the tax basis of such Section
704(c) Property or such other property as of the date of its contribution or
revaluation pursuant to Section l(b) of this Exhibit A, as applicable, using the
"traditional method" as described in Regulation Section 1.704-3(b). Items
described in this Section 3 shall neither be credited nor charged to the
Partners' Capital Accounts.
4. DISTRIBUTION IN KIND. If any assets of the Partnership are
distributed in kind pursuant to this Agreement, the amount of Net Income or Net
Loss that would have been realized had such assets been sold at their fair
market value shall be allocated to the Capital Accounts of the Partners pursuant
to Section 2(a) of this Exhibit A immediately prior to such distribution.
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<PAGE> 53
EXHIBIT B
---------
PARTNERSHIP INTERESTS
---------------------
<TABLE>
<CAPTION>
Number of
Partner Percentage Interest Partnership Units
------- ------------------- -----------------
<S> <C> <C>
Cleveland Indians Baseball Company, Inc., as ___% __
general partner
Cleveland Baseball Corporation, as limited ___% __
partner
--- -----------
Total 100% 12,333,333
</TABLE>
Page 3
<PAGE> 54
EXHIBIT C
---------
TERMS OF LIMITED PARTNER REGISTRATION RIGHTS
--------------------------------------------
The General Partner and the Limited Partner agree as follows
with respect to the Registration Rights granted by the General Partner to the
Limited Partner:
ARTICLE I
---------
CERTAIN DEFINITIONS
-------------------
The following terms and phrases shall, for purposes of this
Exhibit C have the meanings set forth below. Additional terms used herein are
defined in Section 1.1 of the Agreement:
Section 1.1. "ELIGIBLE SECURITIES" shall mean all or any
portion of the Class A Common Shares issued to the Limited Partner upon exercise
of Rights as defined in the Agreement.
As to any proposed offer or sale of Eligible Securities, such
securities shall cease to be Eligible Securities with respect to such proposed
offer or sale when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement; (ii) such securities are permitted to be distributed pursuant to Rule
144(k) (or any successor provision to such Rule) under the Securities Act or are
otherwise freely transferable to the public without registration pursuant to
Section 4(l) of the Securities Act, as confirmed by a written opinion reasonably
satisfactory to counsel to the General Partner addressed to the Limited Partner;
or (111) such securities shall have been otherwise transferred pursuant to an
applicable exemption under the Securities Act, new certificates for such
securities not bearing a legend restricting further transfer shall have been
delivered by the General Partner, and such securities shall be freely
transferable to the public without registration under the Securities Act.
Section 1.2 "OTHER SECURITIES" shall have the meaning set
forth in Section 3.1 of this Exhibit C.
Section 1.3. "REGISTRATION EXPENSES" shall mean all expenses
incident to the General Partner's performance of or compliance with the
registration requirements set forth in this Exhibit C, including, without
limitation, the following: (i) the fees, disbursements, and expenses of the
General Partner's counsel(s) (United States and foreign) and accountants and
experts in connection with the registration of Eligible Securities to be
disposed of under the Securities Act; (ii) all expenses in connection with the
preparation, printing, and filing of the registration statement, any preliminary
prospectus or final prospectus, any other offering document and amendments and
supplements thereto and the mailing and delivering of copies thereof to the
underwriters and dealers; (iii) the cost of printing or producing any agreements
among underwriters, underwriting agreements, and blue sky or legal investment
memoranda, any selling agreements, and any other documents in connection with
the offering, sale, or delivery of Eligible Securities to be disposed of; (iv)
all expenses in connection with the qualification of
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<PAGE> 55
Eligible Securities to be disposed of for offering and sale under state
securities laws, including the fees and disbursements of counsel for the
underwriters in connection with such qualification and in connection with any
blue sky and legal investment surveys; (v) the filing fees incident to securing
any required review by the National Association of Securities Dealers, Inc. of
the terms of the sale of Eligible Securities to be disposed of; and (vi) fees
and expenses incurred in connection with the listing of Eligible Securities on
each securities exchange or quotation system on which securities of the same
class are then listed, PROVIDED, HOWEVER, that Registration Expenses with
respect to any registration pursuant to this Agreement shall not include
underwriting discounts or commissions attributable to Eligible Securities, SEC,
or blue sky registration fees attributable to Eligible Securities, or transfer
taxes applicable to Eligible Securities.
Section 1.4. "SECURITIES ACT" shall mean the Securities Act of
1933, as amended, and the rules and regulations of the SEC thereunder, all as
the same shall be in effect at the relevant time.
ARTICLE II
EFFECTIVENESS OF REGISTRATION RIGHTS
------------------------------------
Section 2.1. EFFECTIVENESS OF REGISTRATION RIGHTS. Any
registration rights granted pursuant to this Exhibit C may not be exercised
prior to the first anniversary of the closing of the Offering.
ARTICLE III
INCIDENTAL REGISTRATION RIGHTS
------------------------------
Section 3.1. Notice AND REGISTRATION. If the General Partner
proposes to file a registration statement with the SEC to register any Class A
Common Shares for public sale for cash under the Securities Act (whether
proposed to be offered for sale by the General Partner or by any other Person)
by the filing of a registration statement with the SEC on a form and in a
manner that would permit registration of Eligible Securities for sale to the
public under the Securities Act ("Other Securities"), it will give prompt
written notice to the Limited Partner of its intention to do so, and upon the
written request of the Limited Partner delivered to the General Partner within
fifteen (15) Business Days after the giving of any such notice (which request
shall specify the number of Eligible Securities intended to be disposed of by
the Limited Partner and the intended method of disposition thereof), the General
Partner will use all reasonable efforts to effect, in connection with the
registration of the Other Securities, the registration under the Securities Act
of all Eligible Securities which the General Partner has been so requested to
register by the Limited Partner, to the extent required to permit the
disposition (in accordance with the intended method or methods thereof as
aforesaid) of Eligible Securities so to be registered, PROVIDED that:
(a) if, at any time after giving such written notice of its
intention to file a registration statement pursuant to Section 3.1 and
prior to the effective date of such registration statement filed in
connection with such registration, the General Partner shall determine
for any reason not to register the Other Securities it had proposed to
register,
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<PAGE> 56
the General Partner may, at its election, give written notice of such
determination to the Limited Partner and thereupon the General Partner
shall be relieved of its obligation to register such Eligible
Securities pursuant to this Section 3.1 (but not from its obligation to
pay Registration Expenses to the extent incurred in connection
therewith as provided IN Section 3.2);
(b) The General Partner will not be required to effect any
registration pursuant to this Article III if the General Partner shall
have been advised in writing (with a copy to the Limited Partner
requesting registration) by a nationally recognized independent
investment banking firm selected by the General Partner to act as lead
underwriter in connection with the public offering of Other Securities
that, in such firm's opinion, inclusion of the Limited Partner's Class
A Common Shares would materially and adversely affect the offering of
the Other Securities; PROVIDED, HOWEVER, that if an offering of some
but not all of the shares requested to be registered by the Limited
Partner would not adversely affect the offering of the Other
Securities, the number of shares requested to be included in such
offering by the Limited Partner shall be reduced to the maximum number
that would not adversely affect the offering of the Other Securities;
and
(c) The General Partner shall not be required to effect any
registration of Eligible Securities under this Article III incidental
to the registration of any of its securities in connection with
mergers, acquisitions, exchange offers, subscription offers, dividend
reinvestment plans, or stock options or other employee benefit plans.
Section 3.2. REGISTRATION EXPENSES. The General Partner (as
between the General Partner and the Limited Partner requesting registration)
shall be responsible for the payment of all Registration Expenses in connection
with any registration pursuant to this Article III, except that such expenses
shall not include any underwriting discounts or commissions, SEC or blue sky
registration fees, or transfer taxes relating to such Eligible Securities, which
expenses shall be the responsibility of the Limited Partner.
ARTICLE IV
REGISTRATION PROCEDURES
-----------------------
Section 4.l. REGISTRATION AND QUALIFICATION. If and whenever the
General Partner is required to use all reasonable efforts to effect the
registration of any Eligible Securities under the Securities Act as provided in
Section 3.1, the General Partner will as promptly as is practicable:
(a) prepare, file, and use all reasonable efforts to cause to
become effective a registration statement under the Securities
Act regarding the Eligible Securities to be offered;
(b) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such
registration statement effective and to
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<PAGE> 57
comply with the provisions of the Securities Act with respect
to the disposition of all Eligible Securities until the
earlier of such time as all of such Eligible Securities have
been disposed of in accordance with the intended methods of
disposition by the Limited Partner requesting registration set
forth in such registration statement or the expiration of
sixty (60) days after such registration statement becomes
effective;
(c) furnish to the Limited Partner and to any underwriter of
such Eligible Securities such number of conformed copies of
such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits),
such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus
and any summary prospectus) in conformity with the
requirements of the Securities Act, such documents
incorporated by reference in such registration statement or
prospectus, and such other documents as the Limited Partner
or such underwriter may reasonably request;
(d) use all reasonable efforts to register or qualify all
Eligible Securities covered by such registration statement
under such other securities or blue sky laws of such
jurisdiction as the Limited Partner or any underwriter of
such Eligible Securities shall reasonably request, and do any
and all other acts and things which may be reasonably
requested by the Limited Partner or any underwriter to
consummate the disposition in such jurisdictions of the
Eligible Securities covered by such registration statement,
except that the General Partner shall not for any such
purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it is not SO
qualified, or to subject itself to taxation in any
jurisdiction where it is not then subject to taxation, or to
consent to general service of process in any jurisdiction
where it is not then subject to service of process;
(e) use all reasonable efforts to list the Eligible Securities
covered by such registration statement on any quotation
system, securities market or securities exchange on which the
Class A Common Shares of the General Partner are then
listed, if the listing of such securities is then permitted
under the rules of such exchange; and
(f) immediately notify the Limited Partner requesting or
participating in a registration of securities at any time
when a prospectus relating to a registration pursuant to
Articles III hereof is required to be delivered under the
Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made,
not misleading, and, at the request of the Limited Partner
prepare and furnish to the Limited Partner as many copies of
a supplement to or an amendment of such prospectus as the
Limited Partner reasonably requests
Page 4
<PAGE> 58
so that, as thereafter delivered to the purchasers of such Eligible
Securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
The General Partner may require the Limited Partner requesting or participating
in a registration of securities to furnish the General Partner such information
regarding the Limited Partner and the distribution of such securities as the
General Partner may from time to time reasonably request in writing and as shall
be required by law or by the SEC in connection with any registration.
4.2. UNDERWRITING. (a) If requested by the underwriters for any
underwritten offering of Eligible Securities pursuant to a registration
requested hereunder, the Limited Partner will enter into and perform its
obligations under an underwriting agreement with such underwriters for such
offering, such agreement to contain such representations and warranties by the
Limited Partner and such other terms and provisions as are customarily
contained in underwriting agreements with respect to secondary distributions,
including, without limitation, indemnities and contributions to the effect and
to the extent provided in Article VI hereof. The representations and warranties
by, and the other agreements on the part of, the General Partner to and for the
benefit of such underwriters shall also be made to and for the benefit of the
Limited Partner. Notwithstanding the foregoing, the Limited Partner requesting
or participating in a registration of securities may elect, in writing at any
time prior to the effective date of the registration statement filed in
connection with such registration, not to include such Eligible Securities in
such registration but such election shall not relieve the Limited Partner of its
responsibility for expenses as provided in Section 4.3.
Section 4.3. QUALIFICATION FOR RULE 144 SALES. The General
Partner will take all actions reasonably necessary to comply with the filing
requirements described in Rule 144 (c) (1) under the Securities Act so as to
enable the Limited Partner to sell Eligible Securities without registration
under the Securities Act, and, upon the written request of the Limited Partner
requesting or participating in a registration of securities, the General Partner
will deliver to the Limited Partner a written statement as to whether it has
complied with such filing requirements.
ARTICLE V
PREPARATION; REASONABLE INVESTIGATION
-------------------------------------
Section 5. 1. PREPARATION; REASONABLE INVESTIGATION. In
connection with the preparation and filing of each registration statement
registering Eligible Securities under the Securities Act, the General Partner
will give the Limited Partner requesting or participating in a registration of
securities and the underwriters, if any, and their respective counsel and
accountants, drafts of such registration statement for their review and comment
prior to filing and such reasonable and customary access to its books and
records and such opportunities to discuss the business of the General Partner
with its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of the
Page 5
<PAGE> 59
Limited Partner and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
ARTICLE VI
INDEMNIFICATION AND CONTRIBUTION
--------------------------------
Section 6. 1. INDEMNIFICATION AND CONTRIBUTION. (a) In the event
of any registration of Eligible Securities hereunder, the General Partner will
enter into customary indemnification arrangements to indemnify and hold harmless
the Limited Partner (including, if applicable its directors, officers, partners,
and trustees), each Person who participates as an underwriter in the offering or
sale of such securities, and each Person, if any, who controls such underwriter
within the meaning of the Securities Act against any losses, claims, damages,
liabilities, and expenses, joint or several, to which such Person may be subject
under the Securities Act or otherwise insofar as such losses, claims, damages,
liabilities, or expenses (or actions or proceedings in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus
or final prospectus included therein, any amendment or supplement thereto, or
any document incorporated by reference therein, or (ii) 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, and the General Partner
will promptly reimburse each such Person for any legal or any other expenses
reasonably incurred by such Person in connection with investigating or defending
any such loss, claim, damage, liability, expense, action, or proceeding;
PROVIDED that the General Partner shall not be liable in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof), or expenses arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus or final prospectus,
amendment, or supplement thereto in reliance upon and in conformity with written
information furnished to the General Partner by the Limited Partner or such
underwriter expressly for use in the registration statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Limited Partner or any such Person and shall survive the
transfer of such securities by the Limited Partner. The General Partner also
shall agree to provide provision for contribution as shall be reasonably
requested by the Limited Partner or any underwriter in circumstances where such
indemnity is held unenforceable.
(b) The Limited Partner, by virtue of exercising its
registration rights hereunder, agrees and undertakes to enter into customary
indemnification arrangements to indemnify and hold harmless (in the same manner
and to the same extent as set forth in Section 6.1 (a)) the General Partner,
each director of the General Partner, each officer of the General Partner who
shall sign such registration statement, each Person who participates as an
underwriter in the offering or sale of such securities and each person, if any,
who controls the General Partner or any such underwriter within the meaning of
the Securities Act, with respect to any statement in or omission from such
registration statement, any preliminary prospectus, or final prospectus included
therein, or any amendment or supplement thereto, but only to the extent that
such statement or omission was made in reliance upon and in conformity with
written information furnished by the Limited Partner to the General Partner
expressly for use in
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<PAGE> 60
the registration statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the General Partner or
any such director, officer, or controlling Person and shall survive the transfer
of the registered securities by the Limited Partner and the expiration of this
Exhibit C. The Limited Partner also shall agree to provide provision for
contribution as shall be reasonably requested by the General Partner or any
underwriter in circumstances where such indemnity is held unenforceable.
(c) Indemnification and contribution similar to that specified
in this Section 6.1 (with appropriate modifications) shall be given by the
General Partner and the Limited Partner with respect to any required
registration or other qualification of such Eligible Securities under any
federal or state law or regulation of any governmental authority other than
under the Securities Act.
ARTICLE VII
TRANSFER OF REGISTRATION RIGHTS
-------------------------------
7.1. TRANSFER OF REGISTRATION RIGHTS. The Class A Limited
Partners may not transfer the registration rights granted hereunder to any other
Person, except by operation of law; provided, however, that the Limited Partner
may transfer the registration rights in connection with the transfer of the
Class A Common Shares or the Partnership Units to which they relate to the
extent permitted in the Agreement and subject to the Ownership Restrictions.
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<PAGE> 61
EXHIBIT D
---------
RIGHTS TERMS
------------
The Rights granted by the General Partner to the Limited
Partners pursuant to Section 11.1 of the Agreement shall be subject to the
following terms and conditions:
Section 1. DEFINITIONS. The following terms and phrases shall,
for purposes of this Exhibit D and the Agreement, have the meanings set forth
below. Additional terms used herein are defined in Section 1.1 of the Agreement.
"CASH PURCHASE PRICE" shall have the meaning set forth in Section
4 hereof.
"COMPUTATION DATE" shall mean the date on which an Exchange
Exercise Notice is delivered to the General Partner.
"ELECTION NOTICE" shall mean the written notice to be given by
the General Partner to the Exercising Partner(s) in response to
the receipt by the General Partner of an Exchange Exercise Notice
from such Exercising Partner(s), the form of which Election
Notice is attached hereto as Schedule 2.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor statute.
"EXCHANGE EXERCISE NOTICE" shall have the meaning set forth in
Section 2 hereof.
"EXCHANGE FACTOR" shall initially mean 100%, and shall hereafter
be adjusted in accordance with the Antidilution Provisions of
Section 11 hereof.
"EXCHANGE RIGHTS" shall have the meaning set forth in Section 2
hereof.
"HRS ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"OFFERED PARTNERSHIP UNITS" shall mean the Partnership Units of
the Exercising Partner(s) identified in an Exchange Exercise
Notice which, pursuant to the exercise of Exchange Rights, can be
acquired by the General Partner under the terms hereof.
"PURCHASE PRICE" shall mean the Cash Purchase Price or the Share
Purchase Price, or a combination thereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any successor statute.
"SHARE PURCHASE PRICE" shall have the meaning set forth in
Section 4 hereof.
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Section 2. DELIVERY OF EXCHANGE EXERCISE NOTICES. The Limited
Partner may, subject to the limitations set forth herein, deliver to the General
Partner written notice (the "Exchange Exercise Notice") pursuant to which the
Limited Partner elects to exercise its rights to exchange (the "Exchange
Rights") all or any portion of its Partnership Units for Class A Common Shares,
subject to the limitations contained in Section 3 below.
Section 3. LIMITATION ON EXERCISE OF EXCHANGE RIGHTS. Exchange
Rights may be exercised at any time prior to the dissolution of the Partnership,
subject to the Ownership Restrictions. The Exchange Rights shall expire with
respect to any Partnership Units for which an Exchange Exercise Notice has not
been delivered to the General Partner on or prior to the date that the
Partnership is dissolved. For purposes of computing the Ownership Restriction as
of any date, the Limited Partner and its Affiliates shall be deemed to own all
Class A Common Shares issuable to the Limited Partner and its Affiliates upon
the exercise of stock options granted on or before such date under any equity
compensation plan of the General Partner. If an Exchange Exercise Notice is
delivered to the General Partner but, as a result of the Ownership Restriction,
the Exchange Rights cannot be exercised in full, the Exchange Exercise Notice
shall be deemed to be modified such that the Exchange Rights shall be exercised
only to the extent permitted under the Ownership Restriction, with the remainder
of such Exchange Rights being deemed to be an offer to sell such Offered
Partnership Units to the General Partner for the Cash Purchase Price.
Section 4. COMPUTATION OF PURCHASE PRICE/FORM OF PAYMENT. The
Purchase Price payable by the General Partner to the Limited Partner for the
Offered Partnership Units shall be payable, at the election of the General
Partner, by (a) the issuance by the General Partner of the number of its Class A
Common Shares equal to the product, expressed as a whole number, of (i) the
number of Partnership Units being exchanged, multiplied by (ii) the Exchange
Factor (the "Share Purchase Price") or (b) in cash; provided, however, that to
the extent the Share Purchase Price would violate the Ownership Restrictions,
the Purchase Price to be paid for the Offered Partnership Units shall be paid in
cash rather than in Class A Common Shares (the "Cash Purchase Price"). The Cash
Purchase Price shall mean, with respect to the applicable number of Offered
Partnership Units upon the exercise of any Exchange Right, an amount of cash (in
immediately available funds) equal to (i) the number of Class A Common Shares
that would be issued to the Exercising Partner if the Share Purchase Price were
paid for such Offered Partnership Units (taking into account the adjustments
required pursuant to the definition of "Exchange Factor") multiplied by (ii) the
Current Per Share Market Price computed as of the Computation Date. The Cash
Purchase Price shall be paid in the form of cash, or cashier's check, or by wire
transfer of immediately available funds to the Limited Partner's designated
account.
Section 5. CLOSING; DELIVERY OF ELECTION NOTICE. The closing of
the acquisition of Offered Partnership Units shall, unless otherwise mutually
agreed, be held at the principal office of the General Partner, on the following
dates:
(a) With respect to the exercise of Exchange Rights for which the
Share Purchase Price is payable, the closing shall occur on the date
agreed to by the General Partner and the Limited Partner, which date
shall in no event be prior to the date which is the later of (i) ten
(10) days after the delivery of the Election Notice and (ii) the
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<PAGE> 63
expiration or termination of the waiting period applicable to each
Exercising Partner, if any, under the HSR Act; and
(b) With respect to the exercise of Exchange Rights for which the
General Partner pays the Cash Purchase Price, the General Partner
shall, within thirty (30) days after receipt by the General Partner of
the Exchange Exercise Notice delivered in accordance with the
requirements of Paragraph 3 hereof, deliver to the Limited Partner an
Election Notice, which Election Notice shall (i) specify the General
Partner's election to pay the Cash Purchase Price for some or all of
the Offered Partnership Units and (ii) set forth the computation of
the Cash Purchase Price to be paid by the General Partner to Limited
Partner and the date, time and location for completion of the purchase
and sale of the Offered Partnership Units, which date shall, to the
extent required, in no event be more than sixty (60) days after the
Computation Date for such Exchange Exercise Notice; PROVIDED, HOWEVER,
that such sixty (60) day period may be extended for an additional
period to the extent required for the General Partner to cause
additional Class A Common Shares to be issued to provide financing to
be used to acquire the Offered Partnership Units. Notwithstanding the
foregoing, the General Partner agrees to use its best efforts to cause
the closing of the acquisition of Offered Partnership Units hereunder
to occur as quickly as possible.
Section 6. ADJUSTMENT TO CASH PURCHASE PRICE. If the General Partner
elects to raise funds to pay the Cash Purchase Price through a public offering
of its securities, borrowings or otherwise, the aggregate Cash Purchase Price
computed under Section 5 above shall be reduced by an amount ("Transaction
Expenses") equal to the expenses incurred by the General Partner in connection
with such raising of funds allocable to the amounts required to pay the Cash
Purchase Price hereunder; provided, however, notwithstanding the foregoing, the
Cash Purchase Price shall not be reduced hereunder by an amount exceeding 5% of
the Cash Purchase Price computed without regard to the adjustment for
Transaction Expenses.
Section 7. CLOSING DELIVERIES. At the closing, payment of the Purchase
Price shall be accompanied by proper instruments of transfer and assignment and
by the delivery of (i) representations and warranties of (A) the Limited Partner
with respect to its due authority to sell all of the right, title and interest
in and to such Offered Partnership Units to the General Partner and with respect
to the status of such Offered Partnership Units being free and clear of all
Liens, and (B) the General Partner with respect to due authority for the
purchase of such Offered Partnership Units, and (ii) to the extent that Class A
Common Shares are issued in payment of the Share Purchase Price, (A) an opinion
of counsel for the General Partner reasonably satisfactory to the Limited
Partner, to the effect that such Class A Common Shares have been duly
authorized, are validly issued, fully paid and non-assessable, and (B) a stock
certificate or certificates evidencing the Class A Common Shares to be issued
and registered in the name of the Limited Partner or its designee.
Section 8. TERM OF RIGHTS. Unless sooner terminated, the rights of the
parties with respect to the Rights shall commence as of the date hereof and
lapse for all purposes and in all respects on the date that the Partnership is
dissolved; PROVIDED, HOWEVER, that the parties hereto shall continue to be bound
by an Exchange Exercise Notice delivered to the General Partner prior to such
date.
Page 3
<PAGE> 64
Section 9. COVENANTS OF THE GENERAL PARTNER. To facilitate the General
Partner's ability to fully perform its obligations hereunder, the General
Partner covenants and agrees as follows:
(a) At all times during the pendency of the Exchange Rights, the
General Partner shall reserve for issuance and keep available, free from
preemptive rights, out of its authorized but unissued Class A Common
Shares, such number of Class A Common Shares as may be necessary to enable
the General Partner to issue Class A Common Shares in full satisfaction of
all Exchange Rights which are from time to time outstanding (assuming no
Ownership Restrictions applied and that the General Partner paid the Share
Purchase Price with respect to all such Exchange Rights).
(b) As long as the General Partner shall be obligated to file periodic
reports under the Exchange Act, the General Partner will timely file such
reports in such manner as shall enable any recipient of Class A Common
Shares issued to the Limited Partner hereunder in reliance upon an
exemption from registration under the Securities Act to continue to be
eligible to rely on Rule 144 promulgated by the SEC pursuant to the
Securities Act, or any successor rule or regulation or statute thereunder,
for the resale thereof.
(c) During the pendency of the Rights, the Limited Partner shall
receive in a timely manner all reports filed by the General Partner with
the SEC and all other communications transmitted from time to time by the
General Partner to its shareholders generally.
(d) All Class A Common Shares which may be issued upon exchange of
Offered Partnership Units will upon issue be validly issued, fully paid and
nonassessable.
Section 10. Limited PARTNERS' COVENANTS. Each Limited Partner
covenants and agrees with the General Partner that all Offered Partnership Units
tendered to the General Partner in accordance with the exercise of Rights herein
provided shall be delivered to the General Partner free and clear of all Liens
and should any Liens exist or arise with respect to such Offered Partnership
Units, the General Partner shall be under no obligation to acquire the same
unless, in connection with such acquisition, the General Partner has elected to
pay a portion of the purchase price in the form of the Cash Purchase Price in
circumstances where such Cash Purchase Price will be sufficient to cause any
existing Liens to be discharged in full upon application of all or a part of the
Cash Purchase Price and the General Partner is expressly authorized to apply
such portion of the Cash Purchase Price as may be necessary to satisfy any
indebtedness in full and to discharge any Liens in full. The Limited Partner
further agrees that, in the event any state or local property transfer tax is
payable as a result of the transfer of its Offered Partnership Units to the
General Partner (or its designee), the Limited Partner shall assume and pay such
transfer tax.
Page 4
<PAGE> 65
Section 11. ANTIDILUTION PROVISIONS.
(a) The Exchange Factor shall be subject to adjustment from time to
time effective upon the occurrence of the following events and shall be
expressed as a percentage, calculated to the nearest one-thousandth of one
percent (.001%):
(i) In case the General Partner shall pay or make a dividend or other
distribution on any class of shares of the General Partner in Class A
Common Shares, the Exchange Factor in effect at the opening of business on
the day following the date FIXED for the determination of stockholders
entitled to receive such dividend or other distribution shall be increased
in proportion to the increase in outstanding Class A Common Shares
resulting from such dividend or other distribution, such increase to become
effective immediately after the opening of business on the day following
the record date fixed for such dividend or other distribution.
(ii) In case outstanding Class A Common Shares shall be subdivided
into a greater number of shares, the Exchange Factor in effect at the
opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately increased, and,
conversely, in case the outstanding Class A Common Shares shall be combined
into a smaller number of shares, the Exchange Factor in effect at the
opening of business on the day following the day upon which such
combination becomes effective shall be proportionately reduced, such
increase or reduction, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(b) In case the General Partner shall issue rights, options or warrants
to all holders of Class A Common Shares entitling them to subscribe for or
purchase Class A Common Shares at a price per share less than the current market
price per share (as determined in the next sentence), each holder of a
Partnership Unit shall be entitled to receive such number of rights or warrants,
as the case may be, as such holder would have been entitled to receive had such
holder exchanged his Partnership Units immediately prior to the record date for
such issuance by the General Partner. For the purpose of any computation
pursuant to the next sentence, the current market price per share of Class A
Common Shares on any date shall be deemed to be the average of the daily Closing
Prices for the five consecutive Trading Days selected by the General Partner
commencing not more than twenty (20) Trading Days before, and ending not later
than, the earlier of the day in question and the day before the "ex" date with
respect to the issuance or distribution requiring such computation. For purposes
of this Exhibit D, the term "' ex' date," when used in respect of any issuance
or distribution, shall mean the first date on which the shares trade regular way
on such exchange or in such market without the right to receive such issuance or
distribution.
(c) In case the Class A Common Shares shall be changed into the same or
a different number of shares of any class or classes of stock, whether by
capital reorganization, reclassification, or otherwise (other than subdivision
or combination of shares or a stock dividend described in subparagraph (a) (ii)
of this Section) then and in
Page 5
<PAGE> 66
each such event the Exchange Rights shall thereafter consist of the right
to exchange Partnership Units for the kind and amount of shares and other
securities and property which would have been received upon such
reorganization, reclassification or other change by holders of the number
of shares into which the Partnership Units might have been exchanged
immediately prior to such reorganization, reclassification or change.
(d) The General Partner may, but shall not be required to, make such
adjustments to the number of Class A Common Shares issuable upon exchange
of a Partnership Unit, in addition to those required by this Section 11,
as the General Partner's board of directors considers to be advisable in
order that any event treated for Federal income tax purposes as a dividend
of stock or stock rights shall not be taxable to the recipients. The
General Partner's board of directors shall have the power to resolve any
ambiguity or correct any error in the adjustments made pursuant to this
Section 11(d) and its actions in so doing shall be final and conclusive.
Section 12. FRACTIONS OF SHARES. No fractional Class A Common Shares
shall be issued upon exchange of Partnership Units. If more than one Partnership
Unit shall be surrendered for exchange at one time by the Limited Partner, the
number of full Class A Common Shares which shall be issuable upon exchange
thereof (or the cash equivalent amount thereof if the Cash Purchase Price is
paid) shall be computed on the basis of the aggregate amount of Partnership
Units so surrendered. Instead of any fractional Class A Common Share which would
otherwise be issuable upon exchange of any Partnership Unit or Partnership
Units, the General Partner shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction of the Current Per Share Market
Price at the close of business on the day of closing specified in Section 5 of
this EXHIBIT D (or, if such day is not a Trading Day, on the Trading Day
immediately preceding such day).
Section 13. Notice OF ADJUSTMENTS OF EXCHANGE FACTOR. Whenever the
Exchange Factor is adjusted as herein provided:
(a) the General Partner shall compute the adjusted Exchange Factor in
accordance with Section 11 hereof and shall prepare a certificate signed
by the chief financial officer or the treasurer of the General Partner
setting forth the adjusted Exchange Factor and showing in reasonable detail
the facts upon which such adjustment is based; and
(b) a notice stating that the Exchange Factor has been adjusted and
setting forth the adjusted Exchange Factor shall forthwith be mailed by the
General Partner to all holders of Exchange Rights at their last addresses
on record under this Agreement.
Section 14. NOTICE OF CERTAIN CORPORATE ACTIONS.
In case:
(a) the General Partner shall declare a dividend (or any other
distribution) on its Class A Common Shares payable otherwise than in cash;
or
Page 6
<PAGE> 67
(b) the General Partner shall authorize the granting to all holders of
its Class A Common Shares of rights, options or warrants to subscribe for
or purchase any shares of stock of any class or of any other rights; or
(c) of any reclassification of the Class A Common Shares (other than a
subdivision or combination of its outstanding Class A Common Shares, or of
any consolidation, merger or share exchange to which the General Partner is
a party and for which approval of any shareholders of the General Partner
is required), or of the sale or transfer of all or substantially all of the
assets of the General Partner; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the General Partner;
then the General Partner shall cause to be mailed to all holders of Exchange
Rights at their last addresses on record under this Agreement, at least twenty
(20) days (or twelve (12) days in any case specified in clause (a) or (b) above)
prior to the applicable record date hereinafter specified, a notice stating (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution, rights, options or warrants, or, if a record is not to be taken,
the date as of which the holders of Class A Common Shares of record to be
entitled to such dividend, distribution, rights, options or warrants are to be
determined, or (ii) the date on which such reclassification, consolidation,
merger, share exchange, sale, transfer, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Shares of record shall be entitled to exchange their shares
for securities, cash or other property deliverable upon such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution, liquidation
or winding up.
Section 15. PROVISIONS IN CASE OF CONSOLIDATION, MERGER OR SALE OF
ASSETS. In case of any consolidation of the General Partner with, or merger of
the General Partner into, any other Person or Persons, any merger or
consolidation of another Person into the General Partner (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of outstanding Class A Common Shares of the General Partner), or
any sale or transfer of all or substantially all of the assets of the General
Partner, the Person formed by such consolidation or resulting from such merger
or which acquires such assets of the General Partner, as the case may be, shall
execute and deliver to each holder of Exchange Rights an agreement providing
that such holder shall have the right thereafter, during the period such
Exchange Rights shall be exercisable as specified herein, to require the
exchange of Partnership Units for the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of Class A Common Shares, for which such Partnership Unit
might have been exchanged immediately prior to such consolidation, merger, sale
or transfer, assuming such holder of Class A Common Shares is not a Person with
which the General Partner consolidated or into which the General Partner merged
or which merged into the General Partner, or to which such sale or transfer, was
made, as the case may be (a "Constituent Person"), or an Affiliate of a
Constituent Person, and failed to exercise his right of election, if any, as to
the kind or amount of securities, cash or other property receivable upon such
consolidation, merger, sale or transfer (provided that if the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer is not the same for each Class A Common Share in respect of
which such rights of election shall not have been exercised ("non-electing
Share"), then for the purpose of this Section 15 the kind and amount of
Page 7
<PAGE> 68
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer by each non-electing Share shall be deemed to be the kind and
amount so receivable per share by a plurality of the non-electing Shares). Such
agreement shall provide for adjustments which, for events subsequent to the
effective date of such agreement, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Exhibit D. The above
provisions of this Section 15 shall similarly apply to successive
consolidations, mergers, sales or transfers.
Page 8
<PAGE> 69
SCHEDULE 1
----------
EXCHANGE EXERCISE NOTICE
------------------------
To: CLEVELAND INDIANS BASEBALL COMPANY, INC.
Reference is made to that certain First Amended and Restated Agreement
of Limited Partnership of Cleveland Indians Baseball Company Limited Partnership
(the "Partnership"), dated as of ___________ ,1998 (the "Partnership
Agreement"), between Cleveland Indians Baseball Company, Inc. and Cleveland
Baseball Corporation. Capitalized terms used but not defined herein shall have
the meanings set forth in the Partnership Agreement. Pursuant to ARTICLE XI and
Section 2 of EXHIBIT D to the Partnership Agreement, the undersigned, being a
limited partner of the Partnership, hereby elects to exercise its Exchange
Rights as to Offered _______ Partnership Units.
Dated:
----------------------
[Name of Limited Partner]
-------------------------------------
By:
Page 9
<PAGE> 70
SCHEDULE 2
----------
ELECTION NOTICE
---------------
To: Exercising Partner(s)
Reference is made to that certain First Amended and Restated Agreement
of Limited Partnership of Cleveland Indians Baseball Company Limited Partnership
(the "Partnership"), dated as of _____________ ,1998 (the "Partnership
Agreement"). All capitalized terms used but not defined herein shall have the
meanings set forth in the Partnership Agreement. Pursuant to Section 5(b) of
Exhibit D to the Partnership Agreement, the undersigned, being the General
Partner of the Partnership, hereby notifies the Exercising Partner(s) that [(a)
the Share Purchase Price is payable by issuance of the number of Class A Common
Shares to the Exercising Partner(s), as set forth below, [(b) it has elected to
pay the Cash Purchase Price by payment of cash to the Exercising Partner(s) for
the number of Offered Partnership Units, as set forth below,] (c) the
computation of the [Share Purchase Price and Cash Purchase Price] as set forth
on an attachment hereto, (d) the closing of the purchase and sale of the Offered
Partnership Units by payment of the [Share Purchase Price] shall take place at
the offices of __________________________ on [date], and [(e) the closing of the
payment of the Cash Purchase Price shall take place at the offices of
______________________________ on [date].
NUMBER OF
OFFERED SHARE CASH
EXERCISING PARTNERSHIP PURCHASE PURCHASE
PARTNER(S) UNITS PRICE PRICE
- ---------- ----- ----- -----
CLEVELAND INDIANS BASEBALL
COMPANY, INC., an Ohio corporation
By:
--------------------------
Its:
-----------------------
Dated:
-----------------------
Page 10
<PAGE> 1
Exhibit 10.19
CLEVELAND INDIANS BASEBALL COMPANY, INC.
DIRECTORS' DEFERRED COMPENSATION PLAN
CLEVELAND INDIANS BASEBALL COMPANY, INC. (the "Company")
desires to establish a Directors' Deferred Compensation Plan (the "Plan") to
assist it in attracting and retaining persons of competence and stature to serve
as directors of the Company and more closely aligning the interests of its
directors with those of the Company's shareholders by giving each director the
option of deferring receipt of the fees payable to that director.
Therefore, the Company hereby adopts the Plan as hereinafter
set forth:
1. EFFECTIVE DATE. The Plan will become effective upon the
closing of the Company's initial public offering of Class A Common Shares (the
"IPO").
2. PARTICIPATION. Each director of the Company who (a) is duly
elected to the Company's Board of Directors and (b) receives fees for services
as a director may elect to defer receipt of fees otherwise payable to such
director pursuant to the terms of the Plan. Each director who elects to defer
fees is a Participant in the Plan.
3. ADMINISTRATION. The Company's Board of Directors will
appoint directors and/or officers of the Company who are not eligible to become
Participants, to act as the Administrators of the Plan ("Administrators"). The
Administrators will serve at the pleasure of the Board of Directors and will
administer, construe and interpret the Plan. The Administrators will not be
liable for any act done or determination made in good faith. The Board of
Directors has the power to designate additional or replacement Administrators at
its discretion.
4. DEFERRALS.
(a) DEFERRAL ELECTION. A Participant may elect to defer fees
by filing an election form with the Company and/or the Administrators
of the Plan prior to the
<PAGE> 2
beginning of a Plan Year (which begins on January 1 and ends on
December 31). Unless the election form indicates that the election
relates to a specific Plan Year, elections will be deemed continuing
and therefore applicable to subsequent Plan Years until the election is
modified or revoked. An election form must state the portion of fees to
be deferred, a distribution commencement date and method of
distribution (cash or Class A Common Shares and lump sum or four equal
annual installments). An election may be modified or revoked with
respect to any Plan Year prior to the commencement of that Plan Year.
Each director who first becomes eligible to participate in the Plan
after the date of the adoption of this Plan may make an election for
the portion of the year in which such director first became eligible
with respect to fees for services to be rendered after the date of such
election.
(b) ACCOUNTING. Appropriate records, which will list and
reflect each Participant's credits and valuations, will be maintained
by the Company ("Deferral Accounts"). The Company will provide each
Participant an annual statement of the balance in such Participant's
Deferral Account. The Company shall credit to each Participant's
Deferral Account an amount equivalent to the fees that would have been
paid to the Participant if the Participant had not elected to
participate in the Plan. The credit shall be made on the date on which
the fee would have been paid absent a deferral election. No funds are
required to be segregated into actual Accounts for the Participants;
the Deferral Accounts shall represent general unsecured obligations of
the Company.
(c) VALUATION. Until distributed to a Participant, amounts
credited to a Deferral Account of such Participant will be increased or
decreased as measured by the
<PAGE> 3
market value of the Company's Class A Common Shares plus the value of
dividends or other distributions on the Class A Company's Common
Shares. Each amount credited to a Deferral Account will be assigned a
number of Share Units (including fractions of a Share) determined by
dividing the amount credited to the Deferral Account, whether in lieu
of payment of fees for service as a director or as a dividend or other
distribution attributable to such Share Units, by the fair market value
of a share of the Company's Class A Common Shares on the date of
credit. "Fair Market Value" means, as of any date, the mean between the
highest and lowest quoted selling price, regular way, of the Shares on
such date on the Nasdaq National Market (or any successor thereto), if
no such sale of the Shares occurs on the Nasdaq National Market (or any
successor thereto) on such date, then such mean price on the next
preceding day on which the Shares were traded. If the Shares are no
longer quoted on the Nasdaq National Market (or any successor thereto),
then the Fair Market Value of the Shares will be determined by the
Administrators in good faith. Each Share Unit will have the value of
one Class A Common Share of the Company. The number of Share Units will
be adjusted to reflect stock splits, stock dividends or other capital
adjustments effected without receipt of consideration by the Company.
5. DISTRIBUTION. A Participant must elect in writing, at the
time he makes a deferral election under subparagraph 4(a), the date on which the
distribution of amount credited to the Participant's Deferral Account to which
the deferral election relates will commence and the method of distribution, as
permitted hereunder. Payment will be made on the earlier of (i) the date
specified in the deferral election or (ii) ninety (90) days after termination of
the Participant's status as a director of the Company. Payment will be made in
the form of Class A
<PAGE> 4
Common Shares or cash as elected at the time of payment by the Participant. The
Company will use its best efforts to register the issuance of the Class A Common
Shares distributed to Participants under the Securities Act of 1933, as amended.
The time of distribution of benefits may vary with each separate election, but
each election will be irrevocable.
Distributions (whether in Class A Common Shares or cash) may
be made in one lump sum or four equal annual installments (each, a "Payment
Date") as specified in a Participant's elections. The amount of an installment
will be paid based on the then current value of the Participant's Deferral
Account as follows: (a) 25% on the first Payment Date; (b) 33% on the second
Payment Date; (c) 50% on the third Payment Date; and (d) 100% on the fourth
Payment Date. The value of the Participant's Deferral Account will be determined
based on the number of Share Units attributable to the applicable deferral
election and the Fair Market Value of such Share Units as of the business day
immediately preceding the Payment Date.
6. DEATH OR DISABILITY.
(a) If a Participant's service is terminated by reason of
death or disability prior to the distribution of any portion of his
benefits, the Company will, within ninety (90) days of the date of
service termination, commence distribution of benefits to the
Participant (or to the beneficiary or beneficiaries in the event of
death). Distribution will be made in accordance with the method of
distribution elected by the Participant pursuant to paragraph 5 hereof.
In the event a Participant's death or disability occurs after
distribution of benefits hereunder has begun, the Company will continue
to make distributions to the Participant (or to the beneficiary or
beneficiaries in the event of death) in accordance with the methods of
distribution elected by the Participant pursuant to paragraph 5 hereof.
<PAGE> 5
(b) Each Participant will have the right to designate one or
more beneficiaries to receive distributions in the event of
Participant's death by filing with the Company a beneficiary
designation. A Participant may change the designated beneficiary or
beneficiaries at any time prior to his death by the delivery to the
Company of a new beneficiary designation. If no beneficiary has been
designated, or if no designated beneficiary survives the Participant,
distributions pursuant to this provision will be made to the
Participant's estate.
7. ASSIGNMENT AND ALIENATION OF BENEFITS. The right of each
Participant to any account, benefit or payment hereunder will not, to the extent
permitted by law, be subject in any manner to attachment or other legal process
for the debts of such Participant; and no account, benefit or payment will be
subject to anticipation, alienation, sale, transfer, assignment or encumbrance.
8. HARDSHIP. Other provisions notwithstanding, at the written
request of a Participant or his or her legal representative, the Administrators,
in their sole discretion, upon a finding that continued deferral will result in
financial hardship to the Participant, may authorize (i) the distribution of all
or a part of a Participant's Deferral Account in a single installment or (ii)
the acceleration of payment of any multiple installments thereof.
9. AMENDMENT OR TERMINATION. The Board of Directors of the
Company may amend or terminate this Plan at any time and from time to time. Any
amendment or termination of this Plan will not affect the rights of a
Participant accrued prior thereto without his written consent.
10. TAXES. The Company will not be responsible for the tax
consequences under federal, state or local law of any election made by any
Participant under the Plan. All payments
<PAGE> 6
under the Plan will be subject to withholding and reporting requirements to the
extent permitted by applicable law.
11. APPLICABLE LAW. This Plan will be interpreted under the
laws of the State of Ohio.
<PAGE> 1
Exhibit 10.20
January 30, 1998
Mr. John Hart
4395 Valley Forge
Fairview Park, Ohio 44126
Dear John:
The following shall constitute the Employment Agreement by and
between Cleveland Indians Baseball Company Limited Partnership, an Ohio limited
partnership (the "Club"), and you and shall, upon acceptance by you, replace
your existing contract dated October 20, 1994.
1. TERM.
(a) Subject to the terms and conditions set forth
below, the Club agrees to employ you as Executive Vice President,
General Manager of the General Partner of the Club, for the period
commencing on January 1, 1998 and ending December 31, 2003, subject to
subsections (b), (c), (d) and (e) below.
(b) The Club shall have the unilateral option to
extend the term of this Agreement through December 31, 2004, at a
salary of $775,000.00 for 2004. Such option may be exercised by written
notice personally delivered or mailed to you at the Club's offices on
or before December 1, 2002.
(c) The Club shall have the unilateral option to
extend the term of this Agreement through December 31, 2005 at a salary
of $800,000.00 for 2005. Such option may be exercised by written notice
personally delivered or mailed to the Club's offices on or before
December 1, 2003.
(d) The Club shall have the unilateral option to
extend the term of this Agreement through December 31, 2006 at a salary
of $825,000.00 for 2006. Such option may be exercised by written notice
personally delivered or mailed to the Club's offices on or before
December 1, 2004.
(e) The Club shall have the unilateral option to
extend the term of this Agreement through December 31, 2006 at a salary
of $850,000.00 for 2007. Such option may be exercised by written notice
personally delivered or mailed to the Club's offices on or before
December 1, 2005.
<PAGE> 2
Mr. John Hart
January 30, 1998
Page 2
(f) Your salary shall be payable each calendar year
in twenty-four equal semi-monthly installments.
2. SALARY.
(a) SALARY. Your salary as Executive Vice President,
General Manager during the period of your employment under this
Agreement shall be as follows, less the amounts deferred pursuant to
paragraph (b) of this Section 2:
January 1, 1998 to December 31, 1998 at the rate of
$600,000.00 per year.
January 1, 1999 to December 31, 1999 - $625,000
January 1, 2000 to December 31, 2000 - $650,000
January 1, 2001 to December 31, 2001 - $675,000
January 1, 2002 to December 31, 2002 - $700,000
January 1, 2003 to December 31, 2003 - $750,000
Option Years:
January 1, 2004 to December 31, 2004 - $775,000
January 1, 2005 to December 31, 2005 - $800,000
January 1, 2006 to December 31, 2006 - $825,000
January 1, 2007 to December 31, 2007 - $850,000
(b) DEFERRED COMPENSATION PLAN. On or before December
1 of the year immediately preceding any calendar year, you may elect to
defer the payment of not more than 50% of the salary otherwise payable
under subsection (a) of this Section 2 and 100% of any bonus payments
for such calendar year, and on June 15 of such calendar year (or, if
later, the date that any bonus payment would otherwise have been
payable), the Club shall deposit such deferred compensation in a trust,
the earnings on which are not currently taxable for federal income tax
purposes, which shall be established by the Club to provide deferred
compensation to you in accordance with this subsection (b) (the
"Deferred Compensation Account"); a copy of such trust is attached
hereto as Exhibit I. Notwithstanding the
<PAGE> 3
Mr. John Hart
January 30, 1998
Page 3
foregoing, if you terminate employment, die or become "permanently
disabled" (as defined under Section 10) during a calendar year, the
amount to be credited to the Deferred Compensation Account for that
year shall be equal to the portion of the deferred amount that you
actually earned through the date of your termination of employment,
death or permanent disability. The fair market value of the Deferred
Compensation Account, as determined under clause (i) of this subsection
(b), shall be paid by the Club to you, or in the case of your death, to
your beneficiary, in ten installments commencing on the first business
day of January of the calendar year following the earlier of the date
of your death, permanent disability or termination of your employment
with the Club. The payments will be computed in accordance with the
following schedule:
<TABLE>
<CAPTION>
Percentage of
Fair Market Value
Payment of Deferred
Number Compensation Account
------ --------------------
<S> <C>
1 10%
2 11.11%
3 12.5%
4 14.28%
5 16.67%
6 20%
7 25%
8 33.33%
9 50%
10 100%
</TABLE>
The Club will reimburse you for the annual premium cost of an
insurance policy that you may purchase to insure that the amount of the
deferred compensation benefits will be paid to you in the event that
the Club fails to pay such benefits due to a bankruptcy or other
financial difficulties of the Club. The obligation to reimburse you for
such premiums will remain in full force and effect until the entire
amount of deferred compensation benefits have been paid to you or your
beneficiaries.
(i) INVESTMENT POLICY. Any deferred compensation credited to
your Deferred Compensation Account pursuant to this Section 2 shall be
deposited in a segregated investment account maintained under the trust
known as the "Trust Agreement under the Cleveland Indians Baseball
Company Limited Partnership Deferred Compensation Plans (the
<PAGE> 4
Mr. John Hart
January 30, 1998
Page 4
"Trust") for the Cleveland Indians Baseball Company Limited Partnership
Deferred Compensation Plan for John Hart (the "Segregated Investment
Account"). Deferred compensation credited to the Segregated Investment
Account pursuant to this Section 2 and all income attributable to such
amounts (net of expenses) shall be invested and reinvested in
accordance with the Trust until such time as the Deferred Compensation
Account is paid to you, or your beneficiary, as applicable. The fair
market value of your Deferred Compensation Account hereunder shall be
based upon the fair market value of the Segregated Investment Account
under the Trust.
The trust known as the Trust Under Cleveland Indians Baseball
Company Limited Partnership Deferred Compensation Plan for John Hart,
under which Independence Bank is the trustee, shall be revoked by the
Club within an administratively reasonable period of time following the
Club's receipt of your acceptance of this amendment to the Agreement
and the assets held under such trust (net of expenses) shall be
transferred in kind to the Trust for deposit in the Segregated
Investment Account.
(ii) DEATH BENEFITS. You shall be entitled to
designate a beneficiary (or beneficiaries) who shall be entitled to
receive that portion of your undistributed Deferred Compensation
Account, as determined under the first paragraph of this subsection (b)
if you die before receiving the total value of the Deferred
Compensation Account. The designation of a beneficiary (or
beneficiaries) must be made in writing on a form substantially similar
to the form attached as Exhibit II to this Agreement and delivered to
the Club. You may change or revoke a beneficiary designation by filing
a new designation or notice of revocation with the Club. If you fail to
designate a beneficiary or if no designated beneficiary survives you,
the Club will pay any amounts payable pursuant to this subsection (b)
to your surviving spouse, and to your personal representative if there
is no surviving spouse.
(iii) HARDSHIP. Regardless of the date on which
payment of the deferred compensation under this subsection (b)
otherwise is to be paid, in the event of your hardship, payment of all
or a portion of the fair market value of the Deferred Compensation
Account can be accelerated by the Club's determination of hardship. The
Club shall have sole discretion as to whether a hardship has occurred
and if so, also shall have sole discretion to determine the amount of
<PAGE> 5
Mr. John Hart
January 30, 1998
Page 5
deferred compensation that may be distributable to you in order to
alleviate that hardship. For this purpose, hardship shall mean any
emergency or necessity affecting your personal or family affairs having
a significant adverse financial effect.
(iv) NO FORFEITURE OF DEFERRED COMPENSATION. All
deferred compensation credited to the Deferred Compensation Account
shall be nonforfeitable.
(v) DEBITING OF DEFERRED COMPENSATION ACCOUNT. Once
an amount of deferred compensation has been paid, such amount shall be
debited from the Deferred Compensation Account and shall cease to
exist.
(vi) PARTICIPANT'S RIGHTS ARE UNFUNDED AND UNSECURED.
Notwithstanding the creation of the trust described herein, all
deferred compensation benefits under this subsection (b) are unfunded
for purposes of the Employee Retirement Income Security Act of 1974, as
amended. Your (or your beneficiary's) right to receive a distribution
hereunder shall be an unsecured claim against the general assets of the
Club, and neither you nor your beneficiary shall have any rights in or
against any amounts credited hereunder or any other specific assets of
the Club or the trust referred to herein. Any deferred compensation
benefits payable hereunder to you or your beneficiary may be payable
out of the trust established by the Club, or may be payable from the
general assets of the Club.
(vii) ANTI-ASSIGNMENT. No right or deferred
compensation payment under this subsection (b) shall be subject to
alienation, sale or assignment.
3. SALE BONUS. In the event of (1) a sale or exchange of
substantially all of the assets of the Club to any person or entity not
controlled by Richard E. Jacobs, his estate or any inter vivos or testamentary
trust of which Richard E. Jacobs is the grantor, (2) a sale of ownership
interests in the Club or the General Partner possessing more than 50% of the
voting power of such entity to any person other than Richard E. Jacobs, his
estate or any inter vivos or testamentary trust of which Richard E. Jacobs is
the grantor, or (3) a public offering of securities possessing more than 50% of
the aggregate value of the Club, you shall be paid a bonus equal to $100,000.
4. LIFE INSURANCE. The Club understands that you may acquire
life insurance policy to insure receipt of proceeds based
<PAGE> 6
Mr. John Hart
January 30, 1998
Page 6
upon the unpaid portion of the salary amounts set forth in paragraph 2. Each
year during the term of this Contract, including any option years if the
applicable option has been exercised, The Club will reimburse you for the cost
of such policy in an amount not to exceed the annual premium based upon
preferred issued rates for a term insurance policy with a death benefits equal
to $2,000,000.
Reimbursement will be made with respect to the option years
only if the option for such year has been exercised.
5. POST SEASON BONUS. In the event that the Club wins the
Central Division Championship, American League Championship Pennant or the World
Series during any championship season during the term of this Agreement,
including any option year if the applicable option has been exercised, you shall
be paid bonus payments as follows:
<TABLE>
<S> <C>
American League Central Division Championship or
Wild Card $ 50,000
American League Championship $100,000
World Series Championship $100,000
</TABLE>
6. GROUP PLAN. In addition to all of the other rights and
benefits under this Agreement, you shall be eligible to participate in any
current or future plan which may be provided by the Club for the benefit of its
executives or employees, provided you qualify, and subject to such plan's or
program's terms and conditions. You may participate in, among other things, any
and all group life insurance policies, plans, and medical and health benefits
maintained by or on behalf of the Club to the fullest extent possible in
accordance with the terms and provisions thereof.
7. EXPENSES. You shall be entitled to incur on behalf of the
Club reasonable and necessary expenses in connection with your duties, in
accordance with the Club's customary practice, including expenses incurred in
connection with your use of an automobile which will be provided by the Club for
your exclusive use; or, in lieu of accepting the use of an automobile provided
by the Club, the Club will pay you a monthly automobile allowance of Three
Hundred Dollars ($300.00).
8. JOB DESCRIPTION. During the term of your employment, you
shall faithfully perform the duties and have the responsibilities of Executive
Vice President, General Manager of the Club, subject to the control and
direction of the President and Chief Executive Officer, if any, the Chairman of
the Board,
<PAGE> 7
Mr. John Hart
January 30, 1998
Page 7
the Board of Directors of the Club and its General Partner. You agree to devote
your full time, energies, talent, and best efforts exclusively to your duties as
Executive Vice President, General Manager and to such other duties as may be
assigned to you as provided above. You agree that the Club will not grant
permission to any other Major League Baseball Club to discuss other employment
opportunities with you during the term of this Contract.
9. PUBLIC CONTACT. You agree to conduct yourself with
propriety and with due regard to public convention and morals, and agree not to
engage in conduct which is detrimental to or contrary to the rules of the Club,
the League and/or professional baseball, and you further agree to abide by and
be subject to the discipline of the Commissioner of Baseball and to his
decisions rendered in accordance with the Professional Baseball Agreement.
10. DEATH OR DISABILITY. Your death or permanent disability
during the term of this Agreement shall immediately terminate this Agreement.
For the purposes of this Section 7, permanent disability is defined as any
condition caused by an accident, sickness or otherwise, which, in the reasonable
judgment of the President and Chief Executive Officer of the Club, if any, the
Chairman of the Board or the Board of Directors of the Club or its General
Partner, disables, or may in the future disable, you from substantially
performing the duties and services required under this Agreement for a period of
120 days, whether consecutive or non-consecutive, in any 12-month period. Upon
termination of this Agreement pursuant to this Section 7, you shall be entitled
to no compensation or any of the other rights or benefits provided in this
Agreement not already earned as of the date of such termination or otherwise
required by law.
11. TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. In the
event that you fail to observe and comply with the provisions of this Agreement
in any material respect or in the event of your fraud or dishonesty in the
performance of your duties, the Club may discharge you prior to the expiration
of the term of this Agreement by giving you written notice, which notice shall
state the specific facts upon which the discharge is based. In the event of such
discharge, you shall be entitled to no compensation or any of the other rights
or benefits provided in this Agreement not already earned as of the date of such
discharge or termination, except as otherwise required by law. Both parties
agree, however, that you shall have no right to terminate this Agreement
voluntarily.
<PAGE> 8
Mr. John Hart
January 30, 1998
Page 8
12. TERMINATION WITHOUT CAUSE. You agree that, should you be
discharged from your duties without cause, you are obligated to seek and, if
offered, accept other comparable employment, either from another Major League
Club or from some other baseball or non-baseball employer. In the event that you
are so discharged without cause, you will receive not less than five days
written notice of such discharge. The compensation due by the Club under this
Agreement will be reduced by any compensation which you receive from such other
employment following such termination. The amount to be deducted includes, but
is not limited to, compensation of any kind for services, including salary,
bonuses, fees, commissions, payments in kind, and similar items, and the
reasonable value of services rendered by you should you become self-employed
following termination.
13. REPRESENTATIONS AND ADDITIONAL COVENANTS.
(a) You hereby represent that you are free to accept
employment with the Club as contemplated hereunder, and that such
employment will not violate the terms of any other agreement or
instrument to which terms you are subject.
(b) You hereby represent that you do not directly or
indirectly, own stock or any other financial interest in the ownership
or earnings of any Major League Club, and you agree that you will not
hereafter acquire or hold any such interest except in accordance with
Major League Rule 20(e).
14. CONFIDENTIALITY. The parties agree that the terms of this
Agreement and all of the conversations and negotiations regarding your
employment with the Club are in strictest confidence and shall be and will
remain confidential and not subject to public disclosure of any kind without our
mutual consent or as may be required by law. In addition, you agree to maintain
the confidentiality of all business information of the Club which you acquire
during your employment hereunder, and to preserve such information for the
exclusive benefit of the Club.
15. INJUNCTIVE AND EQUITABLE RELIEF. Because during the course
of your employment under this Agreement you will gain an intimate knowledge of
the business, activities and affairs of the Club, and because of the special,
unique and extraordinary services you are capable of performing for the Club or
one of its competitors, you recognize that the services to be rendered by you
hereunder are of a character giving them a peculiar value, the loss of which
cannot be adequately or reasonably compensated for by damages. You therefore
agree that if you fail to comply
<PAGE> 9
Mr. John Hart
January 30, 1998
Page 9
with any of the provisions of this Agreement, in addition to the remedies and
procedures provided elsewhere in this Agreement, the Club shall be entitled to
obtain immediate injunctive or other equitable relief to restrain you from
failing to fulfill your obligations hereunder or from becoming affiliated,
directly or indirectly, with any of the Major League Clubs or their respective
minor league affiliates, without prejudice to any other remedies to which the
Club may be entitled under law.
16. BINDING EFFECT. This Agreement shall be binding upon, and
shall inure to the benefit of, both you and the Club. This Agreement may not be
assigned or transferred without the consent of both parties.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties, and supersedes in its entirety any prior agreements,
arrangements and understandings between the parties with respect to the subject
matter hereof, and no amendment hereof shall be deemed valid unless in writing
and signed by the parties hereto.
18. GOVERNANCE. This Agreement is subject to and is governed
by, all applicable rules and regulations of Major League Baseball and the
American League of Professional Baseball Clubs, and any rules or regulations
which the Club may announce from time to time.
19. EXECUTION BONUS. As additional consideration for entering
into this Contract, the Club shall pay you the sum of $100,000 (the "Execution
Bonus"). The Execution Bonus shall be payable, subject to any federal, state,
and local payroll taxes that are required by law to be withheld, upon the
execution of this Contract by you and the Club.
20. CONSULTING AGREEMENT. Upon termination of your employment
pursuant to the terms of this Contract, if you and Club mutually agree, you will
be retained by the Club as a consultant for a period of five (5) years. The
annual consulting fee shall be $200,000. In addition, you shall be eligible to
participate in any medical and life insurance benefit plan which may be provided
by the Club for the benefit of its executives or employees, provided you
qualify, and subject to such plan's or program's terms and conditions. You may
participate in, among other things, any and all group life insurance policies,
plans, and medical and health benefits maintained by or on behalf of the
<PAGE> 10
Mr. John Hart
January 30, 1998
Page 10
Club to the fullest extent possible in accordance with the terms and provisions
thereof.
Very truly yours,
CLEVELAND INDIANS BASEBALL
COMPANY LIMITED PARTNERSHIP
By: Its General Partner,
Cleveland Baseball
Corporation
By: /s/ Richard E. Jacobs
--------------------------------------
Richard E. Jacobs
ACCEPTED:
/s/ John Hart
- ------------------------
Date: February 5, 1998
-------------------
<PAGE> 1
Exhibit 10.21
April 10, 1998
Mr. Dennis Lehman
399 North Main Street
Chagrin Falls, Ohio 44022
Dear Dennis:
The following shall constitute the Employment Agreement by and between
Cleveland Indians Baseball Company Limited Partnership, an Ohio limited
partnership (the "Club"), and you and shall, upon acceptance by you, replace
your existing contract dated January 9, 1995.
1. TERM.
(a) Subject to the terms and conditions set forth below, the
Club agrees to employ you as Executive Vice President/Business of the
Club, for the period commencing on January 1, 1998 and ending December
31, 2002, subject to subsections (b), (c), (d) and (e) below.
(b) The Club shall have the unilateral option to extend the
term of this Agreement through December 31, 2003, at a salary of
$425,000 for 2003. Such option may be exercised by written notice
personally delivered or mailed to you at the Club's offices on or
before December 31, 2001.
(c) The Club shall have the unilateral option to extend the
term of this Agreement through December 31, 2004 at a salary of
$450,000 for 2004. Such option may be exercised by written notice
personally delivered or mailed to the Club's offices on or before
December 31, 2002.
(d) The Club shall have the unilateral option to extend the
term of this Agreement through December 31, 2005 at a salary of
$475,000 for 2005. Such option may be exercised by written notice
personally delivered or mailed to the Club's offices on or before
December 31, 2003.
<PAGE> 2
Mr. Dennis Lehman
April 10, 1998
Page 2
(e) The Club shall have the unilateral option to extend the
term of this Agreement through December 31, 2006 at a salary of
$500,000 for 2006. Such option may be exercised by written notice
personally delivered or mailed to the Club's offices on or before
December 31, 2004.
(f) Your salary shall be payable each calendar year in
twenty-four equal semi-monthly installments.
2. SALARY.
(a) SALARY. Subject to the adjustment described in paragraph
2(c), your salary as Executive Vice President/Business during the
period of your employment under this Agreement shall be as follows,
less the amounts deferred pursuant to paragraph (b) of this Section 2:
January 1, 1998 to December 31, 1998 at the rate of $300,000
per year.
January 1, 1999 to December 31, 1999 - $325,000
January 1, 2000 to December 31, 2000 - $350,000
January 1, 2001 to December 31, 2001 - $375,000
January 1, 2002 to December 31, 2002 - $400,000
Option Years:
January 1, 2003 to December 31, 2003 - $425,000
January 1, 2004 to December 31, 2004 - $450,000
January 1, 2005 to December 31, 2005 - $475,000
January 1, 2006 to December 31, 2006 - $500,000
(b) DEFERRED COMPENSATION PLAN. On or before December 1 of the
year immediately preceding any calendar year, you may elect to defer
the payment of not more than 50% of the salary otherwise payable under
subsection (a) of this Section 2 and 100% of any bonus payments for
such calendar year, and
<PAGE> 3
Mr. Dennis Lehman
April 10, 1998
Page 3
on June 15 of such calendar year (or, if later, the date that any bonus
payment would otherwise have been payable), the Club shall deposit such
deferred compensation in a trust, the earnings on which are not
currently taxable for federal income tax purposes, which shall be
established by the Club to provide deferred compensation to you in
accordance with this subsection (b) (the "Deferred Compensation
Account"); a copy of such trust is attached hereto as Exhibit I.
Notwithstanding the foregoing, if you terminate employment, die or
become "permanently disabled" (as defined under Section 8) during a
calendar year, the amount to be credited to the Deferred Compensation
Account for that year shall be equal to the portion of the deferred
amount that you actually earned through the date of your termination of
employment, death or permanent disability. The fair market value of the
Deferred Compensation Account, as determined under clause (i) of this
subsection (b), shall be paid by the Club to you, or in the case of
your death, to your beneficiary within 60 days following the earlier of
(a) the date of your death or permanent disability or (b) termination
of your employment with the Club.
(i) INVESTMENT POLICY. Any deferred compensation
amounts credited to the Deferred Compensation Account pursuant
to this subsection (b) and all income attributable to such
amounts (net of expenses) shall be held in a segregated
investment account within the Trust and shall be invested and
reinvested accordance with the Trust agreement until such time
as the entire fair market value of Deferred Compensation
Account is paid by the Club to you, or your beneficiary, as
applicable in accordance with Subsection (b)(i) above.
(ii) DEATH BENEFITS. You shall be entitled to
designate a beneficiary (or beneficiaries) who shall be
entitled to receive that portion of your undistributed
Deferred Compensation Account, as determined under the first
paragraph of this subsection (b) if you die before receiving
the total value of the Deferred Compensation Account. The
designation of a beneficiary (or beneficiaries) must be made
in writing on a form substantially similar to the form
attached as Exhibit II to this Agreement and delivered to the
Club. You may change or revoke a beneficiary designation by
filing a new designation or notice of revocation with the
Club. If you fail to designate a beneficiary or if no
designated beneficiary survives you, the Club will pay any
amounts payable pursuant to this subsection (b) to your
surviving spouse, and to your personal representative if there
is no surviving spouse.
<PAGE> 4
Mr. Dennis Lehman
April 10, 1998
Page 4
(iii) HARDSHIP. Regardless of the date on which
payment of the deferred compensation under this subsection (b)
otherwise is to be paid, in the event of your hardship,
payment of all or a portion of the fair market value of the
Deferred Compensation Account can be accelerated by the Club's
determination of hardship. The Club shall have sole discretion
as to whether a hardship has occurred and, if so, also shall
have sole discretion to determine the amount of deferred
compensation that may be distributable to you in order to
alleviate that hardship. For this purpose, hardship shall mean
any emergency or necessity affecting your personal or family
affairs having a significant adverse financial effect.
(iv) NO FORFEITURE OF DEFERRED COMPENSATION. All
deferred compensation credited to the Deferred Compensation
Account shall be nonforfeitable.
(v) DEBITING OF DEFERRED COMPENSATION ACCOUNT. Once
an amount of deferred compensation has been paid, such amount
shall be debited from the Deferred Compensation Account and
shall cease to exist.
(vi) PARTICIPANT'S RIGHTS ARE UNFUNDED AND UNSECURED.
Notwithstanding the creation of the trust described herein,
all deferred compensation benefits under this subsection (b)
are unfunded for purposes of the Employee Retirement Income
Security Act of 1974, as amended. Your (or your beneficiary's)
right to receive a distribution hereunder shall be an
unsecured claim against the general assets of the Club, and
neither you nor your beneficiary shall have any rights in or
against any amounts credited hereunder or any other specific
assets of the Club or the trust referred to herein. Any
deferred compensation benefits payable hereunder to you or
your beneficiary may be payable out of the trust established
by the Club, or may be payable from the general assets of the
Club.
(vii) ANTI-ASSIGNMENT. No right or deferred
compensation payment under this subsection (b) shall be
subject to alienation, sale or assignment.
(c) INFLATION ADJUSTMENT. If the salary amount for any year
during the term of this Agreement, including any option year if the
applicable option has
<PAGE> 5
Mr. Dennis Lehman
April 10, 1998
Page 5
been exercised is less than an amount equal to (i) $300,000, multiplied
by (ii) one (1) plus the percentage increase in the CPI for the period
commencing on January 1, 1998 and ending on the day before the
beginning of the year for which the salary amount is applicable, then
the salary shall be adjusted to equal the amount computed pursuant to
this paragraph 2(c). Any adjustment made pursuant to this paragraph
shall not be taken into account to compute the salary amount for any
other year. CPI shall mean the Consumer Price Index for Urban Wage
Earners and Clerical Workers, All Items, as published by the U.S.
Department of Labor, Bureau of Statistics. If the manner in which the
CPI is determined by the Bureau of Labor Statistics shall be
substantially revised, including, without limitation, a change in the
base index year, an adjustment shall be made in such revised index that
would produce results reasonably equivalent to those that would have
been obtained if such CPI had not been so revised. If the CPI shall
become unavailable to the public because its publication is
discontinued or otherwise, or if equivalent data is not readily
available to make the adjustment referred to in the preceding sentence,
then a comparable index published by an agency of the United States
government that reflects changes in the cost of living or purchasing
power of the consumer dollar shall be substituted or, if no such index
is available, then a comparable index published by a major United
States bank or other financial institution shall be used.
3. POST SEASON BONUS. In the event that the Club participates in a
division playoff series, league championship series or the World Series during
any championship season during the term of this Agreement, including either
option year if the applicable option has been exercised, you shall be entitled
to receive a bonus equal to a full player's share payable to the Club's players
as determined pursuant to Major League Rule 45(b)(2) as the same shall be
amended from time to time.
4. GROUP PLAN. In addition to all of the other rights and benefits
under this Agreement, you shall be eligible to participate in any current or
future plan which may be provided by the Club for the benefit of its executives
or employees, provided you qualify, and subject to such plan's or program's
terms and conditions. You may participate in, among other things, any and all
group life insurance policies, plans, and medical and health benefits maintained
by or on behalf of the Club to the fullest extent possible in accordance with
the terms and provisions thereof.
5. EXPENSES. You shall be entitled to incur on behalf of the Club
reasonable and necessary expenses in connection with your duties, in accordance
with the Club's customary practice, including the following: Expenses incurred
in
<PAGE> 6
Mr. Dennis Lehman
April 10, 1998
Page 6
connection with your business use of an automobile which will be provided by
the Club for your exclusive use; travel expenses, consistent with the Club's
customary policy, incurred by you on Club business trips.
6. JOB DESCRIPTION. During the term of your employment, you shall
faithfully perform the duties and have the responsibilities of Executive Vice
President/Business of the Club, subject to the control and direction of the
President, Chief Executive Officer, the Chairman of the Board and the Board of
Directors of the Club and its General Partner. You agree to devote your full
time, energies, talent, and best efforts exclusively to your duties as Executive
Vice President/Business and to such other duties as may be assigned to you as
provided above. You agree that the Club will not grant permission to any other
Major League Baseball Club to discuss other employment opportunities with you
during the term of this Contract. This paragraph shall not be construed in a
manner that would prohibit you from participation in charitable and civic
activities or organizations; provided that such participation is disclosed to
Club and the Club does not object to such participation.
7. PUBLIC CONTACT. You agree to conduct yourself with propriety and
with due regard to public convention and morals, and agree not to engage in
conduct which is detrimental to or contrary to the rules of the Club, the League
and/or professional baseball, and you further agree to abide by and be subject
to the discipline of the Commissioner of Baseball and to his decisions rendered
in accordance with the Professional Baseball Agreement.
8. DEATH OR DISABILITY. Your death or permanent disability during the
term of this Agreement shall immediately terminate this Agreement. For the
purposes of this Section 8, permanent disability is defined as any condition
caused by an accident, sickness or otherwise, which, in the reasonable judgment
of the President and Chief Executive Officer of the Club, if any, the Chairman
of the Board or the Board of Directors, disables, or may in the future disable,
you from substantially performing the duties and services required under this
Agreement for a period of 120 days, whether consecutive or non-consecutive, in
any 12-month period. Upon termination of this Agreement pursuant to this Section
8, you shall be entitled to no compensation or any of the other rights or
benefits provided in this Agreement not already earned as of the date of such
termination or otherwise required by law.
9. TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. In the event that
you fail to observe and comply with the provisions of this Agreement in any
material respect or in the event of your fraud or dishonesty in the performance
of your duties, the Club may discharge you prior to the expiration of the term
of this
<PAGE> 7
Mr. Dennis Lehman
April 10, 1998
Page 7
Agreement by giving you written notice, which notice shall state the specific
facts upon which the discharge is based. In the event of such discharge, you
shall be entitled to no compensation or any of the other rights or benefits
provided in this Agreement not already earned as of the date of such discharge
or termination, except as otherwise required by law. Both parties agree,
however, that you shall have no right to terminate this Agreement voluntarily.
10. TERMINATION WITHOUT CAUSE. You agree that, should you be discharged
from your duties without cause, you are obligated to seek and, if offered,
accept other comparable employment, either from another Major League Club or
from some other baseball or non-baseball employer. In the event that you are so
discharged without cause, you will receive not less than five days written
notice of such discharge. The compensation due by the Club under this Agreement
will be reduced by any compensation which you receive from such other employment
following such termination. The amount to be deducted includes, but is not
limited to, compensation of any kind for services, including salary, bonuses,
fees, commissions, payments in kind, and similar items, and the reasonable value
of services rendered by you should you become self-employed following
termination.
11. REPRESENTATIONS AND ADDITIONAL COVENANTS.
(a) You hereby represent that you are free to accept
employment with the Club as contemplated hereunder, and that such
employment will not violate the terms of any other agreement or
instrument to which terms you are subject.
(b) You hereby represent that you do not directly or
indirectly, own stock or any other financial interest in the ownership
or earnings of any Major League Club, and you agree that you will not
hereafter acquire or hold any such interest except in accordance with
Major League Rule 20(e).
12. CONFIDENTIALITY. The parties agree that the terms of this Agreement
and all of the conversations and negotiations regarding your employment with the
Club are in strictest confidence and shall be and will remain confidential and
not subject to public disclosure of any kind without our mutual consent or as
may be required by law. In addition, you agree to maintain the confidentiality
of all business information of the Club which you acquire during your employment
hereunder, and to preserve such information for the exclusive benefit of the
Club.
13. INJUNCTIVE AND EQUITABLE RELIEF. Because during the course of
<PAGE> 8
Mr. Dennis Lehman
April 10, 1998
Page 8
your employment under this Agreement you will gain an intimate knowledge of the
business, activities and affairs of the Club, and because of the special, unique
and extraordinary services you are capable of performing for the Club or one of
its competitors, you recognize that the services to be rendered by you hereunder
are of a character giving them a peculiar value, the loss of which cannot be
adequately or reasonably compensated for by damages. You therefore agree that if
you fail to comply with any of the provisions of this Agreement, in addition to
the remedies and procedures provided elsewhere in this Agreement, the Club shall
be entitled to obtain immediate injunctive or other equitable relief to restrain
you from failing to fulfill your obligations hereunder or from becoming
affiliated, directly or indirectly, with any of the Major League Clubs or their
respective minor league affiliates, without prejudice to any other remedies to
which the Club may be entitled under law.
14. BINDING EFFECT. This Agreement shall be binding upon, and shall
inure to the benefit of, both you and the Club. This Agreement may not be
assigned or transferred without the consent of both parties.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties, and supersedes in its entirety any prior agreements,
arrangements and understandings between the parties with respect to the subject
matter hereof, and no amendment hereof shall be deemed valid unless in writing
and signed by the parties hereto.
16. GOVERNANCE. This Agreement is subject to and is governed by, all
applicable rules and regulations of Major League Baseball and the American
League of Professional Baseball Clubs, and any rules or regulations which the
Club may announce from time to time.
17. LIFE INSURANCE. The Club understands that you may acquire life
<PAGE> 9
Mr. Dennis Lehman
April 10, 1998
Page 9
insurance policy to insure receipt of proceeds based upon the unpaid portion of
the salary amounts set forth in paragraph 2. Each year during the term of this
Contract, including any option years if the applicable option has been
exercised, The Club will reimburse you for the cost of such policy in an amount
not to exceed the annual premium based upon preferred issued rates for a term
insurance policy with a death benefits equal to $1,250,000.
Very truly yours,
CLEVELAND INDIANS BASEBALL
COMPANY LIMITED PARTNERSHIP
By: Its General Partner, Cleveland
Baseball Corporation
By: /s/ Richard E. Jacobs
-----------------------------------
Richard E. Jacobs
ACCEPTED:
/s/ Dennis Lehman
- ----------------------------
Date: May 11, 1998
_______________________
<PAGE> 1
Exhibit 10.22
February 5, 1998
Mr. Daniel J. O'Dowd
425 Britannia Parkway
Avon Lake, Ohio 44012
Dear Dan:
The following shall constitute the Employment Agreement by and between
Cleveland Indians Baseball Company Limited Partnership, an Ohio limited
partnership (the "Club"), and you and shall, upon acceptance by you, replace
your existing contract dated October 25, 1994.
1. TERM.
(a) Subject to the terms and conditions set forth below, the
Club agrees to employ you as Vice President for Baseball Operations and
Assistant General Manager of the General Partner of the Club, for the
period commencing on January 1, 1998 and ending December 31, 2002,
subject to subsections (b), (c), (d) and (e) below.
(b) The Club shall have the unilateral option to extend the
term of this Agreement through December 31, 2003, at a salary of
$450,000.00 for 2003. Such option may be exercised by written notice
personally delivered or mailed to you at the Club's offices on or
before December 1, 2001. If the Club exercises this option, the Club
will notify you on or before September 30, 2002 whether or not you will
be promoted to Executive Vice President/General Manager as of January
1, 2003. If you are to be promoted to the position of Executive Vice
President/General Manager as of January 1, 2003, your employment with
the Club shall continue in accordance with the terms and conditions of
this Contract. If the Club declines to promote you to the position of
Executive Vice President/General Manager at that time, you may (1)
during the period commencing on October 1, 2002 and ending on December
1, 2002, seek other employment opportunities and (2) terminate this
Contract as of December 31, 2002 by providing written notice to the
Club no later than December 1, 2002. If you do not elect to terminate
this Contract, your
<PAGE> 2
Mr. Daniel O'Dowd
February 5, 1998
Page 2
employment will continue in accordance with the terms and conditions of
this contract.
(c) The Club shall have the unilateral option to extend the
term of this Agreement through December 31, 2004 at a salary of
$500,000.00 for 2004. Such option may be exercised by written notice
personally delivered or mailed to the Club's offices on or before
December 1, 2002. If the Club exercises this option and you have not
been previously promoted to the position of Executive Vice
President/General Manager, the Club will notify you on or before
September 30, 2003 whether or not you will be promoted to Executive
Vice President/General Manager as of January 1, 2004. If you are to be
promoted to the position of Executive Vice President/General Manager as
of January 1 2004, your employment with the Club shall continue in
accordance with the terms and conditions of this Contract. If the Club
declines to promote you to the position of Executive Vice
President/General Manager at that time, you may (1) during the period
commencing on October 1, 2003 and ending on December 1, 2003, seek
other employment opportunities and (2) terminate this Contract as of
December 31, 2003 by providing written notice to the Club no later than
December 1, 2003. If you do not elect to terminate this Contract, your
employment will continue in accordance with the terms and conditions of
this contract.
(d) The Club shall have the unilateral option to extend the
term of this Agreement through December 31, 2005 at a salary of
$525,000.00 for 2005. Such option may be exercised by written notice
personally delivered or mailed to the Club's offices on or before
December 1, 2003. If the Club exercises this option and you have not
been previously promoted to the position of General Manager, the Club
will notify you on or before September 30, 2004 whether or not you will
be promoted to Executive Vice President/General Manager as of January
1, 2005. If you are to be promoted to the position of Executive Vice
President/General Manager as of January 1 2005, your employment with
the Club shall continue in accordance with the terms and conditions of
this Contract. If the Club declines to promote you to the position of
Executive Vice President/General Manager at that time, you may (1)
during the period commencing on October 1, 2004 and ending on December
1, 2004, seek other employment opportunities and (2) terminate this
Contract as of December 31, 2004 by providing written notice to the
Club no later than December 1, 2004. If you do not elect to terminate
this Contract, your employment will continue in accordance with the
terms and conditions of this contract.
(e) The Club shall have the unilateral option to extend the
term of this Agreement through December 31, 2006 at a salary of
$550,000.00 for 2006. Such option may be exercised by written notice
personally delivered or mailed to the Club's offices on or before
December 1, 2004. If the Club
<PAGE> 3
Mr. Daniel O'Dowd
February 5, 1998
Page 3
exercises this option and you have not been previously promoted to the
position of Executive Vice President/General Manager, the Club will
notify you on or before September 30, 2005 whether or not you will be
promoted to Executive Vice President/General Manager as of January 1,
2006. If you are to be promoted to the position of Executive Vice
President/General Manager as of January 1 2006, your employment with
the Club shall continue in accordance with the terms and conditions of
this Contract. If the Club declines to promote you to the position of
Executive Vice President/General Manager at that time, you may (1)
during the period commencing on October 1, 2005 and ending on December
1, 2005, seek other employment opportunities and (2) terminate this
Contract as of December 31, 2005 by providing written notice to the
Club no later than December 1, 2005. If you do not elect to terminate
this Contract, your employment will continue in accordance with the
terms and conditions of this contract.
(f) Your salary shall be payable each calendar year in
twenty-four equal semi-monthly installments.
2. SALARY.
(a) SALARY. Your salary as Vice President for Baseball
Operation and General Manager during the period of your employment
under this Agreement shall be as follows, less the amounts deferred
pursuant to paragraph (b) of this Section 2:
January 1, 1998 to December 31, 1998 at the rate of
$300,000.00 per year.
January 1, 1999 to December 31, 1999 - $325,000
January 1, 2000 to December 31, 2000 - $350,000
January 1, 2001 to December 31, 2001 - $375,000
January 1, 2002 to December 31, 2002 - $400,000
Option Years:
January 1, 2003 to December 31, 2003 - $450,000
January 1, 2004 to December 31, 2004 - $500,000
January 1, 2005 to December 31, 2005 - $525,000
January 1, 2006 to December 31, 2006 - $550,000
<PAGE> 4
Mr. Daniel O'Dowd
February 5, 1998
Page 4
(b) DEFERRED COMPENSATION PLAN. On or before December 1 of the
year immediately preceding any calendar year, you may elect to defer
the payment of not more than 50% of the salary otherwise payable under
subsection (a) of this Section 2 and 100% of any bonus payments for
such calendar year, and on June 15 of such calendar year (or, if later,
the date that any bonus payment would otherwise have been payable), the
Club shall deposit such deferred compensation in a trust, the earnings
on which are not currently taxable for federal income tax purposes,
which shall be established by the Club to provide deferred compensation
to you in accordance with this subsection (b) (the "Deferred
Compensation Account"); a copy of such trust is attached hereto as
Exhibit I. Notwithstanding the foregoing, if you terminate employment,
die or become "permanently disabled" (as defined under Section 10)
during a calendar year, the amount to be credited to the Deferred
Compensation Account for that year shall be equal to the portion of the
deferred amount that you actually earned through the date of your
termination of employment, death or permanent disability. The fair
market value of the Deferred Compensation Account, as determined under
clause (i) of this subsection (b), shall be paid by the Club to you, or
in the case of your death, to your beneficiary, in ten installments
commencing on the first business day of January of the calendar year
following the earlier of (a) the date of your death or permanent
disability or (b) the later of (i) termination of your employment with
the Club or (ii) your fifty-fifth (55) birthday. The payments will be
computed in accordance with the following schedule:
<TABLE>
<CAPTION>
Percentage of
Fair Market Value
Payment of Deferred
NUMBER COMPENSATION ACCOUNT
<S> <C>
1 10%
2 11.11%
3 12.5%
4 14.28%
5 16.67%
6 20%
7 25%
8 33.33%
9 50%
10 100%
</TABLE>
(i) INVESTMENT POLICY. Any deferred compensation
amounts credited to the Deferred Compensation Account pursuant to this
subsection (b) and all income attributable to such amounts (net of
expenses) shall be held in a segregated investment account within the
Trust and shall be invested and
<PAGE> 5
Mr. Daniel O'Dowd
February 5, 1998
Page 5
reinvested accordance with the Trust agreement until such time as the
entire fair market value of Deferred Compensation Account is paid by
the Club to you, or your beneficiary, as applicable in accordance with
Subsection (b)(i) above.
(ii) DEATH BENEFITS. You shall be entitled to
designate a beneficiary (or beneficiaries) who shall be entitled to
receive that portion of your undistributed Deferred Compensation
Account, as determined under the first paragraph of this subsection (b)
if you die before receiving the total value of the Deferred
Compensation Account. The designation of a beneficiary (or
beneficiaries) must be made in writing on a form substantially similar
to the form attached as Exhibit II to this Agreement and delivered to
the Club. You may change or revoke a beneficiary designation by filing
a new designation or notice of revocation with the Club. If you fail to
designate a beneficiary or if no designated beneficiary survives you,
the Club will pay any amounts payable pursuant to this subsection (b)
to your surviving spouse, and to your personal representative if there
is no surviving spouse.
(iii) HARDSHIP. Regardless of the date on which
payment of the deferred compensation under this subsection (b)
otherwise is to be paid, in the event of your hardship, payment of all
or a portion of the fair market value of the Deferred Compensation
Account can be accelerated by the Club's determination of hardship. The
Club shall have sole discretion as to whether a hardship has occurred
and if so, also shall have sole discretion to determine the amount of
deferred compensation that may be distributable to you in order to
alleviate that hardship. For this purpose, hardship shall mean any
emergency or necessity affecting your personal or family affairs having
a significant adverse financial effect.
(iv) NO FORFEITURE OF DEFERRED COMPENSATION. All
deferred compensation credited to the Deferred Compensation Account
shall be nonforfeitable.
(v) DEBITING OF DEFERRED COMPENSATION ACCOUNT. Once
an amount of deferred compensation has been paid, such amount shall be
debited from the Deferred Compensation Account and shall cease to
exist.
(vi) PARTICIPANT'S RIGHTS ARE UNFUNDED AND UNSECURED.
Notwithstanding the creation of the trust described herein, all
deferred compensation benefits under this subsection (b) are unfunded
for purposes of the Employee Retirement Income Security Act of 1974, as
amended. Your (or your beneficiary's) right to receive a distribution
hereunder shall be an unsecured claim against the general assets of the
Club, and neither you nor your beneficiary shall have any rights in or
against any amounts credited
<PAGE> 6
Mr. Daniel O'Dowd
February 5, 1998
Page 6
hereunder or any other specific assets of the Club or the trust
referred to herein. Any deferred compensation benefits payable
hereunder to you or your beneficiary may be payable out of the trust
established by the Club, or may be payable from the general assets of
the Club.
(vii) ANTI-ASSIGNMENT. No right or deferred
compensation payment under this subsection (b) shall be subject to
alienation, sale or assignment.
3. LIFE INSURANCE. The Club understands that you may acquire life
insurance policy to insure receipt of proceeds based upon the unpaid portion of
the salary amounts set forth in paragraph 2. Each year during the term of this
Contract, including any option years if the applicable option has been
exercised, The Club will reimburse you for the cost of such policy in an amount
not to exceed the annual premium based upon preferred issued rates for a term
insurance policy with a death benefits equal to $1,250,000.
Reimbursement will be made with respect to the option years only if the
option for such year has been exercised.
4. POST SEASON BONUS. In the event that the Club participates in a
division playoff series, league championship series or the World Series during
any championship season during the term of this Agreement, including either
option year if the applicable option has been exercised, you shall be entitled
to receive a bonus equal to one-half (50%) of a player's share payable to the
Club's players as determined pursuant to Major League Rule 45(b)(2) as the same
shall be amended from time to time. The amount of the bonus will be increased to
100% of a full player's share for any Championship Season in which you are the
Executive Vice President/General Manager of the Club.
5. GROUP PLAN. In addition to all of the other rights and benefits
under this Agreement, you shall be eligible to participate in any current or
future plan which may be provided by the Club for the benefit of its executives
or employees, provided you qualify, and subject to such plan's or program's
terms and conditions. You may participate in, among other things, any and all
group life insurance policies, plans, and medical and health benefits maintained
by or on behalf of the Club to the fullest extent possible in accordance with
the terms and provisions thereof.
6. EXPENSES. You shall be entitled to incur on behalf of the Club
reasonable and necessary expenses in connection with your duties, in accordance
with the Club's customary practice, including expenses incurred in connection
with your use of an automobile which will be provided by the Club for your
exclusive use.
7. JOB DESCRIPTION. During the term of your employment, you shall
faithfully perform the duties and have the responsibilities of Assistant General
<PAGE> 7
Mr. Daniel O'Dowd
February 5, 1998
Page 7
Manager and Vice-President for Baseball Operations of the Club, subject to the
control and direction of the President and Chief Executive Officer, if any, the
Chairman of the Board, the Board of Directors, the Executive Vice President and
General Manager of the Club and its General Partner. You agree to devote your
full time, energies, talent, and best efforts exclusively to your duties as
Assistant General Manager and Director of Baseball Operations and to such other
duties as may be assigned to you as provided above. You agree that the Club will
not grant permission to any other Major League Baseball Club to discuss other
employment opportunities with you during the term of this Contract; provided
however, if the Club does not exercise an option to extend the term of the
Contract as described in Paragraph 1, you shall be entitled to discuss, during
the remaining term of this Contract, such other employment opportunities that
may be available to you following the end of the term of this Contract.
8. PUBLIC CONTACT. You agree to conduct yourself with propriety and
with due regard to public convention and morals, and agree not to engage in
conduct which is detrimental to or contrary to the rules of the Club, the League
and/or professional baseball, and you further agree to abide by and be subject
to the discipline of the Commissioner of Baseball and to his decisions rendered
in accordance with the Professional Baseball Agreement.
9. DEATH OR DISABILITY. Your death or permanent disability during the
term of this Agreement shall immediately terminate this Agreement. For the
purposes of this Section 9, permanent disability is defined as any condition
caused by an accident, sickness or otherwise, which, in the reasonable judgment
of the President and Chief Executive Officer of the Club, if any, the Chairman
of the Board or the Board of Directors of the General Partner of the Club,
disables, or may in the future disable, you from substantially performing the
duties and services required under this Agreement for a period of 120 days,
whether consecutive or non-consecutive, in any 12-month period. Upon termination
of this Agreement pursuant to this Section 9, you shall be entitled to no
compensation or any of the other rights or benefits provided in this Agreement
not already earned as of the date of such termination or otherwise required by
law.
10. TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. In the event that
you fail to observe and comply with the provisions of this Agreement in any
material respect or in the event of your fraud or dishonesty in the performance
of your duties, the Club may discharge you prior to the expiration of the term
of this Agreement by giving you written notice, which notice shall state the
specific facts upon which the discharge is based. In the event of such
discharge, you shall be entitled to no compensation or any of the other rights
or benefits provided in this Agreement not already earned as of the date of such
discharge or termination, except as otherwise required by law. Both parties
agree, however, that you shall have no right to terminate this Agreement
voluntarily.
<PAGE> 8
Mr. Daniel O'Dowd
February 5, 1998
Page 8
11. TERMINATION WITHOUT CAUSE. You agree that, should you be discharged
from your duties without cause, you are obligated to seek and, if offered,
accept other comparable employment, either from another Major League Club or
from some other baseball or non-baseball employer. In the event that you are so
discharged without cause, you will receive not less than five days written
notice of such discharge. The compensation due by the Club under this Agreement
will be reduced by any compensation which you receive from such other employment
following such termination. The amount to be deducted includes, but is not
limited to, compensation of any kind for services, including salary, bonuses,
fees, commissions, payments in kind, and similar items, and the reasonable value
of services rendered by you should you become self-employed following
termination.
12. REPRESENTATIONS AND ADDITIONAL COVENANTS.
(a) You hereby represent that you are free to accept
employment with the Club as contemplated hereunder, and that such
employment will not violate the terms of any other agreement or
instrument to which terms you are subject.
(b) You hereby represent that you do not directly or
indirectly, own stock or any other financial interest in the ownership
or earnings of any Major League Club, and you agree that you will not
hereafter acquire or hold any such interest except in accordance with
Major League Rule 20(e).
13. CONFIDENTIALITY. The parties agree that the terms of this Agreement
and all of the conversations and negotiations regarding your employment with the
Club are in strictest confidence and shall be and will remain confidential and
not subject to public disclosure of any kind without our mutual consent or as
may be required by law. In addition, you agree to maintain the confidentiality
of all business information of the Club which you acquire during your employment
hereunder, and to preserve such information for the exclusive benefit of the
Club.
14. INJUNCTIVE AND EQUITABLE RELIEF. Because during the course of your
employment under this Agreement you will gain an intimate knowledge of the
business, activities and affairs of the Club, and because of the special, unique
and extraordinary services you are capable of performing for the Club or one of
its competitors, you recognize that the services to be rendered by you hereunder
are of a character giving them a peculiar value, the loss of which cannot be
adequately or reasonably compensated for by damages. You therefore agree that if
you fail to comply with any of the provisions of this Agreement, in addition to
the remedies and procedures provided elsewhere in this Agreement, the Club shall
be entitled to obtain immediate injunctive or other equitable relief to restrain
you from failing to fulfill your obligations hereunder or from becoming
affiliated, directly or indirectly, with any of the Major League Clubs or their
respective minor league affiliates, without prejudice to any other remedies to
which the Club may be entitled under law.
<PAGE> 9
Mr. Daniel O'Dowd
February 5, 1998
Page 9
15. BINDING EFFECT. This Agreement shall be binding upon, and shall
inure to the benefit of, both you and the Club. This Agreement may not be
assigned or transferred without the consent of both parties.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties, and supersedes in its entirety any prior agreements,
arrangements and understandings between the parties with respect to the subject
matter hereof, and no amendment hereof shall be deemed valid unless in writing
and signed by the parties hereto.
17. GOVERNANCE. This Agreement is subject to and is governed by, all
applicable rules and regulations of Major League Baseball and the American
League of Professional Baseball Clubs, and any rules or regulations which the
Club may announce from time to time.
Very truly yours,
CLEVELAND INDIANS BASEBALL
COMPANY LIMITED PARTNERSHIP
By: Its General Partner, Cleveland
Baseball Corporation
By: /s/ Richard E. Jacobs
------------------------------------
Richard E. Jacobs
ACCEPTED:
/s/ Daniel J. O'Dowd
- -----------------------
Date: February 5, 1998
_________________
<PAGE> 1
Exhibit 10.23
[Cleveland Indians Letterhead]
April 10, 1998
Mr. Jeff Overton
2255 Silveridge Trail
Westlake, OH 44145
Dear Jeff:
The following shall constitute the Employment Agreement by and between
Cleveland Indians Baseball Company Limited Partnership, an Ohio limited
partnership (the "Club"), and you and shall, upon acceptance by you, replace
your existing contract dated December 28, 1994.
1. TERM.
(a) Subject to the terms and conditions set forth below, the
Club agrees to employ you as Vice President-Marketing and
Communications of the Club, for the period commencing on January 1,
1998 and ending December 31, 2002.
(b) Your salary shall be payable each calendar year in
twenty-four equal semi-monthly installments.
2. SALARY.
(a) Salary. As Vice President-Marketing and Communications
your salary during the period of your employment under this Agreement
shall be as follows, less the amounts deferred pursuant to paragraph
(b) of this Section 2:
January 1, 1998 to December 31, 1998 at the rate of $225,000
per year.
January 1, 1999 to December 31, 1999 - $250,000
January 1, 2000 to December 31, 2000 - $275,000
January 1, 2001 to December 31, 2001 - $300,000
January 1, 2002 to December 31, 2002 - $325,000
<PAGE> 2
Mr. Jeff Overton
April 10, 1998
Page 2
(b) DEFERRED COMPENSATION PLAN. On or before December 1 of the
year immediately preceding any calendar year, you may elect to defer
the payment of not more than 50% of the salary otherwise payable under
subsection (a) of this Section 2 and 100% of any bonus payments for
such calendar year, and on June 15 of such calendar year (or, if later,
the date that any bonus payment would otherwise have been payable), the
Club shall deposit such deferred compensation in a trust, the earnings
on which are not currently taxable for federal income tax purposes,
which shall be established by the Club to provide deferred compensation
to you in accordance with this subsection (b) (the "Deferred
Compensation Account"); a copy of such trust is attached hereto as
Exhibit I. Notwithstanding the foregoing, if you terminate employment,
die or become "permanently disabled" (as defined under Section 8)
during a calendar year, the amount to be credited to the Deferred
Compensation Account for that year shall be equal to the portion of the
deferred amount that you actually earned through the date of your
termination of employment, death or permanent disability. The fair
market value of the Deferred Compensation Account, as determined under
clause (i) of this subsection (b), shall be paid by the Club to you or,
in the case of your death, to your beneficiary, in ten installments
commencing on the first business day of January of the calendar year
following the earlier of (a) the date of your death or permanent
disability or (b) the later of (i) termination of your employment with
the Club or (ii) your fifty-fifth (55) birthday. The payments will be
computed in accordance with the following schedule:
<TABLE>
<CAPTION>
Percentage of
Fair Market Value
Payment of Deferred
Number Compensation Account
------ --------------------
<S> <C>
1 10%
2 11.11%
3 12.5%
4 14.28%
5 16.67%
6 20%
7 25%
8 33.33%
9 50%
10 100%
</TABLE>
(i) Investment Policy. Any deferred compensation
amounts credited to the Deferred Compensation Account pursuant to this
subsection (b) and
<PAGE> 3
Mr. Jeff Overton
April 10, 1998
Page 3
all income attributable to such amounts (net of expenses) shall be held in a
segregated investment account within the Trust and shall be invested and
reinvested accordance with the Trust agreement until such time as the entire
fair market value of Deferred Compensation Account is paid by the Club to you,
or your beneficiary, as applicable in accordance with Subsection (b)(i) above.
(ii) DEATH BENEFITS. You shall be entitled to
designate a beneficiary (or beneficiaries) who shall be entitled to receive that
portion of your undistributed Deferred Compensation Account, as determined under
the first paragraph of this subsection (b) if you die before receiving the total
value of the Deferred Compensation Account. The designation of a beneficiary (or
beneficiaries) must be made in writing on a form substantially similar to the
form attached as Exhibit II to this Agreement and delivered to the Club. You may
change or revoke a beneficiary designation by filing a new designation or notice
of revocation with the Club. If you fail to designate a beneficiary or if no
designated beneficiary survives you, the Club will pay any amounts payable
pursuant to this subsection (b) to your surviving spouse, and to your personal
representative if there is no surviving spouse.
(iii) HARDSHIP. Regardless of the date on which
payment of the deferred compensation under this subsection (b) otherwise is to
be paid, in the event of your hardship, payment of all or a portion of the fair
market value of the Deferred Compensation Account can be accelerated by the
Club's determination of hardship. The Club shall have sole discretion as to
whether a hardship has occurred and, if so, also shall have sole discretion to
determine the amount of deferred compensation that may be distributable to you
in order to alleviate that hardship. For this purpose, hardship shall mean any
emergency or necessity affecting your personal or family affairs having a
significant adverse financial effect.
(iv) NO FORFEITURE OF DEFERRED COMPENSATION. All
deferred compensation credited to the Deferred Compensation Account shall be
nonforfeitable.
(v) DEBITING OF DEFERRED COMPENSATION ACCOUNT. Once
an amount of deferred compensation has been paid, such amount shall be debited
from the Deferred Compensation Account and shall cease to exist.
(vi) PARTICIPANT'S RIGHTS ARE UNFUNDED AND UNSECURED.
Notwithstanding the creation of the trust described herein, all deferred
compensation benefits under this subsection (b) are unfunded for purposes of the
Employee Retirement Income Security Act of 1974, as amended. Your (or your
beneficiary's) right to receive a distribution hereunder shall be an unsecured
claim against the general assets of the Club, and neither you nor your
beneficiary shall have any rights in or against any amounts credited hereunder
or any other specific assets of the Club or the trust referred to herein. Any
deferred compensation benefits payable hereunder
<PAGE> 4
Mr. Jeff Overton
April 10, 1998
Page 4
to you or your beneficiary may be payable out of the trust established by the
Club, or may be payable from the general assets of the Club.
(vii) ANTI-ASSIGNMENT. No right or deferred
compensation payment under this subsection (b) shall be subject to alienation,
sale or assignment.
3. BONUS.
(a) On or before January 1 of each year during the term of
this agreement, the Club shall establish a Bonus Target based upon
the amount of adjusted gross revenue from sources taken into account to
compute the Bonus Target ("Adjusted Gross Revenues From Bonus
Revenues") that the Club anticipates realizing from revenue sources
subject to your management and oversight, including annual ticket sales
and ticketing services revenue, ballpark signage and scoreboard
promotions revenue, luxury suite & club seat license fee revenue,
revenue from the rental of ballpark areas to groups, net revenue from
the sale of radio and local television advertising as controlled by the
Club) and local promotional revenue, all as set forth in the annual
budget prepared by the Club in the ordinary course of the Club's
business. Adjusted Gross Income From Bonus Revenues shall be computed
by deducting from gross income from such sources, expenses incurred
directly to produce such income.
(b) In the event that the Club earns Adjusted Gross Income
From Bonus Revenues equal to or greater than the Bonus Target, you
shall be paid a bonus equal to $25,000. The amount of this bonus will
be increased to $37,500 if the Club earns Adjusted Gross Income From
Bonus Revenues equal to or greater than 102.5% of the Bonus Target.
The amount of this bonus will be increased to $50,000 if the Club earns
Adjusted Gross Income From Bonus Revenues equal to or greater than 105%
of the Bonus Target.
(c) The Club shall determine the amount of the Adjusted Gross
Income From Bonus Revenues earned by the Club as soon as practicable
after the end of each fiscal year, but in no event later than March 31.
In the event of a dispute between you and the Club regarding this
computation, the matter will be referred to the firm of independent
accountants engaged by the Club to provide an annual certified audit of
the Club's financial records. This firm shall compute the Adjusted
Gross Revenues From Bonus Revenues of the Club based upon generally
accepted accounting principles employing the same bases, definition and
methods used to establish the Bonus Target. The determination made by
the firm shall be final and binding on all parties. The General Partner
retains the right to modify the list of items of gross income and
expenses to be included in the computation of
<PAGE> 5
Mr. Jeff Overton
April 10, 1998
Page 5
the Bonus Target from year to year; provided however, the method of
computing the Bonus Target shall not be modified after it has been
established with respect to any particular year without your consent,
which shall not be unreasonably withheld.
4. GROUP PLAN. In addition to all of the other rights and benefits
under this Agreement, you shall be eligible to participate in any current or
future plan which may be provided by the Club for the benefit of its executives
or employees, provided you qualify, and subject to such plan's or program's
terms and conditions. You may participate in, among other things, any and all
group life insurance policies, plans, and medical and health benefits maintained
by or on behalf of the Club to the fullest extent possible in accordance with
the terms and provisions thereof.
5. EXPENSES. You shall be entitled to incur on behalf of the Club
reasonable and necessary expenses in connection with your duties, in accordance
with the Club's customary practice, including the following: Expenses incurred
in connection with your business use of an automobile which will be provided by
the Club for your exclusive use; travel expenses, consistent with the Club's
customary policy, incurred by you on Club business trips.
6. JOB DESCRIPTION. During the term of your employment, you shall
faithfully perform the duties and have the responsibilities of Vice
President-Marketing and Communications of the Club, subject to the control and
direction of the President, Chief Executive Officer, the Chairman of the Board,
the Board of Directors and the Executive Vice-President/Business of the Club and
its General Partner. You agree to devote your full time, energies, talent, and
best efforts exclusively to your duties as Vice President-Marketing and
Communication and to such other duties as may be assigned to you as provided
above. This paragraph shall not be construed in a manner that would prohibit you
from participation in charitable and civic activities or organizations; provided
that such participation is disclosed to Club and the Club does not object to
such participation. You agree that the Club will not grant permission to any
other Major League Baseball Club to discuss other employment opportunities with
you during the term of this Contract; provided, however, you may seek or respond
to inquiries for other employment opportunities commencing on January 1, 2002
and as set forth in Paragraph 17. The permission to seek or respond to inquiries
about other employment opportunities would terminate in the event you and the
Club enter into a new contract that would extend beyond 2003.
7. PUBLIC CONTACT. You agree to conduct yourself with propriety and
with due regard to public convention and morals, and agree not to engage in
conduct which is detrimental to or contrary to the rules of the Club, the League
<PAGE> 6
Mr. Jeff Overton
April 10, 1998
Page 6
and/or professional baseball, and you further agree to abide by and be subject
to the discipline of the Commissioner of Baseball and to his decisions rendered
in accordance with the Professional Baseball Agreement.
8. DEATH OR DISABILITY. Your death or permanent disability during the
term of this Agreement shall immediately terminate this Agreement. For the
purposes of this Section 8, permanent disability is defined as any condition
caused by an accident, sickness or otherwise, which, in the reasonable judgment
of the President and Chief Executive Officer of the Club, if any, the Chairman
of the Board or the Board of Directors of the General Partner, disables, or may
in the future disable, you from substantially performing the duties and services
required under this Agreement for a period of 120 days, whether consecutive or
non-consecutive, in any 12-month period. Upon termination of this Agreement
pursuant to this Section 8, you shall be entitled to no compensation or any of
the other rights or benefits provided in this Agreement not already earned as of
the date of such termination or otherwise required by law.
9. TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. In the event that
you fail to observe and comply with the provisions of this Agreement in any
material respect or in the event of your fraud or dishonesty in the performance
of your duties, the Club may discharge you prior to the expiration of the term
of this Agreement by giving you written notice, which notice shall state the
specific facts upon which the discharge is based. In the event of such
discharge, you shall be entitled to no compensation or any of the other rights
or benefits provided in this Agreement not already earned as of the date of such
discharge or termination, except as otherwise required by law. Both parties
agree, however, that you shall have no right to terminate this Agreement
voluntarily.
10. TERMINATION WITHOUT CAUSE. You agree that, should you be discharged
from your duties without cause, you are obligated to seek and, if offered,
accept other comparable employment, either from another Major League Club or
from some other baseball or non-baseball employer. In the event that you are so
discharged without cause, you will receive not less than five days written
notice of such discharge. The compensation due by the Club under this Agreement
will be reduced by any compensation, which you receive from such other
employment following such termination. The amount to be deducted includes, but
is not limited to, compensation of any kind for services, including salary,
bonuses, fees, commissions, payments in kind, and similar items, and the
reasonable value of services rendered by you should you become self-employed
following termination.
<PAGE> 7
Mr. Jeff Overton
April 10, 1998
Page 7
11. REPRESENTATIONS AND ADDITIONAL COVENANTS.
(a) You hereby represent that you are free to accept
employment with the Club as contemplated hereunder, and that such
employment will not violate the terms of any other agreement or
instrument to which terms you are subject.
(b) You hereby represent that you do not directly or
indirectly, own stock or any other financial interest in the ownership
or earnings of any Major League Club, and you agree that you will not
hereafter acquire or hold any such interest except in accordance with
Major League Rule 20(e).
12. CONFIDENTIALITY. The parties agree that the terms of this Agreement
and all of the conversations and negotiations regarding your employment with the
Club are in strictest confidence and shall be and will remain confidential and
not subject to public disclosure of any kind without our mutual consent or as
may be required by law. In addition, you agree to maintain the confidentiality
of all business information of the Club that you acquire during your employment
hereunder, and to preserve such information for the exclusive benefit of the
Club.
13. INJUNCTIVE AND EQUITABLE RELIEF. Because during the course of your
employment under this Agreement you will gain an intimate knowledge of the
business, activities and affairs of the Club, and because of the special, unique
and extraordinary services you are capable of performing for the Club or one of
its competitors, you recognize that the services to be rendered by you hereunder
are of a character giving them a peculiar value, the loss of which cannot be
adequately or reasonably compensated for by damages. You therefore agree that if
you fail to comply with any of the provisions of this Agreement, in addition to
the remedies and procedures provided elsewhere in this Agreement, the Club shall
be entitled to obtain immediate injunctive or other equitable relief to restrain
you from failing to fulfill your obligations hereunder or from becoming
affiliated, directly or indirectly, with any of the Major League Clubs or their
respective minor league affiliates, without prejudice to any other remedies to
which the Club may be entitled under law.
14. BINDING EFFECT. This Agreement shall be binding upon, and shall
inure to the benefit of, both you and the Club. This Agreement may not be
assigned or transferred without the consent of both parties.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties, and supersedes in its entirety any prior agreements,
arrangements and understandings between the parties with respect to the subject
<PAGE> 8
Mr. Jeff Overton
April 10, 1998
Page 8
matter hereof, and no amendment hereof shall be deemed valid unless in writing
and signed by the parties hereto.
16. GOVERNANCE. This Agreement is subject to and is governed by, all
applicable rules and regulations of Major League Baseball and the American
League of Professional Baseball Clubs, and any rules or regulations that the
Club may announce from time to time.
17. EARLY RELEASE/NON-COMPETITION.
(a) The Club agrees that you may seek other employment
opportunities during the period commencing January 1, 2000 and ending
April 30, 2000. You agree that during such period and for a period of
two years following termination of this agreement, you will not seek or
accept any employment or self-employment opportunity relating to the
advertising, marketing, sale or management of professional or amateur
sports within the State of Ohio. You also agree that during such period
you will not seek or accept any employment opportunity with any other
Major League Baseball Club other than a position as the most senior
executive officer in charge of the business operations of a Major
League Baseball Club.
(b) If you provide written notice (either delivered personally
or by certified mail) to the Chief Executive Officer of the Club no
later than April 30, 2000 that you wish to be released from the terms
of this agreement to accept another employment or self-employment
opportunity that the Club determines does not conflict with the terms
of this agreement, the Club will release you from your obligation to
continue to provide services to Club pursuant to this agreement. In
the event that you elect to exercise this opportunity, you and the
Club will agree to determine a mutually acceptable release date;
provided however, the release date will not occur before May 31, 2000,
unless the Club determines that an earlier release date will not
adversely impact the Club.
18. LIFE INSURANCE. The Club understands that you may acquire a life
insurance policy to insure receipt of proceeds based upon the unpaid portion of
the salary amounts set forth in paragraph 2. Each year during the term of this
Contract, including any option years if the applicable option has been
exercised, the Club will reimburse you for the cost of such policy in an amount
not to exceed
<PAGE> 9
Mr. Jeff Overton
April 10, 1998
Page 9
the annual premium based upon preferred issued rates for a term insurance policy
with a death benefit equal to $687,500.
Very truly yours,
CLEVELAND INDIANS BASEBALL
COMPANY LIMITED PARTNERSHIP
By: Its General Partner, Cleveland
Baseball Corporation
By: /s/ Richard E. Jacobs
------------------------------
Richard E. Jacobs
ACCEPTED:
/s/ Jeffry L. Overton
- ---------------------------
Date: 5-15-98
---------------------
<PAGE> 1
Exhibit 10.24
[LOGO]
April 24, 1998
Mr. Ken Stefanov
Vice President, Finance
Cleveland Indians
Jacobs Field
2401 Ontario Avenue
Cleveland, Ohio 44115
Re: Terms of Employment
--------------------
Dear Ken:
The purpose of this letter is to amend and restate the Employment
Agreement by and between Cleveland Indians Baseball Company Limited Partnership,
an Ohio limited partnership (the "Club"), and you.
1. TERM.
(a) Subject to the terms and conditions set forth below, the Club
agrees to employ you as Vice President, Finance of the Club, for the
period commencing on the date of your acceptance as set forth below
and ending December 31, 1999, subject to subsections (b) and (c)
below.
(b) The Club shall have the unilateral option to extend the term
of this Agreement through December 31, 2000, at a salary of
$140,000.00 for the year 2000. Such option may be exercised by written
notice personally delivered or mailed to you at the Club's offices on
or before December 1, 1999.
(c) The Club shall have the unilateral option to extend the term
of this Agreement through December 31, 2001 at a salary of $150,000.00
for the year 2001. Such option may be exercised by written notice
personally delivered or mailed to the Club's offices on or before
December 1, 2000.
[LOGO]
<PAGE> 2
Mr. Ken Stefanov
April 24, 1998
Page 2
(d) Your salary shall be payable each calendar year in
twenty-four equal semi-monthly installments.
2. SALARY.
(a) Your salary as Vice President, Finance during the period of
your employment under this Agreement shall be as follows:
January 1, 1997 to December 31, 1997 at the rate of $100,000.00
per year.
January 1, 1998 to December 31, 1998 - $ 115,000
January 1, 1999 to December 31, 1999 - $ 125,000
Option Years:
January 1, 2000 to December 31, 2000 - $ 140,000
January 1, 2001 to December 31, 2001 - $ 150,000
(b) DEFERRED COMPENSATION PLAN. On or before December 1 of the
year immediately preceding any calendar year, you may elect to defer
the payment of not more than 50% of the salary otherwise payable under
subsection (a) of this Section 2 and 100% of any bonus payments for
such calendar year, and on June 15 of such calendar year (or, if
later, the date that any bonus payment would otherwise have been
payable), the Club shall deposit such deferred compensation in a
trust, the earnings on which are not currently taxable for federal
income tax purposes, which shall be established by the Club to provide
deferred compensation to you in accordance with this subsection (b)
(the "Deferred Compensation Account"); a copy of such trust is
attached hereto as Exhibit 1. Notwithstanding the foregoing, if you
terminate employment, die or become "permanently disabled" (as defined
under Section 10) during a calendar year, the amount to be credited to
the Deferred Compensation Account for that year shall be equal to the
portion of the deferred amount that you actually earned through the
date of your termination of employment, death or permanent disability.
The fair market value of the Deferred Compensation Account, as
determined under clause (i) of this subsection (b), shall be paid by
the Club to you, or in the case of your death, to your beneficiary, in
ten installments commencing on the first business day of January of
the calendar year following the earlier of (a) the date of your death
or permanent disability
<PAGE> 3
Mr. Ken Stefanov
April 24, 1998
Page 3
or (b) the later of (i) termination of your employment with the Club or (ii)
your fifty-fifth (55) birthday. The payments will be computed in accordance with
the following schedule:
<TABLE>
<CAPTION>
Percentage of Fair Market Value
Payment of Deferred
Number Compensation Account
- ------ --------------------
<S> <C>
1 10%
2 11.11%
3 12.5%
4 14.28%
5 16.67%
6 20%
7 25%
8 33.33%
9 50%
10 100%
</TABLE>
(i) INVESTMENT POLICY. Any deferred compensation payments
credited to the Deferred Compensation Account pursuant to this subsection (b)
and all income attributable to such amounts (net of expenses) shall be invested
and reinvested in accordance with the trust agreement described herein until
such time as the Deferred Compensation Account is paid by the Club to you, or
your beneficiary, as applicable.
(ii) DEATH BENEFITS. You shall be entitled to designate a
beneficiary (or beneficiaries) who shall be entitled to receive that portion of
your undistributed Deferred Compensation Account, as determined under the first
paragraph of this subsection (b) if you die before receiving the total value of
the Deferred Compensation Account. The designation of a beneficiary (or
beneficiaries) must be made in writing on a form substantially similar to the
form attached as Exhibit 11 to this Agreement and delivered to the Club. You may
change or revoke a beneficiary designation by filing a new designation or notice
of revocation with the Club. If you fail to designate a beneficiary or if no
designated beneficiary survives you, the Club will pay any amounts payable
pursuant to this subsection (b) to your surviving spouse, and to your personal
representative if there is no surviving spouse.
<PAGE> 4
Mr. Ken Stefanov
April 24, 1998
Page 4
(iii) HARDSHIP. Regardless of the date on which payment of the
deferred compensation under this subsection (b) otherwise is to be paid, in the
event of your hardship, payment of all or a portion of the fair market value of
the Deferred Compensation Account can be accelerated by the Club's determination
of hardship. The Club shall have sole discretion as to whether a hardship has
occurred and if so, also shall have sole discretion to determine the amount of
deferred compensation that may be distributable to you in order to alleviate
that hardship. For this purpose, hardship shall mean any emergency or necessity
affecting your personal or family affairs having a significant adverse financial
effect.
(iv) NO FORFEITURE OF DEFERRED COMPENSATION. All deferred
compensation credited to the Deferred Compensation Account shall be
nonforfeitable.
(v) DEBITING OF DEFERRED COMPENSATION ACCOUNT. Once an amount
of deferred compensation has been paid, such amount shall be debited from the
Deferred Compensation Account and shall cease to exist.
(vi) PARTICIPANT'S RIGHTS ARE UNFUNDED AND UNSECURED.
Notwithstanding the creation of the trust described herein, all deferred
compensation benefits under this subsection (b) are unfunded for purposes of the
Employee Retirement Income Security Act of 1974, as amended. Your (or your
beneficiary's) right to receive a distribution hereunder shall be an unsecured
claim against the general assets of the Club, and neither you nor your
beneficiary shall have any rights in or against any amounts credited hereunder
or any other specific assets of the Club or the trust referred to herein. Any
deferred compensation benefits payable hereunder to you or your beneficiary may
be payable out of the trust established by the Club, or may be payable from the
general assets of the Club.
(vii) ANTI-ASSIGNMENT. No right or deferred compensation
payment under this subsection (b) shall be subject to alienation, sale or
assignment.
(c) POST SEASON BONUS. In the event that the Club participates in a
division playoff series, league championship series or the World Series during
any championship season during the term of this Agreement, including either
option year if the applicable option has been exercised, you shall be entitled
to receive a bonus equal to one-quarter (25%) of a player's share
<PAGE> 5
Mr. Ken Stefanov
April 24, 1998
Page 5
payable to the Club's players as determined pursuant to Major League
Rule 45(b)(2) as the same shall be amended from time to time.
3. GROUP PLAN. In addition to all of the other rights and benefits
under this Agreement, you shall be eligible to participate in any current or
future plan which may be provided by the Club for the benefit of its employees,
provided you qualify, and subject to such plan's or program's terms and
conditions. You may participate in, among other things, any and all group life
insurance policies, plans, and medical and health benefits maintained by or on
behalf of the Club to the fullest extent possible in accordance with the terms
and provisions thereof.
4. EXPENSES. You shall be entitled to incur on behalf of the Club
reasonable and necessary expenses in connection with your duties, in accordance
with the Club's customary practice, excluding expenses incurred in connection
with your use of an automobile.
5. JOB DESCRIPTION. During the term of your employment, you shall
faithfully perform the duties and have the responsibilities of Vice President,
Finance of the Club, subject to the control and direction of the Executive Vice
President of Business Operations, the President and Chief Executive Officer, the
Chairman of the Board and the Board of Directors of the Club or its General
Partner. You agree to devote your full time, energies, talent, and best efforts
exclusively to your duties as Vice President, Finance, and to such other duties
as may be assigned to you as provided above.
6. PUBLIC CONTACT. You agree to conduct yourself with propriety and
with due regard to public convention and morals, and agree not to engage in
conduct which is detrimental to or contrary to the rules of the Club, the League
and/or professional baseball, and you further agree to abide by and be subject
to the discipline of the Commissioner of Baseball and to his decisions rendered
in accordance with the Professional Baseball Agreement.
7. DEATH OR DISABILITY. Your death or permanent disability during the
term of this Agreement shall immediately terminate this Agreement. For the
purposes of this Section 7, permanent disability is defined as any condition
caused by an accident, sickness or otherwise, which, in the reasonable judgment
of the Executive Vice President of Business Operations, the President and Chief
Executive Officer, the Chairman of the Board or the Board of Directors of the
Club or its General Partner, disables, or may in the future disable, you from
substantially performing the duties and services required under this Agreement
for a period of 120 days, whether consecutive or non-consecutive, in any
12-month period. Upon termination of this
<PAGE> 6
Mr. Ken Stefanov
April 24, 1998
Page 6
Agreement pursuant to this Section 7, you shall be entitled to no compensation
or any of the other rights or benefits provided in this Agreement not already
earned as of the date of such termination or otherwise required by law.
8. TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. In the event that
you fail to observe and comply with the provisions of this Agreement in any
material respect or in the event of your fraud or dishonesty in the performance
of your duties, the Club may discharge you prior to the expiration of the term
of this Agreement by giving you written notice, which notice shall state the
specific facts upon which the discharge is based. In the event of such
discharge, you shall be entitled to no compensation or any of the other rights
or benefits provided in this Agreement not already earned as of the date of such
discharge or termination, except as otherwise required by law. You hereby
acknowledge and agree that you shall have no right to terminate this Agreement
voluntarily.
9. TERMINATION WITHOUT CAUSE. You agree that, should you be discharged
from your duties without cause, you are obligated to seek and, if offered,
accept other comparable employment, either from another Major League Club or
from some other baseball or non-baseball employer. In the event that you are so
discharged without cause, you will receive not less than five days written
notice of such discharge. The compensation due by the Club under this Agreement
will be reduced by any compensation which you receive from such other employment
following such termination. The amount to be deducted includes, but is not
limited to, compensation of any kind for services, including salary, bonuses,
fees, commissions, payments in kind, and similar items, and the reasonable value
of services rendered by you should you become self-employed following
termination.
10. REPRESENTATIONS AND ADDITIONAL COVENANTS.
(a) You hereby represent that you are free to accept employment
with the Club as contemplated hereunder, and that such employment will
not violate the terms of any other agreement or instrument to which
terms you are subject.
(b) You hereby represent that you do not directly or indirectly,
own stock or any other financial interest in the ownership or earnings
of any Major League Club, and you agree that you will not hereafter
acquire or hold any such interest except in accordance with Major
League Rule 20(e).
(c) You hereby agree that, during the term of your employment
with the Club, you will not seek, encourage or enter into any
negotiations or discus-
<PAGE> 7
Mr. Ken Stefanov
April 24, 1998
Page 7
sions concerning your employment with any other Major League Club. You
hereby agree to notify the Club promptly in writing if any other Major
League Club requests that you consider an offer of employment with
such Major League Club or otherwise commences discussions concerning
an offer of employment.
11. CONFIDENTIALITY. The parties agree that the terms of this Agreement
and all of the conversations and negotiations regarding your employment with the
Club are in strictest confidence and shall be and will remain confidential and
not subject to public disclosure of any kind without our mutual consent or to
the extent required by law. In addition, you agree to maintain the
confidentiality of all business information of the Club which you acquire during
your employment hereunder, and to preserve such information for the exclusive
benefit of the Club.
12. INJUNCTIVE AND EQUITABLE RELIEF. Because during the course of your
employment under this Agreement you will gain an intimate knowledge of the
business, activities and affairs of the Club, and because of the special, unique
and extraordinary services you are capable of performing for the Club or one of
its competitors, you recognize that the services to be rendered by you hereunder
are of a character giving them a peculiar value, the loss of which cannot be
adequately or reasonably compensated for by damages. You therefore agree that if
you fail to comply with any of the provisions of this Agreement, in addition to
the remedies and procedures provided elsewhere in this Agreement, the Club shall
be entitled to obtain immediate injunctive or other equitable relief to restrain
you from failing to fulfill your obligations hereunder or from becoming
affiliated, directly or indirectly, with any of the Major League Clubs or their
respective minor league affiliates, without prejudice to any other remedies to
which the Club may be entitled under law.
13. BINDING EFFECT. This Agreement shall be binding upon, and shall
inure to the benefit of, both you and the Club. This Agreement may not be
assigned or transferred without the consent of both parties.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties, and supersedes in its entirety any prior agreements,
arrangements and understandings between the parties with respect to the subject
matter hereof, and no amendment hereof shall be deemed valid unless in writing
and signed by the parties hereto.
15. GOVERNANCE. This Agreement is subject to and is governed by, all
applicable rules and regulations of Major League Baseball and the American
League
<PAGE> 8
Mr. Ken Stefanov
April 24, 1998
Page 8
of Professional Baseball Clubs, and any rules or regulations which the Club may
announce from time to time.
Very truly yours,
CLEVELAND INDIANS BASEBALL
COMPANY LIMITED PARTNERSHIP
By: /s/ Richard E. Jacobs
--------------------------------
Richard E. Jacobs
President and Chief Executive
Officer
ACCEPTED:
/s/ Ken Stefanov
- ------------------------------
Ken Stefanov
Date: 5/11/98
-------------------
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-49357 of Cleveland Indians Baseball Company, Inc. of our report dated
February 14, 1998 (March 31, 1998 as to Note 17) on the combined financial
statements of Cleveland Indians Baseball Company Limited Partnership and
Ballpark Management Company and of our report dated April 1, 1998 on Cleveland
Indians Baseball Company, Inc., appearing in the Prospectus, which is a part of
such Registration Statement and to the reference to us under the heading
"Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
May 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FIRST QUARTER INFORMATION AS OF MARCH 31,
1998 FOR THE CLEVELAND INDIANS BASEBALL COMPANY LIMITED
PARTNERSHIP AND BALLPARK MANAGEMENT COMPANY AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,055
<SECURITIES> 63,881
<RECEIVABLES> 8,078
<ALLOWANCES> 0
<INVENTORY> 2,196
<CURRENT-ASSETS> 91,412
<PP&E> 8,054
<DEPRECIATION> 2,962
<TOTAL-ASSETS> 125,037
<CURRENT-LIABILITIES> 100,655
<BONDS> 35,500
0
0
<COMMON> 0
<OTHER-SE> (26,326)
<TOTAL-LIABILITY-AND-EQUITY> 125,037
<SALES> 1,093
<TOTAL-REVENUES> 3,035
<CGS> 1,582
<TOTAL-COSTS> 12,794
<OTHER-EXPENSES> 1,604
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 661
<INCOME-PRETAX> (10,076)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,076)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,076)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
Exhibit 99.2
CONSENT OF PROPOSED DIRECTOR
I hereby consent to being named in this Registration Statement on Form
S-1 as a proposed director of Cleveland Indians Baseball Company, Inc. (the
"Company") and have agreed to serve as a director of the Company if elected.
May 8, 1998 /s/ Robert W. Brown MD
------------------------------
Dr. Robert W. Brown
<PAGE> 1
Exhibit 99.3
CONSENT OF PROPOSED DIRECTOR
I hereby consent to being named in this Registration Statement on Form
S-1 as a proposed director of Cleveland Indians Baseball Company, Inc. (the
"Company") and have agreed to serve as a director of the Company if elected.
May 8, 1998 /s/ William B. Summers, Jr.
---------------------------------
William B. Summers, Jr.
