<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CLASSIC COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
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<TABLE>
<S> <C> <C>
DELAWARE 4841 74-2630019
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
515 CONGRESS AVENUE
SUITE 2626
AUSTIN, TEXAS 78701
512/476-9095
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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J. MERRITT BELISLE
CHAIRMAN OF THE BOARD
CLASSIC COMMUNICATIONS, INC.
515 CONGRESS AVENUE
SUITE 2626
AUSTIN, TEXAS 78701
512/476-9095
(Name, address including zip code, and telephone number, including area code, of
agent for service)
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Copies of all communications to:
CARY FERCHILL, ESQ.
WINSTEAD SECHREST & MINICK P.C.
100 CONGRESS AVE., SUITE 800
AUSTIN, TEXAS 78701
512/370-2844
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF AMOUNT TO BE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED REGISTRATION FEE(1)
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<S> <C> <C>
13 1/4% Senior Discount Notes due 2009...................... $114,000,000 $33,630
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</TABLE>
(1) In accordance with Rule 457(f)(2), the registration fee is calculated based
on the book value, which has been computed as of July 31, 1998, of the
outstanding 13 1/4% Senior Discount Notes due 2009 of the Registrant to be
canceled in the exchange transaction hereunder.
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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. 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 JURISDICTION IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.
PROSPECTUS SUBJECT TO COMPLETION, DATED SEPTEMBER , 1998
OFFER FOR ALL OUTSTANDING
13 1/4% SENIOR DISCOUNT NOTES DUE 2009
IN EXCHANGE FOR
13 1/4% SENIOR DISCOUNT NOTES DUE 2009
OF
CLASSIC COMMUNICATIONS, INC.
[CLASSIC CABLE LOGO]
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Classic Communications, Inc. ("CCI"), a Delaware corporation, is hereby
offering, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together constitute
the "Exchange Offer"), to exchange $114,000,000 aggregate principal amount of
registered 13 1/4% Senior Discount Notes due 2009 (the "New Notes") issued by
CCI for $114,000,000 aggregate principal amount of unregistered 13 1/4% Senior
Discount Notes due 2009 (the "Old Notes") issued by CCI, all of which remain
outstanding. The form and terms of the New Notes are identical to the form and
terms of the Old Notes, except that the New Notes have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and will not bear any
legends restricting their transfer. The New Notes will evidence the same debt as
the Old Notes and will be issued pursuant to, and entitled to the benefits of,
the Indenture (as defined). The Exchange Offer is being made in order to satisfy
certain contractual obligations of CCI. See "The Exchange Offer" and
"Description of New Notes." The New Notes and the Old Notes are sometimes
collectively referred to herein as the "Notes."
Cash interest will not accrue on the New Notes prior to August 1, 2003,
from which time cash interest on the New Notes will accrue at a rate of 13 1/4%
per annum and will be payable semiannually in arrears on each February 1 and
August 1, commencing February 1, 2004. The New Notes will be redeemable at the
option of CCI, in whole or in part, on or after August 1, 2003 at the redemption
prices set forth herein plus accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time on or prior to August 1, 2001, CCI will
have the option to redeem all, but not less than all, of the aggregate principal
amount at maturity of the New Notes at a redemption price equal to 113.25% of
the Accreted Value (as defined) thereof, on the applicable date of redemption,
with the net proceeds of one or more Equity Offerings (as defined) or Strategic
Equity Investments (as defined).
Upon the occurrence of a Change of Control (as defined), (i) CCI will have
the option to repurchase all, but not less than all, of the New Notes at a
purchase price equal to the Accreted Value thereof plus accrued and unpaid
interest to the date of redemption, plus the Applicable Premium (as defined) and
(ii) each holder of the New Notes may require CCI to repurchase all or a portion
of the New Notes held by such holder at a purchase price in cash equal to 101%
of the Accreted Value thereof, plus accrued and unpaid interest, if any, to the
date of repurchase.
The New Notes will be senior unsecured obligations of CCI ranking pari
passu with all Senior Indebtedness (as defined) of CCI, senior to all future
unsecured senior subordinated and subordinated indebtedness of CCI and
structurally subordinated to all indebtedness and liabilities of the Company and
its subsidiaries.
SEE "RISK FACTORS" BEGINNING ON PAGE 11, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE NEW NOTES.
CCI will accept for exchange any and all Old Notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on , 1998,
unless extended (as so extended, the "Expiration Date"). Tenders of Old Notes
may be withdrawn at any time prior to the Expiration Date. The Exchange Offer is
subject to certain customary conditions. See "The Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The letter of transmittal
accompanying this Prospectus (the "Letter of Transmittal") states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. CCI has
agreed, for a period of 90 days after the Expiration Date, to make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
No public market existed for the Old Notes before the Exchange Offer. CCI
currently does not intend to list the New Notes on any securities exchange or to
seek approval for quotation through any automated quotation system, and no
active public market for the New Notes is currently anticipated. CCI will pay
all the expenses incident to the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange pursuant to the Exchange Offer.
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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.
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The date of this Prospectus is , 1998.
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[INSERT MOST RECENT COMBINED COLOR MAP HERE.]
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AVAILABLE INFORMATION
As a result of the filing under the Securities Act of the Registration
Statement on Form S-4 with respect to the New Notes (the "Registration
Statement"), of which this Prospectus is a part, CCI will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will file reports and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports and other information may be inspected and copied at the public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices at 500
West Madison Street, Suite 1400, Chicago, Illinois 60611, and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can also
be obtained at prescribed rates by writing to the Public Reference Section of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549.
This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is hereby made to such exhibit for a more complete description of the
matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. Copies of the Registration Statement and the
exhibits thereto are on file with the Commission and may be examined without
charge at the public reference facilities of the Commission described above.
Copies of such materials can also be obtained at prescribed rates by writing to
the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. The reports, proxy statements and other
information filed by CCI with the Commission may also be obtained from the web
site that the Commission maintains at http://www.sec.gov.
CCI is required by the Indenture to furnish the holders of the Notes with
copies of the annual reports and of the information, documents and other reports
specified in Sections 13 and 15(d) of the Exchange Act, so long as any Notes are
outstanding.
FORWARD-LOOKING STATEMENTS
CERTAIN OF THE MATTERS DISCUSSED IN THIS OFFERING MEMORANDUM, INCLUDING
DOCUMENTS INCORPORATED BY REFERENCE, MAY CONSTITUTE FORWARD-LOOKING STATEMENTS
FOR PURPOSES OF THE SECURITIES ACT AND THE EXCHANGE ACT. SUCH FORWARD-LOOKING
STATEMENTS MAY INVOLVE UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL
RESULTS AND PERFORMANCE OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM FUTURE
RESULTS OR PERFORMANCE EXPRESSED OR IMPLIED BY SUCH STATEMENTS. CAUTIONARY
STATEMENTS REGARDING THE RISKS ASSOCIATED WITH SUCH FORWARD-LOOKING STATEMENTS
INCLUDE, WITHOUT LIMITATION, THOSE STATEMENTS INCLUDED UNDER "RISK FACTORS" AND
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS." CERTAIN OF SUCH RISKS AND UNCERTAINTIES RELATE TO THE HIGHLY
LEVERAGED NATURE OF CCI, THE RESTRICTIONS IMPOSED ON CCI BY CERTAIN
INDEBTEDNESS, THE SENSITIVITY OF CCI TO ADVERSE TRENDS IN THE GENERAL ECONOMY,
THE HIGH DEGREE OF COMPETITION IN CCI'S INDUSTRY, THE IMPACT OF NEW TECHNOLOGIES
AND CHANGES IN FEDERAL COMMUNICATIONS COMMISSION ("FCC") REGULATIONS, THE
VARIABILITY OF THE CCI'S QUARTERLY RESULTS AND CCI'S SEASONALITY, AMONG OTHERS.
ALL WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO CCI ARE
EXPRESSLY QUALIFIED BY THE FOREGOING CAUTIONARY STATEMENTS.
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SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and historical and pro forma
financial information including the notes thereto appearing elsewhere in this
Prospectus. As used herein, the "Company" means Classic Cable, Inc., including
the cable television systems acquired from Cable One, Inc. ("Cable One"), unless
the context requires otherwise. The Company is a Delaware corporation and a
wholly owned subsidiary of CCI. CCI is a holding company and has no other
material assets or operations other than holding the capital stock of the
Company. Reference should be made to "Selected Historical and Pro Forma
Consolidated Financial and Operating Data" for the definition of certain
financial terms appearing throughout this Prospectus.
THE COMPANY
The Company, currently the 35th largest cable television operator in the
United States, owns, operates and develops cable television systems in selected
non-metropolitan markets across eight contiguous states primarily located in the
central United States. Founded in 1992, the Company has completed and integrated
17 acquisitions, including the recent acquisition of approximately 28,009
subscribers from Cable One (the "Cable One Acquisition"). After giving effect to
the completion of the Cable One Acquisition, the Company's cable television
systems (the "Systems") would have passed approximately 295,277 homes and served
approximately 191,252 basic subscribers.
The Company believes that there are significant operating, regulatory,
competitive and economic advantages in acquiring and owning systems in
non-metropolitan markets. In pursuing its business strategy, the Company has
focused its acquisition efforts on cable television systems in growing
non-metropolitan markets and has sought to build geographic clusters of such
systems. Cable television service in these markets is generally required to
receive a full complement of off-air broadcast stations (i.e., ABC, NBC, CBS,
FOX and PBS) which represent approximately 40% of overall television viewing. In
addition, there are typically fewer competitive entertainment alternatives in
these markets. Consequently, non-metropolitan systems are typically
characterized by higher basic penetration rates, lower subscriber turnover and
lower operating costs. The Company, generally the dominant multi-channel video
provider in its markets, has capitalized on these market characteristics by
generating more predictable revenue streams and higher system cash flow margins
than typical cable television systems serving urban markets. The Company had
annualized second quarter 1998 pro forma revenues, System Cash Flow (as
defined), and EBITDA of $75.8, $35.3, and $33.7 million, respectively, and pro
forma System Cash Flow margin and EBITDA margin of 46.5% and 44.5%,
respectively.
Approximately 66.9% of the Company's cable subscribers reside in a county
seat. These markets typically have larger populations, more favorable
demographics, higher growth characteristics, and stronger economic activity than
do other non-metropolitan markets. The Company has created clusters of cable
television systems around such markets and believes that clustering cable
systems provides significant operating and cost advantages. The Company owns and
manages 287 Systems in four regions across eight contiguous states. This level
of clustering allows the Company to efficiently deploy its technical staff,
vehicle fleet, and shared resources, such as system supplies and equipment,
resulting in lower operating and capital costs and greater customer response
time. Clustering also allows management to (i) more effectively manage the
workforce and allocate personnel, (ii) address the specific customer service and
programming needs of its customers, (iii) cost effectively introduce digital
services such as HITS (as defined), and other new services, (iv) maximize the
number of households reached with existing marketing budgets, (v) maximize the
benefits of local and regional community relations efforts, and (vi) manage
political relationships at the local and state level.
The Company believes that providing superior customer service and
developing strong community relations are key elements to its long-term success,
and enable the Company to continue to increase subscription rates and therefore
maximize cash flow. The Company seeks to achieve a high level of customer
satisfaction by employing a well-trained staff of customer service
representatives and experienced field technicians. The Company's centralized
calling center offers 24-hour, 7-day per week coverage to all of its customers
on a toll-free basis.
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J. Merritt Belisle, Chairman and Chief Executive Officer, and Steven E.
Seach, President and Chief Financial Officer, founded the Company in 1992 and
have assembled a management team with significant business experience operating
cable television systems and providing quality customer service to cable
subscribers. Messrs. Belisle and Seach have 20 years of collective experience in
acquiring, operating, integrating and developing cable television systems and
have worked together for over ten years. The Company's Vice
President--Operations and three Regional Managers have an average of 28 years of
cable television industry experience. Messrs. Seach and Belisle, together with
certain other members of the Company's management team, collectively own or have
options with respect to approximately 14% of CCI's Common Stock, on a fully
diluted basis. See "Management."
BUSINESS STRATEGY
The Company's business strategy is to (i) focus on attractive
non-metropolitan markets, (ii) increase the revenue-generating bandwidth of its
cable plant utilizing cost-effective and appropriate technology for the market
served, (iii) maximize revenues and cash flow margins, (iv) expand and improve
clusters through selective acquisitions, (v) focus on customer satisfaction and
community relations, (vi) provide enhanced digital video services, and (vii)
deliver advanced telecommunications, high-speed data and Internet services. See
"Business -- Business Strategy." The Company's four principal business
strategies are as follows:
Focus on Attractive Non-Metropolitan Markets. The Company has followed a
systematic approach to acquiring, consolidating, operating and developing cable
television systems based on the primary goal of increasing operating cash flow
while maintaining the quality of its services. The Company's business strategy
has focused on serving growing non-metropolitan communities in the central
United States. For example, over two-thirds of the Company's cable subscribers
reside in a county seat. These markets generally tend to have more serviceable
households per mile, more robust household growth, higher income per household,
more disposable income per household, and a stronger business foundation than do
other non-metropolitan markets. The Company believes that the Systems generally
involve less risk of increased competition than systems serving large urban
cities. It is the goal of the Company to continue to focus on growing
non-metropolitan areas.
Increase the Revenue-Generating Bandwidth of the Systems. Through a capital
expenditure program (the "System Improvement Program"), the Company plans to
aggressively and systematically upgrade its cable plant utilizing cost-effective
and appropriate technology for the market served. These upgrades include
traditional rebuild to a 550 MHz bandwidth capacity, the deployment of fiber
optic cable, the consolidation of headends, the deployment of digital
compression services such as HITS, the deployment of addressable technology, and
the activation of the return path for two-way data transmission. The Company
believes that such technical upgrades create additional revenue opportunities,
enhance operating efficiencies, increase customer satisfaction, improve
franchise relationships and solidify the Company's position as the dominant
provider of multi-channel video services in its markets. The Company seeks to
benefit from the System Improvement Program by generating additional revenue
from expanded tiers of basic programming, multiplexed premium services,
pay-per-view movies, digital music, on-screen navigators, home shopping
services, high-speed data services, Internet access, near-video-on-demand and
other interactive services. Over the next five years, the Company intends to
spend approximately $78.5 million to complete the System Improvement Program.
Maximize Revenues and Cash Flow Margins. The Company seeks to maximize
revenues by increasing subscriptions to basic, expanded basic, and other tiers
of satellite services and premium programming services through a combination of
innovative marketing programs, an emphasis on customer service and strong
community relations. As a result of the Company's success in facilitating
revenue growth, combined with operating efficiencies generated by the Company's
clustering strategy, economies of scale, volume discounts for cable programming,
cost control culture, and decentralized management structure, the Company
believes its operating cash flow margins compare favorably to the cable
television industry as a whole.
Expand and Improve Clusters through Selective Acquisitions. To date, the
Company has sought to acquire cable television systems in communities that are
in close geographic proximity to other cable television
2
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systems owned or managed by the Company in order to maximize the economies of
scale and operating efficiencies associated with "clusters" of systems.
Management plans to continue its clustering strategy by pursuing opportunities
to purchase cable television systems in the Company's existing markets as well
as by entering contiguous or surrounding markets, if and when attractive
acquisition opportunities become available. In addition to system acquisition
opportunities, management expects to pursue opportunities to exchange certain of
the Systems for other cable television properties to further promote the
Company's clustering strategy. Factors likely to be considered by the Company in
evaluating the desirability of a potential acquisition or asset exchange
opportunity include valuation, subscriber densities, growth potential (in terms
of both market and cash flow) and whether the target system can be readily
integrated into the Company's operations.
CCI PRIVATE OFFERING
On July 29, 1998, CCI closed its private offering under Rule 144A of the
Securities Act, for 144,000 Units consisting of the Old Notes and 342,000 shares
of CCI common stock (the "CCI Private Offering"). Each Unit consisted of one
13 1/4% Senior Discount Note due 2009 ($1,000 principal amount at maturity) and
three shares of CCI common stock.
FINANCING PLAN
At the same time CCI completed the CCI Private Offering, the Company
completed its private offering of $125 million aggregate principal amount of its
9 7/8% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes").
Concurrently, the Company entered into a senior credit agreement (the "Senior
Credit Agreement") with a group of banks and other financial institutions led by
Union Bank of California, N.A. and Goldman Sachs Credit Partners, L.P., as
co-agents. See "Credit Arrangements of the Company." The proceeds of the private
offerings of the Company and CCI and the Senior Credit Agreement were used in
order to (a) prepay the Company's prior Senior Credit Agreement, (the "Prior
Credit Agreement") (b) fund the Cable One Acquisition, (c) redeem outstanding
preferred stock of CCI, (d) repay prior subordinated debt of CCI, and (e) pay
fees and expenses of these transactions. These transactions are collectively
referred to herein as the "Financing Plan."
CABLE ONE ACQUISITION
On July 29, 1998, Black Creek Communications, L.P., a wholly owned
subsidiary of the Company, purchased 14 cable television systems in Kansas,
Missouri, Oklahoma and Texas from Cable One formerly Post-Newsweek Cable) for
$41.7 million. The systems are in close geographic proximity to those currently
owned and operated by the Company, further enhancing its clusters. Cable One has
operated certain of the systems for a number of years, while others were
acquired from Tele-Communications, Inc. in the second quarter of 1997. As of the
acquisition date, in the aggregate, the systems pass 40,628 homes and have
28,166 basic and 16,212 premium subscribers. Seven systems, representing
approximately 48.7% of the total subscribers, have a bandwidth of 450 MHz (61
channel capacity), while the other systems have a bandwidth of at least 300 MHz
(36 channel capacity). Eleven of the 14 systems, representing approximately
71.2% of the subscribers, utilize addressable technology. Each of the systems
has a local office where customer service representatives can assist customers
in person or by a local telephone call. The communities served by the Cable One
systems are economically stable, non-metropolitan communities. Approximately
85.2% of the subscribers being acquired reside in the county seat.
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CCI's principal executive offices are located at 515 Congress Avenue, Suite
2626, Austin, Texas 78701, the telephone number is (512) 476-9095, and its
Internet website is www.classic-cable.com.
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THE EXCHANGE OFFER
The Exchange Offer......... $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of Old Notes. As
of the date hereof, Old Notes representing $114
million aggregate principal amount are outstanding.
The terms of the New Notes and the Old Notes are
substantially identical in all material respects,
except that the New Notes will be freely
transferable by the holders thereof except as
otherwise provided herein. See "Description of New
Notes."
Based on an interpretation by the Commission's
staff set forth in no-action letters issued to
third parties unrelated to CCI, CCI believes that
New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale,
sold and otherwise transferred by any person
receiving the New Notes, whether or not that person
is the registered holder (other than any such
holder or such other person that is an "affiliate"
of CCI within the meaning of Rule 405 under the
Securities Act), without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that (i) the New Notes
are acquired in the ordinary course of business of
that holder or such other person, (ii) neither the
holder nor such other person is engaging in or
intends to engage in a distribution of the New
Notes, and (iii) neither the holder nor such other
person has an arrangement or understanding with any
person to participate in the distribution of the
New Notes. See "The Exchange Offer -- Purpose and
Effect." Each broker-dealer that receives New Notes
for its own account in exchange for Old Notes,
where those Old Notes were acquired by the broker-
dealer as a result of its market-making activities
or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any
resale of these New Notes. See "Plan of
Distribution."
Registration Rights
Agreement.................. The Old Notes were sold by CCI on July 29, 1998 in
the CCI Private Offering. In connection with the
Offering, CCI entered into a Registration Rights
Agreement with the initial purchaser of the Old
Notes (the "Registration Rights Agreement")
requiring CCI to make the Exchange Offer. See "The
Exchange Offer -- Purpose and Effect."
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, , 1998, or such
later date and time to which it is extended by CCI
(the "Expiration Date").
Withdrawal................. The tender of the Old Notes pursuant to the
Exchange Offer may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration
Date. Any Old Notes not accepted for exchange for
any reason will be returned without expense to the
tendering holder thereof as promptly as practicable
after the expiration or termination of the Exchange
Offer.
Interest on the New Notes
and Old Notes.............. Interest on each Note will not accrue until August
1, 2003. No additional interest will be paid on Old
Notes tendered and accepted for exchange.
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to certain customary
conditions, certain of which may be waived by CCI.
See "The Exchange Offer -- Conditions to the
Exchange Offer."
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<PAGE> 9
Procedures for Tendering
Old Notes.................. Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a copy thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver the
Letter of Transmittal, or the copy, together with
the Old Notes and any other required documentation,
to the Exchange Agent (as defined) at the address
set forth herein. Persons holding the Old Notes
through the Depository Trust Company ("DTC") and
wishing to accept the Exchange Offer must do so
pursuant to the DTC's Automated Tender Offer
Program, by which each tendering participant will
agree to be bound by the Letter of Transmittal. By
executing or agreeing to be bound by the Letter of
Transmittal, each holder will represent to CCI
that, among other things, (i) the New Notes
acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the
person receiving such New Notes, whether or not
such person is the registered holder of the Old
Notes, (ii) neither the holder nor any such other
person is engaging in or intends to engage in a
distribution of such New Notes, (iii) neither the
holder nor any such other person has an arrangement
or understanding with any person to participate in
the distribution of such New Notes, and (iv)
neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 promulgated
under the Securities Act, of CCI. Pursuant to the
Registration Rights Agreement, CCI is required to
file a "shelf" registration statement for a
continuous offering pursuant to Rule 415 under the
Securities Act in respect of the Old Notes if (i)
because of any change in law or applicable
interpretations of the staff of the Commission, CCI
is not permitted to effect the Exchange Offer, (ii)
the Exchange Offer is not consummated within 150
days of the Offering, or the Registration Statement
related to this Exchange Offer is not declared
effective within 120 days of the Offering, (iii)
the Initial Purchasers request, (iv) any applicable
law or interpretations do not permit any holder of
Old Notes to participate in the Exchange Offer, (v)
any holder of Old Notes participates in the
Exchange Offer and does not receive freely
transferrable New Notes in exchange for Old Notes
or (vi) CCI so elects.
Acceptance of Old Notes and
Delivery of New Notes.... CCI will accept for exchange any and all Old Notes
that are properly tendered (and not withdrawn) in
the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The New Notes
issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date.
See "The Exchange Offer -- Terms of the Exchange
Offer."
Exchange Agent............. Bank One, N.A. is serving as Exchange Agent (the
"Exchange Agent") in connection with the Exchange
Offer.
Federal Income Tax
Considerations........... The exchange pursuant to the Exchange Offer will
not be a taxable event for federal income tax
purposes. See "Certain United States Federal Income
Tax Considerations."
Effect of Not Tendering.... Old Notes that are not tendered or that are
improperly tendered and not accepted will,
following the completion of the Exchange Offer,
continue to be subject to the existing restrictions
upon transfer thereof. CCI will
5
<PAGE> 10
have no further obligation to provide for the
registration under the Securities Act of such Old
Notes.
THE NEW NOTES
Issuer..................... Classic Communications, Inc.
Securities Offered......... $114,000,000 aggregate principal amount at maturity
of 13 1/4% Senior Discount Notes due 2009.
Maturity Date.............. August 1, 2009.
Interest Payment Dates..... Cash interest will not accrue on the New Notes
prior to August 1, 2003, at which time cash
interest will accrue on the New Notes at a rate of
13 1/4% per annum, payable semiannually on February
1 and August 1 of each year, commencing February 1,
2004.
Original Issue Discount.... Each Old Note was sold with original issue discount
for United States federal income tax purposes.
Thus, although cash interest will not begin to
accrue on the Notes until August 1, 2003, and there
will be no periodic payments of interest on the
Notes prior to February 1, 2004, the total amount
of original issue discount (i.e., the difference
between the stated redemption price at maturity of
the Notes and the amount of the issue price
allocated to the Old Notes) will start to accrue
from the issue date and will be includable as
interest income periodically in a holder's gross
income for federal income tax purposes in advance
of receipt of the cash payments to which the income
is attributable. See "Certain United States Federal
Income Tax Considerations."
Optional Redemption........ The New Notes will be redeemable at the option of
CCI, in whole or in part, at any time on or after
August 1, 2003 at a premium to the aggregate
principal amount at maturity with the premium
declining ratably to 100% of the principal amount
at maturity on August 1, 2006, at the redemption
prices set forth herein, plus accrued and unpaid
interest, if any, to the applicable date of
redemption.
In addition, at any time on or prior to August 1,
2001, CCI will have the option to redeem all (but
not less than all) of the New Notes at a redemption
price equal to 113.25% of the accreted value
thereof, plus accrued and unpaid interest, if any,
to the applicable date of redemption, with the Net
Cash Proceeds of one or more Equity Offerings or of
a Strategic Equity Investment.
Ranking.................... The New Notes will be senior unsecured obligations
of CCI and will rank pari passu in right of payment
to all existing and future unsecured senior
indebtedness of CCI, and senior in right of payment
to all future senior subordinated and subordinated
indebtedness of CCI. As of June 30, 1998, after
giving pro forma effect to the Financing Plan and
the Exchange Offer, CCI on an unconsolidated basis
would have had no indebtedness other than the
Notes. The New Notes will also be effectively
subordinated to all existing and future liabilities
(including trade payables) of CCI's subsidiaries.
As of June 30, 1998, after giving pro forma effect
to the Financing Plan, CCI on a consolidated basis
would have had approximately $294.4 million of
total liabilities. See "Description of the New
Notes -- Subordination."
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<PAGE> 11
Change of Control.......... Upon the occurrence of a Change of Control, (i) CCI
will have the option to redeem all, but not less
than all of the New Notes, at a redemption price
equal to the Accreted Value thereof on the date of
redemption, plus the Applicable Premium (as
defined), and (ii) each holder of New Notes will
have the right to require CCI to repurchase all or
a portion of the Accreted Value of the New Notes
held by such holder at a purchase price equal to
101% of the Accreted Value thereof, plus accrued
and unpaid interest, if any, to the date of
repurchase. See "Description of the New
Notes -- Change of Control."
Certain Covenants.......... The Indenture contains certain covenants that,
among other things, limit the ability of CCI to:
(i) incur Indebtedness (as defined); (ii) make
Restricted Payments (as defined); (iii) create
certain liens; (iv) enter into transactions with
affiliates; (v) create certain dividend and other
payment restrictions affecting subsidiaries; (vi)
make certain Asset Sales (as defined); and (vii)
engage in any merger, consolidation or sale of
substantially all assets. See "Description of the
New Notes -- Certain Covenants."
ABSENCE OF A PUBLIC MARKET FOR THE NOTES
There is currently no market for the Old Notes. The New Notes will be new
securities for which there currently is no market. Although Merrill Lynch,
Pierce, Fenner & Smith Incorporated (the "Initial Purchaser") has informed CCI
that it currently intends to make a market in the Notes, it is not obligated to
do so and any such market making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the New Notes and, if issued, the Exchange Notes. CCI does not intend
to apply for listing of the New Notes, on any securities exchange; however, the
Notes are designated for trading by qualified institutional buyers in the NASD's
Private Offerings, Resales and Trading Through Automatic Linkages ("PORTAL")
market. See "Plan of Distribution."
USE OF PROCEEDS
There will be no cash proceeds to CCI from the exchange pursuant to the
Exchange Offer. See "Use of Proceeds."
RISK FACTORS
Purchasers of the New Notes should carefully consider the risk factors set
forth under the caption "Risk Factors" and the other information included in
this Prospectus prior to making an investment decision. See "Risk Factors."
7
<PAGE> 12
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED
FINANCIAL AND OPERATING DATA
The following table sets forth certain summary historical and pro forma
financial and operating data of CCI and the systems acquired from Cable One. The
historical data for each of the three years ended December 31, 1995, 1996 and
1997 has been derived from the audited consolidated financial statements of CCI
and, with respect to the Cable One systems, from unaudited financial information
of Cable One for the year ended December 31, 1997. The historical financial data
for the six months ended June 30, 1997 and 1998 has been derived from unaudited
financial statements of CCI and Cable One. The unaudited financial statements
include all adjustments, consisting of normal recurring accruals, which CCI
management considers necessary for a fair presentation of the financial position
and the results of operations for these periods. Operating results for the six
months ended June 30, 1998 are not necessarily indicative of the results that
may be expected for the entire year ending December 31, 1998.
The unaudited pro forma data gives effect to the Financing Plan as if all
such transactions had been consummated on January 1, 1997 in the case of
financial data and operations data and June 30, 1998 with respect to balance
sheet data. The pro forma data has been derived from the Unaudited Pro Forma
Condensed Consolidated Financial Information of CCI which is included elsewhere
herein. The unaudited pro forma data does not purport to be indicative of the
results that would have been obtained had such transactions been completed as of
the assumed dates and for the periods presented nor is it necessarily indicative
of results that may be obtained in the future.
The data presented below should be read in conjunction with the historical
consolidated financial statements of CCI and the notes related thereto, the
Unaudited Pro Forma Condensed Consolidated Financial Information and the notes
related thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations," all of which appear elsewhere in this Offering
Memorandum. Acquisitions of cable television systems during the periods for
which the summary financial and operating data are presented below materially
affect the comparability of such data from one period to another.
8
<PAGE> 13
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------ -------------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
------------------------------ --------- ------------------- ---------
1995 1996 1997(1) 1997(1) 1997 1998 1998
-------- -------- -------- --------- -------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL DATA:
Revenues.............................. $36,677 $59,821 $60,995 $72,177 $30,221 $32,214 $37,897
Costs and expenses.................... 18,911 32,495 35,121 41,952 17,377 17,820 21,050
Depreciation and amortization......... 16,427 27,510 27,832 34,058 13,893 14,169 17,355
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)............... 1,339 (184) (1,958) (3,833) (1,049) 225 (508)
Interest expense...................... (14,199) (20,633) (21,299) (30,899) 9,998 (10,497) (15,639)
Gain on sale of cable system.......... -- 4,901 3,644 3,644 3,644 -- --
Write-offs of abandoned telephone
operations.......................... -- (2,994) (500) (500) -- -- --
Other income (expense)................ -- -- 71 190 39 64 (446)
-------- -------- -------- -------- -------- -------- --------
Loss before income tax benefit and
extraordinary loss.................. (12,860) (18,910) (20,042) (31,398) (7,364) (10,208) (16,593)
Income tax benefit.................... 4,533 6,802 7,347 9,767 2,699 1,041 --
Extraordinary loss.................... (4,054) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net loss.............................. $(12,381) $(12,108) $(12,695) $(21,631) $(4,665) $(9,167) $(16,593)
======== ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
System Cash Flow(2)................... $18,887 $28,481 $29,012 $34,265 $14,026 $15,177 $17,630
System Cash Flow margin............... 51.5% 47.6% 47.6% 47.5% 46.4% 47.1% 46.5%
Annualized System Cash Flow(3)........ $-- $-- $-- $-- $28,052 $30,354 $35,260
EBITDA(4)............................. 17,766 27,326 27,559 31,910 12,939 14,394 16,847
EBITDA margin......................... 48.4% 45.7% 45.2% 44.2% 42.8% 44.7% 44.5%
Annualized EBITDA(3).................. $-- $-- $-- $-- $25,878 $28,788 $33,694
Capital expenditures.................. 3,931 8,212 10,135 10,135 4,834 4,201 4,201
Deficiency of earnings to fixed
charges(5).......................... (12,860) (18,910) (20,042) (31,398) (7,364) (10,208) (16,593)
Ratio of Company debt to annualized
EBITDA.............................. 6.6x
Ratio of CCI debt to annualized
EBITDA.............................. 8.3x
Ratio of EBITDA to interest expense... 1.1x
Ratio of EBITDA to cash interest(6)... 1.7x
OPERATING DATA (end of period, except
avg.):
Homes passed(7)....................... 269,336 259,181 254,649 295,277 250,038 254,649 295,277
Basic subscribers(8)(9)............... 182,696 171,657 165,737 193,708 165,299 163,243 191,409
Basic penetration(9)(10).............. 67.8% 66.2% 65.1% 65.6% 66.1% 64.1% 64.8%
Premium subscribers(11)............... 65,400 62,458 63,819 81,531 65,171 63,389 79,601
Premium penetration(12)............... 35.8% 36.4% 38.5% 42.1% 39.4% 38.8% 41.6%
Average monthly basic revenue per
basic subscriber(13)................ $21.40 $22.77 $25.22 $25.34 $24.81 $27.50 $27.47
Average monthly total revenue per
basic subscriber(14)................ 26.00 27.68 30.14 30.59 29.58 32.64 32.78
Annual/Annualized System Cash Flow per
average basic subscriber(15)........ 160.63 158.17 172.02 174.26 164.73 184.51 183.00
Annual/Annualized EBITDA per average
basic subscriber(16)................ 151.10 151.76 163.40 162.29 150.86 174.99 174.87
CCI BALANCE SHEET DATA (end of
period):
Total assets.......................... $271,516 $245,922 $220,412 $-- $-- $211,093 $263,209
Total debt(17)........................ 207,706 197,504 191,990 -- -- 194,149 279,511
Total liabilities..................... 232,531 219,232 206,517 -- -- 207,316 294,375
Total redeemable preferred stock...... 19,260 22,726 26,704 -- -- 29,119 --
Total stockholders equity (deficit)... 19,725 3,965 (12,809) -- -- (25,342) (31,166)
</TABLE>
(Footnotes on following page)
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<PAGE> 14
(1) System Cash Flow excludes a charge of $250,000 for the write-off of
abandoned telephone operations. EBITDA excludes charges, including divorce
litigation costs of $1,035,000 and special bonuses paid to executive
officers of $400,000.
(2) System Cash Flow represents EBITDA plus corporate overhead expenses. The
Company believes that System Cash Flow is a meaningful measure of
performance because it is commonly used in the cable television industry to
analyze and compare cable television companies on the basis of operating
performance, leverage and liquidity. However, System Cash Flow is not
intended to be a performance measure that should be regarded as an
alternative to, or more meaningful than, either operating income or net
income as an indicator of operating performance or cash flows as a measure
of liquidity, as determined in accordance with generally accepted
accounting principles. Also, System Cash Flow, as computed by the Company,
is not necessarily comparable to similarly titled amounts of other
companies.
(3) Annualized System Cash Flow and Annualized EBITDA for all six-month periods
have been computed by multiplying the respective quarterly amounts by two.
(4) EBITDA represents net income before depreciation, amortization, interest
expense and income taxes, and also excludes gain on sale of systems,
abandonment of telephone operations and extraordinary items. The Company
believes that EBITDA is a meaningful measure of performance because it is
commonly used in the cable television industry to analyze and compare cable
television companies on the basis of operating performance, leverage and
liquidity. However, EBITDA is not intended to be a performance measure that
should be regarded as an alternative to, or more meaningful than, either
operating income or net income as an indicator of operating performance or
cash flows as a measure of liquidity, as determined in accordance with
generally accepted accounting principles. Also, EBITDA, as computed by the
Company, is not necessarily comparable to similarly titled amounts of other
companies.
(5) Deficiency of earnings to fixed charges consists of loss before income tax
benefit and extraordinary loss. Fixed charges consist of interest expense,
the interest portion of rental expense, and dividends on unconsolidated
subsidiary.
(6) Pro forma cash interest includes interest on borrowings under the Senior
Credit Agreement and the Senior Subordinated Notes.
(7) Homes passed refers to estimates by the Company of the approximate number
of dwelling units in a particular community that can be connected to the
Company's cable television distribution system without any further
extension of principal transmission lines.
(8) A home with one or more television sets connected to a cable system is
counted as one basic subscriber. Bulk accounts are included on an
equivalent basic unit ("EBU") basis in which the total monthly bill for the
account is divided by the basic monthly charge for a single outlet in the
area. End of period basic and premium subscribers are net of system sales
that occurred during 1996 and 1997.
(9) End of period subscribers reflect asset sales that were consummated during
the third quarter of 1996 and the second quarter of 1997.
(10) Penetration is described as basic subscribers as a percentage of homes
passed.
(11) Premium service units include only single channel services offered for a
monthly fee per channel and do not include tiers of channels offered as a
package for a single monthly fee. A subscriber may purchase more than one
premium service, each of which is counted as a separate premium service
unit.
(12) Premium service units as a percentage of basic subscribers.
(13) Average monthly basic revenue per basic subscriber equals basic revenues of
cable systems during the respective period divided by the months in the
period and divided by the weighted average number of basic subscribers of
the Company for such respective periods.
(14) Average monthly total revenue per basic subscriber equals total revenues of
cable systems during the respective period divided by the months in the
period and divided by the weighted average number of basic subscribers of
the Company for such respective periods.
(15) Annual/Annualized System Cash Flow per average basic subscriber equals
annual System Cash Flow during the respective period divided by the months
in the period and divided by the weighted average number of basic
subscribers of the Company for such respective periods.
(16) Annual/Annualized EBITDA per average basic subscriber equals EBITDA during
the respective period divided by the months in the period and divided by
the weighted average number of basic subscribers of the Company for such
respective periods.
(17) Total debt at June 30, 1998 reflects total indebtedness payable of
$195,217,000 less $1,675,000 of unamortized warrant discount related to the
Prior Credit Agreement.
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<PAGE> 15
RISK FACTORS
In addition to the other information set forth in this Prospectus,
prospective investors should carefully review the following risk factors before
deciding to purchase the New Notes. References to "Company" in this section do
not include the Cable One Acquisition, unless the context requires otherwise.
SUBSTANTIAL LEVERAGE
CCI and the Company are, and will continue to be, highly leveraged as a
result of the substantial indebtedness they have incurred, and intend to incur,
to finance acquisitions and expand their operations. At June 30, 1998, CCI's
aggregate consolidated indebtedness was approximately $194.1 million. After
giving effect to the Financing Plan as if it had been consummated on June 30,
1998, CCI's aggregate consolidated indebtedness on a pro forma basis would have
been approximately $279.5 million and CCI would have had stockholders' deficit
of approximately $31.2 million. The Company will have significant cash interest
expense relating to the Senior Subordinated Notes and its indebtedness under the
Senior Credit Agreement, and a substantial portion of the Company's cash flow
will be required for debt service. In addition, although a portion of the
proceeds of the Old Notes were contributed to the Company as equity and the New
Notes will not be obligations of the Company, CCI will be dependent on the
Company's ability to distribute cash to CCI to meet its cash payment obligations
on the New Notes when such obligations commence on February 1, 2004, and
distributions to CCI to make such payments will, in general, be subordinate
under the Indenture relating to the Senior Subordinated Notes and will be
structurally subordinated to all of the Company's obligations. See "Description
of the New Notes -- Ranking." The average interest rate accrued on CCI's
long-term indebtedness during the year ended December 31, 1997 was 9.8%. CCI and
the Company may incur other indebtedness to make additional acquisitions in the
future.
For the year ended December 31, 1997 and the six months ended June 30,
1998, CCI's earnings were insufficient to cover its fixed charges by $20.0
million and $10.2 million, respectively. However, such amounts reflect non-cash
charges totaling approximately $27.8 million and $14.2 million, respectively,
consisting of depreciation and amortization. After giving pro forma effect to
the Financing Plan, as if such transactions had been consummated on January 1,
1997, CCI's consolidated earnings on a pro forma basis would have been
insufficient to cover its total fixed charges by approximately $31.4 million and
$16.6 million for the year ended December 31, 1997 and the six months ended June
30, 1998. However, such amounts reflect non-cash depreciation and amortization
charges totaling approximately $34.0 million and $17.4 million, respectively.
The degree to which CCI and the Company are leveraged could have important
consequences to holders of the New Notes including, but not limited to, the
following: (i) CCI's and the Company's ability to obtain additional financing in
the future for working capital, capital expenditures, acquisitions, general
corporate or other purposes may be limited; (ii) a substantial portion of both
CCI's and the Company's cash flow from operations will be dedicated to the
payment of the principal of, and interest on, its debt; (iii) the Senior Credit
Agreement contains certain restrictive financial and operating covenants which
could limit the Company's ability to compete as well as its ability to expand;
and (iv) CCI's and the Company's substantial leverage may make it more
vulnerable to economic downturns, limit its ability to withstand competitive
pressures and reduce its flexibility in responding to changing business and
economic conditions. The ability of the Company to meet its debt obligations and
to make distributions to CCI to pay interest and principal on the New Notes will
depend on the future operating performance of the Company, which could be
affected by changes in economic conditions and other factors, including factors
beyond the control of CCI or the Company. Failure to comply with the covenants
and other provisions of debt instruments by CCI or the Company could result in
events of default under such instruments, which could permit acceleration of the
debt under such instruments and, in some cases, acceleration of debt under other
instruments that contain cross-default or cross-acceleration provisions.
If CCI and the Company are unable to generate sufficient cash flow to meet
their debt obligations, they may be required to renegotiate the terms of their
long-term debt instruments or to refinance all or a portion of their long-term
debt. There can be no assurance that CCI or the Company would be able to
renegotiate such terms or refinance their indebtedness, or, if either were able
to do so, that the terms available to them would be
11
<PAGE> 16
favorable. If CCI or the Company were unable to refinance its indebtedness or
obtain new financing under such circumstances, it would have to consider options
such as the sale of certain assets to meet its debt service, reduction of
planned capital expenditures, negotiation with its lenders to restructure
applicable indebtedness or other options available to it under law. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
ORIGINAL ISSUE DISCOUNT
The Old Notes were issued at a substantial discount from their principal
amount at maturity. Although cash interest will not accrue on the Notes prior to
August 1, 2003, and there will be no payments of cash interest on the Notes
prior to February 1, 2004, Original Issue Discount (the difference between the
stated redemption price at maturity of the New Notes and the issue price of the
Old Notes) will accrue from the issue date of the Old Note and generally will be
includable as interest income in the Notes holder's gross income for United
States federal income tax purposes in advance of the cash payments to which the
income is attributable.
Furthermore, the New Notes will be subject to the high yield discount
obligation rules which will defer and may in part eliminate CCI's ability to
deduct the Original Issue Discount attributable to the New Notes. Accordingly,
CCI's after tax cash flow might be less than if the Original Issue Discount on
the Notes was deductible when it accrued. See "Certain United States Federal
Income Tax Considerations." Similar results may apply under state tax laws.
If a bankruptcy case is commenced by or against CCI or the Company under
the Federal Bankruptcy Code of 1978, as amended (the "Bankruptcy Code"), after
the issuance of the New Notes, the claim of a holder of New Notes with respect
to the principal amount thereof may be limited to an amount equal to the sum of
(i) the initial offering price allocable to the Notes and (ii) that portion of
the original issue discount which is not deemed to constitute "unmatured
interest" for purposes of the Bankruptcy Code. Any original issue discount that
was not amortized as of any such bankruptcy filing would constitute "unmatured
interest."
NET LOSSES
CCI reported, on a consolidated basis, a net loss of approximately $12.4
million for the year ended December 31, 1995, a net loss of $12.1 million for
the year ended December 31, 1996, a net loss of $12.7 million for the year ended
December 31, 1997 and a net loss of $9.2 million for the six months ending June
30, 1998. On a pro forma basis for the year ended December 31, 1997, and the six
months ended June 30, 1998, after giving effect to the Financing Plan, CCI would
have reported, on a consolidated basis, net losses of approximately $21.6
million and $16.6 million, respectively. These losses reflect significant
depreciation and amortization charges and interest expense on debt incurred by
CCI and the Company. There can be no assurance that CCI or the Company will
become profitable in the foreseeable future. Utilization of CCI's net operating
losses for federal income tax purposes in the future is subject to certain
limitations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations."
DEPENDENCE ON KEY PERSONNEL
The loss of the services of J. Merritt Belisle, CCI's Chairman and Chief
Executive Officer or Steven E. Seach, CCI's President and Chief Financial
Officer, could have an adverse impact on CCI. Although CCI has employment
agreements with J. Merritt Belisle and Steven E. Seach, there can be no
assurance that the services of such personnel will continue to be made available
to CCI. CCI does carry key man life insurance on Mr. Belisle.
Each of J. Merritt Belisle and Steven E. Seach is permitted, pursuant to
the terms of their employment agreements with CCI, to engage in and pursue the
acquisition of other business opportunities, including other cable television
businesses, so long as CCI has been given a right of first refusal to take
advantage of any such opportunity and so long as the employee continues to
devote substantially all of his time to the management of CCI. If CCI does not
exercise its right of first refusal, Messrs. Seach and Belisle might be in the
position of
12
<PAGE> 17
engaging in other businesses, including businesses that might be in the same
industry as CCI. See "Management -- Employment Agreements and Termination of
Employment Agreements."
RISKS RELATING TO ACQUISITION STRATEGY
A significant element of the Company's growth strategy is to expand by
acquiring cable television systems and/or Internet service providers located in
reasonable proximity to existing systems or of a sufficient size to enable the
acquired system to serve as the basis for a regional cluster. There can be no
assurance that the Company will be able to identify and acquire additional cable
and Internet systems or that it will be able to finance significant acquisitions
in the future. The Company anticipates that it will likely incur substantial
additional indebtedness to finance acquisitions in the future. The Company's
ability to pay interest and principal on the New Notes and to satisfy its debt
obligations will be dependent on the future operating performance of the
Company. See "Business -- Business Strategy."
NON-EXCLUSIVE FRANCHISES; NON-RENEWAL OR TERMINATION OF FRANCHISES
Cable television companies operate under non-exclusive franchises, permits
or licenses granted by a municipality or other state or local governmental
entity which are subject to renewal and renegotiation from time to time. The
terms and conditions of franchises vary materially from jurisdiction to
jurisdiction. A franchise is generally granted for a fixed term ranging from
five to fifteen years, but in many cases is terminable if the franchisee fails
to comply with its material provisions. The Company's business is dependent upon
the retention and renewal of its local franchises. Franchises typically impose
conditions relating to the operation of cable television systems, including
requirements relating to the payment of fees, system bandwidth capacity,
customer service requirements, franchise renewal and termination. The Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act") prohibits franchising authorities from granting exclusive cable television
franchises and from unreasonably refusing to award additional competitive
franchises; it also permits municipal authorities to operate cable television
systems in their communities without franchises. The Cable Communications Policy
Act of 1984 (the "1984 Cable Act"), the 1992 Cable Act and the Telecommunication
Act of 1996 (the "1996 Act") (collectively, the "Cable Acts") provide, among
other things, for an orderly franchise renewal process which requires that an
incumbent franchise renewal application be assessed on its own merits and not as
part of a comparative process with competing applications. A franchise renewal
will not be unreasonably withheld or, if renewal is denied and the franchising
authority acquires ownership of the system or effects a transfer of the system
to another person, the operator generally is entitled to the "fair market value"
for the system covered by such franchise. Historically, franchises have been
renewed for cable operators that have provided satisfactory services and have
complied with the terms of their franchises. Although the Company believes that
it generally has good relationships with its franchise authorities, no assurance
can be given that the Company will be able to retain or renew such franchises or
that the terms of any such renewals will be on terms as favorable to the Company
as the Company's existing franchises. To date, the Company has never had a
franchise revoked and no request for a franchise renewal or extension has been
denied, although the renewal or extended franchises have frequently resulted in
franchise modification on terms satisfactory to the Company. Furthermore, it is
possible that a franchise authority might grant a franchise to another cable
company. The non-renewal or termination of franchises relating to a significant
portion of the Company's subscribers could have a material adverse effect on the
Company's results of operations. See "Business -- Franchises."
LEGISLATION AND REGULATION
The cable television industry is subject to extensive regulation at the
federal, state and local levels. The Cable Acts which amended the Communications
Act of 1934 (the "Communications Act"), establish a national policy to guide the
development and regulation of cable television systems. Principal responsibility
for implementing the policies of the Cable Acts has been allocated between the
FCC and state or local regulatory authorities. It is not possible to predict the
effect that ongoing or future developments may have on the cable communications
industry or on the operations of the Company.
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<PAGE> 18
Under the Cable Acts, franchising authorities may elect to regulate basic
cable rates and rates for tiers of service above the basic rate may be regulated
by the FCC. Under the rate-making rules adopted by the FCC, local authorities
that elected to regulate basic cable rates can require rates to be set at
"benchmark" levels or, at the cable operator's option, based on the operator's
cost of service. The FCC has adopted rules liberalizing cost of service
calculations for small cable systems operated by small cable companies. Few of
the jurisdictions in which the Company operates have elected to certify to
regulate rates and the Company believes that the FCC's small system rate
regulations will afford it additional flexibility to adjust its rates. However
there can be no assurance that the Company's revenues and results of operations
will not be adversely affected in the future by regulation of cable system
rates. The 1996 Act deregulates rates for cable programming services tiers
("CPSTs") commencing in March 1999, and, for certain small cable operators,
immediately eliminates rate regulation of CPSTs, and, in certain limited
circumstances, basic services and equipment. The FCC is currently developing
permanent regulations to implement the rate deregulation provisions of the 1996
Act. The Company is currently unable to predict the ultimate effect of the Cable
Acts including future Congressional action, the FCC's implementing regulations,
or the litigation challenging various aspects of this federal legislation and
the FCC's regulations. The FCC and Congress continue to be concerned that rates
for regulated programming services are rising at a rate exceeding inflation. It
is therefore possible that the FCC will further restrict the ability of cable
television operators to implement rate increases and/or Congress will enact
legislation which would, for example, delay or suspend the scheduled March 1999
termination of CPST rate regulation. Cable television systems generally operate
pursuant to non-exclusive franchises, permits or licenses granted by a
municipality or other state or local governmental entity. The terms and
conditions of franchises vary materially from jurisdiction to jurisdiction. A
number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies. To date, no state in which the Company
currently operates has enacted state level regulation. The Company cannot
predict whether any of the states in which it currently operates will engage in
such regulation in the future. See "Business -- Legislation and
Regulation -- Cable Regulation -- Rate Regulation."
The FCC also regulates numerous other aspects of the cable television
business including terms of franchise agreements, mandatory carriage of certain
local broadcasters that elect must-carry status, ownership of cable television
systems together with telephone systems or programming providers and other
matters. See "Business -- Legislation and Regulation."
The above-described regulations may affect the Company's ability to obtain
a sufficient return on its investments. Furthermore, the regulations are
changing rapidly to allow significantly increased competition among various
service providers. The Company cannot predict the eventual effect of these
regulations. See "Business -- Legislation and Regulation."
SIGNIFICANT COMPETITION IN THE CABLE TELEVISION INDUSTRY
Cable television systems face competition from alternative methods of
receiving and distributing television signals and from other sources of news,
information and entertainment, such as off-air television broadcast programming,
newspapers, movie theaters, live sporting events, interactive computer programs
and home video products, including videotape cassette recorders. Because the
Company's franchises are non-exclusive, there is the potential for competition
with the Company's systems from other operators of cable systems, including
systems operated by local governments and from other distribution systems
capable of delivering programming to homes or businesses, including direct
broadcast satellite ("DBS") systems and multichannel multipoint distribution
service ("wireless cable") systems which use low power microwave frequencies to
transmit video programming over the air to customers. Within the home video
programming market, the Company competes with other cable franchise holders and
with satellite and wireless cable providers. In recent years, the FCC has
adopted policies providing for a more favorable operating environment for new
and existing technologies that provide, or have the potential to provide,
substantial competition to cable systems. Programming comparable to that of
cable systems is currently available to the owners of home satellite dish earth
stations ("HSDs") through conventional-, medium- and high-powered satellites.
Several companies offer DBS. In recent years there has been significant national
growth in the number of subscribers to DBS services, and such growth would be
assisted if one or more DBS providers is successful in delivering
14
<PAGE> 19
local broadcast signals. Legislation has been introduced in Congress to amend
the Copyright Act to authorize carriage of local broadcast signals by DBS
providers.
In addition, recent FCC and judicial decisions and Federal legislation will
enable local telephone companies to provide a wide variety of video services
competitive with services provided by cable systems and to provide cable
services directly to customers. Company cannot predict the extent to which
competition will materialize from other cable television operators, other
distribution systems for delivering video programming to the home or other
potential competitors, or, if such competition materializes, the extent of its
effect on the Company. Various LECs (as defined) currently are providing video
programming services within and outside their telephone service areas through a
variety of distribution methods including both the deployment of broadband wire
facilities and the use of wireless transmission facilities. Advances in
communications technology as well as changes in the marketplace and the
regulatory and legislative environment are constantly occurring. Thus, it is not
possible to predict the effect that ongoing or future developments might have on
the cable industry. See "Business -- Competition" and "Business -- Legislation
and Regulation."
LIMITATIONS ON ACCESS TO CASH FLOW; RANKING
CCI will have no operations of its own. Consequently, CCI will rely on
dividends from the Company, and hence the cash flow of the Company, in order to
meet its debt service obligations. The debt instruments of the Company severely
restrict, among other things, the payment of dividends, the making of loans by
the Company or its subsidiaries to CCI and CCI's ability to purchase New Notes
tendered pursuant to a Change of Control Offer (as defined). For a further
description of these restrictions, see "Description of the Units."
As a result of the relationship of CCI and the Company, the creditors of
CCI, including the holders of the Notes, will effectively rank junior to all
creditors of the Company, including the bank lenders under the Senior Credit
Agreement, the holders of the Senior Subordinated Notes and the trade creditors
of the Company and its subsidiaries, notwithstanding that the New Notes will be
senior obligations of CCI. Accordingly, in the event of the dissolution,
bankruptcy, liquidation or reorganization of CCI and the Company, the holders of
the New Notes may not receive any amounts with respect to the New Notes until
after the payment in full of the claims of creditors of the Company. As of June
30, 1998, on a pro forma basis after giving effect to the Financing Plan, the
aggregate amount of indebtedness and other obligations of the Company and its
subsidiaries, to which the holders of the New Notes would be structurally
subordinated would have been approximately $235.7 million.
The New Notes will not be secured by any of CCI's assets. CCI has pledged
all of the capital stock of the Company to collateralize borrowings of the
Company under the Senior Credit Agreement. If the Company becomes insolvent or
is liquidated, or if payment under the Senior Credit Agreement is accelerated,
the lenders under the Senior Credit Agreement would be entitled to exercise the
remedies available to a secured lender under applicable law and pursuant to the
Senior Credit Agreement. Accordingly, such lenders have a prior claim on the
assets of CCI.
OWNERSHIP OF CCI'S COMMON STOCK
Austin Ventures, L.P., BT Capital Partners, Inc., The Texas Growth Fund and
NationsBank Capital Investors, and Union Bank Ventures collectively own
approximately 64% of the CCI Common Stock on a fully-diluted basis. Such
institutional investors have the ability to elect a majority of CCI's directors,
who, in turn, may direct the operations and business of CCI and the Company as a
whole. Although the directors of CCI have fiduciary obligations to CCI, there
may be conflicts of interest between the institutional investors and the holders
of the New Notes. There can be no assurance that any such conflict, should it
occur, will be resolved in a manner favorable to the holders of the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Following the completion of the Exchange Offer (except as set forth in the
second paragraph under "The Exchange Offer -- Purpose and Effect"), holders of
Old Notes not tendered will not have any further registration rights and those
Old Notes will continue to be subject to certain restrictions on transfer.
15
<PAGE> 20
Accordingly, the liquidity of the market for a holder's Old Notes could be
adversely affected upon completion of the Exchange Offer if the holder does not
participate in the Exchange Offer.
LACK OF ESTABLISHED MARKET FOR NOTES
There is no existing trading market for the Old Notes and, although CCI has
been advised by the Initial Purchaser that it intends to make a market in the
New Notes, the Initial Purchaser is not obligated to do so and any market making
may be discontinued at any time without notice. In addition such market making
activity may be limited during the Exchange Offer. Although the Notes are
eligible for trading in the PORTAL market, there can be no assurance as to the
development of any market or the liquidity of any market that may develop for
the New Notes.
ABILITY TO PURCHASE NEW NOTES UPON A CHANGE OF CONTROL
If a Change of Control occurs, there can be no assurance that CCI will have
sufficient funds to repurchase the New Notes pursuant to the terms of the CCI
Indenture. In the event that a Change of Control occurs at a time when CCI does
not have sufficient funds available to repurchase the New Notes or at a time
when CCI is prohibited from repurchasing the New Notes under the terms of other
indebtedness of CCI (and CCI is unable either to obtain the consent of holders
of such other indebtedness or to repay such other indebtedness), an Event of
Default would occur under the CCI Indenture. Furthermore, both the Senior Credit
Agreement and the CCI Indenture for the New Notes include "change of control"
provisions that permit, in the case of the Senior Credit Agreement, the lenders
thereunder to accelerate the repayment of indebtedness thereunder and that
require, in the case of the CCI Indenture for the New Notes, CCI to offer to
purchase all of the outstanding New Notes. Any acceleration of the obligations
of the Company under the Senior Credit Agreement could materially and adversely
affect the ability of CCI to effect a purchase of the New Notes upon a Change of
Control. In addition, the existence of a holder's right to require CCI to
repurchase its New Notes upon the occurrence of a Change of Control may deter a
third party from acquiring CCI in a transaction which would constitute a Change
of Control. See "Description of the New Notes."
16
<PAGE> 21
USE OF PROCEEDS
There will be no cash proceeds to CCI from the exchange pursuant to the
Exchange Offer. The Company used the net proceeds from the Offering, along with
the net proceeds of offerings made concurrently therewith, (i) to fund the Cable
One Acquisition, (ii) to repay prior indebtedness, (iii) to redeem previously
outstanding preferred stock and (iv) for other general corporate purposes,
including working capital.
17
<PAGE> 22
CAPITALIZATION
The following table sets forth consolidated capitalization of CCI and of
the Company on an actual basis as of June 30, 1998 and as adjusted to give
effect to the Financing Plan as if it had occurred on June 30, 1998. See "Use of
Proceeds."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
-------------------------------------------------
THE COMPANY CCI
--------------------- ------------------------
ACTUAL AS ADJUSTED ACTUAL AS ADJUSTED(1)
------ ----------- ------ --------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Cash and cash equivalents....................... $ 1.8 $ 5.0 $ 1.8 $ 5.0
====== ====== ====== ======
Total debt, including current portion:
Prior Credit Agreement(2)..................... $188.5 $ -- $188.5 $ --
Senior Credit Agreement(3).................... -- 95.8 -- 95.8
9 7/8% Senior Subordinated Notes.............. -- 124.4 -- 124.4
13 1/4% Senior Discount Notes................. -- -- -- 58.7
Other(4)...................................... .6 .6 5.6 .6
------ ------ ------ ------
Total debt................................. $189.1 $ $194.1 $279.5
------ ------ ------ ------
15% PIK Redeemable Senior Preferred Stock....... $ -- $220.8 $ 6.6 $ --
15% PIK Redeemable Junior Preferred Stock....... -- -- 21.3 --
8% Cumulative Redeemable Preferred Stock........ 1.3 -- 1.3 --
Stockholders' equity (deficit)(5)............... 7.8 25.4 (25.3) (31.2)
------ ------ ------ ------
Total capitalization....................... $198.2 $246.2 $198.0 $248.3
====== ====== ====== ======
</TABLE>
- ---------------
(1) The "As Adjusted" information is adjusted to reflect the allocation of $1.3
million of the gross proceeds from the CCI private offering to the shares
issued in conjunction therewith. The value ascribed to the shares will
result in additional debt discount that will be amortized to interest
expense over the term of the New Notes.
(2) Includes $1.8 million of unamortized warrant discount allocated to
stockholders' equity. As of June 30, 1998, there was $190.2 million of
indebtedness payable under the Prior Credit Agreement.
(3) Effective July 29, 1998, the Company entered into the Senior Credit
Agreement. See "Credit Arrangements of the Company."
(4) Includes $0.6 million of promissory notes and $4.3 million of subordinated
debt at CCI.
(5) The "As Adjusted" information reflects (i) the write-off of deferred
financing costs, (ii) unamortized discounts, (iii) a capital contribution
from CCI to the Company and (iv) a 10.07524-to-one stock split of the CCI
Common Stock effective July 22, 1998.
18
<PAGE> 23
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED
FINANCIAL AND OPERATING DATA
The following table sets forth certain summary historical and pro forma
financial and operating data of CCI and the systems acquired from Cable One. The
historical data as of and for the years ended December 31, 1995, 1996 and 1997
has been derived from the audited consolidated financial statements of CCI and,
with respect to the Cable One Systems, from unaudited financial information of
Cable One, Inc. for the year ended December 31, 1997. The historical financial
data for the six-months ended June 30, 1997 and 1998, has been derived from
unaudited financial statements of CCI and Cable One, Inc. The unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, which management considers necessary for a fair presentation of the
financial position and the results of operations for these periods. Operating
results for the six months ended June 30, 1998 are not necessarily indicative of
the results that may be expected for the entire year ending December 31, 1998.
The unaudited pro forma data gives effect to the Financing Plan as if all
such transactions had been consummated on January 1, 1997 in the case of
financial data and operations data and on June 30, 1998 with respect to balance
sheet data. The pro forma data has been derived from the Unaudited Pro Forma
Condensed Consolidated Financial Information of CCI and Cable One, Inc. which is
included elsewhere herein. The unaudited pro forma data does not purport to be
indicative of the results that would have been obtained had such transactions
been completed as of the assumed dates and for the periods presented nor is it
necessarily indicative of results that may be obtained in the future.
19
<PAGE> 24
The data presented below should be read in conjunction with the historical
consolidated financial statements of CCI and Cable One, Inc. and the notes
related thereto, the Unaudited Pro Forma Condensed Consolidated Financial
Information and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," all of which appear elsewhere in this Offering
Memorandum. Acquisitions of cable television systems during the periods for
which the summary financial and operating data are presented below materially
affect the comparability of such data from one period to another.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------------- --------------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
-------------------------------------------------- --------- -------------------- ---------
1993 1994 1995 1996 1997(1) 1997(1) 1997 1998 1998
------- ------- -------- -------- -------- --------- -------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL DATA:
Revenues...................... $10,855 $16,019 $36,677 $59,821 $60,995 $72,177 $30,221 $32,214 $37,897
Costs and expenses............ 5,898 8,372 18,911 32,495 35,121 41,952 17,377 17,820 21,050
Depreciation and
amortization................ 4,240 6,383 16,427 27,510 27,832 34,058 15,893 14,169 17,355
------- ------- -------- -------- -------- -------- -------- --------- ---------
Operating income (loss)....... 717 1,264 1,339 (184) (1,958) (3,833) (1,049) 225 (508)
Interest expense.............. (3,141) (4,975) (14,199) (20,633) (21,299) (30,899) (9,998) (10,497) (15,639)
Gain on sale of cable
system...................... -- 115 -- 4,901 3,644 3,644 -- -- --
Write-offs of abandoned
telephone operations........ -- -- -- (2,994) (500) (500) -- -- --
Other income (expense)........ -- -- -- -- 71 190 39 64 (446)
------- ------- -------- -------- -------- -------- -------- --------- ---------
Loss before income tax
benefit, minority interest
and extraordinary loss...... (2,424) (3,596) (12,860) (18,910) (20,042) (31,398) (7,364) (10,208) (16,593)
Income tax benefit............ 725 1,121 4,533 6,802 7,347 9,767 2,699 1,041 --
Extraordinary loss............ -- -- (4,054) -- -- -- -- -- --
Minority interest in net loss
of sub...................... 5 46 -- -- -- -- -- -- --
------- ------- -------- -------- -------- -------- -------- --------- ---------
Net loss...................... $(1,694) $(2,429) $(12,381) $(12,108) $(12,695) $(21,631) $(4,665) $(9,167) $(16,593)
======= ======= ======== ======== ======== ======== ======== ========= =========
OTHER FINANCIAL DATA:
System Cash Flow(2)........... $5,342 $8,260 $18,887 $28,481 $29,012 $34,265 $14,026 $15,177 $17,630
System Cash Flow margin....... 49.2% 51.6% 51.5% 47.6% 47.6% 47.5% 46.4% 47.1% 46.5%
Annualized System Cash
Flow(3)..................... $-- $-- $-- $-- $-- $-- $28,052 $30,354 $35,260
EBITDA(4)..................... 4,957 7,647 17,766 27,326 27,559 31,910 12,939 14,394 16,847
EBITDA margin................. 45.7% 47.7% 48.4% 45.7% 45.2% 44.2% 42.8% 44.7% 44.5%
Annualized EBITDA(3).......... $-- $-- $-- $-- $-- $-- $25,878 $28,788 $33,694
Capital expenditures.......... 1,738 1,879 3,931 8,212 10,135 10,135 4,834 4,201 4,201
Deficiency of earnings to
fixed
charges(5).................. (2,424) (3,596) (12,860) (18,910) (20,042) (31,398) (7,364) (10,208) (16,593)
Ratio of Company debt to
annualized EBITDA........... 6.6x
Ratio of CCI debt to
annualized
EBITDA...................... 8.3x
Ratio of EBITDA to interest
expense..................... 1.1x
Ratio of EBITDA to cash
interest(6)................. 1.7x
OPERATING DATA (end of period,
except avg.):
Homes passed(7)............... 52,244 95,055 269,336 259,181 254,649 295,277 250,038 254,649 295,277
Basic subscribers(8)(9)....... 40,186 72,865 182,696 171,657 165,737 193,708 165,299 163,243 191,409
Basic penetration(9)(10)...... 76.9% 76.7% 67.8% 66.2% 65.1% 65.6% 66.1% 64.1% 64.8%
Premium subscribers(11)....... 16,874 27,212 65,400 62,458 63,819 81,531 65,171 63,389 79,601
Premium penetration(12)....... 42.0% 37.3% 35.8% 36.4% 38.5% 42.1% 39.4% 38.8% 41.6%
Average monthly basic revenue
per basic subscriber(13).... $-- $-- $21.40 $22.77 $25.22 $25.34 $24.81 $27.50 $27.47
Average monthly total revenues
per basic subscriber(14).... -- -- 26.00 27.68 30.14 30.59 29.58 32.64 32.78
Annual/Annualized System Cash
Flow per average basic
subscriber(15).............. -- -- 160.63 158.17 172.02 174.26 164.73 184.51 183.00
Annual/Annualized EBITDA per
average basic
subscriber(16).............. -- -- 151.10 151.76 163.40 162.29 150.86 174.99 174.87
CCI BALANCE SHEET DATA (end of
period):
Total assets.................. $52,421 $96,136 $271,516 $245,922 $220,412 $-- $-- $211,093 $263,209
Total debt(17)................ 33,582 58,161 207,706 197,504 191,990 -- -- 194,149 279,511
Total liabilities............. 44,942 78,251 232,531 219,232 206,517 -- -- 207,316 294,375
Total redeemable preferred
stock....................... 0 12,332 19,260 22,726 26,704 -- -- 29,119 --
Total stockholders equity
(deficit)................... 7,479 5,553 19,725 3,965 (12,809) -- -- (25,342) (31,166)
</TABLE>
(Footnotes on following page)
20
<PAGE> 25
(1) System Cash Flow excludes a charge of $250,000 for the write-off of
abandoned telephone operations. EBITDA includes charges, including divorce
litigation costs of $1,035,000 and special bonuses paid to executive
officers of $400,000.
(2) System Cash Flow represents EBITDA plus corporate overhead expenses. The
Company believes that System Cash Flow is a meaningful measure of
performance because it is commonly used in the cable television industry to
analyze and compare cable television companies on the basis of operating
performance, leverage and liquidity. However, System Cash Flow is not
intended to be a performance measure that should be regarded as an
alternative to, or more meaningful than, either operating income or net
income as an indicator of operating performance or cash flows as a measure
of liquidity, as determined in accordance with generally accepted
accounting principles. Also, System Cash Flow, as computed by the Company,
is not necessarily comparable to similarly titled amounts of other
companies.
(3) Annualized System Cash Flow and Annualized EBITDA for all six-month periods
have been computed by multiplying the respective quarterly amounts by two.
(4) EBITDA represents net income before depreciation, amortization, interest
expense and income taxes, and also excludes gain on sale of systems,
abandonment of telephone operations, minority interest and extraordinary
items. The Company believes that EBITDA is a meaningful measure of
performance because it is commonly used in the cable television industry to
analyze and compare cable television companies on the basis of operating
performance, leverage and liquidity. However, EBITDA is not intended to be
a performance measure that should be regarded as an alternative to, or more
meaningful than, either operating income or net income as an indicator of
operating performance or cash flows as a measure of liquidity, as
determined in accordance with generally accepted accounting principles.
Also, EBITDA, as computed by the Company, is not necessarily comparable to
similarly titled amounts of other companies.
(5) Deficiency of earnings to fixed charges consists of loss before income tax
benefit and extraordinary loss. Fixed charges consist of interest expense,
the interest portion of rental expense, and dividend on unconsolidated
subsidiary.
(6) Pro forma cash interest includes interest on borrowings under the Senior
Credit Agreement and the Senior Subordinated Notes.
(7) Homes passed refers to estimates by the Company of the approximate number
of dwelling units in a particular community that can be connected to the
Company's cable television distribution system without any further
extension of principal transmission lines.
(8) A home with one or more television sets connected to a cable system is
counted as one basic subscriber. Bulk accounts are included on an EBU basis
in which the total monthly bill for the account is divided by the basic
monthly charge for a single outlet in the area. End of period basic and
premium subscribers are net of system sales that occurred during 1996 and
1997.
(9) End of period subscribers reflect various acquisitions that occurred in
fiscal year 1993, 1994 and 1995, as well as asset sales that were
consummated during the third quarter of 1996 and the second quarter of
1997.
(10) Penetration is described as basic subscribers as a percentage of homes
passed.
(11) Premium service units include only single channel services offered for a
monthly fee per channel and do not include tiers of channels offered as a
package for a single monthly fee. A subscriber may purchase more than one
premium service, each of which is counted as a separate premium service
unit.
(12) Premium service units as a percentage of basic subscribers.
(13) Average monthly basic revenue per basic subscriber equals basic revenues of
cable systems during the respective period divided by the months in the
period and divided by the weighted average number of basic subscribers of
the Company for such respective periods.
(14) Average monthly total revenue per basic subscriber equals total revenues of
cable systems during the respective period divided by the months in the
period and divided by the weighted average number of basic subscribers of
the Company for such respective periods.
(15) Annual/Annualized System Cash Flow per average basic subscriber equals
annual system cash flow during the respective period divided by the months
in the period and divided by the weighted average number of basic
subscribers of the Company for such respective periods.
(16) Annual/Annualized EBITDA per average basic subscriber equals EBITDA during
the respective period divided by the months in the period and divided by
the weighted average number of basic subscribers of the Company for such
respective periods.
(17) Total debt at June 30, 1998 reflects total indebtedness payable of
$195,217,000 less $1,675,000 of unamortized warrant discount related to the
Prior Credit Agreement.
21
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides additional information regarding the
financial condition and results of operations of the Company for the six month
period ended June 30, 1997 and 1998 and for each of the years ended December 31,
1995, 1996 and 1997. This discussion should be read in conjunction with
"Selected Historical Financial and Operating Data" and the Company's financial
statements and the notes thereto appearing elsewhere in this Prospectus. Since
its inception in March 1992, the Company has completed 17 acquisitions and five
divestitures of cable systems. As a result, management believes that
period-to-period comparisons of the Company's financial results to date are not
necessarily meaningful and should not be relied upon as an indication of future
performance due to the number and timing of acquisitions and divestitures in
each period.
OVERVIEW
The Company, currently the 35th largest cable television operator in the
United States, owns, operates and develops cable television systems in selected
non-metropolitan markets across eight contiguous states primarily located in the
central United States. Founded in 1992, the Company has completed and integrated
17 acquisitions including, the Cable One Acquisition, which added 28,009
subscribers. As of June 30, 1998, and after giving effect to the completion of
the Cable One Acquisition, the Systems would have passed approximately 295,277
homes and served approximately 191,409 basic subscribers.
The Cable One Acquisition will result in an increase in subscribers,
revenues and expenses of the Company. The Cable One Acquisition is not reflected
in the discussion of results of operations below.
Revenues. The Company's revenues are primarily attributable to monthly
subscription fees charged to basic subscribers for the Company's basic and
premium cable television programming services. Basic revenues consist of monthly
subscription fees for all services (other than premium programming) as well as
monthly charges for customer equipment rental. Premium revenues consist of
monthly subscription fees for programming provided on a per channel basis. In
addition, other revenues are derived from installation and reconnection fees
charged to basic subscribers to commence or reinstate service, pay-per-view
charges, late payment fees, advertising revenues and commissions related to the
sale of merchandise by home shopping services. At June 30, 1998, the Company
served approximately 163,243 basic subscribers and 63,389 premium units,
representing a basic penetration rate of 64.1% and a premium penetration rate of
38.8%. The table below sets forth for the periods indicated the percentage of
the Company's total revenues attributable to the various sources:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------- --------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Basic...................................... 82.1% 82.3% 83.7% 83.9% 84.2%
Premium.................................... 12.1 10.9 10.4 10.4 9.7
Other...................................... 5.8 6.8 5.9 5.8 6.0
----- ----- ----- ----- -----
Total revenues............................. 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
Operating Expenses. The Company's operating expenses consist of programming
fees, plant and operating costs, general and administrative expenses, and
marketing costs directly attributable to the systems. Programming fees have
historically increased at rates in excess of inflation due to system
acquisitions, and internal growth, as well as increases in the number, quality
and cost of programming services offered by the Company. The Company benefits
from its membership in an industry cooperative with over 10.0 million basic
subscribers which provides its members with volume discounts from programming
networks and cable equipment vendors. Plant and operating costs include expenses
related to wages and employee benefits of technical personnel, electricity,
systems supplies, vehicles and other operating costs. General and administrative
expenses directly attributable to the systems include wages and employee
benefits for customer service,
22
<PAGE> 27
accounting and administrative personnel, franchise fees and expenses related to
billing, payment processing, and office administration.
Corporate overhead consists primarily of expenses incurred by executive
management of the Company and which are not directly attributable to any one
system.
Operating Losses. The high level of depreciation and amortization
associated with the acquisitions and capital expenditures related to continued
construction and upgrading of the current systems, together with interest costs
related to the Company's financing activities, have contributed to the Company's
net losses. The Company believes that such net losses are common for the cable
television industry.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1998
----------------------- ------------------------
AMOUNT % OF REVENUES AMOUNT % OF REVENUES
------- ------------- -------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................................... $30,221 100.0% $ 32,214 100.0%
Operating expenses:............................
Programming.................................. 7,381 24.4% 8,204 25.5%
Plant and operating.......................... 3,640 12.0% 3,865 12.0%
General and administrative................... 4,940 16.3% 4,628 14.4%
Marketing and advertising.................... 234 0.8% 340 1.1%
Corporate overhead............................. 1,182 3.9% 783 2.4%
Depreciation and amortization.................. 13,893 46.0% 14,169 44.0%
------- ----- -------- -----
Earnings/(loss) from operations................ (1,049) (3.5)% 225 0.7%
======= ===== ======== =====
OTHER DATA:
System Cash Flow............................... 14.026 46.4% 15,177 47.1%
EBITDA......................................... $12,939 42.8% $ 14,394 44.7%
</TABLE>
Revenues. Revenues in the first six months of 1998 were $32.2 million, an
improvement of $2.0 million over revenues in the first six months of 1997. Basic
revenues improved by $1.8 million or 7.1% while average monthly basic revenues
per subscriber increased from $24.81 to $27.50, or 10.8% over the same period in
1997. The improvement was due primarily to basic rate increases in February 1998
affecting 234 systems and serving approximately 114,000 subscribers or 69% of
total subscribers. The Company has historically increased rates in the majority
of its systems during the first quarter in order to offset increases in its
operating costs such as programming which occur in January of each year. The
change in basic subscribers for the period ended June 30, 1998 is primarily due
to the sale of certain Kansas and Oklahoma systems serving approximately 4,000
basic subscribers during the second quarter of 1997 as well as bulk account EBU
conversion calculations following the basic rate increases, the increased
availability and affordability of competitive video services, non-pay
disconnects, and other terminations of service. Other revenues increased 11.3%,
from $1.7 million in 1997 to $1.9 million in 1998, due in large part to
continued promotion of pay-per-view events.
Operating Expenses. Operating expenses in the first six months of 1998 were
$17.0 million, an increase of $842,000 or 5.2% over the first six months of
1997. The continued escalation in rates charged by certain programming vendors
as well as increases in copyright fees and premium units were largely
responsible for the $823,000 increase in programming costs over the same period
in 1997. The increase was partially offset by subscriber reductions resulting
from asset sales in 1997. Plant and operating expenses increased from $3.6
million for the six months ended June 30, 1997 to $3.9 million for the six
months ended June 30, 1998, reflecting increases in technical wages and
benefits, systems supplies and maintenance, and plant power. General and
administrative expenses decreased from $4.9 million for the six months ended
June 30, 1997 to $4.6 for the six months ended June 30, 1998 due to lower bad
debt expense resulting from improved management of past due accounts and a
tighter adherence to stated disconnect policies. Marketing expenses for the six
months ended June 30, 1998 were $340,000, an increase of 45.3% over the same
period in 1997. The
23
<PAGE> 28
majority of this increase relates directly to increased spending associated with
the Company's marketing initiatives. As a percentage of revenues, operating
expenses decreased from 53.6% in 1997 to 52.9% in 1998.
Corporate Overhead. Corporate overhead decreased $399,000, or 33.8% from
$1.2 million in the first six months of 1997 to $783,000 in the first six months
of 1998 due primarily to the payment of incentive bonuses to executive
management during the second quarter of 1997.
Depreciation and amortization. Depreciation and amortization expense for
the six months ended June 30, 1998 was $14.2 million, an increase of $276,000
over the same period in 1997. The increase is largely reflective of the
inclusion of fixed assets placed into service during 1997 and 1998.
EBITDA. As a result of the foregoing, EBITDA in the first six months of
1998 was $14.4 million, an increase of $1.5 million, or 11.2% from EBITDA in the
first six months of 1997. Annualized EBITDA per average basic subscriber
increased 16.0%, from $150.86 at June 30, 1997 to $174.99 at June 30, 1998.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997
----------------------- -----------------------
AMOUNT % OF REVENUES AMOUNT % OF REVENUES
------- ------------- ------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................................... $59,821 100.0% $60,995 100.0%
Operating expenses:
Programming................................. 15,106 25.3 14,916 24.5
Plant and operating......................... 7,308 12.2 7,622 12.5
General and administrative.................. 8,688 14.5 9,257 15.2
Marketing and advertising................... 238 0.4 438 0.7
Corporate overhead............................ 1,155 1.9 2,888 4.7
Depreciation and amortization................. 27,510 46.0 27,832 45.6
------- ----- ------- -----
Earnings (loss) from operations............... $(184) (0.3)% $(1,958) (3.2)%
======= ===== ======= =====
OTHER DATA:
System Cash Flow.............................. $28,481 47.6% $29,012 47.6%
EBITDA........................................ 27,326 45.7 27,559 45.2
</TABLE>
Revenues. Revenues for the year ended December 31, 1997 were $61.0 million,
an improvement of $1.2 million or 2.0% over revenues of $59.8 million for the
year ended December 31, 1996. In 1997, basic revenues increased by $1.8 million
or 3.7% due to basic rate increases implemented primarily during the first
quarter of the year. Average monthly basic revenues per subscriber increased
from $22.77 to $25.22 or 10.8% over the same period in 1996. The decrease in
basic subscribers for the period ended December 31, 1997, is largely reflective
of the sale of Kansas and Oklahoma systems serving approximately 4,000 basic
subscribers during the second quarter of 1997 as well as bulk account EBU
conversion calculations following the basic rate increases, the increased
availability and affordability of competitive video services, non-pay
disconnects, and other terminations of service. In 1997, the Company launched a
coordinated array of marketing techniques to attract and retain customers and to
increase premium service penetration, including door-to-door and direct mail
solicitation, telemarketing, media advertising, local promotional events and
cross-channel promotions of new services and pay-per-view events. Net of the
system sales, premium subscribers increased by 2,975 units or 4.9% during 1997
with a corresponding 2.2% increase in penetration, from 36.4% in 1996 to 38.5%
at December 31, 1997. The corresponding premium revenue decreased, however, 3.2%
from $6.5 million in 1996 to $6.3 million in 1997 due in large part to the
system divestitures and discounted pricing offered in connection with the
various marketing campaigns. Other revenues also decreased 11.0%, from $4.1
million in 1996 to $3.6 million in 1997, largely as a function of the system
divestitures and free or heavily-discounted installation marketing promotions.
The decrease was partially offset by $196,698 or 181% increase in pay-per-view
event revenue.
24
<PAGE> 29
Operating Expenses. Operating expenses increased $892,000 or 2.8% from
$31.3 million in 1996 to $32.2 million in 1997. Programming costs for the year
ended December 31, 1997 decreased $190,000 or 1.3% over the year ended December
31, 1996 to $14.9 million. Increases in copyright fees, premium units and rates
charged by certain programming vendors were offset by the renegotiation of
certain programming contracts wherein rate concessions, launch fees and other
marketing support totaling $564,000 were obtained. Plant and operating expenses
increased $314,000 or 4.3% to $7.6 million during 1997 due to the hiring of
additional technical personnel as well as increases in technical wages and
benefits and vehicle operating expenses. General and administrative expenses for
1997 were $9.3 million, an increase of $568,000 or 6.5% over 1996. The increase
was due primarily to the addition of certain key management and administrative
personnel, an increase in bad debt expense and the write-off of certain costs
related to the termination of the purchase agreement and operations associated
with the proposed acquisition of telephone exchanges in Kansas. Marketing and
advertising expenses for the year ended December 31, 1997, were $438,000, an
increase of $200,000 or 84.0% over the year ended December 31, 1996, relating
directly to increased spending associated with the Company's aforementioned new
marketing initiatives. As a percentage of revenues, operating expenses increased
slightly, from 52.4% in 1996 to 52.8% in 1997.
Corporate Overhead. Corporate overhead for the year ended December 31,
1997, was $2.9 million, an increase of $1.7 million over the year ended December
31, 1996. The increase was largely reflective of costs incurred in conjunction
with divorce proceedings of an officer of the Company. The Company agreed to
purchase certain stock of the Company in which the officer's wife held a
community property interest and provide monetary consideration for the release
of certain claims. Legal, consultant and other fees of approximately $1.1
million were charged to Corporate overhead for 1997 in connection with this
matter. The remainder of the increase was due primarily to the hiring of the
Vice President -- Operations in February 1997 as well as other increases in
executive compensation, travel and entertainment.
Depreciation and Amortization. Depreciation and amortization expense for
the year ended December 31, 1997, was $27.8 million, an increase of $322,000
over 1996. The increase is due primarily to the inclusion of fixed assets placed
into service during the year. The increase was partially offset by the sales of
certain systems during 1996 and 1997.
EBITDA. As a result of the foregoing, EBITDA for the year ended December
31, 1997 was $27.6 million, an increase of $233,000 over 1996. EBITDA per
average basic subscriber increased 7.7% from $151.76 in 1996 to $163.40 in 1997.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1996
----------------------- -----------------------
AMOUNT % OF REVENUES AMOUNT % OF REVENUES
------- ------------- ------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................................... $36,677 100.0% $59,821 100.0%
Operating expenses:
Programming................................. 8,221 22.4 15,106 25.3
Plant and operating......................... 4,715 12.9 7,308 12.2
General and administrative.................. 4,782 13.0 8,688 14.5
Marketing and advertising................... 72 0.2 238 0.4
Corporate overhead............................ 1,121 3.1 1,155 1.9
Depreciation and amortization................. 16,427 44.8 27,510 46.0
------- ----- ------- -----
Earnings (loss) from operations............... $1,339 3.7% $ (184) (0.3)%
======= ===== ======= =====
OTHER DATA
System Cash Flow.............................. $18,887 51.5% $28,481 47.6%
EBITDA........................................ 17,766 48.4 27,326 45.7
</TABLE>
25
<PAGE> 30
Revenues. Revenues for the year ended December 31, 1996, were $59.8
million, an improvement of $23.1 million or 63.1% over revenues of $36.7 million
in 1995. In 1996, basic revenues increased by $19.0 million or 63.0% due to the
inclusion of a full year of revenues for the systems representing approximately
111,000 subscribers acquired throughout 1995. Average monthly basic revenues per
subscriber increased from $21.40 to $22.77, or 6.4% over the same period in
1995. The change in basic subscribers for the period ended December 31, 1996 is
largely reflective of the sale of certain Arkansas systems serving approximately
8,219 basic subscribers in 1996 as well as subscriber losses due to the
increased availability and affordability of competitive video services, bulk
account EBU conversion calculations following basic rate increases, non-pay
disconnects, and other terminations of service. Net of the system sales, premium
penetration increased from 35.8% in 1995 to 36.4% in 1996. Premium revenues
increased $2.1 million or 47.4%, from $4.4 million in 1995 to $6.5 million in
1996.
Operating Expenses. Operating expenses increased $13.6 million from $17.8
million in 1995 to $31.3 million in 1996. Programming costs for the year ended
December 31, 1996, increased $6.9 million or 83.7%, over the year ended December
31, 1995, to $15.1 million. As a percentage of revenues, programming expense
increased from 22.4% in 1995 to 25.3% in 1996. The increase was due primarily to
an increase in the number and quality of programming services offered by the
Company, specifically, the addition of The Disney Channel to the basic channel
lineup in a majority of the systems acquired in 1995. Plant and operating
expenses increased $2.6 million or 55.0% to $7.3 million during 1996, reflecting
the addition of the cable systems and subscribers acquired in 1995. Plant and
operating expenses as a percent of revenues decreased from 12.9% in 1995 to
12.2% in 1996, reflecting the continued benefits derived from the Company's
clustered operating strategy. General and administrative expenses for 1996 were
$8.7 million, an increase of $3.9 million, or 81.7% over 1995. The increase was
due primarily to the addition of the cable systems and subscribers acquired
throughout 1995. As a percentage of revenues, general and administrative
expenses increased from 13.0% in 1995 to 14.5% in 1996, due primarily to
increases in salaries and benefits, property taxes, and general insurance.
Marketing and advertising expenses for the year ended December 31, 1996, were
$238,000, an increase of $166,000 over the year ended December 31, 1995,
relating directly to increased spending associated with the Company's 1995
acquisitions. As a percentage of revenues, operating expenses increased from
48.5% in 1995 to 52.4% in 1996.
Corporate Overhead. Corporate overhead for the year ended December 31,
1996, was $1.2 million, an increase of $34,000 over the year ended December 31,
1995. The increase was due primarily to the addition of key accounting and
finance personnel during the year.
Depreciation and Amortization. Depreciation and amortization expense for
the year ended December 31, 1996, was $27.5 million, an increase of $11.1
million over 1995. The increase is due primarily to the inclusion of the
tangible and intangible assets acquired during 1995. The increase was partially
offset by the sales of certain Arkansas systems in 1996.
EBITDA. As a result of the foregoing, EBITDA for the year ended December
31, 1996, was $27.3 million, an increase of $9.6 million over the year ended
December 31, 1995. Annualized EBITDA per average basic subscriber increased from
$151.10 in 1995 to $151.76 in 1996.
CAPITAL EXPENDITURES
The cable television industry is a capital intensive business that
generally requires financing for the upgrade, expansion and maintenance of the
technical infrastructure. In addition, the Company has pursued, and continues to
pursue, a business strategy that includes selective acquisitions. The Company
has funded its working capital requirements, capital expenditures and
acquisitions through a combination of internally generated funds, long and short
term borrowings, and equity contributions. The Company intends to continue to
finance such expenditures from similar sources.
For the two years ended December 31, 1997, the Company's capital
expenditures, other than those related to acquisitions, were approximately $18.3
million, and for the six months ended June 30, 1998, the Company's capital
expenditures were approximately $4.2 million. For the year ended December 31,
1998, the Company has budgeted approximately $14.1 million in capital
expenditure projects. Capital expenditures
26
<PAGE> 31
include expansion and improvements of existing cable properties, plant and
equipment upgrades, as well as cable line drops, line plant extensions and
installations of service to new subscribers.
Over the next five years, the Company intends to spend approximately: (i)
$42.9 million to establish a technical standard of 550 MHz bandwidth capacity
(78 analog channels) in cable television systems serving over 70.4% of its basic
subscribers; (ii) $28.0 million for ongoing maintenance and replacement, for
installations and extensions to improve the cable plant related to customer
growth and headend consolidation; and (iii) $7.7 million for the purchase of
additional addressable converters and headend equipment to support the
deployment of HITS. See "Business."
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, CCI has been supported by equity funding from
institutional equity investors. Capital stock of the Company is owned by
institutional investors, including Austin Ventures, L.P., NationsBank Capital
Investors, The Texas Growth Fund, BT Capital Partners, Inc., certain members of
its bank group led by Chase Manhattan and Union Bank Ventures. After
consummation of the Offerings, these institutional investors comprise
approximately $34.1 million of total equity financing in the Company. At June
30, 1998, CCI had aggregate consolidated indebtedness of approximately $195.2
million, including $190.2 million borrowed under the Prior Credit Agreement.
This debt and equity financing was utilized primarily in the acquisition of
cable television systems.
CCI has no operations of its own. Consequently, CCI will rely on dividends
from the Company, and hence the cash flow of the Company, in order to meet its
debt service obligations. The debt instruments of the Company severely restrict,
among other things, the payment of dividends, the making of loans by the Company
or its subsidiaries to CCI and CCI's ability to purchase New Notes tendered
pursuant to a Change of Control Offer. For a further description of these
restrictions, see "Description of the New Notes."
The Offerings provide the Company with greater flexibility by extending the
maturities of its long-term debt and reduce annual amortization requirements.
Concurrently with the closing of the Offering, the Company repaid all of its
outstanding subordinated indebtedness and redeemable preferred stock as well as
all of its existing indebtedness under the Prior Credit Agreement and entered
into the Senior Credit Agreement with maximum borrowings of $125.0 million. The
Senior Credit Agreement is secured by a first priority lien on and security
interest in substantially all of the assets of the Company, and contains certain
covenants and provide for certain events of default customarily contained in
facilities of a similar type. See "Business -- Business Strategy," "Use of
Proceeds" and "Credit Arrangements of the Company."
Although the Company has not generated earnings sufficient to cover fixed
charges, the Company has generated cash and obtained financing sufficient to
meet its debt service, working capital and capital expenditure requirements.
Although there can be no assurances, the Company expects that it will continue
to generate funds and obtain financing sufficient to meet its financial
obligations and capital expenditure requirements in the foreseeable future. See
"Risk Factors."
INFLATION
Certain of the Company's expenses, such as programming, wages and benefits,
equipment repair and maintenance, billing and marketing are subject to
inflation. However, because changes in costs are generally passed through to
subscribers, such changes historically have not had a material adverse effect on
the Company's results of operations.
YEAR 2000 COMPLIANCE
Over the next eighteen months, most large companies will face a potentially
serious business problem because many software applications and computer
equipment developed in the past may not properly recognize calendar dates
beginning in the year 2000. This problem could cause computers to either shut
down or provide incorrect data. The Company has begun taking measures to address
this problem.
27
<PAGE> 32
The Company has not yet completed its assessment of the impact of Year 2000
on key business applications, operational systems, or relationships with key
business partners. The Company cannot estimate what the total cost will be to
implement remediation efforts for its critical operational systems but it is
possible that such costs will be material.
The Company has started an ongoing program to review the status of key
supplier Year 2000 compliance efforts. While the Company believes it is taking
all appropriate steps to assure Year 2000 compliance, it is dependent on key
business partner compliance to some extent. The Year 2000 problem is pervasive
and complex as virtually every computer operation will be affected in some way.
Consequently, no assurance can be given that Year 2000 compliance can be
achieved without costs that might affect future financial results or cause
reported financial information not to be necessarily indicative of future
operating results or future financial conditions.
28
<PAGE> 33
BUSINESS
COMPANY OVERVIEW
The Company, currently the 35th largest cable television operator in the
United States, owns, operates and develops cable television systems in selected
non-metropolitan markets across eight contiguous states primarily located in the
central United States. Founded in 1992, the Company has completed and integrated
17 acquisitions, including the recent acquisition of approximately 28,419
subscribers, the Cable One Acquisition. As of June 30, 1998, and assuming the
closing of the Cable One Acquisition as of that date, the Systems would have
passed approximately 295,277 homes and served approximately 191,409 basic
subscribers.
The Company believes that there are significant operating, regulatory,
competitive and economic advantages in acquiring and owning systems in
non-metropolitan markets. In pursuing its business strategy, the Company has
focused its acquisition efforts on cable television systems in growing
non-metropolitan markets and has sought to build geographic clusters of such
systems. Cable television service in these markets is generally required to
receive a full complement of off-air broadcast stations (i.e., ABC, NBC, CBS,
FOX and PBS) which represent approximately 40% of overall television viewing. In
addition, there are typically fewer competitive entertainment alternatives in
these markets. Consequently, non-metropolitan systems are typically
characterized by higher basic penetration rates, lower subscriber turnover and
lower operating costs. The Company, generally the dominant multi-channel video
provider in its markets, has capitalized on these market characteristics by
generating more predictable revenue streams and higher system cash flow margins
than typical cable television systems serving urban markets. The Company had
annualized second quarter 1998 pro forma revenues, System Cash Flow, and EBITDA
of $75.8, $35.3, and $33.7 million, respectively. This resulted in System Cash
Flow margin and EBITDA margin of 46.5% and 44.5% respectively.
Approximately 66.9% of the Company's cable subscribers reside in a county
seat. These markets typically have larger populations, more favorable
demographics, higher growth characteristics, and stronger economic activity than
do other non-metropolitan markets. The Company has created clusters of cable
television systems around such markets and believes that clustering cable
systems provides significant operating and cost advantages. The Company owns and
manages 287 Systems in four regions across eight contiguous states. This level
of clustering allows the Company to efficiently deploy its technical staff,
vehicle fleet, and shared resources, such as system supplies and equipment,
resulting in lower operating and capital costs and greater customer response
time. Clustering also allows management to (i) more effectively manage the
workforce and allocate personnel, (ii) address the specific customer service and
programming needs of its customers, (iii) cost effectively introduce digital
services such as HITS and other new services, (iv) maximize the number of
households reached with existing marketing budgets, (v) maximize the benefits of
local and regional community relations efforts, and (vi) manage political
relationships at the local and state level.
The Company believes that providing superior customer service and
developing strong community relations are key elements to its long-term success,
and enable the Company to continue to increase subscription rates and therefore
maximize cash flow. The Company seeks to achieve a high level of customer
satisfaction by employing a well-trained staff of customer service
representatives and experienced field technicians. The Company's centralized
calling center offers 24-hour, 7-day per week coverage to all of its customers
on a toll-free basis.
J. Merritt Belisle, Chairman and Chief Executive Officer, and Steven E.
Seach, President and Chief Financial Officer, founded the Company in 1992 and
have assembled a management team with significant business experience operating
cable television systems and providing quality customer service to cable
subscribers. Messrs. Belisle and Seach have 20 years of collective experience in
acquiring, operating, integrating and developing cable television systems and
have worked together for over ten years. The Company's Vice
President--Operations and three Regional Managers have an average of 28 years of
cable television industry experience. Messrs. Seach and Belisle, together with
certain other members of the Company's management team, collectively own or have
options with respect to approximately 14% of CCI's Common Stock on a
fully-diluted basis. See "Management."
29
<PAGE> 34
Since its inception in March 1992, the Company has been supported by equity
funding from institutional equity investors. Approximately 64% of CCI's
fully-diluted capital stock is owned by institutional investors, including
Austin Ventures, L.P., NationsBank Capital Investors, The Texas Growth Fund, BT
Capital Partners, Inc. and Union Bank Ventures. To date, these institutional
investors have provided approximately $34.1 million of common equity financing
to support the growth of the Company's business. See "Principal Stockholders."
BUSINESS STRATEGY
The Company's business strategy is to (i) focus on attractive
non-metropolitan markets, (ii) increase the revenue-generating bandwidth of its
cable plant utilizing the most cost-effective and appropriate technology for the
markets served, (iii) maximize revenues and cash flow margins, (iv) expand and
improve clusters through selective acquisitions, (v) focus on customer
satisfaction and community relations, (vi) provide enhanced digital video
services, and (vii) deliver advanced telecommunications, high-speed data and
Internet services.
Focus on Attractive Non-Metropolitan Markets. The Company has followed a
systematic approach to acquiring, consolidating, operating and developing cable
television systems based on the primary goal of increasing operating cash flow
while maintaining the quality of its services. The Company's business strategy
has focused on serving growing non-metropolitan communities in the central
United States. For example, over two-thirds of the Company's cable subscribers
reside in a county seat. These markets generally tend to have more serviceable
households per mile, more robust household growth, higher income per household,
more disposable income per household and a stronger business foundation than do
other non-metropolitan markets. According to Equifax National Decisions Systems,
total households are projected to grow by approximately 6.8%, versus the
national average of 5.7%, from 1997 to 2002 in the top 76 systems owned by the
Company. Those 76 systems currently serve approximately 70.4% of the Company's
total subscribers. The Company believes that the Systems generally involve less
risk of increased competition than systems serving large urban cities. It is the
goal of the Company to continue to focus on growing non-metropolitan areas.
Increase the Revenue-Generating Bandwidth of the Systems. Through the
System Improvement Program, the Company plans to aggressively and systematically
upgrade its cable plant utilizing the most cost-effective and appropriate
technology for the market served. These upgrades include traditional rebuild to
a 550 MHz bandwidth capacity, the deployment of fiber optic cable, the
consolidation of headends, the deployment of digital compression services such
as Headend in The Sky(R) ("HITS"), a digital compression service developed by
National Digital Television Center, Inc., a subsidiary of Tele-Communications,
Inc., the deployment of addressable technology, and the activation of the return
path for two-way data transmission. The Company believes that such technical
upgrades create additional revenue opportunities, enhance operating
efficiencies, increase customer satisfaction, improve franchise relationships
and solidify the Company's position as the dominant provider of multi-channel
video services in its markets. The Company seeks to benefit from the System
Improvement Program by generating additional revenue from expanded tiers of
basic programming, multiplexed premium services, pay-per-view movies, digital
music, on-screen navigators, home shopping services, high-speed data services,
Internet access, near-video-on-demand and other interactive services.
Over the next five years, the Company intends to spend approximately: (i)
$42.9 million to establish a technical standard of 550 MHz bandwidth capacity
(78 analog channels) in cable television systems serving over 70.4% of its basic
subscribers; (ii) $28.0 million for ongoing maintenance and replacement, for
installations and extensions to improve the cable plant related to customer
growth and headend consolidation; and (iii) $7.7 million for the purchase of
additional addressable converters and headend equipment to support the
deployment of HITS. Approximately $53.1 million or 67.6% of the $78.5 million in
total capital expenditures will be spent in the first three years after the
consummation of the Financing Plan. A select number of the Company's larger
systems will be rebuilt to 750 MHz bandwidth capacity (112 analog channels). In
addition to its future upgrade plans, the Company has been actively rebuilding
and improving the technical standard of its cable plant over the past 18 months.
The most ambitious rebuild project the Company has initiated is the 750
MHz-spaced rebuild (with 550 MHz equipment) of its 4,400-subscriber
30
<PAGE> 35
Breckenridge, Colorado system. A fiber backbone and a fiber ring were completed
in the Breckenridge city limits in December 1997 that brought the city limits to
550 MHz. The outlying 40 miles of the Breckenridge system will be upgraded in
the latter part of 1998, with projected completion in 1999. The 130-mile system
will be fully addressable upon completion. The Company has also completed other
fiber backbone 550 MHz rebuilds within the last 18 months including its
3,100-subscriber Paola, Kansas system and its 1,900-subscriber Kermit, Texas
system. In 1997, the Company also completed 550 MHz rebuilds of its
1,000-subscriber Spiro, Oklahoma system, its 800-subscriber Mason, Texas system,
and its 500-subscriber Dighton, Kansas system. The Dighton system was rebuilt to
pre-empt the overbuild efforts of the incumbent local exchange carrier. As a
result of its active rebuild efforts to date, approximately 33.1% of the
Company's subscribers are served by systems with over 50 channels of analog
capacity. That figure is expected to increase to approximately 74.4% of the
Company's subscribers by the end of the System Improvement Program. See
"Business -- Technical Overview."
Maximize Revenues and Cash Flow Margins. The Company seeks to maximize
revenues by increasing subscriptions to basic, expanded basic, and other tiers
of satellite services and premium programming services through a combination of
innovative marketing programs, an emphasis on customer service and strong
community relations. As a result of the Company's success in facilitating
revenue growth, combined with operating efficiencies generated by the Company's
clustering strategy, economies of scale, volume discounts for cable programming,
cost control culture, and decentralized management structure, the Company
believes its operating cash flow margins compare favorably to the cable
television industry as a whole.
Expand and Improve Clusters through Selective Acquisitions. To date, the
Company has sought to acquire cable television systems in communities that are
in close geographic proximity to other cable television systems owned or managed
by the Company in order to maximize the economies of scale and operating
efficiencies associated with clusters of systems. Management plans to continue
its clustering strategy by pursuing opportunities to purchase cable television
systems in the Company's existing markets as well as by entering contiguous or
surrounding markets, if and when attractive acquisition opportunities become
available. In addition to system acquisition opportunities, management expects
to pursue opportunities to exchange certain of the Systems for other cable
television properties to further promote the Company's clustering strategy.
Factors likely to be considered by the Company in evaluating the desirability of
a potential acquisition or asset exchange opportunity include valuation,
subscriber densities, growth potential (in terms of both market and cash flow)
and whether the target system can be readily integrated into the Company's
operations.
In order to offer Internet access on a full-scale residential and
commercial basis in the communities it serves, the Company is actively seeking
to acquire incumbent Internet Service Providers ("ISPs") in and around its
markets. The Company believes that acquiring the expertise from an incumbent ISP
would allow the Company to offer services in the most effective and timely
manner enabling it to capitalize on the immediate, viable Internet opportunities
in its markets. The Company is also interested in acquiring or aligning with
other companies that provide other telecommunications services including local
and long distance telephone, utility, and direct-to-home, in addition to other
Internet technology and software firms.
Focus on Customer Satisfaction and Community Relations. The Company
believes that providing superior customer service and enhancing the quality of
life in the communities it serves are the key elements to its ultimate long-term
success, and specifically enables the Company to continue to increase
subscription rates and therefore maximize present and future cash flow. The
Company seeks to achieve a high level of customer satisfaction by employing a
well-trained staff of customer service representatives and experienced field
technicians. The Company's centralized calling center in Plainville, Kansas
offers 24-hour, 7-day per week coverage to all of its Company's customers on a
toll-free basis. The customer service center is supported by three T-1 lines and
can handle up to 60 incoming calls at any given time through a Company-owned
telephone switch. The switch is complemented by a software package that can
track call statistics ranging from average answer time to the number of calls by
type, as well as individual and group performance statistics. This sophisticated
software facilitates the movement of customer service and field service agents
in order to minimize answer times. Data is recorded daily and reports can be
generated to track trends in call
31
<PAGE> 36
volume. For the quarter ending June 30, 1998, the Company's calling center
received 172,875 calls and had an average answer time of 14 seconds compared to
the 30 second FCC requirement.
The Company believes customer service is further enhanced by the Company's
43 local offices' ability to effectively coordinate technical service and
installation appointments and to quickly respond to customer inquiries. The
Company also believes that local offices increase the effectiveness of its
customer retention efforts, community relations endeavors, and marketing
campaigns. The Company's customer service and technical staff attend ongoing
workshops led by both a full-time, in-house Training Specialist and outside
customer service and technical training firms that emphasize first time quality,
point-of-sale subscriber acquisition, upgrade and retention, technical support,
and other pertinent customer service issues. The Company also employs seven
bilingual customer service representatives to effectively serve its Spanish-
speaking subscriber base.
The Company maintains a site on the World Wide Web
(http://www.classic-cable.com) to help communicate and interact with its online
customers. The Company's website was also designed to help the Company's
customers make intelligent television viewing choices and to acquaint its
customers with the Company and its unique corporate mission. In December 1997,
the Company's website was selected as one of three winners in the Best System
Operator Website Competition by a panel of judges at the California Cable
Television Association, the sponsors of the technology-focused Western Cable
Show, and Ziff-Davis, the world's leading integrated media company focused on
technology. From December 1997 to May 1998, the Company's website received over
200,000 hits.
The Company is dedicated to fostering strong community relations in the
communities it serves. The cornerstone of the Company's community relations
strategy is its Classic Cable Scholarship Fund which has provided meaningful
financial assistance to over 225 graduating high school seniors within its
service areas over the past two years. In 1997, the Company received the Best of
Texas Award and the Bronze Community Project Award from the Texas Cable and
Telecommunications Association for its community relations efforts. In 1998, the
Company received the Cable Excellence Award from the Arkansas Cable Television
Association for its community outreach projects. The Company also installs and
provides free cable television service and Internet access to public schools,
government buildings, and public libraries in its franchise areas. The Company
believes that its relations with the communities it serves are good.
Provide Enhanced Digital Video Services. The Company intends to provide
enhanced digital video in the upgraded and certain other systems using HITS, a
digital compression service developed by National Digital Television Center,
Inc., a subsidiary of Tele-Communications, Inc. HITS will enable the Company to
deliver video services such as pay-per-view programming, on-screen programming
navigators, multiplexed premium channels such as HBO2, HBO3, etc., digital
music, and multiple tiers of niche satellite basic programming. The Company
believes that these enhanced digital video services (which it recently
introduced in its 4,200-subscriber Woodward, Oklahoma system) will allow it to
provide digital services comparable to DBS at a lower cost. In addition to its
Woodward, Oklahoma system, the Company plans to launch the HITS service by
year-end 1998 in its Nixa/Ozark and Maryville, Missouri systems that
collectively serve approximately 11,000 subscribers.
Deliver Advanced Telecommunications, High-Speed Data and Internet
Services. The Company believes that additional revenue opportunities exist in
non-metropolitan markets by providing advanced telecommunication services, such
as Internet access and the delivery of high-speed data services, including
local- and wide-area network applications, for residential and commercial
customers. The Company believes that these markets have limited appeal to the
larger telecommunications companies and that its technical platform will provide
such services at higher speeds and lower cost, giving the Company a competitive
advantage over other telecommunication providers in the markets in which it
operates. For example, a 10 megabit ("MB") cable modem provides Internet access
at download speeds 350 times faster than typical 28.8 kilobit dial-up telephone
modem connections. The Company plans to introduce Internet access via the cable
modem in its larger systems and will seek to complement this service with the
telephone modem connection through acquisitions of local ISPs.
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<PAGE> 37
As part of its effort to deliver advanced data services in the communities
it serves, the Company has successfully deployed two cable modem beta sites in
its Phillipsburg, Kansas and Oberlin, Kansas systems. The Phillipsburg project
connects four local area networks ("LAN") in three school buildings and the
district office to a broadband community area network using LanCity cable modems
that transfer up to 10 MB of data per second. The Oberlin project connects three
LANs in two schools buildings and the district office to a broadband wide area
network utilizing Zenith cable modems that can transfer up to 4 MB of data per
second. Both projects have been successful public relations and technological
undertakings for the Company. As such, the Company plans to deploy more cable
modems for school systems and commercial subscribers in several other
communities in which it provides service.
INDUSTRY OVERVIEW
A cable television system receives television, radio and data signals at
the system's "headend" site by means of off-air antennas, microwave relay
systems and satellite earth stations. These signals are then modulated,
amplified and distributed through coaxial and fiber optic distribution systems
to deliver a wide variety of channels of television programming to the homes of
subscribers who pay fees on a monthly basis for this service. A cable television
system may also originate its own television programming and other information
services for distribution through its system. Cable television systems generally
are constructed and operated pursuant to non-exclusive franchises or similar
licenses granted by local governmental authorities for a specified period of
time.
The cable television industry developed in the United States in the late
1940s and early 1950s in response to the needs of residents in predominantly
rural and mountainous areas of the country where the quality of off-air
television reception was inadequate due to factors such as unfavorable
topography and remoteness from television broadcast towers. In the 1960s, cable
systems also developed in non-metropolitan markets that had limited availability
of off-air television station signals. All of these markets are regarded within
the cable industry as "classic cable" television system markets.
Cable television systems offer customers programming consisting of
broadcast television signals of local network affiliates, independent and
educational television stations, a limited number of television signals from
so-called "super stations" originating from distant cites (such as WGN), various
channels (such as Cable News Network ("CNN"), Music Television ("MTV"), the USA
Network ("USA"), Turner Network Television ("TNT"), and Entertainment and Sports
Programming Network ("ESPN")), programming originated locally by the cable
television system (such as public, governmental and education access programs)
and informational displays featuring news, weather and public service
announcements. For an additional monthly charge, cable television systems also
offer "premium" television services to customers on a per-channel basis. These
services (such as Home Box Office ("HBO"), Cinemax, Showtime, The Movie Channel
and selected regional sports networks) are channels that consist principally of
feature films, live sporting events, concerts and other special entertainment
features, usually presented without commercial interruption.
A customer generally pays an initial installation charge and fixed monthly
fees for basic and premium television services and for other services (such as
the rental of converters and remote control devices). Such monthly service fees
constitute the primary source of revenues for cable television systems. In
addition to customer revenues from these services, cable television systems
generate revenues from additional fees paid by customers for pay-per-view
programming of movies and special events and from the sale of available
advertising spots on advertiser-supported programming. Cable television systems
also frequently offer their customers home shopping services for a share of the
revenues from products sold in their service areas. The cable television
industry is changing rapidly due to new technology and new alliances between
cable television and other telecommunications companies. Providing traditional
cable television programming is only one aspect of the industry as potential
opportunities to expand into Internet, broadband data, telephone, and other
telecommunications services continue to develop and become more commercially
viable.
33
<PAGE> 38
OPERATING REGIONS
In order to most effectively manage and operate the systems, the Company
has established four operating regions organized primarily along state lines.
The Northern region serves 62,018 subscribers in Colorado, Kansas, Nebraska and
Missouri, the Central region serves 46,376 subscribers in Oklahoma and Arkansas,
the Southern region serves 54,849 subscribers in Texas and New Mexico, and the
Cable One region will serve 28,166 subscribers in Kansas, Missouri, Oklahoma and
Texas. Each region is headed by a regional manager responsible for managing
local and state political and franchise relationships, maximizing the
profitability of his or her system clusters, allocating regional resources, and
supervising technical and local office customer service personnel. The following
table is a summary of selected subscriber and operating data for the regions as
of June 30, 1998:
<TABLE>
<CAPTION>
NUMBER OF HOMES BASIC BASIC PREMIUM PREMIUM
SYSTEMS PASSED SUBSCRIBERS PENETRATION SUBSCRIBERS PENETRATION
--------- ------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Northern region............ 83 88,794 62,018 69.8% 24,595 39.7%
Central region............. 93 75,474 46,376 61.5 18,337 39.5
Southern region............ 97 90,381 54,849 60.7 20,457 37.3
Cable One region(1)........ 14 40,628 28,166 69.3 16,212 57.6
--- ------- ------- ---- ------ ----
Total............ 287 295,277 191,409 64.8% 79,601 41.6%
=== ======= ======= ==== ====== ====
</TABLE>
- ---------------
(1) Cable One Acquisition closed on July 29, 1998 with 28,009 basic subscribers
and 16,049 premium subscribers.
Cable One Acquisition. On July 29, 1998, Black Creek Communications, L.P.,
a wholly owned subsidiary of the Company purchased 14 cable television systems
in Kansas, Missouri, Oklahoma, and Texas from Cable One, for $41.7 million. The
systems are in close geographic proximity to those currently owned and operated
by the Company, further enhancing its clusters. Cable One has operated certain
of the systems for a number of years, while others were acquired from
Tele-Communications, Inc., in the second quarter of 1997. In the aggregate, the
systems pass 40,628 homes and have 28,166 basic and 16,212 premium subscribers
as of June 30, 1998. Seven systems representing approximately 48.7% of the
subscribers have a bandwidth of 450 MHz (61 channel capacity), while the other
systems have a bandwidth of at least 300 MHz (36 channel capacity). Eleven of
the 14 systems, representing approximately 71.2% of the subscribers, utilize
addressable technology. Each of the systems has a local office where customer
service representatives can assist customers in person or by a local telephone
call. The communities served by the Cable One systems are economically stable,
non-metropolitan communities. Approximately 85.2% of the subscribers being
acquired reside in a county seat.
MARKETING, PROGRAMMING AND RATES
The Company's marketing programs and campaigns are based upon a variety of
cable services creatively packaged and tailored to appeal to the Company's
different markets and segments within each market. The Company routinely surveys
its customer base to ensure that it is meeting the demands of its customers and
stays abreast of its competition in order to effectively counter competitors'
promotional campaigns. The Company uses a coordinated array of marketing
techniques to attract and retain customers and to increase premium service
penetration, including door-to-door and direct mail solicitation, telemarketing,
media advertising, local promotional events typically sponsored by programming
services and cross-channel promotion of new services and pay-per-view.
The Company has various contracts to obtain basic, satellite and premium
programming for the Systems from program suppliers, including, in limited
circumstances, some broadcast stations, with compensation generally based on a
fixed fee per customer or a percentage of the gross receipts for the particular
service. Some program suppliers provide volume discount pricing structures
and/or offer marketing support. In addition, the Company is a member of a
programming consortium consisting of small to medium sized MSOs
34
<PAGE> 39
and individual cable systems serving, in the aggregate, over eight million cable
subscribers. The consortium helps create efficiencies in the areas of securing
and administering programming contracts, as well as to establish more favorable
programming rates and contract terms for small and medium sized cable operators.
The Company does not have long-term programming contracts for the supply of a
substantial amount of its programming. In cases where the Company does have such
contracts, they are generally for fixed periods of time ranging from one to five
years and are subject to negotiated renewal. While management believes that the
Company's relations with its programming suppliers are generally good, the loss
of contracts with certain of its programming suppliers would have a material
adverse effect on the Company's results of operations.
Cable programming costs are expected to continue to increase due to
additional programming being provided to customers, increased costs to purchase
cable programming, inflationary increases and other factors. In 1996, 1997 and
the first six months of 1998, programming costs as a percentage of revenues were
25.3%, 24.5% and 25.5%, respectively. No assurance can be given that the
Company's programming costs will not increase substantially in the near future
or that other materially adverse terms will not be added to its programming
contracts.
The Systems offer their customers programming that includes the local
network, independent and educational television stations, a limited number of
television signals from distant cities, numerous satellite-delivered,
non-broadcast channels (such as CNN, MTV, USA, ESPN and TNT) and in some systems
local information and public access channels. The programming offered by the
Company varies among the Systems depending upon each System's channel capacity
and viewer interests. Primarily for competitive reasons, the Company generally
endeavors to offer a single level of basic service containing all broadcast and
satellite-delivered programming. In a few systems, however, the Company does
offer multiple tiers of cable television programming. The Company also offers
premium programming services, both on a per-channel basis and in many systems as
part of premium service packages designed to enhance the customer's perception
of value.
Monthly customer rates for services vary from market to market, primarily
according to the amount of programming provided and competitive factors. At June
30, 1998, the Company's monthly full basic service rates for residential
customers ranged from $18.00 to $29.95 and per-channel premium service rates
(not including special promotions) ranged from $5.95 to $12.00 per service. At
June 30, 1998, the weighted average price for the Company's monthly full basic
service was approximately $27.50.
A one-time installation fee, which the Company may wholly or partially
waive during a promotional period, is usually charged to new customers. The
Company charges monthly fees for converters and remote control tuning devices.
The Company also charges administrative fees for delinquent payments for
service. Customers are free to discontinue service at any time without
additional charge but may be charged a reconnection fee to resume service.
Commercial customers, such as hotels, motels and hospitals, are charged a
negotiated, non-recurring fee for installation of service and monthly fees.
Multiple dwelling unit accounts may be offered a bulk rate in exchange for
single-point billing and basic service to all units.
In addition to customer fees, the Company derives modest revenues from the
sale of local spot advertising time on locally originated and
satellite-delivered programming. The Company also derives modest revenues from
affiliations with home shopping services, which offer merchandise for sale to
customers and compensate system operators with a percentage of their sales
receipts.
The Company also derives revenue from the sale of programming featuring
movies and special events to customers on a pay-per-view basis. In 1997, the
Company's pay-per-view revenue increased by 181% and the Company believes that
it will be able to further increase its pay-per-view penetration rates and
revenue as it continues to deploy addressable technology in upgraded systems and
in systems where it launches a digital compression service such as HITS.
While the Company plans to offer advanced telecommunications services in
certain of the Systems, it anticipates that monthly customer fees derived from
multi-channel video services will continue to constitute the large majority of
its total revenues for the foreseeable future.
35
<PAGE> 40
TECHNICAL OVERVIEW
As part of its commitment to customer service, the Company endeavors to
maintain high technical performance standards in all of its Systems. To
accomplish this, the Company has embarked on its System Improvement Plan to
selectively upgrade the Systems. This program, which involves the use of fiber
optic technology, will expand channel capacities, enhance signal quality,
improve technical reliability, augment addressability and provide a platform to
develop high-speed data services and Internet access. The Company believes that
such technical upgrades create additional revenue opportunities, enhance
operating efficiencies, increase customer satisfaction, improve franchising
relations and solidify the Company's position as the dominant provider of video
services in the markets in which it operates. Before committing the capital to
upgrade or rebuild a system, the Company carefully assesses: (i) the existing
technical reliability and picture quality of the system; (ii) basic subscribers'
demand for more channels; (iii) requirements in connection with franchise
renewals; (iv) programming alternatives offered by competitors; (v) customers'
demand for other cable television and broadband telecommunications services; and
(vi) the return on investment of any such capital outlay.
Currently, the Company's subscribers, on average, are served by systems
with an analog capacity of 46 channels with 40 channels in use. The table below
summarizes the Company's existing technical profile, on a pro forma basis, as of
June 30, 1998, and after giving effect to the completion of certain upgrade
projects in the Systems in the second quarter of 1998.
<TABLE>
<CAPTION>
UP TO 29 30 TO 39 40 TO 49 50 TO 59 OVER 60
CHANNELS CHANNELS CHANNELS CHANNELS CHANNELS TOTAL
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Number of systems................... 18 124 91 6 48 287
Miles of plant...................... 202.2 1,489.7 3,072.2 244.2 1,368.2 6,376.4
Basic subscribers................... 3,901 40,548 83,269 9,583 54,108 191,409
% of total basic subscribers........ 2.0% 21.2% 43.5% 5.0% 28.3% 100.0%
Basic subscribers per plant mile.... 19.3 27.2 27.1 39.2 39.5 30.0
Premium subscribers................. 1,278 18,450 33,583 4,432 21,858 78,323
Premium penetration................. 32.8% 45.5% 40.3% 46.2% 40.4% 40.9%
</TABLE>
Over the next five years, the Company intends to spend approximately: (i)
$42.9 million to establish a technical standard of 550 MHz bandwidth capacity
(78 analog channels) in cable television systems serving over 70.4% of its basic
subscribers; (ii) $28.0 million for ongoing maintenance and replacement, for
installations and extensions to the cable plant related to customer growth and
headend consolidation; and (iii) $7.7 million for the purchase of additional
addressable converters and headend equipment to support the deployment of HITS.
The table below summarizes the Company's expected technical profile upon
completion of the System Improvement Program.
<TABLE>
<CAPTION>
UP TO 29 30 TO 39 40 TO 49 50 TO 59 OVER 60
CHANNELS CHANNELS CHANNELS CHANNELS CHANNELS TOTAL
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Number of systems................... -- 105 83 1 98 287
Miles of plant...................... -- 964.7 1,098.7 11.2 4,301.8 6,376.4
Basic subscribers................... -- 24,043 24,890 263 142,213 191,409
% of total basic subscribers........ N/A 12.6% 13.0% 0.1% 74.3% 100.0%
Basic subscribers per plant mile.... N/A 24.9 22.7 23.5 33.1 30.0
Premium subscribers................. -- 8,033 9,203 124 62,241 79,601
Premium penetration................. N/A 33.4% 37.0% 47.1% 43.8% 41.6%
</TABLE>
With the exception of 11 of the 14 systems acquired from Cable One, the
Company's remaining Systems do not currently use addressable technology. The
Company utilizes a "trap" scheme whereby a technician installs filters, or
traps, at each cabled home enabling the technician to configure the programming
received by each subscriber. The System Improvement Program contemplates the use
of addressable set-top boxes in selected analog upgraded systems, in addition to
digital addressable technology to take advantage of the HITS service. This
service transmits digitally compressed signals of niche satellite programming,
multiplexed
36
<PAGE> 41
premium services, pay-per-view movies and digital music for reception by cable
systems, which in turn deliver them to their subscribers.
The Company's active use of fiber optic technology as an alternative to
coaxial cable is playing a major role in expanding channel capacity and
improving the performance of its cable television systems. Fiber optic strands
are capable of carrying hundreds of video, data and voice channels over extended
distances without the extensive signal amplification typically required for
coaxial cable. The Company expects to selectively use fiber backbone
architecture to eliminate headend facilities and to reduce amplifier cascades,
thereby improving picture quality, system reliability and headend and
maintenance expenditures. Upon completion of the System Improvement Program, the
Company expects that fiber optic technology will be utilized in systems serving
approximately 49.9% of its basic subscribers.
Recently, high-speed cable modems and set-top boxes using digital
compression technology have become commercially viable. These developments allow
for the introduction of high-speed data services and Internet access and will
increase programming services available to customers. Digital compression
technology has the potential to significantly expand channel capacity given that
up to 16 digital channels can be carried in the bandwidth of one analog channel
(6 MHz).
The Company also owns 285 towers and leases two towers that are used to
receive off-air broadcast signals from the nearest urban transmit site or via
intermittent microwave relay stations. The Company's towers range from 20 feet
to 600 feet in height and 125 of the Company's 287 towers are at least 200 feet
in height. The Company also leases tower space to cellular telephone, personal
communications services ("PCS"), paging and other transmission companies for a
fixed monthly charge typically dictated by long-term contract. For the six
months ended June 30, 1998, the Company derived approximately 0.7% of its total
revenues from tower space leases.
FRANCHISES
Cable television systems are typically constructed and operated under
non-exclusive franchises granted by local governmental authorities. These
franchises typically contain many conditions, such as (i) time limitations on
commencement and completion of construction, (ii) conditions of service,
including number of channels, types of programming and the provision of free
service to schools and certain other public institutions, and (iii) the
maintenance of insurance and indemnity bonds. Certain provisions of local
franchises are subject to federal regulation under both the 1984 Cable Act and
the 1992 Cable Act. See "Legislation and Regulation -- Cable Regulation."
At June 30, 1998, the Company held 364 franchises. These franchises, all of
which are non-exclusive, generally provide for the payment of fees to the
issuing authority. Annual franchise fees imposed on the Systems range from 0% to
5% of the gross revenues generated by the Systems. With limited exceptions,
franchise fees are passed directly through to the customers on their monthly
bills. The 1984 Cable Act prohibits franchising authorities from imposing
franchise fees in excess of 5% of gross revenues, and permits a cable operator
to seek renegotiation and modification of franchise requirements if warranted by
changed circumstances. The Company's franchises can be terminated by the
franchising authority prior to the stated expiration date for uncured breaches
by the Company of material provisions.
The following table sets forth, after giving effect to the Cable One
Acquisition, the number of franchises by year of franchise expiration and the
approximate number and percentage of basic subscribers at June 30, 1998:
<TABLE>
<CAPTION>
NUMBER % OF % OF
OF TOTAL NUMBER OF TOTAL
YEAR OF FRANCHISE EXPIRATION FRANCHISES FRANCHISES SUBSCRIBERS SUBSCRIBERS
- ---------------------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Prior to 1999................................... 18 5.0% 11,015 5.8%
1999 to 2002.................................... 113 31.0 65,669 34.3
After 2002...................................... 233 64.0 114,725 59.9
--- ----- ------- -----
Total........................................... 364 100.0% 191,409 100.0%
=== ===== ======= =====
</TABLE>
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<PAGE> 42
The Cable Acts provide, among other things, comprehensive renewal
procedures which require that an incumbent franchisee's renewal application be
assessed on its own merits and not as part of a comparative process with
competing applications. See "Legislation and Regulation." The Company believes
that it has good relationships with its franchising communities. To date, the
Company has never had a franchise revoked or terminated. Additionally, no
request made by the Company for franchise renewals or extensions has been denied
although the renewal or extended franchises have frequently resulted in
franchise modifications on satisfactory terms. The Cable Acts also establish the
conditions for sale of a cable system in the event that the franchise is not
renewed or is revoked "for cause" by the franchising authority.
The 1992 Cable Act provides that a franchising authority "may not grant an
exclusive franchise," "may not unreasonably refuse to award an additional
competitive franchise" and may operate cable systems itself without franchises.
Under the 1992 Cable Act, franchising authorities are immunized from monetary
damages awards arising from regulation of cable television systems or decisions
made on franchise grants, renewals, transfers and amendments. See "Legislation
and Regulation -- Cable Regulation."
COMPETITION
Cable television systems face competition from alternative methods of
receiving and distributing television signals and from other sources of news,
information and entertainment such as off-air television broadcast programming,
DBS services, wireless cable services, newspapers, movie theaters, live sporting
events, on-line computer services and home video products. Cable communications
system's competitive position depends, in part, upon reasonable prices to
customers, greater variety of programming and other communications services, and
superior technical performance and customer service. Accordingly, cable
operators in rural areas, where off-air reception is more limited, generally
achieve higher penetration rates than cable operators in major metropolitan
areas, where numerous, high quality off-air signals are available.
Cable television systems generally operate pursuant to franchises granted
on a nonexclusive basis, so that more than one cable television system may be
built in the same area (known as an "overbuild"), with potential loss of revenue
to the operator of the original system. It is possible that a franchising
authority might grant a second franchise to another company containing terms and
conditions more favorable than those afforded the Company. The 1992 Cable Act
prohibits franchising authorities from unreasonably denying requests for
additional franchises and permits franchising authorities to operate cable
television systems without a franchise. Although a private competitor ordinarily
would seek a franchise from a local jurisdiction, municipalities have built and
operated their own systems. Overbuilds historically have been relatively rare,
as constructing and developing a cable television system is capital-intensive,
and it is difficult for the new operator to gain a marketing advantage over the
incumbent operator. The Company currently faces direct competition from
traditional overbuilds in two systems passing approximately 4,500 homes.
In recent years, the FCC and the Congress have adopted policies providing a
more favorable operating environment for new and existing technologies that
provide, or have the potential to provide, substantial competition to cable
television systems. These technologies include, among others, DBS service,
whereby signals are transmitted by satellite to receiving facilities located on
customer premises. Programming is currently available to the owners of DBS
dishes through conventional, medium and high-powered satellites. DBS systems
provide movies, broadcast stations, and other program services comparable to
those of cable television systems. DBS Service can be received anywhere in the
United States through installation of a small rooftop or side-mounted antenna.
This technology has the capability of providing more than 100 channels of
programming over a single high-powered satellite with significantly higher
capacity if multiple satellites are placed in the same orbital position. DBS is
currently being heavily marketed on a nationwide basis by three DBS providers,
and a fourth company is also proposing to provide DBS services over multiple
satellites. DBS providers provide significant competition to cable service
providers, including the Company.
The 1992 Cable Act contains provisions, which the FCC has implemented with
regulations, to enhance the ability of cable competitors to purchase and make
available to home satellite dish owners certain satellite delivered cable
programming at competitive costs. The FCC also adopted regulations that preempt
certain local restrictions on satellite and over-the-air antenna reception of
video programming services, including
38
<PAGE> 43
zoning, land-use or building regulations, or any private covenant, homeowners'
association rule or similar restriction on property within the exclusive use or
control of the antenna user. Digital satellite service ("DSS") offered by DBS
systems has certain advantages over cable systems with respect to programming
and digital quality, as well as disadvantages that include high up-front costs
and a lack of local programming, service and equipment distribution. The
Company's strategy of providing pay-per-view and perhaps satellite niche
programming via the HITS application in certain of its Systems is designed to
combat DSS competition. "Bundling" of the Company's video service with advanced
telecommunications services in certain of the Systems may also be an effective
tool for combating DSS competition. DBS does suffer certain significant
operating disadvantages compared to cable television, however, including the
subscriber's present inability to view different programming on different
television sets, line-of-sight reception requirements, up-front costs associated
with the dish antenna, and the lack of local programming. DBS currently faces
technical and legal obstacles to providing local broadcast signals, although at
least one DBS provider is now attempting to do so in certain major markets, and
legislation is now pending that may remove the existing legal obstacle.
Cable television systems also compete with wireless program distribution
services such as multichannel multipoint distribution service ("MMDS") which
uses low power microwave to transmit video programming over the air to
customers. Additionally, the FCC recently adopted new regulations allocating
frequencies in the 28 GHz band for a new multichannel wireless video service
similar to MMDS, known as Local Multipoint Distribution Service ("LMDS"). LMDS
is also suited for providing wireless data services, including the possibility
of Internet access. Wireless distribution services generally provide many of the
programming services provided by cable systems, and digital compression
technology may increase significantly the channel capacity of the Systems.
Because MMDS service requires unobstructed "line of sight" transmission paths,
the ability of MMDS systems to compete may be hampered in some areas by physical
terrain and foliage. The Company has experienced competition from MMDS
operators, namely Heartland Wireless, in 13 systems passing approximately 20,700
homes in Oklahoma, Texas and Kansas.
Federal cross-ownership restrictions historically limited entry by local
telephone companies into the cable television business. The 1996 Act eliminated
this cross-ownership restriction, making it possible for companies with
considerable resources to overbuild existing cable systems. Congress has also
repealed the prohibition against national television networks owning cable
systems. Various LECs currently are seeking to provide video programming
services within their telephone service areas through a variety of distribution
methods, primarily through the deployment of broadband wire facilities, but also
through the use of wireless (MMDS) transmission. Several telephone companies
have begun seeking cable television franchises from local governmental
authorities and constructing cable television systems. The Company has
experienced cable overbuilds by local telephone companies in seven systems
passing approximately 4,900 homes. Cable television systems could be placed at a
competitive disadvantage if the delivery of video programming services by LECs
becomes widespread, since LECs may not be required, under certain circumstances,
to obtain local franchises to deliver such video services or to comply with the
variety of obligations imposed upon cable television systems under such
franchises. The entry of telephone companies as direct competitors is likely to
continue and could adversely affect the profitability and valuation of the
Systems. Issues of cross-subsidization by LECs of video and telephony services
also pose strategic disadvantages for cable operators seeking to compete with
LECs that provide video services. The Company believes, however, that the
non-metropolitan markets in which it provides or expects to provide cable
services are unlikely to support competition in the provision of video and
telecommunications broadband services given the lower population densities and
higher costs per subscriber of installing plant.
The 1996 Telecom Act's provisions promoting facilities-based broadband
competition are primarily targeted at larger markets, and its prohibition of
buyouts and joint ventures between incumbent cable operators and LECs exempts
small operators and carriers meeting certain criteria. See "Legislation and
Regulation." The Company believes that significant growth opportunities exist
for the Company by establishing cooperative rather than competitive
relationships with LECs within service areas, to the extent permitted by law.
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The entry of electric utility companies into the cable television business,
as now authorized by the 1996 Act, could also have an adverse effect on the
Company's business. Well-capitalized businesses from outside the cable industry
may become competitors for franchises or providers of competing services.
Other new technologies may become competitive with non-entertainment
services offered by cable television systems. The FCC has authorized television
broadcast stations to transmit textual and graphic information useful both to
consumers and businesses. The FCC also permits commercial and noncommercial FM
stations to use their sub-carrier frequencies to provide non-broadcast services
including data transmissions. The FCC has established an over-the-air
Interactive Video and Data Service that will permit two-way interaction with
commercial and educational programming along with informational and data
services. The expansion of fiber optic systems and the introduction of new DSL
services by LECs and other common carriers is providing facilities for the
transmission and distribution to homes and businesses of video services,
including interactive computer-based services like the Internet, data and other
non-video services. The FCC has held spectrum auctions for licenses to provide
PCS. PCS will enable license holders, including cable operators, to provide
voice and data services.
Advances in communications technology as well as changes in the marketplace
and the regulatory and legislative environments are constantly occurring. Thus,
it is not possible to predict the effect that ongoing or future developments
might have on the cable industry or on the operations of the Company.
EMPLOYEES
At June 30, 1998, the Company had approximately 306 full-time employees and
33 part-time employees. None of the Company's employees is represented by a
labor union. The Company considers its relations with its employees to be good.
PROPERTIES
A cable television system consists of four principal operating components.
The first component, known as the headend, receives television, radio and
information signals by means of special antennas and satellite earth stations.
The second component, the distribution network, which originates at the headend
and extends throughout the system's service area, consists of microwave relays,
coaxial or fiber optic cables placed on utility poles or buried underground and
associated electronic equipment. The third component of the system is a "drop
cable," which extends from the distribution network into each customer's home
and connects the distribution system to the customer's television set. The
fourth component, a converter, is the home terminal device that expands channel
capacity to permit reception of more than 12 channels of programming.
The Company's principal physical assets consist of cable television
systems, including signal-receiving, encoding and decoding apparatus, headends,
distribution systems and subscriber house drop equipment for each of the
Systems. The signal receiving apparatus typically includes a tower, antenna,
ancillary electronic equipment and earth stations for reception of satellite
signals. Headends, consisting of associated electronic equipment necessary for
the reception, amplification and modulation of signals, are located near the
receiving devices. The Company's distribution systems consist primarily of
coaxial cable and related electronic equipment. As the upgrades are completed,
the Systems will incorporate fiber optic cable. Subscriber equipment consists of
taps, house drops and converters. The Company owns its distribution systems,
various office fixtures, test equipment and certain service vehicles. The
physical components of the Systems require maintenance and periodic upgrading to
keep pace with technological advances.
The Company's cables generally are attached to utility poles under pole
rental agreements with local public utilities, although in some areas the
distribution cable is buried in underground ducts or trenches. The FCC regulates
most pole attachment rates under the federal Pole Attachment Act.
The Company owns or leases parcels of real property for signal reception
sites (antenna towers and headends), microwave complexes and business offices
(including its principal executive offices). The Company believes that its
properties, both owned and leased, are in good condition and are suitable and
adequate for the Company's business operations as presently conducted.
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LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company, CCI
or any of its affiliates are a party or to which any of their respective
properties are subject.
LEGISLATION AND REGULATION
The cable television industry is regulated by the FCC, some state
governments and substantially all local governments. In addition, various
legislative and regulatory proposals under consideration from time to time by
Congress and various federal agencies have in the past materially affected, and
may in the future materially affect, the Company and the cable television
industry. The following is a summary of federal laws and regulations affecting
the growth and operation of the cable television industry and a description of
certain state and local laws. The Company believes that the regulation of its
industry remains a matter of interest to Congress, the FCC and other regulatory
authorities. There can be no assurance as to what, if any, future actions such
legislative and regulatory authorities may take or the effect thereof on the
Company.
FEDERAL REGULATION
The primary federal statute dealing with the regulation of the cable
television industry is the Communications Act. The three principal amendments to
the Communications Act that shaped the existing regulatory framework for the
cable television industry were the 1984 Cable Act, the 1992 Cable Act and the
1996 Telecom Act. The 1996 Telecom Act, which became effective in February 1996,
was the most comprehensive reform of the nation's telecommunications laws since
the Communications Act. Although the long term goal of the 1996 Telecom Act is
to promote competition and decrease regulation of various communications
industries, in the short term, the law delegates to the FCC (and in some cases
to the states) broad new rulemaking authority. The FCC and state regulatory
agencies are required to conduct numerous rulemaking and regulatory proceedings
to implement the 1996 Telecom Act and such proceedings may materially affect the
cable television industry.
The FCC, the principal federal regulatory agency with jurisdiction over
cable television, has promulgated regulations to implement the provisions
contained in the Communications Act. The FCC has the authority to enforce these
regulations through the imposition of substantial fines, the issuance of cease
and desist orders and/or the imposition of other administrative sanctions, such
as the revocation of FCC licenses needed to operate certain transmission
facilities often used in connection with cable operations. A brief summary of
certain of these federal regulations as adopted to date follows.
Cable Rate Regulation
The 1992 Cable Act imposed an extensive rate regulation regime on the cable
television industry. Under that regime, all cable systems are subject to rate
regulation, unless they face "effective competition" in their local franchise
area. Federal law now defines "effective competition" on a community-specific
basis as requiring either low penetration (less than 30%) by the incumbent cable
operator, appreciable penetration (more than 15%) by competing multichannel
video providers ("MVPs"), or the presence of a competing MVP affiliated with a
local telephone company.
Although the FCC rules control, local government units (commonly referred
to as local franchising authorities or "LFAs") are primarily responsible for
administering the regulation of the lowest level of cable -- the basic service
tier ("BST"), which typically contains local broadcast stations and public,
educational, and government ("PEG") access channels. Before an LFA begins BST
rate regulation, it must certify to the FCC that it will follow applicable
federal rules, and many LFAs have voluntarily declined to exercise this
authority. LFAs also have primary responsibility for regulating cable equipment
rates. Under federal law, charges for various types of cable equipment must be
unbundled from each other and from monthly charges for programming services. The
1996 Telecom Act allows operators to aggregate costs for broad categories of
equipment across geographic and functional lines. This change should facilitate
the introduction of new technology. Few of the LFAs in the Communities in which
the Company operates have
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elected to certify to regulate rates, and the Company believes that the FCC's
existing "Small Systems Order" will afford it additional flexibility to adjust
its rates. However there can be no assurance that the Company's revenues and
results of operations will not be adversely affected in the future by regulation
of cable system rates.
The FCC itself directly administers rate regulation of any cable
programming service tiers ("CPST"), which typically contain satellite-delivered
programming. Under the 1996 Telecom Act, the FCC can regulate CPST rates only if
an LFA first receives at least two rate complaints from local subscribers and
then files a formal complaint with the FCC. When new CPST rate complaints are
filed, the FCC now considers only whether the incremental increase is justified
and will not reduce the previously established CPST rate.
Under the FCC's rate regulations, most cable systems were required to
reduce their BST and CPST rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel carriage. The FCC has modified its rate
adjustment regulations to allow for annual rate increases and to minimize
previous problems associated with regulatory lag. Operators also have the
opportunity of bypassing this "benchmark" regulatory scheme in favor of
traditional "cost-of-service" regulation in cases where the latter methodology
appears advantageous. Premium cable services offered on a per-channel or
per-program basis remain unregulated, as do affirmatively marketed packages
consisting entirely of new programming product.
The FCC and Congress have provided various forms of rate relief for smaller
cable systems owned by smaller operators. If requisite eligibility criteria are
satisfied, a cable operator may be allowed to rely on a vastly simplified
cost-of-service rate justification and/or may be allowed to avoid regulation of
CPST rates entirely.
In the former case, cable systems serving 15,000 or fewer subscribers, that
are owned by or affiliated with a cable company serving, in the aggregate, no
more than 400,000 subscribers, can submit a simplified cost-of-service filing
under which the regulated rate (including equipment charges) will be presumed
reasonable if it equates to no more than $1.24 per channel. Eligibility for this
relief remains if the small cable system is subsequently acquired by a larger
cable operator. In the latter case, the 1996 Telecom Act immediately deregulated
the CPST rates of cable systems serving communities with fewer than 50,000
subscribers, that are owned by or affiliated with entities serving, in the
aggregate, no more than one percent of the nation's cable customers
(approximately 617,000) and having no more than $250 million in annual revenues.
For qualifying cable systems that offered only a single level of regulated
service as of December 31, 1994, that entire level of service is rate
deregulated. Essentially all of the Company's existing systems qualify under
this provision, and the majority of the Cable One systems also qualify under
this provision. The 1996 Telecom Act also relaxes existing uniform rate
requirements by specifying that uniform rate requirements do not apply where the
operator faces "effective competition," and by exempting bulk discounts to
multiple dwelling units, although complaints about predatory pricing still may
be made to the FCC.
The 1996 Telecom Act sunsets FCC regulation of CPST rates for all systems
(regardless of size) on March 31, 1999. However, certain cable critics have
called for the delay in that regulatory sunset and even urged more rigorous rate
regulation in the interim, including a limit on operators passing through to
their customers increased programming costs. Several bills have been introduced
in Congress which address cable rates. These bills would, alternatively, repeal
the sunset of the regulation of CPST rates now scheduled for March 1999, sunset
CPST rates except where a franchising authority certifies to the FCC that an
operator is not providing subscribers an acceptable range of programming choices
to the extent technically feasible and economically reasonable, and freeze cable
rates pending the receipt of a report to Congress by the FCC regarding the
causes of cable television rate increases. The Company cannot predict the
outcome of these bills or whether additional cable rate legislation will be
introduced in Congress.
Federal law requires that the BST be offered to all cable subscribers. FCC
regulations adopted pursuant to the 1992 Cable Act require cable systems to
permit customers to purchase video programming on a per channel or a per program
basis without the necessity of subscribing to any tier of service, other than
the basic service tier, unless the cable system is technically incapable of
doing so. Generally, this exemption from
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compliance with the statute for cable systems that do not have such technical
capability is available until a cable system obtains the capability, but not
later than December 2002.
Franchise Fees
Franchising authorities may impose franchise fees, but such payments cannot
exceed 5% of a cable system's annual gross revenues derived from the operation
of the cable system in providing cable service. Under the 1996 Telecom Act,
franchising authorities may not exact franchise fees from revenues derived from
telecommunications services.
Renewal of Franchises
The 1984 Cable Act established renewal procedures and criteria designed to
protect incumbent franchisees against arbitrary denials of renewal. While these
formal procedures are not mandatory unless timely invoked by either the cable
operator or the franchising authority, they can provide substantial protection
to incumbent franchisees. Even after the formal renewal procedures are invoked,
franchising authorities and cable operators remain free to negotiate a renewal
outside the formal process. Nevertheless, renewal is by no means assured, as the
franchisee must meet certain statutory standards. Even if a franchise is
renewed, a franchising authority may impose new and more onerous requirements
such as upgrading facilities and equipment, although the municipality must take
into account the cost of meeting such requirements. The 1992 Cable Act makes
several changes to the process under which a franchise is renewed, some of which
could make it easier in some cases for a franchising authority to deny renewal.
Competing Franchises
The 1992 Cable Act prohibits franchising authorities from unreasonably
refusing to grant franchises to competing cable television systems and permits
franchising authorities to operate their own cable television systems without
franchises.
Franchise Transfers
The 1992 Cable Act requires franchising authorities to act on any franchise
transfer request submitted after December 4, 1992, within 120 days after receipt
of all information required by FCC regulations and by the franchising authority.
Approval is deemed to be granted if the franchising authority fails to act
within such period.
Cable Entry Into Telecommunications
The 1996 Telecom Act provides that no state or local laws or regulations
may prohibit or have the effect of prohibiting any entity from providing any
interstate or intrastate telecommunications service. States are authorized,
however, to impose "competitively neutral" requirements regarding universal
service, public safety and welfare, service quality, and consumer protection.
State and local governments also retain their authority to manage the public
rights-of-way and may require reasonable, competitively neutral compensation for
management of the public rights-of-way when cable operators provide
telecommunications service. The favorable pole attachment rates afforded cable
operators under federal law can be gradually increased by utility companies
owning the poles (beginning in 2001) pursuant to an FCC prescribed formula if
the operator provides telecommunications service, as well as cable service, over
its plant. The FCC recently clarified that a cable operator's favorable pole
rates are not endangered by the provision of Internet access.
Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the 1996 Telecom Act to facilitate the entry of new
telecommunications providers (including cable operators) is the interconnection
obligation imposed on all telecommunications carriers. The FCC adopted
regulations implementing the 1996 Telecom Act requirement that LECs open their
telephone networks to competition by providing competitors interconnection,
access to unbundled network elements and retail services at wholesale rates.
Numerous parties appealed these regulations. The U.S. Court of Appeals for the
Eighth Circuit, where the appeals were consolidated, recently
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vacated key portions of the FCC's regulations, including the FCC's pricing and
nondiscrimination rules, and in January 1998, the United States Supreme Court
agreed to review the lower court's decision. SBC Communications, Inc. also filed
suit in Texas seeking to overturn the long distance entry provisions of the 1996
Telecom Act on constitutional grounds and obtained a favorable decision from the
U.S. District Court in Wichita Falls, Texas, which was recently reversed by the
United States Court of Appeals for the 5th Circuit. SBC is considering an appeal
to the U.S. Supreme Court. The ultimate outcome of the litigation and the FCC's
rulemakings, and the ultimate impact of the 1996 Telecom Act or any final
regulations adopted pursuant to the new law on the Company or its business
cannot be determined at this time.
Telephone Company Entry Into Cable Television
The 1996 Telecom Act makes far reaching changes in the regulation of
telephone companies that provide video programming services. The new law
eliminates federal legal barriers to competition in the local telephone and
cable communications businesses, preempts state and local laws and regulations
which create competitive barriers and sets basic standards for relationships
between telecommunications providers. The 1996 Telecom Act also eliminates the
requirements that LECs obtain FCC approval under Section 214 of the
Communications Act before providing video services in their telephone service
areas and removes the statutory telephone company/cable television
cross-ownership prohibition, thereby allowing LECs to offer video services in
their telephone service areas. LECs may provide service as traditional cable
operators with local franchises, or they may opt to provide their programming
over unfranchised "open video systems," subject to certain conditions,
including, but not limited to, setting aside a portion of their channel capacity
for use by unaffiliated program distributors on a non-discriminatory basis. LECs
could be formidable competitors to traditional cable operators, and certain LECs
have begun offering cable services, both within and outside of their service
areas. The Company has experienced telephone overbuilds in seven systems passing
approximately 4,900 homes.
The 1996 Telecom Act generally limits acquisitions and prohibits certain
joint ventures between LECs and cable operators in the same market. There are
some statutory exceptions to the buy-out and joint venture prohibitions,
including exceptions for certain small cable systems (as defined by Federal law)
and for cable systems or telephone facilities serving certain rural areas, and
the FCC is authorized to grant waivers of the prohibitions under certain
circumstances.
Electric Utility Entry Into Telecommunications/Cable Television
The 1996 Telecom Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services (including cable
television). Electric utilities must establish separate subsidiaries, known as
"exempt telecommunications companies" and must apply to the FCC for operating
authority. Because of their resources, electric utilities could also be
formidable competitors to traditional cable systems.
Additional Ownership Restrictions
The 1996 Telecom Act repealed the 1984 Cable Act's prohibition against LECs
providing video programming directly to customers within their local telephone
exchange service areas. However, with certain limited exceptions, a LEC may not
acquire more than a 10% equity interest in an existing cable system operating
within the LEC's service area. The 1996 Telecom Act also authorized LECs and
others to operate "open video systems" without obtaining a local cable
franchise. See "Business -- Competition."
The 1984 Cable Act and the FCC's rules prohibit the common ownership,
operation, control or interest in a cable system and a local television
broadcast station whose predicted grade B contour (a measure of a television
station's signal strength as defined by the FCC's rules) covers any portion of
the community served by the cable system. The 1996 Telecom Act eliminates the
statutory ban and directs the FCC to review its cross-ownership rule within two
years. Pursuant to the 1996 Telecom Act, the FCC eliminated its restrictions on
the cross-ownership of cable systems and national broadcasting networks, and has
commenced a proceeding to review its broadcast cable cross-ownership
restrictions. In order to encourage competition in the provision of video
programming, the FCC adopted a rule prohibiting the common ownership,
affiliation,
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control or interest in cable television systems and wireless cable facilities
having overlapping service areas, except in very limited circumstances. The 1992
Cable Act codified this restriction and extended it to co-located SMATV systems.
Permitted arrangements in effect as of October 5, 1992, are grandfathered. In
January 1995, the FCC adopted regulations which permit cable operators to own
and operate SMATV systems within their franchise areas, provided that such
operation is consistent with local cable franchise requirements. The 1996
Telecom Act exempts cable systems subject to effective competition from the
wireless cable and SMATV restrictions. In addition, a cable operator can
purchase an SMATV system located within its franchise areas and technically
integrate it into its cable system. The 1992 Cable Act permits states or local
franchising authorities to adopt certain additional restrictions on the
ownership of cable television systems.
Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a cable
system from devoting more than 40% of its activated channel capacity to the
carriage of affiliated national program services and has imposed limits on the
number of cable systems which a single cable operator can own. In general, no
cable operator can have an attributable interest in cable systems which pass
more than 30% of all homes nationwide. Attributable interests for these purposes
include voting interests of 5% or more (unless there is another single holder of
more than 50% of the voting stock), officerships, directorships and general
partnership interests. The FCC has stayed the effectiveness of its 30%
horizontal ownership rule pending the outcome of the appeal from a U.S. District
Court decision holding the multiple ownership limit provision of the 1992 Cable
Act unconstitutional, but has recently implemented certain reporting
requirements for MSO's passing more than 20% of homes nationwide and initiated a
proceeding to examine its current horizontal ownership limitations rule and
whether it should be modified. The FCC also has initiated a rulemaking
proceeding to review its attribution rules which define what constitutes a
"cognizable interest" triggering application of various FCC rules relating to
the provision of cable services such as cross-ownership, programing access and
channel occupancy rules, and horizontal ownership limitations. In addition, the
FCC recently commenced a rulemaking proceeding to examine, among other issues,
whether any limitations on cable-DBS cross-ownership are warranted in order to
prevent anticompetitive conduct in the video services market.
There are no federal restrictions on non-U.S. entities having an ownership
interest in cable television systems or the FCC licenses commonly employed by
such systems. Section 310(b)(4) of the Communications Act does, however,
prohibit foreign ownership of FCC broadcast and telephone licenses, unless the
FCC concludes that such foreign ownership is consistent with the public
interest.
Technical Requirements
The FCC has imposed technical standards applicable to the cable channels on
which broadcast stations are carried, and has prohibited franchising authorities
from adopting standards which are in conflict with or more restrictive than
those established by the FCC. Those standards are applicable to all classes of
channels which carry downstream National Television System Committee (the
"NTSC") video programming. The FCC also has adopted additional standards
applicable to cable television systems using frequencies in the 108-137 MHz and
225-400 MHz bands in order to prevent harmful interference with aeronautical
navigation and safety radio services and has also established limits on cable
system signal leakage. Periodic testing by cable operators for compliance with
the technical standards and signal leakage limits is required and an annual
filing of the results of these measurements is required. The 1992 Cable Act
requires the FCC to periodically update its technical standards to take into
account changes in technology. Under the 1996 Telecom Act, local franchising
authorities may not prohibit, condition or restrict a cable system's use of any
type of subscriber equipment or transmission technology.
The FCC has adopted regulations to implement the requirements of the 1992
Cable Act designed to improve the compatibility of cable systems and consumer
electronics equipment. Among other things, these regulations generally prohibit
cable operators from scrambling their basic service tier. The 1996 Telecom Act
directs the FCC to rely on the marketplace and set only minimal standards to
assure compatibility between television sets, VCRs and cable systems.
Pursuant to the requirements of the 1996 Telecom Act, the FCC recently
adopted an Order implementing regulations intended to promote the commercial
availability of navigation devices (set-top converters).
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The new rules will apply generally to all multichannel video programming
distributors ("MVPDs"), including MMDS, SMATV, etc., and to all equipment used
to receive multichannel video programming, including VCRs and even computers if
used for that purpose. The FCC has exempted from its rules navigation devices
that operate throughout the continental United States and are commercially
available from unaffiliated sources, which includes DBS. The Order requires that
the security (descrambling) functions presently integrated in set-top converters
be separated from their other functions and that separate security modules be
available from cable operators by July 2000. Cable operators will be allowed to
provide integrated set-top converters to their customers until January 1, 2005.
After that time, the sale of or lease by operators of new set-top converters
with embedded security functions will be prohibited, subject to the FCC's
reassessment in 2000. Several parties have requested the FCC to reconsider
various aspects of its Order.
Pole Attachments
The FCC currently regulates the rates and conditions imposed by certain
public utilities for use of their poles unless state public service commissions
are able to demonstrate that they regulate the rates, terms and conditions of
cable television pole attachments. In addition, cooperatively and municipally
owned utilities are not subject to the FCC's pole attachment regulations and in
most cases are not subject to the pole attachment regulations of the state PSC.
The Company may operate systems that utilize poles owned by cooperatively and
municipally owned utilities. None of the states where the Company operates cable
systems have certified to the FCC that they regulate the rates, terms and
conditions for pole attachments. In the absence of state regulation, and except
for cooperatively or municipally owned poles, the FCC administers such pole
attachment rates through use of a formula which it has devised. As directed by
the 1996 Telecom Act, the FCC has adopted a new rate formula for any attaching
party, including cable systems, which offer telecommunications services. This
new formula will result in significantly higher attachment rates for cable
systems which choose to offer such services, but does not begin to take effect
until 2001 and will be phased in by equal increments over the ensuing five
years. Various parties have requested the FCC to reconsider these new
regulations. The FCC has also initiated a rulemaking to consider whether it
should adjust certain elements of its existing rate formula. If adopted, these
adjustments may increase the fees paid by cable operators to utilities for pole
attachments and conduit space. The ultimate outcome of these rulemakings and the
ultimate impact of any revised FCC rate formula or of any new pole attachment
rate regulations on the Company or its business cannot be determined at this
time.
Must Carry/Retransmission Consent
The 1992 Cable Act contains broadcast signals carriage requirements that,
among other things, allow local commercial television broadcast stations to
elect once every three years between requiring a cable system to carry the
station ("must carry") or negotiating for payments for granting permission to
the cable operator to carry the station ("retransmission consent"). A cable
system generally is required to devote up to one-third of its activated channel
capacity for the carriage of local commercial television stations whether
pursuant to the mandatory carriage or retransmission consent requirements of the
1992 Cable Act. Local non-commercial television stations are also given
mandatory carriage rights, subject to certain exceptions, within the larger of:
(i) a 50-mile radius from the station's city of license; or (ii) the station's
Grade B contour (a measure of signal strength). Unlike commercial stations,
noncommercial stations are not given the option to negotiate retransmission
consent for the carriage of their signal. In addition, cable systems must obtain
retransmission consent for the carriage of all "distant" commercial broadcast
stations, except for certain "superstations," i.e., commercial
satellite-delivered independent stations, such as WGN. Must carry requests can
dilute the appeal of a cable systems' programming offerings, and retransmission
consent demands may require substantial payments or other concessions. Either
option has a potentially adverse affect on the Company's business. The burden
associated with "must carry" may increase substantially as broadcasters proceed
with planned conversion to digital transmission and if the FCC determines that
cable systems must carry all analog and digital broadcasts in their entirety.
The FCC has initiated a rulemaking proceeding concerning whether and under what
circumstances cable operators must carry digital broadcast signals.
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Access Channels
LFAs can include franchise provisions requiring cable operators set aside
certain channels for public, educational and governmental access programming.
The 1984 Cable Act further requires cable television systems with 36 or more
activated channels to designate a portion of their channel capacity for
commercial leased access by unaffiliated third parties. While the 1984 Cable Act
allowed cable operators substantial latitude in setting leased access rates, the
1992 Cable Act requires leased access rates to be set according to a formula
determined by the FCC. The FCC has adopted rules regulating the terms,
conditions and maximum rates a cable operator may charge for use of the
designated channel capacity, but use of commercial leased access channels has
been relatively limited. The FCC released revised rules in February 1997
mandating a modest rate reduction. The reduction sparked some increase in
part-time use, but did not make commercial leased access substantially more
attractive to third party programmers.
Access to Programming
To spur the development of independent cable programmers and competition to
incumbent cable operators, the 1992 Cable Act imposed restrictions on the
dealings between cable operators and cable programmers. Of special significance
from a competitive business posture, the 1992 Cable Act precludes video
programmers affiliated with cable companies from favoring cable operators over
competitors and requires such programmers to sell their programming to other
multichannel video distributors. This provision limits the ability of vertically
integrated cable programmers to offer exclusive programming arrangements to
cable companies. Recently, there has been increased interest in further
restricting the marketing practices of cable programmers, including subjecting
programmers who are not affiliated with cable operators to all of the existing
program access requirements. In an effort to increase competition in the video
marketplace, the FCC has recently adopted an Order which revised its program
access complaint procedures. Among other revisions, the Order increased
sanctions for violation of the program access rules, but the Commission declined
to widen the scope of the rules to include terrestrially delivered programming.
Inside Wiring
The FCC recently adopted new procedural guidelines governing the
disposition of home run wiring (a line running to an individual subscriber's
unit from a common feeder or riser cable) in multi-dwelling units ("MDUs"). MDU
owners can use these new rules to attempt to force cable television operators
without contracts to either sell, abandon or remove home run wiring and
terminate service to MDU subscribers unless operators retain rights under common
or state law to maintain ownership rights in the home run wiring. In addition,
the FCC is reviewing the enforceability of contracts to provide exclusive video
service within an MDU complex. The FCC has sought comment on abrogating all such
contracts held by incumbent cable operators, but allowing such contracts when
held by new entrants. These changes will make it easier for an MDU complex owner
to terminate service from an incumbent cable operator in favor of a new entrant
and leave the already competitive MDU sector even more challenging for incumbent
cable operators unless operators retain rights under common or state law to
maintain ownership rights in the home run wiring.
Other FCC Regulations
In addition to the FCC regulations noted above, there are other FCC
regulations covering such areas as equal employment opportunity, subscriber
privacy, programming practices (including, among other things, syndicated
program exclusivity, network program nonduplication, local sports blackouts,
indecent programming, lottery programming, political programming, sponsorship
identification, and children's programming advertisements), registration of
cable systems and facilities licensing, maintenance of various records and
public inspection files, microwave and aeronautical frequency usage, lockbox
availability, antenna structure notification, tower marking and lighting,
consumer protection and customer service standards, technical standards, and
consumer electronics equipment capability. Federal requirements governing
Emergency Alert Systems and Closed Captioning adopted in 1997 will impose
additional costs on the operation of cable systems. The FCC has the authority to
enforce its regulations through the imposition of substantial fines, the
issuance of cease and desist orders and/or the imposition of other
administrative sanctions, such as the
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revocation of FCC licenses needed to operate certain transmission facilities
used in connection with cable operations.
COPYRIGHT
Cable systems are subject to federal copyright licensing covering carriage
of television and radio broadcast signals. In exchange for filing certain
reports and contributing a percentage of their revenue to a federal copyright
royalty pool, cable operators can obtain blanket permission to retransmit
copyrighted material on broadcast signals. The nature and amount of future
payments for broadcast signal carriage cannot be predicted at this time. In a
recent report to Congress, the Copyright Office recommended that Congress make
major revisions of both the cable television and satellite compulsory licenses
to make them as simple as possible to administer, to provide copyright owners
with full compensation for the use of their work, and to treat every
multichannel video delivery system the same, except to the extent that
technological differences or differences in the regulatory burdens placed upon
the delivery system justify different copyright treatment. The possible
simplification, modification or elimination of the compulsory copyright license
is the subject of continuing legislative review. The elimination or substantial
modification of the cable compulsory license could adversely affect the
Company's ability to obtain suitable programming and could substantially
increase the cost of programming that remained available for distribution to the
Company's customers. The Company cannot predict the outcome of this legislative
activity.
Cable operators distribute programming and advertising that use music
controlled by the two major music performing rights organizations, ASCAP and
BMI. In October 1989, the special rate court of the U.S. District Court of the
Southern District of New York imposed interim rates on the cable industry's use
of ASCAP-controlled music. The same federal district court recently established
a special rate court for BMI. BMI and certain cable industry representatives
recently concluded negotiations for a standard licensing agreement covering the
usage of BMI music contained in advertising and other information inserted by
operators into cable programming and on certain local access and origination
channels carried on cable systems. ASCAP and cable industry representatives have
met to discuss the development of a standard licensing agreement covering ASCAP
music in local origination and access channels and pay-per-view programming.
Although the Company cannot predict the ultimate outcome of these industry
negotiations or the amount of any license fees it may be required to pay for
past and future use of ASCAP-controlled music, it does not believe such license
fees will be material to the Company's operations.
STATE AND LOCAL REGULATION
Cable television systems generally are operated pursuant to nonexclusive
franchises granted by a municipality or other state or local government entity
in order to cross public rights-of-way. Federal law now prohibits franchise
authorities from granting exclusive franchises or from unreasonably refusing to
award additional franchises. Cable franchises generally are granted for fixed
terms and in many cases include monetary penalties for non-compliance and may be
terminable if the franchisee failed to comply with material provisions.
The terms and conditions of franchises vary materially from jurisdiction.
Each franchise generally contains provisions governing cable operations, service
rates, franchise fees, system construction and maintenance obligations, system
channel capacity, design and technical performance, customer service standards,
and indemnification protections. A number of states (such as Connecticut)
subject cable television systems to the jurisdiction of centralized state
governmental agencies, some of which impose regulation of a character similar to
that of a public utility. Although LFAs have considerable discretion in
establishing franchise terms, there are certain federal limitations. For
example, LFAs cannot insist on franchise fees exceeding 5% of the system's gross
revenues, cannot dictate the particular technology used by the system, and
cannot specify video programming other than identifying broad categories of
programming.
The 1984 Cable Act places certain limitations on a franchising authority's
ability to control the operation of a cable system operator, and the courts have
from time to time reviewed the constitutionality of several general franchise
requirements, including franchise fees and access channel requirements, often
with
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<PAGE> 53
inconsistent results. On the other hand, the 1992 Cable Act prohibits exclusive
franchises, and allows franchising authorities to exercise greater control over
the operation of franchised cable television systems, especially in the area of
customer service and rate regulation. Moreover, franchising authorities are
immunized from monetary damage awards arising from regulation of cable
television systems or decisions made on franchise grants, renewals, transfers
and amendments.
Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and service or increased
franchise fees as a condition of renewal. Similarly, if a franchise authority's
consent is required for the purchase or sale of a cable system or franchise,
such authority may attempt to impose more burdensome or onerous franchise
requirements in connection with a request for consent. Historically, franchises
have been renewed for cable operators that have provided satisfactory services
and have complied with the terms of their franchise. The Company has generally
had good experience with its cable franchise renewals.
The 1996 Telecom Act provides that no state or local laws or regulations
may prohibit or have the effect of prohibiting any entity from providing any
interstate or intrastate telecommunications service. States are authorized,
however, to impose "competitively neutral" requirements regarding universal
service, public safety and welfare, service quality, and consumer protection.
State and local governments also retain their authority to manage the public
rights-of-way and may require reasonable, competitively neutral compensation for
management of the public right-of-way when cable operators provide
telecommunications service.
OTHER MATTERS
The FCC continues to have rulemaking proceedings pending that will
implement various provisions of the 1996 Telecom Act; it also has adopted
regulations implementing various provisions of the 1992 Cable Act and the 1996
Telecom Act that are the subject of petitions requesting reconsideration of
various aspects of its rulemaking proceedings. In addition to the FCC
regulations noted above, there are other FCC regulations covering such areas as
equal employment opportunity, syndicated program exclusivity, network program
non-duplication, closed captioning of video programming, registration of cable
systems, maintenance of various records and public inspection files, microwave
frequency usage, lockbox availability, origination cablecasting and sponsorship
identification, antenna structure notification, marking and lighting, carriage
of local sports broadcast programming, application of rules governing political
broadcasts, limitations on advertising contained in non-broadcast children's
programming, programmer access to cable systems, programming agreements,
technical standards, emergency alert system requirements, consumer electronics
equipment compatibility and DBS implementation.
The 1992 Cable Act, the 1996 Telecom Act and the FCC's rules implementing
these statutory provisions generally have increased the administrative and
operational expenses of cable systems and have resulted in additional regulatory
oversight by the FCC and local franchise authorities. The Company will continue
to develop strategies to minimize the adverse impact that the FCC's regulations
and the other provisions of the 1992 Cable Act and the 1996 Telecom Act have on
the Company's business. However, no assurances can be given that the Company
will be able to develop and successfully implement such strategies to minimize
the adverse impact of the FCC's rate regulations, the 1992 Cable Act or the 1996
Telecom Act on the Company's business.
The foregoing does not purport to describe all present and proposed
federal, state and local regulations and legislation relating to the cable
television industry. Other existing federal regulations, copyright licensing
and, in many jurisdictions, state and local franchise requirements, currently
are the subject of a variety of judicial proceedings, legislative hearings and
administrative and legislative proposals which could change, in varying degrees,
the manner in which cable television systems operate. Neither the outcome of
these proceedings nor their impact upon the cable television industry can be
predicted at this time.
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MANAGEMENT
All of the outstanding Capital Stock of the Company is owned by CCI. The
executive officers of CCI are also the executive officers of the Company and
hold the same offices. The directors of the Company and all the subsidiaries of
the Company are J. Merritt Belisle and Jeffery C. Garvey. Executive officers,
key operations managers and outside directors of CCI are listed as follows:
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND DIRECTORS AGE POSITION
-------------------------------- --- --------
<S> <C> <C>
J. Merritt Belisle................... 42 Chairman of the Board and Chief Executive
Officer
Steven E. Seach...................... 41 Director, President and Chief Financial
Officer
Gilbert W. Nichols................... 50 Vice President -- Operations
Jeffery C. Garvey.................... 49 Director
James J. Kozlowski................... 42 Director
Robert H. Sheridan III............... 35 Director
Robert Marakovits.................... 40 Director
</TABLE>
J. Merritt Belisle, the Company's Chairman of the Board and Chief Executive
Officer, founded the Company in March 1992 to acquire, operate, and develop
cable television systems in selected non-metropolitan markets of the United
States. From January 1988 through August 1991, he was a Vice President at Texas
Commerce Investment Banking, a division of Texas Commerce Bank, N.A., Houston,
Texas. From April 1985 to January 1988, Mr. Belisle was Chief Executive Officer
of Community Cable Incorporated ("Community Cable"), a small multi-system cable
television operator based in Austin, Texas. Community Cable was sold to a cable
television subsidiary of Time Warner, Inc. Prior to founding Community Cable,
Mr. Belisle was a corporate and securities attorney with the Houston office of
Baker & Botts. Mr. Belisle received a BBA in 1977, a MPA in 1980, and a JD in
1981 from The University of Texas at Austin.
Steven E. Seach, the Company's President and Chief Financial Officer,
helped Mr. Belisle with the founding of the Company in March 1992. Mr. Seach
became President of the Company in October 1996 and presently oversees
substantially all operational and financial aspects of the Company. Mr. Seach
became a director of CCI in 1998. From March 1992 to June 1994, Mr. Seach served
as an advisor to the Company and its Board of Directors for strategic,
operational and financial matters. Mr. Seach became the Company's Chief
Financial Officer in July 1994. Prior to his association with the Company, Mr.
Seach spent 12 years in the banking and investment banking industries, primarily
with Texas Commerce Bank, N.A., Houston, Texas. Mr. Seach received a BBA in
finance from the University of Houston in 1980.
Gilbert W. Nichols, the Company's Vice President -- Operations, joined the
Company in February 1997. As Vice President -- Operations, he is responsible for
the day-to-day operations of the Company's cable systems. Mr. Nichols is a cable
veteran who has spent nearly 30 years in the cable television business.
Throughout his career he has held numerous technical and managerial positions in
both metropolitan and non-metropolitan environments. Mr. Nichols has a degree in
Business Administration from Southwestern Ohio University as well as formal
training in electronics.
Jeffery C. Garvey, a General Partner of Austin Ventures, L.P., has been a
Director of CCI since July 1992. Mr. Garvey has been General Partner of Austin
Ventures, L.P. since 1984. Mr. Garvey is currently a Director of General
Communications, Inc. and Careline, Inc. From 1979 through 1986, Mr. Garvey was
the Executive Vice President and President of Rust Capital, Ltd, a small
business investment company. Prior to that, Mr. Garvey was an officer with PNC
Bank in Philadelphia. Mr. Garvey received his BA with honors from St. Lawrence
University in 1971.
James J. Kozlowski, the Executive Director of The Texas Growth Fund, has
been a Director of CCI since June 1993. Mr. Kozlowski has been the President of
TGF Management Corp. and Executive Director of The Texas Growth Fund since 1992.
Mr. Kozlowski is currently a Director of the following companies: American
Rockwool, Inc., Coastal Towing, Inc., the Lofland Company, Rehab Designs of
America Corp., Sterling Foods, Inc., Technology Works, Inc. and Veridian. Mr.
Kozlowski was a Managing Director of Fortis Private Capital in New Jersey from
1990 to 1992, and Vice President of Merrill Lynch Venture Capital in New York
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<PAGE> 55
from 1986 to 1990. Mr. Kozlowski received his BA degree in economics, cum laude,
from Harvard College in 1978 and his MBA from Harvard University Graduate School
of Business Administration in 1982.
Robert H. Sheridan III, has served as a Director of CCI since April 1997.
Mr. Sheridan is a Managing Director of NationsBank Capital Investors, the
principal investment group within NationsBank Corporation, and a Senior Vice
President of NationsBanc Capital Corp., NationsBanc Investment Corporation and
NationsBank, N.A. NationsBanc Capital Corp. is a stockholder of CCI. Prior to
joining NationsBank Capital Investors in January 1994, Mr. Sheridan worked in
investment banking and capital markets positions at Paine Webber, Inc., from
1986 to 1988. Mr. Sheridan currently serves as a director of Cumulus Media,
Inc., a radio broadcasting company, and Netcom Systems, Inc., a network
equipment testing systems company. Mr. Sheridan holds an MBA from Columbia
University and a BA from Vanderbilt University.
Robert Marakovits, a Managing Director of BT Capital Partners, has been a
Director of CCI since 1995. Mr. Marakovits joined BT Capital Partners in 1987.
Mr. Marakovits is a Director of Alliance Entertainment, Inc. Prior to graduate
school, he worked for three years as a financial associate at General Foods
Corporation. Mr. Marakovits holds a BBA from Pace University and an MBA from
Indiana University.
OTHER CORPORATE PERSONNEL
Bryan D. Noteboom, the Company's Vice President -- Finance &
Administration, has been with the Company since its inception and coordinates
the Company's accounting, finance, human resources and risk management
functions. Mr. Noteboom has an extensive background in cable television,
accounting, and finance through prior work experience in the cable industry and
as a senior auditor with Coopers & Lybrand. Mr. Noteboom earned a BBA in
Accounting/Finance from the University of Texas at Austin in December 1985 and
is licensed to practice as a Certified Public Accountant.
Ashley M. Kimery, the Company's Vice President & Corporate Treasurer
currently oversees the Company's cash management and tax functions. Prior to
joining the Company, Ms. Kimery worked for seven years in both the audit and tax
departments at Ernst & Young LLP. Ms. Kimery received her BBA in Accounting from
Texas A&M University in 1987, her Certificate of Public Accounting in 1990, and
her Masters in Public Accounting from The University of Texas at Austin in 1991.
Tracy M. Anderson, the Company's Vice President -- Marketing, has been with
the Company since September 1995. Ms. Anderson manages the Company's marketing
and community relations efforts. Prior to joining the Company, Ms. Anderson
worked as a senior auditor for the Austin office of Ernst & Young LLP. Ms.
Anderson earned a BBA in Accounting/Finance from Texas A&M in 1992 and her
Certificate of Public Accountancy in 1994.
Christopher M. Calavitta, the Company's Vice President -- Strategic
Planning, has been with the Company since October 1995 and spearheads certain
mergers & acquisitions, capital raising, Internet, broadband technology, and
budgeting efforts on behalf of the Office of the Chairman and Board of
Directors. Prior to joining the Company, Mr. Calavitta was an analyst with
NationsBank Capital Investors, one of CCI's institutional investors. Mr.
Calavitta earned a BSM in Finance, summa cum laude, from Tulane University in
1993.
KEY OPERATIONS PERSONNEL
Nita M. Basgall, the Company's Regional Manager -- Northern, has been with
the Company since its inception and oversees all operational, technical and
local marketing aspects of the Company's systems in Kansas, Nebraska and
Northwest Missouri. Ms. Basgall has over 24 years of experience in the cable
television industry. Ms. Basgall serves on the Board of Directors of the Kansas
Cable Telecommunications Association.
David D. Walker, the Company's Regional Manager -- Central, has over 28
years of experience in the cable television industry and oversees all
operational, technical and local marketing aspects of the Company's systems in
Oklahoma and Arkansas. Mr. Walker serves on the Board of Directors of the
Arkansas Cable Telecommunications Association.
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<PAGE> 56
Kenneth L. Butler, the Company's Corporate Engineering Manager, has been
with the Company since its inception and is responsible for the Company's
overall technical specifications, FCC, FAA and OSHA compliance and filings and
the Company-wide engineering practices. Mr. Butler has over 16 years of
experience in the cable television industry.
Connie A. Ganoung, the Company's Customer Service Manager, has been with
the Company since its inception and is directly responsible for the supervision
and performance of the Company's Customer Service Center located in Plainville,
Kansas. Ms. Ganoung received her BBA from Fort Hays State University in 1981.
Ms. Ganoung has over 9 years of experience in the cable television industry.
Ronald G. Jansonius, the Company's Advanced Technology Manager, has been
with the Company since 1996 and is responsible for directing the Company's
advanced technology initiatives. Mr. Jansonius has over 6 years of computer,
network, and broadband technology expertise. He received a BS from Fort Hays
State University in 1982.
Marsha K. Newell, the Company's Human Resources Manager, has been with the
Company since January 1997 and plans, organizes and directs all aspects of the
Human Resources function within the Company. Ms. Newell has over 26 years of
human resources experience. Ms. Newell holds a BBA in Human Resource Management
from Friends University and an MBA from Fort Hays State University.
Rowdy O. Whittington, the Company's Plant Integrity Manager, oversees the
Company's system technical compliance standards. Mr. Whittington also manages
the operations of a select number of systems located in Missouri and Colorado.
Mr. Whittington has over 12 years of experience in the cable television
industry.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The executive officers of the Company are the executive officers of CCI and
hold the same offices. None of the directors of the Company receive any
compensation for serving as such in addition to the compensation they receive
from CCI. The following table summarizes the compensation for services rendered
which CCI paid to the Chief Executive Officer and President as to whom the total
annual compensation exceeded $100,000 in 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
---------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(2)
--------------------------- -------- -------- ---------------
<S> <C> <C> <C>
J. Merritt Belisle
Chairman of the Board and Chief Executive Officer
1997............................................ $200,000 $-- $4,750
Steven E. Seach(3)
President and Chief Financial Officer
1997............................................ 175,000 175,000 4,750
</TABLE>
- ---------------
(1) The executive officers of CCI received restricted stock, options, stock
appreciation rights or other compensation during 1996 or 1997 under the 1996
Stock Restricted Plan. See "-- 1996 Restricted Stock Plan." At December 31,
1997, Messrs. Belisle and Seach held 30,312 shares and 6,678 shares of
restricted stock, respectively. Concurrently with consummation of the
Offerings, Messrs. Belisle and Seach will exchange their existing shares of
restricted stock for new shares of restricted stock with revised vesting
terms and other restrictions. See "-- 1998 Restricted Stock Plan."
(2) Amounts reported as All Other Compensation represent the Company's
contribution under its 401(k) plan.
(3) In 1998, annual base salary for Mr. Seach was increased to $350,000.
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<PAGE> 57
1996 RESTRICTED STOCK PLAN
Certain members of management own restricted stock subject to the terms of
CCI's 1996 Restricted Stock Plan (the "1996 Plan"). Pursuant to the 1996 Plan,
CCI may, from time to time, grant restricted stock to officers and other key
employees of CCI or its subsidiaries upon the terms, conditions and provisions
of the 1996 Plan. Concurrently with the adoption of the 1996 Plan, CCI granted a
total of 51,376 shares of CCI Common Stock as of such date, of which only 14,385
shares are currently outstanding (see "1998 Restricted Stock Plan"). Pursuant to
the granting agreement, such shares of restricted stock were to vest 25.0% per
year over four years. One-half of such shares of restricted stock are subject to
a distribution threshold equal to $100 per share, i.e., the first $100 of
distributions with respect to such shares were to be withheld and distributed
instead to the other holders of CCI Common Stock, and one-fourth of the shares
were subject to a distribution threshold of $192 per share and one-fourth to a
threshold of $300 per share. Together with shares of Restricted Stock issued to
other members of management, all executive officers as a group own 49,621
shares.
Each member of management of CCI holding shares of CCI Common Stock
(collectively, the "Management Stockholders") executed a stockholders agreement
with CCI and its other shareholders dated as of October 15, 1995, as amended
(the "Stockholders Agreement"). The Stockholders Agreement generally provides
CCI with a right of first refusal in the event of proposed sales of CCI Common
Stock owned by the Management Stockholders, and upon any termination of a
Management Stockholder's employment, to repurchase any CCI Common Stock owned by
such Management Stockholder. The Stockholders Agreement contains certain rights
of the Management Stockholders to participate in sales of CCI Common Stock and
certain obligations of the Management Stockholders to sell their CCI Common
Stock in the case of a sale for cash of all outstanding CCI Common Stock.
Finally, the Management Stockholders are required to vote their CCI Common Stock
to elect to the CCI Board of Directors the directors nominated by the other CCI
stockholders under the Stockholders Agreement. The Stockholders Agreement, and
all rights and obligations of the Management Stockholders thereunder described
above, will terminate following an initial public offering of CCI Common Stock
meeting certain criteria.
1998 RESTRICTED STOCK PLAN
CCI has adopted a new Restricted Stock Plan (the "1998 Plan"). The terms of
the 1998 Plan are similar in all material respects to the 1996 Plan. In July
1998, each of Messrs. Seach and Belisle exchanged all of their existing shares
under the 1996 Plan for 242,209 shares of restricted CCI Common Stock pursuant
to the 1998 Plan, each representing approximately 6.8% of CCI Common Stock on a
fully diluted basis. Pursuant to the granting agreement, such shares of
restricted CCI Common Stock are to vest 33.3% per year over three years. All of
such shares of restricted CCI Common Stock are subject to a distribution
threshold equal to $3.77 per share. Together with shares of restricted CCI
Common Stock issued to other members of management, all executive officers as a
group own 499,940 shares of CCI Common Stock or approximately 14%, on a fully
diluted basis.
Each Management Stockholder continues to be subject to the terms of the
Stockholders Agreement.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
J. Merritt Belisle and Steven E. Seach have employment agreements with CCI,
each of which provides for their continued employment with CCI for a continuing
two year period at all times. Belisle and Seach are paid annual salaries of
$200,000 and $350,000 per year, respectively. Each employment agreement provides
that upon termination by CCI without cause, the employee will be entitled to the
pre-payment of all remaining future compensation under the agreement, i.e., two
years base compensation. Each employment agreement also prohibits the employees
from competing with CCI during their term of employment and for a period of two
years thereafter. Pursuant to the employment agreements, each employee is
permitted to engage in other businesses and to acquire and own other business
properties in the telecommunications industry so long as CCI is first provided
the opportunity to acquire or own such businesses and has declined to do so, and
so long as such businesses do not compete with CCI or its subsidiaries.
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Messrs. Belisle and Seach also have an agreement with CCI to provide
consulting services for which they will receive an aggregate transaction fee of
1% of the value of all acquisitions made by the Company and 1% of the increase
of total capitalization of the Company from additional financings (provided that
duplicate fees will not be paid for financings used to consummate acquisitions).
Messrs. Belisle and Seach received transaction fees of $300,000 and $250,000,
respectively, upon consummation of the Financing Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of CCI as a whole determines the compensation of
CCI's executive officers. J. Merritt Belisle, CCI's Chief Executive Officer, and
Steven E. Seach, CCI's President, as Board members, participate in deliberations
of the Board of Directors with respect to compensation of all executive
officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the consummation of the Financing Plan, CCI and the Company had
outstanding subordinated indebtedness (including accrued interest) in the amount
of approximately $4.4 million to Austin Ventures, L.P., The Texas Growth Fund,
and BT Capital Partners, Inc. and Preferred Stock (including accrued and unpaid
dividends) in the amount of approximately $29.4 million to NationsBanc Capital
Corp. and BT Capital Partners, Inc., each a stockholder of CCI. Approximately
$3.9 million of such indebtedness bore interest at the rate of 15.0% per annum
and the remainder bore interest at the rate of 7.5% per annum. All of such
subordinated indebtedness and Preferred Stock had been incurred or issued to
fund the acquisition of various cable properties of the Company. CCI repaid such
indebtedness and redeemed the Preferred Stock from the holders thereof out of
the proceeds of the Notes. See "Use of Proceeds."
In 1997, the Company advanced $200,000 to Mr. Belisle. This loan bears
interest at the rate of 8% per annum, and is evidenced by a promissory note due
on or before August 21, 2004.
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PRINCIPAL STOCKHOLDERS
All of the outstanding capital stock of the Company is owned by CCI. The
following table sets for the certain information as of August 1, 1998, regarding
the beneficial ownership of CCI's Common Stock by (i) each executive officer and
director of CCI, (ii) each stockholder known by CCI to beneficially own 5.0% or
more of such CCI Common Stock and (iii) all directors and officers as a group.
<TABLE>
<CAPTION>
FULLY-DILUTED PERCENT OF FULLY-
COMMON COMMON DILUTED COMMON
BENEFICIAL OWNER(1) WARRANTS(2) SHARES(3) SHARES STOCK OWNERSHIP(4)
------------------- ----------- --------- ------------- ------------------
<S> <C> <C> <C> <C>
Austin Ventures, L.P.(5)................ -- 735,986 735,985 20.6%
BT Capital Partners, Inc................ 30,225 735,986 766,211 21.4
The Texas Growth Fund................... -- 170,563 170,563 4.8
NationsBanc Capital Corp................ 152,418 542,995 695,413 19.5
J. Merritt Belisle...................... -- 242,209 242,209 6.8
Steven E. Seach......................... -- 242,209 242,209 6.8
Jeffery C. Garvey(6).................... -- 735,986 735,986 20.6
James J. Kozlowski(7)................... -- 170,563 170,563 4.8
Robert Marakovits(8).................... 30,225 735,986 766,211 21.4
Robert H. Sheridan III(9)............... 152,418 542,995 695,413 19.5
All directors and officers as a group... 182,643 2,669,948 2,852,591 79.9
</TABLE>
- ---------------
(1) The address for Austin Ventures, L.P. and Jeffery C. Garvey is 1300 Norwood
Tower, 114 West 7th Street, Austin, Texas 78701. The address for BT Capital
Partners, Inc. and Robert Marakovits is 130 Liberty Street, 25th Floor, New
York, New York 10006. The address for The Texas Growth Fund and James J.
Kozlowski is 100 Congress Ave., Suite 980, Austin, Texas 78701. The address
for NationsBanc Capital Corp. and Robert H. Sheridan III is 100 North Tryon
Street, Charlotte, North Carolina 28255. The address for J. Merritt Belisle
and Steven E. Seach is 515 Congress Ave., Suite 2626, Austin, Texas 78701.
(2) Warrants are for shares of CCI Common Stock which may be acquired at $.01
per share pursuant to a warrant which is exercisable at any time.
(3) All shares of CCI Common Stock listed are Non-Voting Common Stock, except
shares held by Austin Ventures, L.P. and management, which are Voting Common
Stock.
(4) Assumes exercise of all outstanding warrants.
(5) Austin Ventures, L.P. owns 323,832 shares, Austin Ventures III-A, L.P. owns
223,422 shares and Austin Ventures III-B, L.P. owns 188,733 shares. AV
Partners, L.P. is the general partner of each of these partnerships.
(6) Jeffery C. Garvey is a director of CCI and a general partner of AV Partners,
L.P. Mr. Garvey is not the registered holder of any shares and disclaims the
beneficial ownership of the shares listed above except to the extent of his
indirect interest in the assets of the nominal shareholder, if any.
(7) James J. Kozlowski is a director of CCI and President of TGF Management
Corp., which is the executive director of the Board of Trustees of The Texas
Growth Fund -- 1991 Trust, which is the Trustee of the Texas Growth Fund.
Mr. Kozlowski is not the registered holder of any shares and disclaims the
beneficial ownership of the shares listed above except to the extent of his
indirect interest in the assets of the nominal shareholder, if any.
(8) Robert Marakovits is a managing director of BT Capital Partners, Inc. Mr.
Marakovits is not the registered holder of any shares and disclaims the
beneficial ownership of the shares listed above except to the extent of his
indirect interest in the assets of the nominal shareholder, if any.
(9) Robert H. Sheridan III is a director of CCI and managing director of
NationsBank Capital Investors. Mr. Sheridan is not the registered holder of
any shares and disclaims the beneficial ownership of the shares listed above
except to the extent of his indirect interest in the assets of the nominal
shareholder, if any.
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CREDIT ARRANGEMENTS OF THE COMPANY
The Company entered into the Senior Credit Agreement effective July 29,
1998 with a group of banks and other financial institutions led by Union Bank
and Goldman Sachs Credit Partners, L.P., as Co-Agents. The following is a
summary of certain provisions in the Senior Credit Agreement.
The Senior Credit Agreement provides for revolving credit loans of $50
million and term loans of $75 million, or an aggregate of $125 million. The
revolving portion of the Senior Credit Agreement has a term of 8.5 years with
reductions in the commitment commencing 2.5 years after closing. The term
portion has a maturity of 9.25 years with reductions in commitment commencing
1.5 years after closing. In addition, the Company is required to prepay the
Senior Credit Agreement in part upon the occurrence happening of certain events,
such as a sale of assets, the incurrence of certain additional indebtedness, the
receipt of insurance proceeds and the generation of excess cash flow.
The Company's obligations under the Senior Credit Agreement are guaranteed
by each direct and indirect subsidiary of the Company and secured by (i)
substantially all the tangible and intangible assets of the Company and all of
its direct and indirect subsidiaries, and (ii) a pledge of all of the capital
stock of the Company and of all of the direct and indirect subsidiaries of the
Company.
The Senior Credit Agreement contains a number of covenants that, among
other things, restrict the ability of the Company and its respective
subsidiaries to dispose of assets, incur additional indebtedness, incur guaranty
obligations, pay dividends or make capital distributions, create liens on
assets, make investments, make acquisitions, engage in mergers or
consolidations, engage in certain transactions with subsidiaries and affiliates
and otherwise restrict corporate activities. In addition, the Senior Credit
Agreement requires compliance with certain financial covenants. Management does
not expect that such covenants will materially impact the ability of the Company
and its subsidiaries to operate their respective businesses.
The Senior Credit Agreement contains customary events of default, including
the failure to pay principal when due or any interest or other amount that
becomes due within a period of time after the due date thereof, any
representation or warranty being made by the Company that is incorrect in any
material respect on or as of the date made, a default in the performance of any
negative covenants or a default in the performance of certain other covenants or
agreements for a specified period, default in certain other indebtedness,
certain insolvency events, certain change of control events and a default under
the Indenture.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by CCI on July 29, 1998, in a transaction exempt
from registration under the Securities Act pursuant to Rule 144A under the
Securities Act. In connection with that placement, CCI entered into the
Registration Rights Agreement, which requires that CCI file the Registration
Statement under the Securities Act with respect to the New Notes and, upon the
effectiveness of that Registration Statement, offer to the holders of the Old
Notes the opportunity to exchange their Old Notes for a like principal amount of
New Notes, which will be issued without a restrictive legend and which generally
may be reoffered and resold by the holder without registration under the
Securities Act. The Registration Rights Agreement further provides that CCI must
use its best efforts to (i) cause the Registration Statement with respect to the
Exchange Offer to be declared effective on or before November 26, 1998 and (ii)
consummate the Exchange Offer on or before December 28, 1998. Except as provided
below, upon the completion of the Exchange Offer, CCI's obligations with respect
to the registration of the Old Notes and the New Notes will terminate. A copy of
the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part and the summary herein
of certain provisions thereof does not purport to be complete and is qualified
in its entirety by reference thereto. As a result of the filing and the
effectiveness of the Registration Statement and completion of the Exchange
Offer, certain interest rate increases on the Notes provided for in the
Registration Rights Agreement will not become payable by CCI. Following the
completion of the Exchange Offer (except as set forth in the paragraph
immediately below), holders of Old Notes not tendered will not have any further
registration rights and those Old Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the market of the Old
Notes could be adversely affected upon completion of the Exchange Offer.
In order to participate in the Exchange Offer, a holder must represent to
CCI, among other things, that (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving the New Notes, (ii) neither the holder nor any such other
person is engaging in or intends to engage in a distribution of the New Notes,
(iii) neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of the New
Notes and (iv) neither the holder nor any such other person is an "affiliate,"
as defined under Rule 405 promulgated under the Securities Act, of CCI. Pursuant
to the Registration Rights Agreement, CCI is required to file a "shelf"
registration statement for a continuous offering pursuant to Rule 415 under the
Securities Act in respect of the Old Notes if (i) because of any change in law
or applicable interpretations of the staff of the Commission, CCI is not
permitted to effect the Exchange Offer, (ii) the Exchange Offer is not
consummated within 150 days of the Offering or the Registration Statement
related to this Exchange Offer is not declared effective within 120 days of the
Offering, (iii) the Initial Purchaser, (iv) any applicable law or
interpretations do not permit any holder of Old Notes to participate in the
Exchange Offer, (v) any holder of Old Notes participates in the Exchange Offer
and does not receive freely transferrable New Notes in exchange for Old Notes or
(vi) CCI so elects. In the event that CCI is obligated to file a "shelf"
registration statement, it will be required to keep such "shelf" registration
statement effective for at least three years. Other than as set forth in this
paragraph, no holder will have the right to participate in the "shelf"
registration statement nor otherwise to require that CCI register such holder's
shares of Old Notes under the Securities Act. See "-- Procedures for Tendering."
Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third-parties unrelated to CCI, CCI believes that, with the
exceptions set forth below, New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any person receiving such New Notes, whether or not such person
is the registered holder (other than any such holder or such other person that
is an "affiliate" of CCI within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that the New Notes are acquired in the ordinary
course of business of the holder or such other person and neither the holder nor
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes. Any holder who tenders in the
Exchange Offer for the
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purpose of participating in a distribution of the New Notes cannot rely on this
interpretation by the Commission's staff and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. Each broker-dealer that receives New Notes for its
own account in exchange for Old Notes, where the Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
Following the completion of the Exchange Offer (except as set forth in the
second paragraph under "The Exchange Offer -- Purpose and Effect"), holders of
Old Notes not tendered will not have any further registration rights and those
Old Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for a holder's Old Notes could be
adversely affected upon completion of the Exchange Offer if the holder does not
participate in the Exchange Offer.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, CCI will accept any and all Old Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
Expiration Date. CCI will issue $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of outstanding Old Notes accepted in the
Exchange Offer. Holders may tender some or all of their Old Notes pursuant to
the Exchange Offer. However, Old Notes may be tendered only in integral
multiples of $1,000 in principal amount.
The form and terms of the New Notes are substantially the same as the form
and terms of the Old Notes except that the New Notes have been registered under
the Securities Act and will not bear legends restricting their transfer. The New
Notes will evidence the same debt as the Old Notes and will be issued pursuant
to, and entitled to the benefits of, the Indenture pursuant to which the Old
Notes were issued.
As of July 31, 1998, the Old Notes representing $114,000,000 aggregate
principal amount at maturity were outstanding and there was one registered
holder, a nominee of DTC. This Prospectus, together with the Letter of
Transmittal, is being sent to such registered Holder and to others believed to
have beneficial interests in the Old Notes. CCI intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission promulgated thereunder.
CCI shall be deemed to have accepted validly tendered Old Notes when, as,
and if CCI has given oral or written notice thereof to the Exchange Agent. The
Exchange Agent will act as agent for the tendering holders for the purpose of
receiving the New Notes from CCI. If any tendered Old Notes are not accepted for
exchange because of an invalid tender, the occurrence of certain other events
set forth herein or otherwise, certificates for any such unaccepted Old Notes
will be returned, without expense, to the tendering holder thereof as promptly
as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. CCI will pay all charges and expenses, other
than certain applicable taxes, in connection with the Exchange Offer. See "The
Exchange Offer -- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless CCI, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended. In order to extend the Exchange
Offer, CCI will issue a notice of any extension by press release or other public
announcement prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. CCI reserves the right, in its
sole discretion, (i) to delay accepting any Old Notes, to extend the Exchange
Offer or, if any of the conditions set forth under "The Exchange
Offer -- Conditions to the Exchange Offer" shall not have been
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satisfied, to terminate the Exchange Offer, by giving oral or written notice of
such delay, extension or termination to the Exchange Agent, or (ii) to amend the
terms of the Exchange Offer in any manner.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender the Old Notes in the Exchange Offer.
Except as set forth under "The Exchange Offer -- Book Entry Transfer," to tender
in the Exchange Offer a holder must complete, sign, and date the Letter of
Transmittal, or a copy thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver the Letter
of Transmittal or copy to the Exchange Agent prior to the Expiration Date. In
addition, either (i) certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal, prior to the Expiration
Date or (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Old Notes, if that procedure is available, into the
Exchange Agent's account at DTC (the "Book-Entry Transfer Facility") pursuant to
the procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the holder must comply
with the guaranteed delivery procedures described below. To be tendered
effectively, the Letter of Transmittal and other required documents must be
received by the Exchange Agent at the address set forth under "The Exchange
Offer -- Exchange Agent" prior to the Expiration Date.
The tender by a holder that is not withdrawn before the Expiration Date
will constitute an agreement between that holder and CCI in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO CCI. HOLDERS MAY REQUEST
THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR
NOMINEES TO EFFECT THESE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. If the beneficial
owner wishes to tender on the owner's own behalf, the owner must, prior to
completing and executing the Letter of Transmittal and delivering the owner's
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in the beneficial owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless Old Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration Instruction"
or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. If signatures on a Letter of Transmittal or
a notice of withdrawal, as the case may be, are required to be guaranteed, the
guarantee must be by any eligible guarantor institution that is a member of or
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program, the Stock Exchange Medallion
Program, or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, the Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by the
registered holder as that registered holder's name appears on the Old Notes.
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If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to CCI of
their authority to so act must be submitted with the Letter of Transmittal
unless waived by CCI.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance, and withdrawal of tendered Old Notes will be determined by
CCI in its sole discretion, which determination will be final and binding. CCI
reserves the absolute right to reject any and all Old Notes not properly
tendered or any Old Notes CCI's acceptance of which would, in the opinion of
counsel for CCI, be unlawful. CCI also reserves the right to waive any defects,
irregularities, or conditions of tender as to particular Old Notes. CCI's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as CCI shall determine. Although CCI
intends to notify holders of defects or irregularities with respect to tenders
of Old Notes, neither CCI, the Exchange Agent, nor any other person shall incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holders,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, CCI reserves the right in its sole discretion to purchase or
make offers for any Old Notes that remain outstanding after the Expiration Date
or, as set forth under "The Exchange Offer -- Conditions to the Exchange Offer,"
to terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Old Notes in the open market, in privately negotiated transactions, or
otherwise. The terms of any such purchases or offers could differ from the terms
of the Exchange Offer.
By tendering, each holder will represent to CCI that, among other things,
(i) the New Notes acquired pursuant to the Exchange Offer are being obtained in
the ordinary course of business of the person receiving such New Notes, whether
or not such person is the registered holder, (ii) neither the holder nor any
such other person is engaging in or intends to engage in a distribution of such
New Notes, (iii) neither the holder nor any such other person has an arrangement
or understanding with any person to participate in the distribution of such New
Notes, and (iv) neither the holder nor any such other person is an "affiliate,"
as defined under Rule 405 of the Securities Act, of CCI.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal (or, with respect to the DTC and its participants, electronic
instructions in which the tendering holder acknowledges its receipt of and
agreement to be bound by the Letter of Transmittal), and all other required
documents. If any tendered Old Notes are not accepted for any reason set forth
in the terms and conditions of the Exchange Offer or if Old Notes are submitted
for a greater principal amount than the holder desires to exchange, such
unaccepted or non-exchanged Old Notes will be returned without expense to the
tendering Holder thereof (or, in the case of Old Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described below, such
nonexchanged old Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where the Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. See "Plan of Distribution."
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BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes being tendered by
causing the Book-Entry Transfer Facility to transfer such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or copy thereof, with
any required signature guarantees and any other required documents, must, in any
case other than as set forth in the following paragraph, be transmitted to and
received by the Exchange Agent at the address set forth under "The Exchange
Offer -- Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the Exchange Offer through
ATOP, participants in DTC must send electronic instructions to DTC through DTC's
communication system in lieu of sending a signed, hard copy Letter of
Transmittal. DTC is obligated to communicate those electronic instructions to
the Exchange Agent. To tender Old Notes through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to the Exchange Agent must
contain the character by which the participant acknowledges its receipt of and
agrees to be bound by the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent received from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by CCI (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within three New
York Stock Exchange ("NYSE") trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent, and (iii) the
certificates for all physically tendered Old Notes, in proper form for transfer,
or a Book-Entry Confirmation, as the case may be, and all other documents
required by the Letter of Transmittal, are received by the Exchange Agent within
three NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or
(for DTC participants) electronic ATOP transmission notice of withdrawal must be
received by the Exchange Agent at its address set forth on the back cover page
of this Prospectus prior to 5:00 p.m., New York City time, on the Expiration
Date. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify
the Old Notes to be withdrawn (including the certificate number or numbers and
principal amount of such Old Notes), (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee register the
transfer of such Old Notes into the name of the person withdrawing the tender,
and (iv) specify
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the name in which any such Old Notes are to be registered, if different from
that of the Depositor. All questions as to the validity, form, and eligibility
(including time of receipt) of such notices will be determined by CCI, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes that have been tendered for
exchange but that are not exchanged for any reason will be returned to the
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender, or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures under
"The Exchange Offer -- Procedures for Tendering" at any time on or prior to the
Expiration Date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, CCI shall not be
required to accept for exchange, or to issue New Notes in exchange for, any Old
Notes and may terminate or amend the Exchange Offer if at any time before the
acceptance of such Old Notes for exchange or the exchange of the New Notes for
such Old Notes, CCI determines that the Exchange Offer violates applicable law,
any applicable interpretation of the staff of the Commission or any order of any
governmental agency or court of competent jurisdiction.
The foregoing conditions are for the sole benefit of CCI and may be
asserted by CCI regardless of the circumstances giving rise to any such
condition or may be waived by CCI in whole or in part at any time and from time
to time in its sole discretion. The failure by CCI at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right that may be asserted at any time and
from time to time.
In addition, CCI will not accept for exchange any Old Notes tendered, and
no New Notes will be issued in exchange for any such Old Notes, if at such time
any stop order shall be threatened or in effect with respect to the Registration
Statement of which this Prospectus constitutes a part or the qualification of
the Indenture under the Trust Indenture Act of 1939, as amended (the "TIA"). In
any such event CCI is required to use every reasonable effort to obtain the
withdrawal of any stop order at the earliest possible time.
EXCHANGE AGENT
All executed letters of Transmittal should be directed to the Exchange
Agent. BankOne, N.A. has been appointed as Exchange Agent for the Exchange
Offer. Questions, requests for assistance and requests for additional copies of
this Prospectus or of the Letter of Transmittal should be directed to the
Exchange Agent addressed as follows:
Deliver to:
BankOne, N.A., EXCHANGE AGENT
<TABLE>
<CAPTION>
By Registered or Certified Mail: By Overnight Courier: By Hand Delivery:
<S> <C> <C>
235 West Schrock Road 235 West Schrock Road 235 West Schrock Road
Westerville, Ohio 43271-0184 Westerville, Ohio 43271-0184 Westerville, Ohio 43271-0184
Attention: Corporate Trust Attention: Corporate Trust Attention: Corporate Trust
Operations Operations Operations
</TABLE>
Facsimile Transmission Number:
(For Eligible Institutions Only)
614/248-9987
Confirm Receipt of Facsimile by Telephone:
800/346-5153
(Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand, or by overnight delivery service.)
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FEES AND EXPENSES
CCI will not make any payments to brokers, dealers, or others soliciting
acceptances of the Exchange Offer. The principal solicitation is being made by
mail; however, additional solicitations may be made in person or by telephone by
officers and employees of CCI.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by CCI and are estimated in the aggregate to be $175,000,
which includes fees and expenses of the Exchange Agent, accounting, legal,
printing, and related fees and expenses.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
CCI to register New Notes in the name of, or request that Old Notes not tendered
or not accepted in the Exchange Offer be returned to, a person other than the
registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
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DESCRIPTION OF THE NEW NOTES
GENERAL
The New Notes will be issued under the Indenture (the "CCI Indenture")
dated as of July 29, 1998, between CCI and Bank One, N.A., as Trustee (the
"Trustee"). The following statements are subject to the detailed provisions of
the CCI Indenture and are qualified in their entirety by reference to the CCI
Indenture, including the terms made apart thereof by the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Capitalized terms used herein
which are not otherwise defined shall have the meaning assigned to them in the
CCI Indenture.
The CCI common stock issued in conjunction with the CCI Private Offering
(the "Shares") is not being registered with the New Notes. Until the occurrence
of the "Separability Date" as defined below, the Shares are not separately
transferable from the Old Notes. The Shares will not be separately transferable
until the earliest of (i) February 1, 1999; (ii) the date on which a
registration statement with respect to a registered exchange offer for the New
Notes is declared effective under the Securities Act; (iii) the occurrence of an
Event of Default under the Indenture; or (iv) such earlier date as determined by
the Initial Purchaser in its sole discretion. The date of the occurrence of an
event specified in clauses (i) - (iv) above is referred to as the "Separability
Date."
PRINCIPAL, MATURITY AND INTEREST
The New Notes will be issued in an aggregate principal amount at maturity
of up to $114 million and will mature on August 1, 2009. The Old Notes were, and
the New Notes are, being offered at a substantial discount from their principal
amount at maturity. For United States federal income tax purposes, a significant
amount of original issue discount will be recognized by a holder as ordinary
income as such discount is amortized from the Issuance Date, but holders of the
Notes will not receive any cash payments on the Notes until February 1, 2004.
See "Certain United States Federal Income and Tax Considerations -- Original
Issue Discount."
No cash interest will accrue on the Notes until August 1, 2003.
Beginning on August 1, 2003, cash interest on the Notes will accrue at the
rate of 13 1/4% per annum and will be payable semiannually in arrears on
February 1 and August 1, commencing February 1, 2004, to holders of record at
the close of business on the January 15 and July 15 immediately preceding the
interest payment date. Cash interest will accrue from the most recent Interest
Payment Date to which interest has been paid or duly provided for, or, if no
interest has been paid or duly provided for, from August 1, 2003. Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of CCI
maintained for such purpose in the Borough of Manhattan, The City of New York
(which initially shall be the corporate trust office of the Trustee in care of
First Chicago Trust Company of New York, 14 Wall Street, 8th Floor, Suite 4607,
New York, New York 10005), except that, at the option of CCI, payment of
interest, if any, may be made by check mailed to the registered holders of the
Notes at their registered addresses.
The New Notes will be issued only in fully registered form without coupons,
in denominations of $1,000 and any integral multiple thereof. No service charge
will be made for any registration of transfer, exchange or redemption of the
Notes, except in certain circumstances for any tax or other governmental charge
that may be imposed in connection therewith.
RANKING
The New Notes will be senior unsecured obligations of CCI, ranking pari
passu to all existing and future Senior Indebtedness, and senior in right of
payment with all existing and future unsecured senior subordinated and
subordinated Indebtedness of CCI.
CCI, on an unconsolidated basis, has no Indebtedness outstanding other than
the Old Notes.
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Substantially all of the operations of CCI are conducted through its
Subsidiaries and, therefore, CCI is dependent upon the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the Notes.
CCI's Subsidiaries will not be guarantors of the Notes and are separate entities
with no obligation to make payments on the Discount Notes or to make funds
available therefor. Claims of creditors of such Subsidiaries, including trade
creditors, secured creditors and creditors holding Indebtedness and guarantees
issued by such Subsidiaries, and claims of preferred stockholders (if any) of
such Subsidiaries generally will have priority with respect to the assets and
earnings of such Subsidiaries over the claims of creditors of CCI, including
holders of the Notes. The Notes, therefore, will be effectively subordinated to
all Indebtedness and other liabilities and commitments of CCI's Subsidiaries. At
June 30, 1998 on a pro forma basis after giving effect to the Financing Plan,
the total liabilities of CCI's Subsidiaries would have been approximately $235.7
million, including trade payables. Although the CCI Indenture limits the
incurrence of Indebtedness of certain of CCI's Subsidiaries, such limitation is
subject to a number of significant qualifications. Moreover, the CCI Indenture
does not impose any limitation on the incurrence by such Subsidiaries of
liabilities that are not considered Indebtedness under the CCI Indenture. See
"-- Certain Covenants -- Limitation on Indebtedness."
The Indenture provides that in the event of any insolvency or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relative to CCI or its
assets, or any liquidation, dissolution or other winding up of CCI, whether
voluntary or involuntary, or whether or not involving insolvency or bankruptcy,
or any assignment for the benefit of creditors or other marshaling of assets or
liabilities of CCI, all Senior Indebtedness must be paid in full before any
payment or distribution (excluding distributions of certain permitted equity
interests or subordinated securities) is made on account of the principal of,
premium, if any, or interest on the Notes or on account of the purchase,
redemption, defeasance or other acquisition of or in respect of the Notes (other
than payments previously made pursuant to the provisions described under
"Defeasance or Covenant Defeasance").
By reason of such subordination, in the event of liquidation or insolvency,
creditors of CCI who are holders of Senior Indebtedness may recover more,
ratably, than the holders of the Notes, and funds which would be otherwise
payable to the holders of the Notes will be paid to the holders of the Senior
Indebtedness to the extent necessary to pay the Senior Indebtedness in full and
CCI may be unable to meet its obligations fully with respect to the Notes.
The CCI Indenture limits, but does not prohibit, the incurrence by CCI and
its Subsidiaries of additional Indebtedness, and the CCI Indenture prohibits the
incurrence by CCI of Indebtedness that is subordinated in right of payment to
any Senior Indebtedness of CCI and senior in right of payment to the Notes.
OPTIONAL REDEMPTION
The Notes will be redeemable, in whole or in part, at any time after August
1, 2003, at the option of CCI, on not less than 30 and not more than 60 days'
notice prior to the redemption date by first class mail to each holder of Notes
at the following redemption prices (expressed as percentages of the principal
amount at maturity), if redeemed during the twelve-month period beginning with
August 1 of the year indicated below, in each case together with accrued and
unpaid interest, if any, thereon to the date of redemption:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003..................................................... 106.63%
2004..................................................... 104.42
2005..................................................... 102.21
2006 and thereafter...................................... 100.00
</TABLE>
In addition, at any time and from time to time, on or prior to August 1,
2001, CCI may redeem all (but not less than all) of the Notes with the Net Cash
Proceeds of one or more Equity Offerings of or Strategic Equity Investment in
CCI, at a redemption price in cash equal to 113.25% of the Accreted Value to be
redeemed plus accrued and unpaid interest, if any, to the date of redemption.
Any such redemption will be
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required to occur within 45 days following the closing of any such Equity
Offering or Strategic Equity Investment.
Upon the occurrence of a Change of Control, CCI may redeem all, but not
less than all, the Notes in cash, at a redemption price equal to the Accreted
Value thereof plus accrued and unpaid interest to the date of redemption plus
the Applicable Premium. Notice of redemption of the Notes pursuant to this
paragraph shall be mailed to holders of the Notes not more than 30 days
following the occurrence of a Change of Control. CCI may not redeem Notes
pursuant to this paragraph if it has made a Change of Control Offer with respect
to such Change of Control.
If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed, if the Notes are listed on a national securities exchange,
in accordance with the rules of such exchange or, if the Notes are not so
listed, on a pro rata basis or by lot or by such other method that the Trustee
deems to be fair and equitable to holders. If any Note is to be redeemed in part
only, the notice of redemption that relates to such Note shall state the portion
of the principal amount thereof to be redeemed and a new Note or Notes in
principal amount equal to the unredeemed principal portion thereof will be
issued; provided, that no Notes of a principal amount of $1,000 or less shall be
redeemed in part. On and after the redemption date, interest will cease to
accrue on Notes or portions thereof called for redemption as long as CCI shall
have deposited with the Paying Agent for the Notes funds in satisfaction of the
applicable redemption price pursuant to the CCI Indenture.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
The CCI Indenture provides that upon the occurrence of a Change of Control,
each holder of Notes shall have the right to require CCI to repurchase all or
any part of such holder's Notes pursuant to an offer described below (the
"Change of Control Offer") at a purchase price equal to 101% of the Accreted
Value thereof plus any accrued and unpaid interest, if any, thereon to the date
of repurchase (the "Change of Control Payment").
A "Change of Control" means the occurrence of any of the following events:
(i) any Person (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act, including any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than one or more Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening of
an event or otherwise), directly or indirectly, of more than 35% of the total
voting power of the then outstanding Voting Equity Interest of CCI; (ii) CCI
consolidates with, or merges with or into, another Person (other than a Wholly
Owned Restricted Subsidiary) or CCI or any its Subsidiaries sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
the assets of CCI and its Subsidiaries (determined on a consolidated basis) to
any Person (other than CCI or any Wholly Owned Restricted Subsidiary); (iii) CCI
is liquidated or dissolved or adopts a plan of liquidation or dissolution
(whether or not otherwise in compliance with the provisions of the CCI
Indenture); or (iv) a majority of the members of the Board of Directors of CCI
shall consist of Persons who are not Continuing Members.
Within 30 days of the occurrence of a Change of Control, CCI shall send by
first-class mail, postage prepaid, to the Trustee and to each holder of the
Notes, at the address appearing in the register of Notes maintained by the
Registrar, a notice stating: (i) that the Change of Control Offer is being made
pursuant to this covenant and that all Notes tendered will be accepted for
payment; (2) the purchase price and the purchase date, which shall be a business
day no earlier than 30 days nor later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"); (3) that any Note not tendered
will continue to accrue interest; (4) that, unless CCI defaults in the payment
of the Change of Control Payment, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change
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of Control Payment Date; (5) that holders accepting the offer to have their
Notes purchased pursuant to a Change of Control Offer will be required to
surrender the New Notes to the Paying Agent at the address specified in the
notice prior to the close of business on the business day preceding the Change
of Control Payment Date; (6) that holders will be entitled to withdraw their
acceptance if the Paying Agent receives, not later than the close of business on
the third Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the holder,
the principal amount of the Notes delivered for purchase, and a statement that
such holder is withdrawing its election to have such Notes purchased; (7) that
holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered,
provided that each Note purchased and each such New Note issued shall be in an
original principal amount in denominations of $1,000 and integral multiples
thereof; (8) any other procedures that a holder must follow to accept a Change
of Control Offer or effect withdrawal of such acceptance; and (9) the name and
address of the Paying Agent.
On the Change of Control Payment Date, CCI shall, to the extent lawful (i)
accept for payment Notes or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so tendered and (iii) deliver or
cause to be delivered to the Trustee Notes so accepted together with an
Officers' Certificate stating the Notes or portions thereof tendered to CCI. The
Paying Agent shall promptly mail to each holder of Notes so accepted payment in
an amount equal to the purchase price for such Notes, and CCI shall execute and
issue, and the Trustee shall promptly authenticate and mail to such holder, a
new Note equal in principal amount to any unpurchased portion of the Notes
surrendered; provided that each such new Note shall be issued in an original
principal amount in denominations of $1,000 and integral multiples thereof. The
Company will send to the Trustee and the holders of Notes on or as soon as
practicable after the Change of Control Payment Date a notice setting forth the
results of the Change of Control Offer.
CCI will not be required to make a Change of Control Offer if a third party
makes the Change of Control Offer in the manner, at the time and otherwise in
compliance with the requirements set forth in the CCI Indenture applicable to a
Change of Control Offer made by CCI and purchases all Notes or portions thereof
validly tendered and not withdrawn under such Change of Control Offer. CCI will
comply, to the extent applicable, with the requirements of Section 14(e) of the
Exchange Act and any other securities laws or regulations in connection with the
repurchase of Notes pursuant to this covenant.
The definition of Change of Control includes a phrase relating to the sale,
assignment, conveyance, transfer, lease or other disposition of "all or
substantially all" of the assets of CCI and its Subsidiaries. Although there is
a developing body of case law interpreting the phrase "substantially all," there
is not a precise or established definition of the phrase under applicable law.
Accordingly, the ability of a holder of the Notes to require CCI to repurchase
such Notes as a result of a sale, assignment, conveyance, transfer, lease or
other disposition of less than all of the assets of CCI and its Subsidiaries to
another Person or group may be uncertain.
If a Change of Control Offer is made, there can be no assurance that CCI
will have available funds sufficient to pay the Change of Control Purchase Price
for all of the Notes that might be delivered by holders of the Notes seeking to
accept the Change of Control Offer. The Indenture governing the Notes issued by
the Company restricts the Company from paying dividends or making distributions
to CCI. See "-- Ranking." The failure of CCI to make or consummate the Change of
Control Offer or pay the Change of Control Purchase Price when due will give the
Trustee and the holders of the Notes the rights described under "Events of
Default."
The existence of a holder's right to require CCI to repurchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
CCI in a transaction which constitutes a Change of Control.
The provisions of the CCI Indenture do not afford holders of the Notes the
right to require CCI to repurchase the Notes in the event of a highly leveraged
transaction or certain transactions with CCI's management or its Affiliates,
including a reorganization, restructuring, merger or similar transaction
(including, in certain circumstances, an acquisition of CCI by management or its
affiliates) involving CCI that may adversely affect holders of the Notes, if
such transaction is not a transaction defined as a Change of Control. A
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<PAGE> 72
transaction involving CCI's management or its Affiliates, or a transaction
involving a recapitalization of CCI, will result in a Change of Control if it is
the type of transaction specified by such definition.
Asset Sales
The CCI Indenture provides that CCI shall not, and shall not permit any
Restricted Subsidiary to, consummate an Asset Sale unless (i) CCI or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such sale or other disposition at least equal to the fair market value thereof,
as determined in good faith by the Board of Directors of CCI and evidenced in a
board resolution; and (ii) not less than 75% of the consideration received by
CCI or such Restricted Subsidiary, as the case may be, is in the form of cash or
Cash Equivalents.
Within 365 days after the receipt of any Net Available Cash from an Asset
Sale, CCI or the applicable Restricted Subsidiary may apply such Net Available
Cash to: (A) acquire all or substantially all of the assets of a Related
Business; (B) acquire Voting Stock of a Related Business from a Person that is
not a Subsidiary of CCI; provided, that, (x) after giving effect thereto, CCI or
its Restricted Subsidiary owns a majority of such Voting Stock and (y) such
acquisition is otherwise made in accordance with the CCI Indenture, including,
without limitation, the "Limitation on Restricted Payments" covenant; (C) make a
capital expenditure or acquire other long-term assets that are used or useful in
a Related Business; or (D) prepay, repay, redeem or purchase Indebtedness
outstanding under the Senior Credit Agreement. To the extent of the balance of
such Net Available Cash after application in accordance with clauses (A), (B),
(C) or (D) ("Excess Proceeds"), CCI shall make an Offer to holders of the Notes
to purchase Notes and an offer to holders of Pari Passu Indebtedness to
repurchase such indebtedness pursuant to and subject to the conditions set forth
below.
Notwithstanding the foregoing provisions, CCI and its Restricted
Subsidiaries shall not be required to apply any Net Available Cash in accordance
herewith except to the extent that the aggregate Net Available Cash from all
Asset Sales which are not applied in accordance with this covenant exceeds $10
million. Pending application of Net Available Cash pursuant to this covenant,
such Net Available Cash shall be invested in Permitted Investments.
For the purposes of this covenant, the following are deemed to be cash: (x)
the assumption by the transferee of Indebtedness of CCI (other than Indebtedness
that is subordinated to the Notes and other than any Disqualified Equity
Interest of CCI) or Indebtedness of any Restricted Subsidiary and the release of
CCI or such Restricted Subsidiary from all liability on such Indebtedness in
connection with such Asset Sale; (y) securities received by CCI or any
Restricted Subsidiary from the transferee that are converted by CCI or such
Restricted Subsidiary into cash within 20 days of the applicable Asset Sale (to
the extent of the cash received); and (z) any liabilities (as shown on CCI's or
such Restricted Subsidiary's most recent balance sheet) of CCI or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any guarantee thereof) that are assumed by
the transferee of any such assets pursuant to a customary novation agreement
that releases CCI or any such Restricted Subsidiary from further liability.
When the aggregate amount of Excess Proceeds exceeds $10 million or more,
CCI will apply the Excess Proceeds to the repayment of the Notes and any other
Pari Passu Indebtedness outstanding with similar provisions requiring CCI to
make an offer to purchase such Indebtedness with the proceeds from any Asset
Sale as follows: (A) CCI will make an offer to purchase (an "Offer") from all
holders of the Discount Notes in accordance with the procedures set forth in the
CCI Indenture in the maximum principal amount (expressed as a multiple of
$1,000) of Notes that may be purchased out of an amount ( the "Note Amount")
equal to the product of such Excess Proceeds multiplied by a fraction, the
numerator of which is the outstanding principal amount of the Notes, and the
denominator of which is the sum of the outstanding principal amount of the Notes
and such Pari Passu Indebtedness (subject to proration in the event such amount
is less than the aggregate Offered Price (as defined herein) of all Notes
tendered) and (B) to the extent required by such Pari Passu Indebtedness to
permanently reduce the principal amount of such Pari Passu Indebtedness, CCI
will make an offer to purchase or otherwise repurchase or redeem Pari Passu
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Indebtedness (a "Pari Passu Offer") in an amount (the "Pari Passu Debt Amount")
equal to the excess of the Excess Proceeds over the Note Amount; provided that
in no event will CCI be required to make a Pari Passu Offer in a Pari Passu Debt
Amount exceeding the principal amount of such Pari Passu Indebtedness. The offer
price for the Notes will be payable in cash in an amount equal to 100% of the
principal amount of the Notes plus accrued and unpaid interest, if any, to the
date (the "Offer Date") such Offer is consummated (the "Offered Price"), in
accordance with the procedures set forth in the CCI Indenture. To the extent
that the aggregate Offered Price of the Notes tendered pursuant to the Offer is
less than the Note Amount relating thereto or the aggregate amount of Pari Passu
Indebtedness that is purchased in a Pari Passu Offer is less than the Pari Passu
Debt Amount, CCI may use any remaining Excess Proceeds for general corporate
purposes. If the aggregate principal amount of Discount Notes and Pari Passu
Indebtedness surrendered by holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased on a pro rata
basis. Upon the completion of the purchase of all the Notes tendered pursuant to
an Offer and the completion of a Pari Passu Offer, the amount of Net Available
Cash, if any shall be reset at zero.
If CCI is required to make an Offer, CCI shall mail, within 30 days
following the Reinvestment Date, a notice to the holders of Notes stating, among
other things: (1) that such holders have the right to require CCI to apply the
Excess Proceeds to repurchase such Notes at a purchase price in cash equal to
100% of the Accreted Value thereof plus accrued and unpaid interest, if any, to
the date of purchase; (2) the purchase date, which shall be no earlier than 30
days and not later than 60 days from the date such notice is mailed; (3) the
instructions, determined by CCI, that each holder must follow in order to have
such Notes repurchased; and (4) the calculations used in determining the amount
of Excess Proceeds to be applied to the repurchase of such Notes.
CCI will comply, to the extent applicable, with the requirements of Section
14(e) of the Exchange Act and any other securities laws or regulations in
connection with the repurchase of Notes pursuant to this covenant.
The Indenture governing the Notes issued by the Company restricts the
Company from paying dividends or making any distribution to CCI. If CCI is
unable to obtain dividends or receive distributions from the Company sufficient
to permit repurchase of the Notes pursuant to an Offer, CCI will not have the
financial resources to make an Offer.
EVENTS OF DEFAULT
An Event of Default is defined in the CCI Indenture as (i) a default in any
payment of interest on any Note when due, continued for 30 days, (ii) a default
in the payment of principal (or premium, if any, on) of any Note when due at its
Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise, (iii) the failure by CCI to comply with its
obligations under "Certain Covenants -- Merger or Sales of Assets," (iv) the
failure by CCI to comply for 30 days after notice with any of its obligations
under the covenants described under "Repurchase at the Option of
Holders -- Change of Control" or "Certain Covenants" (in each case, other than a
failure to purchase Notes), (v) the failure by CCI to comply for 60 days after
notice with its other agreements contained in the CCI Indenture, (vi) the
failure by CCI or any Restricted Subsidiary of CCI to pay any Indebtedness
within any applicable grace period after final maturity or the acceleration of
any such Indebtedness by the holders thereof because of a default if the total
amount of such Indebtedness unpaid or accelerated exceeds $5 million or its
foreign currency equivalent (the "cross acceleration provision"), (vii) certain
events of bankruptcy, insolvency or reorganization of CCI or any Restricted
Subsidiary of CCI (the "bankruptcy provisions") or (viii) any judgment or decree
for the payment of money in excess of $5 million is rendered against CCI or any
Restricted Subsidiary of CCI and either (A) an enforcement proceeding has been
commenced by any creditor upon such judgment or decree or (B) such judgment or
decree remains outstanding for a period of 60 days following such judgment and
is not discharged, waived or stayed within 10 days of after notice (the
"judgment default provision").
The CCI Indenture provides that if an Event of Default (other than an Event
of Default resulting from certain events of bankruptcy, insolvency or
reorganization) shall have occurred and be continuing, the Trustee
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or the holders of not less than 25% in principal amount of the Notes then
outstanding may declare the Accreted Value of all the Notes to be due and
payable immediately. In case an Event of Default resulting from certain events
of bankruptcy, insolvency or reorganization shall occur, such amount with
respect to all of the Notes shall be due and payable immediately without any
declaration or other act on the part of the Trustee or the holders of the Notes.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of Discount Notes outstanding by written
notice to CCI and the Trustee, may rescind and annul such declaration and its
consequences if (a) CCI has paid or deposited with the Trustee a sum sufficient
to pay (i) all sums paid or advanced by the Trustee under the CCI Indenture and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, (ii) all overdue interest on all Notes then
outstanding, (iii) the principal of and premium, if any, on any Notes then
outstanding which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes and (iv) to the
extent that payment of such interest is lawful, interest upon overdue interest
at the rate borne by the Notes; (b) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction; and (c) all Events of
Default, other than the non-declaration of acceleration, have been cured or
waived as provided in the CCI Indenture. No such rescission shall affect any
subsequent default or impair any right consequent thereon.
The holders of not less than a majority in aggregate principal amount of
the Notes outstanding may on behalf of the holders of all outstanding Notes
waive any past default under the CCI Indenture and its consequences, except a
default (i) in the payment of the principal of, premium, if any, or interest on
any Note (which may only be waived with the consent of each holder of Notes
effected) or (ii) in respect of a covenant or provision which under the CCI
Indenture cannot be modified or amended without the consent of the holder of
each Note affected by such modification or amendment.
No holder of any of the Notes has any right to institute any proceedings
with respect to the CCI Indenture or any remedy thereunder, unless the holders
of at least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee under the Notes and the CCI Indenture, the Trustee
has failed to institute such proceeding within 15 days after receipt of such
notice and the Trustee, within such 15-day period, has not received directions
inconsistent with such written request by holders of a majority in aggregate
principal amount of the outstanding Notes. Such limitations do not, however,
apply to a suit instituted by a holder of a Note for the enforcement of the
payment of the principal of, premium, if any, or interest on such Note on or
after the respective due dates expressed in such Note.
CCI is required to notify the Trustee within five business days of the
occurrence of any Default. CCI is required to deliver to the Trustee, on or
before a date not more than 60 days after the end of each fiscal quarter and not
more than 120 days after the end of each fiscal year, a written statement as to
compliance with the CCI Indenture, including whether or not any Default has
occurred.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee subject to certain
limitations specified in the CCI Indenture. Subject to the provisions of the CCI
Indenture relating to the duties of the Trustee, in case an Event of Default
shall occur and be continuing, the Trustee will be under no obligation to
exercise any of its rights or powers under the CCI Indenture at the request or
direction of any of the holders of the Notes, unless such holders have offered
to the Trustee reasonable indemnity.
CERTAIN COVENANTS
Limitation on Restricted Payments
The CCI Indenture provides that, so long as any of the Notes remain
outstanding, CCI shall not, and shall not permit any Restricted Subsidiary to,
make any Restricted Payment if (i) immediately before or immediately after
giving effect to such Restricted Payment, a Default or Event of Default shall
have occurred
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and be continuing or shall occur as a consequence of such Restricted Payment;
(ii) immediately after giving effect to such Restricted Payment, CCI would not
be able to incur $1.00 of additional Indebtedness under the Debt to Operating
Cash Flow Ratio of the first paragraph of "Limitation on Indebtedness" below; or
(iii) immediately after giving effect to any such Restricted Payment, the
aggregate of all Restricted Payments which shall have been made on or after the
date of the CCI Indenture (the amount of any Restricted Payment, if other than
cash, to be based upon the fair market value thereof on the date of such
Restricted Payment) would exceed an amount equal to the difference between (a)
the Cumulative Credit and (b) 1.4 times Cumulative Interest Expense.
"Restricted Payment" means (i) any dividend (whether made in cash, property
or securities) on or with respect to any Equity Interests of CCI or of any
Restricted Subsidiary (other than any dividend made to CCI or another Wholly
Owned Restricted Subsidiary or any dividend payable in Equity Interests of CCI
or any Restricted Subsidiaries); or (ii) any distribution (whether made in cash,
property or securities) on or with respect to any Equity Interests of CCI or of
any Restricted Subsidiary (other than any distribution made to CCI or another
Wholly Owned Subsidiary or any distribution payable in Equity Interests of CCI
or any Restricted Subsidiary); or (iii) any redemption, repurchase, retirement
or other direct or indirect acquisition of any Equity Interests of CCI or a
Restricted Subsidiary, or any warrants, rights or options to purchase or acquire
any such Equity Interests or any securities exchangeable for or convertible into
any such Equity Interests; or (iv) any redemption, repurchase, retirement or
other direct or indirect acquisition for value or other payment of principal,
prior to any scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, of any Subordinated Obligations; or (v) any Investment (other than
a Permitted Investment).
The provisions of the first paragraph of this covenant shall not prevent
(i) the retirement of any of CCI's Equity Interests in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a Subsidiary
of CCI or an employee stock ownership plan or to a trust established by CCI or
any Subsidiary of CCI for the benefit of its employees) of Equity Interests of
CCI (other than any Disqualified Equity Interest), provided that the Net Cash
Proceeds from the issuance are excluded from clause (i) of the definition of
Cumulative Credit; (ii) the payment of any dividend or distribution on, or
redemption of Equity Interests within 60 days after the date of declaration of
such dividend or distribution or the giving of formal notice of such redemption,
if at the date of such declaration or giving of such formal notice such payment
or redemption would comply with the first paragraph of this covenant and the
other provisions of the CCI Indenture; (iii) investments constituting Restricted
Payments made as a result of the receipt of non-cash consideration from any
Asset Sale made pursuant to and in compliance with the provisions described
under "Repurchase at the Option of Holders -- Asset Sales" above; (iv) the
redemption, repurchase, retirement, defeasance or other acquisition of any
Subordinated Obligations in exchange for, or out of Net Cash Proceeds of the
substantially concurrent sale (other than to a Subsidiary of CCI or any employee
stock ownership plan or to a trust established by CCI or any Subsidiary of CCI
(for the benefit of its employees)) of Equity Interests of CCI (other than any
Disqualified Equity Interest); and (v) the making and consummation of (A) an
Offer in accordance with the provisions of the CCI Indenture with any Excess
Proceeds or (B) a Change of Control Offer with respect to the Notes in
accordance with the provisions of the CCI Indenture; provided, however, that in
the case of clause (ii), no Default or Event of Default shall have occurred and
be continuing at the time of such Restricted Payment or as a result thereof. In
determining the aggregate amount of Restricted Payments made on or after the
date of the CCI Indenture, Restricted Payments made pursuant to clause (ii)
shall be included in such calculation.
Limitation on Indebtedness
The CCI Indenture provides that CCI shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, incur any Indebtedness
(including Acquired Indebtedness) except for Permitted Indebtedness; provided,
however, that CCI or any Restricted Subsidiary which is a Subsidiary Guarantor
may incur Indebtedness if, at the time of and immediately after giving pro forma
effect to such incurrence of Indebtedness and the application of the proceeds
therefrom, the Debt to Operating Cash Flow Ratio would be less than or equal to
8.0 to 1.0.
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The foregoing limitations will not apply to the incurrence of any of the
following (collectively, "Permitted Indebtedness"), each of which shall be given
independent effect:
(a) Indebtedness under the Notes and the CCI Indenture;
(b) Indebtedness of CCI and the Restricted Subsidiaries outstanding on
the Issuance Date and listed on a schedule to the CCI Indenture, other than
Indebtedness described in clause (a), (c), (d), (f) or (j) of this
paragraph;
(c) Indebtedness of (x) any Wholly Owned Restricted Subsidiary owed to
or issued to and held by CCI or any Restricted Subsidiary and (y) CCI owed
to and held by any Wholly Owned Restricted Subsidiary which is unsecured
and subordinated in right of payment to the payment and performance of
CCI's obligations under the CCI Indenture and the Notes; provided, however,
that an incurrence of Indebtedness that is not permitted by this clause (c)
shall be deemed to have occurred upon (i) any sale or other disposition of
any Indebtedness of CCI or a Restricted Subsidiary referred to in this
clause (c) to any Person (other than CCI or a Wholly Owned Restricted
Subsidiary) such that such Restricted Subsidiary ceases to be a Restricted
Subsidiary or (ii) any designation of a Restricted Subsidiary which holds
Indebtedness of CCI as an Unrestricted Subsidiary;
(d) Guarantees by any Restricted Subsidiary of Indebtedness of CCI
permitted in accordance with the provisions of the CCI Indenture;
(e) Indebtedness of any Restricted Subsidiary under the Senior Credit
Agreement in the aggregate principal amount at any one time outstanding not
to exceed $125 million;
(f) Indebtedness of CCI or any Restricted Subsidiary to the extent
representing a replacement, renewal, refinancing or extension
(collectively, a "refinancing") of outstanding Indebtedness of CCI or any
Restricted Subsidiary, as the case may be, incurred in compliance with
clause (a), (b), (e), (g) or (j) of this paragraph of this covenant;
provided, however, that (i) Indebtedness of CCI may not be refinanced under
this clause (f) with Indebtedness of any Restricted Subsidiary, (ii) any
such refinancing shall not exceed the sum of the principal amount or
liquidation preference or redemption payment value (or, if such
Indebtedness provides for a lesser amount to be due and payable upon a
declaration of acceleration thereof at the time of such refinancing, an
amount no greater than such lesser amount) of the Indebtedness being
refinanced plus the amount of accrued interest or dividends thereon and
such reasonable fees and expenses incurred in connection therewith, (iii)
Indebtedness representing a refinancing of Indebtedness of CCI shall not
mature prior to the stated maturity of the Indebtedness refinanced and
shall have a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Indebtedness being refinanced,
(iv) Subordinated Obligations of CCI may only be refinanced with
Subordinated Obligations of CCI, and (v) Other Pari Passu Debt which is
unsecured may only be refinanced with unsecured Indebtedness, which is
either Other Pari Passu Debt or Subordinated Obligations;
(g) Indebtedness of CCI or a Restricted Subsidiary represented by
Capitalized Lease Obligations, mortgage financings, performance bonds,
purchase money obligations or letters of credit, in each case incurred for
the purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of CCI or such Restricted Subsidiary in an aggregate principal
amount not to exceed $10 million at any time outstanding;
(h) Indebtedness incurred and outstanding on or prior to the date on
which such Restricted Subsidiary was acquired by CCI (other than
Indebtedness incurred in connection with, or to provide all or any portion
of the funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by CCI); provided, however,
that on the date of such acquisition and after giving effect thereto, the
Debt to Operating Cash Flow Ratio would have been less than or equal to the
Debt to Operating Cash Flow Ratio immediately prior thereto;
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(i) Indebtedness of CCI and any Restricted Subsidiary under a Hedging
Agreement related to floating interest on Indebtedness under the Senior
Credit Agreement provided that such Hedging Agreement is designed solely to
protect against fluctuations in interest rates and does not increase the
Indebtedness of the obligor outstanding at any time other than as a result
of fluctuations in interest rates;
(j) Indebtedness under the Company Notes and the related Indenture;
and
(k) In addition to any indebtedness described in clauses (a) through
(j) above, Indebtedness of CCI or any of the Restricted Subsidiary so long
as the aggregate principal amount of all such indebtedness incurred
pursuant to this clause (k) does not exceed $5 million at any one time
outstanding.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness described in clauses (a) through (i) above
or is entitled to be incurred pursuant to the first paragraph of this covenant,
CCI shall classify such item of Indebtedness in any manner that complies with
this covenant and such item of Indebtedness shall be treated as having been
incurred pursuant to only one of such clauses or pursuant to the first paragraph
hereof.
Limitation on Transactions with Affiliates. (a) CCI will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, enter into or
conduct any transaction or series of transactions (including the purchase, sale,
lease or exchange of any property, employee compensation arrangements or the
rendering of any service) with any Affiliate, officers or directors of CCI (an
"Affiliate Transaction") unless (i) the terms of such transaction are no less
favorable to CCI or such Restricted Subsidiary, as the case may be, than those
that could be obtained at the time of such transaction in arm's-length dealings
with a Person who is not such an Affiliate; (ii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $1.0 million, the terms of
such transaction are set forth in writing and shall have been approved by a
majority of the members of the Board of Directors having no personal stake in
such Affiliate Transaction (and such majority determines that such Affiliate
Transaction satisfies the criteria in clause (i) above) and (iii) in the event
such Affiliate Transaction involves an aggregate amount in excess of $10
million, CCI has received a written opinion from a nationally recognized
independent investment banking firm, or nationally recognized accounting or
appraisal firm, that such Affiliate Transaction is fair to CCI and its
Restricted Subsidiaries from a financial point of view.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i)
any Restricted Payment permitted to be made pursuant to the covenant "Limitation
on Restricted Payments," (ii) any issuance of securities, or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the funding
of, employment arrangements, stock options and stock ownership plans approved by
the Board of Directors and otherwise permitted under the CCI Indenture, (iii)
the grant of stock options or similar rights to employees and directors of CCI
in the ordinary course of business pursuant to plans approved by the Board of
Directors, and otherwise permitted under the CCI Indenture, (iv) loans or
advances to employees in the ordinary course of business in accordance with the
past practices of CCI or its Restricted Subsidiaries, but in any event not to
exceed $1.0 million in the aggregate outstanding at any one time, (v) the
payment of reasonable fees to directors of CCI and its Restricted Subsidiaries
who are not employees of CCI or its Restricted Subsidiaries, (vi) any
transaction between CCI and a Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries or (vii) the payment of Investment Banking Fees.
Limitation on Sale or Issuance of Capital Stock of Restricted Subsidiaries
CCI (a) will not, and will not permit any Restricted Subsidiary of CCI to,
directly or indirectly, transfer, convey, sell, lease or otherwise dispose of
any Equity Interest of any Restricted Subsidiary to any Person (other than to
CCI or a Wholly Owned Restricted Subsidiary), unless (i) such transfer,
conveyance, sale, lease or other disposition is of all the Equity Interest of
such Restricted Subsidiary and (ii) the Net Cash Proceeds from such transfer,
conveyance, sale, lease or other disposition are applied in accordance with the
provision described above under "Repurchase at the Option of Holders -- Asset
Sales" and (b) will not permit any Restricted Subsidiary to issue any of its
Equity Interest (other than, if required under applicable
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law, shares of its Equity Interest constituting directors' qualifying shares) to
any Person other than to CCI or Wholly Owned Restricted Subsidiary.
Limitation on Sale/Leaseback Transactions
CCI will not, and will not permit any Restricted Subsidiary to, enter into
any Sale/Leaseback Transaction with respect to any property unless (i) CCI or
such Restricted Subsidiary would be entitled to (A) incur Indebtedness in an
amount equal to the Attributable Indebtedness with respect to such Sale/
Leaseback Transaction pursuant to the covenant described under "-- Limitation on
Indebtedness" and (B) create a Lien on such property securing such Attributable
Indebtedness without equally and ratably securing the Notes pursuant to the
covenant described under "-- Limitations on Liens," (ii) the net cash proceeds
received by CCI or any Restricted Subsidiary in connection with such
Sale/Leaseback Transaction are at least equal to the fair value (as determined
in good faith by the Board of Directors of CCI and certified in an Officers'
Certificate to the Trustee) of such property and (iii) the transfer of such
property is permitted by, and CCI or such Restricted Subsidiary applies the
proceeds of such transaction in compliance with, the covenant described under
"Repurchase at the Option of Holders -- Asset Sales."
Limitation on Liens
The CCI Indenture provides that CCI shall not, and will not permit any
Restricted Subsidiary to, directly or indirectly incur any Indebtedness secured
by a Lien against or on any of its property or assets now owned or hereafter
acquired by CCI or any Restricted Subsidiary unless contemporaneously therewith,
(a) if such Indebtedness is not subordinated Indebtedness, effective provision
is made to secure the Notes equally and ratably with such secured Indebtedness,
and (b) if such Indebtedness is subordinated Indebtedness, the Notes are secured
by a lien against such assets or property that is senior in priority to the
liens securing such Subordinated Indebtedness. This restriction does not,
however, apply to Indebtedness secured by (i) Liens securing the Indebtedness
under the Senior Credit Agreement; (ii) Liens, if any, in effect on the date of
the CCI Indenture; (iii) Liens in favor of governmental bodies to secure
progress or advance payments; (iv) Liens on Equity Interests or Indebtedness
existing at the time of the acquisition thereof (including acquisition through
merger or consolidation), provided that such Liens were not incurred in
anticipation of such acquisition; (v) Liens securing the Notes; (vi) Liens
securing Indebtedness of CCI in an amount not to exceed $5 million at any time
outstanding; (vii) Other Permitted Liens; and (viii) any extension, renewal or
replacement of any Lien referred to in the foregoing clauses (i) through (vii),
inclusive, but only to the extent such Liens do not extend to any other property
or assets (other than improvements).
Limitation on Guarantees of Certain Indebtedness
The CCI Indenture provides that CCI shall not (a) permit any Restricted
Subsidiary to guarantee any Indebtedness of CCI other than the Notes (the "Other
Indebtedness"), or (b) pledge any intercompany Indebtedness representing
obligations of any of its Restricted Subsidiaries to secure the payment of Other
Indebtedness, in each case unless such Restricted Subsidiary, CCI and the
Trustee execute and deliver a supplemental indenture causing such Restricted
Subsidiary to guarantee CCI's obligations under the CCI Indenture and the New
Notes to the same extent that such Restricted Subsidiary guaranteed CCI's
obligations under the Other Indebtedness (including waiver of subrogation, if
any, except that (i) such guarantee need not be secured unless required pursuant
to "-- Limitation on Liens" and (ii) if such Indebtedness is by its terms
expressly subordinated to the Notes, any such assumption, guarantee or other
liability of such Restricted Subsidiary with respect to such Indebtedness shall
be subordinated to such Restricted Subsidiary's guarantee of the Notes at least
to the same extent as such Indebtedness is subordinated to the Notes).
Notwithstanding the foregoing, any guarantee by a Restricted Subsidiary of
the Notes shall provide by its terms that it (and all Liens securing the same)
shall be automatically and unconditionally released and discharged upon any
sale, exchange or transfer, to any Person not an Affiliate of CCI, of all of
CCI's Equity Interest in, or all or substantially all the assets of, such
Restricted Subsidiary, which transaction is in compliance with the terms of the
CCI Indenture and such Restricted Subsidiary is released from all
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guarantees, if any, by it of other Indebtedness of CCI or any Restricted
Subsidiaries and (with respect to any guarantees created after the date of the
CCI Indenture) the release by the holders of the Indebtedness of CCI described
in clause (a) above of their security interest or their guarantee by such
Restricted Subsidiary (including any deemed release upon payment in full of all
obligations under such Indebtedness), at such time as (A) no other Indebtedness
of CCI has been secured or guaranteed by such Restricted Subsidiary, as the case
may be, or (B) the holders of all such other Indebtedness which is secured or
guaranteed by such Restricted Subsidiary also release their security interest in
or guarantee by such Restricted Subsidiary (including any deemed release upon
payment in full of all obligations under such Indebtedness).
Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
The CCI Indenture provides that CCI shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any Restricted Subsidiary to (a) pay dividends in
cash or otherwise or make any other distributions to CCI or any Restricted
Subsidiary on its Equity Interests; (b) pay any Indebtedness owed to CCI or any
Restricted Subsidiary; (c) make loans or advances or guarantee any such loans or
advances, to CCI or any Restricted Subsidiary; (d) transfer any of its
properties or assets to CCI or any Restricted Subsidiary; (e) grant Liens on the
assets of CCI or any Restricted Subsidiary in favor of the holders of the Notes;
or (f) guarantee the Notes or any renewals or refinancings thereof (any of the
actions described in clauses (a) through (f) above is referred to herein as a
"Specified Action"), except for (i) such encumbrances or restrictions arising by
reason of Acquired Indebtedness of any Restricted Subsidiary existing at the
time such Person became a Restricted Subsidiary, provided that such encumbrances
or restrictions were not created in anticipation of such Person becoming a
Restricted Subsidiary and are not applicable to CCI or any other Restricted
Subsidiary, (ii) such encumbrances or restrictions arising under refinancing
indebtedness permitted by clause (f) of the second paragraph under
"-- Limitation on Indebtedness" above; provided that the terms and conditions of
any such restrictions are not less favorable to the holders of Notes than those
under the Indebtedness being refinanced, (iii) customary provisions restricting
the assignment of any contract of CCI or any Restricted Subsidiary, (iv) with
respect to clause (d) above, restrictions in security agreements or mortgages
securing Indebtedness of a Restricted Subsidiary to the extent the restriction
restricts the transfer of property subject to such security agreement or
mortgage; (v) restrictions pursuant to the Senior Credit Agreement; and (vi)
restrictions pursuant to the Notes of the Company and the indenture under which
such Notes were issued.
Limitation on Unrestricted Subsidiaries
CCI may designate after the Issuance Date any Subsidiary (other than a
Subsidiary which is a guarantor) as an "Unrestricted Subsidiary" under the CCI
Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(b) CCI would be permitted to make an Investment (other than a
Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
"Limitation on Restricted Payments" above in an amount (the "Designation
Amount") equal to the greater of (1) the net book value of CCI's interest
in such Subsidiary calculated in accordance with GAAP or (2) the Fair
Market Value of CCI's interest in such Subsidiary as determined in good
faith by CCI's board of directors;
(c) CCI would be permitted under the CCI Indenture to incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
covenant described under "-- Limitation on Indebtedness" at the time of
such Designation (assuming the effectiveness of such Designation);
(d) such Unrestricted Subsidiary does not own any Equity Interest in
any Restricted Subsidiary of CCI which is not simultaneously being
designated an Unrestricted Subsidiary;
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(e) such Unrestricted Subsidiary is not liable, directly or
indirectly, with respect to any Indebtedness other than Unrestricted
Subsidiary Indebtedness, provided that an Unrestricted Subsidiary may
provide a guarantee for the Notes; and
(f) such Unrestricted Subsidiary is not a party to any agreement,
contract, arrangement or understanding at such time with CCI or any
Restricted Subsidiary unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to CCI or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of CCI or, in the event such condition is
not satisfied, the value of such agreement, contract, arrangement or
understanding to such Unrestricted Subsidiary shall be deemed a Restricted
Payment.
In the event of any such Designation, CCI shall be deemed to have made an
Investment constituting a Restricted Payment pursuant to the covenant
"-- Limitation on Restricted Payments" for all purposes of the CCI Indenture in
the Designation Amount.
The CCI Indenture also provides that CCI shall not and shall not cause or
permit any Restricted Subsidiary to at any time (x) provide credit support for,
or subject any of its property or assets (other than the Equity Interest of any
Unrestricted Subsidiary) to the satisfaction of, any Indebtedness of any
Unrestricted Subsidiary (including any undertaking, agreement or instrument
evidencing such Indebtedness) (other than permitted Investments in Unrestricted
Subsidiaries) or (y) be directly or indirectly liable for any Indebtedness of
any Unrestricted Subsidiary. For purposes of the foregoing, the Designation of a
Subsidiary of CCI as an Unrestricted Subsidiary shall be deemed to be the
designation of all of the Subsidiaries of such Subsidiary as Unrestricted
Subsidiaries.
CCI may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(a) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation;
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the CCI
Indenture; and
(c) unless such redesignated Subsidiary shall not have any
Indebtedness outstanding (other than Indebtedness that would be Permitted
Indebtedness), immediately after giving effect to such proposed Revocation,
and after giving pro forma effect to the incurrence of any such
Indebtedness of such redesignated Subsidiary as if such Indebtedness was
incurred on the date of the Revocation, CCI could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the covenant
described under "-- Limitation on Indebtedness."
All Designations and Revocations must be evidenced by a resolution of the
board of directors of CCI delivered to the Trustee certifying compliance with
the foregoing provisions.
Reports
The CCI Indenture provides that, whether or not CCI is subject to Section
13(a) or 15(d) of the Exchange Act or any successor provision thereto, CCI shall
file with the SEC (if permitted by SEC practice and applicable law and
regulations) so long as the Notes are outstanding the annual reports, quarterly
reports and other periodic reports which CCI would have been required to file
with the SEC pursuant to Section 13(a) or 15(d) or any successor provision
thereto if CCI was so subject on or prior to the respective dates (the "Required
Filing Dates") by which CCI would have been required to file such documents if
CCI was so subject. CCI shall also in any event (a) within 15 days of each
Required Filing Date (whether or not permitted or required to be filed with the
SEC) (i) transmit or cause to be transmitted by mail to all holders of Notes, at
such holder's address appearing in the register maintained by the Registrar,
without cost to such holders, and (ii) file with the Trustee, copies of the
annual reports, quarterly reports and other documents which CCI is required to
file with the SEC pursuant to the preceding sentence, or if such filing is not
so
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permitted, information and data of a similar nature, and (b) if, notwithstanding
the preceding sentence, filing such documents by CCI with the SEC is not
permitted by SEC practice or applicable law or regulations, promptly upon
written request supply copies of such documents to any holder of Notes. CCI
shall not be obligated to file any such reports with the SEC if the SEC does not
permit such filings for all companies similarly situated other than due to any
action or inaction by CCI. CCI will also comply with Section 314(a) of the TIA.
In addition, for so long as any of the Notes remain outstanding and prior to the
later of the consummation of the Exchange Offer and the effectiveness of the
Shelf Registration Statement, if required, CCI shall furnish to holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
Merger or Sales of Assets
The CCI Indenture provides that CCI shall not, in a single transaction or
through a series of related transactions, consolidate or merge with or into, or
sell, assign, convey, lease, transfer or otherwise dispose of, all or
substantially all of its assets to, another Person or a group of Persons, or
permit any Restricted Subsidiary to do so if such transaction would result in
the transfer of all or substantially all of the assets of CCI on a consolidated
basis, unless (i) either (A) CCI shall be the continuing Person, or (B) the
Person formed by or surviving any such consolidation or merger (if other than
CCI), or to which any such transfer shall have been made, is a corporation,
limited liability company or limited partnership organized and existing under
the laws of the United States, any State thereof or the District of Columbia;
(ii) the surviving Person (if other than CCI) expressly assumes by supplemental
indenture all the obligations of CCI under the Notes and the CCI Indenture;
(iii) immediately after giving effect to such transaction, no Default or Event
of Default shall have occurred and be continuing; (iv) immediately after giving
effect to such transaction, the surviving Person would be able to incur $1.00 of
additional Indebtedness under the Debt to Operating Cash Flow Ratio of the first
paragraph of "-- Limitation of Indebtedness" above; and (v) CCI shall have
delivered to the Trustee prior to the proposed transaction an Officers'
Certificate and an Opinion of Counsel, each stating that the proposed
consolidation, merger or transfer and such supplemental indenture will comply
with the CCI Indenture.
In addition, each Subsidiary Guarantor shall not, and the CCI shall not
permit a Subsidiary Guarantor to, in a single transaction or through a series of
related transactions, consolidate with or merge with or into any other Person
(other than the Issuer or any Subsidiary Guarantor) or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its
properties and assets to any Person or group of Persons (other than the CCI or
any Subsidiary Guarantor), unless clauses (i)-(v) above are satisfied with
respect to such Subsidiary Guarantor (rather than the CCI).
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs in
which CCI is not the Surviving Person and the Surviving Person is to assume all
the obligations of CCI under the Notes and the CCI Indenture pursuant to a
supplemental indenture, such Surviving Person shall succeed to, and be
substituted for, and may exercise every right and power of CCI and CCI would be
discharged from its obligations under the CCI Indenture and the Notes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the CCI Indenture. Reference is made to the CCI Indenture
for the full definition of all such terms as well as any other capitalized terms
used herein for which no definition is provided.
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"Accreted Value" means with respect to any Note, as of any specified date
on or prior to August 1, 2003, the amount provided below for each $1,000
principal amount at maturity of Notes:
(i) if the specified date occurs on one of the following dates after
the issue date (each a "Semiannual Accrual Date"), the Accreted Value will
equal the amount set forth below for such Semiannual Accrual Date:
<TABLE>
<CAPTION>
SEMIANNUAL ACCRUAL DATE ACCRETED VALUE
----------------------- --------------
<S> <C>
August 1, 1998.............................................. 526.85
February 1, 1999............................................ 561.75
August 1, 1999.............................................. 598.97
February 1, 2000............................................ 638.65
August 1, 2000.............................................. 680.96
February 1, 2001............................................ 726.08
August 1, 2001.............................................. 774.18
February 1, 2002............................................ 825.47
August 1, 2002.............................................. 880.16
February 1, 2003............................................ 938.47
August 1, 2003.............................................. 1,000.00
</TABLE>
(ii) if the specified date occurs before February 1, 1999, the
Accreted Value will equal the sum of (a) $526.14 and (b) an amount equal to
the product of (1) the Accreted Value on February 1, 1999 less $526.14
multiplied by (2) a fraction, the numerator of which is the number of days
from the issue date to the specified date, using a 360-day year of twelve
30-day months, and the denominator of which is the number of days from the
issue date to the first Semiannual Accrual Date, using a 360-day year of
twelve 30-day months; or
(iii) if the specified date occurs between two Semiannual Accrual
Dates, the Accreted Value will equal the sum of (a) the Accreted Value for
the Semiannual Accrual Date immediately preceding such specified date and
(b) an amount equal to the product of (1) the Accreted Value for the
immediately following Semiannual Accrual Date less the Accreted Value for
the immediately preceding Semiannual Accrual Date multiplied by (2) a
fraction, the numerator of which is the number of days from the immediately
preceding Semiannual Accrual Date to the specified date, using a 360-day
year of 12 30-day months.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition from such Person and not incurred in connection with, or in
anticipation of, such Person becoming a Restricted Subsidiary or such Asset
Acquisition.
"Affiliate" means (i) any Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, CCI; (ii) any spouse, immediate family member or other relative
who has the same principal residence as any Person described in clause (i)
above; (iii) any trust in which any such Persons described in clauses (i) and
(ii) above has a beneficial interest; and (iv) any corporation or other
organization of which any such Persons described above collectively owns 5% or
more of the equity of such entity. For purposes of this definition, "control"
(including, with correlative meaning, the terms "controlling," "controlled by"
and "under common control with") when used with respect to any specified Person
includes the direct or indirect beneficial ownership of more than 5% of the
voting securities of such Person or the power to direct or cause the direction
of the management and policies of such Person whether by contract or otherwise.
"Applicable Premium" means, with respect to a Note, the greater of (i) 1.0%
of the then outstanding principal amount of such Note and (ii) the excess of (A)
the present value of the required interest and principal payments due on such
Note to the first optional redemption date (assuming all outstanding Notes were
called for redemption on such date) or to the final maturity date of the Notes
at the option of CCI,
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computed using a discount rate equal to the Treasury Rate plus 50 basis points,
over (B) the then outstanding principal amount of such Note.
"Asset Acquisition" means (i) an Investment by CCI or any Restricted
Subsidiary in any other Person pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated or merged with or into CCI or any
Restricted Subsidiary, or (ii) any acquisition by CCI or any Restricted
Subsidiary of the assets of any Person which constitute substantially all of an
operating unit, a division or line of business of such Person or which is
otherwise outside of the ordinary course of business.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition) or other disposition (including, without
limitation, any merger, consolidation or sale leaseback transaction) to any
Person other than CCI or any Wholly Owned Restricted Subsidiary, in one
transaction or a series of related transactions, of (i) any Equity Interest of
any Restricted Subsidiary, (ii) any material license, franchise or other
authorization of CCI or any Restricted Subsidiary, (iii) any assets of CCI or
any Restricted Subsidiary which constitute substantially all of an operating
unit, a division or a line of business of CCI or any Restricted Subsidiary or
(iv) any other property or asset of CCI or any Restricted Subsidiary outside of
the ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include (i) any transaction consummated in compliance
with "Repurchase at the Option of Holders -- Change of Control" above and
"Certain Covenants -- Merger or Sales of Assets" above, and the creation of any
Lien not prohibited under "Certain Covenants -- Limitations on Liens" above,
(ii) the sale of property or equipment that has become worn out, obsolete or
damaged or otherwise unsuitable for use in connection with the business of CCI
or any Restricted Subsidiary, as the case may be, (iii) any transaction
consummated in compliance with "Certain Covenants -- Limitation on Restricted
Payments" above, and (iv) sales, transfers or other disposition of assets with a
fair market value not in excess of $1 million in any transaction or series of
transactions.
"Attributable Debt" means in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at the interest
rate borne by the Notes, compounded annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
such Sale/Leaseback Transaction (including any period for which such lease has
been extended).
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with generally accepted accounting principles
and the amount of such Indebtedness shall be the capitalized amount of such
obligations determined in accordance with generally accepted accounting
principles consistently applied.
"Cash Equivalents" means (i) United States dollars; (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition; (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank that is
a member of the Federal Reserve System having capital and surplus in excess of
$500.0 million; (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above; (v) commercial paper having a rating of at
least P-1 from Moody's or a rating of at least A-1 from S&P; and (vi) money
market mutual or similar funds having assets in excess of $100.0 million, at
least 95% of the assets of which are comprised of assets specified in clauses
(i) through (v) above.
"Consolidated Income Tax Expense" means, with respect to CCI for any
period, the provision for federal, state, local and foreign income taxes payable
by CCI and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with generally accepted accounting principles
consistently applied.
"Consolidated Interest Expense" means, with respect to CCI and the
Restricted Subsidiaries for any period, without duplication, the sum of (i) the
interest expense of CCI and the Restricted Subsidiaries for
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such period as determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied, including, without
limitation, amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation and after taking into
account the effect of elections made under any Hedging Agreements, however
denominated, with respect to such Indebtedness; and (ii) the interest component
of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by CCI and the Restricted Subsidiaries during such period as determined
on a consolidated basis in accordance with generally accepted accounting
principles consistently applied. For purposes of this definition, interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by CCI to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with generally accepted accounting
principles consistently applied.
"Consolidated Net Income" means, with respect to any period, the net income
(loss) of CCI and the Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with generally accepted accounting principles
consistently applied, adjusted, to the extent included in calculating such net
income (loss), by excluding, without duplication, (i) all extraordinary, unusual
or nonrecurring items of income or expense and of gains or losses and all gains
and losses from the sale or other disposition of assets out of the ordinary
course of business (net of taxes, fees and expenses relating to the transaction
giving rise thereto) for such period; (ii) that portion of such net income
(loss) derived from or in respect of investments in Persons other than any
Restricted Subsidiary, except to the extent actually received in cash by CCI or
any Restricted Subsidiary; (iii) the portion of such net income (loss) allocable
to minority interests in unconsolidated Persons for such period, except to the
extent actually received in cash by CCI or any Restricted Subsidiary; (iv) net
income (loss) of any other Person combined with CCI or any Restricted Subsidiary
on a "pooling of interests" basis attributable to any period prior to the date
of combination; (v) net income (loss) of any Restricted Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that net income (loss) is not at the date of
determination permitted without any prior governmental approval (which has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule of
governmental regulation applicable to that Restricted Subsidiary or the holders
of its Equity Interests; (vi) the cumulative effect of a change in accounting
principles after the date of the CCI Indenture; and (vii) net income (loss)
attributable to discontinued operations determined on a consolidated basis in
accordance with generally accepted accounting principles consistently applied.
"Consolidated Total Indebtedness" means, as at any date of determination,
an amount equal to the aggregate amount of all outstanding Indebtedness of CCI
and the Restricted Subsidiaries outstanding as of such date of determination
(including the liquidation value of all Disqualified Equity Interest), less the
obligations of CCI or any Restricted Subsidiary under any Hedging Agreement as
of such date of determination that would appear as a liability on the balance
sheet of such Person, in each case determined on a consolidated basis in
accordance with generally accepted accounting principles consistently applied.
"Continuing Members" means, as of the date of determination, any Person who
(i) was a member of the Board of Directors of CCI on the date of the Indenture,
(ii) was nominated for election or elected to the Board of Directors of CCI with
the affirmative vote of a majority of the Continuing Members who were members of
the Board of Directors of CCI at the time of such nomination or election of
(iii) is a representative of, or was approved by, a Permitted Holder.
"Cumulative Credit" means the sum of (i) the aggregate Net Cash Proceeds
received by CCI from the issue or sale (other than to a Subsidiary) of Equity
Interests (other than Disqualified Equity Interest) of CCI on or after the
Issuance Date, plus (ii) the principal amount (or, if less, accreted amount
determined in accordance with generally accepted accounting principles) of any
Indebtedness of CCI which has been converted into or exchanged for Equity
Interests of CCI on or after the Issuance Date, plus (iii) cumulative Operating
Cash Flow on or after the Issuance Date, to the end of the fiscal quarter
immediately preceding the date of the proposed Restricted Payment, or, if
cumulative Operating Cash Flow for such period is negative, minus the amount by
which cumulative Operating Cash Flow is less than zero, plus (iv) to the extent
not already included in Operating Cash Flow, if any Investment constituting a
Restricted Payment that was made after the date of the CCI Indenture is sold or
otherwise liquidated or repaid the initial dividend amount of
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such Restricted Payment (less the cost of disposition, if any) on the date of
such sale, liquidation or repayment, as determined in good faith by the Board of
Directors.
"Cumulative Interest Expense" means the aggregate amount of Consolidated
Interest Expense paid or accrued of CCI and the Restricted Subsidiaries on or
after the Issuance Date, to the end of the fiscal quarter immediately preceding
the proposed Restricted Payment.
"Debt to Operating Cash Flow Ratio" means the ratio of (i) the Consolidated
Total Indebtedness as of the date of calculation (the "Determination Date") to
(ii) four times the Operating Cash Flow for the latest three months for which
financial information is available immediately preceding such Determination Date
(the "Measurement Period"). For purposes of calculating Operating Cash Flow for
the Measurement Period immediately prior to the relevant Determination Date, (I)
any Person that is a Restricted Subsidiary on the Determination Date (or would
become a Restricted Subsidiary on such Determination Date in connection with the
transaction that requires the determination of such Operating Cash Flow) will be
deemed to have been a Restricted Subsidiary at all times during the Measurement
Period; (II) any Person that is not a Restricted Subsidiary on such
Determination Date (or would cease to be a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of such Operating Cash Flow) will be deemed not to have been a
Restricted Subsidiary at any time during such Measurement Period; and (III) if
CCI or any Restricted Subsidiary shall have in any manner (x) acquired
(including through an Asset Acquisition or the commencement of activities
constituting such operating business) or (y) disposed of (including by way of an
Asset Sale or the termination or discontinuance of activities constituting such
operating business) any operating business during such Measurement Period or
after the end of such period and on or prior to such Determination Date, such
calculation will be made on a pro forma basis in accordance with generally
accepted accounting principles consistently applied, as if, in the case of an
Asset Acquisition or the commencement of activities constituting such operating
business, all such transactions had been consummated on the first day of such
Measurement Period, and, in the case of an Asset Sale or termination or
discontinuance of activities constituting such operating business, all such
transactions had been consummated prior to the first day of such Measurement
Period.
"Disqualified Equity Interest" means, with respect to any Person, any
Equity Interest which, by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, or is exchangeable
into Indebtedness or Disqualified Equity Interest, on or prior to the earlier of
the maturity date of the Notes or the date on which no Notes remain outstanding.
"Equity Interest" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, and
membership interests in such Person, including any Preferred Stock.
"Equity Offering" means an underwritten public offering by CCI for cash
(with gross proceeds to CCI of not less than $25 million) of its common stock,
pursuant to the Securities Act registration statement (not including Forms S-4
or S-8).
"Hedging Agreement" means any interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement or other similar agreement
providing for the transfer or mitigation of interest rate risks either generally
or under specific contingencies.
"Hedging Obligation" means the obligations of such Person pursuant to any
Hedging Agreement.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
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(ii) all Capitalized Lease Obligations of such Person and all
Attributable Debt in respect of Sale/ Leaseback Transactions entered into
by such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (i)
through (iii) above) entered into in the ordinary course of business of
such Person to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than the
tenth Business Day following payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Equity
Interest or, with respect to any Subsidiary of such Person, the liquidation
preference with respect to, any Preferred Stock (but excluding, in each
case, any accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
guarantee;
(vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"Investment" in any Person means, directly or indirectly, any advance, loan
or other extension of credit (including by means of a guarantee) or capital
contribution to (by means of transfers of property to others, payments for
property or services for the account or use of others or otherwise) such Person,
the acquisition, by purchase or otherwise, of any stock, bonds, notes,
debentures, partnership, membership or joint venture interests or other
securities or other evidence of beneficial interest of any Person, and shall
include the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary. If CCI or any Restricted Subsidiary sells or otherwise disposes of
any Voting Equity Interest of any direct or indirect Restricted Subsidiary such
that, after giving effect to such sale or disposition, CCI no longer owns,
directly or indirectly, greater than 50% of the outstanding Voting Equity
Interests of such Restricted Subsidiary, CCI shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Voting Equity Interests of such former Restricted Subsidiary not
sold or disposed of.
"Investment Banking Fee" means pursuant to an agreement between J. Merritt
Belisle and Steven E. Seach, on the one hand, and CCI, on the other hand, a fee
to be paid by CCI to such individuals (i) upon the consummation of the Financing
Plan in the aggregate amount of $550,000 and (ii) thereafter from time to time
in connection with the consummation of acquisitions or financings by CCI in an
amount equal to 1.0% of the purchase price paid for such acquisitions.
"Lien" means any mortgage, pledge, lien, charge, security interest,
hypothecation, assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof or any agreement to give a security interest).
"Moody's" means Moody's Investors Service, Inc., or any successor rating
agency.
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"Net Available Cash" from an Asset Sale means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise and proceeds from the
sale or other disposition of any securities received as consideration, but only
as and when received, but excluding any other consideration received in the form
of assumption by the acquiring Person of Indebtedness or other obligations
relating to such properties or assets or received in any other non cash form)
therefrom, in each case net of (i) all legal, title and recording tax expenses,
commissions and other fees and expenses incurred, and all Federal, state,
provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such Asset Sale, (ii) all payments
made on any indebtedness which is secured by any assets subject to such Asset
Sale, in accordance with the terms of any Lien upon or other security
arrangement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Sale, or by applicable
law, be repaid out of the proceeds from such Asset Sale, (iii) all distributions
and other payments required to be made to minority interest holders in
Restricted Subsidiaries or joint ventures as a result of such Asset Sale and
(iv) the deduction of appropriate amounts to be provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the
assets disposed of in such Asset Sale and retained by CCI or any Restricted
Subsidiary after such Asset Sale.
"Net Cash Proceeds" means, with respect to any issuance or sale of Equity
Interests, the proceeds in the form of cash or Cash Equivalents received by CCI
or any Restricted Subsidiary of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-Recourse Indebtedness" means Indebtedness of a Person (i) as to which
neither CCI nor any of the Restricted Subsidiaries (other than such Person or
any Subsidiaries of such Person) (a) provides any guarantee or credit support of
any kind (including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or (b) is directly or indirectly
liable (as a guarantor or otherwise); and (ii) the incurrence of which will not
result in any recourse against any of the assets of either of CCI or the
Restricted Subsidiaries (other than to such Person or to any Subsidiaries of
such Person and other than to the Equity Interests in such Restricted Subsidiary
or an Unrestricted Subsidiary).
"Operating Cash Flow" means, with respect to CCI and the Restricted
Subsidiaries on a consolidated basis, for any period, an amount equal to the
lesser of (a) the amount of cash dividends received by CCI from the Company and
(b) Consolidated Net Income for such period increased (without duplication) by
the sum of (i) Consolidated Income Tax Expense accrued for such period to the
extent deducted in determining Consolidated Net Income for such period; (ii)
Consolidated Interest Expense for such period to the extent deducted in
determining Consolidated Net Income for such period; and (iii) depreciation,
amortization and any other non-cash items for such period to the extent deducted
in determining Consolidated Net Income for such period (other than any non-cash
item which requires the accrual of, or a reserve for, cash charges for any
future period) of CCI and the Restricted Subsidiaries, including, without
limitation, amortization of capitalized debt issuance costs for such period, all
of the foregoing determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied, and decreased by non-cash
items to the extent they increased Consolidated Net Income (including the
partial or entire reversal of reserves taken in prior periods) for such period,
provided, that with respect to the definition of Debt to Operating Cash Flow
only, Operating Cash Flow shall always have the meaning ascribed in Section (b)
above. For purposes of this definition, the following items shall, to the extent
expensed in calculating Consolidated Net Income, be added to Consolidated Net
Income: (A) any amounts paid to employees of CCI in respect of investment
banking or transaction fees in connection with acquisitions or financings of, or
advisory services to, CCI, in an amount not to exceed 1.5 percent of the fair
market value of such acquisition or the amount of such financing, and (B)
cancellation of debt to any employee of CCI in an aggregate principal amount not
to exceed $200,000.
"Other Pari Passu Debt" means Indebtedness of CCI that does not constitute
Subordinated Obligations and is not senior in right of payment to the Notes.
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"Other Permitted Liens" means (i) Liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and for which an appropriate
reserve or provision shall have been made in accordance with generally accepted
accounting principles consistently applied; (ii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which an appropriate reserve or provision shall
have been made in accordance with generally accepted accounting principles
consistently applied; (iii) easements, rights of way, and other restrictions on
use of property or minor imperfections of title that in the aggregate are not
material in amount and do not in any case materially detract from the property
subject thereto or interfere with the ordinary conduct of the business of CCI or
its Subsidiaries; (iv) Liens related to Capitalized Lease Obligations, mortgage
financings or purchase money obligations (including refinancings thereof), in
each case incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or equipment
used in the business of CCI or any Restricted Subsidiary or a Related Business,
provided that any such Lien encumbers only the asset or assets so financed,
purchased, constructed or improved; (v) Liens resulting from the pledge by CCI
of Equity Interests in any Subsidiary in connection with the Senior Credit
Agreement; (vi) liens resulting from the pledge by CCI of Equity Interests in an
Unrestricted Subsidiary in any circumstance where recourse to CCI is limited to
the value of the Equity Interests so pledged; (vii) Liens incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (viii)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds, deposits to secure the performance of bids, trade
contracts, government contracts, leases or licenses or other obligations of a
like nature incurred in the ordinary course of business (including without
limitation, landlord Liens on leased properties); (ix) leases or subleases
granted to third Persons not interfering with the ordinary course of business of
CCI; (x) deposits made in the ordinary course of business to secure liability to
insurance carriers; (xi) Liens securing reimbursement obligations with respect
to letters of credit which encumber documents and other property relating to
such letters of credit and the products and proceeds thereof; (xii) Liens on the
assets of CCI to secure hedging agreements with respect to Indebtedness
permitted by the CCI Indenture to be incurred; (xiii) attachment or judgment
Liens not giving rise to a Default or an Event of Default; and (xiv) any
interest or title of a lessor under any capital lease or operating lease.
"Permitted Holders" means Austin Ventures, L.P., BT Capital Partners, Inc.,
NationsBank Capital Investors, J. Merritt Belisle and Steven E. Seach.
"Permitted Investments" means (i) Cash Equivalents; (ii) Investments in
prepaid expenses, negotiable instruments held for collection and lease, utility
and workers' compensation, performance and other similar deposits; (iii) the
extension of credit to vendors, suppliers and customers in the ordinary course
of business; (iv) Investments existing as of the date of the CCI Indenture, and
any amendment, modification, extension or renewal thereof to the extent such
amendment, modification, extension or renewal does not require CCI or any
Restricted Subsidiary to make any additional cash or non-cash payments or
provide additional services in connection therewith; (v) Hedging Agreements;
(vi) any Investment for which the sole consideration provided is Equity
Interests of CCI; (vii) any Investment consisting of a guarantee permitted under
clause (e) of the second paragraph of "Certain Covenants -- Limitation on
Indebtedness" above; (viii) Investments in CCI, in any Wholly Owned Restricted
Subsidiary or any Person that, as a result of or in connection with such
Investment, becomes a Wholly Owned Restricted Subsidiary or is merged with or
into or consolidated with CCI or a Wholly Owned Restricted Subsidiary; provided,
however, that such Person's primary business is a Related Business; (ix) loans
and advances to officers, directors and employees of CCI and the Restricted
Subsidiaries for business-related travel expenses, moving expenses and other
similar expenses in each case incurred in the ordinary course of business not to
exceed $1 million outstanding at any time; (x) any acquisition of assets solely
in exchange for the issuance of Equity Interests of CCI; and (xi) other
Investments made after the date of the Indenture, in addition to any Permitted
Investments described in clauses (i) through (x)above, in an aggregate amount at
any one time outstanding not to exceed $1 million.
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"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization, government or agency or political subdivision thereof or any other
entity.
"Preferred Stock" means, in any Person, an Equity Interest of any class or
classes, however designated, which is preferred as to the payment of dividends
or distributions, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person, over Equity Interests of
any other class in such Person.
"Reinvestment Date" means the date which is 365 days after the receipt of
any Net Available Cash from an Asset Sale.
"Related Business" means a cable television, media and communications,
telecommunications or data transmission business, and businesses ancillary,
complementary or reasonably related thereto.
"Restricted Subsidiary" means any Subsidiary of CCI other than an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"Semiannual Accrual Date" has the meaning ascribed under the definition of
Accreted Value.
"Senior Indebtedness" means the principal of, premium, if any, and interest
(including interest, whether or not allowable, accruing after the filing of a
petition initiating any proceeding under any state, federal or foreign
bankruptcy law) on any Indebtedness of CCI (other than as otherwise provided in
this definition), whether outstanding on the date of the Indenture or thereafter
created, incurred or assumed, and whether at any time owing, actually or
contingent, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Notes. Notwithstanding the foregoing, "Senior Indebtedness" shall
not include (i) Indebtedness evidenced by the Notes, (ii) Indebtedness that is
subordinate or junior in right of payment to any Indebtedness of CCI, (iii)
Indebtedness which when incurred and without respect to any election under
Section 1111(b) of Title 11 United States Code, is without recourse to CCI, (iv)
Indebtedness which is represented by Redeemable Capital Stock, (v) any liability
for foreign, federal, state, local or other taxes owed or owing by CCI to the
extent such liability constitutes Indebtedness, (vi) Indebtedness of CCI to a
Subsidiary or any other Affiliate of CCI or any of such Affiliate's
Subsidiaries, (vii) to the extent it might constitute Indebtedness, amounts
owing for goods, materials or services purchased in the ordinary course of
business or consisting of trade accounts payable owed or owing by CCI, and
amounts owed by CCI for compensation to employees or services rendered to CCI,
(viii) that portion of any Indebtedness which at the time of issuance is issued
in violation of the Indenture and (ix) Indebtedness evidenced by any guarantee
of any Subordinated Indebtedness or Pari Passu Indebtedness.
"S&P" means Standard & Poor's Ratings Group, a division of the McGraw Hill
Company, Inc., or any successor rating agency.
"Strategic Equity Investment" means an investment in CCI by a company which
is primarily engaged in the media and communications industry or the
telecommunications industry and which has a market capitalization (if a public
company) on the date of such investment in CCI of more than $1 billion or, if
not a public company, had total revenues of more than $5 billion during its
previous fiscal year.
"Subordinated Obligations" means, with respect to CCI, any Indebtedness of
CCI which is expressly subordinated in right of payment to the Notes.
"Subsidiary" means a Person the majority of whose voting stock, membership
interests or other Voting Equity Interests is or are owned by CCI or a
Subsidiary. Voting stock in a corporation includes Equity Interests having
voting power under ordinary circumstances to elect directors.
"Subsidiary Operating Cash Flow" means, with respect to any Subsidiary for
any period, the "Operating Cash Flow" of such Subsidiary and its Subsidiaries
for such period determined by utilizing all of the elements
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of the definition of "Operating Cash Flow" in the CCI Indenture, including the
defined terms used in such definition, consistently applied only to such
Subsidiary and its Subsidiaries on a consolidated basis for such period.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two business days prior to the date fixed
for redemption of the Notes following a Change of Control (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the then remaining Weighted Average
Life to Maturity of the Notes; provided, however, that if the Weighted Average
Life to Maturity of the Notes is not equal to the constant maturity of a United
States Treasury security for which a weekly average yield is given, the Treasury
Rate shall be obtained by linear interpolation (calculated to the nearest one
twelfth of a year) from the weekly average yields of United States Treasury
securities from which such yields are given, except that if the Weighted Average
Life to Maturity of the Notes is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Unrestricted Subsidiary" means any Subsidiary of CCI (other than a
Subsidiary Guarantor) designated as such pursuant to and in compliance with the
covenant described under "Certain Covenants -- Limitation on Unrestricted
Subsidiaries." Any such designation may be revoked by a resolution of the Board
of Directors of CCI delivered to the Trustee, subject to the provisions of
"Certain Covenants -- Limitation on Unrestricted Subsidiaries."
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary means
Indebtedness of such Unrestricted Subsidiary (i) as to which neither CCI nor any
Restricted Subsidiary is directly or indirectly liable (by virtue of CCI or any
such Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness), except guaranteed debt
of CCI or any Restricted Subsidiary to any Affiliate, in which case (unless the
incurrence of such guaranteed debt resulted in a Restricted Payment at the time
of incurrence) CCI shall be deemed to have made a Restricted Payment equal to
the principal amount of any such Indebtedness to the extent guaranteed at the
time such Affiliate is designated an Unrestricted Subsidiary and (ii) which,
upon the occurrence of a default with respect thereto, does not result in, or
permit any holder of any Indebtedness of CCI or any Subsidiary to declare, a
default on such Indebtedness of CCI or any Subsidiary or cause the payment
thereof to be accelerated or payable prior to its Stated Maturity; provided that
notwithstanding the foregoing any Unrestricted Subsidiary may guarantee the
Notes.
"Voting Equity Interests" means Equity Interests in any Person with voting
power under ordinary circumstances entitling the holders thereof to elect the
board of directors, board of managers or other governing body of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding aggregate
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary of which
all of the outstanding Equity Interests (other than Equity Interests
constituting directors' qualifying shares to the extent mandated by applicable
law) are owned by CCI or by one or more Wholly Owned Restricted Subsidiaries or
by CCI and one or more Wholly Owned Restricted Subsidiaries. Notwithstanding the
foregoing, so long as Universal Cable Holdings, Inc. holds at least 75% of the
issued and outstanding shares of stock of Universal Cable Communications, Inc.,
Universal Cable of Beaver, Oklahoma, Inc. and Universal Cable Midwest, Inc.,
each of such entities shall be deemed to be a Wholly Owned Subsidiary.
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NO LIABILITY OF MANAGERS, OFFICERS, EMPLOYEES, OR SHAREHOLDERS
No manager, director, officer, employee, member, shareholder, partner or
incorporator of CCI or any Subsidiary, as such, will have any liability for any
obligations of CCI under the Notes or the CCI Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
holder of Notes by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and the SEC is of the view that such a waiver is against public policy.
DEFEASANCE AND COVENANT DEFEASANCE
The CCI Indenture provides that CCI may elect either (a) to defease and be
discharged from any and all obligations with respect to the Notes (except for
the obligations to replace temporary or mutilated, destroyed, lost or stolen
Notes, to maintain an office or agency in respect of the Notes and to hold
moneys for payment in trust) ("defeasance") or (b) to be released from its
obligations with respect to the Notes under certain covenants (and related
Events of Default) contained in the CCI Indenture, including but not limited to
those described above under "Certain Covenants' ("covenant defeasance"), upon
the deposit with the Trustee (or other qualifying trustee), in trust for such
purpose, of money and/or U.S. Government Obligations which through the payment
of principal and interest in accordance with their terms will provide money, in
an amount sufficient to pay the principal of, premium, if any, and interest, if
any, on the Notes, on the scheduled due dates therefor. Such a trust may only be
established if, among other things, (x) no Default or Event of Default has
occurred and is continuing or would arise therefrom (or, with respect to Events
of Default resulting from certain events of bankruptcy, insolvency or
reorganization, would occur at any time in the period ending on the 91st day
after the date of deposit) and (y) CCI has delivered to the Trustee an opinion
of counsel (as specified in the CCI Indenture) to the effect that (i) defeasance
or covenant defeasance, as the case may be, will not require registration of
CCI, the Trustee or the trust fund under the Investment Company Act of 1940, as
amended, or the Investment Advisors Act of 1940, as amended, and (ii) the
holders of the Notes will recognize income, gain or loss for Federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such defeasance or covenant defeasance had not occurred. Such
opinion, in the case of defeasance under clause (a) above, must refer to and be
based upon a private ruling concerning the Notes of the Internal Revenue Service
or a ruling of general effect published by the Internal Revenue Service.
MODIFICATION OF CCI INDENTURE
From time to time, CCI and the Trustee may, without consent of holders of
the Notes, enter into one or more supplemental indentures for certain specified
purposes, including providing for a successor or successors to CCI, adding
guarantees, releasing guarantors when permitted by the CCI Indenture, providing
for security for the Notes, adding to the covenants of CCI, surrendering any
right or power conferred upon CCI, providing for uncertificated Notes in
addition to or in place of certificated Notes, making any change that does not
adversely affect the rights of any Note holder, complying with any requirement
of the Trust CCI Indenture Act or curing certain ambiguities, defects or
inconsistencies. The CCI Indenture contains provisions permitting CCI and the
Trustee, with the consent of holders of at least a majority in aggregate
principal amount of the Notes at the time outstanding, to modify the CCI
Indenture or any supplemental indenture or the rights of the holders of the
Notes, except that no such modifications shall, without the consent of each
holder affected thereby (i) change or extend the fixed maturity of the Notes,
reduce the rate or extend the time of payment of interest thereon, reduce the
principal amount thereof or premium, if any, thereon or change the currency in
which the Notes are payable; (ii) reduce the premium payable upon any redemption
of Notes in accordance with the optional redemption provisions of the Notes or
change the time before which no such redemption may be made; (iii) waive a
default in the payment of principal or interest on the Notes (except that
holders of a majority in aggregate principal amount of the Notes at the time
outstanding may (a) rescind an acceleration of the Notes that resulted from a
non-payment default and (b) waive the payment default that resulted from such
acceleration) or alter the rights of Note holders to waive defaults; or (iv)
reduce the aforesaid percentage of Notes, the consent of the holders of which is
required for any such
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modification. Any existing Event of Default, other than a default in the payment
of principal or interest on the Notes, or compliance with any provision of the
Notes or the CCI Indenture, other than any provision related to the payment of
principal or interest on the Notes, may be waived with the consent of holders of
at least a majority in aggregate principal amount of the Notes at the time
outstanding.
COMPLIANCE CERTIFICATE
The CCI Indenture provides that CCI will deliver to the Trustee within 120
days after the end of each fiscal year of CCI an Officers' Certificate stating
whether or not the signers know of any Event of Default that has occurred. If
they do, the certificate will describe the Event of Default and its status.
BOOK-ENTRY; DELIVERY AND FORM
The New Notes will be represented by one or more permanent global New Notes
in definitive, fully registered form without interest coupons (each a "Global
Note") and will be deposited with the Trustee as custodian for, and registered
in the name of a nominee of, DTC.
Each Global Note will be subject to certain restrictions on transfer set
forth therein as described under "Notices to Investors."
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a Global
Note will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants). Qualified Institutional Buyers may hold their
interests in a Global Note directly through DTC if they are participants in such
system, or indirectly through organizations which are participants in such
system.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the New Notes represented by such Global Note for all
purposes under the Indenture and the New Notes. No beneficial owner of an
interest in a Global Note will be able to transfer that interest except in
accordance with DTC's applicable procedures, in additional to those provided for
under the CCI Indenture and, if applicable, those of Euroclear and Cedel Bank.
Payments of the principal of, and interest on, a Global Note will be made
to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither CCI, the Trustee nor any Paying Agent will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
CCI expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records of
DTC or its nominee. CCI also expects that payments by participants to owners of
beneficial interests in such Global Note held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.
CCI expects that DTC will take any action permitted to be taken by a holder
of Notes (including the presentation of Notes for exchange as described below)
only at the direction of one or more participants to whose account the DTC
interests in a Global Note are credited and only in respect of such portion of
the aggregate principal amount of Notes as to which such participant or
participants has or have given such direction. However, if there is an Event of
Default under the Notes, DTC will exchange the applicable Global
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Note for Certificated Notes, which it will distribute to its participants and
which may be legended as set forth under the heading "Notices to Investors."
CCI understands that DTC is a limited purpose trust company organized under
the laws of the State of New York, a "banking organization" within the meaning
of New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a "Clearing
Agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates and certain other
organizations. Indirect access to the DTC system is available to other such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interest in a Global Note among participants of DTC, it
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither CCI nor the Trustee
will have any responsibility for the performance by DTC, Euroclear or Cedel Bank
or their respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Notes and a successor depositary is not appointed by CCI within 90
days, CCI will issue Certificated Notes, which may bear the legend referred to
under "Notices to Investors," in exchange for the Global Notes. Holders of an
interest in a Global Note may receive Certificated Notes, which may bear the
legend referred to under "Notices to Investors," in accordance with the DTC's
rules and procedures in addition to those provided for under the Indenture.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax
considerations relevant to Holders of the Notes. This discussion is based upon
the Internal Revenue Code of 1986, as amended (the "Code"), existing and
proposed Treasury regulations, administrative pronouncements and judicial
decisions now in effect, all of which are subject to change (possibly with
retroactive effect) or different interpretations, which may affect the tax
consequences described herein. This discussion does not purport to deal with all
aspects of federal income taxation that may be relevant to a particular investor
and it is not intended to be wholly applicable to all categories of investors,
some of which, such as dealers in securities, financial institutions, insurance
companies, tax-exempt organizations, or investors who have hedged the risk of
owning Notes, may be subject to special rules. In addition, this discussion is
limited to persons that will hold the Notes as "capital assets" within the
meaning of section 1221 of the Code.
THIS SUMMARY IS FOR GENERAL INFORMATION ONLY AND DOES NOT ADDRESS THE TAX
CONSEQUENCES TO TAXPAYERS WHO ARE SUBJECT TO SPECIAL RULES (SUCH AS FINANCIAL
INSTITUTIONS, TAX-EXEMPT ORGANIZATIONS, INSURANCE COMPANIES, S CORPORATIONS,
REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS, BROKER-DEALERS,
TAXPAYERS SUBJECT TO THE ALTERNATIVE MINIMUM TAX AND PERSONS THAT WILL HOLD THE
NOTES AS PART OF A POSITION IN A "STRADDLE" OR AS PART OF A "CONSTRUCTIVE SALE,
" "HEDGING" OR "CONVERSION" TRANSACTION) OR ADDRESS ASPECTS OF FEDERAL TAXATION
THAT MIGHT BE RELEVANT TO A PROSPECTIVE INVESTOR BASED UPON SUCH INVESTOR'S
PARTICULAR TAX SITUATION. THIS SUMMARY DOES NOT ADDRESS ANY TAX CONSEQUENCES
ARISING UNDER ANY STATE, MUNICIPALITY, FOREIGN COUNTRY OR OTHER TAXING
JURISDICTION. INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE
UNITED STATES FEDERAL TAX CONSEQUENCES OF OWNING AND DISPOSING OF THE NOTES
(INCLUDING THE INVESTOR'S STATUS AS A UNITED STATES HOLDER OR A NON-UNITED
STATES HOLDER), AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF
ANY STATE, MUNICIPALITY, FOREIGN COUNTRY OR OTHER TAXING JURISDICTION.
EACH HOLDER SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF EXCHANGING OLD NOTES FOR NEW NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
EXCHANGE OF OLD NOTES FOR NEW NOTES
The following discussion is a summary of certain federal income tax
considerations relevant to the exchange of Old Notes for New Notes, but does not
purport to be a complete analysis of all potential tax effects. The discussion
is based upon the Internal Revenue Code of 1986, as amended, Treasury
regulations, Internal Revenue Service rulings and pronouncements, and judicial
decisions now in effect, all of which are subject to change at any time by
legislative, judicial or administrative action. Any such changes may be applied
retroactively in a manner that could adversely affect a holder of the New Notes.
The description does not consider the effect of any applicable foreign, state,
local or other tax laws or estate or gift tax considerations.
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not constitute a sale or exchange for federal income tax purposes. Accordingly,
such exchange will not have federal income tax consequences to holders of Old
Notes.
UNITED STATES HOLDERS
General
The following is a general discussion of certain United States federal
income tax consequences of the ownership and sale or other disposition of the
Notes by a beneficial owner that, for United States federal income tax purposes,
is a "United States person" (a "United States Holder"). For purposes of this
discussion, a "United States person" means a citizen or individual resident (as
defined in Section 7701(b) of the Code) of the United States; a corporation or
partnership (including any entity treated as a corporation or partnership for
United States federal income tax purposes) created or organized under the laws
of the United States, any state thereof or the District of Columbia unless, in
the case of a partnership, otherwise provided by regulation; an estate the
income of which is subject to United States federal income tax without regard to
its source; or a
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trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, certain trusts in existence on August
20, 1996, and treated as United States persons prior to such date that elect to
continue to be so treated shall also be considered to be United States persons.
Original Issue Discount
Because the Notes were issued at a discount from their "stated redemption
price at maturity," the Notes were issued with original issue discount, and each
Holder will be required to include in its gross income original issue discount
("OID") income as described below.
Original issue discount on each Note will equal the excess of the stated
redemption price at maturity of the Discount Note over its issue price. A Holder
of a Note must include OID in income as ordinary interest income as it accrues
on the basis of a constant yield to maturity. Generally, OID must be included in
income in advance of the receipt of cash representing such income.
In general, the "issue price" of a Note is determined by allocating the
"issue price" between the Notes and the CCI Common Stock issued in conjunction
with the Notes at the CCI private offering based on their relative fair market
value. For this purpose, the "issue price" is the initial offering price to the
public (excluding underwriters, brokers, etc.) at which a substantial amount of
the Old Notes and the shares of CCI Common Stock issued in conjunction therewith
(the "Shares") were first sold. CCI will allocate a portion of the issue price
to the Notes and the Shares. CCI's allocation reflects its best judgment as to
the relative values of each of those instruments at the time of issuance, but
will not be binding on the Internal Revenue Service (the "Service"). CCI's
allocation will be binding on each Holder of an Old Note and Shares that does
not explicitly disclose that its allocation of the issue price of the Old Note
and Shares is different than CCI's allocation. Such disclosure must be made on a
statement attached to such Holder's timely filed federal income tax return for
its taxable year that includes the acquisition date of the Old Note and Shares.
The stated redemption price at maturity of a Note will equal the sum of all
payments other than any "qualified stated interest" payments. Qualified stated
interest is stated interest that is unconditionally payable in cash or in
property (other than debt instruments of the issuer) at least annually at a
single fixed rate. Because interest on the Notes will not be paid prior to
February 1, 2004, none of the payments on the Notes will constitute qualified
stated interest. Accordingly, all payments on the Notes will be treated as part
of their stated redemption price at maturity and the Notes will have significant
original issue discount.
A United States Holder will be required to include OID in income
periodically over the term of a Note before receipt of the cash or other payment
attributable to such income, regardless of such Holder's method of tax
accounting. The amount of OID required to be included in a United States
Holder's gross income for any taxable year is the sum of the "daily portions" of
OID with respect to the Note for each day during the taxable year or portion of
a taxable year during which such Holder holds the Note. The daily portion is
determined by allocating to each day of any "accrual period" within a taxable
year a pro rata portion of an amount equal to the "adjusted issue price" of the
Note at the beginning of the accrual period multiplied by the "yield to
maturity" of the Note. For purposes of computing OID, the Issuer will use
six-month accrual periods that end on the days in the calendar year
corresponding to the maturity date of the Notes and the date six months prior to
such maturity date, with the exception of an initial short accrual period. A
United States Holder is permitted to use different accrual periods, provided
that each accrual period is no longer than one year, and each scheduled payment
of interest or principal occurs on either the first or last day of an accrual
period. The adjusted issue price of a Note at the beginning of any accrual
period is the issue price of the Note increased by the amount of OID previously
includible in the gross income of the Holder and decreased by any payments
previously made on the Note. The yield to maturity is the discount rate that,
when used in computing the present value of all payments of principal and
interest to be made on a Note, produces an amount equal to the issue price of
the Note. Under these rules, United States Holders of Notes will be required to
include in gross income increasingly greater amounts of OID in each successive
accrual period. Payments of stated interest on a Note will not be separately
included in income, but rather will be treated first as payments of previously
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accrued OID and then as payments of principal and, consequently, will reduce a
United States Holder's basis in a Note as described below under "Certain United
States Federal Income Tax Consequences -- United States Holders -- Sale,
Exchange or Redemption of the Discount Notes."
If CCI fails to register the Notes or the Exchange Offer is not consummated
within the required period of time (and in certain other circumstances), CCI may
be required to pay certain amounts to Holders as liquidated damages. See
"Exchange Offer -- Purpose and Effect." The payment of the liquidated damages
(calculated as an increase in interest rate) should not result in a deemed
taxable exchange of the Notes. Although the characterization of these amounts is
uncertain, such liquidated damages probably constitute contingent interest,
which is generally not includible in income before fixed or paid.
Election to Treat All Interest as Original Issue Discount
A Holder, subject to certain limitations, may elect to treat all "interest"
on any Note as original issue discount and calculate the amount includible in
gross income under the method described above. For this purpose, "interest"
includes stated and unstated interest, OID, acquisition discount, market
discount and de minimis market discount, as adjusted by any acquisition premium
or amortizable bond premium. Such election, if made with respect to a market
discount obligation, will constitute an election to include market discount in
income currently on all market discount obligations acquired by such Holder on
or after the first taxable year to which the election applies. See "Certain
United States Federal Income Tax Consequences -- United States Holders -- Market
Discount." The election is to be made for the taxable year in which the Holder
acquired the Note and may not be revoked without the consent of the Service.
Acquisition Premium
A United States Holder that purchases a Note for an amount that is greater
than its adjusted issue price as of the purchase date will be considered to have
purchased such Note at an "acquisition premium." The amount of OID that such
Holder must include in its gross income with respect to such Note for any
taxable year is generally reduced by the portion of such acquisition premium
properly allocable to such year. The information reported by CCI to the record
Holders of the Notes on an annual basis will not account for an offset against
OID for any portion of the acquisition premium. Accordingly, each United States
Holder should consult its own tax advisor as to the determination of the
acquisition premium amount and the resulting adjustments to the amount of
reportable OID.
Amortizable Bond Premium
A United States Holder that purchases a Note for an amount in excess of its
principal amount will be considered to have purchased the Note at a premium and
may elect to amortize such premium, using a constant yield method, over the
remaining term of the Note (or, if a smaller amortization allowance would
result, by computing such allowance with reference to the amount payable on an
earlier call date and amortizing such allowance over the shorter period to such
call date). The amount amortized in any year will be treated as a reduction of
the United States Holder's interest income from the Note. Bond premium on a Note
held by a United States Holder that does not make such an election will decrease
the gain or increase the loss otherwise recognized on disposition of the Note.
The election to amortize bond premium on a constant yield method, once made,
applies to all debt obligations held or subsequently acquired by the electing
United States Holder on or after the first day of the first taxable year to
which the election applies and may not be revoked without the consent of the
Service.
Market Discount
If a United States Holder purchases, subsequent to its original issuance, a
Note for an amount that is less than its "revised issue price" as of the
purchase date, the amount of the difference generally will be treated as "market
discount," unless such difference is less than a specified de minimis amount.
The Code provides that the revised issue price of a Note equals its issue price
plus the amount of OID includable in the income of all holders for periods prior
to the purchase date (disregarding any deduction for acquisition premium)
reduced
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by the amount of all prior cash payments on the Note. Subject to a de minimis
exception, a United States Holder will be required to treat any gain recognized
on the sale, exchange, redemption, retirement or other disposition of the Note
as ordinary income to the extent of the accrued market discount that has not
previously been included in income. Unless a Holder elects to accrue under a
constant-interest method, accrued market discount is the total market discount
multiplied by a fraction, the numerator of which is the number of days the
Holder has held the obligation and the denominator of which is the number of
days from the date the Holder acquired the obligation until its maturity. A
Holder may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to purchase
or carry a Note purchased with market discount. Any such deferred interest
expense would not exceed the market discount that accrues during such taxable
year and is, in general, allowed as a deduction not later than the year in which
such market discount is includible in income. If the Holder elects to include
market discount in income currently as it accrues on all market discount
instruments acquired by the Holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
Sale, Exchange or Retirement of Discount Notes
Generally, a sale, exchange or redemption of the Notes will result in
taxable gain or loss equal to the difference between the amount of cash or other
property received and the United States Holder's adjusted tax basis in the Note.
A United States Holder's adjusted tax basis for determining gain or loss on the
sale or other disposition of a Note will initially equal the cost of the Note to
such Holder and will be increased by any (i) amounts included in income as OID,
and (ii) any market discount previously included in income by such United States
Holder, and decreased by (a) any principal and stated interest payments received
by the United States Holder, and (b) any amortized premium previously deducted
from income by the United States Holder. Except as described above with respect
to market discount, such gain or loss will be capital gain or loss. Capital gain
or loss will be long-term gain or loss if the Note is held by the United States
Holder for more than one year, otherwise such gain or loss will be short-term.
United States Holders that are corporations will generally be taxed on net
capital gains at a maximum rate of 35%. In contrast, United States Holders that
are individuals will generally be taxed on net capital gains at a maximum rate
of (i) 28% for property held for 18 months or less but more than one year, and
(ii) 20% for property held more than 18 months. Recent legislation recently
passed by Congress and awaiting the President's signature would reduce the
holding period for the property to qualify for the maximum 20% rate to 12 months
or more. Special rules (and generally lower maximum rates) apply for individuals
in lower tax brackets. Any capital losses realized by a United States Holder
that is a corporation generally may be used only to offset capital gains. Any
capital losses realized by a United States Holder that is an individual
generally may be used only to offset capital gains plus $3,000 of other income
per year.
The AHYDO Rule
The Notes will constitute "applicable high yield Discount obligations"
("AHYDOs") because the yield to maturity of such Notes is equal to or greater
than the sum of the relevant applicable federal rate (the "AFR") for July, plus
five percentage points, and the Notes bear "significant" OID. The Notes bear
significant OID for this purpose because, as of the close of any accrual period
ending more than five years after issuance, the total amount of income
includable by a Holder with respect to a Note will exceed the sum of (i) the
total amount of stated interest paid under the Note before the close of such
accrual period, and (ii) the product of the issue price of the debt Note and its
yield to maturity.
Under Sections 163(e) and 163(i) of the Code, a C corporation that is an
issuer of discount notes that are subject to the AHYDO rules is not entitled to
deduct OID that accrues with respect to such discount notes until amounts
attributable to such OID are paid in cash. In addition, to the extent that the
yield to maturity of the Notes exceeds 11.8% (the sum of the relevant AFR plus
six percentage points) (the "Excess Yield"), the "disqualified portion" of the
OID accruing on the Notes will be permanently disallowed, and the disqualified
portion will be characterized as a nondeductible dividend with respect to the
issuer and also will be treated as a dividend distribution (to the extent of
available current and accumulated earnings and profits) solely for purposes of
the dividends received deductions of Sections 243, 246 and 246A of the Code with
respect to
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Holders that are U.S. corporations. The disqualified portion of OID for any
accrual period will equal the product of (i) a percentage determined by dividing
the Excess Yield by the yield to maturity, and (ii) the OID for the accrual
period. Subject to otherwise applicable limitations, such a corporate Holder
will be entitled to a dividend received deduction with respect to the
disqualified portion of the accrued OID if the issuer has sufficient current or
accumulated "earnings and profits." To the extent that the issuer's earnings and
profits are insufficient, any portion of the OID that otherwise would have been
recharacterized as a dividend for purposes of the dividends received deduction
will continue to be treated as ordinary OID income in accordance with the rules
described above in "Original Issue Discount." Treatment of the Notes as AHYDOs
will not disqualify interest or OID with respect to Notes from the portfolio
interest exception described below under "Certain United States Federal Income
Tax Consequences -- Foreign Holders -- Interest;" provided that all applicable
requirements for the exception are otherwise satisfied.
FOREIGN HOLDERS
The following is a general discussion of certain United States federal
income tax consequences of the ownership and sale or other disposition of the
Notes by any beneficial owner of a Note that is not a United States Holder (a
"Non-United States Holder"). Resident alien individuals will be subject to
United States federal income tax with respect to the Discount Notes as if they
were United States Holders.
Interest
Under current United States federal income tax law, and subject to the
discussion of backup withholding below, interest (including OID) paid on the
Notes to a Non-United States Holder will not be subject to the normal 30% United
States federal withholding tax, provided that (i) the interest is "effectively
connected with the conduct of a trade or business in the United States" by the
Non-United States Holder and the Non-United States Holder timely furnishes the
Issuer with two duly executed copies of Internal Revenue Service Form 4224 (or
any successor form), or (ii) all of the following conditions of the portfolio
interest exception (the "Portfolio Interest Exception") are met: (A) the
Non-United States Holder does not, actually or constructively, own 10% or more
of the total combined voting power of all classes of stock of a corporate Issuer
entitled to vote, (B) the Non-United States Holder is not a controlled foreign
corporation that is related, directly or indirectly, to the Issuer through stock
ownership, (C) the Non-United States Holder is not a bank receiving interest
(including OID) pursuant to a loan agreement entered into in the ordinary course
of its trade or business, and (D) either (1) the Non-United States Holder
certifies to the Issuer or its agent, under penalties of perjury, that it is a
Non-United States Holder and provides its name and address, or (2) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Notes in such capacity, certifies to the Issuer or
its agent, under penalties of perjury, that such statement has been received
from the beneficial owner of the Notes by it or by a Financial Institution
between it and the beneficial owner and furnishes the Issuer or its agent with a
copy thereof. The foregoing certification may be provided by the Non-United
States Holder on Internal Revenue Service Form W-8 (or any successor form). Such
certificate is effective with respect to payments of interest (including OID)
made after the issuance of the certificate in the calendar year of its issuance
and the two immediately succeeding calendar years.
On October 14, 1997, final regulations were published in the Federal
Register (the "1997 Final Regulations") that affect the United States federal
income taxation of Non-United States Holders. The 1997 Final Regulations are
effective for payments after December 31, 1999, regardless of the issue date of
the instrument with respect to which such payments are made, subject to certain
transition rules discussed below. The discussion under this heading and under
"Backup Withholding Tax and Information Reporting," below, is not intended to be
a complete discussion of the provisions of the 1997 Final Regulations.
Prospective Holders of the Notes are urged to consult their tax advisors
concerning the tax consequences of their investment in light of the 1997 Final
Regulations.
The 1997 Final Regulations provide documentation procedures designed to
simplify compliance by withholding agents. The 1997 Final Regulations generally
do not affect the documentation rules described above, but add other
certification options. Under one such option, a withholding agent will be
allowed to rely
94
<PAGE> 99
on an intermediary withholding certificate furnished by a "qualified
intermediary" (as defined below) on behalf of one or more beneficial owners (or
other intermediaries) without having to obtain the beneficial owner certificate
described above. Qualified intermediaries include: (i) foreign financial
institutions or foreign clearing organizations (other than a United States
branch or United States office of such institution or organization), or (ii)
foreign branches or offices of United States financial institutions or foreign
branches or offices of United States clearing organizations, which, as to both
(i) and (ii), have entered into withholding agreements with the Service. In
addition to certain other requirements, qualified intermediaries must obtain
withholding certificates, such as revised Service Form W-8 (discussed below),
from each beneficial owner. Under another option, an authorized foreign agent of
a United States withholding agent will be permitted to act on behalf of the
United States withholding agent (including the receipt of withholding
certificates, the payment of amounts of income subject to withholding and the
deposit of tax withheld), provided that certain conditions are met.
For purposes of the certification requirements, the 1997 Final Regulations
generally treat as the beneficial owners of payments on a Note those persons
that, under United States federal income tax principles, are the taxpayers with
respect to such payments, rather than persons such as nominees or agents legally
entitled to such payments. In the case of payments to an entity classified as a
foreign partnership under United States tax principles, the partners, rather
than the partnership, generally must provide the required certifications to
qualify for the withholding tax exemption described above (unless the
partnership has entered into a special agreement with the Service). A payment to
a United States partnership, however, is treated for these purposes as payment
to a United States payee, even if the partnership has one or more foreign
partners. The 1997 Final Regulations provide certain presumptions with respect
to withholding for Holders not furnishing the required certifications to qualify
for the withholding tax exemption described above. In addition, the 1997 Final
Regulations will replace a number of current tax certification forms (including
Internal Revenue Service Form W-8) with a single, revised Service Form W-8
(which, in certain circumstances, requires information in addition to that
previously required). Under the 1997 Final Regulations, this revised Form W-8
will remain valid until the last day of the third calendar year following the
year in which the certificate is signed.
The 1997 Final Regulations provide transition rules concerning existing
certificates, such as Service Form W-8. Valid withholding certificates that are
held on December 31, 1999 will generally remain valid until the earlier of
December 31, 2000 or the date of their expiration. Existing certificates that
expire in 1999 will not be effective after their expiration. Certificates dated
prior to January 1, 1998 will generally remain valid until the end of 1998,
irrespective of the fact that their validity expires during 1998.
In the event that the interest (including OID) paid on the Notes is
effectively connected with the conduct of a trade or business within the United
States of the Non-United States Holder, the Non-United States Holder will
generally be taxed on a net income basis (that is, after allowance for
applicable deductions) at the graduated rates that are applicable to United
States persons in essentially the same manner as if the Notes were held by a
United States person, as discussed above. In the case of a Non-United States
Holder that is a corporation, such income may also be subject to the United
States federal branch profits tax (which is generally imposed on a foreign
corporation upon the deemed repatriation from the United States of effectively
connected earnings and profits) at a 30% rate, unless the rate is reduced or
eliminated by an applicable income tax treaty and the Non-United States Holder
is a qualified resident of the treaty country.
If the interest on the Notes is not "effectively connected" and does not
qualify for the Portfolio Interest Exception, then the interest will be subject
to United States federal withholding tax at a flat rate of 30% (or a lower
applicable income tax treaty rate upon delivery of the appropriate certification
of eligibility for treaty benefits).
Gain on Sale or Other Disposition
Subject to special rules applicable to individuals as described below, a
Non-United States Holder will generally not be subject to regular United States
federal income or withholding tax on gain recognized on a sale or other
disposition of the Notes, unless the gain is effectively connected with the
conduct of a trade or
95
<PAGE> 100
business within the United States of the Non-United States Holder or of a
partnership, trust or estate in which such Non-United States Holder is a partner
or beneficiary.
Gains realized by a Non-United States Holder that are effectively connected
with the conduct of a trade or business within the United States of the
Non-United States Holder will generally be taxed on a net income basis (that is,
after allowance for applicable deductions) at the graduated rates that are
applicable to United States persons, as described above, unless exempt by an
applicable income tax treaty. In the case of a Non-United States Holder that is
a corporation, such income may also be subject to the United States federal
branch profits tax (which is generally imposed on a foreign corporation upon the
deemed repatriation from the United States of effectively connected earnings and
profits) at a 30% rate, unless the rate is reduced or eliminated by an
applicable income tax treaty and the Non-United States Holder is a qualified
resident of the treaty country.
In addition to being subject to the rules described above, an individual
Non-United States Holder who holds the Notes as a capital asset will generally
be subject to tax at a 30% rate on any gain recognized on the sale or other
disposition of such Notes if (i) such gain is not effectively connected with the
conduct of a trade or business within the United States of the Non-United States
Holder, and (ii) such individual is present in the United States for 183 days or
more in the taxable year of the sale or other disposition and either (A) has a
"tax home" in the United States (as specially defined for purposes of the United
States federal income tax), or (B) maintains an office or other fixed place of
business in the United States and the gain from the sale or other disposition of
the Notes is attributable to such office or other fixed place of business.
Individual Non-United States Holders may also be subject to tax pursuant to
provisions of United States federal income tax law applicable to certain United
States expatriates (including certain former long-term residents of the United
States).
Under the 1997 Final Regulations, withholding of United States federal
income tax may apply to payments on a taxable sale or other disposition of the
Notes by a Non-United States Holder who does not provide appropriate
certification to the withholding agent with respect to such transaction.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Under current United States federal income tax law, information reporting
requirements apply to interest (including OID) paid to, and to the proceeds of
sales or other dispositions before maturity by, certain non-corporate persons.
In addition, a 31% backup withholding tax applies if a non-corporate person (i)
fails to furnish such person's Taxpayer Identification Number ("TIN") (which,
for an individual, is his or her Social Security Number) to the payor in the
manner required, (ii) furnishes an incorrect TIN and the payor is so notified by
the Service, (iii) is notified by the Service that such person has failed
properly to report payments of interest and dividends, or (iv) in certain
circumstances, fails to certify, under penalties of perjury, that such person
has not been notified by the Service that such person is subject to backup
withholding for failure properly to report interest and dividend payments.
Backup withholding does not apply to payments made to certain exempt recipients,
such as corporations and tax-exempt organizations.
In the case of a Non-United States Holder, under current United States
federal income tax law, backup withholding and information reporting do not
apply to payments of interest (including OID) with respect to the Note, or to
payments on the sale or other disposition of a Note, if such Holder has provided
to the Issuer or its paying agent the certification described in clause (ii)(D)
of "Certain United States Federal Income Tax Consequences -- Foreign
Holders -- Interest" or has otherwise established an exemption.
Under current United States federal income tax law, (i) interest payments
(including OID) with respect to a Note collected outside the United States by a
foreign office of a custodian, nominee or broker acting on behalf of a
beneficial owner of a Note, and (ii) payments on the sale or other disposition
of a Note to or through a foreign office of a broker are not generally subject
to backup withholding or information reporting. However, if such custodian,
nominee or broker is a United States person, a controlled foreign corporation
for United States tax purposes or a foreign person 50% of more of whose gross
income is effectively connected with the conduct of a United States trade or
business for a specified three-year period (a "U.S. Related Person"), such
custodian, nominee or broker may be subject to certain information reporting
(but not backup
96
<PAGE> 101
withholding) requirements with respect to such payments, unless such custodian,
nominee or broker has in its records documentary evidence that the beneficial
owner is not a United States person and certain conditions are met or the
beneficial owner otherwise establishes an exemption. Backup withholding may
apply to any payment that such custodian, nominee or broker is required to
report if such person has actual knowledge that the payee is a United States
person. Payments to or through the United States office of a broker will be
subject to backup withholding and information reporting unless the Holder
certifies, under penalties of perjury, that it is not a United States person or
otherwise establishes an exemption.
The 1997 Final Regulations modify certain of the certification requirements
for backup withholding and expand the group of U.S. Related Persons. It is
possible that the Issuer or its paying agent may request new withholding
exemption forms from Holders in order to qualify for continued exemption from
backup withholding when the 1997 Final Regulations become effective.
Backup withholding tax is not an additional tax. Rather, any amounts
withheld from a payment to a person under the backup withholding rules are
allowed as a refund or a credit against such person's United States federal
income tax, provided that the required information is furnished to the Service.
97
<PAGE> 102
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. CCI has agreed that, for a period of 120 days after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , 1998, all dealers effecting transactions in the
New Notes may be required to deliver a Prospectus.
CCI will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of he
Securities Act, and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 120 days after the Expiration Date, CCI will promptly send
additional copies of this Prospectus and any amendment or supplement to this
Prospectus to any broker-dealer that requests such documents in the Letter of
Transmittal. CCI has agreed to pay all expenses incident to the Exchange Offer
(including the expenses of one counsel for the holders of the Notes) other than
commissions or concessions of any broker-dealers and will indemnify holders of
the Old Notes (including any broker-dealers) against certain liabilities,
including certain liabilities under the Securities Act.
The Initial Purchasers and certain of their affiliates have provided and
continue to provide investment banking, commercial banking and advisory services
in the ordinary course of business to the Company and certain of its affiliates.
LEGAL MATTERS
The validity of the New Notes will be passed upon for CCI by Winstead
Sechrest & Minick P.C., Austin, Texas.
EXPERTS
The consolidated financial statements of Classic Communications, Inc. at
December 31, 1997 and 1996, and for each of the three years in the period ended
December 31, 1997, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
98
<PAGE> 103
CLASSIC COMMUNICATIONS, INC.
INDEX TO HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CLASSIC COMMUNICATIONS, INC.
Audited Financial Statements
Report of Independent Auditors......................... F-2
Consolidated Balance Sheets as of December 31, 1996 and
1997.................................................. F-3
Consolidated Statements of Operations for the years
ended December 31, 1995, 1996, and 1997............... F-4
Consolidated Statements of Stockholders' Equity
(Deficit) for the years ended December 31, 1995, 1996,
and 1997.............................................. F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1996, and 1997............... F-6
Notes to Consolidated Financial Statements............. F-7
Unaudited Interim Financial Statements
Unaudited Condensed Consolidated Balance Sheet as of
June 30, 1998......................................... F-23
Unaudited Condensed Consolidated Statements of
Operations for the six months ended June 30, 1997 and
1998.................................................. F-24
Unaudited Condensed Consolidated Statements of Cash
Flows for the six months ended June 30, 1997 and
1998.................................................. F-25
Notes to Unaudited Condensed Consolidated Financial
Statements............................................ F-26
</TABLE>
F-1
<PAGE> 104
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Classic Communications, Inc.
We have audited the accompanying consolidated balance sheets of Classic
Communications, Inc. and its subsidiaries as of December 31, 1996 and 1997, and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1997. Our audits also included the financial statement schedule
listed in the Index at Item 21(b). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Classic
Communications, Inc. and its subsidiaries at December 31, 1996 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
/s/ ERNST & YOUNG LLP
Austin, Texas
April 10, 1998 except for Note 14,
as to which the
date is September 15, 1998
F-2
<PAGE> 105
CLASSIC COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------
1996 1997
------------ ------------
<S> <C> <C>
Cash and cash equivalents................................... $ 653,127 $ 615,942
Accounts receivable, net.................................... 5,446,690 4,768,864
Prepaid expenses............................................ 700,223 606,855
Property, plant and equipment, at cost...................... 88,202,624 96,850,298
Less accumulated depreciation............................... (18,535,449) (28,211,443)
------------ ------------
69,667,175 68,638,855
Deferred financing costs, net............................... 5,786,761 4,494,409
Intangible assets:
Subscriber relationships.................................. 83,757,467 82,364,351
Franchise rights.......................................... 60,055,208 59,148,887
Noncompete agreements..................................... 12,059,153 12,104,153
Organization costs........................................ 128,293 228,293
Goodwill.................................................. 43,206,845 39,694,737
------------ ------------
199,206,966 193,540,421
Less accumulated amortization............................. (35,570,928) (52,253,745)
------------ ------------
163,636,038 141,286,676
Other assets................................................ 32,300 --
------------ ------------
Total assets...................................... $245,922,314 $220,411,601
============ ============
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Liabilities:
Accounts payable.......................................... $ 656,639 $ 771,957
Subscriber deposits and unearned income................... 3,260,210 3,506,695
Other accrued expenses.................................... 5,736,197 5,795,285
Accrued interest.......................................... 979,609 1,534,356
Bank debt................................................. 193,997,742 187,967,199
Subordinated debt......................................... 3,506,455 4,023,328
Deferred taxes, net....................................... 11,095,000 2,918,000
------------ ------------
Total liabilities................................. 219,231,852 206,516,820
15% PIK Redeemable Senior Preferred Stock: $.01 par value;
redemption price -- $1,000 per share plus accrued and
unpaid dividends of $1,880,159 in 1997 and $938,083 in
1996; authorized 20,000 shares; issued and outstanding
5,000 shares -- at net issue price plus accrued PIK stock
dividends of 1,880 shares................................. 4,920,483 5,977,759
15% PIK Redeemable Junior Preferred Stock: $.01 par value;
redemption price -- $1,000 per share plus accrued and
unpaid dividends of $5,585,969 in 1997 and $2,786,507 in
1996; authorized 35,000 shares; issued and outstanding
14,815 shares -- at net issue price plus accrued PIK stock
dividends of 5,586 shares................................. 16,512,672 19,433,934
8% Cumulative Redeemable Preferred Stock, Series A of
Television Enterprises, Inc. (a subsidiary): no par value;
redemption price -- $100 per share plus accrued and unpaid
dividends of $25,548 in 1997 and $25,502 in 1996; 55,000
shares authorized; issued and outstanding 12,670
shares -- at net issue price.............................. 1,292,502 1,292,548
Stockholders' equity (deficit):
Common Stock, Voting, convertible to Nonvoting Common
Stock: $.01 par value per share; authorized 4,503,000
shares; issued and outstanding 621,532 shares.......... 6,215 6,215
Common Stock, Nonvoting, convertible to Voting Common
Stock: $.01 par value per share; authorized 5,442,000
shares; issued and outstanding 2,185,532 shares........ 21,855 21,855
Additional paid-in capital................................ 39,380,295 39,380,295
Accumulated deficit....................................... (35,443,560) (52,217,825)
------------ ------------
Total stockholders' equity (deficit).............. 3,964,805 (12,809,460)
------------ ------------
Total liabilities, redeemable preferred stock and
stockholders' equity (deficit).................. $245,922,314 $220,411,601
============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 106
CLASSIC COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------------
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues........................................... $ 36,677,350 $ 59,821,152 $ 60,994,611
Operating expenses:
Programming...................................... 8,221,481 15,105,601 14,916,135
Plant and operating.............................. 4,715,281 7,307,818 7,621,670
General and administrative....................... 4,782,166 8,688,375 9,256,786
Marketing and advertising........................ 71,837 238,352 437,841
Corporate overhead............................... 1,120,729 1,155,116 2,888,209
Depreciation and amortization.................... 16,426,667 27,510,001 27,831,970
------------ ------------ ------------
Earnings (loss) from operations.................... 1,339,189 (184,111) (1,958,000)
Interest expense................................... (14,198,815) (20,632,543) (21,298,671)
Gain on sale of cable system....................... -- 4,900,670 3,644,365
Write-off of abandoned telephone operations and
accrual of related costs......................... -- (2,993,940) (500,000)
Other income....................................... -- -- 70,915
------------ ------------ ------------
Loss before income taxes, minority interest and
extraordinary item............................... (12,859,626) (18,909,924) (20,041,391)
Income tax benefit................................. 4,533,000 6,802,000 7,347,000
------------ ------------ ------------
Loss before extraordinary item..................... (8,326,626) (12,107,924) (12,694,391)
Extraordinary loss on extinguishment of debt, net
of income tax benefit of $2,516,000.............. (4,054,287) -- --
------------ ------------ ------------
Net loss........................................... $(12,380,913) $(12,107,924) $(12,694,391)
============ ============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE> 107
CLASSIC COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
VOTING NONVOTING COMMON STOCK COMMON STOCK
COMMON STOCK COMMON STOCK CLASS A CLASS B-1
------------------ ------------------- ---------------- ---------------------
SHARES SHARES SHARES SHARES
ISSUED AMOUNT ISSUED AMOUNT ISSUED AMOUNT ISSUED AMOUNT
-------- ------- --------- ------- ------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994... -- $ -- -- $ -- 10,075 $ 101 970,246 $ 9,702
Issuance of common stock...... -- -- -- -- -- -- 485,546 4,855
Stock exchange from
Recapitalization............ 492,548 4,925 1,455,792 14,558 -- -- (1,455,792) (14,557)
Issuance of common stock...... 154,353 1,544 186,745 1,867 -- -- -- --
Issuance of warrants.......... -- -- -- -- -- -- -- --
Accretion of discount on
preferred stock............. -- -- -- -- -- -- -- --
Dividends on preferred
stock....................... -- -- -- -- -- -- -- --
Net loss...................... -- -- -- -- -- -- -- --
-------- ------- --------- ------- ------- ----- ---------- --------
Balance at December 31, 1995... 646,901 6,469 1,642,537 16,425 10,075 101 -- --
Conversion of common stock.... (542,995) (5,430) 542,995 5,430 -- -- -- --
Restricted stock awards....... 258,813 2,588 -- -- -- -- -- --
Stock exchange................ 258,813 2,588 -- -- (10,075) (101) -- --
Expenses related to equity
transactions................ -- -- -- -- -- -- -- --
Accretion of discount on
preferred stock............. -- -- -- -- -- -- -- --
Dividends on preferred
stock....................... -- -- -- -- -- -- -- --
Net loss (Restated -- Note
15)......................... -- -- -- -- -- -- -- --
-------- ------- --------- ------- ------- ----- ---------- --------
Balance at December 31, 1996
(Restated -- Note 15)......... 621,532 6,215 2,185,532 21,855 -- -- -- --
Accretion of discount on
preferred stock............. -- -- -- -- -- -- -- --
Dividends on preferred
stock....................... -- -- -- -- -- -- -- --
Net loss...................... -- -- -- -- -- -- -- --
-------- ------- --------- ------- ------- ----- ---------- --------
Balance at December 31,
1997........................ 621,532 $6,215 2,185,532 $21,855 -- $ -- -- $ --
======== ======= ========= ======= ======= ===== ========== ========
<CAPTION>
COMMON STOCK COMMON STOCK
CLASS B-2 CLASS C TOTAL
------------------ ---------------- ADDITIONAL STOCKHOLDERS'
SHARES SHARES PAID-IN ACCUMULATED EQUITY
ISSUED AMOUNT ISSUED AMOUNT CAPITAL DEFICIT (DEFICIT)
-------- ------- ------- ------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994... -- $ -- 25,188 $ 252 $11,083,031 $(5,540,089) $ 5,552,997
Issuance of common stock...... 467,360 4,674 -- -- 17,909,480 -- 17,919,009
Stock exchange from
Recapitalization............ (467,360) (4,674) (25,188) (252) -- -- --
Issuance of common stock...... -- -- -- -- 6,405,845 -- 6,409,256
Issuance of warrants.......... -- -- -- -- 4,071,743 -- 4,071,743
Accretion of discount on
preferred stock............. -- -- -- -- -- (197,590) (197,590)
Dividends on preferred
stock....................... -- -- -- -- -- (1,649,436) (1,649,436)
Net loss...................... -- -- -- -- -- (12,380,913) (12,380,913)
-------- ------- ------- ----- ----------- ------------ ------------
Balance at December 31, 1995... -- -- -- -- 39,470,099 (19,768,028) 19,725,066
Conversion of common stock.... -- -- -- -- -- -- --
Restricted stock awards....... -- -- -- -- (2,588) -- --
Stock exchange................ -- -- -- -- (2,487) -- --
Expenses related to equity
transactions................ -- -- -- -- (84,729) -- (84,729)
Accretion of discount on
preferred stock............. -- -- -- -- -- (237,000) (237,000)
Dividends on preferred
stock....................... -- -- -- -- -- (3,330,608) (3,330,608)
Net loss (Restated -- Note
15)......................... -- -- -- -- -- (12,107,924) (12,107,924)
-------- ------- ------- ----- ----------- ------------ ------------
Balance at December 31, 1996
(Restated -- Note 15)......... -- -- -- -- 39,380,295 (35,443,560) 3,964,805
Accretion of discount on
preferred stock............. -- -- -- -- -- (237,000) (237,000)
Dividends on preferred
stock....................... -- -- -- -- -- (3,842,874) (3,842,874)
Net loss...................... -- -- -- -- -- (12,694,391) (12,694,391)
-------- ------- ------- ----- ----------- ------------ ------------
Balance at December 31,
1997........................ -- $ -- -- $ -- $39,380,295 $(52,217,825) $(12,809,460)
======== ======= ======= ===== =========== ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE> 108
CLASSIC COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------------------
1995 1996 1997
------------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $ (12,380,913) $(12,107,924) $(12,694,391)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation.............................................. 5,470,318 9,490,872 10,284,730
Amortization of intangibles............................... 10,956,349 18,019,129 17,547,240
Amortization of deferred financing costs.................. 1,017,859 1,491,104 1,373,527
Discount accretion on bank debt........................... 81,579 489,456 456,839
PIK interest on Senior Subordinated Promissory Notes...... 535,502 446,315 516,873
Gain on sales of cable systems............................ -- (4,900,670) (3,644,365)
Deferred tax benefit...................................... (7,049,000) (6,804,000) (7,593,000)
Extraordinary loss........................................ 6,570,287 -- --
Changes in working capital, net of acquisition amounts...... 318,017 1,808,837 1,644,908
------------- ------------ ------------
Net cash provided by operating activities................... 5,519,998 7,933,119 7,892,361
INVESTING ACTIVITIES
Acquisition of cable television systems:
Property, plant and equipment............................. (53,544,453) (137,006) --
Intangible assets......................................... (118,593,951) (229,670) --
Working capital, net of cash.............................. 93,895 -- --
------------- ------------ ------------
(172,044,509) (366,676) --
Purchases of property, plant and equipment.................. (3,931,163) (8,211,614) (10,135,485)
Payments for franchise rights, noncompete agreements, and
other intangibles......................................... -- (467,571) (322,886)
Net proceeds from sale of cable systems..................... -- 12,432,887 6,189,389
Net proceeds from litigation settlement..................... -- -- 2,928,108
Costs of pending acquisition................................ (696,675) -- --
------------- ------------ ------------
Net cash provided by (used in) investing activities......... (176,672,347) 3,387,026 (1,340,874)
FINANCING ACTIVITIES
Proceeds from sale of preferred stock and warrants, net of
related fees.............................................. $ 5,000,000 $ -- $ --
Proceeds from sale of common stock, net of related fees..... 24,328,264 (84,729) --
Proceeds from borrowings, net of related fees:
Bridge loan advances...................................... 9,000,000 -- --
Bank debt and related warrants............................ 208,000,000 2,207,547 758,592
Repayments of bank debt..................................... (64,335,542) (13,345,283) (7,245,974)
Cash dividends paid on TVE preferred stock.................. (28,881) (101,430) (101,290)
Financing costs and other................................... (11,873,684) (231,655) --
Purchase of shares of subsidiary from minority
shareholder............................................... -- (600,000) --
------------- ------------ ------------
Net cash provided by (used in) financing activities......... 170,090,157 (12,155,550) (6,588,672)
------------- ------------ ------------
Decrease in cash and cash equivalents....................... (1,062,192) (835,405) (37,185)
Cash and cash equivalents at beginning of year.............. 2,550,724 1,488,532 653,127
------------- ------------ ------------
Cash and cash equivalents at end of year.................... $ 1,488,532 $ 653,127 $ 615,942
============= ============ ============
Cash taxes paid............................................. $ 423,000 $ 5,000 $ 600
Cash interest paid.......................................... $ 12,569,000 $ 17,367,000 $ 18,397,000
Noncash investing and financing activities:
Acquisition of deferred tax liability..................... $ 9,642,000 $ -- $ --
PIK dividends on Preferred Stock.......................... $ 1,595,008 $ 3,229,224 $ 3,741,538
Preferred stock issued for conversion of debt............. $ 1,267,000 $ -- $ --
Accretion of discount on Preferred Stock.................. $ 197,590 $ 237,000 $ 237,000
</TABLE>
See accompanying notes.
F-6
<PAGE> 109
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION
Classic Communications, Inc. and its subsidiaries (collectively, the
"Company") acquire, develop and operate cable television systems throughout the
United States. Operations consist primarily of selling video programming which
is distributed to subscribers for a monthly fee through a network of coaxial
cables.
Operations originally began in July 1992 as Ponca/Universal Holdings, Inc.
("Ponca"). In May 1995, Classic Cable, Inc. ("Classic") was formed as a
subsidiary to Ponca and substantially all of the assets and liabilities of Ponca
were contributed to Classic in exchange for 100% of Classic's outstanding
capital stock.
In October 1995, the Company effected a restructuring (the
"Recapitalization"). Classic Communications, Inc. ("CCI"), was formed to hold
Ponca. Pursuant to an exchange agreement, all holders of the capital stock
(including Preferred Stock) of Ponca exchanged their shares in Ponca for shares
in CCI. Subsequently, Ponca merged into Classic with Classic being the surviving
entity. Effectively, the Company has the same assets, liabilities and operating
results as Ponca before the Recapitalization, but with a modified equity
structure.
These financial statements represent the consolidated company as a whole.
Certain minority interests, which are not material, are not owned by Classic
Communications, Inc.
2. ACQUISITIONS AND DISPOSITIONS OF CABLE TELEVISION SYSTEMS
ACQUISITIONS
In February 1995, the Company acquired certain assets of American Cable
Entertainment Cable Television Systems serving Eufala and Gould, Oklahoma;
Hugoton, Kansas; and communities in northern Texas ("Scott Cable") and
Rocksprings-Canyon TV Company, Inc. for approximately $12,700,000 and $470,000,
respectively. The purchases were financed with available funds of the Company,
$9,000,000 obtained under a bridge loan (later repaid with bank debt) and
$5,000,000 obtained through the sale of 270,732 shares of B-2 Common Stock.
In May 1995, the Company acquired the stock of W.K. Communications, Inc.
for approximately $46,400,000. The purchase and other transactions were financed
with approximately $13,000,000 received from the sale of 485,546 shares of B-1
Common Stock, 196,629 shares of B-2 Common Stock and bank debt. The purchase
price of the systems acquired plus deferred tax liabilities arising from the
acquisition of $9,642,000 were allocated to the tangible and identifiable assets
based on fair market values. The allocation resulted in an excess of cost over
net assets acquired (goodwill) of $11,921,100.
In June 1995, the Company acquired certain assets of Cable-Video
Enterprises, Inc., a corporation operating cable television systems in Texas,
Oklahoma, and Missouri, for approximately $16,400,000 of bank debt.
On October 31, 1995, the Company acquired certain assets of United Video
Cablevision, Inc. ("United Video") serving communities in four states and
Mission Cable Company, L.P. ("Mission Cable") serving communities in three
states for approximately $36,600,000 and $57,500,000, respectively. The
purchases were financed with approximately $10,000,000 received from the sale of
186,745 of Nonvoting Common Stock, 75,635 shares of Voting Common Stock, and
5,000 shares of Senior Preferred Stock and bank debt.
On December 1, 1995, the Company acquired certain assets of Douglas
Cablevision IV, L.P. serving a community in Texas for approximately $720,000 of
available funds.
In May 1996, the Company acquired certain assets of Regional Cable TV
(USA), Inc., a corporation operating cable television systems in Texas, for
approximately $400,000 of available funds.
F-7
<PAGE> 110
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
For financial statement purposes, the above acquisitions were accounted for
using the purchase method. The purchase prices of the systems acquired were
allocated to the identifiable tangible and intangible assets based upon
independent appraisals of current fair market values.
DISPOSITIONS
On September 19, 1996, the Company sold certain nonstrategic cable
televisions systems in Arkansas for cash consideration of $12,409,000, net of
selling expenses. The net pretax gain from the sale was approximately
$5,200,000. Proceeds from the sale were used to reduce a portion of the
Company's bank debt and for working capital purposes.
In April 1996, the Company sold certain nonstrategic cable television
systems in Texas for cash consideration of $24,000, net of selling expenses. The
net pretax loss from the sale was approximately $300,000.
In April and May 1997, the Company sold certain nonstrategic cable
television systems in Kansas and Oklahoma for $5,731,000, net of selling
expenses. The net pretax gain from the sales was approximately $3,600,000.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The operating results of all acquisitions are included in the Company's
consolidated results of operations from the date of acquisition. All significant
intercompany accounts and transactions have been eliminated in consolidation.
MINORITY INTEREST
Minority interest represents the minority stockholder's proportionate share
of the equity of a subsidiary of the Company, WT Acquisition Corporation ("WT").
At December 31, 1995, the Company owned approximately 97% of WT's capital stock,
representing 49% voting control. For financial reporting purposes, WT's assets
and liabilities are consolidated with those of the Company due to the fact that
subsequent to June 18, 1995, the Company could (and, in fact, later did) obtain
voting control of WT through its conversion of nonvoting common stock to voting
common stock of WT. Accordingly, the minority stockholder's interest in WT was
included in the Company's financial statements.
Effective December 31, 1994, the minority interest balance had depleted to
zero due to losses of the subsidiary since inception. Accordingly, the Company
absorbed all losses of the subsidiary during 1995.
On January 1, 1996, the Company (through its subsidiary, Classic) purchased
all outstanding shares from the minority owner for $600,000 in cash thereby
making WT a wholly owned, consolidated subsidiary.
REVENUE RECOGNITION
Service income includes earned subscriber service revenues and charges for
installations and connections. Subscriber services paid for in advance are
recorded as income when earned.
Initial installation revenue is recognized as revenue when receivable, to
the extent of direct selling costs, with any balance deferred and taken into
income over the estimated average period that subscribers are expected to remain
connected to the system.
F-8
<PAGE> 111
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is computed
using the straight-line method over the following estimated useful lives of the
assets:
<TABLE>
<S> <C>
Buildings................................................... 30 Years
Cable television distribution systems....................... 12 Years
Office furniture and equipment.............................. 7 Years
Vehicles.................................................... 5 Years
</TABLE>
Leasehold improvements are amortized over the shorter of their estimated
life or the period of the related leases.
Initial subscriber connection costs are capitalized as part of cable
television distribution systems. Costs related to disconnects and reconnects of
customers are expensed as incurred. Repairs and maintenance are charged to
expense as incurred, while expenditures for major renewals and betterments are
capitalized.
DEFERRED FINANCING COSTS
Included with deferred financing costs are the costs of interest rate cap
agreements. Deferred financing costs are being amortized to interest expense
using the interest method over the terms of the related debt. The Company enters
into interest rate cap agreements to effectively convert a portion of its
floating-rate borrowings into fixed-rate obligations. The cost of such cap
agreements and any interest rate differential to be received are recognized over
the lives of the agreements as an increase in interest expense.
INTANGIBLE ASSETS
Intangible assets, other than goodwill, are being amortized using the
straight-line method over their estimated useful lives ranging from 5 to 15
years. Excess cost over net assets arising from the acquisition of cable
television systems (goodwill) is amortized using the straight-line method over a
period of 40 years.
It is the Company's policy to value intangible assets at the lower of
unamortized cost or fair value. Management reviews the valuation and
amortization of intangible assets on a periodic basis, taking into consideration
any events or circumstances which might result in diminished fair value.
INCOME TAXES
The Company adopted the provisions of the Financial Accounting Standards
Board Statement No. 109, Accounting for Income Taxes, upon inception.
Accordingly, the liability method is used in accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the tax rates that are expected to be in
effect when the differences are expected to reverse, based upon current laws and
regulations.
CASH AND CASH EQUIVALENTS
For financial reporting purposes, the Company considers all highly liquid
investments purchased with original maturities of three months or less to be
cash equivalents.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash, cash equivalents and accounts
receivable. Excess cash is invested in high quality short-term
F-9
<PAGE> 112
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
liquid money instruments issued by highly-rated financial institutions.
Concentrations of credit risk with respect to the Company's receivables are
limited due to the large number of customers, individually small balances, short
payment terms and required deposits.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
STOCK-BASED COMPENSATION
In October 1995, the FASB issued Statement No. 123, Accounting for
Stock-Based Compensation, which prescribes accounting and reporting standards
for all stock-based compensation plans, including restricted stock awards. As
allowed by Statement No. 123, the Company has elected to continue to account for
its employee stock-based compensation in accordance with Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees(APB 25).
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value and carrying amounts for financial instruments may differ due to
instruments which provide fixed interest rates or contain fixed interest rate
elements. Inherently, such instruments are subject to fluctuations in fair value
due to subsequent movements in interest rates. The carrying amounts of cash,
cash equivalents and receivables approximate fair value due to their short-term
nature. The carrying amount of the Company's borrowings under its bank debt
approximates fair value.
4. ACCOUNTS RECEIVABLE
Accounts receivable consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Accounts receivable, trade.................................. $4,459,756 $4,570,438
Accounts receivable, other.................................. 1,499,434 960,540
Less allowance for doubtful accounts........................ (512,500) (762,114)
---------- ----------
Accounts receivables, net of allowance...................... $5,446,690 $4,768,864
========== ==========
</TABLE>
The activity in the Company's allowance for doubtful accounts for the
periods ending December 31, 1995, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
FOR THE PERIOD ENDED OF PERIOD EXPENSES DEDUCTIONS PERIOD
-------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
December 31, 1995........................ 99,127 252,616 (103,014) 248,729
December 31, 1996........................ 248,729 1,491,033 (1,227,262) 512,500
December 31, 1997........................ 512,500 1,248,571 (998,957) 762,114
</TABLE>
F-10
<PAGE> 113
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1996 1997
------------ ------------
<S> <C> <C>
Land.................................................... $ 1,021,146 $ 1,020,556
Buildings and improvements.............................. 2,020,793 2,107,225
Vehicles................................................ 3,595,075 4,087,781
Cable television distribution systems................... 78,096,275 83,499,164
Office furniture, tools and equipment................... 2,214,000 2,499,081
Construction in progress................................ 1,255,335 3,636,491
------------ ------------
88,202,624 96,850,298
Less accumulated depreciation........................... (18,535,449) (28,211,443)
------------ ------------
$ 69,667,175 $ 68,638,855
============ ============
</TABLE>
6. BANK DEBT
Balances of amounts outstanding under the Company's various bank credit
agreements and other notes (collectively "Bank Debt") are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1996 1997
------------ ------------
<S> <C> <C>
Senior Credit Agreement:
Term A Loan........................................... $ 18,729,412 $ 18,323,658
Term B Loan........................................... 59,472,941 58,184,523
Line of Credit Notes.................................. 117,497,647 112,717,183
Other................................................... 646,451 633,705
Discount relating to Senior Credit Agreement............ (2,348,709) (1,891,870)
------------ ------------
$193,997,742 $187,967,199
============ ============
</TABLE>
In May 1995, the Company obtained funds for acquisition, capital
expenditure and working capital purposes through a Senior Credit Agreement
thereby increasing the total credit available through Bank Debt from $57,000,000
to $150,000,000. A portion of the proceeds was used to repay amounts outstanding
under the previously-outstanding Bank Credit Agreement and Loan Agreement.
The Senior Credit Agreement is segregated into three separate debt
facilities, the Term A Loan, the Term B Loan and Line of Credit Notes. In
connection with the 1995 extinguishment of the Bank Credit Agreement and Loan
Agreement, an extraordinary loss related to the write-off of deferred financing
costs of approximately $2,363,000 was recorded. Approximately $4,300,000 in
deferred financing costs were incurred in connection with the Senior Credit
Agreement.
Concurrent with the acquisition of Mission Cable and United Video (in
October 1995 -- see Note 2), the Company amended and restated its Senior Credit
Agreement to obtain additional funds for acquisition, capital expenditure and
working capital purposes. The amendment and restatement increased the total
credit available thereunder from $150,000,000 to $215,000,000 by decreasing the
Term A Loan from $65,000,000 to $20,000,000; increasing the Term B Loan from
$35,000,000 to $65,000,000 and increasing the available Line of Credit Notes
from $50,000,000 to $130,000,000. In connection with the amendment and
restatement, an extraordinary loss related to the write off of deferred
financing costs of the original Senior Credit Agreement of
F-11
<PAGE> 114
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
approximately $4,208,000 was recorded. An additional $7,624,835 in deferred
financing costs were capitalized related to the amendment and restatement.
The Senior Credit Agreement is collateralized by a security interest in
essentially all the assets of Classic Cable, Inc., a wholly owned subsidiary of
Classic Communications, Inc. Classic Communications, Inc. has no operations of
its own. Consequently, it will rely on dividends and cash flow of Classic Cable,
Inc. to meet its debt service obligations. The terms of the Senior Credit
Agreement restrict certain activities of Classic Cable, Inc., including the
incurrence of additional indebtedness and the payment of certain dividends.
Accordingly, substantially all the assets and operations of Classic Cable, Inc.
are restricted as to transfer to the parent Classic Communications, Inc. and may
not be available for dividends and/or debt service of Classic Communications,
Inc.
Warrants to purchase an aggregate of 153,214 shares of common stock at
$.001 per share were issued in connection with the amendment and restatement.
The warrants expire in January 2006. The value of the warrants has been recorded
as a discount to the carrying amount of the amended and restated Senior Credit
Agreement and an increase to additional paid-in capital. (See additional
discussion of the warrants at Note 8.) The discount is being amortized to
interest expense using the interest method over the term of the Agreement. The
discount balance at December 31, 1997 is $1,891,870.
The Term A Loan, the Term B Loan and the Line of Credit Notes bear interest
at the LIBOR rate (5.91% at December 31, 1997) plus an applicable margin or, at
the option of the Company, a base rate (the higher of the weighted average of
the rates on overnight Federal funds transactions or the lender's prime rate)
plus an applicable margin. Interest on LIBOR based debt is payable on the last
day of the Interest Period as defined in the Senior Credit Agreement. Interest
on base rate is payable quarterly. The applicable margin differs for each
facility and is reduced upon the Company's attainment of certain financial
ratios. The range of margin for the facilities is as follows as of December 31,
1997:
<TABLE>
<CAPTION>
LIBOR MARGIN BASE RATE MARGIN
------------ ----------------
<S> <C> <C>
Term A Loan............................................ 3.25 to 3.75% 2.25 to 2.75%
Term B Loan............................................ 3.75 to 4.25% 2.75 to 3.25%
Line of Credit Notes................................... 1.50 to 3.50% 0.50 to 2.50%
</TABLE>
Principal of the Term A Loan is payable as follows:
<TABLE>
<CAPTION>
PRINCIPAL
DATE PAYMENTS
- ---- -----------
<S> <C>
September 30, 2003..................................... $ 7,500,000
December 31, 2003...................................... 7,500,000
March 31, 2004......................................... 2,500,000
June 30, 2004.......................................... 2,500,000
</TABLE>
Principal of the Term B Loan is payable as follows:
<TABLE>
<CAPTION>
PRINCIPAL
DATE PAYMENTS
- ---- -----------
<S> <C>
September 30, 2004..................................... $ 7,475,000
December 31, 2004...................................... 7,475,000
March 31, 2005......................................... 25,025,000
June 30, 2005.......................................... 25,025,000
</TABLE>
Required principal payments of the Term A and Term B Loans are reduced
ratably if borrowings outstanding are less than the total credit available.
F-12
<PAGE> 115
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
The maximum aggregate borrowings available under the Line of Credit Notes
are $114,019,536 at December 31, 1997. The maximum aggregate borrowings will be
reduced quarterly beginning the quarter ended March 31, 1999, with all available
borrowings terminating at June 30, 2003. There are no required quarterly
reductions to the maximum aggregate borrowings available during 1998.
In connection with the Senior Credit Agreement, the Company is required to
pay a quarterly commitment fee equal to 1/2% per annum on the unused portion of
the Line of Credit Notes based on the maximum aggregate borrowings at such time.
Other fees are due in 1998 and 1999 that are based on the amount of outstanding
borrowings. These fees are calculated on June 30, 1998; September 30, 1998 and
January 1, 1999 using rates ranging from 0.25% to 0.75%.
The Company entered into the following interest rate cap agreements whereby
the Company receives compensation when the three-month LIBOR rate exceeds the
maximum interest rate:
<TABLE>
<CAPTION>
MAXIMUM NON-
INTEREST REFUNDABLE
NOTIONAL AMOUNT EFFECTIVE DATE TERMINATION DATE RATE FEE
- --------------- -------------- ---------------- -------- ----------
<S> <C> <C> <C> <C>
$ 20,000,000 July 22, 1992 January 24, 1995 6.50% $110,000
4,000,000 July 30, 1993 February 5, 1996 6.00% 20,800
13,400,000 October 4, 1994 July 31, 1996 6.00% 207,700
15,600,000 December 13, 1994 July 31, 1996 6.75% 265,200
65,000,000 February 29, 1996 December 31, 1997 6.50% 175,500
125,000,000 March 31, 1998 October 31, 1998 6.25% 15,700
</TABLE>
In February 1996, the Company entered into an interest rate swap agreement
with a notional amount of $65,000,000 through December 31, 1997. Under the terms
of the agreement, the Company fixes the three month LIBOR rate at 5.51%. No
material fee was paid in connection with the agreement. The fair value of the
Company's interest rate swap at December 31, 1996 was not significant. The
agreement terminated at December 31, 1997.
During the period from June through September of 1995, the Company pursued
financing for acquisition and working capital purposes through the sale of notes
and debentures under SEC Rule 144A. Costs totaling $1,848,547 were incurred in
connection with this effort. Management determined that the long-term interest
costs associated with this financing were not advantageous to the Company;
therefore, the Company decided to terminate the financing effort. The costs of
the terminated financing are included as a component of interest expense in
1995.
In February 1997, the Senior Credit Agreement was amended. This amendment
modified certain required ratios and waived the pro forma debt service coverage
ratio covenant through December 30, 1997. In addition, the amendment increased
the interest rates charged on the outstanding Term Loans and Line of Credit
Notes as well as restricting the use of proceeds resulting from the future sales
of assets.
An amendment fee of approximately $1 million was paid to the bank equal to
0.5% of the outstanding Term Loans and Line of Credit Notes in 1997. This amount
is included as a component of interest expense in 1997.
In December 1997, the Senior Credit Agreement was further amended. This
amendment modified certain required ratios and waived the pro forma debt service
coverage ratio covenant through December 31, 1998. The amendment also gave
consent for the Company to enter into certain transactions related to certain
divorce proceedings (See Note 14).
F-13
<PAGE> 116
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
Maturities of Bank Debt, reflecting the December 1997 amendment, and
Subordinated Debt (see Note 7), exclusive of interest, are as follows:
<TABLE>
<S> <C>
1998................................... $ 101,114
1999................................... 30,063,387
2000................................... 21,259,183
2001................................... 23,407,668
2002................................... 26,295,638
Thereafter............................. 92,755,407
------------
$193,882,397
============
</TABLE>
7. SUBORDINATED DEBT
Subordinated debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
7.5% Junior Subordinated Promissory Notes(A)................ $ 295,638 $ 295,638
15% Senior Subordinated Promissory Note(B).................. 3,210,817 3,727,690
---------- ----------
$3,506,455 $4,023,328
========== ==========
</TABLE>
- ---------------
(A) Junior Subordinated Promissory Notes (the "Interest Notes") totaling
$295,638 bear interest at 7.5% per annum. The Interest Notes have no
required principal payments other than upon maturity on July 7, 2002. The
interest on the Interest Notes is deferred until maturity. The Interest
Notes are subordinated in right to payment to the Bank Debt.
(B) The Senior Subordinated Promissory Note or (the "Senior Note") was entered
into on June 18, 1993. On May 5, 1995, the Senior Note was amended and
restated and the interest rate was increased from 11.45% per annum to 15%
per annum, payable quarterly in arrears unless paid in kind ("PIK") through
the issuance of new Senior Notes (the "PIK Notes") incorporating the same
terms as the Senior Note. All principal and deferred interest under the
Senior and PIK Notes shall be repaid on December 31, 2007. The Senior Note
is subordinated in right to payment to the Bank Debt.
8. CAPITAL STOCK
At December 31, 1997, the authorized capital stock of the Company consists
of: (i) 20,000 shares of 15% PIK Redeemable Senior Preferred Stock, of which
5,000 shares are issued and outstanding, (ii) 35,000 shares of 15% PIK
Redeemable Junior Preferred Stock, of which 14,815 are issued and outstanding,
(iii) 5,442,000 shares of Voting Common Stock, of which 621,532 are issued and
outstanding and (iv) 4,503,000 shares of Nonvoting Common Stock, of which
2,185,532 shares are issued and outstanding.
At December 31, 1997, 152,418 shares of Voting Common Stock and 181,626
shares of Nonvoting Common Stock were reserved for the exercise of Common Stock
Purchase Warrants described below.
Equity Recapitalization
Concurrent with the October 1995 Recapitalization discussed in Note 1, all
previously outstanding shares of Class B-1, Class B-2 and Class C Common Stock
were exchanged for the newly authorized shares of Voting Common Stock or
Nonvoting Common Stock, and the Class A Common Stock was exchanged for the right
of the holders thereof to receive shares of restricted stock at a later date.
Therefore, all common stock
F-14
<PAGE> 117
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
transactions prior to October 31, 1995 and all prior year amounts will be
described as Class A, Class B-1, Class B-2 or Class C Common Stock and all
common stock transactions subsequent to the Recapitalization will be described
as Voting Common Stock or Nonvoting Common Stock.
Additionally, the 11% PIK Redeemable Preferred Stock sold in the prior year
was amended and restated to become 15% PIK Redeemable Junior Preferred Stock
with all the rights and privileges described below.
In 1996, the Company issued 258,813 shares of Voting Common Stock to
complete the exchange for 10,075 shares of Class A Common Stock that was
initiated in October 1995. These shares of Voting Common Stock are subject to
certain restrictions. These restrictions include a three and one half year
vesting provision and the entitlement to $9.93 less per share in distributions
than the amount otherwise payable for distribution to the holders of the
Company's Common Stock.
Common Stock
In February 1995, the Company sold 270,732 shares of B-2 Common Stock for
$5,000,000 or $19 per share. These funds were used to finance the acquisition of
Scott Cable described in Note 2.
In May 1995, the Company sold 485,546 of Class B-1 Common Stock and 196,629
shares of Class B-2 Common Stock for $19 per share or $13,000,000. The funds
received from the sale of Common Stock were used to finance the acquisition of
WK Communications, Inc. described in Note 2.
In October 1995, to finance the acquisition of United Video and Mission
Cable, the Company sold 186,745 shares of Nonvoting Common Stock and 75,635
shares of Voting Common Stock to existing investors for $19 per share or
$5,000,000.
In December 1995, the Company sold an additional 78,718 shares of Voting
Common Stock for $19 per share or $1,500,096.
Preferred Stock
Certain notes payable were converted into TVE Preferred Stock in June 1995.
The Company may redeem the outstanding shares of TVE Preferred Stock at any
time, in whole or in part, at a redemption price per share of $100 plus any
accrued and unpaid dividends. The TVE Preferred Stock is subject to mandatory
redemption at a redemption price per share of $100 plus any accrued and unpaid
dividends at June 30, 2001.
In October 1995, the Company sold 5,000 shares of Senior Preferred Stock
for $1,000 per share (see Note 2). In conjunction therewith, the Company issued
Common Stock Purchase Warrants entitling the holders to purchase in the
aggregate 30,226 shares of the Company's Voting Common Stock at $0.001 per share
and 30,226 shares of the Company's Nonvoting Common Stock at $0.001 per share.
Under the terms of the warrant agreements, the exercise price and exercise rate
shall be subject to adjustment in the event of a change in the number of shares
outstanding or valuation of the Company's Common Stock. The warrants expire in
January 2006. Proceeds for the issuance of the Senior Preferred Stock and the
Common Stock Purchase Warrants were allocated based on their respective fair
value to Senior Preferred Stock and additional paid-in capital.
The Company may redeem the outstanding shares of Senior or Junior Preferred
Stock at any time, in whole or in part, at a redemption price per share of
$1,000 plus any accrued and unpaid dividends. The Preferred Stock is subject to
mandatory redemption, in whole or in part, by the shareholder at a redemption
price per share of $1,000 plus any accrued and unpaid dividends, at any time
after the earliest to occur of the following events: (i) December 31, 2005; (ii)
the effective date of a Change in Control (as defined in the Investment
Agreement); (iii) the effective date of the sale, lease or exchange of
substantially all of the assets of the Company or any merger or consolidation to
which the Company or any subsidiary is a party other than
F-15
<PAGE> 118
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
the merger of a wholly-owned subsidiary into the Company; (iv) the use of
proceeds for other than that defined in the Investment Agreement; (v) the
acceleration of maturity of indebtedness under the amended and restated Senior
Credit Agreement. No such events have occurred as of December 31, 1997.
Stock Purchase Warrants
At December 31, 1996 and 1997, there were warrants outstanding to acquire
335,858 common shares at $.001 per share which expire beginning 2004 through
2006. No warrants have been exercised as of December 31, 1997.
Voting Rights
At December 31, 1997, all general voting power was vested in the holders of
Voting Common Stock. The holders of Preferred Stock have no voting rights with
regard to matters submitted to a vote of the stockholders. However, the
affirmative consent or vote of at least 80% of the outstanding shares of
Preferred Stock, voting as a class, shall be required with respect to any action
affecting the power, preferences and rights of the holders of shares of
Preferred Stock.
Holders of Nonvoting Common Stock are entitled at any time and from time to
time to convert any and all of the shares held into the same number of shares of
Voting Common Stock provided that such conversion would be in accordance with
all laws, regulations, rules or other requirements of any governmental authority
applicable to such conversion.
Dividends
The holders of Junior and Senior Preferred Stock are entitled to a
cumulative dividend equal to $150.00 per share per annum, due and payable at the
end of each calendar quarter. Dividends are payable solely in the form of
additional shares of such class of Preferred Stock. Stock dividends payable at
December 31, 1997 totaled $7,466,128 representing 7,466 additional shares to be
issued.
The holders of TVE Preferred Stock are entitled to a cumulative cash
dividend equal to $8.00 per share per annum, due and payable on June 30 of each
year. At December 31, 1997, accrued dividends on TVE Preferred Stock totaled
$25,548.
Dividends on Common Stock shall be paid at such times as may be declared by
the Board of Directors. Through December 31, 1997, no such dividends had been
declared.
Liquidation Rights
Upon liquidation or dissolution, the holders of Senior Preferred Stock
shall be entitled to receive, prior to any distribution of any available assets
of the Company to the holders of Junior Preferred Stock and Common Stock, an
amount equal to $1,000 per share plus any accrued and unpaid dividends.
To the extent available assets exist thereafter, holders of Junior
Preferred Stock shall be entitled to receive, prior to any distribution of any
available assets of the Company to the holders of Common Stock, an amount equal
to $1,000 per share plus any accrued and unpaid dividends.
Holders of TVE Preferred Stock shall be entitled to receive, prior to any
distribution of any available assets of TVE to the holders of Common Stock of
TVE, an amount equal to $100 per share plus any accrued and unpaid dividends.
F-16
<PAGE> 119
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
Restricted Stock Award Plan
The Company has a 1996 Restricted Stock Award Plan ("the Plan") whereby
employees may be granted shares of the Company's Voting Stock. The stock awards
will generally vest over a three to four year period. In addition, upon any
liquidating event, the restricted stock shareholders will be entitled to, for
half their shares, $19 less per share and, for the other half, $30 less per
share in distributions than the amount otherwise payable for distribution to the
holders of the Company's Common Stock. The Company has authorized 258,813 shares
under the Plan, all of which were awarded in 1996. The weighted-average grant
date pro forma fair value per share was $2.09.
Upon certain events, the Company has repurchase rights for unvested shares.
The Company also has the right of first refusal for any proposed disposition of
shares issued under the Plan. The restrictions on the shares are transferable.
Pro forma information regarding net income is required for 1996 and 1997 by
FASB Statement No. 123, and has been determined as if the Company had accounted
for its employee stock awards under the fair value method of that Statement. The
fair value for these awards was estimated at the date of grant using a minimum
value pricing model with the following weighted-average assumptions for 1996 (no
awards were granted in 1997):
<TABLE>
<CAPTION>
1996
-------
<S> <C>
Risk-free interest rate................................... 6.2%
Dividend yield............................................ 0%
Weighted-average expected life of the options............. 4 years
</TABLE>
Valuation models require the input of highly subjective assumptions.
Because the Company's stock awards have characteristics different from those of
traded shares, and because changes in the subjective input assumptions can
materially affect the fair value estimate, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock awards.
Based upon the minimum value pricing model and assumptions used, the pro
forma net loss would not differ materially from net loss as reported.
As of December 31, 1997, 517,626 shares of restricted stock were
outstanding. Of these, 258,813 shares were not vested. None were subject to
repurchase.
9. INCOME TAXES
Significant components of income tax benefit from continuing operations are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal..................................... $ (191,000) $ -- $ 246,000
State....................................... -- 2,000 --
----------- ----------- -----------
Total Current....................... (191,000) 2,000 246,000
Deferred:
Federal..................................... (3,865,000) (5,649,000) (6,304,000)
State....................................... (477,000) (1,155,000) (1,289,000)
----------- ----------- -----------
Total Deferred...................... (4,342,000) (6,804,000) (7,593,000)
----------- ----------- -----------
Income tax benefit............................ $(4,533,000) $(6,802,000) $(7,347,000)
=========== =========== ===========
</TABLE>
F-17
<PAGE> 120
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
A deferred benefit of $2,516,000 was recorded related to the extraordinary
item in 1995.
The Company's provision for income taxes differs from the expected tax
expense (benefit) amount computed by applying the statutory federal income tax
rate of 34% to income before income taxes and extraordinary items as a result of
the following:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Tax at U.S. statutory rate.................................. 34.0% 34.0% 34.0%
State taxes, net of federal benefit......................... 4.3 4.3 4.3
Permanent items and other................................... (3.0) (2.3) (1.7)
---- ---- ----
35.3% 36.0% 36.7%
==== ==== ====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Book over tax basis of depreciable assets............... $ 6,856,000 $ 2,091,000
Book over tax basis of assets that are amortizable for
tax.................................................. 13,582,000 5,414,000
----------- -----------
Total deferred tax liabilities.................. 20,438,000 7,505,000
Deferred tax assets:
Net operating loss carryforwards:
Acquired............................................. 10,771,000 4,880,000
Other................................................ 7,298,000 6,807,000
Other..................................................... 461,000 561,000
----------- -----------
Total deferred tax assets................................. 18,530,000 12,248,000
Less valuation allowance.................................. (9,187,000) (7,661,000)
----------- -----------
Net deferred tax assets................................... 9,343,000 4,587,000
----------- -----------
Net deferred tax liabilities.............................. $11,095,000 $ 2,918,000
=========== ===========
</TABLE>
At December 31, 1997, the Company had net operating loss carryforwards of
$30,523,000 for federal income tax purposes, which begin to expire in 2002 if
not utilized. Utilization of some of the loss carryforwards are subject to
various limitations under the Internal Revenue Code.
A valuation allowance has previously been recorded for certain acquisition
net operating loss carryforwards and other acquisition deferred tax assets due
to restrictions on their utilization under the tax law and other uncertainties
regarding their realization. When, and if, realized, the tax benefit associated
with these deferred tax assets will be applied to reduce goodwill and other
noncurrent intangibles related to the acquisitions. A valuation allowance has
not been recorded for the remaining net operating loss carryforwards and
deferred tax assets because existing deferred tax liabilities will reverse
within the carryforward period.
F-18
<PAGE> 121
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
During 1997, net operating loss carryforwards of approximately $3,986,000,
related to a prior acquisition, expired unutilized. A valuation allowance had
been provided for these loss carryforwards at acquisition, and as a result of
their expiration, the valuation allowance was reduced accordingly.
During 1997, a subsidiary of the Company filed an amended income tax return
for a period prior to its acquisition. The amended return resulted in an
additional net operating loss carryforward of $1,525,000 available to the
Company. The Company has recorded a deferred tax asset of $584,000 for this item
and a corresponding reduction to goodwill related to the subsidiary's
acquisition.
10. EMPLOYEE BENEFIT PLAN
The Company provides a defined contribution pension plan covering
substantially all full-time employees of the Company who have completed six
months of service. The plan is subject to the provision of Internal Revenue
Codes Section 401(k). The Company will match employee contributions for an
amount up to 3% of each employee's base salary. Company contributions to the
plan were $73,073, $88,590, and $113,975 for the years ended December 31, 1995,
1996, and 1997 respectively.
11. ABANDONMENT OF TELEPHONE OPERATIONS
At December 31, 1995 the Company was negotiating an agreement to purchase
four telephone exchanges in Kansas. For various reasons, the Company did not
complete the acquisitions and hence, did not enter the telephone business. Net
assets of the telephone business, when abandoned in 1996, consisted primarily of
property, plant and equipment. In connection therewith, the Company recorded a
$2,993,940 charge in 1996 related to the termination of the purchase agreement
and operations associated with the proposed acquisition. Items included in the
charge were the write-off of certain costs capitalized in connection with the
proposed acquisition, legal and consulting fees, and estimated severance for
personnel reductions. The Company revised their estimate of costs associated
with the abandonment and took an additional charge of $500,000 in 1997.
12. COMMITMENTS AND CONTINGENCIES
LEASE ARRANGEMENTS
The Company, as an integral part of its cable operations, has entered into
short-term lease contracts for microwave service, pole use and office space. At
December 31, 1997, approximate annual minimum aggregate rentals under such
leases were $1,057,000 in 1998; $115,000 in 1999 and $32,000 in 2000. Rent
expense was $659,012, $1,070,585, and $1,159,665 for the years ended December
31, 1995, 1996 and 1997, respectively.
SALE OF CABLE SYSTEMS
In December 1997, the Company entered into an agreement to sell certain
non-strategic cable systems in Colorado for an estimated $10,500,000. The
transaction is subject to the completion of technical and financial due
diligence by the buyer and the satisfactory transfer of the related franchise
agreements, and is expected to close during the second quarter of 1998. An
earnest money deposit of $300,000 has been established in connection with the
transaction, wherein the Company will be entitled to the deposit should the sale
not close on or prior to April 30, 1998 as a result of a breach by the buyer.
LITIGATION
The Company is involved in various legal proceedings which have arisen in
the normal course of business. While the ultimate results of these matters
cannot be predicted with certainty, management does not expect them to have a
material adverse effect on the consolidated financial position of the Company.
F-19
<PAGE> 122
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
LEGISLATION AND REGULATION
The Company's operations are subject to extensive regulation at the
federal, state and local levels. Many aspects of such regulation are currently
the subject of judicial proceedings and administrative or legislative proposals.
The Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act"), among other things, significantly expanded the scope of cable
television regulation and made significant changes to the legislative and
regulatory environment in which the Company operates. On April 1, 1993, the
Federal Communications Commission (the "FCC") adopted rules promulgated by the
1992 Cable Act which allow for a greater degree of regulation of the cable
industry with respect to, among other things: (i) cable system rates for both
basic and certain nonbasic services (the "regulated services"); (ii) programming
access and exclusivity arrangements; (iii) leased access terms and conditions;
(iv) ownership of cable systems; (v) customer service requirements; (vi)
television broadcast signal carriage and retransmission consent; (vii) technical
standards; and (viii) obscene or indecent programming. On March 30, 1994, the
FCC released revisions to its April 30, 1993 rate regulations which further
increased regulation in the cable industry.
In June 1995, the FCC released new regulations providing substantial relief
from rate regulation for small systems owned by small cable companies.
Management believes that all of the systems owned by the Company qualify under
the FCC's definition of a small system, and its rates are within the reasonable
rates prescribed for such small systems.
In accordance with the 1992 Cable Act, the regulated service rates charged
by the Company may be reviewed by local franchise authorities (for basic
service) or the FCC (for cable programming service). Refund liability for cable
programming service rates may be calculated from the date a complaint alleging
an unreasonable rate for cable programming service is filed with the FCC until
the refund is implemented. There have been no complaints filed and accepted by
the FCC.
In February 1996, a telecommunications bill was signed into federal law
which significantly impacts the cable industry. Most notably, the bill allows
cable system operators to provide telephony services, allows telephone companies
to offer video services, and it provides for deregulation of cable programming
service rates by 1999. While the impact of the bill cannot be determined at this
time, management does not expect the bill to have a significant adverse impact
on the financial position or results of operations of the Company.
Management of the Company believes that it has complied in all material
respects with the provisions of the FCC rules and regulations and the provisions
of local franchising authorities. Accordingly, no provision has been made in the
financial statements for any potential refunds. These rules and regulations are,
however, subject to judgmental interpretations, and the impact of potential rate
changes or refunds ordered by local franchising authorities or the FCC could
cause the Company to make refunds and/or lower its rates for regulated services
in the future.
13. SETTLEMENT OF CLAIM
In March 1997, the Company settled certain litigation in which the Company
was seeking damages related to a previous year's acquisition. The Company
received approximately $3.5 million in the settlement. A receivable of $500,000
existed at December 31, 1996 related to this claim. The net proceeds of $3
million were recorded as a reduction of goodwill.
14. SUBSEQUENT EVENTS
CLAIM SETTLEMENT
In February 1998, CCI settled claims that arose in conjunction with divorce
proceedings of an officer of CCI. CCI agreed to purchase certain stock of CCI in
which the officer's wife held a community property
F-20
<PAGE> 123
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
interest and to provide monetary consideration for the release of the claims.
Total payments related to the settlement, including $900,000 for the repurchase
of CCI stock from the officer's wife, will approximate $1.1 million. Payments
will commence in 1998. The related expenses, included legal, consultant and
other fees of approximately $1,035,000 are included in corporate overhead
expenses in 1997. The Company has paid certain legal fees related to these
proceedings on behalf of the officer. These amounts, approximately $200,000, are
recorded as a receivable as of December 31, 1997.
ACQUISITION
In July 1998, the Company acquired certain assets of Cable One, Inc.
serving communities in four states for approximately $41.7 million (the "Cable
One Acquisition"). The purchase was financed from proceeds of the Company's
private debt offering. (See Debt Offering below).
The following summarized unaudited pro forma financial information assumes
the Cable One Acquisition had occurred on January 1, 1998 and 1997,
respectively. The following pro forma information is not necessarily indicative
of the results that would have occurred had the transaction been completed at
the beginning of the period indicated, nor is it indicative of future operating
results (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1998 1997
------- -------
<S> <C> <C>
Revenues........................................ $37,897 $35,812
Net Loss........................................ $(8,006) $(3,407)
</TABLE>
DEBT OFFERING
In July 1998, the Company issued $60.0 million gross proceeds ($114.0
million in aggregate principal amount at maturity) of 13.25% Senior Discount
Notes due 2009 and its wholly owned subsidiary, Classic Cable, Inc. ("Cable")
issued $125.0 million of 9.875% Senior Subordinated Notes due 2008. Concurrently
with the offering, Cable entered into a New Senior Credit Agreement. The
proceeds from these transactions were approximately $280.2 million and were used
to (a) fund the acquisition of certain assets of Cable One, Inc., (b) redeem
existing preferred stock, (c) retire the outstanding subordinated debt, (d)
repay the Senior Credit Agreement and other outstanding debt and (e) pay fees
and expenses of these transactions.
The New Senior Credit Agreement consists of a $50.0 million Reducing
Revolving Credit Facility which matures in 2006 and a $75.0 million Term Loan
Facility which matures in 2007. Mandatory payments commence in 2001. Interest is
based upon either a LIBOR rate plus an applicable margin or, at the option of
Cable, a base rate plus an applicable margin.
The Senior Discount Notes were sold in units that consisted of a $1,000
note and three shares of common stock of the Company. Shares issued in
connection with the offering totaled 342,000.
STOCK SPLIT
On July 22, 1998, the Board of Directors declared a 10.07524-for-one Common
Stock split. An amount equal to the par value of the aggregate common shares
issued was transferred from the additional paid-in capital account to the
applicable common stock accounts. All share information within the financial
statements and notes thereto have been restated to reflect the effect of the
stock split and change in par value.
1998 RESTRICTED STOCK PLAN
In July, 1998, the Company adopted the 1998 Restricted Stock Award Plan
(the "1998 Plan"). The terms of the 1998 Plan are similar in all material
aspects to the 1996 Restricted Stock Award Plan (the "1996
F-21
<PAGE> 124
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
Plan"). Two officers of the Company will exchange all of their existing shares
under the 1996 Plan for shares of restricted Common Stock pursuant to the 1998
Plan, each representing approximately 7.5% of the Common Stock on a fully
diluted basis on the date prior to such issuance (before giving effect to the
issuance of the Shares in connection with the Units offering). Pursuant to the
granting agreement, such shares of restricted Common Stock are to vest 33.3% per
year over three years. All of such shares of restricted Common Stock are subject
to a distribution threshold equal to $3.77 per share.
MERGER
Effective September 15, 1998, all subsidiaries of Universal Cable Holdings,
Inc. (the "Universal Subsidiaries") were merged with and into Universal Cable
Holdings, Inc., a wholly owned subsidiary of Classic Cable, Inc. As a result of
the merger, the Universal Subsidiaries ceased to be separate entities, and
former third party shareholders of the Universal Subsidiaries who owned 25% of
the stock of each of the Universal Subsidiaries received approximately $50,000
in the aggregate for their shares. All subsidiaries of Classic Cable, Inc. are
now wholly owned by Classic Cable, Inc.
F-22
<PAGE> 125
CLASSIC COMMUNICATIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
(IN THOUSANDS)
ASSETS
<TABLE>
<S> <C>
Cash and cash equivalents................................... $ 1,845
Accounts receivable, net.................................... 4,836
Prepaid expenses............................................ 616
Property, plant, and equipment.............................. 101,051
Less accumulated depreciation............................... (33,716)
--------
67,335
Deferred financing costs, net............................... 3,852
Intangible assets:
Subscriber relationships.................................. 82,351
Franchise rights.......................................... 59,149
Noncompete agreements..................................... 11,946
Organization costs........................................ 228
Goodwill.................................................. 39,695
--------
193,369
Less accumulated amortization............................... (60,760)
--------
132,609
--------
Total Assets...................................... $211,093
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 313
Subscriber deposits and unearned income................... 4,081
Other accrued expenses.................................... 4,840
Accrued interest.......................................... 2,056
Promissory notes.......................................... 610
Bank debt................................................. 189,157
Subordinated debt......................................... 4,382
Deferred taxes, net....................................... 1,877
--------
Total liabilities................................. 207,316
15% PIK Redeemable Senior Preferred Stock................... 6,561
15% PIK Redeemable Junior Preferred Stock................... 21,266
8% Cumulative Redeemable Preferred Stock.................... 1,292
Stockholders' deficit:
Common Stock, Voting...................................... 6
Common Stock, Non Voting.................................. 22
Treasury stock............................................ (900)
Paid in capital........................................... 39,381
Accumulated deficit....................................... (63,851)
--------
Total stockholders' deficit....................... (25,342)
--------
Total liabilities and stockholders' deficit....... $211,093
========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-23
<PAGE> 126
CLASSIC COMMUNICATIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998
------- --------
<S> <C> <C>
Revenues.................................................... $30,221 $ 32,214
Operating expenses:
Programming............................................... 7,381 8,204
Plant and operating....................................... 3,640 3,865
General and administrative................................ 4,940 4,628
Marketing and advertising................................. 234 340
Corporate overhead........................................ 1,182 783
Depreciation and amortization............................. 13,893 14,169
------- --------
Earnings (loss) from operations............................. (1,044) 225
Interest expense............................................ (9,998) (10,497)
Gain on sale of cable system................................ 3,644 --
Other income................................................ 39 64
------- --------
Loss before income taxes.................................... (7,364) (10,208)
Income tax benefit.......................................... 2,699 1,041
------- --------
Net loss.................................................... $(4,665) $ (9,167)
======= ========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-24
<PAGE> 127
CLASSIC COMMUNICATIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
DOLLARS IN THOUSANDS IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1997 1998
------- -------
<S> <C> <C>
CASH FROM OPERATIONS........................................ $ 3,844 $ 4,526
INVESTING ACTIVITIES
Purchases of property, plant and equipment.................. (4,834) (4,201)
Payments for franchise rights, noncompete agreements, and
other intangibles......................................... (288) (18)
Net proceeds from the sale of cable systems................. 6,189 --
Net proceeds from litigation settlement..................... 2,928 --
------- -------
Net cash provided by (used in) investing activities......... 3,995 (4,219)
FINANCING ACTIVITIES
Proceeds from bank debt..................................... -- 1,015
Repayments of bank debt..................................... (7,207) (42)
Repayment of promissory notes............................... -- (40)
Cash dividends paid on TVE preferred stock.................. (50) (51)
------- -------
Net cash provided by (used in) financing activities......... (7,257) 882
Change in cash and cash equivalents......................... 582 1,229
Cash and cash equivalents at beginning of year.............. 653 616
------- -------
Cash and cash equivalents at end of year.................... $ 1,235 $ 1,845
======= =======
Noncash investing and financing activities:
PIK dividends on Preferred Stock.......................... $ 1,802 $ 2,131
Accretion of discount on Preferred Stock.................. $ 118 $ 284
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-25
<PAGE> 128
CLASSIC COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Classic Communications, Inc. (the "Company"), have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six-month period ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, which is
required to be adopted in years beginning after June 15, 1999. Because of the
Company's minimal use of derivatives, management does not anticipate that the
adoption of the new Statement will have a significant effect on earnings or the
financial position of the Company.
3. VALUATION ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
FOR THE SIX MONTHS ENDED OF PERIOD EXPENSES DEDUCTIONS PERIOD
------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
June 30, 1997.................. $512,500 $759,786 $(984,529) $287,757
June 30, 1998.................. 762,114 297,276 (877,243) 182,147
</TABLE>
4. PROMISSORY NOTES
In February 1998, the Company settled claims that arose in conjunction with
divorce proceedings of an officer of the Company. The Company agreed to purchase
certain stock of the Company in which the officer's wife held a community
property interest and provide monetary compensation for the release of the
claims. The Company acquired for $900,000 ($250,000 cash and $650,000 of
promissory notes) 101,538 shares of the Company's Common Stock (76,350 of which
were originally awarded under the Company's 1996 Restricted Stock Award
Program). This amount has been recorded as treasury stock. Expenses related to
this transaction were recognized in 1997.
The promissory notes issued accrue interest at 7% per annum. The promissory
note for $250,000 requires quarterly interest payments and monthly principal
payments of $10,000. The promissory note for $400,000 requires quarterly
interest payments with all principal due in 2003. Both notes become due and
payable upon a "Major Corporate Event" as defined.
5. INCOME TAXES
The Company recorded an income tax provision for the six months ended June
30, 1998 at an effective tax rate of approximately 10.2% which is based on the
Company's anticipated results for the year. The effective tax rates for the six
months ended June 30, 1998 and June 30, 1997 differ primarily due to an increase
in the valuation allowance against deferred tax assets. The Company believes it
is more likely than not that such deferred tax assets will not be utilized in
the near term.
The Company's benefit for income taxes differs from the amount computed by
applying the statutory rate to loss before income taxes primarily due to the
impact of permanent differences, an increase in the valuation allowance and
other items as discussed above.
F-26
<PAGE> 129
6. SUBSEQUENT EVENTS
ACQUISITION
In July 1998, the Company acquired certain assets of Cable One, Inc.
serving communities in four states for approximately $41.7 million (the "Cable
One Acquisition"). The purchase was financed from proceeds of the Company's
private debt offering. (See Debt Offering below).
The following summarized unaudited pro forma financial information assumes
the Cable One Acquisition had occurred on January 1, 1998 and 1997,
respectively. The following pro forma information is not necessarily indicative
of the results that would have occurred had the transaction been completed at
the beginning of the period indicated, nor is it indicative of future operating
results (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------
1998 1997
---- ----
<S> <C> <C>
Revenues....................................... $37,897 $35,812
Net Loss....................................... $(8,006) $(3,407)
</TABLE>
DEBT OFFERING
In July 1998, the Company issued $60.0 million gross proceeds ($114.0
million in aggregate principal amount at maturity) of 13.25% Senior Discount
Notes due 2009 and its wholly owned subsidiary, Classic Cable, Inc. ("Cable")
issued $125.0 million of 9.875% Senior Subordinated Notes due 2008. Concurrently
with the offering, Cable entered into a New Senior Credit Agreement. The
proceeds from these transactions were approximately $280.2 million and were used
to (a) fund the acquisition of certain assets of Cable One, Inc., (b) redeem
existing preferred stock, (c) retire the outstanding subordinated debt, (d)
repay the Senior Credit Agreement and other outstanding debt and (e) pay fees
and expenses of these transactions.
The New Senior Credit Agreement consists of a $50.0 million Reducing
Revolving Credit Facility which matures in 2006 and a $75.0 million Term Loan
Facility which matures in 2007. Mandatory payments commence in 2001. Interest is
based upon either a LIBOR rate plus an applicable margin or, at the option of
Cable, a base rate plus an applicable margin.
The Senior Discount Notes were sold in units that consisted of a $1,000
note and three shares of common stock of the Company. Shares issued in
connection with the offering totaled 342,000.
STOCK SPLIT
On July 22, 1998, the Board of Directors declared a 10.07524-for-one Common
Stock split. An amount equal to the par value of the aggregate common shares
issued was transferred from the additional paid-in capital account to the
applicable common stock accounts. All share information within the financial
statements and notes thereto have been restated to reflect the effect of the
stock split and change in par value.
1998 RESTRICTED STOCK PLAN
In July, 1998, the Company adopted the 1998 Restricted Stock Award Plan
(the "1998 Plan"). The terms of the 1998 Plan are similar in all material
aspects to the 1996 Restricted Stock Award Plan (the "1996 Plan"). Two officers
of the Company will exchange all of their existing shares under the 1996 Plan
for shares of restricted Common Stock pursuant to the 1998 Plan, each
representing approximately 7.5% of the Common Stock on a fully diluted basis on
the date prior to such issuance (before giving effect to the issuance of the
Shares in connection with the Units offering). Pursuant to the granting
agreement, such shares of restricted Common Stock are to vest 33.3% per year
over three years. All of such shares of restricted Common Stock are subject to a
distribution threshold equal to $3.77 per share.
F-27
<PAGE> 130
MERGER
Effective September 15, 1998, all subsidiaries of Universal Cable Holdings,
Inc. (the "Universal Subsidiaries") were merged with and into Universal Cable
Holdings, Inc., a wholly owned subsidiary of Classic Cable, Inc. As a result of
the merger, the Universal Subsidiaries ceased to be separate entities, and
former third party shareholders of the Universal Subsidiaries who owned 25% of
the stock of each of the Universal Subsidiaries received approximately $50,000
in the aggregate for their shares. All subsidiaries of Classic Cable, Inc. are
now wholly owned by Classic Cable, Inc.
F-28
<PAGE> 131
CLASSIC COMMUNICATIONS, INC.
INDEX TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<S> <C>
CLASSIC COMMUNICATIONS, INC.
Unaudited Pro Forma Condensed Consolidated Financial
Information
Unaudited Pro Forma Condensed Consolidated Financial
Information........................................... P-2
Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of June 30, 1998............................. P-3
Notes to Unaudited Pro Forma Condensed Consolidated
Balance Sheet as of June 30, 1998..................... P-4
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 1997....... P-6
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the six months ended June 30, 1998..... P-7
Notes to Unaudited Pro Forma Condensed Consolidated
Statements of Operations.............................. P-8
</TABLE>
P-1
<PAGE> 132
CLASSIC COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Consolidated Financial
Information of CCI is based on the audited and unaudited financial statements of
CCI, included elsewhere herein, and unaudited financial information of Cable
One. The unaudited pro forma adjustments are based upon available information
and certain assumptions that CCI believes are reasonable. The Unaudited Pro
Forma Condensed Consolidated Financial Information and accompanying notes should
be read in conjunction with the historical financial statements of CCI and the
respective notes thereto, and "Management's Discussion and Analysis of Results
of Operations and Financial Condition" appearing elsewhere in the Offering
Memorandum.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet has been
prepared to give effect to the Financing Plan and a 10.07524-to-one stock split
of the CCI Common Stock as if they had occurred on June 30, 1998. The Unaudited
Pro Forma Condensed Consolidated Statements of Operations have been prepared to
give effect to the Financing Plan as if it had occurred on January 1, 1997. The
Unaudited Pro Forma Condensed Consolidated Financial Information reflect CCI's
allocation of the purchase price for the Cable One Acquisition based upon CCI's
current estimates of the values of the assets acquired and liabilities assumed.
The final purchase price and the allocation thereof may vary as additional
information is obtained and, accordingly, the ultimate allocation may differ
from those used in the unaudited pro forma financial information. The Unaudited
Pro Forma Condensed Consolidated Financial Information also reflect CCI
managements' estimated valuation of the fair market value of CCI Common Stock.
The final valuation may change as additional information is obtained and,
accordingly, the ultimate valuation may differ from that used in the unaudited
pro forma financial information.
The Unaudited Pro Forma Condensed Consolidated Financial Information does
not purport to be indicative of the results that would have been obtained had
such transactions been completed as of the assumed dates and for the periods
presented, or that may be obtained in the future.
P-2
<PAGE> 133
CLASSIC COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
CLASSIC
COMMUNICATIONS CABLE ONE ADJUSTMENTS PRO FORMA
-------------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Cash and cash equivalents.............................. $ 1,845 $ 27 $ (27)(a)
3,189(b) $ 5,034
Accounts receivable, net............................... 4,836 1,023 -- 5,859
Prepaid expenses....................................... 616 (20) -- 596
Property, plant and equipment.......................... 101,051 20,996 (8,129)(c) 113,918
Less accumulated depreciation.......................... (33,716) (14,604) 14,604(d) (33,716)
-------- -------- --------- --------
67,335 6,392 6,475 80,202
Deferred financing costs, net.......................... 3,852 -- 9,412(f)
(3,852)(g) 9,412
Intangible assets:
Subscriber relationships............................. 82,351 -- -- 82,351
Franchise rights..................................... 59,149 284 (284)(h)
20,504(i) 79,653
Noncompete agreements................................ 11,946 -- 2,878(j) 14,824
Organization costs................................... 228 -- -- 228
Goodwill............................................. 39,695 1,010 (1,010)(k)
6,115(l) 45,810
-------- -------- --------- --------
193,369 1,294 28,203 222,866
Less accumulated amortization.......................... (60,760) (105) 105(m) (60,760)
-------- -------- --------- --------
132,609 1,189 28,308 162,106
-------- -------- --------- --------
Total Assets................................... $211,093 $ 8,611 $ 43,505 $263,209
======== ======== ========= ========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Liabilities:
Accounts payable..................................... $ 313 $ -- $ -- $ 313
Subscriber deposits and unearned income.............. 4,081 908 -- 4,989
Other accrued expenses............................... 4,840 789 -- 5,629
Accrued interest..................................... 2,056 -- -- 2,056
Promissory notes..................................... 610 -- (610)(n) --
Bank debt............................................ 189,157 -- 95,800(o)
(190,225)(p)
1,675(r) 96,407
Senior subordinated notes............................ -- -- 124,413(s) 124,413
Senior discount notes................................ -- -- 58,691(t) 58,691
Subordinated debt.................................... 4,382 -- (4,382)(u) --
Deferred taxes, net.................................. 1,877 -- -- 1,877
-------- -------- --------- --------
Total liabilities.............................. 207,316 1,697 85,362 294,375
15% PIK Redeemable Senior Preferred Stock.............. 6,561 -- (7,406)(v)
845(w) --
15% PIK Redeemable Junior Preferred Stock.............. 21,266 -- (22,007)(x)
741(y) --
8% Cumulative Redeemable Preferred Stock............... 1,292 -- (1,292)(z) --
Stockholders' deficit:
Common stock, voting................................. 6 -- -- 6
Common stock, nonvoting.............................. 22 -- -- 22
Treasury stock....................................... (900) -- -- (900)
Additional paid in capital........................... 39,381 4,015 (4,015)(aa)
1,289(cc) 40,670
Accumulated deficit.................................. (63,851) 2,899 (2,899)(bb)
(3,852)(g)
(1,675)(r)
(845)(w)
(741)(y) (70,964)
-------- -------- --------- --------
Total stockholders' deficit.................... (25,342) 6,914 (12,738) (31,166)
-------- -------- --------- --------
Total liabilities, redeemable preferred stock
and stockholders' deficit.................... $211,093 $ 8,611 $ 43,505 $263,209
======== ======== ========= ========
</TABLE>
See notes to unaudited pro forma condensed consolidated balance sheet.
P-3
<PAGE> 134
CLASSIC COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
The following pro forma adjustments to the unaudited condensed consolidated
balance sheet assume the Financing Plan had been consummated on June 30, 1998.
The Cable One Acquisition will be accounted for using the purchase method.
The cost of the acquisition will be allocated to the fair value of the assets
acquired as of the closing date, based upon valuations which are not yet
complete. Accordingly, the allocations of the purchase price may change upon
completion of the acquisition. This pending acquisition is dependent upon
obtaining various approvals and sufficient financing.
The estimated purchase price of the Cable One Acquisition and preliminary
allocations are as follows (in thousands):
<TABLE>
<S> <C>
Purchase price of the Cable One Acquisition................. $41,670
=======
Net equity of the Cable One Acquisition at June 30, 1998
(book value of net assets):
Paid in capital........................................... $ 4,015(aa)
Retained earnings......................................... 2,899(bb)
-------
6,914
Assets not acquired:
Cash...................................................... (27)(a)
Eliminate intangible assets previously recorded by Cable
One:
Franchise rights.......................................... (284)(h)
Goodwill.................................................. (1,010)(k)
Accumulated amortization.................................. 105(m)
Adjustments to record assets at fair value:
Property, plant and equipment............................. (8,129)(c)
Accumulated depreciation.................................. 14,604(d)
Franchise rights.......................................... 20,504(i)
Noncompete agreements..................................... 2,878(j)
Goodwill.................................................. 6,115(l)
-------
$41,670
=======
</TABLE>
P-4
<PAGE> 135
CLASSIC COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET -- (CONTINUED)
AS OF JUNE 30, 1998
Sources and uses of funds for the Financing Plan are as follows (in
thousands):
<TABLE>
<S> <C>
Sources of funds:
Proceeds from the New Senior Credit Agreement............. $ 95,800(o)
Proceeds from the sale of the Notes (less unamortized
discount of $587)...................................... 124,413(s)
Proceeds from the sale of the Units (less unamortized
discount of $55,244)................................... 58,691(t)
Proceeds from sale of common stock........................ 1,289(cc)
--------
Total sources of funds............................ $280,193
========
Uses of funds:
Cable One Acquisition..................................... $ 41,670
Retirement of 15% PIK Redeemable Senior Preferred Stock... 7,406(v)
Retirement of 15% PIK Redeemable Junior Preferred Stock... 22,007(x)
Retirement of TVE Preferred Stock......................... 1,292(z)
Prepayment of Existing Senior Credit Agreement............ 190,225(p)
Payment of promissory notes............................... 610(n)
Prepayment of subordinated debt........................... 4,382(u)
Estimated fees and expenses............................... 9,412(f)
Working capital........................................... 3,189(b)
--------
Total uses of funds............................... $280,193
========
</TABLE>
Concurrent with the Financing Plan, the Company will write-off the
following items related to the Existing Senior Credit Agreement and the
Preferred Stock (in thousands):
<TABLE>
<S> <C>
Unamortized deferred financing costs........................ $3,852(g)
Unamortized discount -- Existing Senior Credit Agreement.... $1,675(r)
Unamortized discount -- 15% PIK Redeemable Senior Preferred
Stock..................................................... $ 845(w)
Unamortized discount -- 15% PIK Redeemable Junior Preferred
Stock..................................................... $ 741(y)
</TABLE>
P-5
<PAGE> 136
CLASSIC COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASSIC
COMMUNICATIONS CABLE ONE ADJUSTMENTS PRO FORMA
-------------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues....................................... $60,995 $11,182 $-- $72,177
Operating expenses:
Programming.................................. 14,916 2,634 -- 17,550
Plant and operating.......................... 7,622 1,415 -- 9,037
General and administrative................... 9,257 1,768 -- 11,025
Marketing and advertising.................... 438 112 -- 550
Corporate overhead........................... 2,888 902 -- 3,790
Depreciation and amortization................ 27,832 1,148 5,078(a) 34,038
----------- -------- --------- --------
Earnings (loss) from operations................ (1,958) 3,203 (5,078) (3,833)
Interest expense............................... (21,299) -- (9,600)(b) (30,899)
Gain on sale of cable system................... 3,644 -- -- 3,644
Write-off of abandoned telephone operations and
accrual of related costs..................... (500) -- -- (500)
Other income................................... 72 854 (736)(c) 190
----------- -------- --------- --------
Earnings (loss) before income taxes............ (20,041) 4,057 (15,414) (31,398)
Income tax benefit............................. 7,347 -- 2,420(d) 9,767
----------- -------- --------- --------
Net income (loss).............................. $(12,694) $4,057 $(12,994) $(21,361)
=========== ======== ========= ========
</TABLE>
See notes to unaudited pro forma condensed consolidated statement of operations.
P-6
<PAGE> 137
CLASSIC COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASSIC
COMMUNICATIONS CABLE ONE ADJUSTMENTS PRO FORMA
-------------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues....................................... $32,214 $5,683 $ -- $ 37,897
Operating expenses:
Programming.................................. 8,204 1,531 -- 9,735
Plant and operating.......................... 3,865 703 -- 4,568
General and administrative................... 4,628 917 -- 5,545
Marketing and advertising.................... 340 79 -- 419
Corporate overhead........................... 783 -- -- 783
Depreciation and amortization................ 14,169 650 2,536(a) 17,355
------- ------ ------- --------
Earnings (loss) from operations................ 225 1,803 (2,536) (508)
Interest expense............................... (10,497) -- (5,142)(b) (15,639)
Other (expense) income......................... 64 (510) -- (446)
------- ------ ------- --------
Earnings (loss) before income taxes............ (10,208) 1,293 (7,678) (16,593)
Income tax benefit............................. 1,041 -- (1,041)(d) --
------- ------ ------- --------
Net income (loss).............................. $(9,167) $1,293 $(8,719) $(16,593)
======= ====== ======= ========
</TABLE>
See notes to unaudited pro forma condensed consolidated statement of operations.
P-7
<PAGE> 138
================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY
OTHER THAN THE NOTES OFFERED HEREBY IN ANY JURISDICTION WHERE, 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 THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH
IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................... 1
Risk Factors.......................... 11
Use of Proceeds....................... 17
Capitalization........................ 18
Selected Historical and Pro Forma
Consolidated Financial and Operating
Data................................ 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 29
Legislation and Regulation............ 41
Management............................ 50
Certain Relationships and Related
Transactions........................ 54
Principal Stockholders................ 55
Credit Arrangements of the Company.... 56
The Exchange Offer.................... 57
Description of the New Notes.......... 64
Certain United States Federal Income
Tax Considerations.................. 90
Plan of Distribution.................. 98
Legal Matters......................... 98
Experts............................... 98
Index to Historical Financial
Statements.......................... F-1
Index to Pro Forma Consolidated
Condensed Financial Information..... P-1
</TABLE>
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW
NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
================================================================================
OFFER TO EXCHANGE
ALL OUTSTANDING
13 1/4% SENIOR DISCOUNT NOTES
DUE 2009
FOR
13 1/4% SENIOR DISCOUNT NOTES
DUE 2009
[CLASSIC CABLE LOGO]
CLASSIC COMMUNICATIONS, INC.
------------------------
PROSPECTUS
------------------------
, 1998
================================================================================
<PAGE> 139
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") grants each corporation organized thereunder, such as the Registrant,
the power to indemnify its directors and officers against liabilities for
certain of their acts. Section 102(b)(7) of the DGCL permits a provision in the
certificate of incorporation of each corporation organized thereunder, such as
the Registrant, eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for certain breaches of
fiduciary duty as a director except (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) for any transaction from which a director derived an
improper personal benefit. Article Eighth of the Registrant's Certificate of
Incorporation has eliminated the personal liability of directors to the fullest
extent permitted by Section 102(b)(7) of the DGCL.
Article 10 of the Registrant's Certificate of Incorporation provides as
follows: The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(whether or not by or in the right of the Corporation) by reason of the fact
that he is or was a director, officer, employee, or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), liability, loss,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding to the fullest extent
permitted by either (i) any applicable law in effect on the date of
incorporation of the Corporation, or (ii) any law which becomes effective during
the existence of the Corporation and which is applicable to it.
Article 8 of the Registrant's By-Laws provides as follows: To the extent
permitted by law, the Corporation shall indemnify any person against any and all
judgments, fines, amounts paid in settling or otherwise disposing of actions or
threatened actions, and expenses in connection therewith, incurred by reason of
the fact that he, his testator or intestate is or was a director or officer of
the Corporation or of any other corporation of any type or kind, domestic or
foreign, which he served in any capacity at the request of the Corporation. To
the extent permitted by law, expenses so incurred by any such person in
defending a civil or criminal action or proceeding shall at his request be paid
by the Corporation in advance of the final disposition of such action or
proceeding.
The foregoing statements are subject to the detailed provisions of Section
102(b)(7) of the DGCL, Article 10 of the Certificate of Incorporation of the
Registrant and Article 8 of the By-Laws of the Registrant, as applicable.
The foregoing discussion is qualified in its entirety by reference to the
DGCL and the Registrant's Certificate of Incorporation and By-Laws.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
3.1 -- Amended and Restated Certificate of Incorporation of
Classic Communications, Inc., dated as of October 30,
1995.
3.1(b) -- Certificate of Amendment to Amended and Restated
Certificate of Incorporation of Classic Communications,
Inc. dated July 21, 1998.
3.2 -- Bylaws of Classic Communications, Inc., as amended.
</TABLE>
II-1
<PAGE> 140
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
4.1 -- Indenture dated as of July 29, 1998, for Units consisting
of $114,000,000 in Aggregate Principal Amount at
Maturity, 13 1/4% Senior Discount Notes due 2009, by and
among Classic Communications, Inc., as Issuer, and Bank
One, N.A., as Trustee.
4.2 -- Form of Global Securities.
4.3A -- Registration Rights Agreement dated as of July 29, 1998,
by and between Classic Communications, Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
4.3B -- Shareholder and Registration Rights Agreement, dated as
of July 29, 1998, by and among Classic Communications,
Inc. and Certain Stockholders and Merrill, Lynch, Pierce,
Fenner & Smith Incorporated.
4.3C -- Amended and Restated Registration Rights Agreement dated
as of October 31, 1995, modified by Amendment No. 1
(dated as of October 31, 1995) and Amendment No. 2 (dated
as of December 27, 1995).
4.3D -- Amended and Restated Shareholders Agreement dated as of
October 31, 1995, modified by Amendment No. 1 (dated as
of October 31, 1995), Amendment No. 2 (dated as of
December 27, 1995) and Amendment No. 3 (dated as of
December 19, 1997).
5.1 -- Opinion of Winstead Sechrest & Minick P.C. regarding the
enforceability and issuance of the securities, including
consent.
8.1 -- Opinion of Winstead Sechrest & Minick P.C. regarding
certain federal income tax matters, including consent.
10.1 -- Employment Agreement dated as of January 31, 1998 by and
between Classic Communications, Inc., Classic Cable, Inc.
and J. Merritt Belisle.
10.2 -- Employment Agreement dated as of January 31, 1998 by and
between Classic Communications, Inc., Classic Cable, Inc.
and Steven E. Seach.
10.3 -- Credit Agreement among Classic Cable, Inc., As Borrower,
the Lenders Parties thereto, Union Bank of California,
N.A. and Goldman Sachs Credit Partners L.P. as
Co-Arrangers, Goldman Sachs Credit Partners L.P., as
Syndication Agent and Union Bank of California, N.A., as
Administrative and Documentation Agent, dated as of July
29, 1998.
10.4 -- Asset Purchase Agreement dated May 14, 1998 by and
between Cable One, Inc. and Black Creek Communications,
Inc.
10.4(b) -- Assignment of Asset Purchase Agreement dated June 19,
1998.
10.4(c) -- Amendment No. 1 to Asset Purchase Agreement dated July
15, 1998.
10.5 -- 1996 Restricted Stock Award Plan of Classic
Communications, Inc.
10.6 -- 1998 Restricted Stock Award Plan of Classic
Communications, Inc.
12.1 -- Statement of Earnings to Fixed Charges.
21.1 -- Subsidiaries of Classic Communications, Inc.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Winstead Sechrest & Minick P.C. (included in
Exhibits 5.1 and 8.1 of this Registration Statement).
24.1 -- Powers of Attorney (included as part of signature page of
this Registration Statement).
25.1 -- Statement of Eligibility on Form T-1 of Bank One, N.A.,
as Trustee, including consent.
27.1 -- Financial Data Schedule.
99.1 -- Form of Transmittal Letter with respect to the Exchange
Offer (to be filed by amendment).
</TABLE>
II-2
<PAGE> 141
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
99.2 -- Form of Notice of Guaranteed Delivery with respect to the
Exchange Offer (to be filed by amendment).
</TABLE>
b. Financial Statement Schedules.
The following appear after the signature page of this Registration
Statement:
Report of Independent Public Accountants on Financial Statement Schedules
<TABLE>
<CAPTION>
PAGE
SCHEDULE DESCRIPTION NO.
- -------- ----------- ----
<C> <S> <C>
S-1 Condensed Financial Information of Classic Communications,
Inc. stand alone. S-1
</TABLE>
All other schedules are omitted because the required information is
included in the Consolidated Financial Statements or the Notes thereto or is
otherwise inapplicable.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to this request.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement.
II-3
<PAGE> 142
(d) The undersigned Registrant hereby undertakes as follows: That prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is part of this Registration Statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
(e) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph immediately preceding, or (ii) that
purports to meet the requirements of section 10(a)(3) of the Act is used in
connection with an offering of securities subject to Rule 415 (sec. 230.415 of
this chapter), will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(f) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, 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 was it declared effective.
(2) For purposes of determining any liability under the Securities Act
of 1933, 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> 143
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Austin, State of Texas, on
the 17th day of September, 1998.
CLASSIC COMMUNICATIONS, INC.
By: /s/ J. MERRITT BELISLE
----------------------------------
J. Merritt Belisle,
Chairman of the Board and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints J. Merritt Belisle and Steven E. Seach, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including, without
limitation, post-effective amendments and any subsequent registration statement
filed pursuant to Rule 462(b) or 462(d) under the Securities Act of 1933) to
this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all interests and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chairman of the Board and September 17, 1998
- ----------------------------------------------------- Chief Executive Officer
J. Merritt Belisle and a Director (Principal
Executive Officer)
/s/ STEVEN E. SEACH President and Chief September 17, 1998
- ----------------------------------------------------- Financial Officer and a
Steven E. Seach Director (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ JEFFERY C. GARVEY Director September 17, 1998
- -----------------------------------------------------
Jeffery C. Garvey
/s/ JAMES J. KOZLOWSKI Director September 17, 1998
- -----------------------------------------------------
James J. Kozlowski
/s/ ROBERT H. SHERIDAN, III Director September 17, 1998
- -----------------------------------------------------
Robert H. Sheridan, III
/s/ ROBERT MARAKOVITS Director September 17, 1998
- -----------------------------------------------------
Robert Marakovits
</TABLE>
II-5
<PAGE> 144
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CLASSIC COMMUNICATIONS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ -- $ --
Investment in and advances to affiliates.................... 28,971,981 16,715,607
------------ ------------
Total assets...................................... $ 28,971,981 $ 16,715,607
============ ============
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
Liabilities:
Accrued interest.......................................... $ 67,566 $ 90,046
Subordinated debt......................................... 3,506,455 4,023,328
------------ ------------
Total liabilities................................. 3,574,021 4,113,374
15% PIK Redeemable Senior Preferred Stock................. 4,920,483 5,977,759
15% PIK Redeemable Junior Preferred Stock................. 16,512,672 19,433,934
Common stock, Voting...................................... 6,215 6,215
Common stock, Nonvoting................................... 21,855 21,855
Paid in capital........................................... 39,380,295 39,380,295
Accumulated deficit....................................... (35,443,560) (52,217,825)
------------ ------------
Total stockholders' equity (deficit).............. 3,964,805 (12,809,460)
------------ ------------
Total liabilities, redeemable preferred stock and
stockholders' equity (deficit).................. $ 28,971,981 $ 16,715,607
============ ============
</TABLE>
S-1
<PAGE> 145
CLASSIC COMMUNICATIONS, INC.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------------
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Interest expense................................. $ (66,519) $ (468,858) $ (539,353)
Interest in earnings (loss) of subsidiaries...... (12,337,842) (11,807,717) (12,352,760)
------------ ------------ ------------
Loss before taxes................................ (12,404,361) (12,276,575) (12,892,113)
Income tax benefit............................... 23,448 168,651 197,722
------------ ------------ ------------
Net loss......................................... $(12,380,913) $(12,107,924) $(12,694,391)
============ ============ ============
</TABLE>
S-2
<PAGE> 146
CLASSIC COMMUNICATIONS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------
1995 1996 1997
------------ -------- --------
<S> <C> <C> <C>
Cash from operations.................................... $ -- $ 84,729 $ --
Investing activities
Advances to affiliates................................ (29,328,264) -- --
------------ -------- --------
Net cash used in investing activities................... (29,328,264) -- --
Financing activities
Proceeds from sales of preferred stock and warrants,
net of related fees................................ 5,000,000 -- --
Expenses related to equity financings................. -- (84,729) --
Proceeds from sale of stock........................... 24,328,264 -- --
------------ -------- --------
Net cash provided by (used in) financing activities..... 29,328,264 (84,729) --
Net change in cash...................................... -- -- --
------------ -------- --------
Cash and cash equivalents at beginning of year.......... -- -- --
------------ -------- --------
Cash and cash equivalents at end of year................ $ -- $ -- $ --
============ ======== ========
All 1997 activity related to non cash items.
</TABLE>
S-3
<PAGE> 147
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. BASIS OF PRESENTATION
In the parent company-only financial statements, the Company's investment
in subsidiaries is stated at cost plus equity in undistributed earnings (losses)
of subsidiaries since the date of acquisition, plus advances to, and less
payments from, subsidiaries. The parent company-only financial statements should
be read in conjunction with the Company's consolidated financial statements.
2. SUBORDINATED DEBT
Subordinated debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1996 1997
---------- ----------
<S> <C> <C>
7.5% Junior Subordinated Promissory Notes(A)................ $ 295,638 $ 295,638
15% Senior Subordinated Promissory Note (B)................. 3,210,817 3,727,690
---------- ----------
$3,506,455 $4,023,328
========== ==========
</TABLE>
- ---------------
(A) Junior Subordinated Promissory Notes (the "Interest Notes") totaling
$295,638 bear interest at 7.5% per annum. The Interest Notes have no
required principal payments other than upon maturity on July 7, 2002. The
interest on the Interest Notes is deferred until maturity. The Interest
Notes are subordinated in right to payment to the Bank Debt.
(B) The Senior Subordinated Promissory Note or (the "Senior Note") was
entered into on June 18, 1993. On May 5, 1995, the Senior Note was
amended and restated and the interest rate was increased from 11.45% per
annum to 15% per annum, payable quarterly in arrears unless paid in kind
("PIK") through the issuance of new Senior Notes (the "PIK Notes")
incorporating the same terms as the Senior Note. This amendment resulted
in an extraordinary loss of approximately $4,054,000 in 1995. All
principal and deferred interest under the Senior and PIK Notes shall be
repaid on December 31, 2007. The Senior Note is subordinated in right to
payment to the Bank Debt.
S-4
<PAGE> 148
EXHIBIT LIST
<TABLE>
<CAPTION>
EXHIBIT
NO. NAME
------- ----
<C> <S>
3.1 -- Amended and Restated Certificate of Incorporation of
Classic Communications, Inc., dated as of October 30,
1995, as amended on July 21, 1998.
3.1(b) -- Certificate of Amendment to Amended and Restated
Certificate of Incorporation of Classic Communications,
Inc. dated July 21, 1998.
3.2 -- Bylaws of Classic Communications, Inc., as amended.
4.1 -- Indenture dated as of July 29, 1998, for Units consisting
of $114,000,000 in Aggregate Principal Amount at
Maturity, 13 1/4% Senior Discount Notes due 2009, by and
among Classic Communications, Inc., as Issuer, and Bank
One, N.A., as Trustee.
4.2 -- Form of Global Securities.
4.3A -- Registration Rights Agreement dated as of July 29, 1998,
by and between Classic Communications, Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
4.3B -- Shareholder and Registration Rights Agreement, dated as
of July 29, 1998, by and among Classic Communications,
Inc. and Certain Stockholders and Merrill, Lynch, Pierce,
Fenner & Smith Incorporated.
4.3C -- Amended and Restated Registration Rights Agreement dated
as of October 31, 1995, modified by Amendment No. 1
(dated as of October 31, 1995) and Amendment No. 2 (dated
as of December 27, 1995).
4.3D -- Amended and Restated Shareholders Agreement dated as of
October 31, 1995, modified by Amendment No. 1 (dated as
of October 31, 1995), Amendment No. 2 (dated as of
December 27, 1995) and Amendment No. 3 (dated as of
December 19, 1997).
5.1 -- Opinion of Winstead Sechrest & Minick P.C. regarding the
enforceability and issuance of the securities, including
consent.
8.1 -- Opinion of Winstead Sechrest & Minick P.C. regarding
certain federal income tax matters, including consent.
10.1 -- Employment Agreement dated as of January 31, 1998 by and
between Classic Communications, Inc., Classic Cable, Inc.
and J. Merritt Belisle.
10.2 -- Employment Agreement dated as of January 31, 1998 by and
between Classic Communications, Inc., Classic Cable, Inc.
and Steven E. Seach.
10.3 -- Credit Agreement among Classic Cable, Inc., As Borrower,
the Lenders Parties thereto, Union Bank of California,
N.A. and Goldman Sachs Credit Partners L.P. as
Co-Arrangers, Goldman Sachs Credit Partners L.P., as
Syndication Agent and Union Bank of California, N.A., as
Administrative and Documentation Agent, dated as of July
29, 1998.
10.4 -- Asset Purchase Agreement dated May 14, 1998 by and
between Cable One, Inc. and Black Creek Communications,
Inc.
10.4(b) -- Assignment of Asset Purchase Agreement dated June 19,
1998.
10.4(c) -- Amendment No. 1 to Asset Purchase Agreement dated July
15, 1998.
10.5 -- 1996 Restricted Stock Award Plan of Classic
Communications, Inc.
10.6 -- 1998 Restricted Stock Award Plan of Classic
Communications, Inc.
12.1 -- Statement of Earnings to Fixed Charges.
21.1 -- Subsidiaries of Classic Communications, Inc.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Winstead Sechrest & Minick P.C. (included in
Exhibits 5.1 and 8.1 of this Registration Statement).
24.1 -- Powers of Attorney (included as part of signature page of
this Registration Statement).
</TABLE>
<PAGE> 149
<TABLE>
<CAPTION>
EXHIBIT
NO. NAME
------- ----
<C> <S>
25.1 -- Statement of Eligibility on Form T-1 of Bank One, N.A.,
as Trustee, including consent.
27.1 -- Financial Data Schedule.
99.1 -- Form of Transmittal Letter with respect to the Exchange
Offer (to be filed by amendment).
99.2 -- Form of Notice of Guaranteed Delivery with respect to the
Exchange Offer (to be filed by amendment).
</TABLE>
<PAGE> 1
SCHEDULE 2.1
<TABLE>
<CAPTION>
COMMITMENTS
-----------
Term Loan Revolving Loan
Lender Commitment Commitment
------ ---------- ----------
<S> <C> <C>
Goldman Sachs
Credit Partners
L.P. $62,500,000 $0
Union Bank of
California, N.A. $12,500,000 $50,000,000
</TABLE>
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CLASSIC COMMUNICATIONS, INC.
(Incorporated October 4, 1995, under the name "Classic Telecommunications
Corp.")
THE UNDERSIGNED does hereby certify that the following is the Amended
and Restated Certificate of Incorporation of Classic Communications, Inc.:
1. Name. The name of the corporation is Classic Communications,
Inc. (the "Corporation").
2. Duration. The Corporation is to have perpetual existence.
3. Purpose. The purpose for which the Corporation is organized is
to engage in any and all lawful acts and activities for which corporations may
be organized under the General Corporation Law of the State of Delaware.
4. Authorized Shares. *See Amendment*
The designations, powers, preferences and relative, participating,
optional and other special rights with respect to the Preferred Stock and the
Common Stock, and the qualifications, restrictions and limitations thereof, are
as follows:
A. Voting Rights.
Except as provided herein, the holders of Preferred Stock shall
have no voting rights with regard to matters submitted to a vote of the
Corporation's stockholders. The affirmative consent or vote of at least
eighty percent (80%) of the outstanding shares of either class of
Preferred Stock, voting as a class, shall be required with respect to
any action which (a) would materially and adversely alter the powers,
preferences and rights of the holders of shares of such class of
Preferred Stock as set forth herein, (b) would create any new class or
series of stock of the Corporation having preference over or being in
parity with such class of Preferred Stock, or (c) would increase the
authorized number of shares of such class of Preferred Stock. The
holders of the Voting Common Stock shall each have one vote per share of
Voting
<PAGE> 2
Common Stock held by them on all matters to be voted on by the
Corporation's stockholders. Except as may be required by law, the
holders of the Nonvoting Common Stock shall have no right to vote on any
matter.
B. Dividends.
The holders of the Preferred Stock will be entitled to dividends
as follows:
Commencing on the date of its issuance, a cumulative dividend
equal to $150.00 per share per annum shall accrue on the Preferred Stock
and shall become due and payable on December 31, 1995, and on March 31,
June 30, September 30, and December 31 of each year thereafter.
Dividends on each class of Preferred Stock shall be payable on
each such date (a "Preferred Stock Dividend Payment Date") solely in the
form of additional shares of such class of Preferred Stock and issued on
such Preferred Stock Dividend Payment Date to the registered holder
thereof in the amount of such dividend payable on such Preferred Stock
Dividend Payment Date.
Dividends shall be paid on the Common Stock at such times as may
be declared by the Board of Directors.
C. Rights Upon Liquidation.
Upon any liquidation (partial or complete), dissolution or
winding up of the Corporation (a "Liquidating Event"), the Corporation
shall distribute the assets of the Corporation legally available for
distribution (the "Available Assets") to its stockholders after making
adequate provision for (i) all contingent and other liabilities of the
Corporation, including, without limitation, any and all indebtedness,
fees, penalties, profits, interest or other amounts or payments due from
the Corporation to any creditor of the Corporation, (ii) the Preferred
Stock Liquidation Preference (as defined below) in accordance with the
following paragraph, and (iii) the fair market value of any warrants or
options to acquire any equity securities of the Corporation issued by
the Corporation to any creditor of the Corporation, in accordance with
the provisions of this Article 4.
C(i). Senior Preferred Stock. Upon the occurrence of a
Liquidating Event, the holders of Senior Preferred Stock shall be
entitled to receive, by reason of their ownership thereof, prior and in
preference to any distribution of any of the assets of the Corporation
to the holders of Junior Preferred Stock and Common Stock, an amount
equal to $1,000.00 per share (the "Preferred Stock Liquidation
Preference"), plus any accrued and unpaid dividends. Written notice of
any such liquidation, dissolution or winding up, stating a payment date,
the place where such payment
2
<PAGE> 3
shall be made, the amount of each liquidating payment and the amount of
accrued dividends to be paid, shall be given by first class mail,
postage paid, not less than thirty (30) days prior to the payment date
stated therein, to each holder of record of the Senior Preferred Stock
at such holder's address as shown on the records of the Corporation. If
upon the occurrence of such Liquidating Event, the assets and funds to
be thus distributed among the holders of the Senior Preferred Stock
shall be insufficient to permit the payment to such holders of the full
amount due hereunder, then the holders of Senior Preferred Stock shall
share ratably in any distribution of assets of the Corporation in
proportion to the respective amounts which would otherwise be payable
with respect to the shares of Senior Preferred Stock held by them upon
such distribution if the full amount payable on or with respect to such
shares were paid in full.
C(ii). Junior Preferred Stock. Upon the occurrence of a
Liquidating Event, the holders of Junior Preferred Stock shall be
entitled to receive, by reason of their ownership thereof, prior and in
preference to any distribution of any of the assets of the Corporation
to the holders of Common Stock, an amount equal to $1,000.00 per share,
plus any accrued and unpaid dividends. Written notice of any such
liquidation, dissolution or winding up, stating a payment date, the
place where such payment shall be made, the amount of each liquidating
payment and the amount of accrued dividends to be paid, shall be given
by first class mail, postage paid, not less than thirty (30) days prior
to the payment date stated therein, to each holder of record of the
Junior Preferred Stock at such holder's address as shown on the records
of the Corporation. If upon the occurrence of such Liquidating Event,
the assets and funds to be thus distributed among the holders of the
Junior Preferred Stock shall be insufficient to permit the payment to
such holders of the full amount due hereunder, then the holders of
Junior Preferred Stock shall share ratably in any distribution of assets
of the Corporation in proportion to the respective amounts which would
otherwise be payable with respect to the shares of Junior Preferred
Stock held by them upon such distribution if the full amount payable on
or with respect to such shares were paid in full.
C(iii). Common Stock. Upon the occurrence of a Liquidating
Event, to the extent Available Assets exist after the payment of or
provision for the liabilities set forth in paragraph C(i) and C(ii)
above, such Available Assets shall be distributed among the holders of
Common Stock based on the number of shares owned by them.
D. Conversion.
D(i). Conversion of Voting Common Stock. Each record holder of
Voting Common Stock is entitled at any time, and from time to time, to
convert any or all of such holder's shares of Voting Common Stock into
the same number of shares of Nonvoting Common Stock.
3
<PAGE> 4
D(ii). Conversion of Nonvoting Common Stock. Each record holder
of Nonvoting Common Stock is entitled at any time, and from time to
time, to convert any or all of such holder's shares of Nonvoting Common
Stock into the same number of shares of Voting Common Stock; provided,
that no holder of Nonvoting Common Stock is entitled to convert any
share or shares of Nonvoting Common Stock to the extent that such
conversion would be inconsistent with any law or any regulation, rule or
other requirement of any governmental authority applicable at the time
of such conversion, relating to the direct or indirect ownership,
control or power to vote securities of the kind issued by the
Corporation.
D(iii). Conversion Procedure.
(a) Each conversion of shares of Nonvoting Common Stock
into Voting Common Stock or of Voting Common Stock into Nonvoting
Common Stock pursuant to the foregoing paragraphs D(i) and D(ii)
will be effected by the surrender, at the principal office of the
Corporation during normal business hours, of the certificate or
certificates representing the shares to be converted, together
with a written notice by the holder of such stock being converted
stating (A) that such holder desires to convert the shares, or a
stated number of the shares, of the stock represented by such
certificate or certificates into the class of common stock of the
Corporation specified in such notice, and (B) in the case of a
conversion of Nonvoting Common Stock into Voting Common Stock,
that upon such conversion such holder and its affiliates will not
directly or indirectly own, control or have the power to vote a
greater quantity of securities of any kind issued by the
Corporation than such holder and its affiliates are permitted to
own, control or have the power to vote under any applicable law
or any regulation, rule or other governmental requirement (and
such statement will obligate the Corporation to issue such Voting
Common Stock). Such conversion will be deemed to have been
effected as of the close of business on the date on which such
certificate or certificates have been surrendered and such notice
has been delivered, and at such time the rights of the holder of
the converted stock as such holder will cease and the person(s)
in whose name(s) the shares of Nonvoting Common Stock or Voting
Common Stock, surrendered, was or were registered will be deemed
to have become the holder(s) of record of such shares.
(b) Promptly after such surrender and the receipt of
such notice, the Corporation will issue and deliver in accordance
with the surrendering holder's instructions (A) a certificate(s)
for the Nonvoting Common Stock or Voting Common Stock, as the
case may be, issuable upon such conversion, and (B) a certificate
for any Nonvoting Common Stock or Voting Common
4
<PAGE> 5
Stock, as the case may be, which was represented by a surrendered
certificate but which was not converted.
(c) The Corporation shall not in any manner subdivide
(by stock split, stock dividend or otherwise) or combine (by
reverse stock split or otherwise) any share of any class of
common stock of the Corporation.
(d) The issuance of certificates for shares of
Nonvoting Common Stock or Voting Common Stock, as the case may
be, upon conversion of any Voting Common Stock or Nonvoting
Common Stock, respectively, will be made without charge to the
holders of such shares for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection with such
conversion and the related issuance of shares of such Nonvoting
Common Stock or Voting Common Stock, as the case may be.
(e) The Corporation will not close its books against
the transfer of any class of Nonvoting Common Stock or Voting
Common Stock issued or issuable upon conversion of Voting Common
Stock or Nonvoting Common Stock, respectively, in any manner
which would interfere with the timely conversion of any Nonvoting
Common Stock or Voting Common Stock.
5. Redemption of Preferred Stock.
The Corporation shall redeem the outstanding shares of Preferred
Stock as follows:
5A. Redemption at the Option of the Corporation.
The Corporation shall have the right to redeem the outstanding
shares of Preferred Stock at any time, in whole or in part, at a
redemption price equal to $1,000.00 per share (the "Redemption Price"),
plus any accrued and unpaid dividends.
5B. Redemption at the Option of the Holder.
The Preferred Stock shall be subject, at the election of the
holder thereof, to mandatory redemption, in whole or in part, at a price
per share equal to the Redemption Price plus any accrued and unpaid
dividends, at any time after the earliest to occur of the following
events:
(i) September 30, 2005;
5
<PAGE> 6
(ii) The effective date of a Change of Control (as
defined below).
(iii) The effective date of (A) the sale, lease or
exchange of all or substantially all of the assets of the
Corporation, or (B) any merger or consolidation to which the
Corporation or any subsidiary is a party other than the merger of
a wholly-owned subsidiary into the Corporation; or
(iv) The diversion of proceeds from the uses set forth
in that certain Investment Agreement, dated as of July 26, 1994,
as amended by the Amendment, Waiver and Consent No. 1 to
Investment Agreement dated as of February 17, 1995, by and
between Ponca/Universal Holdings, Inc., and NationsBanc Capital
Corp. ("NationsBanc") without the prior written consent of
NationsBanc; or
(v) Acceleration of the maturity of indebtedness under
the "Credit Agreement" dated May 5, 1995, among Classic Cable,
Inc., WT Acquisition Corporation, The Chase Manhattan Bank, N.A.,
and certain other banks named therein, or any credit facility
replacing in whole or in part the Credit Agreement.
For purposes of this Section 5B, "Change of Control" means an
event as a result of which J. Merritt Belisle, Austin Ventures,
L.P., Austin Ventures III-A, L.P., Austin Ventures II-B, L.P., BT
Capital Partners, Inc., Texas Growth Fund and NationsBanc cease
to own a majority of the issued and outstanding shares of Common
Stock of the Company.
5C. Procedure for Redemption.
(a) The Corporation shall redeem each class of
Preferred Stock ratably among the holders of such class of
Preferred Stock as shown on the records of the Corporation, based
on their respective percentage ownership of outstanding shares of
such class of Preferred Stock as of the date of notices provided
for in subparagraph (b) hereof, and shall pay all dividends
outstanding on such class of Preferred Stock to be redeemed at
each payment date.
(b) The Corporation shall give the holders of the
Preferred Stock not fewer than thirty (30) nor more than
forty-five (45) days' prior written notice (the "Notice of
Redemption") of the REDEMPTION DATE and the amount of each
REDEMPTION PAYMENT and shall set forth the amount of accrued
dividends to be paid.
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<PAGE> 7
(c) All Preferred Stock redeemed, purchased or
otherwise acquired by the Corporation shall be retired and
cancelled and shall not be reissuable.
(d) Notice shall be deemed given when personally
delivered or deposited in the United States mail, first class,
postage prepaid, to each holder of Preferred Stock to be redeemed
at the address of such holder as the same shall appear on the
records of the Corporation. Neither the failure of any
stockholder to receive any such Notice of Redemption nor the
failure of the Corporation to mail or deliver the same to any
stockholder shall affect the validity of the proceedings for
redemption except as to a holder whose notice is not mailed or
delivered. If notice is given as provided herein and if on or
before the Redemption Date the Corporation shall set aside or
deposit, with a redemption agent specified in the Redemption
Notice, an amount sufficient to pay the aggregate redemption
price of all shares to be redeemed, the shares called for
redemption shall, after the Redemption Date, be deemed no longer
outstanding and the holder thereof shall cease to be a
stockholder with respect to such shares and shall have no right
to dividends or other stockholder rights thereafter.
6. Cumulative Voting Denied. Cumulative voting by the
stockholders of the Corporation at any election of directors of the
Corporation is prohibited.
7. Registered Office, Agent. The registered office of the
Corporation is located at 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.
8. Quorum; Arrangement with Creditors. The following
provisions are included for the management of the business and for the
conduct of the affairs of the Corporation, and for further definition,
limitation and regulation of the powers of the Corporation and of its
directors and stockholders:
(a) At all meetings of the Board of Directors of the
Corporation a majority of the entire Board, consisting of at
least a majority of the directors designated by Austin Ventures,
L.P., Austin Ventures III-A, L.P., Austin Ventures III-B, L.P.,
Texas Growth Fund, BT Capital Partners, Inc. and NationsBanc
Capital Corp. (the "Majority Purchaser Directors") shall be
necessary to and shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, unless
otherwise provided by any applicable provision of law or by this
Certificate of Incorporation. Anything to the contrary in this
Certificate of Incorporation notwithstanding, the provisions of
this paragraph 8(b) shall not be amended, altered or repealed
unless such action is first approved by affirmative vote or
consent of the
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<PAGE> 8
Board of Directors, which shall include the affirmative vote or
consent of the Majority Purchaser Directors and at least one
director designated by J. Merritt Belisle.
(b) Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them
and/or between the Corporation and its stockholders or any class
of them, any court of equitable jurisdiction within the State of
Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the
Corporation under Section 291 of Title 8 of the Delaware Code or
on the application of trustees in dissolution or of any receiver
or receivers appointed for the Corporation under Section 279 of
Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or the stockholders or class of
stockholders of the Corporation, as the case may be, to be
summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement,
the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of
creditors, and/or all the stockholders or class of stockholders
of this Corporation, as the case may be, and also on the
Corporation.
9. Director Liability. To the fullest extent permitted by
the General Corporation Law of the State of Delaware, as the same exists
or may hereafter be amended, a director of the Corporation shall not be
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director.
10. Indemnification. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (whether or not by or
in the right of the Corporation) by reason of the fact that he is or was
a director, officer, employee, or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
liability, loss, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action,
suit or proceeding to the fullest extent permitted by either (i) any
applicable law in effect on the date of incorporation of the
Corporation, or (ii) any law which becomes effective during the
existence of the Corporation and which is applicable to it.
8
<PAGE> 9
11. Bylaws. In furtherance of and not in limitation of the
powers conferred by statute, the Board of Directors is expressly
authorized to make, alter or repeal the bylaws of the Corporation,
subject to such limitations, if any, as shall be set forth in the
bylaws.
12. Election of Directors. Elections of directors need not be
by written ballot unless the bylaws of the Corporation shall so provide.
This amended and restated certificate of incorporation of Classic
Communications, Inc., has been duly adopted pursuant to Sections 242 and 245
of the General Corporation Law of the State of Delaware.
The undersigned declares and certifies that the facts herein stated are
true, and accordingly has hereunto set his hand this 30th day of October, 1995.
CLASSIC COMMUNICATIONS, INC.
By: /s/ STEPHEN S. SMITH
---------------------------------
Stephen S. Smith
President
9
<PAGE> 1
EXHIBIT 3.1(b)
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
CLASSIC COMMUNICATIONS, INC.
It is hereby certified that:
1. The name of the corporation is Classic Communications, Inc. (the
"Corporation").
2. The first paragraph of Article 4 of the Amended and Restated
Certificate of Incorporation of the Corporation is hereby amended to read in
its entirety as follows:
4. Authorized Shares. The total number of shares of stock
which the Corporation shall have authority to issue is 10,000,000. Such
shares shall be divided into 55,000 shares of 15% PIK Redeemable
Preferred Stock (the "Preferred Stock"), which shall be further divided
into two classes, 20,000 of which shall be Senior Preferred Stock, $.01
par value per share, and 35,000 of which shall be Junior Preferred
Stock, $.01 par value per share, and 9,945,000 shares of Common Stock
(the "Common Stock"), which shall be further divided into two classes,
5,442,000 of which shall be Voting Common Stock, $.01 par value per
share, and 4,503,000 of which shall be Nonvoting Common Stock, $0.01 par
value per share.
3. The amendment of the Amended and Restated Certificate of
Incorporation herein certified has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
Signed and attested to on July 21, 1998.
CLASSIC COMMUNICATIONS, INC.
By: /s/ J. MERRITT BELISLE
-------------------------------
J. Merritt Belisle
Chief Executive Officer
Attest:
/s/ BRYAN NOTEBOOM
- ------------------------------
Bryan Noteboom, Secretary
<PAGE> 2
Instruments Defining the Rights of Security Holders
Amended and Restated Articles of Incorporation of Classic Communications, Inc.,
as amended:
4. Authorized Shares. The total number of shares of stock which the
Corporation shall have authority to issue is 10,000,000. Such shares shall be
divided into 55,000 shares of 15% PIK Redeemable Preferred Stock (the "Preferred
Stock"), which shall be further divided into two classes, 20,000 of which shall
be Senior Preferred Stock, $.01 par value per share, and 35,000 of which shall
be Junior Preferred Stock, $.01 par value per share, and 9,945,000 shares of
Common Stock (the "Common Stock"), which shall be further divided into two
classes, 5,442,000 of which shall be Voting Common Stock, $.01 par value per
share, and 4,503,000 of which shall be Nonvoting Common Stock, $0.01 par value
per share.
A. Voting Rights.
Except as provided herein, the holders of Preferred Stock
shall have no voting rights with regard to matters submitted to a vote
of the Corporation's stockholders. The affirmative consent or vote of
at least eighty percent (80%) of the outstanding shares of either class
of Preferred Stock, voting as a class, shall be required with respect
to any action which (a) would materially and adversely alter the
powers, preferences and rights of the holders of shares of such class
of Preferred Stock as set forth herein, (b) would create any new class
or series of stock of the Corporation having preference over or being
in parity with such class of Preferred Stock, or (c) would increase the
authorized number of shares of such class of Preferred Stock. The
holders of the Voting Common Stock shall each have one vote per share
of Voting Common Stock held by them on all matters to be voted on by
the Corporation's stockholders. Except as may be required by law, the
holders of the Nonvoting Common Stock shall have no right to vote on
any matter.
B. Dividends.
The holders of the Preferred Stock will be entitled to
dividends as follows:
Commencing on the date of its issuance, a cumulative dividend
equal to $150.00 per share per annum shall accrue on the Preferred
Stock and shall become due and payable on December 31, 1995, and on
March 31, June 30, September 30, and December 31 of each year
thereafter.
Dividends on each class of Preferred Stock shall be payable on
each such date (a "Preferred Stock Dividend Payment Date") solely in
the form of additional shares of such class of Preferred Stock and
issued on such Preferred Stock Dividend
<PAGE> 3
Payment Date to the registered holder thereof in the amount of such
dividend payable on such Preferred Stock Dividend Payment Date.
Dividends shall be paid on the Common Stock at such times as
may be declared by the Board of Directors.
C. Rights Upon Liquidation.
Upon any liquidation (partial or complete), dissolution or
winding up of the Corporation (a "Liquidating Event"), the Corporation
shall distribute the assets of the Corporation legally available for
distribution (the "Available Assets") to its stockholders after making
adequate provision for (i) all contingent and other liabilities of the
Corporation, including, without limitation, any and all indebtedness,
fees, penalties, profits, interest or other amounts or payments due
from the Corporation to any creditor of the Corporation, (ii) the
Preferred Stock Liquidation Preference (as defined below) in accordance
with the following paragraph, and (iii) the fair market value of any
warrants or options to acquire any equity securities of the Corporation
issued by the Corporation to any creditor of the Corporation, in
accordance with the provisions of this Article 4.
C(i). Senior Preferred Stock. Upon the occurrence of a
Liquidating Event, the holders of Senior Preferred Stock shall be
entitled to receive, by reason of their ownership thereof, prior and in
preference to any distribution of any of the assets of the Corporation
to the holders of Junior Preferred Stock and Common Stock, an amount
equal to $1,000.00 per share (the "Preferred Stock Liquidation
Preference"), plus any accrued and unpaid dividends. Written notice of
any such liquidation, dissolution or winding up, stating a payment
date, the place where such payment shall be made, the amount of each
liquidating payment and the amount of accrued dividends to be paid,
shall be given by first class mail, postage paid, not less than thirty
(30) days prior to the payment date stated therein, to each holder of
record of the Senior Preferred Stock at such holder's address as shown
on the records of the Corporation. If upon the occurrence of such
Liquidating Event, the assets and funds to be thus distributed among
the holders of the Senior Preferred Stock shall be insufficient to
permit the payment to such holders of the full amount due hereunder,
then the holders of Senior Preferred Stock shall share ratably in any
distribution of assets of the Corporation in proportion to the
respective amounts which would otherwise be payable with respect to the
shares of Senior Preferred Stock held by them upon such distribution if
the full amount payable on or with respect to such shares were paid in
full.
C(ii). Junior Preferred Stock. Upon the occurrence of a
Liquidating Event, the holders of Junior Preferred Stock shall be
entitled to receive, by reason of their ownership thereof, prior and in
preference to any distribution of any of the assets of the Corporation
to the holders of Common Stock, an amount equal to $1,000.00 per share,
plus any accrued and unpaid dividends. Written notice of any such
liquidation,
2
<PAGE> 4
dissolution or winding up, stating a payment date, the place where such
payment shall be made, the amount of each liquidating payment and the
amount of accrued dividends to be paid, shall be given by first class
mail, postage paid, not less than thirty (30) days prior to the payment
date stated therein, to each holder of record of the Junior Preferred
Stock at such holder's address as shown on the records of the
Corporation. If upon the occurrence of such Liquidating Event, the
assets and funds to be thus distributed among the holders of the Junior
Preferred Stock shall be insufficient to permit the payment to such
holders of the full amount due hereunder, then the holders of Junior
Preferred Stock shall share ratably in any distribution of assets of
the Corporation in proportion to the respective amounts which would
otherwise be payable with respect to the shares of Junior Preferred
Stock held by them upon such distribution if the full amount payable on
or with respect to such shares were paid in full.
C(iii). Common Stock. Upon the occurrence of a Liquidating
Event, to the extent Available Assets exist after the payment of or
provision for the liabilities set forth in paragraph C(i) and C(ii)
above, such Available Assets shall be distributed among the holders of
Common Stock based on the number of shares owned by them.
D. Conversion.
D(i). Conversion of Voting Common Stock. Each record holder of
Voting Common Stock is entitled at any time, and from time to time, to
convert any or all of such holder's shares of Voting Common Stock into
the same number of shares of Nonvoting Common Stock.
D(ii). Conversion of Nonvoting Common Stock. Each record
holder of Nonvoting Common Stock is entitled at any time, and from time
to time, to convert any or all of such holder's shares of Nonvoting
Common Stock into the same number of shares of Voting Common Stock;
provided, that no holder of Nonvoting Common Stock is entitled to
convert any share or shares of Nonvoting Common Stock to the extent
that such conversion would be inconsistent with any law or any
regulation, rule or other requirement of any governmental authority
applicable at the time of such conversion, relating to the direct or
indirect ownership, control or power to vote securities of the kind
issued by the Corporation.
D(iii). Conversion Procedure.
(1) Each conversion of shares of Nonvoting
Common Stock into Voting Common Stock or of
Voting Common Stock into Nonvoting Common Stock
pursuant to the foregoing paragraphs D(i) and
D(ii) will be effected by the surrender, at the
principal office of the Corporation during
normal business hours, of the certificate or
certificates representing the shares to be
converted, together with a written notice by
the holder of such stock being converted
stating (A)
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<PAGE> 5
that such holder desires to convert the shares, or a stated
number of the shares, of the stock represented by such
certificate or certificates into the class of common stock
of the Corporation specified in such notice, and (B) in the
case of a conversion of Nonvoting Common Stock into Voting
Common Stock, that upon such conversion such holder and its
affiliates will not directly or indirectly own, control or
have the power to vote a greater quantity of securities of
any kind issued by the Corporation than such holder and its
affiliates are permitted to own, control or have the power
to vote under any applicable law or any regulation, rule or
other governmental requirement (and such statement will
obligate the Corporation to issue such Voting Common Stock).
Such conversion will be deemed to have been effected as of
the close of business on the date on which such certificate
or certificates have been surrendered and such notice has
been delivered, and at such time the rights of the holder of
the converted stock as such holder will cease and the
person(s) in whose name(s) the shares of Nonvoting Common
Stock or Voting Common Stock, surrendered, was or were
registered will be deemed to have become the holder(s) of
record of such shares.
(2) Promptly after such surrender and the receipt of such
notice, the Corporation will issue and deliver in accordance
with the surrendering holder's instructions (A) a
certificate(s) for the Nonvoting Common Stock or Voting
Common Stock, as the case may be, issuable upon such
conversion, and (B) a certificate for any Nonvoting Common
Stock or Voting Common Stock, as the case may be, which was
represented by a surrendered certificate but which was not
converted.
(3) The Corporation shall not in any manner subdivide (by
stock split, stock dividend or otherwise) or combine (by
reverse stock split or otherwise) any share of any class of
common stock of the Corporation.
(4) The issuance of certificates for shares of Nonvoting
Common Stock or Voting Common Stock, as the case may be,
upon conversion of any Voting Common Stock or Nonvoting
Common Stock, respectively, will be made without charge to
the holders of such shares for any issuance tax in respect
thereof or other cost incurred by the Corporation in
connection with such conversion and the related issuance of
shares of such Nonvoting Common Stock or Voting Common
Stock, as the case may be.
(4) The Corporation will not close its books against the
transfer of any class of Nonvoting Common Stock or Voting
Common Stock
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<PAGE> 6
issued or issuable upon conversion of Voting Common Stock or
Nonvoting Common Stock, respectively, in any manner which
would interfere with the timely conversion of any Nonvoting
Common Stock or Voting Common Stock.
5. Redemption of Preferred Stock.
The Corporation shall redeem the outstanding shares of
Preferred Stock as follows:
5A. Redemption at the Option of the Corporation.
The Corporation shall have the right to redeem the outstanding
shares of Preferred Stock at any time, in whole or in part, at a
redemption price equal to $1,000.00 per share (the "Redemption Price"),
plus any accrued and unpaid dividends.
5B. Redemption at the Option of the Holder.
The Preferred Stock shall be subject, at the election of the
holder thereof, to mandatory redemption, in whole or in part, at a
price per share equal to the Redemption Price plus any accrued and
unpaid dividends, at any time after the earliest to occur of the
following events:
(i) September 30, 2005;
(ii) The effective date of a Change of Control (as
defined below).
(iii) The effective date of (A) the sale, lease or
exchange of all or substantially all of the assets of the
Corporation, or (B) any merger or consolidation to which the
Corporation or any subsidiary is a party other than the merger
of a wholly-owned subsidiary into the Corporation; or
(iv) The diversion of proceeds from the uses set
forth in that certain Investment Agreement, dated as of July
26, 1994, as amended by the Amendment, Waiver and Consent No.
1 to Investment Agreement dated as of February 17, 1995, by
and between Ponca/Universal Holdings, Inc., and NationsBanc
Capital Corp. ("NationsBanc") without the prior written
consent of NationsBanc; or
(v) Acceleration of the maturity of indebtedness
under the "Credit Agreement" dated May 5, 1995, among Classic
Cable, Inc., WT Acquisition Corporation, The Chase Manhattan
Bank, N.A., and certain other banks named therein, or any
credit facility replacing in whole or in part the Credit
Agreement.
5
<PAGE> 7
For purposes of this Section 5B, "Change of Control" means an
event as a result of which J. Merritt Belisle, Austin
Ventures, L.P., Austin Ventures III-A, L.P., Austin Ventures
II-B, L.P., BT Capital Partners, Inc., Texas Growth Fund and
NationsBanc cease to own a majority of the issued and
outstanding shares of Common Stock of the Company.
5C. Procedure for Redemption.
(a) The Corporation shall redeem each class of
Preferred Stock ratably among the holders of such class of
Preferred Stock as shown on the records of the Corporation,
based on their respective percentage ownership of outstanding
shares of such class of Preferred Stock as of the date of
notices provided for in subparagraph (b) hereof, and shall pay
all dividends outstanding on such class of Preferred Stock to
be redeemed at each payment date.
(b) The Corporation shall give the holders of the
Preferred Stock not fewer than thirty (30) nor more than
forty-five (45) days' prior written notice (the "Notice of
Redemption") of the REDEMPTION DATE and the amount of each
REDEMPTION PAYMENT and shall set forth the amount of accrued
dividends to be paid.
(c) All Preferred Stock redeemed, purchased or
otherwise acquired by the Corporation shall be retired and
cancelled and shall not be reissuable.
(d) Notice shall be deemed given when personally
delivered or deposited in the United States mail, first class,
postage prepaid, to each holder of Preferred Stock to be
redeemed at the address of such holder as the same shall
appear on the records of the Corporation. Neither the failure
of any stockholder to receive any such Notice of Redemption
nor the failure of the Corporation to mail or deliver the same
to any stockholder shall affect the validity of the
proceedings for redemption except as to a holder whose notice
is not mailed or delivered. If notice is given as provided
herein and if on or before the Redemption Date the Corporation
shall set aside or deposit, with a redemption agent specified
in the Redemption Notice, an amount sufficient to pay the
aggregate redemption price of all shares to be redeemed, the
shares called for redemption shall, after the Redemption Date,
be deemed no longer outstanding and the holder thereof shall
cease to be a stockholder with respect to such shares and
shall have no right to dividends or other stockholder rights
thereafter.
6
<PAGE> 1
EXHIBIT 3.2
CLASSIC COMMUNICATIONS, INC.
f/k/a CLASSIC TELECOMMUNICATIONS, INC.
BYLAWS Adopted 10/5/95
ARTICLE I.
OFFICES
Section 1.1. Registered Office. The registered office of the
Corporation within the State of Delaware shall be located at the principal
place of business in said state of such corporation or individual acting as the
Corporation's registered agent in Delaware.
Section 1.2. Other Offices. The Corporation may also have
offices and places of business at such other places both within and without the
State of Delaware as the Board of Directors may from time to time determine or
the business of the Corporation may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 2.1. Place of Meetings. All meetings of shareholders
shall be held at the principal office of the Corporation, or at such other
place within or without the State of Delaware as shall be stated in the notice
of the meeting or in a duly executed waiver or notice thereof.
Section 2.2. Annual Meetings. The annual meeting of
stockholders shall be held at such time on such day, other than a legal
holiday, in the third month next succeeding the month in which the fiscal year
of the Corporation ends, as the Board of Directors in each such year
determines. At the annual meeting, the stockholders entitled to vote for the
election of directors shall elect, by a plurality vote, a Board of Directors
and transact such other business as may properly come before the meeting.
Section 2.3. Special Meetings. Special meetings of
shareholders, for any purpose or purposes, may be called by the President or
the Board of Directors and shall be called promptly by the President at the
written request of a majority of the entire Board of Directors or the holders
of record of at least twenty-five per cent (25%) of the issued and outstanding
shares of stock of the Corporation entitled to vote. Any such request shall
state the purpose or purposes of the proposed meeting. At any special meeting
of stockholders, only such business may be transacted as is related to the
purpose or purposes set forth in the notice of such meeting.
Section 2.4. Notice of Meetings. Written notice of every
meeting of stockholders, stating the place, date and hour thereof and, in the
case of a special meeting of stockholders, the purpose or purposes thereof and
the person or persons by whom or at whose direction such meeting has been
called and such notice is being issued, shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting, either personally
or by mail, by or at the direction of the President, the Secretary, or the
persons calling the meeting, to each stockholder of record, whether or not such
stockholder is entitled to vote at such meeting. If mailed, such notice shall
be deemed to be given when deposited in the United States mail, postage
prepaid, directed to the stockholder at his address as it appears on the stock
transfer books of the Corporation. Nothing herein contained shall preclude the
stockholders from waiving notice as provided in Section 4.1 hereof.
<PAGE> 2
Section 2.5. Quorum. The holders of a majority of the issued
and outstanding shares of stock of the Corporation entitled to vote,
represented in person or by proxy, shall be necessary to and shall constitute a
quorum for the transaction of business at any meeting of stockholders. If,
however, such quorum shall not be present or represented at any meeting of
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might not
have been transacted at the meeting as originally noticed. Notwithstanding the
foregoing, if after any such adjournment the Board of Directors shall fix a new
record date for the adjourned meeting, or if the adjournment is for more than
thirty (30) days, a notice of such adjourned meeting shall be given as provided
in Section 2.4 of these Bylaws, but such notice may be waived as provided in
Section 4.1 hereof.
Section 2.6. Voting. At each meeting of the stockholders, each
holder of record of shares of stock entitled to vote shall be entitled to vote
in person or by proxy, and each such holder shall be entitled to one vote for
every share standing in his name or the books of the Corporation as of the
record date fixed by the Board of Directors or prescribed by law and, if a
quorum is present, a majority of the shares of such stock present or
represented at any meeting of stockholders shall be the vote of the
stockholders with respect to any item of business, unless otherwise provided by
any applicable provision of law, by these Bylaws or by the Certificate of
Incorporation.
Section 2.7. Proxies. Every stockholder entitled to vote at a
meeting or to express consent or dissent without a meeting or a stockholder's
duly authorized attorney-in-fact may authorize another person or persons to act
for him by proxy. Each proxy shall be in writing executed by the stockholder
giving the proxy or by his duly authorized attorney. No proxy shall be valid
after the expiration of three (3) years from its date, unless a longer period
is provided for in the proxy. Unless and until voted, every proxy shall be
revocable at the pleasure of the person who executed it, or his legal
representatives or assigns, except in those cases where an irrevocable proxy
permitted by statute has been given.
Section 2.8. Consents. Whenever a vote of stockholders at a
meeting thereof is required or permitted to be taken in connection with any
corporate action by any provision of statute or of the Certificate of
Incorporation or these Bylaws, the meeting, prior notice thereof and vote of
stockholders may be dispensed with if the holders of shares having not less
than the minimum number of votes that would have been necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted shall consent in writing to the taking of such action. Where
corporate action is taken in such matter by less than unanimous written
consent, prompt written notice of the taking of such action shall be given to
all stockholders of record, whether or not entitled to vote on or consent in
writing with respect thereto.
Section 2.9. Stock Records. The Secretary or agent having
charge of the stock transfer books shall make, at least ten (10) days before
each meeting of stockholders, a complete list of the stockholders entitled to
vote at such meeting or any adjournment thereof, arranged in alphabetical order
and showing the address of and the number and class and series, if any, of
shares held by each. Such list, for a period of ten (10) days prior to such
meeting, shall be kept at the principal place of business of the Corporation or
at the office of the transfer agent or registrar of the Corporation and such
other places as required by statute and shall be subject to inspection by any
stockholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder at any time during the meeting.
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ARTICLE III.
DIRECTORS
Section 3.1. Number. The number of directors of the Corporation
which shall constitute the entire Board of Directors shall be fixed from time
to time by a vote of a majority of the entire Board and shall be not less than
one (1) nor more than seven (7). The first Board of Directors shall consist of
one member.
Section 3.2. Qualifications, Election and Tenure. Directors
shall be at least eighteen (18) years of age but need not be residents of the
State of Delaware. Directors need not be stockholders of the Corporation.
With the exception of the first Board of Directors, which shall be elected by
the incorporator, and except as otherwise provided in these Bylaws, directors
shall be elected at the annual meeting of stockholders, and each director so
elected shall hold office until the next annual meeting of stockholders and
until his successor has been elected and has qualified.
Section 3.3. Resignation and Removal. Any director may resign
at any time upon notice of resignation to the Corporation. Any director may be
removed at any time by vote of the stockholders then entitled to vote for the
election of directors at a special meeting called for that purpose, either with
or without cause.
Section 3.4. Newly Created Directorships and Vacancies. Newly
created directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason whatsoever shall
be filled by vote of the Board. If the number of directors then in office is
less than a quorum, such newly created directorships and vacancies may be
filled by a vote of a majority of the directors then in office. Any director
elected to fill a vacancy shall be elected until the next meeting of
stockholders at which the election of directors is in the regular course of
business, and until his successor has been elected and qualified.
Section 3.5. Powers and Duties. Subject to the applicable
provisions of law, these Bylaws or the Certificate of Incorporation, but in
furtherance and not in limitation of any rights therein conferred, the Board of
Directors shall have the control and management of the business and affairs of
the Corporation and shall exercise all such powers of the Corporation and do
all such lawful acts and things as may be exercised by the Corporation.
Section 3.6. Place of Meetings. All meetings of the Board of
Directors may be held either within or without the State of Delaware.
Section 3.7. Annual Meetings. An annual meeting of each newly
elected Board of Directors shall be held immediately following the annual
meeting of stockholders, and no notice of such meeting to the newly elected
directors shall be necessary in order legally to constitute the meeting,
provided a quorum shall be present, or the newly elected directors may meet at
such time and place as shall be fixed by the written consent of all of such
directors.
Section 3.8. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice or without notice, and at such time and
at such place as shall from time to time be determined by the Board.
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Section 3.9 Special Meetings. Special meetings of the Board of
Directors may be called by the President and shall be called promptly by the
President or the Secretary upon the written request of any director specifying
the special purpose thereof, in either event, on not less than five (5)
business days notice to each director. Such request shall state the date, time
and place of the meeting. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Section 3.10. Notice of Meetings. Notice of each special
meeting of the Board (and of each regular meeting for which notice shall be
required) shall be given by the President, the Secretary or an Assistant
Secretary and shall state the place, date and time of the meeting. Notice of
each such meeting shall be given personally or shall be mailed to each director
at his usual place of business. Notice shall be deemed given when delivered in
person or one (1) business day after deposit in the United States mail, postage
prepaid. Notice of any meeting need not be given to any director who shall
submit, either before or after the meeting, a signed waiver of notice or who
shall attend such meeting without protesting, prior to or at its commencement,
the lack of notice to him. Notice of any adjourned meeting, including the
place, date and time of the new meeting, shall be given to all directors not
present at the time of the adjournment, as well as to the other directors
unless the place, date and time of the new meeting is announced at the
adjourned meeting. Nothing herein contained shall preclude the directors from
waiving notice as provided in Section 4.1 hereof.
Section 3.11. Quorum and Voting. At all meetings of the Board
of Directors a majority of the entire Board, consisting of at least a majority
of the directors designated by Austin Ventures, L.P., Austin Ventures III-A,
L.P., Austin Ventures III-B, L.P., Texas Growth Fund, BT Capital Partners, Inc.
and NationsBanc Capital Corp. (the "Majority Purchaser Directors"), shall be
necessary to and shall constitute a quorum for the transaction of business at
any meeting of directors, unless otherwise provided by any applicable provision
of law, by these Bylaws, or by the Certificate of Incorporation. The act of a
majority of the directors present at the time of the vote, if a quorum is
present at such time, shall be the act of the Board of Directors, unless
otherwise provided by any applicable provision of law, by these Bylaws or by
the Certificate of Incorporation. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present there may adjourn the
meeting from time to time, until a quorum shall be present. Anything to the
contrary in these Bylaws notwithstanding, the provisions of this Section 3.11
shall not be amended, altered or repealed unless such action is first approved
by affirmative vote or consent of the Board of Directors, which shall include
the affirmative vote or consent of the Majority Purchaser Directors and at
least one director designated by J. Merritt Belisle if he is then entitled by
statute or contract to designate at least one member of the Board of Directors.
Section 3.12. Compensation. The Board of Directors, by the
affirmative vote of a majority of the directors then in office, and
irrespective of any personal interest of any of its members, shall have
authority to establish reasonable compensation of all directors for services to
the Corporation as directors, officers or otherwise.
Section 3.13. Books and Records. The directors may keep the
books of the Corporation, except such as are required by law to be kept within
the state, outside of the State of Delaware, at such place or places as they
may from time to time determine.
Section 3.14. Action Without a Meeting. Any action required or
permitted to be taken by the Board, or by a committee of the Board, may be
taken without a meeting if all members of the Board or
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the committee, as the case may be, consent in writing to the adoption of a
resolution authorizing the action. Any such resolution and the written
consents thereto by the members of the Board or committee shall be filed with
the minutes of the proceedings of the Board or committee.
Section 3.15. Telephone Participation. Any one or more members
of the Board, or any committee of the board, may participate in a meeting of
the Board or committee by means of a conference telephone call or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at a meeting.
Section 3.16. Committees of the Board. The Board, by resolution
adopted by a majority of the entire Board, may designate one or more
committees, each consisting of one or more directors. The Board may designate
one or more directors as alternate members of any such committee. Such
alternate members may replace any absent member or members at any meeting of
such committee. Each committee (including the members thereof) shall serve at
the pleasure of the Board and shall keep minutes of its meetings and report the
same to the Board. Except as otherwise provided by law, each such committee,
to the extent provided in the resolution establishing it, shall have and may
exercise all the authority of the Board with respect to all matters. However,
no such committee shall have power or authority to:
(a) amend the Certificate of Incorporation;
(b) adopt an agreement or merger or consolidation;
(c) recommend to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's
property and assets;
(d) recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution;
(e) amend these Bylaws; and unless expressly so provided
by resolution of the Board, no such committee shall have power or
authority to:
(f) declare a dividend; or
(g) authorize the issuance of shares of the Corporation
of any class.
ARTICLE IV.
WAIVER
Section 4.1. Waiver. Whenever a notice is required to be given
by any provision of law, by these Bylaws, or by the Certificate of
Incorporation, a waiver thereof in writing, whether before or after the time
stated therein, shall be deemed equivalent to such notice. In addition, any
stockholder attending a meeting of stockholders in person or by proxy without
protesting prior to the conclusion of the meeting the lack of notice thereof to
him, and any director attending a meeting of the Board of Directors without
protesting prior to the meeting or at its commencement such lack of notice,
shall be conclusively deemed to have waived notice of such meeting.
5
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ARTICLE V.
OFFICERS
Section 5.1. Executive Officers. The executive officers of the
Corporation shall be a Chairman of the Board, a President, a Treasurer and a
Secretary. Any person may hold two or more of such offices. The executive
officers of the Corporation shall be elected annually (and from time to time by
the Board of Directors, as vacancies occur), at the annual meeting of the Board
of Directors following the meeting of stockholders at which the Board of
Directors was elected.
Section 5.2. Other Officers. The Board of Directors may appoint
such other officers and agents, including one or more Vice Presidents,
Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers, as
it shall at any time or from time to time deem necessary or advisable.
Section 5.3. Authorities and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of the business and affairs of the Corporation as may
be provided in these Bylaws, or, to the extent not so provided, as may be
prescribed by the Board of Directors.
Section 5.4. Tenure and Removal. The officers of the
Corporation shall be elected or appointed to hold office until their respective
successors are elected or appointed. All officers shall hold office at the
pleasure of the Board of Directors, and any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors for
cause or without cause at any regular or special meeting.
Section 5.5. Vacancies. Any vacancy occurring in any office of
the Corporation, whether because of death, resignation or removal, with or
without cause, or any other reason, shall be filled by the Board of Directors.
Section 5.6. Compensation. The salaries and other compensation
of all officers and agents of the Corporation shall be fixed by or in the
manner prescribed by the Board of Directors.
Section 5.7. Chairman of the Board. The Chairman of the Board
shall be the chief administrative and executive officer of the Corporation.
The Chairman of the Board shall preside at all meetings of the stockholders and
the directors and shall see to it that all orders and resolutions of the Board
of Directors are carried into effect.
Section 5.8. President. The President shall have general and
active management of the business and affairs of the Corporation and be
responsible for its day-to-day operations, subject to the control of the Board
of Directors.
Section 5.9. Vice Presidents. Each Vice President, if any,
shall have such powers and shall perform such duties as may from time to time
be assigned to him by the Board of Directors.
Section 5.10. Secretary. The Secretary shall attend all
meetings of the stockholders and all meetings of the Board of Directors and
shall record all proceedings taken at such meetings in a book to be kept for
that purpose; he shall see that all notices of meetings of stockholders and
meetings of the Board of Directors are duly given in accordance with the
provisions of these Bylaws or as required by law; he shall
6
<PAGE> 7
be the custodian of the records of the Corporation; and in general, he shall
perform all duties incident to the office of the Secretary of a corporation,
and such other duties as the Bard of Directors may from time to time prescribe.
Section 5.11. Treasurer. The Treasurer shall have charge of and
be responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit, or cause to be deposited, in the name and to the
credit of the Corporation, all moneys and valuable effects in such banks, trust
companies, or other depositories as shall from time to time be selected by the
Board of Directors. He shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation; he shall render to the
President and to each member of the Board of Directors, whenever requested, an
account of all of his transactions as Treasurer and of the financial condition
of the Corporation; and in general, he shall perform all of the duties incident
to the office of the Treasurer of a corporation, and such other duties as the
Board of Directors may from time to time prescribe.
Section 5.12. Other Officers. The Board of Directors may also
elect or may delegate to the President the power to appoint such other officers
as it may at any time from time to time deem advisable, and any officers so
elected or appointed shall have such authority and perform such duties as the
Board of Directors or the President, if he shall have appointed them, may from
time to time prescribe.
ARTICLE VI.
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 6.1. Form and Signature. The shares of the Corporation
shall be represented by certificates signed by the President or any Vice
President and by the Secretary or any Assistant Secretary or the Treasurer or
any Assistant Treasurer, and may be issued without a seal of the Corporation.
Each certificate representing shares shall state upon its face (a) that the
Corporation is formed under the laws of the State of Delaware, (b) the name of
the person or persons to whom it is issued, (c) the number of shares which such
certificate represents and (d) the par value, if any, of each share represented
by such certificate.
Section 6.2. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares of stock to receive dividends or other distributions,
and to vote as such owner, and to hold liable for calls and assessments a
person registered on its books as the owner of shares of stock, and shall not
be bound to recognize any equitable or legal claim to or interest in such
shares on the part of any other person.
Section 6.3. Transfer of Stock. Upon surrender to the
Corporation or the appropriate transfer agent, if any, of the Corporation, of a
certificate representing shares of stock duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, and, in the event
that the certificate refers to any agreement restricting transfer of the shares
which it represents, proper evidence of compliance with such agreement, a new
certificate shall be issued to the person entitled thereto, and the old
certificate cancelled and the transaction recorded upon the books of the
Corporation.
Section 6.4. Lost Certificates, etc. The Corporation may issue
a new certificate for shares in place of any certificate theretofore issued by
it, alleged to have been lost, mutilated, stolen or destroyed, and the Board
may require the owner of such lost, mutilated, stolen or destroyed certificate,
or his legal representatives, to make an affidavit to that fact and/or to give
the Corporation a bond in such sum as it may direct as indemnity against any
claim that may
7
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be made against the Corporation on account of the alleged loss, mutilation,
theft or destruction of any such certificate or the issuance of any such new
certificate.
Section 6.5. Record Date. For the purpose of determining the
stockholders entitled to notice of, or to vote at, any meeting of stockholders
or any adjournment thereof, or to express written consent to any corporate
action without a meeting, or for the purpose of determining stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board may fix, in advance, a record date. Such date shall not be more than
sixty (60) nor less than ten (10) days before the date of any such meeting, nor
more than sixty (60) days prior to any other action.
Section 6.6. Regulations. Except as otherwise provided by law,
the Board may make such additional rules and regulations, not inconsistent with
these Bylaws, as it may deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the Corporation. The Board
may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars and may require all certificates for
shares of capital stock to bear the signature or signatures of any of them.
ARTICLE VII.
GENERAL PROVISIONS
Section 7.1. Dividends and Distributions. Dividends and other
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, bonds, property, or in stock of the
Corporation. The Board shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
corporate document or instrument binding upon the Corporation to determine
what, if any, dividends or distributions shall be declared and paid or made.
Section 7.2. Checks, etc. All checks or demands for money and
notes or other instruments evidencing indebtedness or obligations of the
Corporation shall be signed by such officer or officers or other person or
persons as may from time to time be designated by the Board of Directors.
Section 7.3. Fiscal Year. The fiscal year of the Corporation
shall be determined by the Board of Directors.
Section 7.4. General and Special Bank Accounts. The Board may
authorize from time to time the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board
may designate or as may be designated by any officer or officers of the
Corporation to whom such power of designation may be delegated by the Board
from time to time. The Board may make such special rules and regulations with
respect to such bank accounts, not inconsistent with the provisions of these
Bylaws, as it may deem expedient.
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ARTICLE VIII.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 8.1. Indemnification by Corporation. To the extent
permitted by law, the Corporation shall indemnify any person against any and
all judgments, fines, amounts paid in settling or otherwise disposing of
actions or threatened actions, and expenses in connection therewith, incurred
by reason of the fact that he, his testator or intestate is or was a director
or officer of the Corporation or of any other corporation of any type or kind,
domestic or foreign, which he served in any capacity at the request of the
Corporation. To the extent permitted by law, expenses so incurred by any such
person in defending a civil or criminal action or proceeding shall at his
request be paid by the Corporation in advance of the final disposition of such
action or proceeding.
ARTICLE IX.
ADOPTION AND AMENDMENTS
Section 9.1. Power to Amend. Except as otherwise provided
elsewhere in these Bylaws, these Bylaws may be amended or repealed and any new
Bylaw may be adopted by the Board of Directors; provided that these Bylaws and
any other Bylaws amended or adopted by the Board of Directors may be amended or
repealed, and any Bylaws repealed by the Board of Directors may be reinstated,
and new Bylaws may be adopted, by the stockholders of the Corporation entitled
to vote at the time for the election of directors.
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CLASSIC COMMUNICATIONS, INC.
AMENDMENT NO. 1 TO BYLAWS
The first sentence of Section 3.1 of the Bylaws of Classic
Communications, Inc., is amended to read as follows:
The number of directors of the corporation which shall constitute the
entire Board of Directors shall be fixed from time to time by a vote of
a majority of the entire Board and shall be not less than one (1) nor
more than eight (8).
* * * *
Certificate
I certify that the foregoing amendment to the Bylaws of Classic
Communications, Inc., was adopted on January 23, 1996, by unanimous consent of
the Board of Directors.
By: ELIZABETH J. OSSENFORT
-------------------------------
Elizabeth J. Ossenfort
Assistant Secretary
<PAGE> 1
EXHIBIT 4.1
CONFORMED COPY
================================================================================
INDENTURE
Dated as of July 29, 1998
Among
CLASSIC COMMUNICATIONS, INC., as Issuer,
and
BANK ONE, N.A., as Trustee
-----------------
$114,000,000 in Aggregate Principal Amount at Maturity
13 1/4% Senior Discount Notes due 2009
================================================================================
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions...................................................................1
SECTION 1.02 Other Definitions. ..........................................................21
SECTION 1.03 Incorporation by Reference of Trust Indenture Act............................22
SECTION 1.04 Rules of Construction........................................................22
ARTICLE TWO
THE SECURITIES
SECTION 2.01 Form and Dating..............................................................23
SECTION 2.02 Execution and Authentication.................................................23
SECTION 2.03 Registrar; Paying Agent; Depositary..........................................24
SECTION 2.04 Paying Agent to Hold Money in Trust..........................................25
SECTION 2.05 Securityholder Lists.........................................................25
SECTION 2.06 Transfer and Exchange........................................................25
SECTION 2.07 Replacement Securities.......................................................26
SECTION 2.08 Outstanding Securities.......................................................26
SECTION 2.09 Treasury Securities..........................................................27
SECTION 2.10 Temporary Securities.........................................................27
SECTION 2.11 Cancellation.................................................................27
SECTION 2.12 Defaulted Interest...........................................................28
SECTION 2.13 Book-Entry Provisions for Global Securities..................................28
ARTICLE THREE
REDEMPTION
SECTION 3.01 Notices to Trustee...........................................................29
SECTION 3.02 Selection of Securities to Be Redeemed.......................................30
SECTION 3.03 Notice of Redemption.........................................................30
SECTION 3.04 Effect of Notice of Redemption...............................................31
SECTION 3.05 Deposit of Redemption Price..................................................31
SECTION 3.06 Securities Redeemed in Part..................................................31
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ARTICLE FOUR
COVENANTS
SECTION 4.01 Payment of Securities........................................................32
SECTION 4.02 Maintenance of Office or Agency..............................................32
SECTION 4.03 Limitation on Transactions with Affiliates...................................33
SECTION 4.04 Limitation on Indebtedness...................................................34
SECTION 4.05 Disposition of Proceeds of Asset Sales.......................................36
SECTION 4.06 Limitation on Restricted Payments............................................38
SECTION 4.07 Corporate Existence..........................................................40
SECTION 4.08 Payment of Taxes and Other Claims............................................40
SECTION 4.09 Notice of Defaults...........................................................40
SECTION 4.10 Maintenance of Properties....................................................41
SECTION 4.11 Compliance Certificate.......................................................41
SECTION 4.12 Provision of Financial Information...........................................41
SECTION 4.13 Waiver of Stay, Extension or Usury Laws......................................42
SECTION 4.14 Change of Control............................................................42
SECTION 4.15 Calculation of Original Issue Discount.......................................44
SECTION 4.16 Limitations on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries............................................44
SECTION 4.17 Designation of Unrestricted Subsidiaries.....................................45
SECTION 4.18 Limitation on Liens..........................................................46
SECTION 4.19 Limitation on Guarantees of Certain Indebtedness.............................47
SECTION 4.20 Limitation on Sale or Issuance of Capital Stock of Restricted
Subsidiaries.................................................................48
SECTION 4.21 Limitation on Sale/Leaseback Transactions....................................48
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01 Merger, Sale of Assets, etc..................................................49
SECTION 5.02 Successor Corporation Substituted............................................49
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01 Events of Default............................................................49
SECTION 6.02 Acceleration.................................................................52
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SECTION 6.03 Other Remedies....................................53
SECTION 6.04 Waiver of Past Default............................53
SECTION 6.05 Control by Majority...............................54
SECTION 6.06 Limitation on Suits...............................54
SECTION 6.07 Rights of Holders To Receive Payment..............55
SECTION 6.08 Collection Suit by Trustee........................55
SECTION 6.09 Trustee May File Proofs of Claim..................55
SECTION 6.10 Priorities........................................56
SECTION 6.11 Undertaking for Costs.............................56
ARTICLE SEVEN
TRUSTEE
SECTION 7.01 Duties of Trustee.................................56
SECTION 7.02 Rights of Trustee.................................58
SECTION 7.03 Individual Rights of Trustee......................59
SECTION 7.04 Trustee's Disclaimer..............................60
SECTION 7.05 Notice of Defaults................................60
SECTION 7.06 Reports by Trustee to Holders.....................60
SECTION 7.07 Compensation and Indemnity........................61
SECTION 7.08 Replacement of Trustee............................62
SECTION 7.09 Successor Trustee by Merger, etc..................63
SECTION 7.10 Eligibility; Disqualification.....................63
SECTION 7.11 Preferential Collection of Claims Against Issuer..64
ARTICLE EIGHT
[INTENTIONALLY OMITTED]
SECTION 8.01 [Intentionally Omitted.]..........................64
ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01 Defeasance and Covenant Defeasance................64
SECTION 9.02 Application of Trust Money........................66
SECTION 9.03 Repayment to Issuer...............................66
SECTION 9.04 Reinstatement.....................................66
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ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01 Without Consent of Holders...................................................67
SECTION 10.02 With Consent of Holders......................................................68
SECTION 10.03 Compliance with Trust Indenture Act..........................................69
SECTION 10.04 Effect of Consents...........................................................69
SECTION 10.05 Notation on or Exchange of Securities........................................70
SECTION 10.06 Trustee to Sign Amendments, etc..............................................70
ARTICLE ELEVEN
[INTENTIONALLY OMITTED]
SECTION 11.01 [Intentionally Omitted.].....................................................70
ARTICLE TWELVE
[INTENTIONALLY OMITTED]
SECTION 12.01 [Intentionally Omitted.].....................................................71
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01 Trust Indenture Act Controls.................................................71
SECTION 13.02 Notices......................................................................71
SECTION 13.03 Communications by Holders with Other Holders.................................73
SECTION 13.04 Certificate and Opinion as to Conditions Precedent...........................73
SECTION 13.05 Statements Required in Certificate or Opinion................................73
SECTION 13.06 Rules by Trustee, Paying Agent, Registrar....................................74
SECTION 13.07 Governing Law................................................................74
SECTION 13.08 No Recourse Against Others...................................................74
SECTION 13.09 Successors...................................................................74
SECTION 13.10 Counterpart Originals........................................................74
SECTION 13.11 Severability.................................................................74
SECTION 13.12 No Adverse Interpretation of Other Agreements................................74
SECTION 13.13 Legal Holidays...............................................................75
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SIGNATURES.....................................................................................76
</TABLE>
EXHIBIT A - Form of Security A-1
EXHIBIT B - Form of Legends for Securities and
Schedule for Exchanges of Global
Security B-1
APPENDIX - Subsidiary Guarantors
NOTE: This Table of Contents shall not, for any purpose, be deemed to be
a part of the Indenture.
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<PAGE> 7
INDENTURE dated as of July 29, 1998, between CLASSIC COMMUNICATIONS,
INC., a Delaware corporation (the "Issuer"), and BANK ONE, N.A., a national
banking association, as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the Issuer's 13 1/4%
Senior Discount Notes due 2009 (the "Initial Securities") and, if and when
issued in exchange for Initial Securities as provided in the Registration Rights
Agreement dated as of the date hereof between the Issuer, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Goldman, Sachs & Co. (the "Registration Rights
Agreement"), the Issuer's 13 1/4% Senior Discount Exchange Notes due 2009,
Series B (the "Exchange Securities," together with the Initial Securities, the
"Securities").
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
"Accreted Value" means with respect to any Security, as of any
specified date on or prior to August 1, 2003, the amount provided below for each
$1,000 principal amount at maturity of the Securities:
(i) if the specified date occurs on one of the following dates
after the Issue Date (each a "Semiannual Accrual Date"), the Accreted
Value will equal the amount set forth below for such Semiannual Accrual
Date:
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Semiannual Accrual Date Accreted Value
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<S> <C>
July 29, 1998.................................................................$526.14
August 1, 1998................................................................$526.85
February 1, 1999..............................................................$561.75
August 1, 1999................................................................$598.97
February 1, 2000..............................................................$638.65
August 1, 2000................................................................$680.96
February 1, 2001..............................................................$726.08
August 1, 2001................................................................$774.18
February 1, 2002..............................................................$825.47
August 1, 2002................................................................$880.16
February 1, 2003..............................................................$938.47
August 1, 2003..............................................................$1,000.00
</TABLE>
<PAGE> 8
-2-
(ii) if the specified date occurs before February 1, 1999, the
Accreted Value will equal the sum of (a) $526.14 and (b) an amount
equal to the product of (1) the Accreted Value on February 1, 1999 less
$526.14 multiplied by (2) a fraction, the numerator of which is the
number of days from the issue date to the specified date, using a
360-day year of twelve 30-day months, and the denominator of which is
the number of days from the issue date to the first Semiannual Accrual
Date, using a 360- day year of twelve 30-day months; or
(iii) if the specified date occurs between two Semiannual
Accrual Dates, the Accreted Value will equal the sum of (a) the
Accreted Value for the Semiannual Accrual Date immediately preceding
such specified date and (b) an amount equal to the product of (1) the
Accreted Value for the immediately following Semiannual Accrual Date
less the Accreted Value for the immediately preceding Semiannual
Accrual Date multiplied by (2) a fraction, the numerator of which is
the number of days from the immediately preceding Semiannual Accrual
Date to the specified date, using a 360-day year of twelve 30-day
months.
"Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person becomes a Restricted Subsidiary or assumed in connection with
an Asset Acquisition from such Person and not incurred in connection with, or in
anticipation of, such Person becoming a Restricted Subsidiary or such Asset
Acquisition.
"Acquired Person" means, with respect to any specified Person, any
other Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Affiliate" means (i) any Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Issuer; (ii) any spouse, immediate family member or other
relative who has the same principal residence as any Person described in clause
(i) above; (iii) any trust in which any such Persons described in clauses (i)
and (ii) above has a beneficial interest; and (iv) any corporation or other
organization of which any such Persons described above collectively owns 5% or
more of the equity of such entity. For purposes of this definition, "control"
(including, with correlative meaning, the terms "controlling," "controlled by"
and "under common control with") when used with respect to any specified Person
includes the direct or indirect beneficial ownership of more than 5% of the
voting securities of such Person or the power to direct or cause the direction
of the management and policies of such Person whether by contract or otherwise.
<PAGE> 9
-3-
"Agent" means any Registrar, Paying Agent or co-Registrar. See Section
2.03.
"Applicable Premium" means, with respect to a Security, the greater of
(i) 1.0% of the then outstanding principal amount of such Security and (ii) the
excess of (a) the present value of the required interest and principal payments
due on such Security to the first optional redemption date (assuming all
outstanding Securities were called for redemption on such date) or to the final
maturity date of the Securities at the option of the Issuer, computed using a
discount rate equal to the Treasury Rate plus 50 basis points, over (b) the then
outstanding principal amount of such Security.
"Asset Acquisition" means (i) an Investment by the Issuer or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be consolidated or merged with or into
the Issuer or any Restricted Subsidiary, or (ii) any acquisition by the Issuer
or any Restricted Subsidiary of the assets of any Person which constitute
substantially all of an operating unit, a division or line of business of such
Person or which is otherwise outside of the ordinary course of business.
"Asset Sale" means any direct or indirect sale, conveyance, transfer,
lease (that has the effect of a disposition) or other disposition (including,
without limitation, any merger, consolidation or sale leaseback transaction) to
any Person other than the Issuer or any Wholly Owned Restricted Subsidiary, in
one transaction or a series of related transactions, of (i) any Equity Interest
of any Restricted Subsidiary, (ii) any material license, franchise or other
authorization of the Issuer or any Restricted Subsidiary, (iii) any assets of
the Issuer or any Restricted Subsidiary which constitute substantially all of an
operating unit, a division or a line of business of the Issuer or any Restricted
Subsidiary or (iv) any other property or asset of the Issuer or any Restricted
Subsidiary outside of the ordinary course of business. For the purposes of this
definition, the term "Asset Sale" shall not include (i) any transaction
consummated in compliance with Section 4.14 or 5.01 and the creation of any Lien
not prohibited under Section 4.18, (ii) the sale of property or equipment that
has become worn out, obsolete or damaged or otherwise unsuitable for use in
connection with the business of the Issuer or any Restricted Subsidiary, as the
case may be, (iii) any transaction consummated in compliance with Section 4.06,
and (iv) sales, transfers or other disposition of assets with a fair market
value not in excess of $1.0 million in any transaction or series of
transactions.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at the interest
rate borne by the Securities, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).
<PAGE> 10
-4-
"Board of Directors" means (i) in the case of a Person that is a
partnership, the board of directors of such Person's corporate general partner
(or if such general partner is itself a partnership, the board of directors of
such general partner's corporate general partner), (ii) in the case of a Person
that is a corporation, the board of directors of such Person and (iii) in the
case of any other Person, the board of directors, management committee or
similar governing body or any authorized committee thereof responsible for the
management of the business and affairs of such Person.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in the City of New York
are authorized or obligated by law, resolution or executive order to close.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with generally accepted accounting principles
and the amount of such Indebtedness shall be the capitalized amount of such
obligations determined in accordance with generally accepted accounting
principles consistently applied.
"Cash Equivalents" means (i) United States dollars; (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition; (iii) certificates of deposit
and Eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank that
is a member of the Federal Reserve System having capital and surplus in excess
of $500.0 million; (iv) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses (ii) and
(iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above; (v) commercial paper having a
rating of at least P-1 from Moody's or a rating of at least A-1 from S&P; and
(vi) money market mutual or similar funds having assets in excess of $100.0
million, at least 95% of the assets of which are comprised of assets specified
in clauses (i) through (v) above.
"Change of Control" means the occurrence of any of the following
events: (i) any Person (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act, including any group acting for the purpose of acquiring, holding
or disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than one or more Permitted Holders, is or
<PAGE> 11
-5-
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that Person shall be deemed to have "beneficial ownership"
of all shares that any such Person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time, upon the happening
of an event or otherwise), directly or indirectly, of more than 35% of the total
voting power of the then outstanding Voting Equity Interest of the Issuer; (ii)
the Issuer consolidates with, or merges with or into, another Person (other than
a Wholly Owned Restricted Subsidiary) or the Issuer or any of its Subsidiaries
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of the assets of the Issuer and its Subsidiaries (determined
on a consolidated basis) to any Person (other than the Issuer or any Wholly
Owned Restricted Subsidiary); (iii) the Issuer is liquidated or dissolved or
adopts a plan of liquidation or dissolution (whether or not otherwise in
compliance with the provisions of this Indenture); or (iv) a majority of the
members of the Board of Directors of the Issuer shall consist of Persons who are
not Continuing Members.
"Consolidated Income Tax Expense" means, with respect to the Issuer for
any period, the provision for federal, state, local and foreign income taxes
payable by the Issuer and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with generally accepted
accounting principles consistently applied.
"Consolidated Interest Expense" means, with respect to the Issuer and
the Restricted Subsidiaries for any period, without duplication, the sum of (i)
the interest expense of the Issuer and the Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied, including, without
limitation, amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation and after taking into
account the effect of elections made under any Hedging Agreements, however
denominated, with respect to such Indebtedness; and (ii) the interest component
of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by the Issuer and the Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with generally accepted
accounting principles consistently applied. For purposes of this definition,
interest on a Capitalized Lease Obligation shall be deemed to accrue at an
interest rate reasonably determined by the Issuer to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance with generally
accepted accounting principles consistently applied.
"Consolidated Net Income" means, with respect to any period, the net
income (loss) of the Issuer and the Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with generally accepted
accounting principles consistently applied, adjusted, to the extent included in
calculating such net income (loss), by excluding, without duplication, (i) all
extraordinary, unusual or nonrecurring items of income or expense and of gains
or losses and all
<PAGE> 12
-6-
gains and losses from the sale or other disposition of assets out of the
ordinary course of business (net of taxes, fees and expenses relating to the
transaction giving rise thereto) for such period; (ii) that portion of such net
income (loss) derived from or in respect of investments in Persons other than
any Restricted Subsidiary, except to the extent actually received in cash by the
Issuer or any Restricted Subsidiary; (iii) the portion of such net income (loss)
allocable to minority interests in unconsolidated Persons for such period,
except to the extent actually received in cash by the Issuer or any Restricted
Subsidiary; (iv) net income (loss) of any other Person combined with the Issuer
or any Restricted Subsidiary on a "pooling of interests" basis attributable to
any period prior to the date of combination; (v) net income (loss) of any
Restricted Subsidiary to the extent that the declaration or payment of dividends
or similar distributions by that Restricted Subsidiary of that net income (loss)
is not at the date of determination permitted without any prior governmental
approval (which has not been obtained) or, directly or indirectly, by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule of governmental regulation applicable to that Restricted
Subsidiary or the holders of its Equity Interests; (vi) the cumulative effect of
a change in accounting principles after the date of this Indenture; and (vii)
net income (loss) attributable to discontinued operations determined on a
consolidated basis in accordance with generally accepted accounting principles
consistently applied.
"Consolidated Net Worth" with respect to any Person means the equity of
the holders of Qualified Equity Interests of such Person and its Restricted
Subsidiaries, as reflected in a balance sheet of such Person determined on a
consolidated basis and in accordance with GAAP.
"Consolidated Total Indebtedness" means, as at any date of
determination, an amount equal to the aggregate amount of all outstanding
Indebtedness of the Issuer and the Restricted Subsidiaries outstanding as of
such date of determination (including the liquidation value of all Disqualified
Equity Interests), less the obligations of the Issuer or any Restricted
Subsidiary under any Hedging Agreement as of such date of determination that
would appear as a liability on the balance sheet of such Person, in each case
determined on a consolidated basis in accordance with generally accepted
accounting principles consistently applied.
"Continuing Members" means, as of the date of determination, any Person
who (i) was a member of the Board of Directors of the Issuer on the date of this
Indenture, (ii) was nominated for election or elected to the Board of Directors
of the Issuer with the affirmative vote of a majority of the Continuing Members
who were members of the Board of Directors of the Issuer at the time of such
nomination or election or (iii) is a representative of, or was approved by, a
Permitted Holder.
<PAGE> 13
-7-
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 13.02 or such other address as the Trustee may give
notice to the Issuer.
"Cumulative Credit" means the sum of (i) the aggregate Net Cash
Proceeds received by the Issuer from the issue or sale (other than to a
Subsidiary) of Equity Interests (other than Disqualified Equity Interests) of
the Issuer on or after July 29, 1998, plus (ii) the principal amount (or, if
less, accreted amount determined in accordance with generally accepted
accounting principles) of any Indebtedness, of the Issuer which has been
converted into or exchanged for Equity Interests of the Issuer on or after July
29, 1998, plus (iii) cumulative Operating Cash Flow on or after July 29, 1998,
to the end of the fiscal quarter immediately preceding the date of the proposed
Restricted Payment, or, if cumulative Operating Cash Flow for such period is
negative, minus the amount by which cumulative Operating Cash Flow is less than
zero, plus (iv) to the extent not already included in Operating Cash Flow, if
any Investment constituting a Restricted Payment that was made after the date of
this Indenture is sold or otherwise liquidated or repaid the initial dividend
amount of such Restricted Payment (less the cost of disposition, if any) on the
date of such sale, liquidation or repayment, as determined in good faith by the
Board of Directors.
"Cumulative Interest Expense" means the aggregate amount of
Consolidated Interest Expense paid or accrued of the Issuer and the Restricted
Subsidiaries on or after July 29, 1998, to the end of the fiscal quarter
immediately preceding the proposed Restricted Payment.
"Debt to Operating Cash Flow Ratio" means the ratio of (i) the
Consolidated Total Indebtedness as of the date of calculation (the
"Determination Date") to (ii) four times the Operating Cash Flow for the latest
three months for which financial information is available immediately preceding
such Determination Date (the "Measurement Period"). For purposes of calculating
Operating Cash Flow for the Measurement Period immediately prior to the relevant
Determination Date, (I) any Person that is a Restricted Subsidiary on the
Determination Date (or would become a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of such Operating Cash Flow) will be deemed to have been a
Restricted Subsidiary at all times during the Measurement Period; (II) any
Person that is not a Restricted Subsidiary on such Determination Date (or would
cease to be a Restricted Subsidiary on such Determination Date in connection
with the transaction that requires the determination of such Operating Cash
Flow) will be deemed not to have been a Restricted Subsidiary at any time during
such Measurement Period; and (III) if the Issuer or any Restricted Subsidiary
shall have in any manner (x) acquired (including through an Asset Acquisition or
the commencement of activities constituting such operating business) or (y)
disposed of (including by way of an Asset Sale or the termination or
discontinuance of activities constituting such operating business) any operating
business during such Measurement Period or after the end of
<PAGE> 14
-8-
such period and on or prior to such Determination Date, such calculation will be
made on a pro forma basis in accordance with generally accepted accounting
principles consistently applied, as if, in the case of an Asset Acquisition or
the commencement of activities constituting such operating business, all such
transactions had been consummated on the first day of such Measurement Period,
and, in the case of an Asset Sale or termination or discontinuance of activities
constituting such operating business, all such transactions had been consummated
prior to the first day of such Measurement Period.
"Default" means any event that is or with the passing of time or giving
of notice or both would be an Event of Default.
"Depositary" means, with respect to Securities issued in the form of
one or more Global Securities, DTC or another Person designated as Depositary by
the Issuer, which Person must be a clearing agency registered under Section 17A
of the Exchange Act.
"Designation" has the meaning set forth in Section 4.17.
"Designation Amount" has the meaning set forth in Section 4.17.
"Disposition" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"Disqualified Equity Interest" means, with respect to any Person, any
Equity Interest which, by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, or is exchangeable
into Indebtedness or Disqualified Equity Interest, on or prior to the earlier of
the maturity date of the Securities or the date on which no Securities remain
outstanding.
"DTC" means The Depository Trust Company.
"Equity Interest" in any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, and
membership interests in such Person, including any Preferred Stock.
<PAGE> 15
-9-
"Equity Offering" means an underwritten public offering by the Issuer
for cash (with gross proceeds to the Issuer in an amount not less than $25.0
million) of its common stock pursuant to the Securities Act of 1933, as amended,
registration statement (not including Forms S-4 or S-8).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the Securities and Exchange
Commission thereunder.
"GAAP" means, at any date of determination, generally accepted
accounting principles in effect in the United States which are applicable at the
date of determination and which are consistently applied for all applicable
periods.
"Global Security" means a Security evidencing all or part of the
Securities issued to the Depositary in accordance with Section 2.13 and bearing
the legend described in Exhibit B.
"Guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit. A guarantee shall include,
without limitation, any agreement to maintain or preserve any other person's
financial condition or to cause any other Person to achieve certain levels of
operating results.
"Hedging Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement
providing for the transfer or mitigation of interest rate risks either generally
or under specific contingencies.
"Hedging Obligation" of any Person means the obligations of such Person
pursuant to any Hedging Agreement.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the books of the Registrar or any co-Registrar.
"Incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the
<PAGE> 16
-10-
balance sheet of such Person (and "Incurrence," "Incurred" and "Incurring" shall
have meanings correlative to the foregoing). Indebtedness of any Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary (or is merged into or consolidates with the Issuer or any Restricted
Subsidiary), whether or not such Indebtedness was incurred in connection with,
or in contemplation of, such Person becoming a Restricted Subsidiary (or being
merged into or consolidated with the Issuer or any Restricted Subsidiary), shall
be deemed Incurred at the time any such Person becomes a Restricted Subsidiary
or merges into or consolidates with the Issuer or any Restricted Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal in respect of (A) indebtedness of such
Person for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
(ii) all Capitalized Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions entered into by such
Person;
(iii) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of such
Person and all obligations of such Person under any title retention agreement
(but excluding trade accounts payable arising in the ordinary course of
business);
(iv) all obligations of such Person for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (i) through (iii)
above) entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the extent drawn
upon, such drawing is reimbursed no later than the tenth Business Day following
payment on the letter of credit);
(v) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any Disqualified Equity
Interest or, with respect to any Subsidiary of such Person, the liquidation
preference with respect to, any Preferred Stock (but excluding, in each case,
any accrued dividends);
<PAGE> 17
-11-
(vi) all obligations of the type referred to in clauses (i)
through (v) of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
guarantee;
(vii) all obligations of the type referred to in clauses (i)
through (vi) of other Persons secured by any Lien on any property or asset of
such Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this
definition, Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Insolvency or Liquidation Proceeding" means, with respect to any
Person, any liquidation, dissolution or winding up of such Person, or any
bankruptcy, reorganization, insolvency, receivership or similar proceeding with
respect to such Person, whether voluntary or involuntary.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Securities.
"Investment" in any Person means, directly or indirectly, any advance,
loan or other extension of credit (including by means of a guarantee) or capital
contribution to (by means of transfers of property to others, payments for
property or services for the account or use of others or otherwise) such Person,
the acquisition, by purchase or otherwise, of any stock, bonds, securities,
debentures, partnership, membership or joint venture interests or other
securities or other evidence of beneficial interest of any Person, and shall
include the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary. If the Issuer or any Restricted Subsidiary sells or otherwise
disposes of any Voting Equity Interest of any direct or indirect Restricted
Subsidiary such that, after giving effect to such sale or disposition, the
Issuer no longer owns, directly or indirectly, greater than 50% of the
outstanding Voting Equity Interests of such Restricted Subsidiary, the Issuer
shall be deemed to have made an
<PAGE> 18
-12-
Investment on the date of any such sale or disposition equal to the fair market
value of the Voting Equity Interests of such former Restricted Subsidiary not
sold or disposed of.
"Investment Banking Fee" means pursuant to an agreement between J.
Merritt Belisle and Steven E. Seach, on the one hand, and the Issuer, on the
other hand, a fee to be paid by the Issuer to such individuals (i) on the date
of this Indenture in the aggregate amount of $550,000 and (ii) thereafter from
time to time in connection with the consummation of acquisitions or financings
by the Issuer in an amount equal to 1.0% of the purchase price paid for such
acquisitions.
"Issue Date" means the original issue date of the Initial Securities,
July 29, 1998.
"Issuer" means the Person named as the "Issuer" in the first paragraph
of this Indenture until a successor shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Issuer" shall mean such
successor.
"Issuer Request" or "Issuer Order" means a written request or order
signed in the name of each of the Issuer by its respective Chairman of the Board
of Directors, Vice Chairman of the Board of Directors, President or a Vice
President, and by its respective Treasurer, an Assistant Treasurer, Secretary or
an Assistant Secretary, and delivered to the Trustee.
"Lien" means any mortgage, pledge, lien, charge, security interest,
hypothecation, assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof or any agreement to give a security interest).
"Maturity Date" means the date, which is set forth on the face of the
Securities, on which the Securities will mature.
"Moody's" means Moody's Investors Service, Inc., or any successor
rating agency.
"Net Available Cash" from an Asset Sale means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise and proceeds from the
sale or other disposition of any securities received as consideration, but only
as and when received, but excluding any other consideration received in the form
of assumption by the acquiring Person of Indebtedness or other obligations
relating to such properties or assets or received in any other non cash form)
therefrom, in each case net of (i) all legal, title and recording tax expenses,
commissions and other fees and expenses incurred, and all Federal, state,
provincial, foreign and local taxes
<PAGE> 19
-13-
required to be paid or accrued as a liability under GAAP, as a consequence of
such Asset Sale, (ii) all payments made on any indebtedness which is secured by
any assets subject to such Asset Sale, in accordance with the terms of any Lien
upon or other security arrangement of any kind with respect to such assets, or
which must by its terms, or in order to obtain a necessary consent to such Asset
Sale, or by applicable law, be repaid out of the proceeds from such Asset Sale,
(iii) all distributions and other payments required to be made to minority
interest holders in Restricted Subsidiaries or joint ventures as a result of
such Asset Sale and (iv) the deduction of appropriate amounts to be provided by
the seller as a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Sale and retained by the
Issuer or any Restricted Subsidiary after such Asset Sale.
"New Senior Credit Agreement" means the credit agreement dated as of
July 29, 1998, among Classic Cable, Inc., the lenders referred to therein, Union
Bank of California, N.A. and Goldman Sachs Credit Partners L.P., as co-arrangers
for such lenders, together with the related documents thereto (including,
without limitation, any guarantee agreements, pledge agreements and security
documents executed in connection therewith), in each case as such agreements may
be amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring such indebtedness
(provided any amendment, supplement, extension, refinancing, replacement or
restructuring is otherwise permitted under Sections 4.04, 4.05, 4.06, 4.15, 4.16
or 4.19), or adding subsidiaries of the Issuer as additional borrowers or
guarantors thereunder. Without limiting the generality of the foregoing, "New
Senior Credit Agreement" shall include all interest rate collars, caps, hedges
and other interest rate protection agreements with lenders (or affiliates
thereof) party to the New Senior Credit Agreement which are permitted by Section
4.04(i) of this Indenture.
"Non-Recourse Indebtedness" means Indebtedness of a Person (i) as to
which neither the Issuer nor any of the Restricted Subsidiaries (other than such
Person or any Subsidiaries of such Person) (a) provides any guarantee or credit
support of any kind (including any undertaking, guarantee, indemnity, agreement
or instrument that would constitute Indebtedness) or (b) is directly or
indirectly liable (as a guarantor or otherwise); and (ii) the incurrence of
which will not result in any recourse against any of the assets of either of the
Issuer or the Restricted Subsidiaries (other than to such Person or to any
Subsidiaries of such Person and other than to the Equity Interests in such
Restricted Subsidiary or an Unrestricted Subsidiary).
"Notes" means the 9 7/8 Senior Subordinated Notes due 2008 issued by
Classic Cable, Inc. pursuant to an indenture dated July 29, 1998.
<PAGE> 20
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"Obligations" means any principal, interest (including, without
limitation, Post- Petition Interest), penalties, fees, indemnifications,
reimbursement obligations, damages and other liabilities payable under the
documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the Board
of Directors, the President, any Vice President, the Chief Financial Officer,
the Treasurer, or the Secretary of such Person.
"Officer's Certificate" means a certificate signed by an Officer
complying with Sections 13.04 and 13.05.
"Operating Cash Flow" means, with respect to the Issuer and the
Restricted Subsidiaries on a consolidated basis, for any period, an amount equal
to the lesser of (a) the amount of cash dividends received by the Issuer from
Classic Cable, Inc., a Delaware corporation and Wholly Owned Subsidiary of the
Issuer, and (b) Consolidated Net Income for such period increased (without
duplication) by the sum of (i) Consolidated Income Tax Expense accrued for such
period to the extent deducted in determining Consolidated Net Income for such
period; (ii) Consolidated Interest Expense for such period to the extent
deducted in determining Consolidated Net Income for such period; and (iii)
depreciation, amortization and any other non-cash items for such period to the
extent deducted in determining Consolidated Net Income for such period (other
than any non-cash item which requires the accrual of, or a reserve for, cash
charges for any future period) of the Issuer and the Restricted Subsidiaries,
including, without limitation, amortization of capitalized debt issuance costs
for such period, all of the foregoing determined on a consolidated basis in
accordance with generally accepted accounting principles consistently applied,
and decreased by non-cash items to the extent they increased Consolidated Net
Income (including the partial or entire reversal of reserves taken in prior
periods) for such period provided, that with respect to the definition of Debt
to Operating Cash Flow only, Operating Cash Flow shall always have the meaning
ascribed in clause (b) above. For the purpose of this definition, the following
items shall, to the extent expensed in calculating Consolidated Net Income, be
added to Consolidated Net Income: (A) any amounts paid to employees of the
Issuer in respect of investment banking, advisory or transaction fees in
connection with acquisitions or financings of, or advisory services to, the
Issuer, in an amount not to exceed 1.5 percent of the fair market value of such
acquisition or the amount of such financing, and (B) cancellation of debt to any
employee of the Issuer in an aggregate principal amount not to exceed $200,000.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Issuer or the Trustee.
<PAGE> 21
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"Other Pari Passu Debt" means Indebtedness of the Issuer or any
Restricted Subsidiary that does not constitute Subordinated Obligations and is
not senior in right of payment to the Securities.
"Other Permitted Liens" means (i) Liens imposed by law, such as
carriers', warehousemen's and mechanics' liens and other similar liens arising
in the ordinary course of business which secure payment of obligations that are
not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and for which an
appropriate reserve or provision shall have been made in accordance with
generally accepted accounting principles consistently applied; (ii) Liens for
taxes, assessments or governmental charges or claims that are not yet delinquent
or that are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and for which an appropriate reserve or
provision shall have been made in accordance with generally accepted accounting
principles consistently applied; (iii) easements, rights of way, and other
restrictions on use of property or minor imperfections of title that in the
aggregate are not material in amount and do not in any case materially detract
from the property subject thereto or interfere with the ordinary conduct of the
business of the Issuer or its Subsidiaries; (iv) Liens related to Capitalized
Lease Obligations, mortgage financings or purchase money obligations (including
refinancings thereof), in each case incurred for the purpose of financing all or
any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Issuer or any
Restricted Subsidiary or a Related Business, provided that any such Lien
encumbers only the asset or assets so financed, purchased, constructed or
improved; (v) Liens resulting from the pledge by the Issuer of Equity Interests
in any Subsidiary in connection with the New Senior Credit Agreement; (vi) Liens
resulting from the pledge by the Issuer of Equity Interests in an Unrestricted
Subsidiary in any circumstance where recourse to the Issuer is limited to the
value of the Equity interests so pledged; (vi) Liens incurred or deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (vii) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds, deposits to secure the performance of bids, trade contracts, government
contracts, leases or licenses or other obligations of a like nature incurred in
the ordinary course of business (including without limitation, landlord Liens on
leased properties); (viii) leases or subleases granted to third Persons not
interfering with the ordinary course of business of the Issuer; (ix) deposits
made in the ordinary course of business to secure liability to insurance
carriers; (x) Liens securing reimbursement obligations with respect to letters
of credit which encumber documents and other property relating to such letters
of credit and the products and proceeds thereof; (xi) Liens on the assets of the
Issuer to secure Hedging Agreements with respect to Indebtedness permitted by
this Indenture to be incurred; (xii) attachment or judgment
<PAGE> 22
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Liens not giving rise to a Default or an Event of Default; and (xiii) any
interest or title of a lessor under any capital lease or operating lease.
"Permitted Holders" means Austin Ventures, L.P., BT Capital Partners,
Inc., NationsBank Capital Investors, J. Merritt Belisle and Steven E. Seach.
"Permitted Investments" means (i) Cash Equivalents; (ii) Investments in
prepaid expenses, negotiable instruments held for collection and lease, utility
and workers' compensation, performance and other similar deposits; (iii) the
extension of credit to vendors, suppliers and customers in the ordinary course
of business; (iv) Investments existing as of the date of this Indenture, and any
amendment, modification, extension or renewal thereof to the extent such
amendment, modification, extension or renewal does not require the Issuer or any
Restricted Subsidiary to make any additional cash or non-cash payments or
provide additional services in connection therewith; (v) Hedging Agreements;
(vi) any Investment for which the sole consideration provided is Equity
Interests of the Issuer; (vii) any Investment consisting of a guarantee
permitted under clause (e) of the second paragraph of Section 4.04; (viii)
Investments in the Issuer, in any Wholly Owned Restricted Subsidiary or any
Person that, as a result of or in connection with such Investment, becomes a
Wholly Owned Restricted Subsidiary or is merged with or into or consolidated
with the Issuer or a Wholly Owned Restricted Subsidiary, provided, however, that
such Person's primary business is a Related Business; (ix) loans and advances to
officers, directors and employees of the Issuer and the Restricted Subsidiaries
for business-related travel expenses, moving expenses and other similar expenses
in each case incurred in the ordinary course of business not to exceed $1
million outstanding at any time; (x) any acquisition of assets solely in
exchange for the issuance of Equity Interests of the Issuer; and (xi) other
Investments made after the date of this Indenture, in addition to any Permitted
Investments described in clauses (i) through (x) above, in an aggregate amount
at any one time outstanding not to exceed $1.0 million.
"Person" means any individual, corporation, partnership, limited
liability Issuer, joint venture, association, joint stock Issuer, trust,
unincorporated organization, government or agency or political subdivision
thereof or any other entity.
"Preferred Stock," means, in any Person, an Equity Interest of any
class or classes, however designated, which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
"Principal" of a debt security means the principal of the security
plus, when appropriate, the premium, if any, on the security.
<PAGE> 23
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"Productive Assets" means assets of a kind used or useable by the
Issuer and the Restricted Subsidiaries in any Related Business and specifically
includes assets acquired through Asset Acquisitions (it being understood that
"assets" may include Equity Interests of a Person that owns such Productive
Assets, provided that after giving effect to such transaction, such Person would
be a Restricted Subsidiary).
"Purchase Money Indebtedness" means Indebtedness of the Issuer or any
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price or the cost of construction or improvement of any property,
provided that the aggregate principal amount of such Indebtedness does not
exceed the lesser of the fair market value of such property or such purchase
price or cost.
"Qualified Equity Interest" in any Person means any Equity Interest in
such Person other than any Disqualified Equity Interest.
"redemption date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture.
"redemption price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
as set forth in the form of Security annexed as Exhibit A.
"Reinvestment Date" means the date which is 365 days after the receipt
of any Net Available Cash from an Asset Sale.
"Related Business" means a cable television, media and communications,
telecommunications, internet service provider or data transmission business, and
businesses ancillary, complementary or reasonably related thereto.
"Restricted Subsidiary" means any Subsidiary of the Issuer other than
an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Issuer or a Restricted Subsidiary
transfers such property to a Person and the Issuer or a Restricted Subsidiary
leases it back from such Person.
"SEC" means the Securities and Exchange Commission.
<PAGE> 24
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"Securities" means the 13 1/4% Senior Discount Notes due 2009, as
amended or supplemented from time to time pursuant to the terms of this
Indenture, that are issued under this Indenture.
"Securities Custodian" means the Trustee, as custodian with respect to
the Securities in global form, or any successor entity thereto.
"Semiannual Accrual Date" has the meaning ascribed under the definition
of Accreted Value.
"Senior Indebtedness" means the principal of, premium, if any, and
interest (including interest, whether or not allowable, accruing after the
filing of a petition initiating any proceeding under any state, federal or
foreign bankruptcy law) on any Indebtedness of the Issuer (other than as
otherwise provided in this definition), whether outstanding on the date of this
Indenture or thereafter created, incurred or assumed, and whether at any time
owing, actually or contingent, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Securities. Notwithstanding the
foregoing, "Senior Indebtedness" shall not include (i) Indebtedness evidenced by
the Securities, (ii) Indebtedness that is subordinate or junior in right of
payment to any Indebtedness of the Issuer, (iii) Indebtedness which when
incurred and without respect to any election under Section 1111(b) of Title 11
United States Code, is without recourse to the Issuer, (iv) Indebtedness which
is represented by Redeemable Capital Stock, (v) any liability for foreign,
federal, state, local or other taxes owed or owing by the Issuer to the extent
such liability constitutes Indebtedness, (vi) Indebtedness of the Issuer to a
Subsidiary or any other Affiliate of the Issuer or any of such Affiliate's
Subsidiaries, (vii) to the extent it might constitute Indebtedness, amounts
owing for goods, materials or services purchased in the ordinary course of
business or consisting of trade accounts payable owed or owing by the Issuer,
and amounts owed by the Issuer for compensation to employees or services
rendered to the Issuer, (viii) that portion of any Indebtedness which at the
time of issuance is issued in violation of this Indenture and (ix) Indebtedness
evidenced by any guarantee of any Subordinated Indebtedness or Pari Passu
Indebtedness.
"Senior Representative" means an authorized representative of a holder
of Senior Indebtedness.
"S&P" means Standard & Poor's Ratings Group, a division of the McGraw
Hill Company, Inc., or any successor rating agency.
<PAGE> 25
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"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Strategic Equity Investment" means an investment in the Issuer by a
company which is primarily engaged in the media and communications industry or
the telecommunications industry and which has a market capitalization (if a
public company) on the date of such investment in the Issuer of more than $1.0
billion or, if not a public company, had total revenues of more than $5.0
billion during its previous fiscal year.
"Subordinated Obligations" means, with respect to the Issuer, any
Indebtedness of the Issuer which is expressly subordinated in right of payment
to the Securities.
"Subsidiary" means a Person the majority of whose voting stock,
membership interests or other Voting Equity Interests is or are owned by the
Issuer or a Subsidiary. Voting stock in a corporation includes Equity Interests
having voting power under ordinary circumstances to elect directors.
"Subsidiary Operating Cash Flow" means, with respect to any Subsidiary
for any period, the "Operating Cash Flow" of such Subsidiary and its
Subsidiaries for such period determined by utilizing all of the elements of the
definition of "Operating Cash Flow" in this Indenture, including the defined
terms used in such definition, consistently applied only to such Subsidiary and
its Subsidiaries on a consolidated basis for such period.
"Surviving Person" means, with respect to any Person involved in or
that makes any Disposition, the Person formed by or surviving such Disposition
or the Person to which such Disposition is made.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in
Section 10.03.
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two business days prior to the date fixed
for redemption of the Securities following a Change of Control (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the then remaining Weighted Average
Life to Maturity of the Securities; provided, however, that if the Weighted
Average Life to Maturity of the Securities is not equal to the constant maturity
of a United States Treasury security for
<PAGE> 26
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which a weekly average yield is given, the Treasury Rate shall be obtained by
linear interpolation (calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for which such yields
are given, except that if the Weighted Average Life to Maturity of the
Securities is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means any officer within the corporate trust department
(or any successor group of the Trustee) including any vice president, assistant
vice president, assistant secretary or any other officer or assistant officer of
the Trustee customarily performing functions similar to those performed by the
persons who at that time shall be such officers, and also means, with respect to
a particular corporate trust matter, any other officer to whom such trust matter
is referred because of his knowledge of and familiarity with the particular
subject.
"Unrestricted Subsidiary" means any Subsidiary of the Issuer (other
than a Subsidiary Guarantor) designated as such pursuant to and in compliance
with Section 4.17. Any such designation may be revoked by a resolution of the
Board of Directors of the Issuer delivered to the Trustee, subject to the
provisions of Section 4.17.
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary
means Indebtedness of such Unrestricted Subsidiary (i) as to which neither the
Issuer nor any Restricted Subsidiary is directly or indirectly liable (by virtue
of the Issuer or any such Restricted Subsidiary being the primary obligor on,
guarantor of, or otherwise liable in any respect to, such Indebtedness, except
guaranteed debt of the Issuer or any Restricted Subsidiary to any Affiliate, in
which case (unless the incurrence of such guaranteed debt resulted in a
Restricted Payment at the time of incurrence) the Issuer shall be deemed to have
made a Restricted Payment equal to the principal amount of any such Indebtedness
to the extent guaranteed at the time such Affiliate is designated an
Unrestricted Subsidiary and (ii) which, upon the occurrence of a default with
respect thereto, does not result in, or permit any holder of any Indebtedness of
the Issuer or any Subsidiary to declare, a default on such Indebtedness of the
Issuer or any Subsidiary or cause the payment thereof to be accelerated or
payable prior to its Stated Maturity; provided that notwithstanding the
foregoing any Unrestricted Subsidiary may guarantee the Securities.
<PAGE> 27
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"Voting Equity Interests" means Equity Interests in any Person with
voting power under ordinary circumstances entitling the holders thereof to elect
the board of directors, board of managers or other governing body of such
Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding aggregate
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary of
which all of the outstanding Equity Interests (other than Equity Interests
constituting directors' qualifying shares to the extent mandated by applicable
law) are owned by the Issuer or by one or more Wholly Owned Restricted
Subsidiaries or by the Issuer and one or more Wholly Owned Restricted
Subsidiaries. Notwithstanding the foregoing, so long as Universal Cable
Holdings, Inc. holds at least 75% of the issued and outstanding shares of stock
of Universal Cable Communications Inc., Universal Cable of Beaver, Oklahoma,
Inc. and Universal Cable Midwest, Inc., each of such entities shall be deemed to
be a Wholly Owned Subsidiary.
SECTION 1.02 Other Definitions.
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Affiliate Transaction" 4.03
"Bankruptcy Law" 6.01
"Custodian" 6.01
"Event of Default" 6.01
"Other Indebtedness" 4.19
"Participants" 2.13
"Paying Agent" 2.03
"Permitted Indebtedness" 4.04
"Physical Securities" 2.13
"Registrar" 2.03
"Required Filing Dates" 4.12
"Restricted Payment" 4.06
"Revocation" 4.17
</TABLE>
<PAGE> 28
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SECTION 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" or "obligors" on the indenture securities means the Issuer or
any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.04 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles in effect from
time to time, and any other reference in this Indenture to "generally accepted
accounting principles" refers to GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and words in the plural
include the singular;
(e) provisions apply to successive events and transactions; and
<PAGE> 29
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(f) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01 Form and Dating.
The Securities and the Trustee's certificates of authentication shall
be substantially in the form of Exhibit A. The Securities may have notations,
legends or endorsements required by law, stock exchange rule or usage. Any
notations, legends or endorsements not contained in the form of Security
contained in Exhibit A shall be delivered in writing to the Trustee. The Issuer
shall approve the form of the Securities and any notation, legend or endorsement
on them. Each Security shall be dated the date of its authentication.
The terms and provisions contained in the form of the Securities,
annexed hereto as Exhibit A, shall constitute, and are hereby expressly made, a
part of this Indenture.
SECTION 2.02 Execution and Authentication.
An Officer shall sign the Securities for the Issuer by facsimile
signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until the Trustee manually signs the
certificate of authentication on the Security. The signature shall be conclusive
evidence that the Security has been authenticated under this Indenture.
The Trustee shall authenticate Securities for original issue in the
aggregate principal amount at maturity of up to $114,000,000, upon a written
order signed by an Officer of the Issuer. The order shall specify the amount of
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated. The aggregate principal amount at maturity of
Securities outstanding at any time may not exceed $114,000,000 except as
provided in Section 2.07.
<PAGE> 30
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The Securities shall initially be issued in the form of one or more
permanent Global Securities, substantially in the form set forth in Exhibit A.
Global Securities shall be registered in the name of a nominee of the Depositary
and deposited with the Trustee, at its principal operations office in New York,
New York, in its capacity as Securities Custodian, duly executed by the Issuer
and authenticated by the Trustee as hereinafter provided. Each Global Security
shall evidence such of the outstanding Securities as shall be specified therein
and each shall provide that it shall evidence the aggregate principal amount at
maturity of outstanding Securities from time to time endorsed thereon, and that
the aggregate principal amount at maturity of outstanding Securities represented
thereby may from time to time be reduced or increased, as applicable, to reflect
exchanges, redemptions, and other similar transactions. Any endorsement of a
Global Security to reflect the amount of any increase or decrease in the amount
of outstanding Securities represented thereby shall be made by the Trustee or
the Securities Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03 Registrar; Paying Agent; Depositary.
The Issuer shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Securities may be presented for payment ("Paying Agent").
The Issuer may have one or more co-Registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Issuer shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent and shall, if required,
incorporate the provisions of the TIA. The Issuer shall notify the Trustee of
the name and address of any such Agent. If the Issuer fail to maintain a
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation in accordance with the provisions of Section 7.07.
The Issuer initially appoints the Trustee as Registrar and Paying
Agent. The Issuer shall give written notice to the Trustee in the event that the
Issuer decides to act as Registrar or Paying Agent.
<PAGE> 31
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The Issuer initially appoints DTC to act as Depositary with respect to
any Global Securities and initially appoints the Trustee to act as Securities
Custodian with respect to any Global Securities.
SECTION 2.04 Paying Agent to Hold Money in Trust.
The Issuer shall require each Paying Agent to agree in writing to hold
in trust for the benefit of Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal of or interest on the Securities
(whether such money has been paid to it by the Issuer or any other obligor on
the Securities), and the Issuer and the Paying Agent shall each notify the
Trustee of any default by the Issuer (or any other obligor on the Securities) in
making any such payment. If the Issuer or a Subsidiary of the Issuer acts as
Paying Agent, it shall segregate the money and hold it as a separate trust fund.
The Issuer at any time may require a Paying Agent to pay all money held by it to
the Trustee and account for any funds disbursed and the Trustee may at any time
during the continuance of any payment default, upon written request to a Paying
Agent, require such Paying Agent to pay all money held by it to the Trustee and
to account for any funds disbursed. Upon making such payment the Paying Agent
shall have no further liability for the money delivered to the Trustee.
SECTION 2.05 Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Issuer shall furnish
to the Trustee at least five Business Days before each Interest Payment Date and
at such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Securityholders.
SECTION 2.06 Transfer and Exchange.
Subject to the provisions of Section 2.13, when Securities are
presented to the Registrar or a co-Registrar with a request to register the
transfer or to exchange them for an equal principal amount at maturity of
Securities of other authorized denominations, the Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transactions are met. To permit registrations of transfers and exchanges, the
Issuer shall execute and the Trustee shall authenticate Securities. The date of
any Security issued pursuant to this Section 2.06 shall be the date of such
transfer or exchange. No service charge shall be made to the Securityholder for
any registration of transfer or exchange, but the Issuer may require from the
Securityholder payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar
<PAGE> 32
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governmental charge payable upon exchanges pursuant to Sections 2.10, 3.06, 4.14
or 10.05, in which event the Issuer shall be responsible for the payment of such
taxes).
Any Holder of the Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interests in such Global Security
may be effected only through a book-entry system (as described in Section 2.13)
maintained by the Depositary (or its agent), and that ownership of a beneficial
interest in the Global Security shall be required to be reflected in a book
entry.
SECTION 2.07 Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Issuer shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. An indemnity bond in an amount
sufficient in the judgment of the Issuer and the Trustee to protect the Issuer,
the Trustee or any Agent from any loss which any of them may suffer if a
Security is replaced may be required by the Trustee or the Issuer. The Issuer
and the Trustee each may charge such Holder for its expenses in replacing such
Security.
If, after the delivery of such replacement Security, a bona fide
purchaser of the original Security in lieu of which such replacement Security
was issued presents for payment or registration such original Security, the
Trustee shall be entitled to recover such replacement Security from the person
to whom it was delivered or any person taking therefrom, except a bona fide
purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Trustee in connection therewith.
Every replacement Security is an additional obligation of the Issuer.
SECTION 2.08 Outstanding Securities.
Securities outstanding at any time are all Securities that have been
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation and those described in this Section as not outstanding.
Except as provided in paragraph 5(b) of the Securities, a Security does not
cease to be outstanding because the Issuer or an Affiliate of the Issuer holds
the Security.
<PAGE> 33
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If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Issuer, a Subsidiary of the Issuer
or an Affiliate of the Issuer) holds on a redemption date or Maturity Date money
sufficient to pay the principal of, and interest on Securities payable on that
date, then on and after that date such Securities cease to be outstanding and
interest on them ceases to accrue.
SECTION 2.09 Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Issuer, any Subsidiary Guarantor or any of their respective Affiliates
shall be disregarded, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Securities that a Trust Officer of the Trustee actually knows are so owned
shall be so disregarded.
SECTION 2.10 Temporary Securities.
Until definitive Securities are ready for delivery, the Issuer may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Issuer consider appropriate for temporary Securities.
Without unreasonable delay, the Issuer shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities. Until
such exchange, temporary Securities shall be entitled to the same rights,
benefits and privileges as definitive Securities.
SECTION 2.11 Cancellation.
The Issuer at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee and no one else shall cancel all Securities surrendered for transfer,
exchange, payment or cancellation. Except as provided in Section 2.07, the
Issuer may not issue new Securities to replace, or reissue or resell, Securities
which the Issuer has redeemed, paid, purchased on the open market or otherwise,
or otherwise acquired or have been delivered to the Trustee for cancellation.
The Trustee (subject to the record-retention requirements of the Exchange Act)
may, but shall not be required to destroy canceled Securities.
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SECTION 2.12 Defaulted Interest.
If the Issuer defaults in a payment of interest on the Securities, it
shall pay the defaulted interest, plus any interest payable on the defaulted
interest pursuant to Section 4.01 hereof, to the persons who are Securityholders
on a subsequent special record date, and such term, as used in this Section 2.12
with respect to the payment of any defaulted interest, shall mean the fifteenth
day next preceding the date fixed by the Issuer for the payment of defaulted
interest, whether or not such day is a Business Day. At least 15 days before
such special record date, the Issuer shall mail to each Securityholder and to
the Trustee a notice that states such special record date, the payment date and
the amount of defaulted interest to be paid.
SECTION 2.13 Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in the name
of the Depositary or the nominee of such Depositary, (ii) be delivered to the
Trustee as custodian for such Depositary and (iii) bear legends as set forth in
Exhibit B.
Members of, or participants in, the Depositary ("Participants") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Security, and the Depositary may be treated by the Issuer, the Trustee
and any agent of the Issuer or the Trustee as the absolute owner of the Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Issuer, the Trustee or any agent of the Issuer or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Participants, the operation of customary practices governing the
exercise of the rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers in
whole, but not in part, to the Depositary, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may be
transferred or exchanged for certificated Securities ("Physical Securities") in
accordance with the rules and procedures of the Depositary. In addition,
Physical Securities shall be transferred to all beneficial owners in exchange
for their beneficial interests in Global Securities if (i) the Depositary
notifies the Issuer that it is unwilling or unable to continue as Depositary for
any Global Security and a successor depositary is not appointed by the Issuer
within 90 days of such notice or (ii) an Event of Default has occurred and is
continuing and the Registrar has received a request from the Depositary to issue
Physical Securities.
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(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Security to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Securities are to be
issued) reflect on its books and records the date and a decrease in the
principal amount at maturity of the Global Security in an amount equal to the
principal amount at maturity of the beneficial interest in the Global Security
to be transferred or exchanged, and the Issuer shall execute (and any Subsidiary
Guarantor shall execute the Subsidiary Guarantee endorsed thereon), and the
Trustee, pursuant to instructions set forth in an Officer's Certificate from the
Issuer, shall authenticate and deliver, one or more Physical Securities of like
tenor and amount.
(d) In connection with the transfer or exchange of Global Securities as
an entirety to beneficial owners pursuant to paragraph (b), the Global
Securities shall be deemed to be surrendered to the Trustee for cancellation,
and the Issuer shall execute (and any Subsidiary Guarantor shall execute the
Subsidiary Guarantee endorsed thereon), and the Trustee, pursuant to
instructions set forth in an Officer's Certificate from each of the Issuer,
shall authenticate and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in the Global Securities, an
equal aggregate principal amount at maturity of Physical Securities of
authorized denominations.
(e) The Holder of any Global Security may grant proxies and otherwise
authorize any person, including Participants and persons that may hold interests
through Participants, to take any action which a Holder is entitled to take
under this Indenture or the Securities.
ARTICLE THREE
REDEMPTION
SECTION 3.01 Notices to Trustee.
If the Issuer is to effect the redemption of any Securities pursuant to
paragraph 5 of the Securities at the applicable redemption price set forth
therein, it shall notify the Trustee in writing of the redemption date and the
principal amount at maturity of Securities to be redeemed.
The Issuer shall give the notice provided for in this Section 3.01 at
least 45 days before the redemption date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officer's Certificate
stating that such redemption will comply with the conditions contained herein.
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SECTION 3.02 Selection of Securities to Be Redeemed.
If less than all of the Securities are to be redeemed pursuant to
paragraph 5 thereof, the Trustee shall select the Securities to be redeemed pro
rata or by lot or in such other manner as the Trustee shall deem appropriate and
fair. The Trustee shall make the selection from the Securities then outstanding,
subject to redemption and not previously called for redemption. The Trustee may
select for redemption portions (equal to $1,000 or any integral multiple
thereof) of the principal of Securities that have denominations larger than
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
SECTION 3.03 Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date,
the Issuer shall mail a notice of redemption by first-class mail to each Holder
whose Securities are to be redeemed at such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) the CUSIP number;
(d) the name and address of the Paying Agent to which the Securities
are to be surrendered for redemption;
(e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Issuer defaults in making the redemption payment,
interest on Securities called for redemption ceases to accrue on and after the
redemption date and the only remaining right of the Holders is to receive
payment of the redemption price upon surrender of such Securities to the Paying
Agent; and
(g) if any Security is being redeemed in part, the portion of the
principal amount at maturity of such Security to be redeemed and that, after the
redemption date, upon surrender
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of such Security, a new Security or Securities in principal amount at maturity
equal to the unredeemed portion thereof will be issued.
At the Issuer's request, the Trustee shall give the notice of
redemption on behalf of the Issuer, in the Issuer's name and at the Issuer's
expense.
SECTION 3.04 Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for redemption
become due and payable on the redemption date and at the redemption price. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price, plus accrued interest thereon to the redemption date, but interest
installments whose maturity is on or prior to such redemption date shall be
payable to the Holders of record at the close of business on the relevant record
dates referred to in the Securities. The Trustee shall not be required to (i)
issue, authenticate, register the transfer of or exchange any Security during a
period beginning 15 days before the date a notice of redemption is mailed and
ending at the close of business on the date the redemption notice is mailed, or
(ii) register the transfer or exchange of any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
SECTION 3.05 Deposit of Redemption Price.
At least one Business Day before the redemption date, the Issuer shall
deposit with the Paying Agent (or if the Issuer is the Paying Agent, such Issuer
shall, on or before the redemption date, segregate and hold in trust) money
sufficient to pay the redemption price of and accrued and unpaid interest on all
Securities to be redeemed on that date other than Securities or portions thereof
called for redemption on that date which have been delivered by the Issuer to
the Trustee for cancellation.
SECTION 3.06 Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security equal in principal amount at
maturity to the unredeemed portion of the Security surrendered.
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ARTICLE FOUR
COVENANTS
SECTION 4.01 Payment of Securities.
The Issuer shall pay the principal of and interest on the Securities in
the manner provided in the Securities. An installment of principal or interest
shall be considered paid on the date due if the Trustee or Paying Agent (other
than the Issuer, a Subsidiary or an Affiliate of the Issuer) holds on that date
money designated for and sufficient to pay the installment in full and is not
prohibited from paying such money to the Holders of the Securities pursuant to
the terms of this Indenture.
The Issuer shall pay interest on overdue principal at the same rate per
annum borne by the Securities. The Issuer shall pay interest on overdue
installments of interest at the same rate per annum borne by the Securities, to
the extent lawful.
Payments of the principal of and interest on any Global Securities will
be made to the Depositary or its nominee, as the case may be, as the registered
owner thereof. None of the Issuer, the Trustee nor any Paying Agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in any Global
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interest.
SECTION 4.02 Maintenance of Office or Agency.
The Issuer shall maintain in the Borough of Manhattan, the City of New
York, an office or agency where Securities may be surrendered for registration
of transfer or exchange or for presentation for payment and where notices and
demands to or upon the Issuer in respect of the Securities and this Indenture
may be served. The Issuer shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuer shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 13.02.
The Issuer may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided that no such designation or rescission shall in any manner relieve the
Issuer of its obligation to maintain an office or agency in the
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Borough of Manhattan, the City of New York, for such purposes. The Issuer shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
SECTION 4.03 Limitation on Transactions with Affiliates.
The Issuer shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into or conduct any transaction or series of
transactions (including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service) with any
Affiliate, officers or directors of the Issuer (an "Affiliate Transaction")
unless (i) the terms of such transaction are no less favorable to the Issuer or
such Restricted Subsidiary, as the case may be, than those that could be
obtained at the time of such transaction in arm's-length dealings with a Person
who is not such an Affiliate; (ii) in the event such Affiliate Transaction
involves an aggregate amount in excess of $1.0 million, the terms of such
transaction are set forth in writing and shall have been approved by a majority
of the members of the Board of Directors having no personal stake in such
Affiliate Transaction (and such majority determines that such Affiliate
Transaction satisfies the criteria in clause (i) above) and (iii) in the event
such Affiliate Transaction involves an aggregate amount in excess of $10
million, the Issuer has received a written opinion from a nationally recognized
independent investment banking firm, or nationally recognized accounting or
appraisal firm, that such Affiliate Transaction is fair to the Issuer and its
Restricted Subsidiaries from a financial point of view.
The provisions of the foregoing paragraph shall not prohibit (i) any
Restricted Payment permitted to be made pursuant to Section 4.06, (ii) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors and
otherwise permitted under this Indenture, (iii) the grant of stock options or
similar rights to employees and directors of the Issuer in the ordinary course
of business pursuant to plans approved by the Board of Directors, and otherwise
permitted under this Indenture (iv) loans or advances to employees in the
ordinary course of business in accordance with the past practices of the Issuer
or its Restricted Subsidiaries, but in any event not to exceed $1.0 million in
the aggregate outstanding at any one time, (v) the payment of reasonable fees to
directors of the Issuer and its Restricted Subsidiaries who are not employees of
the Issuer or its Restricted Subsidiaries, (vi) any transaction between the
Issuer and a Wholly Owed Subsidiary or between Wholly Owned Subsidiaries or
(vii) the payment of Investment Banking Fees.
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SECTION 4.04 Limitation on Indebtedness
The Issuer shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, incur any Indebtedness (including Acquired
Indebtedness) except for Permitted Indebtedness; provided, however, that the
Issuer or any Restricted Subsidiary which is a Subsidiary Guarantor may incur
Indebtedness if, at the time of and immediately after giving pro forma effect to
such incurrence of indebtedness and the application of the proceeds therefrom,
the Debt to Operating Cash Flow Ratio would be less than or equal to 8.0 to 1.0.
The foregoing limitations will not apply to the incurrence of any of
the following (collectively, "Permitted Indebtedness"), each of which shall be
given independent effect:
(a) Indebtedness under the Securities issued on the date of this
Indenture, the Exchange Securities and this Indenture;
(b) Indebtedness of the Issuer and the Restricted Subsidiaries
outstanding on the Issuance Date and listed on a schedule to this Indenture,
other than Indebtedness described in clause (a), (c), (d), (f) or (j) of this
Section 4.04;
(c) Indebtedness of (x) any Wholly Owned Restricted Subsidiary owed to
or issued to and held by the Issuer or any Restricted Subsidiary and (y) the
Issuer owed to and held by any Wholly Owned Restricted Subsidiary which is
unsecured and subordinated in right of payment to the payment and performance of
the Issuer's obligations under this Indenture and the Securities; provided,
however, that an incurrence of Indebtedness that is not permitted by this clause
(c) shall be deemed to have occurred upon (i) any sale or other disposition of
any Indebtedness of the Issuer or a Restricted Subsidiary referred to in this
clause (c) to any Person (other than the Issuer or a Wholly Owned Restricted
Subsidiary) such that such Restricted Subsidiary ceases to be a Restricted
Subsidiary or (ii) any designation of a Restricted Subsidiary which holds
Indebtedness of the Issuer as an Unrestricted Subsidiary;
(d) guarantees by any Restricted Subsidiary of Indebtedness of the
Issuer permitted in accordance with the provisions of this Indenture;
(e) Indebtedness of any Restricted Subsidiary under the New Senior
Credit Agreement in the aggregate principal amount at any one time outstanding
not to exceed $125.0 million;
(f) indebtedness of the Issuer or any Restricted Subsidiary to the
extent representing a replacement, renewal, refinancing or extension
(collectively, a "refinancing") of outstanding
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Indebtedness of the Issuer or any Restricted Subsidiary, as the case may be,
incurred in compliance with clause (a), (b), (e), (g) or (j) of this paragraph
of this covenant; provided, however, that (i) Indebtedness of the Issuer may not
be refinanced under this clause (f) with Indebtedness of any Restricted
Subsidiary, (ii) any such refinancing shall not exceed the sum of the principal
amount or liquidation preference or redemption payment value (or, if such
Indebtedness provides for a lesser amount to be due and payable upon a
declaration of acceleration thereof at the time of such refinancing, an amount
no greater than such lesser amount) of the Indebtedness being refinanced plus
the amount of accrued interest or dividends thereon and such reasonable fees and
expenses incurred in connection therewith, (iii) Indebtedness representing a
refinancing of Indebtedness of the Issuer shall not mature prior to the stated
maturity of the Indebtedness refinanced and shall have a Weighted Average Life
to Maturity equal to or greater than the Weighted Average Life to Maturity of
the Indebtedness being refinanced, (iv) Subordinated Obligations of the Issuer
may only be refinanced with Subordinated Obligations of the Issuer, and (v)
Other Pari Passu Debt which is unsecured may only be refinanced with unsecured
Indebtedness, which is either Other Pari Passu Debt or Subordinated Obligations;
(g) Indebtedness of the Issuer or a Restricted Subsidiary represented
by Capitalized Lease Obligations, mortgage financings, performance bonds,
purchase money obligations or letters of credit, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the business
of the Issuer or such Restricted Subsidiary in an aggregate principal amount not
to exceed $10.0 million at any time outstanding;
(h) Indebtedness incurred and outstanding on or prior to the date on
which such Restricted Subsidiary was acquired by the Issuer (other than
Indebtedness incurred in connection with, or to provide all or any portion of
the funds or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Issuer); provided, however, that on
the date of such acquisition and after giving effect thereto, the Debt to
Operating Cash Flow Ratio would have been less than or equal to the Debt to
Operating Cash Flow Ratio immediately prior thereto;
(i) Indebtedness of the Issuer and any Restricted Subsidiary under a
Hedging Agreement related to floating interest on Indebtedness under the New
Senior Credit Agreement provided that such Hedging Agreement is designed solely
to protect against fluctuations in interest rates and does not increase the
Indebtedness of the obligor outstanding at any time other than as a result of
fluctuations in interest rates;
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(j) Indebtedness under the Notes and the related indenture; and
(k) In addition to any Indebtedness described in clauses (a) through
(j) above, Indebtedness of the Issuer or any of the Restricted Subsidiaries so
long as the aggregate principal amount of all such indebtedness incurred
pursuant to this clause (k) does not exceed $5.0 million at any one time
outstanding.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness described in clauses (a) through (i) above
or is entitled to be incurred pursuant to the first paragraph of this covenant,
the Issuer shall classify such item of Indebtedness in any manner that complies
with this covenant and such item of Indebtedness shall be treated as having been
incurred pursuant to only one of such clauses or pursuant to the first paragraph
hereof.
SECTION 4.05 Disposition of Proceeds of Asset Sales.
The Issuer shall not, and shall not permit any Restricted Subsidiary
to, consummate an Asset Sale unless (i) the Issuer or such Restricted
Subsidiary, as the case may be, receives consideration at the time of such sale
or other disposition at least equal to the fair market value thereof, as
determined in good faith by the Board of Directors of the Issuer and evidenced
in a Board Resolution; and (ii) not less than 75% of the consideration received
by the Issuer or such Restricted Subsidiary, as the case may be, is in the form
of cash or Cash Equivalents.
Within 365 days after the receipt of any Net Available Cash from an
Asset Sale, the Issuer or the applicable Restricted Subsidiary may apply such
Net Available Cash to: (A) acquire all or substantially all of the assets of a
Related Business; (B) acquire Voting Stock of a Related Business from a Person
that is not a Subsidiary of the Issuer; provided, that, (x) after giving effect
thereto, the Issuer or its Restricted Subsidiary owns a majority of such Voting
Stock and (y) such acquisition is otherwise made in accordance with this
Indenture, including, without limitation, the covenant in Section 4.06; (C) make
a capital expenditure or acquire other long-term assets that are used or useful
in a Related Business; or (D) prepay, repay, redeem or purchase Indebtedness
outstanding under the New Senior Credit Agreement. To the extent of the balance
of such Net Available Cash after application in accordance with clauses (A),
(B), (C) or (D) ("Excess Proceeds"), the Issuer shall make an Offer to Holders
of the Securities to purchase Securities and an offer to holders of Pari Passu
Indebtedness to repurchase such Indebtedness pursuant to and subject to the
conditions set forth below.
Notwithstanding the foregoing provisions, the Issuer and its Restricted
Subsidiaries shall not be required to apply any Net Available Cash in accordance
herewith except to the
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extent that the aggregate Net Available Cash from all Asset Sales which are not
applied in accordance with this covenant exceeds $10.0 million. Pending
application of Net Available Cash pursuant to this covenant, such Net Available
Cash shall be invested in Permitted Investments.
For the purposes of this covenant, the following are deemed to be cash:
(x) the assumption by the transferee of Indebtedness of the Issuer (other than
Indebtedness that is subordinated to the Securities and other than any
Disqualified Equity Interest of the Issuer) or Indebtedness of any Restricted
Subsidiary and the release of the Issuer or such Restricted Subsidiary from all
liability on such Indebtedness in connection with such Asset Sale; (y)
securities received by the Issuer or any Restricted Subsidiary from the
transferee that are converted by the Issuer or such Restricted Subsidiary into
cash within 20 days of the applicable Asset Sale (to the extent of the cash
received); and (z) any liabilities (as shown on the Issuer's or such Restricted
Subsidiary's most recent balance sheet) of the Issuer or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Securities or any Subsidiary Guarantee thereof) that
are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Issuer or any such Restricted Subsidiary
from further liability.
When the aggregate amount of Excess Proceeds exceeds $10.0 million or
more, the Issuer will apply the Excess Proceeds to the repayment of the
Securities and any other Pari Passu Indebtedness outstanding with similar
provisions requiring the Issuer to make an offer to purchase such Indebtedness
with the proceeds from any Asset Sale as follows: (A) the Issuer will make an
offer to purchase (an "Offer") from all holders of the Securities in accordance
with the procedures set forth in this Indenture in the maximum principal amount
(expressed as a multiple of $1,000) of Securities that may be purchased out of
an amount (the "Security Amount") equal to the product of such Excess Proceeds
multiplied by a fraction, the numerator of which is the outstanding principal
amount of the Securities, and the denominator of which is the sum of the
outstanding principal amount of the Securities and such Pari Passu Indebtedness
(subject to proration in the event such amount is less than the aggregate
Offered Price (as defined herein) of all Securities tendered) and (B) to the
extent required by such Pari Passu Indebtedness to permanently reduce the
principal amount of such Pari Passu Indebtedness, the Issuer will make an offer
to purchase or otherwise repurchase or redeem Pari Passu Indebtedness (a "Pari
Passu Offer") in an amount (the "Pari Passu Debt Amount") equal to the excess of
the Excess Proceeds over the Security Amount; provided that in no event will the
Issuer be required to make a Pari Passu Offer in a Pari Passu Debt Amount
exceeding the principal amount of such Pari Passu Indebtedness. The offer price
of the Securities will be payable in cash in an amount equal to 100% of the
Accreted Value of the Securities plus accrued and unpaid interest, if any, to
the date (the "Offer Date") such Offer is consummated
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(the "Offered Price"), in accordance with the procedures set forth in this
Indenture. To the extent that the aggregate Offered Price of the Securities
tendered pursuant to the Offer is less than the Security Amount relating thereto
or the aggregate amount of Pari Passu Indebtedness that is purchased in a Pari
Passu Offer is less than the Pari Passu Debt Amount, the Issuer may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Securities and Pari Passu Indebtedness surrendered by
holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Securities to be purchased on a pro rata basis. Upon the completion of the
purchase of all the Securities tendered pursuant to an Offer and the completion
of a Pari Passu Offer, the amount of Net Available Cash, if any shall be reset
at zero.
If the Issuer is required to make an Offer, the Issuer shall mail,
within 30 days following the Reinvestment Date, a notice to the holders of
Securities stating, among other things: (1) that such holders have the right to
require the Issuer to apply the Excess Proceeds to repurchase such Securities at
a purchase price in cash equal to 100% of the Accreted Value thereof plus
accrued and unpaid interest, if any, to the date of purchase; (2) the purchase
date, which shall be no earlier than 30 days and not later than 60 days from the
date such notice is mailed; (3) the instructions, determined by the Issuer, that
each holder must follow in order to have such Securities repurchased; and (4)
the calculations used in determining the amount of Excess Proceeds to be applied
to the repurchase of such Securities.
The Issuer shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
covenant.
SECTION 4.06 Limitation on Restricted Payments.
The Issuer shall not, and shall not permit any Restricted Subsidiary
to, make any Restricted Payment if (i) immediately before or immediately after
giving effect to such Restricted Payment, a Default or Event of Default shall
have occurred and be continuing or shall occur as a consequence of such
Restricted Payment; (ii) immediately after giving effect to such proposed
Restricted Payment, the Issuer would not be able to incur $1.00 of additional
Indebtedness under the Debt to Operating Cash Flow Ratio of the first paragraph
of Section 4.04; or (iii) immediately after giving effect to any such Restricted
Payment, the aggregate of all Restricted Payments which shall have been made on
or after the date of this Indenture (the amount of any Restricted Payment, if
other than cash, to be based upon the fair market value thereof on the date of
such Restricted Payment) would exceed an amount equal to the difference between
(a) the Cumulative Credit and (b) 1.4 times Cumulative Interest Expense.
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"Restricted Payment" means (i) any dividend (whether made in cash,
property or securities) on or with respect to any Equity Interests of the Issuer
or of any Restricted Subsidiary (other than any dividend made to the Issuer or
another Wholly Owned Restricted Subsidiary or any dividend payable in Equity
Interests of the Issuer or any Restricted Subsidiaries); or (ii) any
distribution (whether made in cash, property or securities) on or with respect
to any Equity Interests of the Issuer or of any Restricted Subsidiary (other
than any distribution made to the Issuer or another Wholly Owned Subsidiary or
any distribution payable in Equity Interests of the Issuer or any Restricted
Subsidiary); or (iii) any redemption, repurchase, retirement or other direct or
indirect acquisition of any Equity Interests of the Issuer, or any warrants,
rights or options to purchase or acquire any such Equity Interests or any
securities exchangeable for or convertible into any such Equity Interests; or
(iv) any redemption, repurchase, retirement or other direct or indirect
acquisition for value or other payment of principal, prior to any scheduled
final maturity, scheduled repayment or scheduled sinking fund payment, of any
Subordinated Obligations; or (v) any Investment (other than a Permitted
Investment).
The provisions of the first paragraph of this covenant shall not
prevent (i) the retirement of any of the Issuer's Equity Interests in exchange
for, or out of the proceeds of, the substantially concurrent sale (other than to
a Subsidiary of the Issuer or an employee stock ownership plan or to a trust
established by the Issuer or any Subsidiary of the Issuer for the benefit of its
employees) of Equity Interests of the Issuer (other than any Disqualified Equity
Interest), provided that the Net Cash Proceeds from the issuance are excluded
from clause (i) of the definition of Cumulative Credit; (ii) the payment of any
dividend or distribution on, or redemption of Equity Interests within 60 days
after the date of declaration of such dividend or distribution or the giving of
formal notice of such redemption, if at the date of such declaration or giving
of such formal notice such payment or redemption would comply with the first
paragraph of this covenant and the other provisions of this Indenture; (iii)
investments constituting Restricted Payments made as a result of the receipt of
non-cash consideration from any Asset Sale made pursuant to and in compliance
with the provisions described in Section 4.05; (iv) the redemption, repurchase,
retirement, defeasance or other acquisition of any Subordinated Obligations in
exchange for, or out of Net Cash Proceeds of the substantially concurrent sale
(other than to a Subsidiary of the Issuer or any employee stock ownership plan
or to a trust established by the Issuer or any Subsidiary of the Issuer (for the
benefit of its employees)) of Equity Interests of the Issuer (other than any
Disqualified Equity Interest); and (v) the making and consummation of (A) an
Offer in accordance with the provisions of this Indenture with any Excess
Proceeds or (B) a Change of Control Offer with respect to the Securities in
accordance with the provisions of this Indenture; provided however, that in the
case of clause (ii), no Default or Event of Default shall have occurred and be
continuing at the time of such Restricted Payment or as a result thereof. In
determining the aggregate amount of Restricted Payments made on or
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after the date of this Indenture, Restricted Payments made pursuant to clause
(ii) shall be included in such calculation.
SECTION 4.07 Corporate Existence.
Subject to Article Five, the Issuer shall do or shall cause to be done
all things necessary to preserve and keep in full force and effect its corporate
or partnership existence, as the case may be, and the corporate, partnership or
other existence of each of the Restricted Subsidiaries in accordance with the
respective organizational documents of each such Restricted Subsidiary and the
rights (charter and statutory), licenses and franchises of the Issuer and the
Restricted Subsidiaries.
SECTION 4.08 Payment of Taxes and Other Claims.
The Issuer shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all material taxes, assessments and
governmental charges levied or imposed upon the Issuer or any of its Restricted
Subsidiaries or upon the income, profits or property of the Issuer or any of its
Restricted Subsidiaries and (2) all lawful claims for labor, materials and
supplies which, in each case, if unpaid, might by law become a material
liability, or Lien (other than a Permitted Lien) upon the property, of the
Issuer or any of its Restricted Subsidiaries; provided, however, that the Issuer
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and for which
appropriate reserves or other provision has been made.
SECTION 4.09 Notice of Defaults.
(a) In the event that any Indebtedness of the Issuer or any of its
Restricted Subsidiaries is declared due and payable before its maturity because
of the occurrence of any default (or any event which, with notice or lapse of
time, or both, would constitute such a default) under such Indebtedness, the
Issuer shall promptly give written notice to the Trustee of such declaration,
the status of such default or event and what action the Issuer is taking or
proposes to take with respect thereto.
(b) Within five business days of the occurrence of any Default, the
Issuer shall promptly deliver an Officer's Certificate to the Trustee specifying
the Default or Event of Default.
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SECTION 4.10 Maintenance of Properties.
The Issuer shall cause all material properties owned by or leased to it
or any of its Restricted Subsidiaries and used or useful in the conduct of its
business or the business of any of its Restricted Subsidiaries to be maintained
and kept in normal condition, repair and working order and supplied with all
necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Issuer may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
SECTION 4.11 Compliance Certificate.
The Issuer shall deliver to the Trustee on or before a date not more
than 60 days after the end of each fiscal quarter and not more than 120 days
after the close of each fiscal year a certificate signed by the principal
executive officer, principal financial officer or principal accounting officer
of the Issuer stating that a review of the activities of the Issuer has been
made under the supervision of the signing officers with a view to determining
whether a Default or Event of Default has occurred and whether or not the
signers know of any Default or Event of Default that occurred during such fiscal
year. If they do know of such a Default or Event of Default, the certificate
shall describe all such Defaults or Events of Default, their status and the
action the Issuer is taking or proposes to take with respect thereto.
SECTION 4.12 Provision of Financial Information.
Whether or not the Issuer is subject to Sections 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, the Issuer shall file with the
SEC so long as the Securities are outstanding the annual reports, quarterly
reports and other periodic reports which the Issuer would have been required to
file with the SEC pursuant to such Sections 13(a) or 15(d) or any successor
provision thereto if the Issuer was so subject on or prior to the respective
dates (the "Required Filing Dates") by which the Issuer would have been required
so to file such documents if the Issuer was so subject. The Issuer shall also in
any event (a) within 15 days of each Required Filing Date (whether or not
permitted or required to file with the SEC) (i) transmit or cause to be
transmitted by mail to all holders of Securities, as their names and addresses
appear in the register maintained by the Registrar, without cost to such
holders, and (ii) file with the Trustee, copies of the annual reports, quarterly
reports and other documents which the Issuer is required to file with the SEC
pursuant to the preceding sentence or, if such filing is not so permitted,
information and data of a similar nature, and (b) if, notwithstanding the
preceding sentence, filing such documents by the Issuer with the SEC is not
permitted by SEC practice or applicable law or regulations, promptly upon
written request supply copies of
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such documents to any Holder. The Issuer shall not be obligated to file any such
reports with the SEC if the SEC does not permit such filings for all companies
similarly situated other than due to any action or inaction by the Issuer. The
Issuer will also comply with Section 314(a) of the TIA. In addition, for so long
as any of the Securities remain outstanding and prior to the later of the
consummation of the Exchange Offer and the effectiveness of the Shelf
Registration Statement, if required, the Issuer shall furnish to holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act of 1933, as amended.
SECTION 4.13 Waiver of Stay, Extension or Usury Laws.
The Issuer covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law, which would prohibit or forgive the Issuer from paying all or any
portion of the principal of and/or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Issuer hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not hinder, delay or
impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 4.14 Change of Control.
Upon the occurrence of a Change of Control, each holder of Securities
shall have the right to require the Issuer to repurchase all or any part of such
holder's Securities pursuant to an offer described below (the "Change of Control
Offer") at a purchase price equal to 101% of the Accreted Value thereof plus any
accrued and unpaid interest, if any, thereon to the date of repurchase (the
"Change of Control Payment").
Within 30 days of the occurrence of a Change of Control, the Issuer
shall send by first-class mail, postage prepaid, to the Trustee and to each
holder of the Securities, at the address appearing in the register of Securities
maintained by the Registrar, a notice stating: (i) that the Change of Control
Offer is being made pursuant to this covenant and that all Securities tendered
will be accepted for payment; (2) the purchase price and the purchase date,
which shall be a business day no earlier than 30 days nor later than 60 days
from the date such notice is mailed (the "Change of Control Payment Date"); (3)
that any Security not tendered will continue to accrue interest; (4) that,
unless the Issuer defaults in the payment of the Change of Control Payment, any
Securities accepted for payment pursuant to the Change of Control Offer
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shall cease to accrue interest after the Change of Control Payment Date; (5)
that holders accepting the offer to have their Securities purchased pursuant to
a Change of Control Offer will be required to surrender the Securities to the
Paying Agent at the address specified in the notice prior to the close of
business on the business day preceding the Change of Control Payment Date; (6)
that holders will be entitled to withdraw their acceptance if the Paying Agent
receives, not later than the close of business on the third Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder, the principal
amount of the Securities delivered for purchase, and a statement that such
holder is withdrawing its election to have such Securities purchased; (7) that
holders whose Securities are being purchased only in part will be issued new
Securities equal in principal amount to the unpurchased portion of the
Securities surrendered, provided that each Security purchased and each such new
Security issued shall be in an original principal amount in denominations of
$1,000 and integral multiples thereof; (8) any other procedures that a holder
must follow to accept a Change of Control Offer or effect withdrawal of such
acceptance; and (9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuer shall, to the extent
lawful (i) accept for payment Securities or portions thereof tendered pursuant
to the Change of Control Offer, (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Securities or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee Securities so
accepted together with an Officer's Certificate stating the Securities or
portions thereof tendered to the Issuer. The Paying Agent shall promptly mail to
each holder of Securities so accepted payment in an amount equal to the purchase
price for such Securities, and the Issuer shall execute and issue, and the
Trustee shall promptly authenticate and mail to such holder, a new Security
equal in principal amount to any unpurchased portion of the Securities
surrendered; provided that each such new Security shall be issued in an original
principal amount in denominations of $1,000 and integral multiples thereof. The
Issuer will send to the Trustee and the holders of Securities on or as soon as
practicable after the Change of Control Payment Date a notice setting forth the
results of the Change of Control Offer.
The Issuer will not be required to make a Change of Control Offer if a
third party makes the Change of Control Offer in the manner, at the time and
otherwise in compliance with the requirements set forth in this Indenture
applicable to a Change of Control Offer made by the Issuer and purchases all
Securities or portions thereof validly tendered and not withdrawn under such
Change of Control Offer.
The Issuer will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Securities pursuant to this
covenant.
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SECTION 4.15 Calculation of Original Issue Discount.
The Issuer shall file with the Trustee promptly at the end of each
calendar year (i) a written notice specifying the amount of original issue
discount (including daily rates and accrual periods) accrued on outstanding
Securities as of the end of such year and (ii) such other specific information
relating to such original issue discount as may then be relevant under the
Internal Revenue Code of 1986, as amended from time to time, and requested by
the Trustee.
SECTION 4.16 Limitations on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries.
The Issuer shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (a) pay dividends in cash or otherwise
or make any other distributions to the Issuer or any Restricted Subsidiary on
its Equity Interests; (b) pay any Indebtedness owed to the Issuer or any
Restricted Subsidiary; (c) make loans or advances or guarantee any such loans or
advances, to the Issuer or any Restricted Subsidiary; (d) transfer any of its
properties or assets to the Issuer or any Restricted Subsidiary; (e) grant Liens
on the assets of the Issuer or any Restricted Subsidiary in favor of the holders
of the Securities; or (f) guarantee the Securities or any renewals or
refinancings thereof (any of the actions described in clauses (a) through (f)
above is referred to herein as a "Specified Action"), except for (i) such
encumbrances or restrictions arising by reason of Acquired Indebtedness of any
Restricted Subsidiary existing at the time such Person became a Restricted
Subsidiary, provided that such encumbrances or restrictions were not created in
anticipation of such Person becoming a Restricted Subsidiary and are not
applicable to the Issuer or any other Restricted Subsidiary, (ii) such
encumbrances or restrictions arising under refinancing Indebtedness permitted by
clause (f) of the second paragraph under Section 4.04; provided that the terms
and conditions of any such restrictions are not less favorable to the holders of
Securities than those under the Indebtedness being refinanced, (iii) customary
provisions restricting the assignment of any contract of the Issuer or any
Restricted Subsidiary, (iv) with respect to clause (d) above, restrictions in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent the restriction restricts the transfer of property
subject to such security agreement or mortgage; (v) restrictions pursuant to the
New Senior Credit Agreement; and (vi) restrictions pursuant to the Notes and the
related indenture.
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SECTION 4.17 Designation of Unrestricted Subsidiaries.
The Issuer may designate after the Issuance Date any Subsidiary of the
Issuer (other than a Subsidiary Guarantor) as an "Unrestricted Subsidiary" under
this Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(b) the Issuer would be permitted to make an Investment (other than a
Permitted Investment) at the time of Designation (assuming the effectiveness of
such Designation) pursuant to the first paragraph of Section 4.06 in an amount
(the "Designation Amount") equal to the greater of (1) the net book value of the
Issuer's interest in such Subsidiary calculated in accordance with GAAP or (2)
the Fair Market Value of the Issuer's interest in such Subsidiary as determined
in good faith by the Issuer's Board of Directors;
(c) the Issuer would be permitted under this Indenture to Incur $1.00
of additional Indebtedness (other than Permitted Indebtedness) under the Debt to
Operating Cash Flow Ratio of the first paragraph of Section 4.04 at the time of
such Designation (assuming the effectiveness of such Designation);
(d) such Unrestricted Subsidiary does not own any Equity Interest in
any Restricted Subsidiary of the Issuer which is not simultaneously being
designated an Unrestricted Subsidiary;
(e) such Unrestricted Subsidiary is not liable, directly or indirectly,
with respect to any Indebtedness other than Unrestricted Subsidiary
Indebtedness, provided that an Unrestricted Subsidiary may provide a Subsidiary
Guarantee for the Securities; and
(f) such Unrestricted Subsidiary is not a party to any agreement,
contract, arrangement or understanding at such time with the Issuer or any
Restricted Subsidiary unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Issuer or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Issuer or, in the event such condition is not
satisfied, the value of such agreement, contract, arrangement or understanding
to such Unrestricted Subsidiary shall be deemed a Restricted Payment.
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In the event of any such Designation, the Issuer shall be deemed to
have made an Investment constituting a Restricted Payment pursuant Section 4.06
for all purposes of this Indenture in the Designation Amount.
The Issuer shall not and shall not cause or permit any Restricted
Subsidiary to at any time (x) provide credit support for, or subject any of its
property or assets (other than the Equity Interest of any Unrestricted
Subsidiary) to the satisfaction of, any Indebtedness of any Unrestricted
Subsidiary (including any undertaking, agreement or instrument evidencing such
Indebtedness) (other than permitted Investments in Unrestricted Subsidiaries) or
(y) be directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary. For purposes of the foregoing, the Designation of a Subsidiary of
the Issuer as an Unrestricted Subsidiary shall be deemed to be the designation
of all of the Subsidiaries of such Subsidiary as Unrestricted Subsidiaries.
The Issuer may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if:
(a) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation;
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at such
time, have been permitted to be incurred for all purposes of this Indenture; and
(c) unless such redesignated Subsidiary shall not have any Indebtedness
outstanding (other than Indebtedness that would be Permitted Indebtedness),
immediately after giving effect to such proposed Revocation, and after giving
pro forma effect to the incurrence of any such Indebtedness of such redesignated
Subsidiary as if such Indebtedness was incurred on the date of the Revocation,
the Issuer could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 4.04.
All Designations and Revocations must be evidenced by a resolution of
the Board of Directors of the Issuer delivered to the Trustee certifying
compliance with the foregoing provisions.
SECTION 4.18 Limitation on Liens.
The Issuer shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, to incur any Indebtedness secured by a Lien against
or on any of its property or assets
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now owned or hereafter acquired by the Issuer or any Restricted Subsidiary
unless contemporaneously therewith (a) if such Indebtedness is not Subordinated
Indebtedness, effective provision is made to secure the Securities equally and
ratably with such secured Indebtedness, and (b) if such Indebtedness is
Subordinated Indebtedness, the Securities are secured by a lien against such
assets or property that is senior in priority to the liens securing such
Subordinated Indebtedness. This restriction does not, however, apply to
Indebtedness secured by (i) Liens securing the Indebtedness under the New Senior
Credit Agreement; (ii) Liens, if any, in effect on the date of this Indenture;
(iii) Liens in favor of governmental bodies to secure progress or advance
payments; (iv) Liens on Equity Interests or Indebtedness existing at the time of
the acquisition thereof (including acquisition through merger or consolidation),
provided that such Liens were not incurred in anticipation of such acquisition;
(v) Liens securing the Securities; (vi) Liens securing Indebtedness of the
Issuer in an amount not to exceed $5.0 million at any time outstanding; (vii)
Other Permitted Liens; and (viii) any extension, renewal or replacement of any
Lien referred to in the foregoing clauses (i) through (vii), inclusive but only
to the extent such liens do not extend to any other property or assets (other
than improvements).
SECTION 4.19 Limitation on Guarantees of Certain Indebtedness.
The Issuer shall not (a) permit any Restricted Subsidiary to guarantee
any Indebtedness of the Issuer other than the Securities (the "Other
Indebtedness"), or (b) pledge any intercompany Indebtedness representing
obligations of any of its Restricted Subsidiaries to secure the payment of Other
Indebtedness, in each case unless such Restricted Subsidiary, the Issuer and the
Trustee execute and deliver a supplemental indenture causing such Restricted
Subsidiary to guarantee the Issuer's obligations under this Indenture and the
Securities to the same extent that such Restricted Subsidiary guaranteed the
Issuer's obligations under the Other Indebtedness (including waiver of
subrogation, if any except that (A) such guarantee need not be secured unless
required pursuant to Section 4.18 and (B) if such Indebtedness is by its terms
expressly subordinated to the Securities, any such assumption, guarantee or
other liability of such Restricted Subsidiary with respect to such Indebtedness
shall be subordinated to such Restricted Subsidiary's guarantee of the
Securities at least to the same extent as such Indebtedness is subordinated to
the Securities).
Notwithstanding the foregoing, any Guarantee by a Restricted Subsidiary
of the Securities shall provide by its terms that it (and all Liens securing the
same) shall be automatically and unconditionally released and discharged upon
any sale, exchange or transfer, to any Person not an Affiliate of the Issuer, of
all of the Issuer's Equity Interest in, or all of or substantially all the
assets of, such Restricted Subsidiary which transaction is permitted by the
terms of this Indenture and such Restricted Subsidiary is released from all
guarantees, if any, by it of other Indebtedness of the Issuer or any Restricted
Subsidiaries and (with respect to any
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Guarantees created after the date of this Indenture) the release by the holders
of the Indebtedness of the Issuer described in clause (a) above of their
security interest or their guarantee by such Restricted Subsidiary (including
any deemed release upon payment in full of all obligations under such
Indebtedness), at such time as (A) no other Indebtedness of the Issuer has been
secured or guaranteed by such Restricted Subsidiary, as the case may be, or (B)
the holders of all such other Indebtedness which is secured or guaranteed by
such Restricted Subsidiary also release their security interest in or guarantee
by such Restricted Subsidiary (including any deemed release upon payment in full
of all obligations under such Indebtedness).
SECTION 4.20 Limitation on Sale or Issuance of Capital Stock of Restricted
Subsidiaries.
The Issuer (a) shall not, and shall not permit any Restricted
Subsidiary of the Issuer to, directly or indirectly, transfer, convey, sell,
lease or otherwise dispose of any Equity Interest of any Restricted Subsidiary
to any Person (other than to the Issuer or a Wholly Owned Restricted
Subsidiary), unless (i) such transfer, conveyance, sale, lease or other
disposition is of all the Equity Interest of such Restricted Subsidiary and (ii)
the Net Cash Proceeds from such transfer conveyance, sale, lease or other
disposition are applied in accordance with Section 4.05 and (b) will not permit
any Restricted Subsidiary to issue any of its Equity Interest (other than, if
required under applicable law, shares of its Equity Interest constituting
directors' qualifying shares) to any Person other than to the Issuer or Wholly
Owned Restricted Subsidiary.
SECTION 4.21 Limitation on Sale/Leaseback Transactions.
The Issuer shall not, and shall not permit any Restricted Subsidiary
to, enter into any Sale/Leaseback Transaction with respect to any property
unless (i) the Issuer or such Restricted Subsidiary would be entitled to (A)
incur Indebtedness in an amount equal to the Attributable Indebtedness with
respect to such Sale/Leaseback Transaction pursuant to Section 4.04 and (B)
create a Lien on such property securing such Attributable Indebtedness without
equally and ratably securing the Securities pursuant to the covenant described
under Section 4.18; (ii) the net cash proceeds received by the Issuer or any
Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at
least equal to the fair value (as determined in good faith by the Board of
Directors of the Issuer and certified in an Officer's Certificate to the
Trustee) of such property and (iii) the transfer of such property is permitted
by, and the Issuer or such Restricted Subsidiary applies the proceeds of such
transaction in compliance with Section 4.05.
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ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01 Merger, Sale of Assets, etc.
The Issuer shall not, in a single transaction or through a series of
related transactions, consolidate or merge with or into, or sell, assign,
convey, lease, transfer or otherwise dispose of all or substantially all of its
assets to, another Person or a group of Persons, or permit any Restricted
Subsidiary to do so if such transaction would result in the transfer of all or
substantially all of the assets of the Issuer on a consolidated basis unless (i)
either (A) the Issuer shall be the continuing Person, or (B) the Person formed
by or surviving any such consolidation or merger (if other than the Issuer), or
to which any such transfer shall have been made, is a corporation, limited
liability company or limited partnership organized and existing under the laws
of the United States, any State thereof or the District of Columbia; (ii) the
surviving Person (if other than the Issuer) expressly assumes by supplemental
indenture all the obligations of the Issuer under the Securities and this
Indenture; (iii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; (iv) immediately
after giving effect to such transaction, the surviving Person would be able to
incur $1.00 of additional Indebtedness under the Debt to Operating Cash Flow
Ratio of Section 4.04; and (v) the Issuer shall have delivered to the Trustee
prior to the proposed transaction an Officer's Certificate and an Opinion of
Counsel, each stating that the proposed consolidation, merger or transfer and
such supplemental indenture will comply with this Indenture.
In addition, each Subsidiary Guarantor shall not, and the Issuer shall
not permit a Subsidiary Guarantor to, in a single transaction or through a
series of related transactions, consolidate with or merge with or into any other
Person (other than the Issuer or any Subsidiary Guarantor) or sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of its
properties and assets to any Person or group of Persons (other than the Issuer
or any Subsidiary Guarantor), unless clauses (i)-(v) above are satisfied with
respect to such Subsidiary Guarantor (rather than the Issuer).
SECTION 5.02 Successor Corporation Substituted.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in Section 5.01 in which the Issuer is not
the Surviving Person and the Surviving Person is to assume all the Obligations
of such Issuer under the Securities, the Registration Rights Agreement and this
Indenture pursuant to a supplemental indenture, such Surviving Person shall
succeed to, and be substituted for, and may exercise every right and
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power of, such Issuer and such Issuer shall be discharged from its Obligations
under this Indenture, the Securities.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01 Events of Default.
Each of the following shall be an "Event of Default":
(a) failure to pay interest on any Security when the same becomes due
and payable and such Default continues for a period of 30 days, whether or not
such payment is prohibited by Article Eight hereof;
(b) failure to pay the principal (or premium, if any, on) of any
Securities when the same becomes due and payable at maturity, upon optional
redemption, upon required repurchase, upon declaration or otherwise, whether or
not such payment is prohibited by Article Eight hereof;
(c) failure to perform or comply with any of the provisions of Sections
5.01 or 5.02;
(d) failure to perform or comply with any of the provisions of Sections
4.03, 4.04, 4.06, 4.12, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19 or 4.20 for 30 days
after notice;
(e) failure to observe or perform any other covenant, warranty or
agreement contained in the Securities or this Indenture, and the Default
continues for the period and after the notice specified in the last paragraph of
this Section 6.01;
(f) a default or defaults under the terms of one or more instruments
evidencing or securing Indebtedness of the Issuer or any Restricted Subsidiary
having an outstanding principal amount of $5.0 million or more individually or
in the aggregate that has resulted in the acceleration of the payment of such
Indebtedness or the failure to pay principal when due at the stated maturity of
any such Indebtedness;
(g) [Intentionally Omitted.]
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The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
(h) either of the Issuer or any Restricted Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(1) commences a voluntary case or proceeding,
(2) consents to the entry of an order for relief against it in an
involuntary case or proceeding,
(3) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or
(4) makes a general assignment for the benefit of its creditors;
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(1) is for relief against the Issuer or any Restricted Subsidiary
in an involuntary case or proceeding,
(2) appoints a Custodian of the Issuer or any Restricted Subsidiary
or for all or substantially all of its property, or
(3) orders the liquidation of the Issuer or any Restricted
Subsidiary,
and in each case the order or decree remains unstayed and in effect for 60
consecutive days; provided, however, that if the entry of such order or decree
is appealed and dismissed on appeal then the Event of Default hereunder by
reason of the entry of such order or decree shall be deemed to have been cured;
or
(j) there shall have been any judgment or judgments against the Issuer
or any Restricted Subsidiary in an amount of $5.0 million or more (net of any
amounts covered by reputable and creditworthy insurance companies) and either
(A) an enforcement proceeding has been commenced by any creditor upon such
judgement or decree or (B) such judgement or decree remains outstanding for a
period of 60 days following such judgement and is not discharged waived or
stayed within 10 days of after notice.
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A Default under clause (e) is not an Event of Default until the Trustee
notifies the Issuer, or the Holders of at least 25% in aggregate principal
amount of the outstanding Securities notify the Issuer and the Trustee, of the
Default in writing and the Issuer does not cure the Default within 60 days after
receipt of the notice. The notice must specify the Default, demand that it be
remedied and state that the notice is a "Notice of Default." Such notice shall
be given by the Trustee if so requested by the Holders of at least 25% in
aggregate principal amount of the Securities then outstanding. When a Default is
cured, it ceases.
SECTION 6.02 Acceleration.
If an Event of Default with respect to the Securities (other than an
Event of Default specified in clause (h) or (i) of Section 6.01 with respect to
the Issuer) occurs and is continuing, the Trustee or the Holders of at least 25%
in aggregate principal amount of the outstanding Securities by notice in writing
to the Issuer (and to the Trustee if given by the Holders) may declare the
unpaid Accreted Value of and accrued and unpaid interest to the date of
acceleration on all the outstanding Securities to be due and payable immediately
and, upon any such declaration, such Accreted Value and accrued and unpaid
interest shall become immediately due and payable.
If an Event of Default specified in clause (h) or (i) of Section 6.01
with respect to the Issuer occurs, the Accreted Value of all outstanding
Securities shall ipso facto become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder thereof.
After a declaration of acceleration, but before a judgment or decree
for payment of the money due in respect of the Securities has been obtained by
the Trustee, the Holders of not less than a majority in aggregate principal
amount of the Securities then outstanding by written notice to the Issuer and
the Trustee may rescind and annul such declaration and its consequences if (a)
the Issuer has paid or deposited with the Trustee a sum sufficient to pay (i)
all sums paid or advanced by the Trustee under this Indenture and the reasonable
compensation, expenses, disbursements and advances of the trustee, its agents
and counsel, (ii) all overdue interest on all Securities then outstanding, (iii)
the Accreted Value of and premium, if any, on any Securities then outstanding
which have become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Securities and (iv) to the extent that
payment of such interest is lawful, interest upon overdue interest at the rate
borne by the Securities; (b) the rescission would not conflict with any judgment
or decree of a court of competent jurisdiction; and (c) all Events of Default,
other than the non-declaration of
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acceleration, have been cured or waived as provided in this Indenture. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.
SECTION 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment of
the Accreted Value of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
maturing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04 Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 10.02, prior to the declaration of
acceleration of the Securities, the Holders of not less than a majority in
aggregate principal amount of the then outstanding Securities, on behalf of all
the Holders, by written notice to the Trustee may waive an existing Default or
Event of Default and its consequences, except a Default in the payment of
principal of, premium on, if any, or interest on any Security as specified in
clauses (a) and (b) of Section 6.01 or a Default in respect of any term or
provision of this Indenture that may not be amended or modified without the
consent of each Holder affected as provided in Section 10.02. The Issuer shall
deliver to the Trustee an Officer's Certificate stating that the requisite
percentage of Holders have consented to such waiver and attaching copies of such
consents. In case of any such waiver, the Issuer, the Trustee and the Holders
shall be restored to their former positions and rights hereunder and under the
Securities, respectively. This paragraph of this Section 6.04 shall be in lieu
of Section 316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) of the TIA is
hereby expressly excluded from this Indenture and the Securities, as permitted
by the TIA.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred for every
purpose of this Indenture and the Securities, but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereon.
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SECTION 6.05 Control by Majority.
Subject to Section 2.09, the Holders of a majority in principal amount
of the then outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it. However, the Trustee may refuse to follow
any direction that conflicts with law or this Indenture, that the Trustee
determines may be unduly prejudicial to the rights of another Securityholder, or
that may involve the Trustee in personal liability; provided, however, that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction. In the event the Trustee takes any action or
follows any direction pursuant to this Indenture, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against any loss or
expense caused by taking such action or following such direction. This Section
6.05 shall be in lieu of Section 316(a)(1)(A) of the TIA, and such Section
316(a)(1)(A) of the TIA is hereby expressly excluded from this Indenture and the
Securities, as permitted by the TIA.
SECTION 6.06 Limitation on Suits.
Subject to Section 6.07, a Securityholder may not pursue any remedy
with respect to this Indenture or the Securities unless:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least 25% in aggregate principal amount of the
then outstanding Securities make a written request to the Trustee to pursue a
remedy;
(c) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability or
expense;
(d) the Trustee does not comply with the request within 15 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 15-day period the Holders of a majority in principal
amount of the then outstanding Securities (excluding Affiliates of the Issuer)
do not give the Trustee a direction which, in the opinion of the Trustee, is
inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
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SECTION 6.07 Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of, premium on, if any, or interest on
the Security, on or after the respective due dates expressed in the Security
(subject to Articles Eight and Twelve), or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of the Holder.
SECTION 6.08 Collection Suit by Trustee.
If an Event of Default in payment of interest or principal specified in
Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Issuer
or any other obligor on the Securities for the whole amount of the Accreted
Value and accrued interest remaining unpaid, together with interest overdue on
the Accreted Value and to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate per annum
borne by the Securities and such further amount as shall be sufficient to cover
the reasonable costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and the Securityholders
allowed in any judicial proceedings relative to the Issuer (or any other obligor
upon the Securities), their creditors or its property and shall be entitled and
empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceedings is hereby authorized by each Securityholder to
make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Securityholders, to pay
to the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Securityholder any plan of reorganization, arrangement, adjustment
or composition affecting the Securities or the rights of any Holder thereof, or
to authorize the Trustee to vote in respect of the claim of any Securityholder
in any such proceeding.
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SECTION 6.10 Priorities.
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money or property in the following order:
(a) First: to the Trustee for amounts due under Section 7.07;
(b) Second: to Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and
interest, respectively; and
(c) Third: to the Issuer.
The Trustee, upon prior written notice to the Issuer, may fix a record
date and payment date for any payment to Securityholders pursuant to this
Section 6.10.
SECTION 6.11 Undertaking for Costs.
All parties to this Indenture agree, and each holder of any Security by
his acceptance thereof shall be deemed to have agreed, that in any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 shall not apply
to a suit by the Trustee, a suit by a Holder or group of Holders of more than
10% in aggregate principal amount of the outstanding Securities, or to any suit
instituted by any Holder for the enforcement or the payment of the principal or
interest on any Securities on or after the respective due dates expressed in the
Security.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01 Duties of Trustee.
(a) If a Default has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture and use
the same degree of care and skill in
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their exercise as a prudent man would exercise or use under the circumstances in
the conduct of his own affairs.
(b) Except during the continuance of a Default:
(1) The Trustee shall not be liable except for the performance of
such duties as are specifically set forth herein and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions conforming to the
requirements of this Indenture; however, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee shall not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01;
(2) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received by
it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it or it does not receive an indemnity reasonably satisfactory
to it against such risk, liability, loss, fee or expense which might be incurred
by it in compliance with such request or direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree with the Issuer. Money held in trust by
the Trustee need not be segregated from other funds except to the extent
required by law.
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SECTION 7.02 Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on an Officer's Certificate or Opinion of
Counsel.
(c) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization and
protection from liability in respect of any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.
(d) Any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by an Issuer Request or Issuer Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution.
(e) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Securityholders pursuant to this Indenture, unless such
Securityholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Issuer, personally or by agent or attorney.
(g) The Trustee may execute any of its trusts or powers or perform any
duties under this Indenture either directly or by or through agents or
attorneys, and may in all cases pay, subject to reimbursement as provided in
Section 7.07, such reasonable compensation as it deems proper to all such agents
and attorneys reasonably employed or retained by it, and the
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Trustee shall not be responsible for any misconduct or negligence of any agent
or attorney appointed with due care by it.
(h) The Trustee is not required to take notice or deemed to have notice
of any default or Event of Default hereunder, except Events of Default under
Section 6.01(a) and 6.01(b), unless a Trust Officer of the Trustee has actual
knowledge thereof or has received notice in writing of such default or Event of
Default from the Issuer or from the holders of at least 25% in aggregate
principal amount of the Outstanding Securities, and in the absence of any such
notice, the Trustee may conclusively assume that no such default or Event of
Default exists.
(i) The Trustee is not required to give any bond or surety with respect
to the performance of its duties or the exercise of its powers under this
Indenture.
(j) In the event the Trustee receives inconsistent or conflicting
requests and indemnity from two or more groups of holders of Securities, each
representing less than a majority in aggregate principal amount of such
securities outstanding, pursuant to the provisions of this Indenture, the
Trustee, in its sole discretion, may determine what action, if any, shall be
taken.
(k) The Trustee's immunities and protections from liability and its
right to indemnification in connection with the performance of its duties under
this Indenture shall extend to the Trustee's officers, directors, agents,
attorneys and employees. Such immunities and protections and right to
indemnification shall survive the Trustee's resignation or removal, the
discharge of this Indenture and final payment of the Securities.
(l) The permissive right of the Trustee to take the actions permitted
by this Indenture shall not be construed as an obligation or duty to do so.
(m) Except for information provided by the Trustee concerning the
Trustee, the Trustee shall have no responsibility for any information in any
offering memorandum or other disclosure material distributed with respect to the
Securities, and the Trustee shall have no responsibility for compliance with any
state or federal securities laws in connection with the Securities.
SECTION 7.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Issuer or its
Affiliates with the same rights it would
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have if it were not Trustee. The Trustee, in its commercial banking or in any
other capacity, may also engage in or be interested in any financial or other
transaction with the Issuer and may act as depository, trustee or agent for any
committee of Securityholders secured hereby or other obligations of the Issuer
as freely as if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee is subject to Sections 7.10 and 7.11. The provisions of
this Section 7.03 shall apply to Affiliates of the Trustee and any agent.
SECTION 7.04 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Securities, it shall not be
accountable for the Issuer's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Issuer in this Indenture or
any document issued in connection with the sale of Securities or any statement
in the Securities other than the Trustee's certificate of authentication.
SECTION 7.05 Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and the
Trustee knows of such Defaults or Events of Default, the Trustee shall mail to
each Securityholder notice of the Default or Event of Default within 30 days
after the occurrence thereof. Except in the case of a Default or an Event of
Default in payment of principal of or interest on any Security or a Default or
Event of Default in complying with Section 5.01, the Trustee may withhold the
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interest of Securityholders.
This Section 7.05 shall be in lieu of the proviso to Section 315(b) of the TIA
and such proviso to Section 315(b) of the TIA is hereby expressly excluded from
this Indenture and the Securities, as permitted by the TIA.
SECTION 7.06 Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after each June 15
beginning with the June 15 following the date of this Indenture, the Trustee
shall mail to each Securityholder a report dated as of such June 15 that
complies with TIA Section 313(a); provided, however, that, if no event under TIA
Section 313(a) has occurred in a 12 month period, no such report need be
transmitted. The Trustee also shall comply with TIA Section 313(b), (c) and (d).
A copy of each such report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange, if any, on
which the Securities are listed.
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The Issuer shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or of any delisting thereof.
SECTION 7.07 Compensation and Indemnity.
The Issuer shall pay to the Trustee from time to time such compensation
as the Issuer and the Trustee shall from time to time agree in writing for its
services. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Issuer shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including reasonable fees, disbursements and expenses of its agents
and counsel) incurred or made by it in addition to the compensation for its
services except any such disbursements, expenses and advances as may be
attributable to the Trustee's negligence or bad faith. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents, accountants, experts and counsel and any taxes or other expenses
incurred by a trust created pursuant to Section 9.01 hereof.
The Issuer shall indemnify the Trustee for, and hold it harmless
against any and all loss, damage, claims, liability or expense, including taxes
(other than franchise taxes imposed on the Trustee and taxes based upon,
measured by or determined by the income of the Trustee), arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder, except to the extent that such loss, damage, claim,
liability or expense is due to its own negligence or bad faith. The Trustee
shall notify the Issuer promptly of any claim asserted against the Trustee for
which it may seek indemnity. However, the failure by the Trustee to so notify
the Issuer promptly shall not relieve the Issuer of its obligations hereunder
except to the extent that the Issuer is materially prejudiced thereby. The
Issuer shall defend the claim and the Trustee shall cooperate in the defense
(and may employ its own counsel) at the Issuer's expense; provided, however,
that the Issuer's reimbursement obligation with respect to counsel employed by
the Trustee will be limited to the reasonable fees of such counsel. The Issuer
need not pay for any settlement made without its written consent, which consent
shall not be unreasonably withheld. The Issuer need not reimburse any expense or
indemnify against any loss or liability incurred by the Trustee as a result of
the violation of this Indenture by the Trustee.
To secure the Issuer's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Securities against all money or property
held or collected by the Trustee, in
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its capacity as Trustee, except money or property held in trust to pay principal
of or interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) occurs, the expenses (including the
reasonable fees and expenses of its agents and counsel) and the compensation for
the services shall be preferred over the status of the Holders in a proceeding
under any Bankruptcy Law and are intended to constitute expenses of
administration under any Bankruptcy Law. The Issuer's obligations under this
Section 7.07 and any claim arising hereunder shall survive the resignation or
removal of any Trustee, the discharge of the Issuer's obligations pursuant to
Article Eight and any rejection or termination under any Bankruptcy Law.
SECTION 7.08 Replacement of Trustee.
The Trustee may resign at any time by so notifying the Issuer in
writing. The Holders of a majority in principal amount of the then outstanding
Securities may remove the Trustee by so notifying the Trustee and the Issuer in
writing and may appoint a successor Trustee with the Issuer's consent. The
Issuer may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent under any
Bankruptcy Law;
(c) a custodian or other public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed (the Trustee in such event being
referred to herein as the retiring Trustee), the Issuer shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Issuer.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the
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successor Trustee shall have the rights, powers and duties of the Trustee under
this Indenture. A successor Trustee shall mail notice of its succession to each
Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the
Holders of at least 10% in aggregate principal amount of the then outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article Seven shall become effective until
the acceptance of appointment by the successor Trustee under Section 7.08.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Issuer's obligations under Section 7.07 shall continue for the benefit
of the retiring Trustee.
SECTION 7.09 Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another corporation
or banking corporation, the resulting, surviving or transferee corporation or
banking corporation without any further act shall be the successor Trustee,
provided such corporation shall be otherwise qualified and eligible under this
Article Seven.
SECTION 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be eligible to
act as Trustee under TIA Sections 310(a)(1) and 310(a)(2). The Trustee shall
have a combined capital and surplus of at least $100,000,000 as set forth in its
most recent published annual report of condition. If the Trustee has or shall
acquire any "conflicting interest" within the meaning of TIA Section 310(b), the
Trustee and the Issuer shall comply with the provisions of TIA Section 310(b).
If at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect hereinbefore specified in this Article Seven.
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SECTION 7.11 Preferential Collection of Claims Against Issuer.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE EIGHT
[INTENTIONALLY OMITTED]
SECTION 8.01 [Intentionally Omitted.]
ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01 Defeasance and Covenant Defeasance.
The Issuer may terminate its substantive obligations in respect of the
Securities by delivering all outstanding Securities to the Trustee for
cancellation and paying all sums payable by it on account of principal of and
interest on all Securities or otherwise. In addition to the foregoing, the
Issuer may, provided that no Default or Event of Default has occurred and is
continuing or would arise therefrom (or, with respect to a Default or Event of
Default specified in Section 6.01(h) or (i), any time on or prior to the 91st
calendar day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until after such 91st day)) and provided
that no default under any Senior Indebtedness would result therefrom, terminate
its substantive obligations in respect of the Securities (except for its
obligations to pay the principal of and interest on the Securities) by (i)
depositing with the Trustee, under the terms of an irrevocable trust agreement,
money or direct non-callable obligations of the United States of America for the
payment of which the full faith and credit of the United States is pledged
("United States Government Obligations") sufficient (without reinvestment) to
pay all remaining Indebtedness on the Securities, (ii) delivering to the Trustee
either an Opinion of Counsel or a ruling directed to the Trustee from the
Internal Revenue Service to the effect that the Holders of the Securities will
not recognize income, gain or loss for federal income tax purposes solely as a
result of such deposit and termination of obligations, (iii) delivering to the
Trustee an Opinion of Counsel to the effect that the Issuer's exercise of its
option under this paragraph will not result in the Issuer, the Trustee or the
trust created by the Issuer's deposit of funds pursuant to this provision
becoming or being deemed to be an "investment company"
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under the Investment Company Act of 1940, as amended, and (iv) delivering to the
Trustee an Officer's Certificate and an Opinion of Counsel each stating
compliance with all conditions precedent provided for herein. In addition, with
respect to the creation of the defeasance trust provided for in the following
clause (i), the Issuer may, provided that no Default or Event of Default has
occurred and is continuing or would arise therefrom (or, with respect to a
Default or Event of Default specified in Section 6.01(h) or (i), any time on or
prior to the 91st calendar day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until after such
91st day)) and provided that no default under any Senior Indebtedness would
result therefrom, terminate all of its substantive obligations in respect of the
Securities (including its obligations to pay the principal of and interest on
the Securities) by (i) depositing with the Trustee, under the terms of an
irrevocable trust agreement, money or United States Government Obligations
sufficient (without reinvestment) to pay all remaining Indebtedness on the
Securities, (ii) delivering to the Trustee either a ruling directed to the
Trustee from the Internal Revenue Service to the effect that the Holders of the
Securities will not recognize income, gain or loss for federal income tax
purposes solely as a result of such deposit and termination of obligations or an
Opinion of Counsel based upon such a ruling addressed to the Trustee or a change
in the applicable Federal tax law since the date of this Indenture to such
effect, (iii) delivering to the Trustee an Opinion of Counsel to the effect that
the Issuer's exercise of its option under this paragraph will not result in any
of the Issuer, the Trustee or the trust created by the Issuer's deposit of funds
pursuant to this provision becoming or being deemed to be an "investment
company" under the Investment Company Act of 1940, as amended, and (iv)
delivering to the Trustee an Officer's Certificate and an Opinion of Counsel
each stating compliance with all conditions precedent provided for herein.
Notwithstanding the foregoing paragraph, the Issuer's obligations in
Sections 2.03, 2.05, 2.06, 2.07, 4.01 (but not with respect to termination of
substantive obligations pursuant to the third sentence of the foregoing
paragraph), 4.02, 7.07, 7.08, 9.03 and 9.04 shall survive until the Securities
are no longer outstanding. Thereafter the Issuer's obligations in Sections 7.07,
9.03 and 9.04 shall survive.
After such delivery or irrevocable deposit and delivery of an Officer's
Certificate and Opinion of Counsel, the Trustee upon request shall acknowledge
in writing the discharge of the Issuer's obligations under the Securities and
this Indenture except for those surviving obligations specified above.
<PAGE> 72
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SECTION 9.02 Application of Trust Money.
The Trustee shall hold in trust money or United States Government
Obligations deposited with it pursuant to Section 9.01, and shall apply the
deposited money and the money from United States Government Obligations in
accordance with this Indenture solely to the payment of principal of and
interest on the Securities.
SECTION 9.03 Repayment to Issuer.
Subject to Sections 7.07 and 9.01, the Trustee shall promptly pay to
the Issuer upon written request any excess money held by it at any time. The
Trustee shall pay to the Issuer upon written request any money held by it for
the payment of principal or interest that remains unclaimed for two years;
provided, however, that the Trustee before being required to make any payment
may at the expense of the Issuer cause to be published once in a newspaper of
general circulation in The City of New York or mail to each Holder entitled to
such money notice that such money remains unclaimed and that, after a date
specified therein which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining shall
be repaid to the Issuer. After payment to the Issuer, Securityholders entitled
to money must look to the Issuer for payment as general creditors unless an
applicable abandoned property law designates another person and all liability of
the Trustee or Paying Agent with respect to such money shall thereupon cease.
SECTION 9.04 Reinstatement.
If the Trustee is unable to apply any money or United States Government
Obligations in accordance with Section 9.01 by reason of any legal proceeding or
by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Issuer'
and the Subsidiary Guarantors' obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 9.01 until such time as the Trustee is permitted to apply
all such money or United States Government Obligations in accordance with
Section 9.01; provided, however, that if the Issuer has made any payment of
interest on or principal of any Securities because of the reinstatement of its
obligations, the Issuer shall be subrogated to the rights of the Holders of such
Securities to receive such payment from the money or United States Government
Obligations held by the Trustee.
<PAGE> 73
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ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01 Without Consent of Holders.
The Issuer, when authorized by a resolution of the Board of Directors
and the Trustee may amend or supplement this Indenture or the Securities without
notice to or consent of any Securityholder:
(a) to cure any ambiguity, defect or inconsistency; provided, however,
that such amendment or supplement does not materially and adversely affect the
rights of any Holder under this Indenture or the Securities;
(b) to effect the assumption by a successor Person of all obligations
of the Issuer under the Securities and this Indenture in connection with any
transaction complying with Article Five of this Indenture;
(c) to provide for uncertificated Securities in addition to or in place
of certificated Securities;
(d) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(e) to make any change that would provide any additional benefit or
rights to the Holders;
(f) to make any other change that does not materially and adversely
affect the rights of any Holder under this Indenture or the Securities;
(g) [Intentionally Omitted]
(h) to add to the covenants of the Issuer for the benefit of the
Holders, or to surrender any right or power herein conferred upon the Issuer;
(i) to add guarantees with respect to the subsidiaries; or
(j) to secure the Securities pursuant to the requirements of Section
4.18 or otherwise;
<PAGE> 74
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SECTION 10.02 With Consent of Holders.
Subject to Section 6.07, the Issuer, when authorized by a resolution of
the Board of Directors, and the Trustee may amend or supplement this Indenture
or the Securities with the written consent of the Holders of at least a majority
in aggregate principal amount of the then outstanding Securities. Subject to
Section 6.07, the Holders of a majority in aggregate principal amount of the
then outstanding Securities, on behalf of all Holders, may waive compliance by
the Issuer with any provision of this Indenture or the Securities. However,
without the consent of each Securityholder affected, an amendment, supplement or
waiver, including a waiver pursuant to Section 6.04, may not:
(a) change or extend the fixed maturity of the Securities, reduce the
rate or extend the time of payment of interest thereon, reduce the principal
amount thereof or premium, if any, thereon or change the currency in which the
Securities are payable;
(b) reduce the premium payable upon any redemption of Securities in
accordance with the optional redemption provisions of the Securities or change
the time before which no such redemption may be made;
(c) waive a default in the payment of principal or interest on the
Securities (except that holders of a majority in aggregate principal amount of
the Securities at the time outstanding may (a) rescind an acceleration of the
Securities that resulted from a non-payment default and (b) waive the payment
default that resulted from such acceleration) or alter the rights of
Securityholders to waive defaults;
(d) modify any provisions of Section 6.04 (other than to add sections
of this Indenture or the Securities subject thereto) or 6.07 or this Section
10.02 (other than to add sections of this Indenture or the Securities which may
not be amended, supplemented or waived without the consent of each
Securityholder affected);
(e) reduce the percentage of the principal amount of outstanding
Securities necessary for amendment to or waiver of compliance with any provision
of this Indenture or the Securities or for waiver of any Default;
(f) modify the ranking or priority of the Securities, or modify the
definition of Senior Indebtedness; or
<PAGE> 75
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(g) modify the provisions relating to any Offer required pursuant to
Section 4.05 or Change of Control Offer required pursuant to Section 4.14 in a
manner materially adverse to the Holders.
An amendment under this Section 10.02 may not make any change under
Article Nine hereof that adversely affects in any material respect the rights of
any holder of Senior Indebtedness then outstanding unless the holders of such
Senior Indebtedness (or any agent or representative thereof authorized to give a
consent) shall have consented to such change in writing.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Issuer shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Issuer to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 10.03 Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 10.04 Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of that
Security or portion of that Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security.
The Issuer may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then those persons who were
Holders at such record date (or their duly designated proxies), and only those
persons, shall be entitled to consent to such amendment, supplement or waiver
whether or not such persons continue to be Holders after such record date. No
such consent shall be valid or effective for more than 90 days after such record
date.
<PAGE> 76
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After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(a) through (g) of Section 10.02. In that case the amendment, supplement or
waiver shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security.
SECTION 10.05 Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Issuer or the Trustee
so determines, the Issuer in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 10.06 Trustee to Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article Ten is
authorized or permitted by this Indenture and that such amendment, supplement or
waiver constitutes the legal, valid and binding obligation of the Issuer and the
Subsidiary Guarantors, enforceable in accordance with its terms (subject to
customary exceptions). The Trustee may, but shall not (except to the extent
required in the case of a supplemental indenture entered into pursuant to
Section 10.01(d)) be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise. In signing any amendment, supplement or waiver, the
Trustee shall be entitled to receive an indemnity reasonably satisfactory to it.
ARTICLE ELEVEN
[INTENTIONALLY OMITTED]
SECTION 11.01 [Intentionally Omitted.]
<PAGE> 77
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ARTICLE TWELVE
[INTENTIONALLY OMITTED]
SECTION 12.01 [Intentionally Omitted.]
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01 Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that are
required to be a part of this Indenture, and shall, to the extent applicable, be
governed by such provisions. If any provision of this Indenture modifies any TIA
provision that may be so modified, such TIA provision shall be deemed to apply
to this Indenture as so modified. If any provision of this Indenture excludes
any TIA provision that may be so excluded, such TIA provision shall be excluded
from this Indenture.
The provisions of TIA Sections 310 through 317 that impose duties on
any Person (including the provisions automatically deemed included unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 13.02 Notices.
Any notice or communication required or permitted to be given under
this Indenture shall be sufficiently given if in writing and delivered in
person, by facsimile and confirmed by overnight courier, or mailed by
first-class mail addressed as follows:
if to the Issuer:
Classic Communications, Inc.
515 Congress Ave., Suite 2626
Austin, Texas 78701
Attention: Steven E. Seach
Title: President & Chief Financial Officer
Facsimile: (512) 476-5204
Telephone: (512) 476-9095
<PAGE> 78
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with a copy to:
Winstead Sechrest & Minick
100 Congress Avenue, Suite 800
Austin, Texas 78701-4042
Attention: Cary Ferchill
Facsimile: (512) 370-2850
Telephone: (512) 474-4330
if to the Trustee:
Bank One, N.A.
100 East Broad Street
8th Floor
Columbus, Ohio 43215
Attention: Corporate Trust Administration
Facsimile: (614) 248-5195
Telephone: (614) 248-6229
The Issuer or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Notwithstanding the foregoing, notices to the Trustee shall be effective only
upon receipt.
Any notice or communication mailed, first class, postage prepaid, to a
Securityholder, including any notice delivered in connection with TIA Section
310(b), TIA Section 313(c), TIA Section 314(a) and TIA Section 315(b), shall be
mailed to him at his address as set forth on the registration books of the
Registrar and shall be sufficiently given to him if so mailed within the time
prescribed. To the extent required by the TIA, any notice or communication shall
also be mailed to any Person described in TIA Section 313(c).
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. Except for a notice to the Trustee, which is deemed given only
when received, if a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
<PAGE> 79
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SECTION 13.03 Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Issuer, the Trustee, the Registrar and any other person shall
have the protection of TIA Section 312(c).
SECTION 13.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuer to the Trustee to take or
refrain from taking any action under this Indenture, the Issuer shall furnish to
the Trustee at the request of the Trustee:
(a) an Officer's Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
SECTION 13.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(a) a statement that the person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided, however, that with
respect to matters of fact an Opinion of Counsel may rely on an Officer's
Certificate or certificates of public officials.
<PAGE> 80
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SECTION 13.06 Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 13.07 Governing Law.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS
INDENTURE AND THE SECURITIES WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
SECTION 13.08 No Recourse Against Others.
A director, officer, employee, incorporator, limited or general partner
or stockholder, as such, of the Issuer shall not have any liability for any
obligations of the Issuer under the Securities or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Securityholder by accepting a Security waives and releases all
such liability.
SECTION 13.09 Successors.
All agreements of the Issuer in this Indenture and the Securities shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successor.
SECTION 13.10 Counterpart Originals.
The parties may sign any number of counterparts of this Indenture. Each
signed counterpart shall be an original, but all of them together represent the
same agreement.
SECTION 13.11 Severability.
In case any provision in this Indenture and in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.
SECTION 13.12 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Issuer or a Subsidiary of Issuer. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
<PAGE> 81
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SECTION 13.13 Legal Holidays.
If a payment date occurs on a day that is not a Business Day at a place
of payment, payment may be made at that place on the next succeeding day that is
a Business Day, and no interest shall accrue for the intervening period.
[Signature Pages Follow]
<PAGE> 82
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
CLASSIC COMMUNICATIONS, INC.,
as Issuer
By: /s/ Steven E. Seach
-----------------------------------
Name: Steven E. Seach
Title: President and Chief Financial
Officer
BANK ONE, N.A., as Trustee
By: /s/ Jeff Eubank
-----------------------------------
Name: Jeff Eubank
Title: Authorized Signatory
<PAGE> 1
EXHIBIT 4.2
EXHIBIT A
[FORM OF SECURITY]
(Face of Security)
CUSIP No. 182728AC9
CLASSIC COMMUNICATIONS, INC.
-------------------------------------
13 1/4% SENIOR DISCOUNT NOTE DUE 2009
No. 1 $114,000,000
Classic Communications, Inc. hereby promises to pay to CEDE & CO. or
registered assigns the principal sum of ONE HUNDRED FOURTEEN MILLION DOLLARS on
the Maturity Date of August 1, 2009.
Interest Payment Dates: February 1 and August 1, commencing February 1, 2004
Record Dates: January 15 or July 15
Reference is hereby made to the further provisions on this Security set forth on
the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
IN WITNESS WHEREOF, Classic Communications, Inc. and Bank One, N.A.
have caused this instrument to be signed manually or by facsimile by each of
their respective duly authorized officers.
Dated: July 29, 1998
CLASSIC COMMUNICATIONS, INC., as Issuer
By:
-----------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
Certificate of Authentication:
This is one of the 13 1/4% Senior Discount Notes due 2009 referred to
in the within-mentioned Indenture.
BANK ONE, N.A., as Trustee
By Date of Authentication: July 29, 1998
----------------------------------
Authorized Signatory
<PAGE> 2
A-2
(Reverse Of Security)
CLASSIC COMMUNICATIONS, INC.
-------------------------------------
13 1/4% Senior Discount Note Due 2009
1. Interest.
Classic Communications, Inc., a Delaware corporation (the "Issuer")
promises to pay the principal of this Security on August 1, 2009. Beginning on
August 1, 2003, cash interest on the Securities will accrue at the rate of
13 1/4 per annum and will be payable semiannually in arrears on February 1 and
August 1, commencing February 1, 2004, to holders of record at the close of
business on the January 15 and July 15 immediately preceding the interest
payment date. Cash interest will accrue from the most recent Interest Payment
Date to which interest has been paid or duly provided for, or, if no interest
has been paid or duly provided for, from August 1, 2003. If an Interest Payment
Date falls on a day that is not a Business Day, the interest payment to be made
on such Interest Payment Date will be made on the next succeeding Business Day
with the same force and effect as if made on such Interest Payment Date, and no
additional interest will accrue as a result of such delayed payment. No cash
interest will accrue on the Discount Notes until August 1, 2003, except as
provided in the next paragraph. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
In the event that (i) an exchange offer registration statement under
the Securities Act ("Exchange Offer Registration Statement") is not filed with
the SEC on or prior to 60 days following July 29, 1998, (ii) the Exchange Offer
Registration Statement is not declared effective on or prior to 120 days
following July 29, 1998 or (iii) the Exchange Offer is not consummated on or
prior to 150 days following July 29, 1998, cash interest will accrue on the
Securities (in addition to the accretion of original issue discount on the
Securities) at a rate per annum of one-quarter of one percent of the Accreted
Value of the Securities (a) following such 60-day period in the case of (i)
above, (b) following such 120-day period in the case of clause (ii) above, (c)
following such 150-day period in the case of (iii) above and (d) following each
such subsequent 90-day period in the case of clauses (i), (ii) and (iii) above;
provided that the aggregate increase in such interest rate will in no event
exceed one percent per annum. Upon (x) the filing of the Exchange Offer
Registration Statement in the case of clause (i) above, (y) the effectiveness of
the Exchange Offer Registration Statement in the case of clause (ii) above or
(z) the day before the date of the consummation of the Exchange Offer or the
effectiveness of the Shelf Registration Statement. as the case may be, in the
case of clause (iii) above, the payment of cash interest will cease, from the
date of such filing, effectiveness or day before the date of the consummation,
as the case may be.
<PAGE> 3
A-3
2. Method of Payment.
The interest payable on the Securities, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Security is registered at the close of
business on the regular record date, which shall be the January 15 or July 15
(whether or not a Business Day) next preceding such Interest Payment Date. Any
such interest not so punctually paid or duly provided for, and any interest
payable on such defaulted interest (to the extent lawful), will forthwith cease
to be payable to the Holder on such regular record date and shall be paid to the
person in whose name this Security is registered at the close of business on a
special record date for the payment of such defaulted interest to be fixed by
the Issuer, notice of which shall be given to Holders not less than 15 days
prior to such special record date. Payment of the principal of and interest on
this Security will be made at the agency of the Issuer maintained for that
purpose in New York, New York and at any other office or agency maintained by
the Issuer for such purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Issuer payment of
interest may be made by check mailed to the address of the person entitled
thereto as such address shall appear in the Security register.
3. Paying Agent and Registrar.
Initially, Bank One, N.A. (the "Trustee") will act as Paying Agent and
Registrar. The Issuer may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders of Securities. The Issuer or any of its
Subsidiaries may act as Registrar, co-Registrar or, except in certain
circumstances specified in the Indenture, Paying Agent.
4. Indenture.
This Security is one of a duly authorized issue of Securities of the
Issuer, designated as its 13 1/4% Senior Discount Notes due 2009 (the
"Securities"), limited in aggregate principal amount at maturity to $114,000,000
(except for Securities issued in substitution for destroyed, lost or stolen
Securities) issuable under an indenture dated as of July 29, 1998 (the
"Indenture"), among the Issuer and the Trustee. The terms of the Securities
include those stated in the Indenture and those required to be made part of the
Indenture by the Trust Indenture Act of 1939 (the "Act") (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of the Indenture and the date the
Indenture is qualified under the Act. The Securities are subject to all such
terms, and Holders of Securities are referred to the Indenture and the Act for a
statement of them. Each Securityholder, by accepting a Security, agrees to be
bound by all of the terms and provisions of the Indenture, as the same may be
amended from time to time.
Capitalized terms contained in this Security to the extent not defined
herein shall have the meanings assigned to them in the Indenture.
5. Optional Redemption.
(a) The Securities are not redeemable prior to August 1, 2003, except
as provided in clause (b) or (c) below of this paragraph 5. On and after such
date, the Securities
<PAGE> 4
A-4
may be redeemed at any time, in whole or in part, at the option of the Issuer,
at redemption prices (expressed as percentages of the Accreted Value) set forth
below, if redeemed during the 12-month period beginning August 1 of the year
indicated below, in each case together with interest accrued and unpaid to but
excluding the date fixed for redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C> <C>
2003......................................... 106.63%
2004......................................... 104.42%
2005......................................... 102.21%
2006 and thereafter.......................... 100.000%
</TABLE>
(b) At any time prior to August 1, 2001, the Issuer may redeem all (but
not less than all) of the Securities with the Net Cash Proceeds of one or more
Equity Offerings of or Strategic Equity Investment in the Issuer, at a
redemption price in cash equal to (expressed as a percentage of the Accreted
Value) 113.25% of the principal amount at maturity thereof, plus accrued and
unpaid interest to the date fixed for redemption. Any such redemption pursuant
to this paragraph will be required to occur within 45 days following the closing
of any such Equity Offering or Strategic Equity Investment.
(c) Upon the occurrence of a Change of Control, the Issuer may redeem
all, but not less than all, the Securities in cash, at a redemption price equal
to the Accreted Value thereof plus accrued and unpaid interest to the date of
redemption plus the Applicable Premium. Notice of redemption of the Securities
pursuant to this paragraph shall be mailed to holders of the Securities not more
than 30 days following the occurrence of a Change of Control. The Issuer may not
redeem Securities pursuant to this paragraph if it has made a Change of Control
Offer with respect to such Change of Control.
6. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at least 30 and
not less than 60 days before the redemption date to each Holder of Securities to
be redeemed at the address appearing in the register of Securities maintained by
the Registrar. Securities in denominations larger than $1,000 may be redeemed in
part. On and after the redemption date, interest ceases to accrue on those
Securities or portion of them called for redemption.
7. Purchase upon Occurrence of a Change of Control.
Within 30 days of the occurrence of a Change of Control, the Issuer
will offer to purchase the Securities, in whole and not in part, at a purchase
price equal to 101% of the Accreted Value thereof plus any accrued and unpaid
interest thereon.
<PAGE> 5
A-5
8. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons in denominations
of $1,000 and integral multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not transfer or exchange any Securities selected for redemption.
9. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of it
for all purposes.
10. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee or Paying Agent will repay the funds to the Issuer at its
request. After such repayment Holders of Securities entitled to such funds must
look to the Issuer for payment unless an abandoned property law designates
another person.
11. Discharge Prior to Redemption or Maturity.
The Indenture will be discharged and canceled except for certain
Sections thereof, subject to the terms of the Indenture, upon the payment of all
the Securities or upon the irrevocable deposit with the Trustee of funds or
United States Government Obligations sufficient for such payment or redemption.
12. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the outstanding Securities, and any past default or
compliance with any provision may be waived with the consent of the Holders of a
majority in principal amount of the outstanding Securities. Without notice to or
the consent of any Holder, the Issuer and the Trustee may amend or supplement
the Indenture or the Securities to cure any ambiguity, defect or inconsistency,
or to make any change that does not materially and adversely affect the rights
of any Holder of Securities.
13. Restrictive Covenants.
The Securities are senior unsecured Indebtedness of the Issuer limited
to the aggregate principal amount at maturity of $114,000,000. The Indenture
restricts, among other things, the ability of the Issuer or any of its
Restricted Subsidiaries to permit any Liens to be imposed on their assets, to
make certain payments and investments, limits the Indebtedness which the Issuer
and its Restricted Subsidiaries may incur and limits the terms on which the
Issuer and its Restricted Subsidiaries may engage in Asset Sales. The Issuer is
also obligated under certain circumstances to make an offer to purchase
Securities with the net cash proceeds
<PAGE> 6
A-6
of certain Asset Sales. The Issuer must report annually to the Trustee on
compliance with certain covenants in the Indenture.
14. Successor Corporation.
Pursuant to the Indenture, the ability of the Issuer to consolidate
with, merge with or into or transfer its assets to another person is conditioned
upon certain requirements, including certain financial requirements applicable
to the surviving Person.
15. Defaults and Remedies.
If an Event of Default shall occur and be continuing, the principal of
all of the outstanding Securities, plus all accrued and unpaid interest, if any,
to the date the Securities become due and payable, may be declared due and
payable in the manner and with the effect provided in the Indenture.
16. Trustee Dealings with Issuer.
The Trustee in its individual or any other capacity, may become the
owner or pledgee of Securities and make loans to, accept deposits from, and
perform services for the Issuer or its Affiliates, and may otherwise deal with
the Issuer or its Affiliates, as if it were not Trustee.
17. No Recourse Against Others.
A director, officer, employee, incorporator, limited or general partner
or stockholder, as such, of the Issuer shall not have any liability for any
obligations of the Issuer or under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of a Security by accepting a Security waives and releases
all such liability. The waiver and release are part of the consideration for the
issue of the Securities.
18. Authentication.
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
19. Abbreviations.
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
<PAGE> 7
A-7
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuer has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
21. GOVERNING LAW.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE, THIS
SECURITY AND ANY SUBSIDIARY GUARANTEE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW.
22. Units.
Until the Separability Date (as defined below), this certificate shall
also represent 342,000 shares of common stock of the Issuer (three shares per
$1,000 principal amount at maturity of the 13 1/4% Senior Discount Notes due
2009). The Separability Date shall be the earlier of the following dates: (i)
February 1, 1999; (ii) the date on which a registration statement with respect
to a registered exchange offer for the Securities is declared effective under
the Securities Act; (iii) the occurrence of an Event of Default; or (iv) such
earlier date as determined by the Initial Purchaser in its sole discretion. On
or after the Separability Date, this certificate shall represent only the
13 1/4% Senior Discount Notes due 2009.
<PAGE> 8
A-8
ASSIGNMENT FORM
If you the Holder want to assign this Security, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Security to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ,
--------------------------------------------------------
agent to transfer this Security on the books of the Issuer. The agent may
substitute another to act for him.
Dated: Signed:
-------------------- -------------------------------------
(Sign exactly as your name appears
on the other side of this Security)
Signature Guarantee:*
----------------------------------------------------------
- ------------------
* Signature must be guaranteed by a member of the Medallion Signature
Program.
<PAGE> 9
A-9
OPTION OF HOLDER TO ELECT PURCHASE
If you the Holder want to elect to have this Security purchased by the Issuer,
check the box: [ ]
If you want to elect to have only part of this Security purchased by the Issuer,
state the amount: $ _______________
Dated: Your Signature:
-------------------- ----------------------------------
(Sign exactly as your name appears
on the other side of this Security)
Signature Guarantee:*
----------------------------------------------------------
- ------------------
* Signature must be guaranteed by a member of the Medallion Signature
Program.
<PAGE> 10
EXHIBIT B
FORM OF LEGENDS FOR SECURITIES
Any Global Security authenticated and delivered hereunder
shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY
BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
Any Global Security which represents the Initial Securities (and all
Securities issued in substitution thereof) shall bear a legend in substantially
the following form:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
<PAGE> 11
B-2
SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
(1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT ("RULE 144A")), (2) AGREES THAT IT WILL NOT PRIOR
TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED
BY RULE 144 UNDER THE SECURITIES ACT AND ANY SUCCESSOR PROVISION THEREUNDER)
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS
SECURITY) OR THE LAST DAY ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS
THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH
LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE
RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR AS LONG AS THE NOTES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT
THE ISSUER, THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL HAVE THE
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM AND (ii) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE
OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
<PAGE> 12
B-3
SCHEDULE OF EXCHANGES
The following exchanges of a part of this Global Security for Physical
Securities have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of at Maturity Signature of
decrease in increase of this Global authorized
Principal Amount in Principal Security officer of
at Maturity Amount at following such Trustee or
Date of of this Global Maturity of this decrease Securities
Exchange Security Global Security (or increase) Custodian
- -------- -------- --------------- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 13
B-4
APPENDIX
Subsidiary Guarantors
Classic Cable Holding, Inc.
Ponca Holdings, Inc.
Classic Telephone, Inc.
Universal Cable Holdings, Inc.
Universal Cable Communications Inc.
Universal Cable of Beaver, Oklahoma, Inc.
Universal Cable Midwest, Inc.
WT Acquisition Corporation
W.K. Communications, Inc.
Television Enterprises, Inc.
Black Creek Communications, L.P.
Black Creek Management, L.L.C.
<PAGE> 1
EXHIBIT 4.3A
------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of July 29, 1998
among
Classic Communications, Inc.
and
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
------------------------------------------
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into this 29th day of July, 1998, among Classic Communications, Inc., a
Delaware corporation (the "Company") and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Initial Purchaser").
This Agreement is made pursuant to the Purchase Agreement, dated
July 21, 1998, among the Company and the Initial Purchaser (the "Purchase
Agreement"), which provides for the sale by the Company to the Initial Purchaser
of units consisting of $59,979,960 gross proceeds ($114,000,000 in aggregate
principle amount of maturity) of the Company's 13 1/4% Senior Discount Notes due
2009 (the "Securities") and 342,000 shares. In order to induce the Initial
Purchaser to enter into the Purchase Agreement, the Company has agreed to
provide to the Initial Purchaser and their direct and indirect transferees the
registration rights set forth in this Agreement. The execution of this Agreement
is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Closing Date" shall mean the Closing Time as defined in the Purchase
Agreement.
"Company" shall have the meaning set forth in the preamble and shall
also include the Company's successors.
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Company, provided, however, that such depositary
must have an address in the Borough of Manhattan, in the City of New York.
"Exchange Offer" shall mean the exchange offer by the Company of
Exchange Securities for Registrable Securities pursuant to Section 2.1 hereof.
"Exchange Offer Registration" shall mean a registration under the 1933
Act effected pursuant to Section 2.1 hereof.
<PAGE> 3
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form), and all amendments and supplements to such registration statement,
including the Prospectus contained therein, all exhibits thereto and all
documents incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in Section 2.1
hereof.
"Exchange Securities" shall mean the 13 1/4% Senior Discount Notes due
2009, Series B issued by the Company under the Indenture containing terms
identical to the Securities in all material respects (except for references to
certain interest rate provisions, restrictions on transfers and restrictive
legends), to be offered to Holders of Securities in exchange for Registrable
Securities pursuant to the Exchange Offer.
"Holder" shall mean an Initial Purchaser, for so long as it owns any
Registrable Securities, and each of its successors, assigns and direct and
indirect transferees who become registered owners of Registrable Securities
under the Indenture and each Participating Broker-Dealer that holds Exchange
Securities for so long as such Participating Broker-Dealer is required to
deliver a prospectus meeting the requirements of the 1933 Act in connection with
any resale of such Exchange Securities.
"Indenture" shall mean the Indenture relating to the Securities, dated
as of July 29, 1998, between the Company and Bank One, N.A., as trustee, as the
same may be amended, supplemented, waived or otherwise modified from time to
time in accordance with the terms thereof.
"Initial Purchaser" shall have the meaning set forth in the preamble.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of Outstanding (as defined in the Indenture)
Registrable Securities; provided that whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company and other obligors on the
Securities or any Affiliate (as defined in the Indenture) of the Company shall
be disregarded in determining whether such consent or approval was given by the
Holders of such required percentage amount.
"Participating Broker-Dealer" shall mean any of Merrill Lynch, Pierce,
Fenner & Smith Incorporated and any other broker-dealer which makes a market in
the Securities and exchanges Registrable Securities in the Exchange Offer for
Exchange Securities.
"Person" shall mean an individual, partnership (general or limited),
corporation, limited liability company, trust or unincorporated organization, or
a government or agency or political subdivision thereof.
"Private Exchange" shall have the meaning set forth in Section 2.1
hereof.
-2-
<PAGE> 4
"Private Exchange Securities" shall have the meaning set forth in
Section 2.1 hereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including any such
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by a Shelf Registration Statement, and by
all other amendments and supplements to a prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Purchase Agreement" shall have the meaning set forth in the preamble.
"Registrable Securities" shall mean the Securities and, if issued, the
Private Exchange Securities; provided, however, that Securities and, if issued,
the Private Exchange Securities, shall cease to be Registrable Securities when
(i) a Registration Statement with respect to such Securities shall have been
declared effective under the 1933 Act and such Securities shall have been
disposed of pursuant to such Registration Statement, (ii) such Securities have
been sold to the public pursuant to Rule 144 (or any similar provision then in
force, but not Rule 144A) under the 1933 Act, (iii) such Securities shall have
ceased to be outstanding, as defined in the Indenture, or (iv) the Exchange
Offer is consummated (except in the case of Securities purchased from the
Company and continued to be held by the Initial Purchaser).
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. (the "NASD") registration and filing fees, including,
if applicable, the fees and expenses of any "qualified independent underwriter"
(and its counsel) that is required to be retained by any holder of Registrable
Securities in accordance with the rules and regulations of the NASD, (ii) all
fees and expenses incurred in connection with compliance with state securities
or blue sky laws and compliance with the rules of the NASD (including reasonable
fees and disbursements of counsel for any underwriters or Holders in connection
with blue sky qualification of any of the Exchange Securities or Registrable
Securities and any filings with the NASD), (iii) all expenses of any Persons in
preparing or assisting in preparing, word processing, printing and distributing
any Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements and other
documents relating to the performance of and compliance with this Agreement,
(iv) all fees and expenses incurred in connection with the listing, if any, of
any of the Registrable Securities on any securities exchange or exchanges, (v)
all rating agency fees, (vi) the fees and disbursements of counsel for the
Company and of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, (vii) the fees and expenses of the Trustee,
and any escrow agent or custodian, (viii) the reasonable fees and expenses of
the Initial Purchaser in connection with the Exchange Offer, including the
reasonable fees and expenses of counsel to the Initial Purchaser in connection
therewith, (ix) the reasonable fees and disbursements of Dow, Lohnes &
Albertson, PLLC, special counsel representing the Holders of Registrable
Securities and (x) any fees and disbursements of the
-3-
<PAGE> 5
underwriters customarily required to be paid by issuers or sellers of securities
and the fees and expenses of any special experts retained by the Company in
connection with any Registration Statement, but excluding underwriting discounts
and commissions and transfer taxes, if any, relating to the sale or disposition
of Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement of the
Company which covers any of the Exchange Securities or Registrable Securities
pursuant to the provisions of this Agreement, and all amendments and supplements
to any such Registration Statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission or any
successor agency or government body performing the functions currently performed
by the United States Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2.2 hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company filed pursuant to the provisions of Section 2.2 of this
Agreement which covers all of the Registrable Securities or all of the Private
Exchange Securities on an appropriate form under Rule 415 under the 1933 Act, or
any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"Trustee" shall mean the trustee with respect to the Securities under
the Indenture.
2. Registration Under the 1933 Act.
2.1 Exchange Offer. The Company shall, for the benefit of the Holders,
at the Company's cost, (A) prepare and, as soon as practicable but not later
than 60 days following the Closing Date, file with the SEC an Exchange Offer
Registration Statement on an appropriate form under the 1933 Act with respect to
a proposed Exchange Offer and the issuance and delivery to the Holders, in
exchange for the Registrable Securities (other than Private Exchange
Securities), of a like principal amount of Exchange Securities, (B) use its best
efforts to cause the Exchange Offer Registration Statement to be declared
effective under the 1933 Act within 120 days of the Closing Date, (C) use its
best efforts to keep the Exchange Offer Registration Statement effective until
the closing of the Exchange Offer and (D) use its best efforts to cause the
Exchange Offer to be consummated not later than 150 days following the Closing
Date. The Exchange Securities will be issued under the Indenture. Upon the
effectiveness of the Exchange Offer Registration Statement, the Company shall
promptly commence the Exchange Offer, it being the objective of such Exchange
Offer to enable each Holder eligible and electing to exchange Registrable
Securities for Exchange Securities (assuming that such Holder (a) is not an
affiliate of the Company within the meaning of Rule 405 under the 1933 Act, (b)
is not a broker-dealer tendering Registrable Securities acquired directly from
-4-
<PAGE> 6
the Company for its own account, (c) acquired the Exchange Securities in the
ordinary course of such Holder's business and (d) has no arrangements or
understandings with any Person to participate in the Exchange Offer for the
purpose of distributing the Exchange Securities) to transfer such Exchange
Securities from and after their receipt without any limitations or restrictions
under the 1933 Act and under state securities or blue sky laws.
In connection with the Exchange Offer, the Company shall:
(a) mail as promptly as practicable to each Holder a copy of
the Prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related documents;
(b) keep the Exchange Offer open for acceptance for a period
of not less than 30 calendar days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law) (such period referred to
herein as the "Exchange Period");
(c) utilize the services of the Depositary for the Exchange
Offer;
(d) permit Holders to withdraw tendered Registrable Securities
at any time prior to 5:00 p.m. (Eastern Time), on the last business day of the
Exchange Period, by sending to the institution specified in the notice, a
telegram, telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Securities delivered for exchange,
and a statement that such Holder is withdrawing such Holder's election to have
such Securities exchanged;
(e) notify each Holder that any Registrable Security not
tendered will remain outstanding and continue to accrue interest, but will not
retain any rights under this Agreement (except in the case of the Initial
Purchaser and Participating Broker-Dealers as provided herein); and
(f) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
If, prior to consummation of the Exchange Offer, the Initial Purchaser
hold any Securities acquired by them and having the status of an unsold
allotment in the initial distribution, the Company upon the request of any
Initial Purchaser shall, simultaneously with the delivery of the Exchange
Securities in the Exchange Offer, issue and deliver to such Initial Purchaser in
exchange (the "Private Exchange") for the Securities held by such Initial
Purchaser, a like principal amount of debt securities of the Company, that are
identical (except that such securities shall bear appropriate transfer
restrictions) to the Exchange Securities (the "Private Exchange Securities").
The Exchange Securities and the Private Exchange Securities shall be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture and which, in either case, has been qualified under
the Trust Indenture Act of 1939, as amended (the "TIA"), or is exempt from such
qualification and shall provide that the Exchange Securities shall not be
subject to the
-5-
<PAGE> 7
transfer restrictions set forth in the Indenture but that the Private Exchange
Securities shall be subject to such transfer restrictions. The Indenture or such
indenture shall provide that the Exchange Securities, the Private Exchange
Securities and the Securities shall vote and consent together on all matters as
one class and that none of the Exchange Securities, the Private Exchange
Securities or the Securities will have the right to vote or consent as a
separate class on any matter. The Private Exchange Securities shall be of the
same series as and the Company shall use all commercially reasonable efforts to
have the Private Exchange Securities bear the same CUSIP number as the Exchange
Securities. The Company shall not have any liability under this Agreement solely
as a result of such Private Exchange Securities not bearing the same CUSIP
number as the Exchange Securities.
As soon as practicable after the close of the Exchange Offer and/or the
Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Registrable Securities duly
tendered and not validly withdrawn pursuant to the Exchange Offer in
accordance with the terms of the Exchange Offer Registration Statement
and the letter of transmittal which shall be an exhibit thereto;
(ii) accept for exchange all Securities properly tendered
pursuant to the Private Exchange;
(iii) deliver to the Trustee for cancellation all Registrable
Securities so accepted for exchange; and
(iv) cause the Trustee promptly to authenticate and deliver
Exchange Securities or Private Exchange Securities, as the case may be,
to each Holder of Registrable Securities so accepted for exchange in a
principal amount equal to the principal amount of the Registrable
Securities of such Holder so accepted for exchange.
Interest on each Exchange Security and Private Exchange Security will
accrue from the last date on which interest was paid on the Registrable
Securities surrendered in exchange therefor or, if no interest has been paid on
the Registrable Securities, from the date of original issuance. The Exchange
Offer and the Private Exchange shall not be subject to any conditions, other
than (i) that the Exchange Offer or the Private Exchange, or the making of any
exchange by a Holder, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) the due tendering of Registrable
Securities in accordance with the Exchange Offer and the Private Exchange, (iii)
that each Holder of Registrable Securities exchanged in the Exchange Offer shall
have represented that all Exchange Securities to be received by it shall be
acquired in the ordinary course of its business and that at the time of the
consummation of the Exchange Offer it shall have no arrangement or understanding
with any person to participate in the distribution (within the meaning of the
1933 Act) of the Exchange Securities and shall have made such other
representations as may be reasonably necessary under applicable SEC rules,
regulations or interpretations to render the use of Form S-4 or other
appropriate form under the 1933 Act available and (iv) that no action or
proceedings shall
-6-
<PAGE> 8
have been instituted or threatened in any court or by or before any governmental
agency with respect to the Exchange Offer or the Private Exchange which, in the
Company's judgment, would reasonably be expected to impair the ability of the
Company to proceed with the Exchange Offer or the Private Exchange. The Company
shall inform the Initial Purchaser of the names and addresses of the Holders to
whom the Exchange Offer is made, and the Initial Purchaser shall have the right
to contact such Holders and otherwise facilitate the tender of Registrable
Securities in the Exchange Offer.
2.2 Shelf Registration. (i) If, because of any changes in law, SEC
rules or regulations or applicable interpretations thereof by the staff of the
SEC, the Company is not permitted to effect the Exchange Offer as contemplated
by Section 2.1 hereof, (ii) if for any other reason the Exchange Offer
Registration Statement is not declared effective within 120 days following the
original issue of the Registrable Securities or the Exchange Offer is not
consummated within 150 days after the original issue of the Registrable
Securities, (iii) upon the request of any of the Initial Purchaser or (iv) if a
Holder is not permitted to participate in the Exchange Offer or does not receive
fully tradeable Exchange Securities pursuant to the Exchange Offer, then in case
of each of clauses (i) through (iv) the Company shall, at its cost:
(a) As promptly as practicable, file with the SEC, and
thereafter shall use its best efforts to cause to be declared effective as
promptly as practicable but no later than 150 days after the original issue of
the Registrable Securities, a Shelf Registration Statement relating to the offer
and sale of the Registrable Securities by the Holders from time to time in
accordance with the methods of distribution elected by the Majority Holders
participating in the Shelf Registration and set forth in such Shelf Registration
Statement.
(b) Use its best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the Prospectus forming part
thereof to be usable by Holders for a period of two years from the date the
Shelf Registration Statement is declared effective by the SEC, or for such
shorter period that will terminate when all Registrable Securities covered by
the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement or cease to be outstanding or otherwise to be Registrable
Securities (the "Effectiveness Period"); provided, however, that the
Effectiveness Period in respect of the Shelf Registration Statement shall be
extended to the extent required to permit dealers to comply with the applicable
prospectus delivery requirements of Rule 174 under the 1933 Act and as otherwise
provided herein.
(c) Notwithstanding any other provisions hereof, use its best
efforts to ensure that (i) any Shelf Registration Statement and any amendment
thereto and any Prospectus forming part thereof and any supplement thereto
complies in all material respects with the 1933 Act and the rules and
regulations thereunder, (ii) any Shelf Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any Prospectus
forming part of any Shelf Registration Statement, and any supplement to such
Prospectus (as amended or supplemented from time to time), does not include an
untrue
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<PAGE> 9
statement of a material fact or omit to state a material fact necessary in order
to make the statements, in light of the circumstances under which they were
made, not misleading.
The Company shall not permit any securities other than Registrable
Securities to be included in the Shelf Registration Statement. The Company
further agrees, if necessary, to supplement or amend the Shelf Registration
Statement, as required by Section 3(b) below, and to furnish to the Holders of
Registrable Securities copies of any such supplement or amendment promptly after
its being used or filed with the SEC.
2.3 Expenses. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2.1 or 2.2. Each Holder
shall pay all underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
2.4 Effectiveness.
(a) The Company will be deemed not to have used its best
efforts to cause the Exchange Offer Registration Statement or the Shelf
Registration Statement, as the case may be, to become, or to remain, effective
during the requisite period if the Company voluntarily takes any action that
would, or omits to take any action which omission would, result in any such
Registration Statement not being declared effective or in the Holders of
Registrable Securities covered thereby not being able to exchange or offer and
sell such Registrable Securities during that period as and to the extent
contemplated hereby, unless such action is required by applicable law or the
Initial Purchaser consent in writing to such action or omission.
(b) An Exchange Offer Registration Statement pursuant to
Section 2.1 hereof or a Shelf Registration Statement pursuant to Section 2.2
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that if, after it has been declared
effective, the offering of Registrable Securities pursuant to an Exchange Offer
Registration Statement or a Shelf Registration Statement is interfered with by
any stop order, injunction or other order or requirement of the SEC or any other
governmental agency or court, such Registration Statement will be deemed not to
have become effective during the period of such interference, until the offering
of Registrable Securities pursuant to such Registration Statement may legally
resume.
2.5 Interest. The Indenture executed in connection with the Securities
will provide that in the event that either (a) the Exchange Offer Registration
Statement is not filed with the Commission on or prior to the 60th calendar day
following the date of original issue of the Securities, (b) the Exchange Offer
Registration Statement has not been declared effective on or prior to the 120th
calendar day following the date of original issue of the Securities or (c) the
Exchange Offer is not consummated or a Shelf Registration Statement is not
declared effective, in either case, on or prior to the 150th calendar day
following the date of original issue of the Securities (each such event referred
to in clauses (a) through (c) above, a "Registration Default"), cash interest
will accrue
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<PAGE> 10
on the Securities (in addition to the accretion of original issue discount on
the Securities) at a rate per annum of one-quarter of one percent of the
Accreted Value of the Securities (i) following such 60-day period in the case of
(a) above, (ii) following such 120-day period in the case of clause (b) above,
(iii) following such 150-day period in the case of (c) above and (d) following
each such subsequent 90-day period in the case of clauses (a), (b) and (c)
above; provided that the aggregate increase in such interest rate will in no
event exceed one percent per annum. Upon (x) the filing of the Exchange Offer
Registration Statement in the case of clause (a) above, (y) the effectiveness of
the Exchange Offer Registration Statement in the case of clause (b) above or (z)
the day before the date of the consummation of the Exchange Offer or the
effectiveness of the Shelf Registration Statement, as the case may be, in the
case of clause (c) above, the payment of cash interest will cease, from the date
of such filing, effectiveness or day before the date of the consummation, as the
case may be.
If the Shelf Registration Statement is unusable by the Holders for any
reason, and the aggregate number of days in any consecutive twelve-month period
for which the Shelf Registration Statement shall not be usable exceeds 30 days
in the aggregate, then cash interest will accrue on the Securities (in addition
to the accretion of original issue discount on the Securities) at a rate per
annum of one-quarter of one percent of the Accreted Value of the Securities for
the first 90-day period (or portion thereof) beginning on the 31st such date
that such Shelf Registration Statement ceases to be usable, which rate shall be
increased by an additional 0.25% per annum of the Accreted Value of the
Securities at the beginning of each subsequent 90-day period, provided that the
maximum aggregate increase in the interest rate will in no event exceed one
percent (1%) per annum. Any amounts payable under this paragraph shall also be
deemed "Additional Interest" for purposes of this Agreement. Upon the Shelf
Registration Statement once again becoming usable, the payment of cash interest
will cease, from the date the Shelf Registration becomes usable if the Company
is otherwise in compliance with this Agreement at such time. Additional Interest
shall be computed based on the actual number of days elapsed in each 90-day
period in which the Shelf Registration Statement is unusable.
The Company shall notify the Trustee within three business days after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Additional Interest shall be
paid by depositing with the Trustee, in trust, for the benefit of the Holders of
Registrable Securities, on or before the applicable semiannual interest payment
date, immediately available funds in sums sufficient to pay the Additional
Interest then due. The Additional Interest due shall be payable on each interest
payment date to the record Holder of Securities entitled to receive the interest
payment to be paid on such date as set forth in the Indenture. Each obligation
to pay Additional Interest shall be deemed to accrue from and including the date
following the applicable Event Date.
3. Registration Procedures.
In connection with the obligations of the Company with respect to
Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Company
shall:
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<PAGE> 11
(a) prepare and file with the SEC a Registration Statement, within the
relevant time period specified in Section 2, on the appropriate form under the
1933 Act, which form (i) shall be selected by the Company, (ii) shall, in the
case of a Shelf Registration, be available for the sale of the Registrable
Securities by the selling Holders thereof, (iii) shall comply as to form in all
material respects with the requirements of the applicable form and include or
incorporate by reference all financial statements required by the SEC to be
filed therewith or incorporated by reference therein, and (iv) shall comply in
all respects with the requirements of Regulation S-T under the 1933 Act, and use
its best efforts to cause such Registration Statement to become effective and
remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary under applicable
law to keep such Registration Statement effective for the applicable period; and
cause each Prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 (or any similar
provision then in force) under the 1933 Act and comply with the provisions of
the 1933 Act, the 1934 Act and the rules and regulations thereunder applicable
to them with respect to the disposition of all securities covered by each
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the selling Holders thereof
(including sales by any Participating Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Securities, at least five business days prior to filing, that a
Shelf Registration Statement with respect to the Registrable Securities is being
filed and advising such Holders that the distribution of Registrable Securities
will be made in accordance with the method selected by the Majority Holders
participating in the Shelf Registration; (ii) furnish to each Holder of
Registrable Securities and to each underwriter of an underwritten offering of
Registrable Securities, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder or underwriter may
reasonably request, including financial statements and schedules and, if the
Holder so requests, all exhibits in order to facilitate the public sale or other
disposition of the Registrable Securities; and (iii) hereby consent to the use
of the Prospectus or any amendment or supplement thereto by each of the selling
Holders of Registrable Securities in connection with the offering and sale of
the Registrable Securities covered by the Prospectus or any amendment or
supplement thereto;
(d) use its best efforts to register or qualify the Registrable
Securities under all applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Securities covered by a Registration
Statement and each underwriter of an underwritten offering of Registrable
Securities shall reasonably request by the time the applicable Registration
Statement is declared effective by the SEC, and do any and all other acts and
things which may be reasonably necessary or advisable to enable each such Holder
and underwriter to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; provided, however, that the Company
shall not be required to (i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), or (ii)
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<PAGE> 12
take any action which would subject it to general service of process or taxation
in any such jurisdiction where it is not then so subject;
(e) notify promptly each Holder of Registrable Securities under a Shelf
Registration or any Participating Broker-Dealer who has notified the Company
that it is utilizing the Exchange Offer Registration Statement as provided in
paragraph (f) below and, if requested by such Holder or Participating
Broker-Dealer, confirm such advice in writing promptly (i) when a Registration
Statement has become effective and when any post-effective amendments and
supplements thereto become effective, (ii) of any request by the SEC or any
state securities authority for post-effective amendments and supplements to a
Registration Statement and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the SEC or
any state securities authority of any stop order suspending the effectiveness of
a Registration Statement or the initiation of any proceedings for that purpose,
(iv) in the case of a Shelf Registration, if, between the effective date of a
Registration Statement and the closing of any sale of Registrable Securities
covered thereby, the representations and warranties of the Company contained in
any underwriting agreement, securities sales agreement or other similar
agreement, if any, relating to the offering cease to be true and correct in all
material respects, (v) of the happening of any event or the discovery of any
facts during the period a Shelf Registration Statement is effective which makes
any statement made in such Registration Statement or the related Prospectus
untrue in any material respect or which requires the making of any changes in
such Registration Statement or Prospectus in order to make the statements
therein not misleading, (vi) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Registrable
Securities or the Exchange Securities, as the case may be, for sale in any
jurisdiction or the initiation or threatening of any proceeding for such purpose
and (vii) of any determination by the Company that a post-effective amendment to
such Registration Statement would be appropriate;
(f) (A) in the case of the Exchange Offer Registration Statement (i)
include in the Exchange Offer Registration Statement a section entitled "Plan of
Distribution" which section shall be reasonably acceptable to Merrill Lynch on
behalf of the Participating Broker-Dealers, and which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that holds
Registrable Securities acquired for its own account as a result of market-making
activities or other trading activities and that will be the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) of Exchange Securities to be
received by such broker-dealer in the Exchange Offer, whether such positions or
policies have been publicly disseminated by the staff of the SEC or such
positions or policies, in the reasonable judgment of Merrill Lynch on behalf of
the Participating Broker-Dealers and its counsel, represent the prevailing views
of the staff of the SEC, including a statement that any such broker-dealer who
receives Exchange Securities for Registrable Securities pursuant to the Exchange
Offer may be deemed a statutory underwriter and must deliver a prospectus
meeting the requirements of the 1933 Act in connection with any resale of such
Exchange Securities, (ii) furnish to each Participating Broker-Dealer who has
delivered to the Company the notice referred to in Section 3(e), without charge,
as many copies of each prospectus included in the Exchange Offer Registration
Statement, including any preliminary prospectus, and any amendment or supplement
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<PAGE> 13
thereto, as such Participating Broker-Dealer may reasonably request, (iii)
hereby consent to the use of the Prospectus forming part of the Exchange Offer
Registration Statement or any amendment or supplement thereto, by any Person
subject to the prospectus delivery requirements of the SEC, including all
Participating Broker-Dealers, in connection with the sale or transfer of the
Exchange Securities covered by the Prospectus or any amendment or supplement
thereto, and (iv) include in the transmittal letter or similar documentation to
be executed by an exchange offeree in order to participate in the Exchange Offer
(x) the following provision:
"If the exchange offeree is a broker-dealer holding
Registrable Securities acquired for its own account as a
result of market-making activities or other trading
activities, it will deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of
Exchange Securities received in respect of such Registrable
Securities pursuant to the Exchange Offer;" and
(y) a statement to the effect that by a broker-dealer making the acknowledgment
described in clause (x) and by delivering a Prospectus in connection with the
exchange of Registrable Securities, the broker-dealer will not be deemed to
admit that it is an underwriter within the meaning of the 1933 Act; and
(B) in the case of any Exchange Offer Registration Statement,
the Company agrees to deliver to the Initial Purchaser on behalf of the
Participating Broker-Dealers upon the effectiveness of the Exchange Offer
Registration Statement (i) an opinion of counsel or opinions of counsel
substantially in the form attached hereto as Exhibit A, and (ii) officers'
certificates substantially in the form customarily delivered in a public
offering of debt securities.
(g) (i) in the case of an Exchange Offer, furnish counsel for the
Initial Purchaser and (ii) in the case of a Shelf Registration, furnish the
special counsel representing the Holders of Registrable Securities copies of any
comment letters received from the SEC or any other request by the SEC or any
state securities authority for amendments or supplements to a Registration
Statement and Prospectus or for additional information;
(h) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment;
(i) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, and each underwriter, if any, without charge, at least
one conformed copy of each Registration Statement and any post-effective
amendment thereto, including financial statements and schedules (without
documents incorporated therein by reference and all exhibits thereto, unless
requested);
(j) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Securities to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any restrictive legends; and enable such Registrable Securities to be in
such denominations (consistent with the provisions of the Indenture) and
registered in such
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<PAGE> 14
names as the selling Holders or the underwriters, if any, may reasonably request
at least three business days prior to the closing of any sale of Registrable
Securities;
(k) in the case of a Shelf Registration, upon the occurrence of any
event or the discovery of any facts, each as contemplated by Sections 3(e)(v)
and 3(e)(vi) hereof, as promptly as practicable after the occurrence of such an
event, use its best efforts to prepare a supplement or post-effective amendment
to the Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities or
Participating Broker-Dealers, such Prospectus will not contain at the time of
such delivery any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or will remain so
qualified. At such time as such public disclosure is otherwise made or the
Company determines that such disclosure is not necessary, in each case to
correct any misstatement of a material fact or to include any omitted material
fact, the Company agrees promptly to notify each Holder of such determination
and to furnish each Holder such number of copies of the Prospectus as amended or
supplemented, as such Holder may reasonably request;
(l) in the case of a Shelf Registration, a reasonable time prior to the
filing of any Registration Statement, any Prospectus, any amendment to a
Registration Statement or amendment or supplement to a Prospectus or any
document which is to be incorporated by reference into a Registration Statement
or a Prospectus after initial filing of a Registration Statement, provide copies
of such document to the Initial Purchaser on behalf of such Holders; and make
representatives of the Company as shall be reasonably requested by the Holders
of Registrable Securities, or the Initial Purchaser on behalf of such Holders,
available for discussion of such document;
(m) obtain a CUSIP number for all Exchange Securities, Private Exchange
Securities or Registrable Securities, as the case may be, not later than the
effective date of a Registration Statement, and provide the Trustee with printed
certificates for the Exchange Securities, Private Exchange Securities or the
Registrable Securities, as the case may be, in a form eligible for deposit with
the Depositary;
(n) (i) cause the Indenture to be qualified under the TIA in connection
with the registration of the Exchange Securities or Registrable Securities, as
the case may be, (ii) cooperate with the Trustee and the Holders to effect such
changes to the Indenture as may be required for the Indenture to be so qualified
in accordance with the terms of the TIA and (iii) execute, and use its best
efforts to cause the Trustee to execute, all documents as may be required to
effect such changes, and all other forms and documents required to be filed with
the SEC to enable the Indenture to be so qualified in a timely manner;
(o) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and appropriate
actions in order to expedite or facilitate the disposition of such Registrable
Securities and in such connection whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration:
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<PAGE> 15
(i) make such representations and warranties to the Holders of
such Registrable Securities and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters
in similar underwritten offerings as may be reasonably requested by
them;
(ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if any,
and the holders of a majority in principal amount of the Registrable
Securities being sold) addressed to each selling Holder and the
underwriters, if any, covering the matters customarily covered in
opinions requested in sales of securities or underwritten offerings and
such other matters as may be reasonably requested by such Holders and
underwriters;
(iii) obtain "cold comfort" letters and updates thereof from
the Company's independent certified public accountants (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company
for which financial statements are, or are required to be, included in
the Registration Statement) addressed to the underwriters, if any, and
use reasonable efforts to have such letter addressed to the selling
Holders of Registrable Securities (to the extent consistent with
Statement on Auditing Standards No. 72 of the American Institute of
Certified Public Accounts), such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort"
letters to underwriters in connection with similar underwritten
offerings;
(iv) enter into a securities sales agreement with the Holders
and an agent of the Holders providing for, among other things, the
appointment of such agent for the selling Holders for the purpose of
soliciting purchasers of Registrable Securities, which agreement shall
be in form, substance and scope customary for similar offerings;
(v) if an underwriting agreement is entered into, cause the
same to set forth indemnification provisions and procedures
substantially equivalent to the indemnification provisions and
procedures set forth in Section 4 hereof with respect to the
underwriters and all other parties to be indemnified pursuant to said
Section or, at the request of any underwriters, in the form customarily
provided to such underwriters in similar types of transactions; and
(vi) deliver such documents and certificates as may be
reasonably requested and as are customarily delivered in similar
offerings to the Holders of a majority in principal amount of the
Registrable Securities being sold and the managing underwriters, if
any.
The above shall be done at (i) the effectiveness of such Registration Statement
(and each post-effective amendment thereto) and (ii) each closing under any
underwriting or similar agreement as and to the extent required thereunder;
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<PAGE> 16
(p) in the case of a Shelf Registration or if a Prospectus is required
to be delivered by any Participating Broker-Dealer in the case of an Exchange
Offer, make available for inspection by representatives of the Holders of the
Registrable Securities, any underwriters participating in any disposition
pursuant to a Shelf Registration Statement, any Participating Broker-Dealer and
any counsel or accountant retained by any of the foregoing, all financial and
other records, pertinent corporate documents and properties of the Company
reasonably requested by any such persons, and cause the respective officers,
directors, employees, and any other agents of the Company to supply all
information reasonably requested by any such representative, underwriter,
special counsel or accountant in connection with a Registration Statement, and
make such representatives of the Company available for discussion of such
documents as shall be reasonably requested by the Initial Purchaser;
(q) (i) in the case of an Exchange Offer Registration Statement, a
reasonable time prior to the filing of any Exchange Offer Registration
Statement, any Prospectus forming a part thereof, any amendment to an Exchange
Offer Registration Statement or amendment or supplement to such Prospectus,
provide copies of such document to the Initial Purchaser and to the special
counsel to the Holders of Registrable Securities and make such changes in any
such document prior to the filing thereof as the Initial Purchaser or counsel to
the Holders of Registrable Securities may reasonably request and, except as
otherwise required by applicable law, not file any such document in a form to
which the Initial Purchaser on behalf of the Holders of Registrable Securities
and counsel to the Holders of Registrable Securities shall not have previously
been advised and furnished a copy of or to which the Initial Purchaser on behalf
of the Holders of Registrable Securities or counsel to the Holders of
Registrable Securities shall reasonably object, and make the representatives of
the Company available for discussion of such documents as shall be reasonably
requested by the Initial Purchaser; and
(ii) in the case of a Shelf Registration, a reasonable time
prior to filing any Shelf Registration Statement, any Prospectus forming a part
thereof, any amendment to such Shelf Registration Statement or amendment or
supplement to such Prospectus, provide copies of such document to the Holders of
Registrable Securities, to the Initial Purchaser, to counsel for the Holders and
to the underwriter or underwriters of an underwritten offering of Registrable
Securities, if any, make such changes in any such document prior to the filing
thereof as the Initial Purchaser, the special counsel to the Holders or the
underwriter or underwriters reasonably request and not file any such document in
a form to which the Majority Holders, the Initial Purchaser on behalf of the
Holders of Registrable Securities, to the special counsel for the Holders of
Registrable Securities or any underwriter shall not have previously been advised
and furnished a copy of or to which the Majority Holders, the Initial Purchaser
on behalf of the Holders of Registrable Securities, the special counsel to the
Holders of Registrable Securities or any underwriter shall reasonably object,
and make the representatives of the Company available for discussion of such
document as shall be reasonably requested by the Holders of Registrable
Securities, the Initial Purchaser on behalf of such Holders, the special counsel
for the Holders of Registrable Securities or any underwriter;
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<PAGE> 17
(r) in the case of a Shelf Registration, use its best efforts to cause
all Registrable Securities to be listed on any securities exchange on which
similar debt securities issued by the Company are then listed if requested by
the Majority Holders, or if requested by the underwriter or underwriters of an
underwritten offering of Registrable Securities, if any;
(s) in the case of a Shelf Registration, use its best efforts to cause
the Registrable Securities to be rated by the appropriate rating agencies, if so
requested by the Majority Holders, or if requested by the underwriter or
underwriters of an underwritten offering of Registrable Securities, if any;
(t) otherwise comply with all applicable rules and regulations of the
SEC and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering at least 12 months which shall
satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;
(u) cooperate and assist in any filings required to be made with the
NASD and, in the case of a Shelf Registration, in the performance of any due
diligence investigation by any underwriter and its counsel (including any
"qualified independent underwriter" that is required to be retained in
accordance with the rules and regulations of the NASD); and
(v) upon consummation of an Exchange Offer or a Private Exchange,
obtain a customary opinion of counsel to the Company addressed to the Trustee
for the benefit of all Holders of Registrable Securities participating in the
Exchange Offer or Private Exchange, and which includes an opinion that (i) the
Company has duly authorized, executed and delivered the Exchange Securities
and/or Private Exchange Securities, as applicable, and the related indenture,
and (ii) each of the Exchange Securities and related indenture constitute a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its respective terms (with customary exceptions).
In the case of a Shelf Registration Statement, the Company may (as a
condition to such Holder's participation in the Shelf Registration) require each
Holder of Registrable Securities to furnish to the Company such information
regarding the Holder and the proposed distribution by such Holder of such
Registrable Securities as the Company may from time to time reasonably request
in writing.
In the case of a Shelf Registration Statement, each Holder agrees that,
upon receipt of any notice from the Company of the happening of any event or the
discovery of any facts, each of the kind described in Section 3(e)(v) hereof,
such Holder will forthwith discontinue disposition of Registrable Securities
pursuant to a Registration Statement until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 3(k) hereof,
and, if so directed by the Company, such Holder will deliver to the Company (at
its expense) all copies in such Holder's possession, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
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<PAGE> 18
In the event that the Company fails to effect the Exchange Offer or
file any Shelf Registration Statement and maintain the effectiveness of any
Shelf Registration Statement as provided herein, the Company shall not file any
Registration Statement with respect to any securities (within the meaning of
Section 2(1) of the 1933 Act) of the Company other than Registrable Securities.
If any of the Registrable Securities covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the underwriter or
underwriters and manager or managers that will manage such offering will be
selected by the Majority Holders of such Registrable Securities included in such
offering and shall be acceptable to the Company. No Holder of Registrable
Securities may participate in any underwritten registration hereunder unless
such Holder (a) agrees to sell such Holder's Registrable Securities on the basis
provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
4. Indemnification; Contribution.
(a) The Company agrees to indemnify and hold harmless the Initial
Purchaser, each Holder, each Participating Broker-Dealer, each Person who
participates as an underwriter (any such Person being an "Underwriter") and each
Person, if any, who controls any Holder or Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment or supplement thereto)
pursuant to which Exchange Securities or Registrable Securities were
registered under the 1933 Act, including all documents incorporated
therein by reference, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arising out of any untrue
statement or alleged untrue statement of a material fact contained in
any Prospectus (or any amendment or supplement thereto) or the omission
or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 4(d) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by any
indemnified party), reasonably incurred in
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<PAGE> 19
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Holder or Underwriter expressly for use in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto).
(b) Each Holder severally, but not jointly, agrees to indemnify and
hold harmless the Company, the Initial Purchaser, each Underwriter and the other
selling Holders, and each of their respective directors and officers, and each
Person, if any, who controls the Company, the Initial Purchaser, any Underwriter
or any other selling Holder within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, against any and all loss, liability, claim, damage
and expense described in the indemnity contained in Section 4(a) hereof, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Shelf Registration Statement (or any
amendment thereto) or any Prospectus included therein (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
with respect to such Holder furnished to the Company by such Holder expressly
for use in the Shelf Registration Statement (or any amendment thereto) or such
Prospectus (or any amendment or supplement thereto); provided, however, that no
such Holder shall be liable for any claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Registrable Securities
pursuant to such Shelf Registration Statement.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action or proceeding commenced
against it in respect of which indemnity may be sought hereunder, but failure so
to notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. Any indemnifying
party may participate at its own expense in the defense of such action;
provided, however, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying party or parties be liable for the fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgement with respect to
any litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 4 (whether or
not the
-18-
<PAGE> 20
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 4(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) If the indemnification provided for in this Section 4 is for any
reason unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, liabilities, claims, damages or expenses referred to
therein, then each indemnifying party shall contribute to the aggregate amount
of such losses, liabilities, claims, damages and expenses incurred by such
indemnified party, as incurred, in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and the Holders and the
Initial Purchaser on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative fault of the Company on the one hand and the Holders and
the Initial Purchaser on the other hand shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company, the Holders or the Initial Purchaser and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company, the Holders and the Initial Purchaser agree that it would
not be just and equitable if contribution pursuant to this Section 4 were
determined by pro rata allocation (even if the Initial Purchaser 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 in this Section
4. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 4 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 4, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities sold
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<PAGE> 21
by it were offered exceeds the amount of any damages which such Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.
No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 4, each Person, if any, who controls an
Initial Purchaser or Holder within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
Initial Purchaser or Holder, and each director of the Company, and each Person,
if any, who controls the Company within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to contribution as
the Company. The Initial Purchaser' respective obligations to contribute
pursuant to this Section 7 are several in proportion to the principal amount of
Securities set forth opposite their respective names in Schedule A to the
Purchase Agreement and not joint.
5. Miscellaneous.
5.1 Rule 144 and Rule 144A. For so long as the Company is subject to
the reporting requirements of Section 13 or 15 of the 1934 Act, the Company
covenants that it will file the reports required to be filed by it under the
1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules and
regulations adopted by the SEC thereunder. If the Company ceases to be so
required to file such reports, the Company covenants that it will upon the
request of any Holder of Registrable Securities (a) make publicly available such
information as is necessary to permit sales pursuant to Rule 144 under the 1933
Act, (b) deliver such information to a prospective purchaser as is necessary to
permit sales pursuant to Rule 144A under the 1933 Act and it will take such
further action as any Holder of Registrable Securities may reasonably request,
and (c) take such further action that is reasonable in the circumstances, in
each case, to the extent required from time to time to enable such Holder to
sell its Registrable Securities without registration under the 1933 Act within
the limitation of the exemptions provided by (i) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, (ii) Rule 144A under the 1933 Act,
as such Rule may be amended from time to time, or (iii) any similar rules or
regulations hereafter adopted by the SEC. Upon the request of any Holder of
Registrable Securities, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
5.2 No Inconsistent Agreements. The Company has not entered into and
the Company will not after the date of this Agreement enter into any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not and will not for the term of
this Agreement in any way conflict with the rights granted to the holders of the
Company's other issued and outstanding securities under any such agreements.
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<PAGE> 22
5.3 Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or departure.
5.4 Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (a) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 5.4, which address initially is the address set forth in the Purchase
Agreement with respect to the Initial Purchaser; and (b) if to the Company,
initially at the Company's address set forth in the Purchase Agreement, and
thereafter at such other address of which notice is given in accordance with the
provisions of this Section 5.4.
All such notices and communications shall be deemed to have
been duly given: at the time delivery by hand, if personally delivered; two
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopies; and
on the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the person giving the same to the Trustee
under the Indenture, at the address specified in such Indenture.
5.5 Successor and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Purchase Agreement or the Indenture.
If any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement, including the restrictions on resale set forth in this Agreement
and, if applicable, the Purchase Agreement, and such person shall be entitled to
receive the benefits hereof.
5.6 Third Party Beneficiaries. The Initial Purchaser (even if
the Initial Purchaser are not Holders of Registrable Securities) shall be third
party beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Holders, on the other hand, and shall have the right to
enforce such agreements directly to the extent they deem such enforcement
necessary or advisable to protect their rights or the rights of Holders
hereunder. Each Holder of Registrable Securities shall be a third party
beneficiary to the agreements made hereunder between the Company,
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<PAGE> 23
on the one hand, and the Initial Purchaser, on the other hand, and shall have
the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights hereunder.
5.7 Specific Enforcement. Without limiting the remedies
available to the Initial Purchaser and the Holders, the Company acknowledges
that any failure by the Company to comply with its obligations under Sections
2.1 through 2.4 hereof may result in material irreparable injury to the Initial
Purchaser or the Holders for which there is no adequate remedy at law, that it
would not be possible to measure damages for such injuries precisely and that,
in the event of any such failure, the Initial Purchaser or any Holder may obtain
such relief as may be required to specifically enforce the Company's obligations
under Sections 2.1 through 2.4 hereof.
5.8 Restriction on Resales. Until the expiration of two years
after the original issuance of the Securities and the Guarantees, the Company
and the Guarantor will not, and will cause their "affiliates" (as such term is
defined in Rule 144(a)(1) under the 1933 Act) not to, resell any Securities and
Guarantees which are "restricted securities" (as such term is defined under Rule
144(a)(3) under the 1933 Act) that have been reacquired by any of them and shall
immediately upon any purchase of any such Securities and Guarantees submit such
Securities and Guarantees to the Trustee for cancellation.
5.9 Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
5.10 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
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<PAGE> 24
5.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
5.12 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
-23-
<PAGE> 25
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CLASSIC COMMUNICATIONS, INC.
By: /s/ STEVEN E. SEACH
----------------------------------------
Name: Steven E. Seach
-----------------------------------
Title: President
----------------------------------
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BY: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ TASTRAM E. COLLINS
----------------------------------------
Name: Tastram E. Collins
-----------------------------------
Title: Vice President
----------------------------------
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<PAGE> 26
Exhibit A
FORM OF OPINION OF COUNSEL
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
We have acted as counsel for Classic Communications, Inc., a Delaware
corporation (the "Company"), in connection with the sale by the Company to the
Initial Purchaser (as defined below) of units consisting of $59,979,960 gross
proceeds ($114,000,000 in aggregate principle amount at maturity) of 13 1/4%
Senior Discount Notes due 2009 (the "Notes") of the Company and 342,000 shares
of Common Stock of the Company pursuant to the Purchase Agreement dated as of
July 29, 1998 (the "Purchase Agreement") among the Company and Merrill Lynch,
Pierce, Fenner & Smith Incorporated (the "Initial Purchaser") and the filing by
the Company of an Exchange Offer Registration Statement (the "Registration
Statement") in connection with an Exchange Offer to be effected pursuant to the
Registration Rights Agreement (the "Registration Rights Agreement"), dated as of
July 29, 1998 between the Company and the Initial Purchaser. This opinion is
furnished to you pursuant to Section 3(f)(B) of the Registration Rights
Agreement. Unless otherwise defined herein, capitalized terms used in this
opinion that are defined in the Registration Rights Agreement are used herein as
so defined.
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion. In rendering this opinion, as to
all matters of fact relevant to this opinion, we have assumed the completeness
and accuracy of, and are relying solely upon, the representations and warranties
of the Company set forth in the Purchase Agreement and the statements set forth
in certificates of public officials and officers of the Company, without making
any independent investigation or inquiry with respect to the completeness or
accuracy of such representations, warranties or statements, other than a review
of the certificate of incorporation, bylaws and relevant minute books of the
Company.
Based on and subject to the foregoing, we are of the opinion that:
1. The Exchange Offer Registration Statement and the
Prospectus (other than the financial statements, notes or schedules thereto and
other financial data and supplemental schedules included or incorporated by
reference therein or omitted therefrom and the Form T-1, as to which we need
express no opinion), comply as to form in all material respects with the
<PAGE> 27
requirements of the 1933 Act and the applicable rules and regulations
promulgated under the 1933 Act.
2. We have participated in the preparation of the Registration
Statement and the Prospectus and in the course thereof have had discussions with
representatives of the Underwriters, officers and other representatives of the
Company and Ernst & Young, LLP, the Company's independent public accountants,
during which the contents of the Registration Statement and the Prospectus were
discussed. We have not, however, independently verified and are not passing
upon, and do not assume any responsibility for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectus. Based on our participation as described above, nothing has come to
our attention that would lead us to believe that the Registration Statement
(except for financial statements and schedules and other financial data included
therein as to which we make no statement) 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 or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included therein, as to which
we make no statement), at the time the Prospectus was issued, at the time any
such amended or supplemented Prospectus was issued or at the Closing Time,
included or includes an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
This opinion is being furnished to you solely for your benefit in
connection with the transactions contemplated by the Registration Rights
Agreement, and may not be used for any other purpose or relied upon by any
person other than you. Except with our prior written consent, the opinions
herein expressed are not to be used, circulated, quoted or otherwise referred to
in connection with any transactions other than those contemplated by the
Registration Rights Agreement by or to any other person.
Very truly yours,
<PAGE> 1
EXHIBIT 4.3B
- -------------------------------------------------------------------------------
SHAREHOLDERS AND REGISTRATION RIGHTS
AGREEMENT
Dated as of July 29, 1998
among
CLASSIC COMMUNICATIONS, INC.
AND
CERTAIN STOCKHOLDERS
AND
MERRILL, LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
- -------------------------------------------------------------------------------
<PAGE> 2
SHAREHOLDERS AND REGISTRATION RIGHTS AGREEMENT
THIS SHAREHOLDERS AND REGISTRATION RIGHTS AGREEMENT (the "Agreement")
is made and entered into as of July 29, 1998, among CLASSIC COMMUNICATIONS,
INC., a Delaware corporation ("Holdings"), J. MERRITT BELISLE ("Belisle"),
STEVEN E. SEACH ("Seach"), and BRYAN D. NOTEBOOM ("Noteboom") (Belisle, Seach
and Noteboom are collectively known as "Management Stockholders"), BT CAPITAL
PARTNERS, INC., a Delaware corporation ("BT Capital"), UNION BANCAL VENTURE
CORPORATION, a Delaware corporation ("Union Bancal"), AUSTIN VENTURES, L.P., a
Delaware limited partnership ("Austin"), AUSTIN VENTURES III-A, L.P., a Delaware
limited partnership ("Austin III-A"), AUSTIN VENTURES III-B, L.P., a Delaware
limited partnership ("Austin III-B"; Austin, Austin Ill-A, and Austin III-B are
collectively referred to as "Austin Ventures"), TEXAS GROWTH FUND ("Growth
Fund"), NATIONSBANC CAPITAL CORP. ("NationsBanc"), a Texas corporation (Austin,
Austin III-A, Austin III-B, Union Bancal, Growth Fund, BT Capital and
NationsBanc are collectively referred to as the "Investors" and individually as
an "Investor,") and MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED ("Initial Purchaser"). The Management Stockholders and Investors
are collectively referred to as the "Stockholders" and individually as a
"Stockholder").
This Agreement is made pursuant to the Purchase Agreement, dated as of
July 22, 1998, between Holdings and the Initial Purchaser (the "Initial
Purchaser"), relating to the sale by Holdings to the Initial Purchaser of an
aggregate of 114,000 Units, each unit consisting of $ 1,000 principal amount
13-1/4% Senior Discount Notes due 2009 (the "Discount Notes") and three shares
(342,000 shares in the aggregate, the "Shares") of Common Stock, par value $0.01
per share, of Holdings. In order to induce the Initial Purchaser to enter into
the Purchase Agreement, Holdings has agreed to provide to the Initial Purchaser
and its direct and indirect transferees (the "Holders"), among other things, the
registration rights for the Common Stock set forth in this Agreement and the
Stockholders have agreed to provide the Holders, among other things, the
take-along rights for the Common Stock set forth herein. The execution of this
Agreement is a condition to the obligations of the Initial Purchaser to purchase
the Units under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1 . Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"Affiliate" means, when used with reference to any, Person, any
other Person directly or indirectly controlling, controlled by, or
under direct or indirect common control with, the referent Person or
such other Person, as the case may be. For the purposes of this
definition, "control" when used with respect to any specified Person
means the power to direct or cause the direction of management or
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"affiliated, "controlling" and "controlled" have meanings correlative of
the foregoing. Neither the Initial Purchaser nor any of its Affiliates
shall be deemed to be an Affiliate of Holdings or of any of its
Subsidiaries or Affiliates.
<PAGE> 3
"Business Day" shall mean a day that is not a Legal Holiday.
"Capital Stock" means any and all shares, interests, participations, or
other equivalents (however designated) of corporate stock of Holdings, including
each class of common stock and preferred stock of Holdings, together with any
warrants, rights, or options to purchase or acquire any of the foregoing.
"Closing Date" shall mean the Closing Date as defined in the Purchase
Agreement.
"Common Stock" shall mean the common stock, par value $0.1 per share of
Holdings.
"Company" shall mean Classic Cable, Inc., a Delaware corporation and
Holdings' wholly owned subsidiary.
"Definitive Certificate" shall mean a certificate representing Shares
in definitive registered form, other than a Global Certificate.
"Demand Registration" shall have the meaning set forth in Section 2.1.
"Depository" shall mean, with respect to Shares represented by one or
more Global Certificates, The Depository Trust Company or another person
designated as Depository by Holdings, which must be a clearing agency registered
under the Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Fair Market Value" of a share of Common Stock on any date means (i)
the average of the last reported sale prices for a period of 20 consecutive
trading days ending 5 days prior to such date of the high and low sale prices
(or if no sales are reported, the average of the bid and ask prices or, if more
than one in either case, the average of the closing bid and closing ask prices),
as reported in the composite transactions for the New York Stock Exchange, or
(ii) if the Common Stock is not listed or admitted to trading on such exchange,
as reported in the composite transactions for the principal national or regional
United States securities exchange on which the security is listed or admitted to
trading or, (iii) if the Common Stock is not listed or admitted to trading on a
United States national or regional securities exchange, as reported by NASDAQ or
by the National Quotation Bureau Incorporated or, (iv) if the Common Stock is
not listed or traded on any national securities exchange and prices for the
security are not reported by NASDAQ or the National Quotation Bureau
Incorporated, the value as determined (without any discount for lack of
liquidity, the amount of Common Stock proposed to be sold or the fact that the
shares of Common Stock held by any Holder of such Common Stock may represent a
minority interest in a private company) by a nationally recognized investment
banking firm selected by Holdings for the determination of such value.
-2-
<PAGE> 4
"Global Certificate" shall mean a certificate representing all or part
of the Shares issued to the Depository.
"Holder" shall mean the Initial Purchaser, for so long as it owns any
Common Stock, and each of its successors, assigns and direct and indirect
transferees who become registered owners of Common Stock.
"Holdings" shall have the meaning set forth in the preamble and shall
also include Holdings' successors.
"Indenture" means the Indenture, dated July 29, 1998 between Holdings
and Banc One, N.A., as trustee.
"Initial Purchaser" shall have the meaning set forth in the preamble.
"Legal Holiday" shall mean a Saturday, a Sunday or a day on which
banking institutions in New York, New York are required by law, regulation or
executive order to remain closed. If a payment date is a Legal Holiday, payment
may be made on the next succeeding day that is not a Legal Holiday.
"Management Stockholders" shall have the meaning set forth in the
preamble and shall include any of such Person's Permitted Transferees.
"Non-Qualified Transferee" shall mean any person that is not a
Permitted Transferee.
"Permitted Transferees" shall mean (A) the Permitted Holders as that
term is defined in the Indenture and (B) Holdings.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Piggy-Back Registration" shall have the meaning set forth in Section
2.2.
"Purchase Agreement" shall have the meaning set forth in the preamble.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Registrable Securities" shall mean any of (i) the Shares and (ii)
Common Stock or other securities issued or issuable with respect to any
Registrable Securities by way of stock dividend or stock split or in connection,
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (i) a Registration
Statement with respect to such securities shall have been declared effective
under the Securities Act and, such securities shall have been disposed of
pursuant to such Registration Statement, (ii) such securities have been sold to
the public
-3-
<PAGE> 5
pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A)
under the Securities Act, (iii) such securities shall have been otherwise
transferred by such holder and new certificates for such securities not bearing
a legend restricting further transfer shall have been delivered by Holdings or
its transfer agent and subsequent disposition of such securities shall not
require registration or qualification under the Securities Act or any similar
state law then in force or (iv) such securities shall have ceased to be
outstanding.
"Registration Expenses" shall mean all expenses incident to Holdings'
performance of or compliance with this Agreement, including, without limitation,
all SEC and stock exchange or National Association of Securities Dealers, Inc.
registration and filing fees and expenses, fees and expenses of compliance with
securities or blue sky laws (including, without limitation, reasonable fees and
disbursements of counsel for the underwriters in connection with blue sky
qualifications of the Registrable Securities), rating agency fees, printing
expenses, messenger, telephone and delivery expenses, fees and disbursements of
counsel for Holdings and all independent certified public accountants, the fees
and disbursements of underwriters customarily paid by issuers or sellers of
securities (but not including any underwriting discounts or commissions or
transfer taxes, if any, attributable to the sale of Registrable Securities by
Holders of such Registrable Securities) and other reasonable out-of-pocket
expenses of Holders.
"Registration Statement" shall mean any registration statement of
Holdings which covers any of the Shares pursuant to the provisions of this
Agreement and all amendments and supplements to any such Registration Statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Regulation S" shall mean Regulation S under the Securities Act.
"Requisite Shares" shall mean a number of Registrable Securities equal
to not less than 25% of the Registrable Securities held in the aggregate by all
Holders.
"Restricted Security" shall have the meaning set forth in Rule
144(a)(3) under the Securities Act.
"Rule 144" shall mean Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
"Rule 144A" shall mean Rule 144A under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
"SEC" shall mean the Securities and Exchange Commission.
-4-
<PAGE> 6
"Securities Act" shall mean the Securities Act of 19' )3, as amended
from time to time.
"Selling-Holder" shall mean a Holder who is selling Shares in
accordance with the provision of Section 2.2, 2.3, 3.3 or 3.4 hereof.
"Separability Date" shall have the meaning ascribed in Section 3.6
hereof.
"Shares" shall have the meaning set forth in the preamble.
"Shelf Registration" shall have the meaning set forth in Section 2.4.
"Stockholders" shall have the meaning set forth in the preamble and
shall include any of such Person's Permitted Transferees.
"Trading-Day" means each day on which the securities exchange or
quotation system which is used to determine Fair Market Value is open for
trading or quotation.
"Transfer Agent" means American Stock Transfer & Trust Company and any
successor transfer agent or registrar for the Common Stock.
2. Registration Rights.
2.1 Demand Registration.
(a) Request for Registration. At any time after the 180th day following
the earlier of (i) the listing of the Common Stock on any national securities
exchange or the inclusion for trading of the Common Stock in NASDAQ or (ii) an
initial public offering pursuant to an effective registration statement under
the Securities Act of Common Stock, Holders owning, individually or in the
aggregate, at least the Requisite Shares may make a written request for
registration under the Securities Act of their Registrable Securities (a "Demand
Registration"). Any such request will specify the number of Registrable
Securities proposed to be sold and will also specify the intended method of
disposition thereof Holdings shall give written notice of such registration
request within 10 days after the receipt thereof to all other Holders. Within 20
days after receipt of such notice by any Holder, such Holder may request in
writing that Registrable Securities be included in such registration and
Holdings shall include in the Demand Registration the Registrable Securities of
any such Selling Holder requested to be so included (the "Included Shares").
Each such request by such other Selling Holders shall specify the number of
Included Shares proposed to be sold and the intended method of disposition
thereof. Subject to Section 2.1(c), Holdings shall be required to register
Registrable Securities pursuant to this Section 2.1 on a maximum of three
separate occasions.
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(b) Effective Registration. A registration will not be deemed
to have been effected as a Demand Registration unless it has been declared
effective by the SEC and Holdings has complied in all material respects with its
obligations under this Agreement with respect thereto; provided that if, after
it has become effective, the offering of Registrable Securities pursuant to such
registration is or becomes the subject of any stop order, injunction or other
order or requirement of the SEC or any other governmental or administrative
agency, or if any court prevents or otherwise limits the sale of Registrable
Securities pursuant to the registration (for any reason other than the act or
omissions of the Selling Holders), such registration will be deemed not to have
been effected. If (i) a registration requested pursuant to this Section 2.1 is
deemed not to have been effected or (ii) the registration requested pursuant to
this Section 2.1 does not remain effective for a period of at least 90 days
beyond the effective date thereof or until the consummation of the distribution
by the Selling Holders of the Included Shares, then Holdings shall continue to
be obligated to effect an additional registration pursuant to this Section 2.1.
The Selling Holders of Registrable Securities shall be permitted to withdraw all
or any part of the Included Shares from a Demand Registration at any time prior
to the effective date of such Demand Registration. If at any time a Registration
Statement is filed pursuant to a Demand Registration, and subsequently a
sufficient number of Included Shares are withdrawn from the Demand Registration
so that such Registration Statement does not cover at least 25% of the
Registrable Securities held by all Holders, the Selling Holders who have not
withdrawn their Included Shares shall have the opportunity to include an
additional number of Registrable Securities in the Demand Registration so that
such Registration Statement covers at least 25% of the Registrable Securities
held by all Holders. If an additional number of Registrable Securities is not so
included, Holdings may withdraw the Registration Statement. Such withdrawn
Registration Statement will not count as a Demand Registration and Holdings
shall continue to be obligated to effect a registration pursuant to this Section
2.1.
(c) Priority in Demand Registrations Pursuant to Section 2.1.
If a Demand Registration pursuant to this Section 2.1 involves an underwritten
offering and the managing underwriter advises Holdings in writing that, in its
opinion, the number of securities requested to be included in such registration
(including securities of Holdings which are not Registrable Securities) exceeds
the number which can be sold in such offering, Holdings will include in such
registration only the Registrable Securities requested to be included in such
registration. In the event that the number of Registrable Securities requested
to be included in such registration exceeds the number which, in the opinion of
such managing underwriter, can be sold, the number of such Registrable
Securities to be included in such registration shall be allocated pro rata in
proportion to the respective number of shares requested to be registered to the
extent necessary to reduce the total number of shares requested to be included
in such offering to the number of shares, if any, recommended by such managing
underwriter. In the event that the number of Registrable Securities requested to
be included in such registration is less than the number which, in the opinion
of the managing underwriter, can be sold, Holdings may include in such
registration the securities Holdings proposes to sell up to the number of
securities that, in the opinion of the underwriter, can be sold.
(d) Selection of Underwriter. If the Selling Holders so elect,
the offering of such Registrable Securities pursuant to such Demand Registration
shall be in the form of an underwritten offering. The Selling Holders making
such Demand Registration shall select one or more nationally recognized firms of
investment bankers, who shall be reasonably acceptable to Holdings, to act as
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<PAGE> 8
the managing Underwriter or Underwriters in connection with such offering and
shall select any additional investment bankers and managers to be used in
connection with the offering.
(e) Expenses. Holdings will pay all Registration Expenses in
connection with the registrations requested pursuant to Section 2.1(a). Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to a registration statement requested pursuant to this
Section 2.1.
2.2 Piggy-Back Registration. If at any time Holdings proposes
to file a Registration Statement under the Securities Act with respect to an
offering by Holdings for its own account or for the account of any of its
respective security holders of any class of its common equity securities (other
than (i) a Registration Statement on Form S-4 or S-8 (or any substitute form
that may be adopted by the SEC), (ii) a Registration Statement filed in
connection with an exchange offer or offering of securities solely to Holdings'
existing security holders or (iii) a Demand Registration or Shelf Registration),
then Holdings shall give written notice of such proposed filing to the Holders
of Registrable Securities as soon as practicable (but in no event less than 20
days before the anticipated filing date), and such notice shall offer such
Holders the opportunity to register such number of shares of Registrable
Securities as each such Holder may request (which request shall specify the
Registrable Securities intended to be disposed of by such Selling Holder) (a
"Piggy-Back Registration"). Holdings shall use its best efforts to cause the
managing Underwriter or Underwriters of such proposed underwritten offering to
pen-nit the Registrable Securities requested to be included in a Piggy-Back
Registration to be included on the same terms and conditions as any similar
securities of Holdings or any other security holder included therein and to
permit the sale or other disposition of such Registrable Securities in
accordance with the intended method of distribution thereof Any Selling Holder
shall have the right to withdraw its request for inclusion of its Registrable
Securities in any Registration Statement pursuant to this Section 2.2 by giving
written notice to Holdings of its request to withdraw. Holdings may withdraw a
Piggy-Back Registration at any time prior to the time it becomes effective,
provided that Holdings shall give prompt notice thereof to participating Selling
Holders. Holdings will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 2.2,
and each Holder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities pursuant to a registration statement effected pursuant to
this Section 2.2.
No registration effected under this Section 2.2, and no
failure to effect a registration under this Section 2.2, shall relieve Holdings
of its obligation to effect a registration pursuant to Section 2.1 or Section
2.5.
2.3 Reduction of Offering,
(a) Piggy-Back Registration. If the managing Underwriter or
Underwriters of any underwritten offering described in Section 2.2 have
informed, in writing. the Selling Holders of the Registrable Securities
requesting inclusion in such offering that it is their opinion that the total
number of shares which Holdings, the Selling Holders and any other Persons
desiring to participate
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<PAGE> 9
in such registration intend to include in such offering is such as to materially
and adversely affect the success of such offering, including the price at which
such securities can be sold, then the number of shares to be offered for the
account of the Selling Holders and all such other Persons (other than Holdings)
participating in such registration shall be reduced or limited pro rata in
proportion to the respective number of shares requested to be registered to the
extent necessary to reduce the total number of shares requested to be included
in such offering to the number of shares, if any, recommended by such managing
Underwriters; provided. however, that if such offering is effected for the
account of any security holder of Holdings other than the Selling Holders,
pursuant to the demand registration rights of any such security holder, then the
number of shares to be offered for the account of Holdings (if any) and the
Selling Holders (but not such security holders who have exercised their demand
registration rights) shall be reduced or limited pro rata in proportion to the
respective number of shares requested to be registered to the extent necessary
to reduce the total number of shares requested to be included in such offering
to the number of shares, if any, recommended by such managing Underwriters.
(b) If, as a result of the proration provisions of this
Section 2.3, any Selling Holder shall not be entitled to include all Registrable
Securities in a Piggy-Back Registration that such Selling Holder has requested
to be included, such Selling Holder may elect to withdraw his request to include
Registrable Securities in such registration (a "Withdrawal Election"); provided,
however, that a Withdrawal Election shall be irrevocable and, after making a
withdrawal Election, a Selling Holder shall no longer have any right to include
Registrable Securities in the registration as to which such Withdrawal Election
was made.
2.4 Shelf Registration. If prior to August 1, 2003, Holdings
has not completed an initial public offering of its Common Stock, Holdings shall
prepare and file with the SEC a registration statement for an offering to be
made on a continuous basis pursuant to Rule 415 covering all of the Registrable
Securities (the "Shelf Registration") and take all steps necessary to cause such
Shelf Registration to become effective and to permit the Holders to dispose of
Registrable Securities Holdings shall file with the SEC the Shelf Registration
on or prior to 30 days after such date (the "Filing Date"). The Shelf
Registration shall be on the appropriate form permitting registration of such
Registrable Securities for resale by the Holders thereof in the manner or
manners designated by them (including, without limitation, one or more
underwritten offerings). Holdings shall use its best efforts to cause the Shelf
Registration to be declared effective under the Securities Act on or prior to 60
days after the Filing Date (the "Effectiveness Date") and to keep the Shelf
Registration continuously effective under the Securities Act until (i) the date
which is 36 months following the date on which the Shelf Registration was
initially declared effective by the SEC (the "Effectiveness Period"), or (ii)
such shorter period ending when all Registrable Securities covered by the Shelf
Registration have been sold, provided that the Effectiveness Period shall be
extended to the extent required solely to permit dealers to comply with the
applicable prospectus delivery requirements under Rule 174 under the Securities
Act in connection with sales of Common Stock other than sales pursuant to the
Shelf Registration.
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<PAGE> 10
3. Transfers of Shares.
3.1 Generally. All Shares at any time and from time to time
outstanding shall be held subject to the conditions and restrictions set forth
in this Agreement. the provisions of which shall apply equally to the
Stockholders and their transferees (except as otherwise expressly stated), and
each Stockholder by executing this Agreement or by accepting a certificate
representing shares of Common Stock or other indicia of ownership therefor from
Holdings agrees with Holdings and with each other Stockholder to such conditions
and restrictions.
3.2 Restrictions on Transfer.
(a) No Stockholder shall sell, assign, give, transfer,
exchange, convert, devise, bequeath, pledge or otherwise dispose of
(collectively, "transfer") any Shares or any interest therein except (A) in
compliance with Sections 3.5 and 3.6 and (B)(i) to a Permitted Transferee, (ii)
in a transaction that complies with Section 3.3 or (iii) pursuant to an
effective Registration Statement under the Securities Act. Each certificate
representing shares of Common Stock shall contain conspicuous notation on such
certificate indicating that the transfer of such shares of Common Stock is
subject to the terms and restrictions of this Agreement, and each Stockholder
consents to the placement of such legend on the certificate or certificates
representing the shares of Common Stock owned by such Stockholder.
(b) Each Holder agrees that it will not transfer any Shares or
any interest therein except in compliance with Sections 3.5 and 3.6.
3.3 Take-Along Rights.
(a) In the event that, after the Separability Date, any of the
Stockholders proposes to transfer (other than in a bona fide public distribution
pursuant to an effective Registration Statement under the Securities Act) in a
single transaction or a series of related transactions a number of shares of
Common Stock greater than or equal to 10% of the shares of Common Stock
collectively owned by the Stockholders on the date hereof to a Non-Qualified
Transferee, such Stockholders (the "Selling Stockholders") shall give written
notice (the "Take-Along, Notice") to the Holders of Common Stock (the
"Non-Selling Stockholders") stating (i) the name and address of the
Non-Qualified Transferee, (ii) the price and terms upon which the Non-Qualified
Transferee proposes to purchase Shares owned by any Stockholder and (iii) the
number of shares proposed to be transferred to the Non-Qualified Transferee. The
Non-Selling Stockholders each shall have the irrevocable and exclusive option,
but not the obligation (the "Take-Along Option"), to sell to the Non-Qualified
Transferee, up to such number of Shares proposed to be sold by the Selling
Stockholders (the "Included Shares") determined in accordance with Section
3.3(b), at the price and on the terms set forth in the Take-Along Notice. The
Take-Along Option shall be exercised by any or all of the Non-Selling
Stockholders by giving written notice to the Selling Stockholders proposing to
make such transfer, within ten business days of receipt of the Take-Along
Notice. indicating its election to exercise the Take-Along Option (the
"Participating Stockholders"). Failure by any Non- Selling Stockholder to give
such notice within the ten business day period shall be deemed an election by
such Non-Selling Stockholder not to sell its Shares pursuant to that Take-Along
Notice.
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<PAGE> 11
The closing with respect to any sale to a Non-Qualified Transferee pursuant to
this Section shall be held at the time and place specified in the Take-Along
Notice but in any event within 30 days of the date the Take-Along Notice is
given; provided that if through the exercise of reasonable efforts the Selling
Stockholders are unable to cause such transaction to close within 30 days, such
period may be extended for such reasonable period of time as may be necessary to
close such transaction. Consummation of the sale of shares by any Selling
Stockholder to a Non-Qualified Transferee shall be conditioned upon consummation
of the sale by each Participating Stockholder to such NonQualified Transferee of
the Included Shares, if any. As used in this Section 3 )3(a), the term
"transfer" shall be deemed to include all transactions or series of transactions
pursuant to which beneficial ownership of Common Stock is succeeded, directly or
indirectly, to a Non-Qualified Transferee, regardless of the number or type of
intermediate entities or transactions between a Management Stockholder and such
Non-Qualified Transferee.
(b) The number of Shares purchased from each Participating
Stockholder and the Selling Stockholders and the number of shares of Common
Stock purchased from each other Person (the "Other Take-Along Persons") who has
a right to sell and who has exercised such night to sell shares of Common Stock
pursuant to the Amended and Restated Stockholders Agreement, dated as of October
31, 1995, and as amended by Amendment No. 1, Amendment No. 2 and Amendment No. 3
thereto (the "Amended 1995 Shareholder Agreement") among Holdings and the
Stockholders, shall be determined by multiplying the aggregate number of Shares
proposed to be purchased from the Selling Stockholders or their Permitted
Transferees by a Non-Qualified Transferee by a fraction, the numerator of which
is the total number of Shares owned by such Participating Stockholder or such
Selling Stockholder or the total number of shares of Common Stock owned by such
Other Tag- Along Persons, as the case may be, and the denominator of which is
the sum of the total number of Shares owned by all Participating Stockholders,
the total number of Shares owned by the Selling Stockholders and the total
number of shares of Common Stock owned by the Other Tag-Along Persons. In the
event that any Participating Stockholder shall elect to sell less than the
maximum number of Shares he is entitled to sell pursuant to the provisions of
this Section 3.3(b) then each other Participating Stockholder and each Other
Tag-Along Person shall have the right to sell additional Shares and shares of
Common Stock, as the case may be, pro rata. according to the respective number
of Shares and shares of Common Stock offered for sale by the Participating
Stockholders and the Other Tag-Along Persons.
(c) The Selling Stockholders who are parties to a sale to a
Non-Qualified Transferee shall arrange for payment directly by the Non-Qualified
Transferee to each Participating Stockholder, upon delivery of the certificate
or certificates representing the Shares duly endorsed for transfer, together
with such other documents as the Non-Qualified Transferee may reasonably
request. The reasonable costs and expenses incurred by the Selling Stockholders
and Participating Stockholders in connection with a sale of Shares subject to
this Section 3.3 shall be allocated pro rata based upon the number of shares
sold by each Stockholder to a Non-Qualified Transferee; provided that the costs
and expenses shall not include the fees and expenses of more than one law firm,
which firm shall be selected by the Selling Stockholders and shall be counsel of
recognized national standing representing the interests of the Selling
Stockholders and the Participating Stockholders, unless representation of the
Selling Stockholders and the Participating Stockholders by the same counsel, due
to actual or potential differing interests between them, shall create a conflict
of interest, in which
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<PAGE> 12
case the costs and expenses shall include the reasonable fees and expenses of
one additional law firm designated by Participating Stockholders proposing to
sell a majority of the Shares proposed to be sold by all Participating
Stockholders.
(d) If at the end of 30 days following the date on which a
Take-Along Notice was given, or as otherwise extended pursuant to the provisions
of Section 3.3(a), the sale of shares of Common Stock by the Selling
Stockholders and the sale of the Included Shares have not been completed in
accordance with the terms of the Non-Qualified Transferee's offer, all
certificates representing the Included Shares shall be returned to the
Participating Stockholders, and all the restrictions on sale, transfer or
assignment contained in this Agreement with respect to Shares owned by the
Selling Stockholders shall again be in effect.
3.4 Obligation to Sell Under Certain Circumstances.
(a) In the event that, after the Separability Date, the
Investors determine to transfer all of the Common Stock then owned, beneficially
or of record, by them in the aggregate to a Non-Qualified Transferee other than
a bona fide public distribution pursuant to an effective Registration Statement
under the Securities Act, the Investors shall have the right to require the
Holders to sell all of the Shares then held by them to such Non-Qualified
Transferee subject to the satisfaction of all of the following conditions: (i)
the consideration per share of Common Stock or equivalent to be received by the
Holders shall be cash or readily marketable securities which, upon receipt by a
Holder, will be freely transferable and not subject to any restriction on the
sale or disposition thereof-, (ii) the consideration to be received by the
Holders shall be identical to the consideration per share of Common Stock or
equivalent to be received by the Stockholders; (iii) the consideration per Share
to be received by the Holders shall not be less than the Fair Market Value per
share of the Common Stock; and (iv) after giving effect to such transaction, the
Investors shall not own, directly or indirectly, any common equity security, or
any warrant, options or other rights convertible into or exercisable for common
equity security, of the transferee entity except as received as part of the
consideration paid to all holders of Common Stock in such transaction.
(b) The Investors who are parties to a sale subject to this
Section 3.4, shall arrange for payment directly to each Holder, upon the closing
of such sale and delivery of the certificate or certificates representing the
Shares held by such Holder duly endorsed for transfer, together with such other
documents as the buyer of the Common Stock may reasonably request. The
reasonable costs and expenses incurred by the Stockholders and the Holders in
connection with a sale of Shares subject to this Section 3.4 shall be paid by
Holdings; provided that the costs and expenses shall not include the cost of
more than one law firm, which firm shall be selected by Holdings and shall be
counsel of recognized national standing.
(c) The Holders shall not be required to make any
representation or warranty in connection with any sale Shares pursuant to this
Section 3.4, except, as to each Holder, representations concerning such Holder's
title to the Shares to be transferred by it and such Holder's ability to
transfer such Shares.
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3.5 Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Definitive Certificates. Holdings
and the Transfer Agent shall not be obligated to register the transfer or
exchange of any Definitive Certificate that is a Restricted Security unless such
Shares are delivered to the Transfer Agent duly endorsed or accompanied by
written instruments of transfer and are accompanied by the following additional
information and documents, as applicable:
(A) if such Restricted Security is being
delivered to the Transfer Agent by a holder
for registration in the name of such holder,
without transfer, a certification from such
holder to that effect (in substantially the
form of Exhibit A hereto); or
(B) if such Restricted Security is being
transferred to a Qualified Institutional
Buyer in accordance with Rule 144A or
pursuant to an exemption from registration
in accordance with Rule 144, a certification
to that effect (in substantially the form of
Exhibit A hereto); or
(C) if such Restricted Security is being
transferred in reliance on another exemption
from the registration requirements of the
Act, a certification to that effect (in
substantially the form of Exhibit A hereto)
and an Opinion of Counsel reasonably
acceptable to Holdings and to the Transfer
Agent to the effect that such transfer is in
compliance with the Securities Act.
(b) Restrictions on Transfer of a Definitive Certificate for a
Beneficial Interest in a Global Certificate. A Definitive Certificate may not be
exchanged for a beneficial interest in a Global Certificate except upon
satisfaction of the requirements set forth below. Upon receipt by the Transfer
Agent of a Definitive Certificate, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Transfer Agent, together
with:
(A) if such Definitive Certificate represents
Restricted Securities, certification,
substantially in the form of Exhibit A
hereto, that such Definitive Certificate is
being transferred to a Qualified
Institutional Buyer (as defined in Rule
144A) in accordance with Rule 144A; and
(B) whether or not such Definitive Certificate
represents Restricted Securities, written
instructions directing the Transfer Agent to
make, or to direct the Depositary to make,
an endorsement on the Global Certificate to
reflect an increase in the aggregate number
of shares of Common Stock represented by the
Global Certificate,
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<PAGE> 14
then the Transfer Agent shall cancel such Definitive Certificate and cause, or
direct the Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Transfer Agent, the number of
shares of Common Stock represented by the Global Certificate to be increased
accordingly. If no Global Certificate is then outstanding, Holdings shall issue
and the Transfer Agent shall authenticate a new Global Certificate in the
appropriate amount.
(c) Transfer and Exchange of Global Certificate. The transfer
and exchange of a Global Certificate or beneficial interests therein shall be
effected through the Depositary, in accordance with this Agreement (including
the restrictions on transfer set forth herein) and the procedures of the
Depositary therefor.
(d) Transfer of a Beneficial Interest in a Global Certificate
for a Definitive Certificate.
(i) Subject to Section 3.6, any person having a
beneficial interest in a Global Certificate may upon
request exchange such beneficial interest for a
Definitive Certificate. Upon receipt by the Transfer
Agent of written instructions or such other form of
instructions as is customary for the Depositary from
the Depositary or its nominee on behalf of any person
having a beneficial interest in a Global Certificate
and upon receipt by the Transfer Agent of a written
order or such other form of instructions as is
customary for the Depositary or the person designated
by the Depositary as having such a beneficial
interest containing registration instructions and, in
the case of a beneficial interest in shares that are
Restricted Securities only, the following additional
information and documents:
(A) If such beneficial interest is being
transferred to the person designated by the
Depositary as being the beneficial owner, a
certification from such person to that
effect (in substantially the form of Exhibit
A hereto); or
(B) if such beneficial interest is being
transferred to a qualified institutional
buyer (as defined in Rule 144A) in
accordance with Rule 144A or pursuant to an
exemption from registration in accordance
with Rule 144 or pursuant to an effective
registration statement under the Securities
Act, a certification to that effect from the
transferee or transferor (in substantially
the form of Exhibit A hereto); or
(C) if such beneficial interest is being
transferred in reliance on another exemption
from the registration requirements of the
Securities Act, a certification to that
effect from the transferee or transferor (in
substantially the form of Exhibit A hereto)
and an opinion of counsel from the
transferee or transferor reasonably
acceptable to Holdings
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<PAGE> 15
and to the Transfer Agent to the effect that
such transfer is in compliance with the Act,
then the Transfer Agent will cause, in accordance with the
standing instructions and procedures existing between the
Depositary and the Transfer Agent, the aggregate amount of the
Global Certificate to be reduced and, following such
reduction, Holdings will execute and, upon receipt of an
authentication order in the form of an Officers' Certificate
(as defined), the Transfer Agent will authenticate and deliver
to the transferee a Definitive Certificate.
(ii) Definitive Certificates issued in exchange for a beneficial
interest in a Global Certificate pursuant to this Section
3.5(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Transfer Agent in writing. The
Transfer Agent shall deliver such Definitive Certificates to
the persons in whose names such Definitive Certificates are
registered.
(e) Restrictions on Transfer and Exchange of Global Certificates.
Notwithstanding any other provisions of this Agreement (other than the
provisions set forth in subsection (f) of this Section 3.5), a Global
Certificate may not be transferred as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Issuance of Definitive Certificates in Absence of Depository. If at
anytime:
(i) the Depositary for the Global Certificates notifies Holdings
that the Depositary is unwilling or unable to continue as
Depositary for the Global Certificates and a successor
Depositary for the Global Certificates is not appointed by
Holdings within 90 days after delivery of such notice; or
(ii) Holdings, at its sole discretion, notifies the Transfer Agent
in writing that it elects to cause the issuance of Definitive
Certificates under this Agreement and such action would not
cause the Common Stock to be ineligible for trading in the
Private Offering, Resales and Trading through Automated
Linkages ("PORTAL") Market,
then Holdings will execute, and the Transfer Agent, upon receipt of an officers'
certificate signed by two officers of Holdings (one of whom must be the
principal executive officer, principal financial officer or principal accounting
officer) (an "Officers' Certificate") requesting the authentication and delivery
of Definitive Certificates, will authenticate and deliver Definitive
Certificates, in an aggregate number equal to the aggregate number of shares
represented by the Global Certificate, in exchange for such Global Certificate.
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(g) Legends.
(i) Except as permitted by the following paragraph (ii), each
Definitive Certificate (and all shares of Common Stock issued
in exchange therefor or substitution thereof) shall bear a
legend substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT
OF. U.S. PERSONS EXCEPT AS SET FORTH BELOW. EACH
PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT
THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE ACT) OR (B) IT IS AN "INSTITUTIONAL ACCREDITED
INVESTOR" (AS DEFINED IN RULE 5 01 (a)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT), (2) AGREES THAT IT
WILL NOT WITHIN TWO YEARS AFTER THE LATER OF ORIGINAL
ISSUANCE OF THIS SECURITY AND THE LAST DATE THE
SECURITY WAS HELD BY AN AFFILIATE OF THE COMPANY
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A)
TO HOLDINGS OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE ACT, (C) INSIDE
THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR
HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER)
TO THE TRANSFER AGENT A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRANSFER AGENT), (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND (3) AGREES
THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS
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<PAGE> 17
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE
OF THIS SECURITY IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRANSFER AGENT
AND HOLDINGS SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
ACT.
(ii) Upon any sale or transfer of any share of Common Stock that is
a Restricted Security (including any Restricted Security
represented by a Global Certificate) pursuant to Rule 144
under the Securities Act or an effective registration
statement under the Securities Act:
(A) in the case of any Restricted Security
represented by a Definitive Certificate, the
Transfer Agent shall permit the holder
thereof to exchange such Restricted Security
for a Definitive Certificate that does not
bear the first paragraph of the legend set
forth above and rescind any related
restriction on the transfer of such
Restricted Security; and
(B) any Restricted Security represented by a
Global Certificate shall not be subject to
the provisions set forth in (i) above (such
sales or transfers being subject only to the
provisions of Section 3.5(c) through (f);
provided, however, that with respect to any
request for an exchange of a Restricted
Security that is represented by a Global
Certificate for a Definitive Certificate
that does not bear the first paragraph of
the legend set forth above, which request is
made in reliance upon Rule 144, the holder
thereof shall certify in writing to the
Transfer Agent that such request is being
made pursuant to Rule 144 (such
certification to be substantially in the
form of Exhibit A hereto).
(iii) Any Global Certificate shall bear a legend (which
would be in addition to any other legends required in
the case of a Restricted Security) in substantially
the following form:
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<PAGE> 18
THIS SECURITY IS A GLOBAL CERTIFICATE AND IS
REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE
OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE SHAREHOLDERS AND
REGISTRATION RIGHTS AGREEMENT DATED AS OF JULY
29,1998 AMONG THE ISSUER, MERRILL, LYNCH, PIERCE.
FENNER & SMITH INCORPORATED AND THE STOCKHOLDERS
PARTY THERETO (THE "SHAREHOLDERS AGREEMENT"), AND NO
TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF
THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF
THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE SHAREHOLDERS
AGREEMENT.
UNLESS THE CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
(h) Cancellation and/or Adjustment of a Global Certificate. At
such time as all beneficial interests in a Global Certificate have either been
exchanged for Definitive Certificates, redeemed, repurchased or canceled, such
Global Certificate shall be returned to or retained and canceled by the Transfer
Agent. At any time prior to such cancellation, if any beneficial interest in
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<PAGE> 19
a Global Certificate is exchanged for Definitive Certificates, redeemed,
repurchased or canceled, the number of shares of Common Stock represented by
such Global Certificate shall be reduced and an endorsement shall be made on
such Global Certificate, by the Transfer Agent to reflect such reduction.
(i) Obligations with Respect to Transfers and Exchanges
of Definitive Certificates.
(i) To permit registrations of transfers and exchanges,
Holdings shall execute. at the Transfer Agent's
request, and the Transfer Agent shall countersign and
register Definitive Certificates and Global
Certificates.
(ii) All Definitive Certificates and Global Certificates
issued upon any registration, transfer or exchange of
Definitive Certificates or Global Certificates shall
be validly issued, fully paid and nonassessable.
3.6 Separation of Shares from Discount Notes.
(a) The Discount Notes and Shares offered pursuant to the
Purchase Agreement will initially be represented by a single certificate and
will not be separately transferable prior to the close of business on the
earlier of (the "Separability Date") (i) February 1, 1999, (ii) the date a
registration statement with respect to a registered exchange offer for the
Discount Notes or covering the sale by Holders of the Discount Notes is declared
effective under the Securities Act, (iii) the occurrence of an Event of Default
with respect to the Discount Notes or (iv) such earlier date as may be
determined by the Initial Purchaser and specified to the Transfer Agent and
Holdings in writing, at which time such Shares shall be separately transferable.
3.7 Issuances of Common Stock. Holdings covenants and agrees
that it will not issue any shares of Common Stock or of capital stock for less
than its fair market value as determined in good faith by Holdings' Board of
Directors, other than pursuant to any issuance of Common Stock pursuant to the
exercise of options and warrants outstanding as of the date of this Agreement.
3.8 Waiver of Certain Provisions. The Company and the
Stockholders hereby waive the requirement in Section 3.4 of the Amended 1995
Shareholder Agreement with respect to the Shares and any other provision of such
agreement or any other agreement between the Company and the Stockholders which
conflicts with the provisions of this Agreement.
4. Registration Procedures. In connection with the obligations
of Holdings with respect to any Registration Statement pursuant to Sections 2.1,
2.2 and 2.4 hereof, Holdings shall:
(a) prepare and file with the SEC a Registration
Statement on the appropriate form under the Securities Act, which form (i) shall
be selected by Holdings and (ii) shall comply as to form in all material
respects with the requirements of the applicable form and include all financial
statements required by the SEC to be filed therewith, and Holdings shall use its
best
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<PAGE> 20
efforts to cause such Registration Statement to become effective and remain
effective in accordance with Section 2 hereof and for such additional period as
may be required pursuant to Section 6 hereof,
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement effective for the applicable period, cause each
Prospectus to be supplemented by any required prospectus supplement and, as so
supplemented, to be filed pursuant to Rule 424 under the Securities Act;
(c) furnish to each Holder of Registrable Securities
and to each underwriter of an underwritten offering of Registrable Securities,
if any, without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and such other
documents as such Holder or underwriter may reasonably request, in order to
facilitate the public sale or other disposition of the Registrable Securities;
(d) use their best efforts to register or qualify the
Registrable Securities under all applicable state securities or Blue Sky laws of
such jurisdictions as any Holder thereof covered by a Registration Statement
shall reasonably request in writing by the time the applicable Registration
Statement is declared effective by the SEC, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such Holder to
consummate the disposition in each such jurisdiction of such Registrable
Securities owned by such Holder; provided, however, that Holdings shall not be
required to (i) qualify as a foreign corporation or as a dealer in securities in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 4(d), (ii) file any general consent to service of process or (iii)
subject itself to taxation in any such jurisdiction if it is not so subject;
(e) notify each Holder of Registrable Securities
promptly and, if requested by such Holder, confirm such advice in writing (i)
when a Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of any request by the
SEC or any state securities authority for amendments and supplements to a
Registration Statement and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the SEC or
any state securities authority of any stop order suspending the effectiveness of
a Registration Statement or the initiation of any proceedings for that purpose,
(iv) if, between the effective date of a Registration Statement and the closing
of any sale of Registrable Securities covered thereby, the representations and
warranties of Holdings contained in any underwriting agreement, securities sales
agreement or other similar agreement, if any, relating to the offering cease to
be true and correct in all material respects or if Holdings receives any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose and (v) of the happening of any event during the
period a Registration Statement is effective which makes any statement made in
such Registration Statement or the related Prospectus untrue in any material
respect or which requires the making of any changes in such Registration
Statement or Prospectus in order to make the statements therein not misleading;
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<PAGE> 21
(f) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of a Registration Statement
at the earliest possible moment;
(g) furnish to each Holder of Registrable Securities
and to the Purchaser, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (with documents
incorporated therein by reference or exhibits thereto);
(h) cooperate with the Selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends and registered in such names as the selling Holders may reasonably
request at least two business days prior to the closing of any sale of
Registrable Securities:
(i) upon (A) the occurrence of any event contemplated
by Section 4(e)(v) hereof or (B) the availability of audited financial
statements of Holdings for any fiscal year (and in no event later than is
required to cause the Prospectus to comply with Section I O(a) of the Securities
Act), use reasonable efforts to prepare a supplement or post-effective amendment
to a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that Holdings shall not be required to amend or supplement a Registration
Statement, any related Prospectus or any document incorporated therein by
reference in the event that, and for so long as, an event occurs and is
continuing as a result of which the Registration Statement, any related
Prospectus or any document incorporated therein by reference as then amended or
supplemented would, in Holdings' good faith judgment, contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein not misleading in light of the circumstances
under which they are made. Holdings agrees to notify each Holder to suspend use
of the Prospectus as promptly as practicable after the occurrence of such an
event, and each Holder hereby agrees to suspend use of the Prospectus until
Holdings has amended or supplemented the Prospectus to correct such misstatement
or omission. At such time as such public disclosure is otherwise made or
Holdings determines in good faith that such disclosure is not necessary,
Holdings agrees promptly to notify each Holder of such determination, to amend
or supplement the Prospectus if necessary to correct any untrue statement or
omission therein and to furnish each Holder such numbers of copies of the
Prospectus as so amended or supplemented as each Holder may reasonably request;
(j) A reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus or any document which is to
be incorporated by reference into a Registration Statement or a Prospectus after
initial filing of a Registration Statement, provide copies of such document to
the Holders and make available for discussion of such document the
representatives of Holdings as shall be reasonably requested by the Holders of
Registrable Securities;
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<PAGE> 22
(k) Enter into an underwriting agreement in form,
scope and substance as is customary in underwritten offerings and take all such
other actions as are reasonably requested by the managing underwriters in order
to expedite or facilitate the registration or the disposition of such
Registrable Securities, and in such connection, (i) make such representations
and warranties to the underwriters, with respect to the business of Holdings and
its subsidiaries, and the Registration Statement, prospectus and documents, if
any, incorporated or deemed to be incorporated by reference therein, in each
case, in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
requested; (ii) obtain opinions of counsel to Holdings and updates thereof
(which counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters), addressed to the underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by underwriters;
(iii) obtain "cold comfort" letters and updated thereof from the independent
certified public accountants of Holdings (and, if necessary, any other
independent certified public accountants of any subsidiary of Holdings or of any
business acquired by Holdings for which financial statements and financial data
are, or are required to be, included in the Registration Statement), addressed
to each of the underwriters such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings; and (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures no less
favorable than those set forth in Section 5 hereof (or such other provisions and
procedures acceptable to holders of a majority of Registrable Securities covered
by such Registration Statement and the managing underwriters or agents) with
respect to all parties to be indemnified pursuant to said Section. The above
shall be done at each closing under such underwriting agreement, or as and to
the extent required thereunder;
(1) Make available for inspection by a representative
of the Holders of Registrable Securities being sold, any underwriter
participating in any such disposition of Registrable Securities, if any, and any
attorney or accountant retained by such representative of the holders or
underwriter (collectively, the "Inspectors"), at the offices where normally
kept, during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of Holdings and its subsidiaries,
and cause the officers, directors and employees of Holdings and its subsidiaries
to supply all information in each case reasonably requested by any such
Inspector in connection with such Registration Statement;
(m) Comply with all applicable rules and regulations
of the SEC and make generally available to its security holders earnings
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 60 days after the end of any 12-month period (or 120 days after
the end of any 12-month period if such period is a fiscal year (i) commencing at
the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts underwritten offering and (ii)
if not sold to underwriters in such an offering, commencing on the first day of
the first fiscal quarter of the Company after the effective date of a
Registrable Statement, which statements shall cover said 12-month periods;
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<PAGE> 23
(n) if requested by the Holders in connection with
any Registration Statement, shall use its best efforts to cause (w) counsel for
Holdings to deliver an opinion relating to the Registration Statement and the
Common Stock, in customary form, (x) its officers to execute and deliver A
customary documents and certificates requested by a representative of the
Holders or any underwriter, as applicable and (y) its independent public
accountants to provide a comfort letter in customary form;
Holdings may, as a condition to such Holder's participation in
any Registration Statement, require each Holder of Registrable Securities to (i)
furnish to Holdings such information regarding the Holder and the proposed
distribution by such Holder of such Registrable Securities as Holdings may from
time to time reasonably request in writing and (ii) agree in writing to be bound
by this Agreement.
5. Indemnification and Contribution.
(a) Holdings agrees to indemnify and hold harmless each Holder
and each person, if any, who controls such Holder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, or is under
common control with, or is controlled by, such Holder, from and against all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred by any Holder or any such
controlling or affiliated person in connection with defending or investigating
any such action or claim) caused by an), untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (or any
amendment thereto) pursuant to which Registrable Securities were registered
under the Securities Act, or caused by an), omission or alleged omission to
state therein a material fact necessary to make the statements therein in light
of the circumstances under which they were made not misleading, or caused by any
untrue statement or alleged untrue statement of a material fact contained in any
Prospectus (as amended or supplemented if Holdings shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact necessary to make the statements
therein in light of the circumstances under which they were made not misleading,
except insofar as such losses, claims, damages or liabilities are causer by any
such untrue statement or omission or alleged untrue statement or omission based
upon information relating to any Holder furnished to Holdings in writing by such
Holder expressly for use in any such Registration Statement or Prospectus.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless Holdings, its directors, its officers and each
person, if any, who controls Holdings within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from Holdings to such Holder, but only with reference to
information relating to such Holder furnished to Holdings in writing by such
Holder expressly for use in any Registration Statement (or any amendment
thereto) or any Prospectus (or any amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either paragraph (a) or (b) above, such
person (the "indemnified party") shall promptly notify the person
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<PAGE> 24
against which such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the reasonable fees and disbursements of such counsel
relating to such proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified parry shall have mutually agreed in
writing to the retention of such counsel or (ii) the indemnifying party fails
promptly to assume the defense of such proceeding or fails to employ counsel
reasonably satisfactory to such indemnified party or parties or (iii) the named
parties to any such proceeding (including any impleaded parties) include both
such indemnified party or parties and the indemnifying parties or an affiliate
of the indemnifying parties or such indemnified parties, and there may be one or
more defenses available to such indemnified party or parties that are different
from or additional to those available to the indemnifying parties, in which
case, if such indemnified party or parties notifies the indemnifying parties in
writing that it elects to employ separate counsel of its choice at the expense
of the indemnifying parties, the indemnifying parties shall not have the right
to assume the defense thereof and such counsel shall be at the expense of the
indemnifying parties, it being understood, however, that unless there exists a
conflict among indemnified parties, the indemnifying parties shall not, in
connection with any one such proceeding or separate but substantially similar or
related proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for such indemnified party or parties. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written consent
but, if settled with such consent or if there be a final Judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is a party, and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 5 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by Holdings on the one hand and the Holders on the other hand
from the offering of such Registrable Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of Holdings on the one hand
and the Holders on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative fault of Holdings on the
one hand and the Holders on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
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<PAGE> 25
information supplied by Holdings or by the Holders and the parties, relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(e) Holdings and each Holder agrees that it would not be just
or equitable if contribution pursuant to this Section 5 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in paragraph (d) above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred (and not otherwise reimbursed) by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section II(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The remedies provided for in
this Section 5 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any indemnified party at law or in equity.
6. Market Making. Holdings shall give the Initial Purchaser notice of
its intention to file any Registration Statement hereunder not less than ten
business days prior to the filing thereof with the SEC. If the Initial Purchaser
or any of its Affiliates in the reasonable judgment of the Initial Purchaser
would be required to deliver a prospectus in connection with sales of Common
Stock following the sale of such Common Stock to the public pursuant to the
Registration Statement (other than solely as a result of the Initial Purchaser
acting as an underwriter or dealer in connection with the Registration
Statement), Holdings shall, upon the request of the Initial Purchaser, (i)
include in the Registration Statement and the related Prospectus a "Plan of
Distribution" section permitting the Initial Purchaser to use such Prospectus in
connection with sales of the Common Stock in the course of its trading
activities as a broker-dealer and (ii) notwithstanding an), other provision this
Agreement maintain the effectiveness of such Registration Statement and comply
with the provisions of Section 4 hereof with respect to the Registration
Statement until the Initial Purchaser advises Holdings that it is no longer
required to deliver a prospectus in connection with sales of the Common Stock.
If the Initial Purchaser exercises its rights under this
Section 6, it shall be deemed and shall have the rights of "Holder" of
Registrable Securities and a Holder under Section 4 hereof and indemnify
Holdings and be indemnified by Holdings as a Holder under Section 5 hereof.
7. Miscellaneous.
(a) No Inconsistent Agreements. Holdings has not entered into
nor will Holdings on or after the date of this Agreement enter into any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
Holdings' other issued and outstanding securities, if any, under any such
agreements.
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<PAGE> 26
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless Holdings has obtained the written consent of Holders of
at least a majority in aggregate principal amount of the outstanding Registrable
Securities affected by such amendment, modification, supplement, waiver or
consent; provided, however, a waiver or consent to departure from the provisions
hereof that relates exclusively to the rights of Holders of Registrable
Securities whose securities are being sold pursuant to a registration statement
and that does not directly or indirectly affect the rights of other Holders of
Registrable Securities may be given by the Holders of a majority of the
Registrable Securities proposed to be sold.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, Telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
Holdings by means of a notice given in accordance with the provisions of this
Section 7(c), which address initially is, with respect to the Initial Purchaser,
the address set forth in the Purchase Agreement; and (ii) if to Holdings,
initially at Holdings' address set forth in the Purchase Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 7(c), with a copy to Winstead Sechrest & Minick,
P.C., 100 Congress Avenue, Suite 800, Austin. Texas 78701-4042; Attention: Cary
Ferchill, Esq.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered, five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day, if timely delivered to an air courier guaranteeing
overnight delivery. Copies of all such notices, demands, or other communications
shall be concurrently delivered by the person giving the same to the Trustee
under the Indenture, at the address specified in such Indenture.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided, however, that nothing herein
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Securities in violation of the terms of the Purchase Agreement. If
any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, SUCH Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement and such person shall be entitled to receive the benefits hereof.
(E) THIRD PARTY BENEFICIARY. THE HOLDERS SHALL BE A THIRD
PARTY BENEFICIAL TO THE AGREEMENTS MADE HEREUNDER BETWEEN HOLDINGS AND THE
STOCKHOLDERS, ON THE ONE HAND, AND THE INITIAL PURCHASER, ON THE OTHER HAND, AND
THE INITIAL PURCHASER SHALL HAVE THE RIGHT TO ENFORCE SUCH AGREEMENTS DIRECTLY
TO THE EXTENT IT DEEMS SUCH ENFORCEMENT NECESSARY OR ADVISABLE TO PROTECT ITS
RIGHTS OR THE RIGHTS OF HOLDERS HEREUNDER.
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<PAGE> 27
(f) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(H) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED WITHIN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Specific Enforcement. Without limiting the remedies
available to the Initial Purchasers and the Holders, Holdings acknowledges that
any failure by Holdings to comply with its obligations under Section 2 hereof
may result in material irreparable injury to the Initial Purchasers or the
Holders for which monetary damages would not be adequate, that it would not be
possible to measure damages for such injuries precisely and that, in the event
of an), such failure, the Initial Purchasers or any Holder may obtain such
relief as may be required to specifically enforce Holdings' obligations under
Section 2.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CLASSIC COMMUNICATIONS, INC.
By: /s/ J. MERRITT BELISLE
------------------------------
J. Merritt Belisle
Chief Executive Officer
By: /s/ J. MERRITT BELISLE
------------------------------
J. Merritt Belisle
By: /s/ STEVEN E. SEACH
------------------------------
Steven E. Seach
By: /s/ BRYAN D. NOTEBOOM
------------------------------
Bryan D. Noteboom
-26-
<PAGE> 28
AUSTIN VENTURE, L.P.
By: AV PARTNERS, L.P.
By: /s/ JEFFERY C. GARVEY
------------------------------
Jeffery C. Garvey
General Partner
AUSTIN VENTURE III-A, L.P.
By: AV PARTNERS III, L.P.
By: /s/ JEFFERY C. GARVEY
-----------------------------
Jeffery C. Garvey
General Partner
AUSTIN VENTURE III-B, L.P.
By: AV PARTNERS III, L.P.
By: /s/ JEFFERY C. GARVEY
-----------------------------
Jeffery C. Garvey
General Partner
NATIONSBANC CAPITAL CORP.
By: /s/ ROBERT H. SHERIDAN
--------------------------------------
Robert H. Sheridan
Senior Vice President
TEXAS GROWTH FUND
By: /s/ JAMES J. KOZLOWSKI
--------------------------------------
James J. Kozlowski
President
BT CAPITAL PARTNERS, INC.
By: /s/ ROBERT J. MARAKOVITS
--------------------------------------
Robert J. Marakovits
President
MERRILL, LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ TRISTRAM E. COLLINS
--------------------------------------
Tristram E. Collins
Vice President
UNION BANCAL VENTURE CORPORATION
By: /s/ BILL GOOCH
--------------------------------------
Bill Gooch, Senior Vice President
By: /s/ ROBERT S. CLARKE
--------------------------------------
Robert S. Clarke, President
-27-
<PAGE> 29
Exhibit A
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF COMMON STOCK
Re: Common Stock (the "Common Stock")
of Classic Communications, Inc.
This Certificate relates to ___________ shares of Common Stock held
in*____________ book-entry or*___________ definitive form by (the
"Transferor").
The Transferor:*
[ ] has requested the Transfer Agent by written order to deliver in
exchange for its beneficial interest in the Global Certificate held by the
Depository a certificate or certificates representing shares of Common Stock
in definitive, registered form equal to its beneficial interest in the shares
of Common Stock represented by such Global Certificate (or the portion thereof
indicated above); or
[ ] has requested the Transfer Agent by written order to exchange or
register the transfer of a certificate or certificates representing shares of
Common Stock.
In connection with such request, the Transferor does hereby certify that
Transferor is familiar with the Shareholders and Registration Rights Agreement
("Agreement") relating to the shares of Common Stock and the restrictions on
transfers thereof as provided in Section 3.5 of such Agreement, and that the
transfer of shares of Common Stock requested hereby does not require
registration under the Securities Act (as defined below) because:
[ ] Such shares of Common Stock are being acquired for the
Transferor's own account, without transfer.
[ ] Such shares of Common Stock are being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act of 19')
3, as amended (the "Securities Act")), in reliance on Rule 144A.
[ ] Such shares of Common Stock are being transferred in accordance
with Rule 144 under the Securities Act.
-1-
<PAGE> 30
[ ] Such shares of Common Stock are being transferred pursuant to an
effective registration statement under the Securities Act.
[ ] Such shares of Common Stock are being transferred in reliance on
and in compliance with an exemption from the registration requirements of the
Securities Act, other than Rule 144A or Rule 144 or Regulation S under the
Securities Act. An opinion of counsel to the effect that such transfer does
not require registration under the Securities Act accompanies this
Certificate.
----------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-------------------------------------
Date:
------------------------
*Check applicable box.
-2-
<PAGE> 1
EXHIBIT 4.3C
CLASSIC COMMUNICATIONS, INC.
(formerly Classic Telecommunications, Corp.
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
"Agreement"), dated as of October 31, 1995, by and among CLASSIC COMMUNICATIONS,
INC. (formerly Classic Telecommunications Corp.), a Delaware corporation (the
"COMPANY"), J. MERRITT BELISLE ("BELISLE"), AUSTIN VENTURES, L.P., a Delaware
limited partnership ("AUSTIN"), AUSTIN VENTURES III-A, L.P., a Delaware limited
partnership ("AUSTIN III-A"), AUSTIN VENTURE III-B, L.P., a Delaware limited
partnership ("AUSTIN III-B"), Austin , Austin III-A and Austin III-B are
collectively referred to as "AUSTIN VENTURES"), BT CAPITAL PARTNERS, INC., a
Delaware corporation ("BT CAPITAL"), TEXAS GROWTH FUND, a trust fund created by
the Constitution of the State of Texas ("GROWTH FUND"), NATIONSBANC CAPITAL
CORP., a Texas corporation ("NATIONSBANC"), and THE CHASE MANHATTAN BANK, N.A.
("CHASE"). Austin, Austin III-A, Austin III-B, BT Capital, Growth Fund,
NationsBanc and Chase are collectively referred to as the "INVESTORS" and
individually as an "INVESTOR".
WHEREAS, the Investors are the owners of all of the issued and
outstanding capital stock of the Company and all warrants to acquire capital
stock of the Company: and
'WHEREAS. the Company, Austin Ventures. BT Capital. Growth Fund, NationsBanc and
Belisle are parties to that certain Registration Rights Agreement dated as of
October 15. 1995 the "Prior Agreement"); and
WHEREAS, the Company wishes to induce the Investors to recapitalize the
Company on and as of the date hereof by granting certain registration rights to
the Investors.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto agree as follows:
1. Definitions. As used herein the following defined terms shall have
the following respective meanings:
(a) The term "CAPITAL STOCK" means the Company's Voting Common Stock.
Nonvoting Common Stock and any other class of common stock created by the
Company in the future.
(b) The term "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
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<PAGE> 2
(c) The term "EXCHANGE ACT REGISTRATION STATEMENT" means a registration
statement filed with the SEC pursuant to the Exchange Act.
(d) The "HOLDERS" means any holder or holders of shares of Capital Stock
issued to the Investors.
(e) The term "INDEMNIFIED PARTY" has the meaning set forth in
subparagraph 6(c).
(r) The term "INDEMNIFYING PARTY" as the meaning set forth in
subparagraph 6(c).
(g) The term "NONVOTING COMMON STOCK" means the Company's Nonvoting
Common Stock, par value $0.01 per share.
(h) The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (as defined below) or the Exchange Act and
the declaration or ordering of the effectiveness of such registration statement.
(i) The term "REGISTRABLE SECURITIES" means all shares of Capital Stock
of the company which are Shares.
(j) The term "SEC" means the Securities and Exchange Commission.
(k) The term "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(1) The term "SHARES" means all shares of Capital Stock of the Company
held by the Investors or which the Holders shall have acquired by or through the
Investors (including such shares as may represent stock dividends or a stock
split or those acquired pursuant to any conversion right or preemptive right of
purchase).
(m) The term "VOTING COMMON STOCK" means the Company's Voting Common
Stock. par value $0.01 per share.
2. Company Registration.
(a) If at any time or from time to time the Company shall
determine to register any of its securities, either for its own account
or the account of a security holder or
2
<PAGE> 3
holders, in a registration statement covering the sale of Capital Stock
to the general public pursuant to an underwritten public offering
(except with respect to any registration filed on Form S-8, Form S-4 or
any successor forms thereto), the Company will: (i) give to each Holder
written notice thereof at least ninety (90) days before the initial
filing of such registration if such registration relates to the
Company's initial public offering of Capital Stock, or forty-five (45)
days before filing if such registration is a subsequent registration;
provided, however, in the case of a Registration Statement for Form S-3,
the company shall be required to give each Holder written notice of the
proposed filing thereof promptly after a decision to make such filing
has been made and in no event less than ten (10) business days prior to
filing: and (ii) use its best efforts to include in such registration
(and any related qualification under blue sky laws) and in any
underwriting involved therein, all the Registrable Securities specified
in a written request or requests made within thirty days after receipt
of such written notice from the Company, or, in the case of a
Registration Statement on Form S-3, within seven (7) business days after
receipt of such written notice, by any Holder or Holders, except as set
forth in subparagraph 2(b) below. The notice referred to in this
subparagraph shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under the
applicable blue sky or other state securities laws.
(b) The right of any holder to registration pursuant to this
Paragraph 2 shall be conditioned upon such Holder's participation in the
underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together
with the Company) enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by
the Company, and may, at their option, require that any or all of the
representations and warranties by and the covenants and other agreements
on the part of, the Company to and for the benefit of such underwriter
shall also be made to and for the benefit of such Holders. Such Holders
shall not be required to make any representations or warranties to or
agreements with the company or the underwriter other than those relating
to such Holders., their Shares and their intended methods of
distribution and information about such Holders provided by such Holders
for use in the registration statement. If requested by the underwriter,
the Holders will agree, for themselves and their affiliates, not to sell
or offer to sell any shares of their Capital Stock for a reasonable
period of time (not to exceed one hundred eighty (180) days) after the
effective date of the registration statement. Notwithstanding any other
provision of this Paragraph 2, if the underwriter determines that
marketing factors require a limitation of the numbers of shares to be
underwritten, the underwriter may limit the number of Registrable
Securities to be included in the registration and underwriting;
provided, however, that with respect to such registration, the
underwriter may not limit the amount of Registrable Securities included
in such registration and underwriting to less than an amount equal to
the product of (i) the total number of shares of Capital Stock held
3
<PAGE> 4
by all shareholders of the company (including the Holders) that are
proposed to be included such registration and underwriting and (ii) a
fraction, the numerator of which is the total number of Registrable
Securities held by all selling Holders and the denominator of which is
the total number of shares held by all selling shareholders (including
the selling Holders). The Company shall so advise all Holders of
Registrable Securities which would otherwise be registered and
underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the registration and underwriting
shall be allocated among all Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by
such Holders at the time of filing the registration statement. If any
selling shareholder withdraws from the registration and underwriting the
Company will include in any such registration a proportional number of
additional shares of Registrable Securities which were requested to be
included by a Holder and which were excluded pursuant to the
above-described underwriter limitation up to the maximum set by such
underwriter.
3. Requested Registration
(a) If at any time following the consummation of an initial public
offering of Capital Stock, the Company receives from any one (1) of (x)
Austin Ventures, (y) BT Capital, or (z) NationsBanc, a written request
that the Company effect a registration under the Securities Act with
respect to Registrable Securities, the Company will, as expeditiously as
possible, notify in writing all the Holders of such request and use its
diligent best efforts to effect all such registrations (Including,
without limitation, the execution of an undertaking to file
post-effective amendments and appropriate qualifications and approvals
under the laws and regulations applicable to the Company of any
applicable governmental agencies and authorities, including the
applicable blue sky or other state securities laws) as may be so
requested and as would permit or facilitate the sale and distribution of
all or such portion of the Registrable Securities as are specified in
such request, together with any Registrable Securities held by other
Holders who may desire to participate in such registration; provided,
however, that a Holder's request may not be made within three months
following the effectiveness of any registered public offering of Capital
Stock or within one hundred twenty (120) days following the Company's
receipt of any effective request for registration pursuant to this
subparagraph 3(a); and provided, further, that before filing any such
registration statement or any amendments or supplements thereto, the
Company will (x) furnish to the Holders of Registrable Securities which
are to be included in such registration copies of all such documents
proposed to be filed, which documents will be subject to the review of
such Holders and their counsel, and (y) give the Holders of Registrable
Securities to be included in such registration statement and their
representatives the opportunity to conduct a reasonable investigation of
the records and business of the Company and to participate in the
preparation of any such
4
<PAGE> 5
registration statement or any amendments or supplements thereto; and
provided, further, that after the Company has effect one such
registration pursuant to this subparagraph 3(a) at the request of the
Holders and such registration has been declared or ordered effective,
then at the request of any one (1) of (x) Austin Ventures, (y) BT
Capital, or (z) NationsBanc (other than the Investor that requested the
first registration pursuant to this subparagraph 3(a)), the Company
shall effect one (1) additional registration upon the same terms and
conditions as set forth in this subparagraph 3(a) for the initial
registration. With respect to any registration requested pursuant to
this paragraph 3, the company may include in such registration any other
shares of Capital Stock, subject to the restrictions set forth in
subparagraph 3(c) only upon the written consent of the Holders of a
majority of the shares of Registrable Securities being registered in the
registration.
(b) Subject to subparagraph 3(a) above and the other terms and
conditions contained herein, the Company shall file a registration
statement covering the Registrable Securities so requested to be
registered as soon as practicable, but in any event within ninety (90)
days after (i) receipt of the request or requests of the Holders or (ii)
the date on which the Holders agree, pursuant to subparagraph 3(c), on
the terms and conditions of an underwriting, if applicable, as evidenced
by its acceptance of a letter of intent describing such terms and
conditions, whichever is later; provided, however, that if the Company
shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of
Directors it would be seriously detrimental to the company and its
stockholders for such registration statement to be filed at the date
filing would be required hereunder and it is therefore essential to
defer the filing of such registration statement, the Company shall have
an additional period of not more than sixty(60) days within which to
file such registration statement (which additional period may be
extended to ninety (90) days if such deferral will materially reduce the
expenses of such registration due to the elimination of the need for any
special audits to be performed in connection with such registration.)
(c) If the Holders intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to
subparagraph 3(a). In such event. if so requested in writing by the
Company, the Holders shall negotiate in good faith with a nationally
recognized underwriter, or underwriters, or major regional underwriter
or underwriters acceptable to the Holders, selected by the Company and
reasonably satisfactory to the Holders with regard to the underwriting
of such requested registration; provided, however, that if the Holders
of the majority of shares to be registered have not agreed with such
underwriter(s), in their discretion. as to the terms and conditions of
such underwriting within thirty (30) days following commencement of such
negotiations, the Holders may select an underwriter of their choice. The
right of the Holders to registration pursuant to
5
<PAGE> 6
this Paragraph 3 shall be conditioned upon the Holder's participation in
such underwriting to the extent provided herein. The Company shall
(together with all Holders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected pursuant to
this Paragraph 3. Notwithstanding any other provision of this Paragraph
3, if the underwriter advises the Company in writing with a copy to the
Holders that marketing factors require a limitation of the number of
shares to be underwritten. the Company shall so advise all Holders. and
the Company will include in such registration up to the maximum allowed
by such underwriter (x) first. as many shares as possible of Registrable
Securities requested to be included by the applicable Holders. which
shall be allocated among all Holders thereof in proportion. as nearly as
practicable, to the respective amounts of Registrable Securities
entitled to inclusion in such registration held by such Holders at the
time of filing the registration statement, and (y) second, shares to be
sold by the Company or other holders of Capital Stock, if any. If any
Holder of Registrable Securities disapproves of the terms of the
underwriting, he may elect to withdraw therefrom by written notice to
the Company. the underwriter and the other Holders. In the event of any
such withdrawal, the Company will include in any such registration in
lieu thereof any additional shares of Registrable Securities which were
requested to be included by a Holder and which were excluded pursuant to
the above-described underwriter limitation up to the maximum set by such
underwriter.
(d) The Company will use its best efforts to do any and all other
acts which may be necessary or advisable to enable each selling Holder
to dispose of the Registrable Securities being sold including, without
limitation, furnishing to each such seller (x) the number of copies of
the registration statement and of the exhibits and the prospectus
contained therein reasonably requested by each such Holders, and (y)
signed counterparts, addressed to each such Holders, of an opinion of
the Company's counsel and a "cold comfort" letter of the Company's
independent certified public accountants with respect to the matters
customarily covered in such documents delivered to underwriters in
underwritten public offerings.
4. Expenses of Registration. All expenses incurred in connection with
any registration or qualification pursuant to this Agreement, including, without
limitation, all registration, filing and qualification fees, printing expenses,
fees and disbursements of counsel for the Company, and expenses and fees of any
special audits incidental to or required by such registration, shall be borne by
the Company; provided, however, that the Company shall not be required to pay
fees of legal counsel of the Holders, or underwriters' discounts or commissions
relating to registrable Securities (such underwriters' fees, discounts or
commissions to be borne by the Holders, on a pro rata basis, based on the number
of shares of Registrable Securities sold by each of them).
6
<PAGE> 7
5. Registration Procedures. In the case of each registration effected
by the Company pursuant to this Agreement, the Company will keep each Holder
participating therein advised in writing as to the initiation of such
registration (any state qualification) and as to the completion thereof.)
6. Indemnification.
(a) The Company will indemnify each Holder of Registrable
Securities. each of the Holder's officers directors. partners and
employees, and each person controlling such Holder. with respect to such
registration or qualification effected pursuant to this Agreement and in
which Registrable Securities of the Holders are included, against all
claims, losses, damages, and liabilities (or actions in respect thereto)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, registration
statement or other document incident to any such registration or
qualification. or based on 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, or any violation by the
Company of any rule or regulation promulgated pursuant to any Federal,
state or common law rule or regulation including, without limitations
the Securities Act, applicable to the Company and relating to action or
inaction required of the Company in connection with any such
registration. qualification or compliance and will reimburse each such
Holder, each of such Holder's officers. directors, partners, and
employees, and each person controlling such Holder, for any legal and
any other reasonable expenses incurred in connection with investigating
or defending any such claim. loss. damage, liability or action.
including reasonable attorneys fees and expenses; provided, however,
that the Company will not be liable in any such case to the extent that
any such claim, loss, damage or liability arises out of or is based on
any untrue statement or omission based upon and in conformity with
written information furnished to the company by such Holder in a signed
document. Such indemnity shall be effective notwithstanding any
investigation made by or on behalf of any Holder or any such officer,
director, partner, employee or controller person and shall survive any
transfer by the same of the Registrable Securities.
(b) Each Holder will, if Registrable Securities held by or issuable
to such Holder are included in the securities as to which such
registration or qualification is being effected, indemnify the Company,
each of its directors, officers and employees, each person who controls
the Company, and each other such Holder, each of such other Holder's
officers, directors, partners and employees, and each person controlling
such other Holder, against all claims, losses, damages and liabilities
(or actions in respect thereto) arising out of or based upon any untrue
statement (alleges untrue statement) of a material fact contained in any
such registration statement, prospectus or other document,
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<PAGE> 8
or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company, such Holders,
such directors, officers, partners, employees or persons for any legal
or any other reasonable expenses incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action, including reasonable attorneys' fees and expenses, in each case
to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in
such registration statement, prospectus or other document in reliance
upon and in conformity with written information furnished to the company
by such Holder. Notwithstanding the foregoing, the liability of any such
Holder shall not exceed an amount equal to the proceeds realized by each
such Holder of Registrable Securities sold as contemplated herein. Such
indemnity shall be effective notwithstanding any investigation made by
or on behalf of the company, any such director, officer, partner,
employee, or controlling person and shall survive the transfer of such
securities by such Holder.
(c) Each party entitled to indemnification under this Paragraph 6
(the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought. Unless in the reasonable judgment of the
Indemnified Party a conflict of interest may exist between the
Indemnifying Party and the Indemnified Party, the indemnifying Party
shall be permitted to assume the defense of any such claim or any
litigation resulting therefrom; provided, however, that in any event
counsel for the Indemnifying Party or Indemnified Party who shall
conduct the defense of such claim or litigation as provided above shall
be approved by the other Party (which approval shall not be unreasonably
withheld), and such other Party may participate in such defense at such
party's expense; provided, further, that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the
Indemnifying party of its obligations under this Paragraph 6 unless such
failure shall have had a material adverse effect on the Indemnifying
party's ability to defend such claim.
(d) The Indemnified Party shall make no settlement of any claim or
litigation which would give rise to liability on the part of the
Indemnifying Party under any indemnity contained in this Paragraph 6
without the written consent of the Indemnifying Party, which consent
shall not be unreasonably withhold or delayed, and no Indemnifying Party
shall make any settlement of any such claim or litigation without the
consent of the Indemnified Party, which consent shall not be
unreasonably withheld or delayed. If the Indemnified Party notifies the
Indemnifying Party in writing that the Indemnified Party desired to
accept and agree to such offer, but the Indemnifying Party elects not to
accept or agree to such offer within ten 910) days after receipt of
written notice from the Indemnified Party of the terms of such offer,
then, in such event, the Indemnified party
8
<PAGE> 9
shall continue to contest or defend such claim or litigation and, if
such claim or litigation is within the scope of the Indemnifying Party's
indemnity contained in this paragraph 6, the indemnified Party shall be
indemnified pursuant to the terms hereof. If a firm offer is made to
settle a claim or litigation defended by the Indemnifying Party and the
Indemnifying Party notifies the Indemnified Party in writing and the
Indemnifying Party desires to accept and agree to such offer, but the
Indemnified Party elects not to accept or agree to such offer within ten
910) days after receipt of written notice from the Indemnifying party of
the terms of such offer, then, in such event, the Indemnified Party may
continue to content or defend such claim or litigation and, in such
event, the total maximum liability of the Indemnifying Party to
indemnify or otherwise reimburse the Indemnified Party in accordance
with this Agreement with respect to such claim or litigation shall be
limited to and shall not exceed the amount of such settlement offer,
plus reasonable out-of-pocket costs and expenses (including reasonable
fees and disbursements of counsel) to the date of notice that the
Indemnifying Party desired to accept such settlement offer.
(e) The indemnification payments required pursuant to this
Paragraph 6 for expenses of the investigation or defense of a claim or
lawsuit shall be made from time to time during the course of the
investigation or defense, as the case may be, upon submission of
reasonably sufficient documentation that any such expenses have been
incurred.
7. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
written information regarding such Holder or Holders and the distribution
proposed by such Holder or Holders as the Company may reasonably request in
writing and as shall be required in connection with any registration or
qualification referred to in this Agreement. The Company agrees to include in
any such registration statement all information concerning the Holders and their
distribution which the Holders shall reasonably request.
8. Filing of Reports Under the Exchange Act. The Company shall give
prompt notice to the Holders of (a) the filing of any Exchange Act Registration
Statement relating to any class of equity securities of the company, and (b) the
effectiveness of such exchange Act Registration Statement, in order to enable
the Holders to comply with any reporting requirements under the Exchange Act or
the Securities Act. The Company shall, at any time after the Company shall
register any shares of Common Stock under the Securities Act and upon the
written request of the Holders, file an Exchange Act Registration Statement
relating to any class of equity securities of the Company then held by the
Holders or issuable upon conversion or exercise of any class of debt or equity
securities or warrant or options of the company then held by the Holders,
whether or not the class of equity securities with respect to which such request
is made shall be held by at least
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<PAGE> 10
the number of persons which would require the filing of a registration statement
under Section 12(g)(1) of the Exchange Act.
9. Rule 144 Reporting. With a view to making available to the Holders
benefits of certain rules and regulations of the SEC which may permit the sale
of the Shares to the public without registration, after the completion of any
registration pursuant to Paragraph 2 above, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any successor provision thereto,
at all times;
(b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities
Act and the Exchange Act;
(c) so long as a Holder owns any Shares (or other securities of the
company), to furnish to such Holder forthwith upon its request a written
statement by the Company as to the Company's compliance with the reporting
requirements of Rule 144 and of the Securities Act and the Exchange act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Company as such Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing such Holder to sell any such securities without registration; and
(d) take any further action reasonably requested by a Holder to
enable such Holder to sell its Registrable Securities without registration
under Rule 144, under any successor provision, or any similar rule or
regulation promulgated by the SEC from time to time.
10. Transfer of Registration Rights. The Rights to cause the Company to
register Registrable Securities that are granted by the Company under Paragraph
2 may be assigned by a Holder to a permitted transferee or assignee of any of
its Registrable Securities; provided, however, that the Company is given written
notice by the Holder at the time of or within a reasonable time after the
transfer, stating the name and address of the transferee or assignee and
identifying the securities with respect to which such registration rights are
being assigned. Subject to the foregoing provision, this Agreement shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assign; provided , further, that the registration
rights granted in this Agreement shall not be transferred to persons who
received Registrable securities pursuant to a registration statement under the
Securities Act or pursuant to a transaction under Rule 144 or any successor
provision thereto.
10
<PAGE> 11
11. Changes. The terms and provisions of this Agreement may not be
modified or amended, except that they may be modified or amended with the
written consent of (a) the Company and (b) the Holders of a majority of the
Shares outstanding. None of the terms and provisions of this Agreement may be
waived except in writing by the person so waiving.
12. Granting of Registration Rights. The Company shall not, without the
prior written consent of Holders of seventy-five percent (75%) of the Shares
then outstanding which have not already been registered , grant any rights to
any persons to register any shares of Capital stock or other securities of the
company if such rights could reasonably be expected to conflict with or be on
parity with the rights of the Holders of the Shares.
13. Governing Laws. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to the
principles of conflicts of law thereof.
14. Notice. All notices and other communications required or permitted to
be given in respect of this Agreement shall be deemed to have been given or made
if delivered personally or if mailed by registered or certified mail return
receipt requested, to the following parties at the following addresses, or, in
each case, at such other address or addresses as any party shall hereafter
specify by written notice to the others:
To the Company: Classic Communications, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Attn: J. Merritt Belisle
Facsimile No.: (512) 476-5204
With a copy (which shall
not constitute notice) to: Winstead Sechrest & Minick P.C.
100 Congress Avenue
Suite 800
Austin, Texas 78701
Attn: Cary Ferchill
Facsimile No: (512) 370-2841
To Belisle: J. Merritt Belisle
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Facsimile No.: (512) 476-5204
11
<PAGE> 12
With a copy (which shall
not constitute notice) to: Winstead Sechrest & Minick P.C.
100 Congress Avenue
Suite 800
Austin, Texas 78701
Attn: Cary ferchill
Facsimile No: (512) 370-2841
To Austin Ventures: Austin Ventures, L.P.
Austin Ventures III-A, L.P.
Austin Ventures III-B, L.P.
c/o Austin Ventures
1300 Norwood Tower
114 West 7th Street
Austin, Texas 78701
Attn: Jeffery C. Garvey
Facsimile No.: (512) 476-3952
To BT Capital: BT Capital partners, Inc.
280 Park Avenue
32 West
New York, New York 10015
Attn: Robert Marakovits
Facsimile No.: (512) 454-2421
To Growth Fund: Texas Growth Fund
c/o TGF Management Corp.
100 Congress, Suite 980
Austin, Texas 78701
Attn: James J. Kozlowski and
Steven M. Soileau
Facsimile No.: (512) 322-3101
12
<PAGE> 13
As to Austin Ventures,
BT Capital and Growth
Fund, with copies (which
shall not constitute notice
to: Edens, Snodgrass, Nichols & Breeland P.C.
111 Congress, 2800 Franklin Plaza
Austin, Texas 78701
Attn: Patrick K. Breeland, Esq.
Facsimile No.: (512) 595-5911
Jenkens & Gilchrist
2200 One American Center
600 Congress Avenue
Austin, Texas 78701
Attn: William Volk, Esq.
Facsimile No.: (512) 404-3520
To NationsBanc: NationsBanc Capital Corp.
NationsBanc Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Attn: Michael F. Elliott
Facsimile No.: (704) 386-6432
With a copy (which shall not
constitute notice to: Fennebresque, Clark, Swindell & Hay
NationsBanc Corporate Center
Suite 2900
100 North Tryon Street
Charlotte, North Carolina 28202-4011
Attn: Jeff S. Hay, Esq.
Facsimile No.: (704) 347-3838
To Chase: The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza, 10th Floor
New York, New York 10081
Attn: John P. White
Facsimile No.: (212) 552-7623
With a copy (which shall not
constitute notice) to: Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza, 47th Floor
New York, New York 10005
Attn: Richard J. Wight
Facsimile Nol: (212) 530-5219
13
<PAGE> 14
All such notices and communications, if mailed, shall be deemed to have been
given on the third business day after the mailing thereof.
15. Termination. This Agreement shall terminate with respect to any Holder
upon the later to occur of (a) ninety (90) days following the effective date of
a registration under the Securities Act or 9b) such Holder's ownership of Shares
falls below one percent (!) Of the issued and outstanding shares of Capital
Stock.
16. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original and which together shall constitute a single
agreement.
17. Headings. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part
hereof.
18. Severability. If any provision or any portion of any provision of this
Agreement shall be held to be void or unenforceable, the remaining portions of
this Agreement shall continue in full force and effect.
19. Prior Agreement. This Agreement supersedes and replaces in its
entirety the Prior Agreement.
IN WITNESS WHERE, the undersigned have cause this Amended and Restated
Registration Rights Agreement to be duly executed by their authorized officers
as of the day and year first above written.
CLASSIC TELECOMMUNICATIONS CORP.
By: /s/
----------------------------------------
Stephen S. Smith President
BELISLE:
/s/
-------------------------------------------
J. Merritt Belisle
14
<PAGE> 15
AUSTIN VENTURES, L.P.
By: AV Partners, L.P., Its General Partner
By: /s/
----------------------------------------
Jeffery C. Garvey
AUSTIN VENTURES III-A, L.P.
By: AV Partners III, L.P., Its General Partner
By: /s/
----------------------------------------
Jeffery C. Garvey
AUSTIN VENTURES III-B, L.P.
By: AV Partners III, L.P., Its General Partner
By: /s/
----------------------------------------
Jeffery C. Garvey
BT CAPITAL PARTNERS, INC.
By: /s/
---------------------------------------------
Robert Marakovits
Board of Trustees of TEXAS GROWTH FUND -
1991 Trust, as Trustees
By: TGF Management Corp.,
its Executive Directors
By: /s/
----------------------------------------
James J. Kozlowski, President
NATIONSBANC CAPITAL CORP.
By: /s/
---------------------------------------------
Michael F. Elliott, Sr. Vice President
CHASE MANHATTAN BANK
(National Association)
By: /s/
---------------------------------------------
John P. White, Vice President
15
<PAGE> 16
EXHIBIT A
[FORM OF SECURITY]
(Face of Security)
CUSIP No. 182728AC9
CLASSIC COMMUNICATIONS, INC.
-------------------------------------
13 1/4% SENIOR DISCOUNT NOTE DUE 2009
No. 1 $114,000,000
Classic Communications, Inc. hereby promises to pay to CEDE & CO. or
registered assigns the principal sum of ONE HUNDRED FOURTEEN MILLION DOLLARS on
the Maturity Date of August 1, 2009.
Interest Payment Dates: February 1 and August 1, commencing February 1, 2004
Record Dates: January 15 or July 15
Reference is hereby made to the further provisions on this Security set forth on
the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
IN WITNESS WHEREOF, Classic Communications, Inc. and Bank One, N.A.
have caused this instrument to be signed manually or by facsimile by each of
their respective duly authorized officers.
Dated: July 29, 1998
CLASSIC COMMUNICATIONS, INC., as Issuer
By:
-----------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
Certificate of Authentication:
This is one of the 13 1/4% Senior Discount Notes due 2009 referred to
in the within-mentioned Indenture.
BANK ONE, N.A., as Trustee
By Date of Authentication: July 29, 1998
----------------------------------
Authorized Signatory
<PAGE> 17
(Reverse Of Security)
CLASSIC COMMUNICATIONS, INC.
-------------------------------------
13 1/4% Senior Discount Note Due 2009
1. Interest.
Classic Communications, Inc., a Delaware corporation (the "Issuer")
promises to pay the principal of this Security on August 1, 2009. Beginning on
August 1, 2003, cash interest on the Securities will accrue at the rate of
13 1/4 per annum and will be payable semiannually in arrears on February 1 and
August 1, commencing February 1, 2004, to holders of record at the close of
business on the January 15 and July 15 immediately preceding the interest
payment date. Cash interest will accrue from the most recent Interest Payment
Date to which interest has been paid or duly provided for, or, if no interest
has been paid or duly provided for, from August 1, 2003. If an Interest Payment
Date falls on a day that is not a Business Day, the interest payment to be made
on such Interest Payment Date will be made on the next succeeding Business Day
with the same force and effect as if made on such Interest Payment Date, and no
additional interest will accrue as a result of such delayed payment. No cash
interest will accrue on the Discount Notes until August 1, 2003, except as
provided in the next paragraph. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
In the event that (i) an exchange offer registration statement under
the Securities Act ("Exchange Offer Registration Statement") is not filed with
the SEC on or prior to 60 days following July 29, 1998, (ii) the Exchange Offer
Registration Statement is not declared effective on or prior to 120 days
following July 29, 1998 or (iii) the Exchange Offer is not consummated on or
prior to 150 days following July 29, 1998, cash interest will accrue on the
Securities (in addition to the accretion of original issue discount on the
Securities) at a rate per annum of one-quarter of one percent of the Accreted
Value of the Securities (a) following such 60-day period in the case of (i)
above, (b) following such 120-day period in the case of clause (ii) above, (c)
following such 150-day period in the case of (iii) above and (d) following each
such subsequent 90-day period in the case of clauses (i), (ii) and (iii) above;
provided that the aggregate increase in such interest rate will in no event
exceed one percent per annum. Upon (x) the filing of the Exchange Offer
Registration Statement in the case of clause (i) above, (y) the effectiveness of
the Exchange Offer Registration Statement in the case of clause (ii) above or
(z) the day before the date of the consummation of the Exchange Offer or the
effectiveness of the Shelf Registration Statement. as the case may be, in the
case of clause (iii) above, the payment of cash interest will cease, from the
date of such filing, effectiveness or day before the date of the consummation,
as the case may be.
2
<PAGE> 18
2. Method of Payment.
The interest payable on the Securities, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Security is registered at the close of
business on the regular record date, which shall be the January 15 or July 15
(whether or not a Business Day) next preceding such Interest Payment Date. Any
such interest not so punctually paid or duly provided for, and any interest
payable on such defaulted interest (to the extent lawful), will forthwith cease
to be payable to the Holder on such regular record date and shall be paid to the
person in whose name this Security is registered at the close of business on a
special record date for the payment of such defaulted interest to be fixed by
the Issuer, notice of which shall be given to Holders not less than 15 days
prior to such special record date. Payment of the principal of and interest on
this Security will be made at the agency of the Issuer maintained for that
purpose in New York, New York and at any other office or agency maintained by
the Issuer for such purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Issuer payment of
interest may be made by check mailed to the address of the person entitled
thereto as such address shall appear in the Security register.
3. Paying Agent and Registrar.
Initially, Bank One, N.A. (the "Trustee") will act as Paying Agent and
Registrar. The Issuer may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders of Securities. The Issuer or any of its
Subsidiaries may act as Registrar, co-Registrar or, except in certain
circumstances specified in the Indenture, Paying Agent.
4. Indenture.
This Security is one of a duly authorized issue of Securities of the
Issuer, designated as its 13 1/4% Senior Discount Notes due 2009 (the
"Securities"), limited in aggregate principal amount at maturity to $114,000,000
(except for Securities issued in substitution for destroyed, lost or stolen
Securities) issuable under an indenture dated as of July 29, 1998 (the
"Indenture"), among the Issuer and the Trustee. The terms of the Securities
include those stated in the Indenture and those required to be made part of the
Indenture by the Trust Indenture Act of 1939 (the "Act") (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of the Indenture and the date the
Indenture is qualified under the Act. The Securities are subject to all such
terms, and Holders of Securities are referred to the Indenture and the Act for a
statement of them. Each Securityholder, by accepting a Security, agrees to be
bound by all of the terms and provisions of the Indenture, as the same may be
amended from time to time.
Capitalized terms contained in this Security to the extent not defined
herein shall have the meanings assigned to them in the Indenture.
5. Optional Redemption.
(a) The Securities are not redeemable prior to August 1, 2003, except
as provided in clause (b) or (c) below of this paragraph 5. On and after such
date, the Securities may
3
<PAGE> 19
be redeemed at any time, in whole or in part, at the option of the Issuer,
at redemption prices (expressed as percentages of the Accreted Value) set forth
below, if redeemed during the 12-month period beginning August 1 of the year
indicated below, in each case together with interest accrued and unpaid to but
excluding the date fixed for redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003......................................... 106.63%
2004......................................... 104.42%
2005......................................... 102.21%
2006 and thereafter.......................... 100.000%
</TABLE>
(b) At any time prior to August 1, 2001, the Issuer may redeem all (but
not less than all) of the Securities with the Net Cash Proceeds of one or more
Equity Offerings of or Strategic Equity Investment in the Issuer, at a
redemption price in cash equal to (expressed as a percentage of the Accreted
Value) 113.25% of the principal amount at maturity thereof, plus accrued and
unpaid interest to the date fixed for redemption. Any such redemption pursuant
to this paragraph will be required to occur within 45 days following the closing
of any such Equity Offering or Strategic Equity Investment.
(c) Upon the occurrence of a Change of Control, the Issuer may redeem
all, but not less than all, the Securities in cash, at a redemption price equal
to the Accreted Value thereof plus accrued and unpaid interest to the date of
redemption plus the Applicable Premium. Notice of redemption of the Securities
pursuant to this paragraph shall be mailed to holders of the Securities not more
than 30 days following the occurrence of a Change of Control. The Issuer may not
redeem Securities pursuant to this paragraph if it has made a Change of Control
Offer with respect to such Change of Control.
6. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at least 30 and
not less than 60 days before the redemption date to each Holder of Securities to
be redeemed at the address appearing in the register of Securities maintained by
the Registrar. Securities in denominations larger than $1,000 may be redeemed in
part. On and after the redemption date, interest ceases to accrue on those
Securities or portion of them called for redemption.
7. Purchase upon Occurrence of a Change of Control.
Within 30 days of the occurrence of a Change of Control, the Issuer
will offer to purchase the Securities, in whole and not in part, at a purchase
price equal to 101% of the Accreted Value thereof plus any accrued and unpaid
interest thereon.
4
<PAGE> 20
8. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons in denominations
of $1,000 and integral multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not transfer or exchange any Securities selected for redemption.
9. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of it
for all purposes.
10. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee or Paying Agent will repay the funds to the Issuer at its
request. After such repayment Holders of Securities entitled to such funds must
look to the Issuer for payment unless an abandoned property law designates
another person.
11. Discharge Prior to Redemption or Maturity.
The Indenture will be discharged and canceled except for certain
Sections thereof, subject to the terms of the Indenture, upon the payment of all
the Securities or upon the irrevocable deposit with the Trustee of funds or
United States Government Obligations sufficient for such payment or redemption.
12. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the outstanding Securities, and any past default or
compliance with any provision may be waived with the consent of the Holders of a
majority in principal amount of the outstanding Securities. Without notice to or
the consent of any Holder, the Issuer and the Trustee may amend or supplement
the Indenture or the Securities to cure any ambiguity, defect or inconsistency,
or to make any change that does not materially and adversely affect the rights
of any Holder of Securities.
13. Restrictive Covenants.
The Securities are senior unsecured Indebtedness of the Issuer limited
to the aggregate principal amount at maturity of $114,000,000. The Indenture
restricts, among other things, the ability of the Issuer or any of its
Restricted Subsidiaries to permit any Liens to be imposed on their assets, to
make certain payments and investments, limits the Indebtedness which the Issuer
and its Restricted Subsidiaries may incur and limits the terms on which the
Issuer and its Restricted Subsidiaries may engage in Asset Sales. The Issuer is
also obligated under certain circumstances to make an offer to purchase
Securities with the net cash proceeds of certain Asset
5
<PAGE> 21
Sales. The Issuer must report annually to the Trustee on compliance with
certain covenants in the Indenture.
14. Successor Corporation.
Pursuant to the Indenture, the ability of the Issuer to consolidate
with, merge with or into or transfer its assets to another person is conditioned
upon certain requirements, including certain financial requirements applicable
to the surviving Person.
15. Defaults and Remedies.
If an Event of Default shall occur and be continuing, the principal of
all of the outstanding Securities, plus all accrued and unpaid interest, if any,
to the date the Securities become due and payable, may be declared due and
payable in the manner and with the effect provided in the Indenture.
16. Trustee Dealings with Issuer.
The Trustee in its individual or any other capacity, may become the
owner or pledgee of Securities and make loans to, accept deposits from, and
perform services for the Issuer or its Affiliates, and may otherwise deal with
the Issuer or its Affiliates, as if it were not Trustee.
17. No Recourse Against Others.
A director, officer, employee, incorporator, limited or general partner
or stockholder, as such, of the Issuer shall not have any liability for any
obligations of the Issuer or under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of a Security by accepting a Security waives and releases
all such liability. The waiver and release are part of the consideration for the
issue of the Securities.
18. Authentication.
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
19. Abbreviations.
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
6
<PAGE> 22
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuer has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
21. GOVERNING LAW.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE, THIS
SECURITY AND ANY SUBSIDIARY GUARANTEE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW.
22. Units.
Until the Separability Date (as defined below), this certificate shall
also represent 342,000 shares of common stock of the Issuer (three shares per
$1,000 principal amount at maturity of the 13 1/4% Senior Discount Notes due
2009). The Separability Date shall be the earlier of the following dates: (i)
February 1, 1999; (ii) the date on which a registration statement with respect
to a registered exchange offer for the Securities is declared effective under
the Securities Act; (iii) the occurrence of an Event of Default; or (iv) such
earlier date as determined by the Initial Purchaser in its sole discretion. On
or after the Separability Date, this certificate shall represent only the
13 1/4% Senior Discount Notes due 2009.
7
<PAGE> 23
ASSIGNMENT FORM
If you the Holder want to assign this Security, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Security to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ,
--------------------------------------------------------
agent to transfer this Security on the books of the Issuer. The agent may
substitute another to act for him.
Dated: Signed:
-------------------- -------------------------------------
(Sign exactly as your name appears
on the other side of this Security)
Signature Guarantee:(1)
---------------------------------------------------------
- ------------------
(1) Signature must be guaranteed by a member of the Medallion Signature
Program.
8
<PAGE> 24
OPTION OF HOLDER TO ELECT PURCHASE
If you the Holder want to elect to have this Security purchased by the Issuer,
check the box: |_|
If you want to elect to have only part of this Security purchased by the Issuer,
state the amount: $ __________
Dated: Signed:
-------------------- -------------------------------------
(Sign exactly as your name appears
on the other side of this Security)
Signature Guarantee:(2)
---------------------------------------------------------
- ------------------
(2) Signature must be guaranteed by a member of the Medallion Signature
Program.
9
<PAGE> 25
EXHIBIT B
FORM OF LEGENDS FOR SECURITIES
Any Global Security authenticated and delivered hereunder
shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY
BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
Any Global Security which represents the Initial Securities (and all
Securities issued in substitution thereof) shall bear a legend in substantially
the following form:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
10
<PAGE> 26
B-2
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE
144A")), (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS
(OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES
ACT AND ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL
ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON
WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY
BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"),
OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (C) FOR AS LONG AS THE NOTES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE ISSUER,
THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM AND (ii) IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE
OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
<PAGE> 27
B-3
SCHEDULE OF EXCHANGES
The following exchanges of a part of this Global Security for Physical
Securities have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of at Maturity Signature of
decrease in increase of this Global authorized
Principal Amount in Principal Security officer of
at Maturity Amount at following such Trustee or
Date of of this Global Maturity of this decrease Securities
Exchange Security Global Security (or increase) Custodian
- -------- ---------------- ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 4.3D
EXECUTED FORM
CLASSIC COMMUNICATIONS, INC.
(formerly Classic Telecommunications Corp.)
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
This Amended and Restated Stockholders Agreement ("Agreement") is
entered into as of October 31, 1995, among Classic Communications, Inc., a
Delaware corporation (the "Company"), J. Merritt Belisle ("Belisle"), Stephen S.
Smith ("Smith"), Steven E. Seach ("Seach"), Mark Livingston ("Livingston"), and
Bryan D. Noteboom ("Noteboom"; Belisle, Smith, Seach, Livingston, and Noteboom
are referred to collectively as "Management" and each individually as a "Member
of Management"), Austin Ventures, L.P., a Delaware limited partnership
("Austin"), Austin Ventures III-A, L.P., a Delaware limited partnership ("Austin
III-A"), Austin Ventures III-B, L.P., a Delaware limited partnership ("Austin
III-B"; Austin, Austin III-A and Austin III-B are collectively referred to as
"Austin Ventures"), BT Capital Partners, Inc., a Delaware corporation ("BT
Capital"), Texas Growth Fund, a trust fund created by the Constitution of the
State of Texas ("Growth Fund"), NationsBanc Capital Corp. ("NationsBanc"), a
Texas corporation, and The Chase Manhattan Bank, N.A. ("Chase"). (Austin, Austin
III-A, Austin III-B, BT Capital, Growth Fund, NationsBanc and Chase are referred
to collectively as the "Investors" and each individually as an "Investor."
Management and Investors are referred to collectively as "Stockholders" and each
individually as a "Stockholder.")
Recitals:
The Stockholders are holders of shares of Common Stock, Preferred
Stock, Management Options and Warrants (each as defined herein) constituting all
of the issued and outstanding capital stock of the Company or rights to acquire
the same. The parties deem it in the best interests of the Company to provide
for continuity in the management and ownership of the Company as provided in
this Agreement.
The parties hereto do hereby agree as follows:
A. DEFINITIONS
For the purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Affiliate" means with respect to any Person, a Person (other
than a Subsidiary) (1) which directly or indirectly controls, or is controlled
by, or is under common control with, such Person, (2) which owns 10% or more of
the equity interest of such Person, or (3) 10% or more of the voting stock (or
in the case of a Person which is not a corporation, 10% or more of the equity
interest) of which is owned by such Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and
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policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"BT Investor" means any person affiliated with BT Capital
Partners, Inc.
"Business Day" means any day other than a Saturday, Sunday or
public holiday under the laws of the States of Texas and New York.
"CAI" means Classic Acquisition, Inc., a Delaware corporation
and wholly-owned subsidiary of Classic Cable.
"Cable Systems" means the cable television systems owned or
acquired by the Company and its Subsidiaries from time to time.
"Class C Stock" means the Class C Common Stock, $0.01 par
value per share, of Classic Communications, Inc.
"Classic Cable" means Classic Cable, Inc., a Delaware
corporation and wholly-owned subsidiary of the Company.
"Classic Telephone" means Classic Telephone, Inc., a Delaware
corporation and wholly-owned subsidiary of Classic Cable.
"Common Stock" means the Company's Voting Common Stock and
Nonvoting Common Stock.
"Company Subsidiaries" means Classic Cable, Classic Telephone,
CAI, Holdings, Ponca, each of the Holdings Subsidiaries and any other Person
that is or becomes a Subsidiary of the Company after the date hereof.
"Contractual Obligation" means, with respect to a Person, any
provision of any security issued by such Person, including provisions contained
in the articles or certificate of incorporation or bylaws of such Person, or of
any agreement, franchise, license, permit, undertaking, contract, indenture,
mortgage, deed of trust or other instrument or understanding to which such
Person is a party or by which it or any of its property is bound.
"Credit Agreement" means the Amended and Restated Credit
Agreement dated as of October 31, 1995 between Classic Cable, WTAC, the Lenders
named therein, and Chase Manhattan Bank, N.A., as Administrative Agent, as the
same shall be amended, restated, modified and supplemented (including, without
limitation, to increase the amount of credit available thereunder) and in effect
from time to time.
"Distribution of Assets" means, as applied to any Person, any
payment or other distribution, division or application, partial or complete,
voluntary or involuntary, by operation
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of law or otherwise, of assets of such Person of any kind or character, whether
in cash, property or securities, to any creditor or creditors of the Company.
"GAAP" means generally accepted United States accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board that
are applicable to the circumstances as of the date of determination.
"Green Purchase Agreement" means the Stock Purchase Agreement
dated as of October 1, 1995, between Alexander Green and Classic Cable providing
for the purchase by Classic Cable of all shares of capital stock of WTAC held by
Alexander Green.
"Holdings" means Universal Cable Holdings, Inc., a Delaware
corporation and wholly-owned subsidiary of Classic Cable.
"Holdings Subsidiaries" means Universal Cable Communications
Inc., Universal Cable of Beaver, Oklahoma, Inc., and Universal Cable Midwest,
Inc., each of which is a Delaware corporation and a wholly-owned subsidiary of
Holdings, and Universal Cable Com, Inc., a Delaware corporation and a
wholly-owned subsidiary of Universal Cable Communications Inc.
"Investor Affiliate" means, as to any Investor, its general or
limited partners, stockholders or trust beneficiaries, or any partnership,
limited liability company, corporation or other Person that directly or
indirectly controls, is controlled by, or is under common control with such
Investor.
"Investor Stock" means all shares of Common Stock, Warrants
and Preferred Stock now owned or hereafter acquired by an Investor or any
successor of an Investor, including, without limitation, shares of Common Stock
issued upon exercise of Warrants and additional shares of Preferred Stock issued
pursuant to the terms of the Company's Certificate of Incorporation, and all
shares of Management/Investor Stock.
"Lien" means any security interest, mortgage, lien, adverse
claim, restriction or other encumbrance.
"Majority Investors" means the holders of at least 80% of the
outstanding shares of Common Stock issued to the Investors, provided, however,
that for purposes of this calculation, (i) all shares of Common Stock issuable
pursuant to the Warrants shall be deemed to be issued and outstanding, (ii) for
purposes of paragraph B.3, any Warrants acquired by Chase pursuant to the Stock
Purchase Agreement, or any Investor Stock acquired upon exercise of such
Warrants, shall be excluded and (iii) under no circumstances shall the
percentage vote to which the Warrants and Investor Stock referred to in the
foregoing clause (ii) shall be entitled be greater than 4.9% of the total Common
Stock and Warrants issued to the Investors.
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"Management/Investor Stock" means the 2,500 shares of Voting
Common Stock issued to Belisle in exchange for the shares of Class C Stock
issued to him pursuant to the 1992 Purchase Agreement.
"Management Options" means the options held by Management
pursuant to the Company's 1995 Stock Option Plan. Holders of options have no
rights as stockholders until issuance of a stock certificate for shares covered
by such options.
"Nonvoting Common Stock" means the Company's Nonvoting Common
Stock, $0.01 par value per share.
"Organic Change" means (i) the sale, assignment, transfer,
pledge or other disposition by the Company of any of the capital stock of any
Company Subsidiary or the authorization or issuance by any Company Subsidiary of
any additional shares of stock of any class which results in a dilution of the
Company's ownership of such Company Subsidiary; (ii) any sale, lease or exchange
of all or substantially all of the property and assets of the Company or any
Company Subsidiary whether or not in the ordinary course of business and whether
directly or through the sale of stock of any Company Subsidiary or Company
Subsidiaries; (iii) the issuance by the Company of any capital stock except as
permitted in this Agreement and the Stock Purchase Agreement; or (iv) any merger
or consolidation to which the Company or any Company Subsidiary is a party other
than the merger of a wholly-owned Company Subsidiary into the Company or another
wholly-owned Company Subsidiary; provided, however, that (A) if the Majority
Investors consent to any transaction of the type described in the foregoing
clauses (i) through (iv), such transaction shall not be an "Organic Change"
within the meaning of this Agreement, and (B) the pledges of stock and assets of
the Company Subsidiaries pursuant to the Credit Agreement and the related
documents provided for therein, and the enforcement of the remedies provided for
therein, shall not constitute an "Organic Change".
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Ponca" means Ponca Holdings, Inc., a Delaware corporation and
wholly-owned subsidiary of Classic Cable.
"Preferred Stock" means the Company's 15% PIK Redeemable
Senior Preferred Stock, par value $0.01 per share, and the Company's 15% PIK
Redeemable Junior Preferred Stock, par value $.01 per share, as such Preferred
Stock may be amended from time to time.
"Preferred Stock Holders" means the holders of the Preferred
Stock.
"Purchase Agreements" means (i) the 1992 Purchase Agreement;
(ii) the purchase agreement for notes and common stock of Ponca/Universal
Holdings, Inc., dated as of June 18, 1993, as amended, among Ponca/Universal
Holdings, Inc., Belisle, Austin Ventures, BT Capital,
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and Growth Fund; (iii) the investment agreement for preferred stock, common
stock and a warrant of Ponca/Universal Holdings, Inc., dated as of July 26,
1994, as amended, among Ponca/Universal Holdings, Inc. and NationsBanc; (iv) the
stock purchase agreement for common stock of Classic Communications, Inc., dated
as of May 5, 1995, among Classic Communications, Inc., Belisle, Austin Ventures,
BT Capital, Growth Fund and NationsBanc; and (v) the Stock Purchase Agreement.
"1992 Purchase Agreement" means the purchase agreement for
notes and common stock of Ponca/Universal Holdings, Inc., dated as of July 7,
1992, as amended, among Ponca/Universal Holdings, Inc., Belisle, Austin Ventures
and BT Capital.
"Requirement of Law" means, with respect to a Person, the
articles or certificate of incorporation and bylaws or other organization or
governing documents of such Person, and any law, treaty, rule, regulation,
right, privilege, qualification, license or franchise or determination of an
arbitrator or a court or other governmental authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject or pertaining to any or all of the transactions
contemplated or referred to herein.
"Restricted Stock" means all shares of Common Stock and other
equity securities of the Company now owned or hereafter acquired by Management,
including without limitation, shares of Voting Common Stock issued upon exercise
of the Management Options, but does not include Management/Investor Stock.
"Stock Purchase Agreement" means the stock purchase agreement
for common stock, preferred stock and warrants, dated as of October 31, 1995,
among the Company, Belisle, Austin Ventures, BT Capital, Growth Fund,
NationsBanc and Chase.
"Subsidiary" means as to any Person (i) any corporation more
than 50% of the outstanding voting securities of which are owned by such Person
or such Person's Subsidiary, directly or indirectly, and (ii) a partnership,
limited liability company or other Person in which such Person or such Person's
Subsidiary holds a general partnership or other equity interest sufficient to
enable it to direct the management and policies thereof.
"Voting Common Stock" means the Company's Voting Common Stock,
$0.01 par value per share.
"WTAC" means WT Acquisition Corporation, a Delaware
corporation.
"WTAC Subsidiaries" means Television Enterprises, Inc., De-Cal
Cable, Inc., and Calco Construction Company, Inc., each a Texas corporation,
Transwestern Video, Inc., an Oklahoma corporation, and W.K. Communications,
Inc., a Kansas corporation, each a wholly-owned subsidiary of WTAC, and any
other Person that is or becomes a Subsidiary of WTAC after the date hereof.
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"Warrants" means the warrants created in the Company's Common
Stock Purchase Warrant issued to (i) NationsBanc dated as of October 31, 1995,
to purchase 12,128 shares of Common Stock, as adjusted pursuant to the terms
thereof, (ii) NationsBanc dated as of October 31, 1995 to purchase 3,000 shares
of Common Stock, as adjusted pursuant to the terms thereof, (iii) BT Capital
dated as of October 31, 1995 to purchase 3,000 shares of Common Stock, as
adjusted pursuant to the terms thereof, and (iv) Chase dated as of October 31,
1995 to purchase 15,207 shares of Common Stock, as adjusted pursuant to the
terms thereof, and, in each case, any replacement or substitute warrants for all
or any portion thereof.
B. ELECTION OF DIRECTORS; RESTRICTIONS ON STOCK; SALE OF COMPANY.
B.1 Election of Directors; Quorum.
B.1(a) In any election of directors of the Company, the Stockholders
shall vote all shares of Common Stock of the Company owned or controlled by them
in favor of a Board of Directors comprising directors designated as follows:
(i) for so long as Belisle owns any Common Stock, one shall be
a director designated by Belisle;
(ii) for so long as Austin Ventures owns at least 10% of the
fully-diluted Common Stock, two shall be directors designated by Austin
Ventures;
(iii) for so long as BT Capital owns at least 10% of the
fully-diluted Common Stock, two shall be directors designated by BT
Capital;
(iv) for so long as Growth Fund owns at least 2.5% of the
fully-diluted Common Stock, one shall be a director designated by
Growth Fund; and
(v) for so long as NationsBanc owns at least 10% of the
fully-diluted Common Stock, two shall be directors designated by
NationsBanc.
In the event of any vacancy in the Board of Directors of the Company occurring
for any reason, each of the Stockholders covenants and agrees to vote all shares
of Common Stock owned or controlled by them and to otherwise use their best
efforts to fill the vacancy in such a manner that the Board of Directors of the
Company will include eight directors so designated. In the event that the number
of persons then comprising the entire Board of Directors of the Company is
proposed to be increased to a number in excess of eight, each of the
Stockholders covenants and agrees to vote all shares of Common Stock of the
Company owned or controlled by it in favor of additional person(s) as
director(s) jointly designated by the Investors and Belisle. The Company agrees
to use its best efforts to cause such designees to be elected to the Board of
Directors of the Company.
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B.1(b) Notwithstanding the foregoing, the Board of Directors shall
initially comprise four members, as follows: (i) Belisle, as the designee of
Belisle, (ii) Jeffery C. Garvey, as the designee of Austin Ventures, (iii) James
J. Kozlowski, as the designee of Growth Fund, and (iv) Michael F. Elliott, as
the designee of NationsBanc. BT Capital, NationsBanc, and Austin Ventures shall
each be entitled at any time on or after the date hereof to designate additional
persons for election to fill the vacancies in the Board of Directors in
accordance with paragraph B.1(a) above.
B.1(c) The Company shall reimburse each director of the Company (or
person(s) designated by Austin Ventures, Growth Fund, BT Capital or NationsBanc
to attend any meeting of the Board of Directors if Austin Ventures, Growth Fund,
BT Capital or NationsBanc, as the case may be, has not exercised its right to
designate the number of persons which it is entitled to designate to serve as
directors of the Company pursuant to paragraph B.1(a) above; provided, that the
expenses of no more than two representatives of Austin Ventures, one
representative of Growth Fund, two representatives of BT Capital and two
representatives of NationsBanc, as directors or otherwise, shall be reimbursable
by the Company with respect to any meeting of the Board of Directors) who does
not receive a salary from the Company as an officer or employee for all
reasonable out-of-pocket expenses incurred by such director (or designated
attendee) in connection with the attendance by such director (or designated
attendee) at meetings of the Board of Directors of the Company.
B.1(d) The Board of Directors of each of the Company Subsidiaries is to
be constituted in the same manner as provided in paragraphs B.1(a) and B.1(b)
above in respect of the Company's Board of Directors and each Stockholder
covenants and agrees, if necessary, to vote its shares of capital stock in order
to cause the Boards of Directors of the Company and the Company Subsidiaries to
hold regular meetings at least six times during each fiscal year of the Company
and to meet at least once during each two calendar month period.
B.1(e) The Stockholders shall vote all shares of Common Stock owned or
controlled by them in favor of, and otherwise to use their best efforts to
cause, and the Company covenants and agrees to cause, the Bylaws and the
Certificate of Incorporation of the Company and each Company Subsidiary to
provide that (x) in order to constitute a quorum for a meeting of the Board of
Directors of the Company and each Company Subsidiary at least a majority of the
directors designated by the Investors (the "Majority Investor Directors") must
be present in person, (y) the provisions of the Bylaws and Certificate of
Incorporation reflecting the provisions of clause (x) above may be amended only
upon the vote of at least one director designated by Belisle (for so long as
Belisle is entitled to designate a director) and by the Majority Investor
Directors, and (z) the number of shares of authorized capital stock of the
Company shall be increased as necessary to assure that sufficient shares are
available for issuance upon exercise of the Warrants.
B.2 Provisions Applicable to Restricted Stock.
B.2(a) General Restrictions on Transfer.
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(i) During the term of this Agreement, none of the Restricted
Stock now owned or hereafter acquired by Management may be sold, assigned,
transferred, pledged, encumbered or otherwise hypothecated (each a "transfer")
except in accordance with the provisions of this Agreement.
(ii) Any attempted transfer of Restricted Stock other than in
accordance with this Agreement (other than an involuntary transfer by operation
of law) shall be null and void and the Company shall refuse to recognize any
such transfer and shall not reflect on its records any change in record
ownership of shares of Restricted Stock pursuant to any such transfer.
(iii) Notwithstanding anything herein to the contrary, but
subject to Section B.4 hereof, a Member of Management may transfer any or all of
the Restricted Stock beneficially owned by him (x) to his spouse or children and
(y) to trusts established for the benefit of his spouse or children, in each
event free of the restrictions and requirements of paragraphs B.2(b) and B.2(c)
hereof, provided that in connection with the transfer, the transferee grants to
such transferor an irrevocable proxy coupled with an interest to vote all of the
shares of Restricted Stock so transferred, and provided further that the
provisions of this Agreement, including, without limitation, paragraphs B.2(b),
B.2(c) and B.2(d) and Section B.5, shall be applicable to the shares of
Restricted Stock so transferred.
B.2(b) Right of First Refusal.
(i) Subject to paragraph B.2(c) hereof, whenever and as often
as a Member of Management shall desire to sell any shares of Restricted Stock
pursuant to a bona fide offer for the purchase thereof in a private transaction,
he shall be deemed an "Offeror" for purposes of paragraphs B.2(b) and B.2(c) and
shall give notice (the "Notice") to each Investor (each an "Investor Offeree"
and collectively the "Investor Offerees") in writing to such effect, enclosing a
copy of such bona fide offer (it being agreed that Offeror shall cause any such
offer to be reduced to writing) and specifying the number of shares of
Restricted Stock which Offeror desires to sell, the name of the person or
persons to whom Offeror desires to make such sale and the dollar value of the
consideration which has been offered in connection therewith. Upon receipt of
the Notice, the Investor Offerees shall have the first right and option to
purchase all of the shares proposed to be sold, pro rata according to their
respective holdings of Common Stock (determined on a fully-diluted basis), for
cash at a purchase price equal to the dollar value of such consideration (in the
event such consideration includes non-cash consideration, the dollar value of
such non-cash consideration shall be determined by the Company's Board of
Directors, whose good faith determination shall be conclusive, provided that
Offeror shall not participate in such determination), exercisable for a period
of 20 days from the date of receipt of the Notice. Failure of any Investor
Offeree to respond to the Notice within the 20-day period shall be deemed to
constitute a notification to Offeror of such Investor Offeree's decision not to
exercise the first right and option to purchase the shares under this paragraph
B.2(b)(i).
(ii) In such event (and in the event that an Investor Offeree
shall notify Offeror of such Investor Offeree's decision not to exercise its
first right and option) Offeror shall give
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written notice to each of the other Investor Offerees who has agreed to purchase
his or its pro rata share of the shares proposed to be transferred and each such
Investor Offeree shall have the right, exercisable for a period of five days
from the date of receipt of such notice, to purchase the remaining shares, for
cash at a purchase price equal to the dollar value of the consideration offered
for such shares as set forth in the Notice, pro rata according to such Investor
Offeree's holdings of Common Stock (determined on a fully-diluted basis). This
process shall be repeated until one or more of such Investor Offerees has
agreed, or none of such Investor Offerees has agreed, to accept the offer with
respect to all of the shares proposed to be transferred. Failure of any such
Investor Offeree to respond to such notice within the five-day period shall be
deemed to constitute a notification to Offeror of such Investor Offeree's
decision not to exercise the first right and option to purchase the remaining
shares under this paragraph B.2(b)(ii).
(iii) In the event that all of the shares proposed to be
transferred are not purchased by the Investor Offerees, Offeror shall give
Notice as specified above to each Member of Management, excluding himself (each
a "Management Offeree" and collectively the "Management Offerees"), specifying
the remaining number of shares of Restricted Stock which Offeror desires to
sell. Upon receipt of the Notice, the Management Offerees shall have the right
and option to purchase all of the shares proposed to be sold to them, pro rata
according to their respective holdings of Common Stock (determined on a
fully-diluted basis), for cash at a purchase price equal to the dollar value of
the consideration offered for such shares as set forth in the Notice,
exercisable for a period of 20 days from the date of receipt of the Notice.
Failure of any Management Offeree to respond to the Notice within the 20-day
period shall be deemed to constitute a notification to Offeror of such
Management Offeree's decision not to exercise the first right and option to
purchase the shares under this paragraph B.2(b)(iii).
(iv) In such event (and in the event that a Management Offeree
shall notify Offeror of such Management Offeree's decision not to exercise its
right and option) Offeror shall give written notice to each of the other
Management Offerees who has agreed to purchase his pro rata share of the shares
proposed to be transferred and each such Management Offeree shall have the
right, exercisable for a period of five days from the date of receipt of such
notice, to purchase the remaining shares, for cash at a purchase price equal to
the dollar value of the consideration offered for such shares as set forth in
the Notice, pro rata according to such Management Offeree's holdings of Common
Stock (determined on a fully-diluted basis). This process shall be repeated
until one or more of such Management Offerees has agreed, or none of such
Management Offerees has agreed, to accept the offer with respect to all of the
shares proposed to be transferred. Failure of any such Management Offeree to
respond to such notice within the five-day period shall be deemed to constitute
a notification to Offeror of such Management Offeree's decision not to exercise
the first right and option to purchase the remaining shares under this paragraph
B.2(b)(iv).
(v) The Investor Offerees and Management Offerees (together,
the "Offerees") may exercise the right and option provided in paragraphs
B.2(b)(i) through (iv) by giving written notice to Offeror not later than the
close of business on the date of expiration of such right and option (or if such
date is not a Business Day, then on or before the close of business on the next
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succeeding Business Day), advising of the election to exercise the same and the
date (not later than five days from the date of expiration of all applicable
rights and options to purchase shares under this paragraph B.2(b)) upon which
payment of the purchase price for the shares shall be made. Offeror shall
deliver to the Offeree(s) at the Company's principal office, on the payment date
specified in such notice, the certificate or certificates representing such
shares, properly endorsed for transfer, against payment of the purchase price
therefor by the Offeree(s) in immediately available funds.
(vi) In the event that all of the shares proposed to be
transferred are not purchased by the Offerees hereunder, Offeror shall then
offer the Company the right and option to purchase the balance of the shares for
cash at the same purchase price and on the same terms offered to the Offerees.
Failure of the Company to respond to such notice within a 10-day period shall be
deemed to constitute a notification to Offeror of the Company's decision not to
exercise the right and option to purchase such shares under this paragraph
B.2(b)(vi).
(vii) The Company may exercise the right and option provided
in paragraph B.2(b)(vi) by giving written notice to Offeror not later than the
close of business on the date of expiration of such right and option (or if such
date is not a Business Day, then on or before the close of business on the next
succeeding Business Day), advising of the election to exercise the same and the
date (not later than five days from the date of such notice) upon which payment
of the purchase price for the shares shall be made. Offeror shall deliver to the
Company's principal office, on the payment date specified in such notice, the
certificate or certificates representing the shares being purchased by the
Company, properly endorsed for transfer, against payment of the purchase price
therefor by the Company in immediately available funds.
(viii) If all the shares proposed to be transferred are not
purchased by the Offerees and the Company in accordance with this paragraph
B.2(b), Offeror (A) shall not be required to sell any of the shares proposed to
be transferred to the Offerees or to the Company, and (B) may, during the 60-day
period commencing on the expiration of the rights and options provided for in
this Section B.2, sell all (but not less than all) of such shares to the
transferee named in the Notice for a consideration equal to or greater than the
consideration specified in the Notice, free of the restrictions contained in
paragraph B.2(b) of this Agreement (but subject to the other terms and
conditions hereof, including, without limitation, paragraph B.2(c)). In
addition, in the event that all of the shares proposed to be transferred are not
purchased by the Offerees and the Company in accordance with this paragraph
B.2(b), each Offeree shall be entitled, at its option within seven Business Days
of being notified that such shares are not to be purchased, to exercise the
rights specified in paragraph B.2(c) below.
(ix) Notwithstanding the foregoing, the Investors may
designate their respective Investor Affiliates (or any of them) to exercise such
Investor's right and option pursuant to this paragraph B.2(b) to purchase any or
all of the shares proposed to be transferred by Offeror.
B.2(c) Come-Along. Whenever and as often as Offeror shall receive
from a prospective purchaser a bona fide offer to purchase any shares of
Restricted Stock which Offeror wishes to
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accept, the Offerees shall have the right, at each Offeree's option, either to
exercise such Person's rights under paragraph B.2(b) hereof or to require
Offeror to arrange for the sale, to the prospective purchaser, on terms and
conditions at least as favorable to the Offeree as the terms and conditions set
out in the offer received by Offeror, of the number of the Offeree's shares of
Common Stock and Warrants which bears the same proportion to the number of
shares of Common Stock and Warrants (determined on a fully-diluted basis) owned
by such Offeree as the number of shares of Common Stock and Warrants being sold
by Offeror bears to the total number of shares of Common Stock and Warrants
(determined on a fully-diluted basis) owned by the Offeror, to the prospective
purchaser on terms and conditions at least as favorable to the Offeree as the
terms and conditions set out in the offer received by Offeror. If the
prospective purchaser will not purchase all the shares of Common Stock and
Warrants which Offeror and the Offerees wish to sell pursuant to this paragraph
B.2(c), the number of shares of Common Stock and shares issuable upon exercise
of the Warrants which Offeror and the Offerees shall be permitted to sell to
such prospective purchaser shall be a number of shares equal to the number of
shares which the prospective purchaser desires to purchase times a fraction, the
numerator of which is the number of shares of Common Stock (determined on a
fully-diluted basis) beneficially owned by Offeror or each selling Offeree, as
appropriate, and the denominator of which is the aggregate number of shares of
Common Stock (determined on a fully-diluted basis) beneficially owned by Offeror
and the selling Offerees. An Offeree may exercise his or its right under this
paragraph B.2(c) by written notice given within 10 days after the date on which
such person received the Notice required by paragraphs B.2(b)(i) and (iii)
above.
B.2(d) Purchase of Restricted Stock and Management/Investor Stock.
(i) In the event that a Member of Management (A) commits a
material breach of his duty of loyalty to the Company or any Company Subsidiary,
(B) is found guilty of a criminal offense that has a material adverse effect
upon the business or reputation of the Company or any Company Subsidiary, (C) is
terminated as an employee of the Company for willful refusal to perform his
assigned duties, which willful refusal has had, or if continued, could
reasonably be expected to have, a material adverse effect on the Company or the
Company Subsidiaries or their respective businesses or prospects, and which
willful refusal has continued after such Member of Management has received at
least two written warnings specifically advising him of his shortcomings and
providing him with an opportunity to resume performance in accordance with his
assigned duties, or (D) commits a material breach of his covenants contained in
Section B.2 of this Agreement, the Company, at its option, may purchase all or
any portion of the Restricted Stock or Management/Investor Stock held by him,
for a cash purchase price of $1 per share of Restricted Stock and $100 per share
of Management/Investor Stock.
(ii) In the event that a Member of Management resigns from the
Company or any Company Subsidiary or refuses to be employed by the Company or
any other Company Subsidiary, the Company, at its option, may (A) purchase all
or any portion of the shares of Restricted Stock and Management/Investor Stock
owned by the Member of Management, for cash at a purchase price for the
Restricted Stock equal to the greater of (x) $1.00 per share or (y) the Fair
Market Value (as defined below) of the shares of Restricted Stock, and a
purchase price
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<PAGE> 12
for the Management/Investor Stock equal to the greater of (x) $100 per share or
(y) the Fair Market Value of the shares of Management/Investor Stock.
(iii) Within 60 days of the date upon which the Company first
determines that an event entitling the Company to purchase Restricted Stock or
Management/Investor Stock pursuant to paragraph B.2(d)(i) or B.2(d)(ii) has
occurred, the Company shall give the affected Member of Management written
notice of such occurrence, indicating the number of shares of Restricted Stock
and Management/Investor Stock, if any, which the Company elects to purchase (the
"Repurchase Notice"). Upon receipt of the Repurchase Notice, the affected Member
of Management shall be obligated to sell such Restricted Stock and
Management/Investor Stock to the Company. The purchase of Restricted Stock and
Management/Investor Stock pursuant to this paragraph B.2(d) shall be consummated
within 90 days of the date of the Repurchase Notice or, if later, the fifteenth
day after receipt of the Appraised Valuation in the event the Restricted Stock
or Management Investor Stock is being purchased at Fair Market Value; provided,
however, that in the event the Restricted Stock or Management/Investor Stock is
being purchased at Fair Market Value based on an Appraised Valuation (as defined
below), the Company may elect not to purchase such Restricted Stock and
Management/Investor Stock by delivering a notice to such effect to the affected
Member of Management within ten days following the receipt of the Appraised
Valuation.
(iv) In the event the Company elects not to repurchase all or
any portion of the Restricted Stock and Management/Investor Stock, it shall
deliver written notice (the "Notice") to each Investor (the "Investor Offerees")
of the occurrence of an event under paragraph B.2(d)(i) or B.2(d)(ii) and of the
number of shares of Restricted Stock and Management/Investor Stock owned by the
affected Member of Management which will not be purchased by the Company. Upon
receipt of the Notice, the Investor Offerees shall have the right and option to
purchase all of the shares of Restricted Stock and Management/Investor Stock
owned by the affected Member of Management which will not be purchased by the
Company, pro rata according to their respective holdings of Common Stock
(determined on a fully-diluted basis), for cash at the purchase prices
established in paragraph B.2(d)(i) or B.2(d)(ii), respectively, exercisable for
a period of 20 days from the date of receipt of the Notice. Failure of any
Investor Offeree to respond to the Notice within the 20-day period shall be
deemed to constitute a notification to the Company of such Investor Offeree's
decision not to exercise the first right and option to purchase the shares under
this paragraph B.2(d)(iv).
(v) In the event that any Investor Offerees fail to respond to
the Notice under paragraph B.2(d)(iv) in a timely manner (and in the event that
an Investor Offeree shall notify the Company of such Offeree's decision not to
exercise its right and option), the Company shall give written notice to each of
the other Investor Offerees who has agreed to purchase his or its pro rata share
of the shares of Restricted Stock and Management/Investor Stock owned by the
affected Member of Management and each such Investor Offeree shall have the
right, exercisable for a period of five business days from the date of receipt
of such notice, to purchase the remaining shares, for cash at the purchase
prices established in paragraphs B.2(d)(i) or B.2(d)(ii), respectively, pro rata
according to such Investor Offeree's holdings of Common Stock
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<PAGE> 13
(determined on a fully-diluted basis). This process shall be repeated until one
or more of such Investor Offerees has agreed, or none of such Investor Offerees
has agreed, to purchase all of the shares of Restricted Stock and
Management/Investor Stock owned by the affected Member of Management. Failure of
any such Investor Offeree to respond to such notice within the five-day period
shall be deemed to constitute a notification to the Company of such Investor
Offeree's decision not to exercise the first right and option to purchase the
remaining shares under this paragraph.
(vi) In the event that all of the shares proposed to be
transferred are not purchased by the Investor Offerees, the Company shall give
Notice as specified above to each Member of Management, excluding the affected
Member of Management (each a "Management Offeree" and collectively the
"Management Offerees"), specifying the number of shares of Restricted Stock and
Management/Investor Stock which will not be purchased by the Company and the
Investor Offerees. Upon receipt of the Notice, the Management Offerees shall
have the right and option to purchase all of the remaining shares, pro rata
according to their respective holdings of Common Stock (determined on a
fully-diluted basis), for cash at the purchase prices established in paragraphs
B.2(d)(i) or B.2(d)(ii), respectively, exercisable for a period of 20 days from
the date of receipt of the Notice. Failure of any Management Offeree to respond
to the Notice within the 20-day period shall be deemed to constitute a
notification to the Company of such Management Offeree's decision not to
exercise the right and option to purchase the shares under this paragraph
B.2(d)(vi).
(vii) In the event that any Management Offerees fail to
respond to the Notice under paragraph B.2(d)(vi) in a timely manner (and in the
event that a Management Offeree shall notify the Company of such Management
Offeree's decision not to exercise its right and option) the Company shall give
written notice to each of the other Management Offerees who has agreed to
purchase his or its pro rata share of the shares owned by the affected Member of
Management and each such Management Offeree shall have the right, exercisable
for a period of five days from the date of receipt of such notice, to purchase
the remaining shares, for cash at the purchase prices established in paragraphs
B.2(d)(i) or B.2(d)(ii), respectively, pro rata according to such Management
Offeree's holdings of Common Stock (determined on a fully-diluted basis). This
process shall be repeated until one or more of such Management Offerees has
agreed, or none of such Management Offerees has agreed, to purchase all of the
shares of stock owned by the affected Member of Management. Failure of any such
Management Offeree to respond to such notice within the five-day period shall be
deemed to constitute a notification to the Company of such Management Offeree's
decision not to exercise the right and option to purchase the remaining shares
under this paragraph.
(viii) The Company shall then notify the affected Member of
Management of the number of shares of Restricted Stock and Management/Investor
Stock which the Investors, other Members of Management and the Company have
elected to purchase, and the Member of Management shall be obligated to sell
such Restricted Stock or Management/Investor Stock to them. The purchase of
Restricted Stock or Management/Investor Stock pursuant to this paragraph B.2(d)
shall be consummated within 90 days of the date of such notice or, if later, the
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<PAGE> 14
fifteenth day after receipt of the Appraised Valuation (as defined below) by the
Company; provided, however, that in the event the Restricted Stock or
Management/Investor Stock is being purchased at Fair Market Value based on an
Appraised Valuation, any purchaser who is an Investor or Member of Management
may elect not to purchase such Restricted Stock or Management/Investor Stock by
delivering a notice to such effect to the Company within ten days following its
receipt of the Appraised Valuation.
(ix) For purposes of this paragraph B.2(d), "Fair Market
Value" of any Restricted Stock or Management/Investor Stock means the value of
such Restricted Stock or Management/Investor Stock determined in accordance with
the following formula:
(A) Within 10 days after the Company determines that an
event giving rise to an option to repurchase shares of Restricted Stock
or Management/Investor Stock pursuant to this paragraph B.2(d) has
occurred, the Company shall notify the affected Member of Management in
writing of the Company's valuation of such Restricted Stock or
Management/Investor Stock (the "Company's Valuation"). If such Member
of Management does not object to the Company's Valuation within 10 days
following receipt thereof, "Fair Market Value" means the Company's
Valuation.
(B) If such Member of Management objects to the Company's
Valuation, he shall so notify the Company, stating his proposed
valuation of the Restricted Stock or Management/Investor Stock. If the
Company and such Member of Management then agree on a valuation (an
"Agreed Valuation") within 10 days following the Company's receipt of
such notice from such Member of Management, then "Fair Market Value"
means the Agreed Valuation.
(C) If within 10 days following receipt by the Company of
such notice from such Member of Management, no Agreed Valuation has
been reached, then "Fair Market Value" shall be the amount determined
by Daniels & Associates to be the value of the Restricted Stock or
Management/Investor Stock, based upon its independent review and
valuation of the Company (the "Appraised Valuation"). The Appraised
Valuation shall establish a valuation for the shares without giving
effect to whether the Restricted Stock or Management/Investor Stock
comprises only a minority interest in the equity of the Company. The
Company shall notify Daniels & Associates of the need for a valuation
pursuant to this paragraph B.2(d)(ix)(C) within 10 days after such need
is determined. Daniels & Associates shall complete its valuation and
deliver its report to the Company and to such Member of Management
within 45 days following its notification of the need for a valuation.
The report of Daniels & Associates shall state in detail the basis for
its valuation and shall be conclusive and binding on the Company and
such Member of Management.
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<PAGE> 15
(D) The fee charged by Daniels & Associates for
establishing the Appraised Valuation shall be paid 1/2 by the Company
and 1/2 by such Member of Management.
B.2(e) Recovery of Purchase Price under Green Purchase Agreement. In
order to provide that the purchase price of the shares of capital stock of WTAC
purchased by Classic Cable pursuant to the Green Purchase Agreement shall be
borne by the Members of Management, it is agreed that, notwithstanding any
provision to the contrary in this Agreement, in the Certificate of Incorporation
of the Company, or in any other document or
instrument, all amounts payable with respect to capital stock of the Company
issued pursuant to the Management Options, whether as dividends, as a return of
capital, upon liquidation, or otherwise, shall be paid first to the holders of
Investor Stock, ratably in accordance with the number of shares of Investor
Stock held by them, until the holders of Investor Stock shall have received, in
the aggregate, $600,000. Thereafter, all amounts payable in respect of such
shares of capital stock of the Company shall be paid in accordance with the
Certificate of Incorporation of the Company.
B.3 Provisions Applicable to Investor Stock.
B.3(a) Warrants. In applying the provisions of this Section B.3, the
Common Stock issuable upon exercise of the Warrants shall be deemed to be issued
and outstanding and owned of record by the registered holder of the Warrants.
Without limiting the foregoing, a transfer of Warrants shall be treated as a
transfer of the Common Stock issuable upon exercise thereof and shall be subject
to the restrictions set forth in this Section B.3.
B.3(b) General Restrictions on Transfer.
(i) None of the Investor Stock now owned or hereafter acquired
by any Stockholder may be transferred except in accordance with the provisions
of this Agreement.
(ii) Any attempted transfer of Investor Stock not in compliance
with this Agreement (other than an involuntary transfer by operation of law)
shall be null and void and the Company shall refuse to recognize such transfer
and shall not reflect on its records any change in record ownership of shares of
Investor Stock pursuant to any such transfer.
(iii) Notwithstanding anything herein to the contrary, subject
to Section B.4 hereof, the following transfers of Investor Stock may be made
free of the restrictions and requirements of this Section B.3: (A) an Investor
or any subsequent holder of Investor Stock may transfer any or all of its
Investor Stock to any of its Investor Affiliates, (B) BT Capital may grant
participation in its Investor Stock to any BT Investor, (C) any Investor may
transfer or grant participation in shares of a particular class of Investor
Stock to any other holder of the same class of Investor Stock, and (D) a
transfer by a holder of Management/Investor Stock to the Persons and on the
terms set forth in paragraph B.2(a)(iii).
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<PAGE> 16
B.3(c) Right of First Refusal.
(i) Subject to paragraph B.3(d) hereof, whenever and as often
as a holder of Investor Stock (the "Selling Holder") shall desire to sell any
shares of Investor Stock pursuant to a bona fide offer for the purchase thereof
in a private transaction, he shall give notice (the "Notice") to each other
holder of Investor Stock (each a "Non-Selling Holder" and collectively the
"Non-Selling Holders") in writing to such effect, enclosing a copy of such bona
fide offer (it being agreed that Selling Holder shall cause any such offer to be
reduced to writing) and specifying the number of shares of Investor Stock which
Selling Holder desires to sell, the name of the person or persons to whom
Selling Holder desires to make such sale and the dollar value of the
consideration which has been offered in connection therewith. Upon receipt of
the Notice, the Non-Selling Holders shall have the first right and option to
purchase all of the shares proposed to be sold, pro rata according to their
respective holdings of Investor Stock (determined on a fully-diluted basis), for
cash at a purchase price equal to the dollar value of such consideration (in the
event such consideration includes non-cash consideration, the dollar value of
such non-cash consideration shall be determined by the Company's Board of
Directors, whose good faith determination shall be conclusive, provided that
Selling Holder shall not participate in such determination), exercisable for a
period of 40 days from the date of receipt of the Notice. Failure of any
Non-Selling Holder to respond to the Notice within the 40-day period shall be
deemed to constitute a notification to Selling Holder of such Non-Selling
Holder's decision not to exercise the first right and option to purchase the
shares under this paragraph B.3(c)(i).
(ii) In such event (and in the event that a Non-Selling Holder
shall notify Selling Holder of such Non-Selling Holder's decision not to
exercise its first right and option) Selling Holder shall give written notice to
each of the other Non-Selling Holders who has agreed to purchase his or its pro
rata share of the shares proposed to be transferred and each such Non-Selling
Holder shall have the right, exercisable for a period of five days from the date
of receipt of such notice, to purchase the remaining shares, for cash at a
purchase price equal to the dollar value of the consideration offered for such
shares as set forth in the Notice, pro rata according to such Non-Selling
Holder's holdings of Investor Stock (determined on a fully-diluted basis). This
process shall be repeated until one or more of such Non-Selling Holders has
agreed, or none of such Non-Selling Holders has agreed, to accept the offer with
respect to all of the shares proposed to be transferred. Failure of any such
Non-Selling Holder to respond to such notice within the five-day period shall be
deemed to constitute a notification to Selling Holder of such Non-Selling
Holder's decision not to exercise the first right and option to purchase the
remaining shares under this paragraph B.3(c)(ii).
(iii) In the event that all of the shares proposed to be
transferred are not purchased by the Non-Selling Holders, Selling Holder shall
give Notice as specified above to each Member of Management (each a "Management
Offeree" and collectively the "Management Offerees"), specifying the remaining
number of shares of Investor Stock which Selling Holder desires to sell. Upon
receipt of the Notice, the Management Offerees shall have the right and option
to purchase all of the shares proposed to be sold to them, pro rata according to
their respective holdings of Common Stock (determined on a fully-diluted basis),
for cash at a purchase price equal to the
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<PAGE> 17
dollar value of the consideration offered for such shares as set forth in the
Notice, exercisable for a period of 20 days from the date of receipt of the
Notice. Failure of any Management Offeree to respond to the Notice within the
20-day period shall be deemed to constitute a notification to Selling Holder of
such Management Offeree's decision not to exercise the right and option to
purchase the shares under this paragraph B.3(c)(iii).
(iv) In such event (and in the event that a Management Offeree
shall notify Selling Holder of such Management Offeree's decision not to
exercise its first right and option) Selling Holder shall give written notice to
each of the other Management Offerees who has agreed to purchase his or its pro
rata share of the shares proposed to be transferred and each such Management
Offeree shall have the right, exercisable for a period of five days from the
date of receipt of such notice, to purchase the remaining shares, for cash at a
purchase price equal to the dollar value of the consideration offered for such
shares as set forth in the Notice, pro rata according to such Management
Offeree's holdings of Common Stock (determined on a fully-diluted basis). This
process shall be repeated until one or more of such Management Offerees has
agreed, or none of such Management Offerees has agreed, to accept the offer with
respect to all of the shares proposed to be transferred. Failure of any such
Management Offeree to respond to such notice within the five-day period shall be
deemed to constitute a notification to Selling Holder of such Management
Offeree's decision not to exercise the right and option to purchase the
remaining shares under this paragraph B.3(c)(iv).
(v) The Non-Selling Holders and Management Offerees (together,
the "Offerees") may exercise the right and option provided in paragraphs
B.3(c)(i) through (iv) by giving written notice to Selling Holder not later than
the close of business on the date of expiration of such right and option (or if
such date is not a Business Day, then on or before the close of business on the
next succeeding Business Day), advising of the election to exercise the same and
the date (not later than five days from the date of expiration of all applicable
rights and options to purchase shares under this paragraph B.3(c)) upon which
payment of the purchase price for the shares shall be made. Selling Holder shall
deliver to the Offeree(s) at the Company's principal office, on the payment date
specified in such notice, the certificate or certificates representing such
shares, properly endorsed for transfer, against payment of the purchase price
therefor by the Offeree(s) in immediately available funds.
(vi) In the event that all of the shares proposed to be
transferred are not purchased by the Non-Selling Holders and the Management
Offerees hereunder, the Selling Holder shall then offer the Company the right
and option to purchase the balance of the shares for cash at the same purchase
price and on the same terms offered to the Non-Selling Holders and the
Management Offerees. Failure of the Company to respond to such notice within a
15-day period shall be deemed to constitute a notification to the Selling Holder
of the Company's decision not to exercise the right and option to purchase such
shares under this paragraph B.3(c)(vi).
(vii) The Company may exercise the right and option provided
in paragraph B.3(c)(vi) by giving written notice to the Selling Holder not later
than the close of business on the date of expiration of such right and option
(or if such date is not a Business Day, then on or
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<PAGE> 18
before the close of business on the next succeeding Business Day), advising of
the election to exercise the same and the date (not later than five days from
the date of such notice) upon which payment of the purchase price for the shares
shall be made. The Selling Holder shall deliver to the Company's principal
office, on the payment date specified in such notice, the certificate or
certificates representing the shares being purchased by the Company, properly
endorsed for transfer, against payment of the purchase price therefor by the
Company in immediately available funds.
(viii) If all the shares proposed to be transferred are not
purchased by the Non-Selling Holders, the Management Offerees and the Company in
accordance with this paragraph B.3(c), the Selling Holder (A) shall not be
required to sell any of the shares proposed to be transferred to the Non-Selling
Holders, the Management Offerees or the Company, and (B) may, during the 60-day
period commencing on the expiration of the rights and options provided for in
this Section B.3, sell all (but not less than all) of such shares to the
transferee named in the Notice for a consideration equal to or greater than the
consideration specified in the Notice, free of the restrictions contained in
this paragraph B.3(c) (but subject to the other terms and conditions hereof
including, without limitation, paragraph B.3(d)). In addition, in the event that
all of the shares proposed to be transferred are not purchased by the Offerees
and the Company in accordance with this paragraph B.3(c), each Offeree shall be
entitled, at its option within seven Business Days of being notified that such
shares are not to be purchased, to exercise the rights specified in paragraph
B.3(d) below.
(ix) Notwithstanding the foregoing, the holders of Investor
Stock may designate its respective Investor Affiliates (or any of them) to
exercise such Investor's right and option pursuant to this paragraph B.3(c) to
purchase any or all of the shares proposed to be transferred by the Selling
Holder.
B.3(d) Come-Along. Whenever and as often as the Selling Holder (except
for NationsBanc and BT Capital, with respect to their Preferred Stock only)
shall receive from a prospective purchaser a bona fide offer to purchase any
shares of Investor Stock which such Selling Holder wishes to accept, the
Non-Selling Holders (except for NationsBanc and BT Capital with respect to their
Preferred Stock only) shall have the right, at each Non-Selling Holder's option,
either to exercise such Person's rights under paragraph B.3(c) hereof or to
require the Selling Holder to arrange for the sale, to the prospective
purchaser, on terms and conditions at least as favorable to such Non-Selling
Holder as the terms and conditions set out in the offer received by the Selling
Holder, of the number of the Non-Selling Holder's shares of Investor Stock which
bears the same proportion to the number of shares of Investor Stock owned by
such Non-Selling Holder as the number of shares of Investor Stock sold by the
Selling Holder bears to the total number of shares of Investor Stock owned by
such Selling Holder. If the prospective purchaser will not purchase all the
shares of Investor Stock which the Selling Holder and the Non-Selling Holders
wish to sell pursuant to this paragraph B.3(d), the number of shares of Investor
Stock which the Selling Holder and the Non-Selling Holders shall be permitted to
sell to such prospective purchaser shall be a number of shares equal to the
number of shares which the prospective purchaser desires to purchase times a
fraction, the numerator of which is the
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<PAGE> 19
number of shares of Investor Stock beneficially owned by the Selling Holder or
each other selling Non-Selling Holder, as appropriate, and the denominator of
which is the aggregate number of shares of Investor Stock beneficially owned by
the Selling Holder and the Non-Selling Holders who elect to participate in such
sale. A Non- Selling Holder may exercise his or its right under this paragraph
B.3(d) by written notice given within 10 days after the date on which such
person received the Notice required by paragraph B.3(c)(i) above. For purposes
of this paragraph B.3(d) only, the term "Investor Stock" shall be deemed to
exclude Preferred Stock.
B.4 Purchasers or Transferees of Capital Stock. Except as otherwise
specifically provided herein, any Person who shall acquire (voluntarily or
involuntarily, by operation of law or otherwise) any shares of Common Stock,
Warrants or Preferred Stock shall be bound by all the terms and conditions of
this Agreement to the same extent as the parties hereto, and, prior to
registration of the transfer of any such securities on the books of the Company,
any purchaser or other transferee shall execute an agreement with the parties
hereto agreeing to be bound hereby.
B.5 Sale of the Company.
B.5(a) Definition. The term "Sale of the Company," as used in this
Agreement, means either (i) a sale of all or substantially all of the assets, or
all or substantially all of the capital stock, of (A) the Company, or one or
more of the Company Subsidiaries, or (B) WTAC or one or more of the WTAC
Subsidiaries, in one or more transactions for cash or freely salable securities
and a subsequent liquidation of the Company or WTAC in which their respective
stockholders receive liquidating distributions of such proceeds of sale after
payment or provision for the valid debts and liabilities of the Company or WTAC,
as the case may be, (ii) a merger or consolidation of (A) the Company or one or
more of the Company Subsidiaries, or (B) WTAC or one or more of the WTAC
Subsidiaries, with or into one or more corporations, limited liability companies
or partnerships in which (x) the Company or it Subsidiaries, or (y) WTAC or the
WTAC Subsidiaries receive cash or freely salable securities for all of its or
their assets, as the case may be, and a subsequent liquidation of (A) the
Company or one or more of its Subsidiaries, or (B) WTAC or one or more of its
Subsidiaries, in which the stockholders of the Company or WTAC, as the case may
be, receive liquidating distributions of such proceeds of sale, merger or
consolidation after payment or provision for the valid debts and liabilities of
the Company or WTAC, as the case may be, or (iii) a merger or consolidation of
the Company with or into another corporation, limited liability company or a
partnership in which the Stockholders receive cash or marketable securities for
all of their stock of the Company.
B.5(b) Stockholders' Right to Cause a Sale. The Majority Investors
shall be entitled at any time by written notice to the Company and each other
Stockholder to direct the Company to cause a Sale of the Company. Upon receipt
of such notice, the Company shall, at the request of the Majority Investors (i)
retain a third party appraisal firm reasonably satisfactory to the Company and
the Majority Investors as soon as possible (but in no event more than 30 days
after such notice is given) for the purpose of providing such valuations of the
Company as a whole and various combinations of its assets or the assets of its
subsidiaries as the Company and the Majority Investors deem reasonably
satisfactory, and for the purpose of advising the Company
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<PAGE> 20
and the Investors concerning the private sale of the Company's assets or stock
or the assets of its subsidiaries or a merger or consolidation of the Company or
its subsidiaries with or into another corporation or partnership, (ii) take all
commercially reasonable action necessary to effect a Sale of the Company, and
(iii) consult with and, to the extent reasonably practicable, conform to the
wishes of the Investors in determining the manner and form of the Sale of the
Company. The Company shall use commercially reasonable efforts to enter into a
binding agreement for a Sale of the Company (subject to normal contingencies)
within 120 days from the date of notice under this paragraph B.5(b).
B.5(c) Offer from an Affiliate. Unless the Majority Investors approve
such an offer, an offer to purchase the Company by any Member of Management or
any Affiliate of any Member of Management shall not relieve the Company of its
obligation to effect a Sale of the Company as provided in this Section B.5.
B.5(d) Tax Savings. In order to subject the proceeds received by the
Stockholders to one level of taxation, the Company shall use commercially
reasonable efforts to structure a Sale of the Company in the form of a sale of
the capital stock of the Company as opposed to sale of the stock or assets of
one or more of the Company Subsidiaries or a sale of the stock or assets of WTAC
or one or more of the WTAC Subsidiaries. In the event of the sale of the capital
stock of the Company, the proceeds of such sale shall be divided as provided in
the Company's Certificate of Incorporation.
B.5(e) Cash Consideration. Any Sale of the Company shall be for cash
unless otherwise agreed by the Majority Investors. Unless otherwise agreed by
the Majority Investors, in the event of a Sale of the Company which by its terms
results in cash distributions to the Company rather than the stockholders of the
Company, the Company shall be liquidated promptly thereafter so that the
proceeds of the Sale of the Company will be distributed to the Stockholders.
B.5(f) Sale Documentation. The Stockholders agree that upon any Sale of
the Company pursuant hereto, they will execute all documents reasonably required
to effect such sale, provided such documents are customary in form and substance
for transactions of that type. The Stockholders further agree that they will
vote their shares of Common Stock in favor of any such Sale of the Company and
will not exercise any right to dissent and seek appraisal of their interests
under the laws of the State of Delaware or any other state or pursue any other
comparable statutory remedy in connection with the Sale of the Company.
B.6 Legends on Certificates. During the term of this Agreement, each
certificate representing shares of Restricted Stock and Investor Stock shall
bear legends in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
TRANSFERRED UNLESS
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<PAGE> 21
THE COMPANY HAS RECEIVED A WRITTEN OPINION FROM COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY STATING THAT
SUCH TRANSFER IS BEING MADE IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS. THE TRANSFER OF SECURITIES
REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT IS SUBJECT TO
TRANSFER RESTRICTIONS, OBLIGATIONS AND OTHER CONDITIONS
SPECIFIED IN THE AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
AMONG THE COMPANY AND CERTAIN SECURITYHOLDERS.
The Company shall make a notation on its records and give instructions to any
transfer agent of the Common Stock, Warrants and Preferred Stock in order to
implement the restrictions on transfer established in this Agreement.
B.7 Certain Matters Relating to Regulation Y.
For purposes hereof, "Regulation Y" shall mean Regulation Y
promulgated by the Board of Governors of the Federal Reserve System (12 C.F.R.
ss.225) or any successor regulation.
Notwithstanding anything in this Agreement or the Warrants to
the contrary, Chase shall not, and shall not permit any of its Affiliates to,
transfer any Warrants or Investor Stock held by it to any Person other than (1)
in connection with any public offering or public sale of securities of the
Company (including a public offering registered under the Securities Act of
1933, as amended, and a public sale pursuant to Rules 144 or 144A of the
Securities and Exchange Commission or any similar rules then in force), (2) to a
Person or group of Persons (within the meaning of the Securities and Exchange
Act of 1934, as amended (the "1934 Act") if, after such sale, such Person or
group of Persons in the aggregate would own or control securities which possess
in the aggregate the ordinary voting power to elect a majority of the Company's
directors, provided that such sale has been approved by the Company's Board of
Directors or a committee thereof, (3) to a Person or group of Persons (within
the meaning of the 1934 Act) if, after such sale, such Person or group of
Persons in the aggregate would own or control securities of the Company
(excluding the portion of the securities being disposed of by Chase (and its
Affiliates) in connection with such sale) which possess in the aggregate the
ordinary voting power to elect a majority of the Company's directors, (4) to a
Person or group of Persons (within the meaning of the 1934 Act) if, after such
sale, such Person or group of Persons would not, in the aggregate, own, control
or have the right to acquire more than two percent (2%) of the outstanding
securities of any class of voting securities of the Company, (5) to a Person or
group of Persons (within the meaning of the 1934 Act) if, prior to such sale,
such Person or group of Persons in the aggregate already own or control
securities the Company which possess in the aggregate the ordinary voting power
to elect a majority of the Company's directors, (6) in connection with a merger,
consolidation or similar transaction involving the Company if, after such
transaction, a Person or group of Persons (within the meaning of the 1934 Act)
would own or control securities which possess in the aggregate the ordinary
voting power to elect a majority
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of the surviving corporation's directors, provided that such transaction has
been approved by the Company's Board of Directors or a committee thereof, (7) to
any Member of Management, the Company or any other Investor, pursuant to the
provisions of Section B.2 or B.3 and (8) as otherwise permitted by applicable
law and regulations.
C. ADDITIONAL COVENANTS OF THE COMPANY WITH THE INVESTORS.
C.1 Covenants.
C.1(a) Financial Statements and Other Information. The Company will
furnish to each Investor (so long as it holds any Common Stock, Preferred Stock
or Warrants) and to each holder of at least 10% of the outstanding Common Stock
or Preferred Stock (each, a "Recipient"):
(i) Not later than December 31 of each fiscal year, capital and
operating expense budgets, projections of sources and applications of
funds and profit and loss projections (prepared in accordance with
GAAP, consistently applied) for the Company (and each of the Company
Subsidiaries with which it prepares consolidated financial statements)
on a consolidated basis for each month of the next succeeding fiscal
year, all itemized in reasonable detail and prepared by the Company.
Any material revisions made in such budgets or projections shall be
furnished promptly to each Recipient.
(ii) As soon as available and in any event within 90 days after
the end of each fiscal year, audited financial statements of the
Company (and the Company Subsidiaries with which it prepares
consolidated financial statements) on a consolidated and consolidating
basis, including a balance sheet as at the end of such fiscal year,
statements of income and retained earnings and a related statement of
cash flows for such fiscal year and the figures for the preceding year,
together with all notes thereto, prepared in reasonable detail and in
accordance with GAAP, consistently applied, and accompanied by the
report thereof of Ernst & Young or such other "Big Six" firm of
independent certified public accountants as may be selected by the
Company. Such financial statements shall be certified by the chief
financial officer of the Company to be complete and accurate, to fairly
present the financial condition of the Company and the Company
Subsidiaries, and to be prepared in accordance with GAAP, consistently
applied.
(iii) As soon as reasonably possible and in any event within
30 days after the end of each month, monthly financial reports of the
Company (and the Company Subsidiaries with which it prepares
consolidated financial statements) on a consolidated basis, including a
balance sheet as of the end of the preceding calendar month, statements
of income and retained earnings, a related statement of cash flows for
such month (prepared in accordance with GAAP, consistently applied),
such figures for the corresponding month of the preceding fiscal year,
and comparisons to the budget for such month.
(iv) As soon as reasonably possible and in any event within 30
days after the end of each month, a statement signed by the chief
executive and chief financial officers of
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the Company, setting forth in reasonable detail, as to each of the
Cable Systems, (A) the number and type of subscribers to such system as
at the end of such month, (B) the range of rates charged to subscribers
during such month, (C) the total miles of activated plant as of the end
of such month, (D) the Company's best estimate of the number of
residential units passed as of the end of such month, (E) the number of
subscribers terminating and adding cable service during such month, and
(F) the monthly and year-to-date revenues, expenses and operating
expenses of the Company and the Company Subsidiaries on a consolidated
basis, together with the corresponding figures for the Company's and
the Company Subsidiaries' budgets on a consolidated basis provided to
each Recipient by the Company pursuant to paragraph C.1(a)(i) hereof.
(v) Promptly, and in no event more than 10 days after receipt
thereof, copies of all audit reports, so-called "management letters",
and other communications and reports submitted to the Company or any
Company Subsidiary by independent certified public accountants in
connection with each interim or special audit of a Company Subsidiary
made by such accountants.
(vi) Promptly, but in any event within 10 days after the
Company has knowledge thereof, written notice of any actual or
anticipated material adverse change in any Company Subsidiary's
operations or financial condition, including any material adverse
change relating to any of the Cable Systems or any part thereof
contained in a single municipality.
(vii) With each report pursuant to paragraphs C.1(a)(ii) or
C.1(a)(iii) hereof, an Officer's Certificate of the Company,
substantially in the form attached hereto as Annex 1.
(viii) Simultaneously with delivery to the Lenders (as defined
in the Credit Agreement) under the Credit Agreement, copies of all
financial statements, information and notices delivered to such Lenders
which are not otherwise delivered to each Recipient pursuant to
subparagraphs (i) through (vii) above.
(ix) Immediately upon receipt thereof by the Company, copies
of all financial statements, information and notices delivered to the
Company by WTAC.
(x) Promptly after receipt of any request therefor from an
Investor, such information as such Investor shall request in order for
it to deliver or make all reports or filings required to be made by it
or any of its Affiliates with the Small Business Administration or any
other governmental authority.
C.1(b) Information and Inspection. As often as any Investor shall
reasonably request, the Company shall furnish to the Investors with reasonable
promptness full information pertinent to any covenant, provision or condition
hereof or to any matter in connection with the business of the Company, any
Company Subsidiary, WTAC or any WTAC Subsidiary. In addition, during
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normal business hours upon reasonable notice, the Company shall permit any
authorized representative designated by an Investor to visit (at its own
expense) and inspect any properties of the Company or any Company Subsidiary,
including its books and records (and to make extracts therefrom), and to discuss
its affairs, finances and accounts with the Company's and each Company
Subsidiary's officers, accountants and attorneys.
C.1(c) Additional Advice. Promptly, and in any event within 10 days
after the discovery or receipt of notice of the existence of any default in the
performance by the Company, any Company Subsidiary, WTAC or any WTAC Subsidiary
under any covenant or agreement contained in the Credit Agreement, this
Agreement, any Purchase Agreement, or any other Contractual Obligation to which
any of them is subject or by which any of them is bound, or the commencement of
any litigation against the Company, any Company Subsidiary, WTAC or any WTAC
Subsidiary in which the amount in controversy exceeds $50,000, the Company shall
give written notice to each Investor specifying the nature and period of
existence thereof and what actions the Company, any Company Subsidiary, WTAC or
any WTAC Subsidiary has taken and proposes to take with respect thereto.
C.1(d) Affirmative Covenants. Without the prior written consent of the
Majority Investors, the Company shall, and shall cause each Company Subsidiary
to:
(i) maintain in full force and effect all franchises, permits,
licenses, easements and other rights necessary to the operation of the Cable
Systems;
(ii) maintain its corporate existence and its business; and
maintain all properties which are reasonably necessary for the conduct of its
business, now or hereafter owned by it, in good repair, working order and
condition, reasonable wear and tear excepted, and make any replacements of
properties necessary for the successful operation of its business;
(iii) maintain, on all insurable properties now or hereafter
owned by it, insurance against loss or damage by fire or other casualty
(including business interruption coverage) to the extent customary with respect
to similar properties of companies conducting business similar to that conducted
by it, and to maintain public liability and worker's compensation insurance
covering it to the extent customary with respect to companies conducting
business similar to that conducted by it;
(iv) comply in all respects with this Agreement and in all
material respects with all other material Contractual Obligations to which it is
now or hereafter subject or by which it or any of its properties and assets are
now or hereafter bound, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings and adequate reserves
have been established on its books with respect thereto in accordance with GAAP;
(v) pay and discharge when payable all taxes, assessments and
governmental charges imposed upon its respective properties or upon the income
or profits therefrom (in each case before the same becomes delinquent and before
penalties accrued thereon) and all claims for
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<PAGE> 25
labor, materials or supplies which if unpaid might by law become a Lien upon any
of its respective properties, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings and adequate reserves (as
determined in accordance with GAAP, consistently applied) have been established
on its respective books with respect thereto;
(vi) comply with all Requirements of Law, the violation of
which might reasonably be expected to have material adverse effect upon its
financial condition, operating results or business prospects; and
(vii) maintain proper books of record and account which fairly
represent its financial condition and results of operations and make provisions
on its financial statements for all such proper reserves as in each case are
required in accordance with GAAP, consistently applied.
C.1(e) Negative Covenants. Without the prior written consent of the
Majority Investors, the Company shall not, and shall cause each Company
Subsidiary not to:
(i) enter into any agreement, lease, contract or other
transaction, either directly or indirectly, with any Member of Management or any
Affiliate of any Member of Management, on terms that are less favorable to it
than those which might be obtained at the time from an unaffiliated third party;
(ii) enter into any material amendment of any Contractual
Obligation, if such amendment would by its terms restrict the Company's
performance of its obligations to the Stockholders hereunder, under any Investor
Stock or under any agreement or instrument relating hereto or contemplated
hereby;
(iii) enter into any agreement providing for an Organic
Change;
(iv) incur any Indebtedness (as defined in the Credit
Agreement), except as permitted under the Credit Agreement;
(v) make loans or advances to or guarantees for the benefit of
any Person, except as provided for in the Credit Agreement and for advances or
guarantees given to suppliers in the ordinary course of business, and advances
to employees in an amount not to exceed $1,000 per employee pursuant to normal
employment arrangements;
(vi) except as provided by the terms of the Preferred Stock
and except for the redemption from Belisle of up to 2,500 shares of Nonvoting
Common Stock which is not Restricted Stock at a price not in excess of $250,000,
purchase, redeem or otherwise acquire or retire for value any of its capital
stock or other equity securities or declare or make any distribution with
respect to any of its capital stock or other equity securities other than as
provided for in the Preferred Stock or the Warrants;
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<PAGE> 26
(vii) acquire any interest in any business entity (whether by
a purchase of assets, purchase of stock or other securities, merger, loan or
otherwise), or establish or acquire, directly or indirectly, any Subsidiary;
(viii) amend its certificate of incorporation or bylaws, issue
any shares of capital stock (other than (x) pursuant to the exercise of the
Warrants, (y) pursuant to the Company's 1995 Stock Option Plan, and (z) the
issuance of additional shares of Preferred Stock in connection with the payment
in-kind of dividends as provided in the Preferred Stock), or issue any options
(other than pursuant to the Company's 1995 Stock Option Plan), warrants or
rights to acquire shares of its capital stock, or any other equity securities,
issue any profit participation or stock appreciation, or adopt any phantom stock
plan; or
(ix) create, assume, incur or permit to exist, any Lien on any
of its assets or properties other than (A) Liens securing Indebtedness under or
in respect of, or permitted by, the Credit Agreement, (B) Liens for taxes not
yet due or which are being contested in good faith and for which adequate
reserves have been established, (C) deposits or pledges made to secure the
payment of utilities or similar services, worker's compensation or unemployment
insurance, pensions or social security obligations, (D) interests or title of a
lessor under a lease, (E) easements, rights-of-way, restrictions or similar
charges not interfering with its ordinary conduct of business, or (F) mechanics'
liens, materialman's liens and other Liens by suppliers of goods and services in
the ordinary course of business where payment for the related obligation has
been (or is being) made in full in accordance with the terms thereof.
C.1(f) Compliance with Agreements. The Company will perform and
observe, and will cause each Company Subsidiary to perform and observe, all of
its material obligations to the Stockholders and the holders of Preferred Stock,
Warrants, and Common Stock set forth in (i) this Agreement, (ii) such
instruments, (iii) the agreements under which such instruments were purchased,
(iv) the Company's 1995 Stock Option Plan, and (v) the Certificate of
Incorporation of the Company or such Company Subsidiary, including, without
limitation, the payment of dividends and interest with respect to the Company's
securities.
C.1(g) Indemnification. The Company, without limitation as to time,
will indemnify each Investor and its officers, directors, employees and agents
against, and hold each Investor and its officers, directors, employees and
agents harmless from, all losses, claims, damages, liabilities, costs (including
the costs of preparation and attorneys' fees and expenses) (collectively, the
"Losses") incurred pursuant to any investigation or proceeding against the
Company, such Investor or any of its officers, directors, employees and agents
arising out of or in connection with this Agreement or any Purchase Agreement
(or any other document or instrument executed herewith or pursuant hereto or
thereto), which investigation or proceeding requires the participation of, or is
commenced or filed against, one or more of the Investors and any of its or their
officers, directors, employees and agents because of this Agreement, any
Purchase Agreement or such other documents and the transactions contemplated
hereby or thereby, other than any Losses resulting from action on the part of
the Investors or their officers, directors, employees and agents which is
finally determined in such proceeding to be primarily
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<PAGE> 27
and directly a result of such party's gross negligence or willful misconduct.
The Company agrees to reimburse each Investor and its officers, directors,
employees and agents promptly for all such Losses as they are incurred by such
Investor and its officers, directors, employees and agents. Each Investor agrees
to reimburse the Company for any payments made by the Company to such Investor
pursuant to this paragraph for Losses which are finally determined in such
proceeding to result primarily and directly from the gross negligence or willful
misconduct of such Investor. The obligations of the Company under this paragraph
will be separate obligations and the obligations under this paragraph to the
Investors or any of their officers, directors, employees and agents will not be
extinguished solely because any Investor or its officers, directors, employees
or agents are not entitled to indemnity under this paragraph. The obligations of
the Company under this paragraph will survive the termination of this Agreement
and any transfer of Preferred Stock, Warrants or Common Stock by any Investor.
C.1(h) Environmental Matters.
(i) Upon an Investor's receipt of any environmental order,
notice, permit, application, or other communication or report (an "Environmental
Notice"), the Company, any Company Subsidiary, WTAC or any WTAC Subsidiary shall
at its expense, at the request of the Majority Investors, obtain an
environmental site assessment or environmental audit report or an update of any
of the foregoing from an independent environmental consultant satisfactory to
the Majority Investors with respect to the premises identified in the
Environmental Notice, all in form and content satisfactory to Majority
Investors.
(ii) Without limiting the provisions of paragraph C.1(g)
hereof, the Company agrees to defend, protect, indemnify and hold harmless the
Investors and each of their officers, directors, employees, attorneys and agents
(collectively called the "Indemnitees") from and against all liabilities,
obligations (including removal and remedial actions), losses, damages (including
foreseeable and unforeseeable consequential damages and punitive damages),
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
(including reasonable attorneys' and consultants' fees and disbursements) of any
kind or nature whatsoever that may at any time be incurred by, imposed on or
asserted against such Indemnitees directly or indirectly based on, or arising or
resulting from, (A) the actual or alleged presence of Hazardous Materials (as
defined below) on any property now, previously or hereafter owned, leased or
otherwise held by the Company or any of the Company Subsidiaries, WTAC or any of
the WTAC Subsidiaries, (B) any Environmental Claim (as defined below) relating
to the Company, the Company Subsidiaries, WTAC, the WTAC Subsidiaries or any of
their operations, or (C) the exercise of the Investors' rights under any of the
provisions of this paragraph (the "Indemnified Matters") regardless of when such
Indemnified Matters arise.
(iii) As used herein, "Hazardous Materials" means (A) any
petroleum or petroleum products, radioactive materials, asbestos in any form
that is or could become friable, urea formaldehyde foam insulation, transformers
or other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls, or radon gas; (B) any chemicals, materials or
substances defined as or included in the definition of "hazardous substances,"
"hazardous
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wastes," "hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or
"pollutants," or words of similar import, under any applicable Environmental Law
(as defined below); and (C) any other chemical, material or substance, exposure
to which is prohibited, limited or regulated by any governmental authority. As
used herein, "Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code, policy or rule of common law now or hereafter
in effect and in each case as amended, and any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment relating to the environment, health, safety or Hazardous
Materials, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss. 9601
et seq.; the Hazardous Materials Transportation Act, as amended, 49 U.S.C. ss.
1801 et seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
ss. 6901 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
ss. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.;
the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the Safe Drinking Water Act, 42
U.S.C. ss. 3608 et seq.; Occupational Safety and Health Act, 29 U.S.C. ss. 651
et seq.; and their counterparts under applicable state and local laws. As used
herein, "Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigations or proceedings relating in any way
to any Environmental Law or any permit issued under any such Environmental Law
("Claims"), including without limitation (x) any and all Claims by governmental
or regulatory authorities for enforcement, cleanup, removal, response, remedial
or other actions or damages, fines or penalties pursuant to any applicable
Environmental Law, and (y) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
C.1(i) Brokerage. The Company and the Company Subsidiaries shall pay,
and hold each Investor harmless against, any liability, loss or expense
(including, without limitation, reasonable attorneys' fees and out-of-pocket
expenses) arising in connection with any claim for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by the Purchase Agreements.
C.1(j) Management; Conflicts of Interest. For so long as each Member of
Management holds the position or performs the duties currently held by him or
any other position with the Company or the Company Subsidiaries, such Member of
Management shall devote substantially all of his business time and attention to
managing the business and affairs of the Company and the Company Subsidiaries,
and shall offer to the Company all opportunities that become available to him
for investment in or acquisition of cable television systems or operations and
related businesses suitable for investment or acquisition by the Company in
accordance with the Company's business objectives, as determined from time to
time by the Company's Board of Directors. Each Member of Management shall serve
at the pleasure of the Board of Directors of the Company, in its absolute
discretion, and nothing contained in this paragraph C.1(j) or elsewhere in this
Agreement shall be construed to create in any Member of Management any right to
continued employment by the Company or any Company Subsidiary.
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<PAGE> 29
C.1(k) Meetings; Representation. The Company shall have regular
meetings of its Board of Directors at least every calendar quarter and of the
stockholders at least once a year, as provided for in the Company's Bylaws, and
minutes of such meetings shall be prepared and maintained as a part of the
permanent records of the Company. The Company shall provide each Investor with
written notice of all proposed agendas (which shall not, however, limit the
matters which may be acted upon in the event a majority of the directors or
stockholders present, as appropriate, vote to discuss or act upon any other
matter) for all meetings of the Stockholders, Board of Directors and Executive
Committee of the Company at lease five days in advance (except in the case of
special meetings of the Board of Directors or meetings of the Executive
Committee, in which case such notice shall be as prompt as practicable) and,
except as otherwise provided by paragraph B.1(c) hereof, at least one
representative of each Investor, in addition to the directors designated by such
Investor hereunder, will be permitted to attend such meetings, at its own
expense. Executive Committee meetings may be called without prior approval by
the Company's Board of Directors.
C.2 Changes to WTAC Certificate of Incorporation. The Company shall
not consent to any amendment to the Certificate of Incorporation of WTAC, or to
that certain Second Amended and Restated Stockholders Agreement, dated as of May
5, 1995, among WTAC, Alexander Green and Classic Cable that would increase the
percentage of Available Assets (as defined in such Certificate of Incorporation)
that is distributable to holders of WTAC Class A Stock.
D. MISCELLANEOUS.
D.1 Termination.
D.1(a) Notwithstanding the provisions of paragraph D.1(b) hereof, all
rights and obligations created by this Agreement shall terminate upon the
earlier to occur of (i) the written agreement of the parties hereto holding 90%
or more of the shares of Common Stock, together with the holders of 90% of the
Warrants and 90% of the Preferred Stock, (ii) the acquisition by a single Person
of all of the issued and outstanding shares of Common Stock and Preferred Stock
and all of the issued and outstanding Warrants and (iii) the date upon which at
least 25% of the outstanding shares of Common Stock shall have been sold
pursuant to a registration statement filed and declared effective by the
Securities and Exchange Commission.
D.1(b) The provisions of Section B.1 and the second sentence of
Paragraph B.5(f) hereof shall terminate on October 30, 2005.
D.2 No Employment Agreement. Nothing in this Agreement shall be
construed to create an employment agreement for any Member of Management.
Members of Management acknowledge and agree that they are employees at will.
D.3 Management Compensation. For so long as the following Members of
Management is employed by the Company in his current position, the Company shall
pay to him
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an annual salary as follows: Belisle - $200,000; Smith - $140,000; Seach -
$135,000 and Noteboom - $75,000 (pro rated for any partial year); such annual
salary to be subject to upward adjustment from time to time at the discretion of
the Company's Board of Directors. Each Member of Management shall be entitled to
receive such other benefits as determined from time to time by the Company's
Board of Directors. In the event that a Member of Management is terminated as an
employee of the Company other than for one of the reasons specified in clauses
(A) through (D) of paragraph B.2(d)(i) hereof, the Company shall (i) promptly
thereafter pay to him as severance compensation an amount equal to the salary
paid to him over the prior twelve month period, and (ii) continue to provide him
with medical insurance coverage for a period of twelve months after his
termination.
D.4 Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or by
cable, telex, facsimile transmission, telegram or overnight delivery service, or
72 hours after having been mailed by certified or registered mail, return
receipt requested and postage prepaid, to the recipient. Such notices, demands
and other communications will be sent to each party at the address indicated
below:
To the Company: Classic Communications, Inc.
515 Congress Ave.
Suite 2626
Austin, Texas 78701
Attn: J. Merritt Belisle
Facsimile No.: (512) 476-5204
With a copy (which shall
not constitute notice) to: Winstead Sechrest & Minick P.C.
100 Congress Avenue
Suite 800
Austin, Texas 78701
Attn: Cary Ferchill
Facsimile No.: (512) 370-2841
To Management: J. Merritt Belisle
Stephen S. Smith
Steven E. Seach
Bryan D. Noteboom
515 Congress Ave.
Suite 2626
Austin, Texas 78701
Facsimile No.: (512) 476-5204
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<PAGE> 31
Mark Livingston
605 N.W. Third St.
P.O. Box 429
Plainville, Kansas 67663
Facsimile No.: (913) 434-2614
With a copy (which shall
not constitute notice) to: Winstead Sechrest & Minick P.C.
100 Congress Avenue
Suite 800
Austin, Texas 78701
Attn: Cary Ferchill
Facsimile No.: (512) 370-2841
To Investors: Austin Ventures, L.P.
Austin Ventures III-A, L.P.
Austin Ventures III-B, L.P.
c/o Austin Ventures
1300 Norwood Tower
114 West 7th Street
Austin, Texas 78701
Attn: Jeffery C. Garvey
Facsimile No.: (512) 476-3952
BT Capital Partners, Inc.
130 Liberty Street
25th Floor
New York, New York 10006
Attn: Robert Marakovits
Facsimile No.: (512) 250-7651
Texas Growth Fund
c/o TGF Management Corp.
100 Congress Avenue
Suite 980
Austin, Texas 78701
Attn: James J. Kozlowski and Steven M. Soileau
Facsimile No.: (512) 322-3101
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<PAGE> 32
NationsBanc Capital Corp.
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Attn: Michael F. Elliott
Facsimile No.: (704) 386-6432
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza, 4th Floor
New York, NY 10081
Attn: John P. White
Facsimile: (212) 552-7623
With copies (which shall
not constitute notice) to: Edens, Snodgrass, Nichols & Breeland, P.C.
111 Congress Avenue
2800 Franklin Plaza
Austin, Texas 78701
Attn: Patrick K. Breeland, Esq.
Facsimile No.: (512) 505-5911
and: Jenkens & Gilchrist
2200 One American Center
600 Congress Avenue
Austin, Texas 78701
Attn: William R. Volk
Facsimile No.: (512) 404-3520
and: Fennebresque, Clark, Swindell & Hay
NationsBank Corporate Center
Suite 2900
100 North Tryon Street
Charlotte, North Carolina 28202-4011
Attn: Jeffrey S. Hay, Esq.
Facsimile No.: (704) 347-3838
and: Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza, 47th Floor
New York, NY 10005
Attn: Richard J. Wight
Facsimile: (212) 530-5219
or to such other address or to the attention of such other person as the
recipient party has specified to the sending party by prior written notice.
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D.5 Governing Law. The corporate laws of Delaware shall govern all
questions concerning the relative rights of the Company and the Stockholders.
All other questions concerning the construction, validity and interpretation of
this Agreement shall be governed by the internal laws of the State of Texas
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Texas or any other jurisdiction) that would cause the
application of the laws or any jurisdiction other than the State of Texas.
D.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
D.7 Reorganization, Etc. The provisions of this Agreement shall apply
to any stock or other securities resulting from any stock split or reverse
split, stock dividend, reclassification, subdivision, consolidation or
reorganization of any stock or other securities of
the Company and to any stock or other securities of the Company or of any
successor company which may be received by any of the parties hereto by virtue
of their respective ownership of Common Stock.
D.8 Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
D.9 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
D.10 Binding Effect. Except as otherwise expressly provided herein, all
covenants and agreements in this Agreement by or on behalf of any of the parties
hereto will bind and inure to the benefit of the respective heirs, personal
representatives, successors and assigns of the parties hereto whether so
expressed or not. In addition, and whether or not any express assignment has
been made, the provisions of this Agreement which are for any Investor's benefit
as a purchaser or holder of Common Stock, Preferred Stock or Warrants are also
for the benefit of, and enforceable by, any subsequent holder of such Common
Stock, Preferred Stock or Warrants. The Company shall not make any assignment or
transfer of any of its rights or obligations hereunder without the prior written
consent of all of the Investors.
D.11 Loss of Securities; Reissue of Securities in Lesser Denominations.
Upon:
(i) receipt of evidence satisfactory to the Company of loss,
theft, mutilation or destruction of a stock certificate or warrant, and
(ii) in the case of any such loss, theft, or destruction, upon
delivery of indemnity in such form and amount as shall be reasonably
satisfactory to the Company, or in the event of such mutilation, upon surrender
and cancellation of such stock certificate or warrant, the
-33-
<PAGE> 34
Company will make and deliver a new stock certificate or warrant of like tenor,
in lieu of such lost, stolen, mutilated or destroyed certificate or warrant. In
addition, upon request of any holder of a stock certificate, warrant or other
securities of the Company now or hereafter issued by the Company to a
Stockholder, and upon surrender of such certificate, warrant or other securities
to the Company and compliance with any restrictive legends, the Company will
reissue, in lesser denominations to parties designated by such holder, new
certificates, warrants or other securities in the equivalent amounts of such
other securities surrendered.
D.12. Prior Agreement. This Agreement supercedes and replaces in its
entirety the Stockholders Agreement dated as of October 15, 1995 among the
Company, Management and certain of the Investors.
D.13. Amendments. This Agreement may be amended upon the affirmative
vote of the holders of not less than (i) 90% of the outstanding shares of Common
Stock and (ii) 90% of the outstanding shares of Preferred Stock.
* * * *
-34-
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have caused this Stockholders'
Agreement to be executed as of the date first above written.
COMPANY:
CLASSIC COMMUNICATIONS, INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
J. Merritt Belisle
Chief Executive Officer
BELISLE:
By: /s/ J. MERRITT BELISLE
-----------------------------------
J. Merritt Belisle
SMITH:
By: /s/ STEPHEN S. SMITH
-----------------------------------
Stephen S. Smith
SEACH:
By: /s/ STEVEN E. SEACH
-----------------------------------
Steven E. Seach
LIVINGSTON:
By: /s/ MARK LIVINGSTON
-----------------------------------
Mark Livingston
-35-
<PAGE> 36
NOTEBOOM:
By: /s/ BRYAN D. NOTEBOOM
-----------------------------------
Bryan D. Noteboom
AUSTIN VENTURES, L.P.
By: AV PARTNERS, L.P.
Its: General Partner
By: /s/ JEFFERY C. GARVEY
-----------------------------------
Jeffery C. Garvey
General Partner
AUSTIN VENTURES III-A, L.P.
By: AV PARTNERS III, L.P.
Its: General Partner
By: /s/ JEFFERY C. GARVEY
-----------------------------------
Jeffery C. Garvey
General Partner
AUSTIN VENTURES III-B, L.P.
By: AV PARTNERS III, L.P.
Its: General Partner
By: /s/ JEFFERY C. GARVEY
-----------------------------------
Jeffery C. Garvey
General Partner
-36-
<PAGE> 37
BT CAPITAL PARTNERS, INC.
By: /s/ ROBERT MARAKOVITS
-----------------------------------
Robert Marakovits
Managing Director
BOARD OF TRUSTEES OF TEXAS GROWTH
FUND - 1991 TRUST, AS TRUSTEES
By: TGF MANAGEMENT CORP.
Its: Executive Director
By: /s/ JAMES J. KOZLOWSKI
-----------------------------------
James J. Kozlowski
President
NATIONSBANC CAPITAL CORP.
By: /s/ MICHAEL F. ELLIOTT
-----------------------------------
Michael F. Elliott
Senior Vice President
THE CHASE MANHATTAN BANK, N.A.
By: /s/ JOHN P. WHITE
-----------------------------------
John P. White
Vice President
-37-
<PAGE> 38
ANNEX 1
FORM OF OFFICER'S CERTIFICATE
The undersigned hereby certifies that:
1. He is the duly elected, qualified and acting Chairman and Chief
Executive Officer of Classic Communications, Inc., a Delaware corporation (the
"Company").
2. He has reviewed and is familiar with the Amended and Restated
Stockholders' Agreement (the "Stockholders' Agreement") dated as of October 31,
1995, among the Company, Management and the Investors named therein.
3. This Certificate is delivered pursuant to paragraph C.1(a)(vii) of
the Stockholders' Agreement in connection with the delivery of the financial
reports of the Company and each of the Company Subsidiaries (as defined in the
Stockholders' Agreement) for the month or fiscal year ended .
-----------------
4. The financial reports referred to in the preceding paragraph are
complete and accurate in all material respects, fairly present the financial
condition of the Company and each of the Company Subsidiaries and their results
of operations, and have been prepared in accordance with generally accepted
accounting principles, consistently applied (except, if monthly reports, for the
omission of footnotes and other disclosures normally required by such
principles).
Dated: COMPANY:
-----------------------
CLASSIC COMMUNICATIONS, INC.
By:
--------------------------------
J. Merritt Belisle
Chairman and
Chief Executive Officer
Executed 10/31/95
-38-
<PAGE> 39
AMENDMENT NO. 1
This AMENDMENT NO. 1 is entered into as of October 31, 1995
between CLASSIC COMMUNICATIONS, INC., a Delaware corporation (the "Company"), J.
MERRITT BELISLE ("Belisle"), STEPHEN S. SMITH ("Smith"), MARK LIVINGSTON
("Livingston"), and BRYAN D. NOTEBOOM ("Noteboom") (Belisle, Smith, Seach,
Livingston and Noteboom are referred to collectively as "Management" and each
individually as a "Member of Management"), AUSTIN VENTURES, L.P., a Delaware
limited partnership ("Austin"), AUSTIN VENTURES III-A, L.P., a Delaware limited
partnership ("Austin III-A"), AUSTIN VENTURES III-B, L.P., a Delaware limited
partnership ("Austin III-B"), Austin, Austin III-A and Austin III-B are
collectively referred to as "Austin Ventures"), BT CAPITAL PARTNERS, INC., a
Delaware corporation ("BT Capital"), TEXAS GROWTH FUND, a trust fund created by
the Constitution of the State of Texas ("Growth Fund"), NATIONSBANC CAPITAL
CORP. ("NationsBanc"), a Texas corporation, and THE CHASE MANHATTAN BANK, N.A.
("Chase"), Austin, Austin III-A, Austin III-B, BT Capital, Growth Fund,
NationsBanc and Chase are referred to collectively as the "Investors" and each
individually as an "Investor". Management and Investors are referred to
collectively as "Stockholders" and each individually as a "Stockholder").
Recitals:
The Company and the Stockholders are parties to an Amended and
Restated Stockholders Agreement (the "Stockholder Agreement") entered into as of
October 31, 1995 and wish to amend the stockholders Agreement in certain
respects. Accordingly, the parties hereto hereby agree as follows:
A. Definitions. Except as herein otherwise expressly provided,
terms defined in the Stockholders Agreement are used herein as defined therein.
B. Amendments to Stockholders Agreement.
B.1 The definitions of "Majority Investors" and "Warrants" in
paragraph A of the Stockholders Agreement as hereby amended in their entirety to
read as follows:
"Majority Investors" means the holders of at least 80% of the
outstanding shares of Common Stock issued to the Investors, provided,
however, that for purposes of this calculation, (i) all shares of
Common Stock issuable pursuant to the Warrants shall be deemed to be
issued and outstanding, (ii) for purposes of paragraph B.3, any
Warrants acquired by Chase pursuant to the Stock Purchase Agreement (or
by any lender under the Credit Agreement pursuant to paragraph B.8
hereof), or any Investor Stock acquired upon exercise of such Warrants,
shall be excluded and (iii) under no circumstances shall the percentage
vote to which the Warrants and
<PAGE> 40
Investor Stock referred to in the foregoing clause (ii) shall be
entitled to be greater than 4.9% of the total Common Stock and
Warrants issued to the Investors. "
Warrants" means the warrants created in the Company's Common
Stock Purchase Warrant issued to (i) NationsBanc dated as of October
31, 1995, to purchase 12,128 shares of Common Stock, as adjusted
pursuant to the terms thereof, (ii) NationsBanc dated as of October
31, 1995 to purchase 3,000 shares of Common Stock, as adjusted
pursuant to the terms thereof, (iii) BT Capital dated as of October
31, 1995 to purchase 3000 shares of Common Stock, as adjusted pursuant
to the terms thereof, (iv) Chase dated as of October 31, 1995 to
purchase 15,207 shares of Common Stock, as adjusted pursuant to the
terms thereof and (v) the Person acquiring Warrants pursuant to
paragraph 8B hereof, and, in each case, any replacement or substitute
warrants for all or any portion thereof.
B.2 Paragraph b.& of the Stockholders Agreement is hereby
amended in its entirety to read as follows:
For purposes hereof, "Regulation &" shall mean Regulation &
promulgated by the Board of Governors of the Federal Reserve System (12
C.F.R. ss. 225) or any successor regulation.
Notwithstanding anything in this Agrement or the Warrants to
the contrary, neither Chase nor any lender under the Credit Agreement
that shall acquire Warrants pursuant to paragraph B.8 hereof (Chase,
and any such lender, being herein collectively referred to as
"Lenders") shall, nor shall any Lender permit any of its Affiliates to,
transfer any Warrants or Investor Stock held by it to any Person other
than 91) in connection with any public offering or public sale of
securities of the company (including a public offering registered under
the Securities Act of 1933, as amended, and a public sale pursuant to
Rule 144 or 144 A of the Securities and Exchange Commission or other
similar rules then in force, (2) to a Person or group of Persons
(within the meaning of the Securities and Exchange Act of 1934, as
amended (the "1934 Act") if, after such sale, such Person or group of
Persons in the aggregate would own or control securities which possess
in the aggregate the ordinary voting power to elect a majority of the
company's directors, provided that such sale has been approved by the
Company's Board of Directors or a committee thereof, (3) to a Person or
group of Persons (within the meaning of the 1934 Act) if, after such
sale, such Person or Group of Persons in the aggregate would own or
control securities of the company (excluding the portion of the
securities being disposed of by such Lender (and its Affiliates) in
connection with such sale) which possess in the
<PAGE> 41
aggregate the ordinary voting power to elect a majority of the
company's directors (4) to a Person or group of Persons (within the
meaning of the 1934 Act) if, after such sale, such Person or group of
Persons would not, in the aggregate, own, control or have the rgith to
acquire more than two percent (2%) of the outstanding securities of any
class of voting securities of the Company, (5) to a person or group fo
Persons (within the meaning of the 1934 Act) if, prior to such sale,
such Person or group of Persons (within the meaning of the 1934 Act)
if, prior to such sale, such Person or group of Persons in the
aggregate already own or control securities of the Company which
possess in the aggregate the ordinary voting power to elect a majority
of the company's directors, (6) in connection with a merger,
consolidation or similar transaction involving the company if, after
such transaction, a Person or group of Persons (within the meaning of
the 1934 Act) would own or control securities which possess in the
aggregate the ordinary voting power to elect a majority of the
surviving corporation's directors, provided that such transaction has
been approved by the Company's Board of Directors or a committee
thereof, (7) to any Member of Management, the company or any other
Investor, pursuant to the provisions of Section B.2 or B.3 and (8) as
otherwise permitted by applicable law and regulations.
B.3 The Stockholders Agreement is hereby amended by adding a
new paragraph B8 after paragraph B.7 to read as follows:
B.8 Transfers in Connection with Credit Agreement Syndication.
Notwithstanding anything in this Agreement to the contrary
(including, without limitation, the provisions of paragraph B.3
thereof), if Chase shall assign or otherwise transfer any of the loans
or other credit or commitments under the Credit Agreement (including
without limitation by means of selling participations therein), Chase
may request (upon 3 Business Days' prior notice to the Company) that a
number of the Warrants held by Chase be canceled on the date of such
assignment and transfer and that a like number of Warrants be issued by
the Company to the Person to whom such loans or other credit or
commitments are being assigned or otherwise transferred. Any such
issuance by the company shall be subject to the consent of the Company
to the Person to whom such loans or other credit or commitments are
being assigned or otherwise transferred. Any such issuance by the
Company shall be subject to the consent of the Company which shall not
be unreasonably withheld or delayed. Upon the date specified in such
request, the Company shall (subject to granting such consent) issue,
and Chase shall deliver to the Company for cancellation, such number of
Warrants as aforesaid and the
<PAGE> 42
Company and such Person shall execute and deliver an Instrument of
transfer in the form of Exhibit A hereto pursuant to which such Person
(i) becomes an "Investor" hereunder and under the Amended and Restated
Registration Rights Agreement dated as of October 31, 1995, by and
among the Company, Belisle and the Investors, in each case entitled to
all the benefits accordedc to an Investor under, and subject to all of
the obligations imposed upon an Investor pursuant to, this Agreement
and such Amended and Restated Registration Rights Agreement, as if such
Person had been one of the Investors that was an original signatory
party hereto or thereto and 9ii) becomes entitled to the rights of a
"Purchaser" under Section 4 and 5 of the stock Purchase Agreement, as
if such Person had been one of the "Purchasers" was an original
signatory party thereto. Any such cancellation, issuance and exchange
of Warrant shall not be subject to the provisions of this Agreement.
C. Miscellaneous. Except as herein provided, the Stockholders Agreement
shall remain unchanged and in full force and affect. This Amendment No. 1 may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 1 by signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to be executed as of the date first above written.
CLASSIC COMMUNICATIONS, INC.
By: /s/ STEPHEN S. SMITH
----------------------------------------------
Stephen S. Smith President
BELISLE:
/s/ J. MERRITT BELISLE
-------------------------------------------------
J. Merritt Belisle
SMITH:
/s/ STEPHEN S. SMITH
-------------------------------------------------
Stephen S. Smith
SEACH:
/s/ STEPHEN S. SMITH
-------------------------------------------------
Steven E. Seach
<PAGE> 43
LIVINGSTON:
/s/ MARK LIVINGSTON
-------------------------------------------------
Mark Livingston
NOTEBOOM:
/s/ BRYAN D. NOTEBOOM
-------------------------------------------------
Bryan D. Noteboom
AUSTIN VENTURES, L.P.
By: AV Partners, L.P., Its General Partner
By: /s/ JEFFERY C. GARVEY
-------------------------------------
Jeffery C. Garvey
AUSTIN VENTURES III-A, L.P.
By: AV Partners III, L.P., Its General
Partner
By: /s/ JEFFERY C. GARVEY
---------------------------------
Jeffery C. Garvey
AUSTIN VENTURES III-B, L.P.
By: AV Partners III, L.P., Its General
Partner
By: /s/ JEFFERY C. GARVEY
---------------------------------
Jeffery C. Garvey
BT CAPITAL PARTNERS, INC.
By: /s/ ROBERT MARAKOVITS
------------------------------------------
Robert Marakovits
Board of Trustees of TEXAS GROWTH
FUND - 1991 Trust, as Trustees
By: TGF Management Corp.,
its Executive Directors
By: /s/ JAMES J. KOZLOWSKI
-----------------------------------
James J. Kozlowski, President
NATIONSBANC CAPITAL CORP.
By: /s/ MICHAEL F. ELLIOTT
---------------------------------------------------
Michael F. Elliott, Sr. Vice President
CHASE MANHATTAN BANK
(National Association)
By: /s/ JOHN P. WHITE
----------------------------------------------------
John P. White, Vice President
<PAGE> 44
CLASSIC COMMUNICATIONS, INC.
AMENDMENT NO. 2
THIS AMENDMENT NO. 2 is entered into as of December 27, 1995, between
CLASSIC COMMUNICATIONS, INC., a Delaware corporation (the "Company"), J. MERRITT
BELISLE ("Belisle"), STEPHEN S. SMITH ("Smith"), STEVEN E. SEACH ("Seach"), MARK
LIVINGSTON ("Livingston"), and BRYAN D. NOTEBOOM ("Noteboom") (Belisle, Smith,
Seach, Livingston, and Noteboom are referred to collectively as "Management" and
each individually as a "Member of Management"); AUSTIN VENTURES, L.P., a
Delaware limited partnership ("Austin"), AUSTIN VENTURES III-A, L.P., a Delaware
limited partnership ("Austin III-A"), AUSTIN VENTURES III-B, L.P., a Delaware
limited partnership ("Austin III-B") (Austin, Austin III-A and Austin III-B are
collectively referred to as "Austin Ventures"), BT CAPITAL PARTNERS, INC., a
Delaware corporation ("BT Capital"), TEXAS GROWTH FUND, a trust fund created by
the Constitution of the State of Texas ("Growth Fund"), NATIONSBANC CAPITAL
CORP., a Texas corporation ("NationsBanc"), THE CHASE MANHATTAN BANK, N.A.
("Chase"), and UNION VENTURE CORPORATION, a California corporation ("Union")
(Austin, Austin III-A, Austin III-B, BT Capital, Growth Fund, NationsBanc,
Chase, and Union are referred to collectively as the "Investors" and each
individually as an "Investor"); Management and Investors are referred to
collectively as "Stockholders" and each individually as a "Stockholder").
R E C I T A L S
The Company and the Stockholders, other than Union, are parties to an
Amended and Restated Stockholders Agreement, entered into as of October 31, 1995
and amended pursuant to Amendment No. 1 (the "Stockholders Agreement"), and wish
to amend the Stockholders Agreement to add Union as an Investor. The Company and
the Stockholders, other than Union, are also parties to an Amended and Restated
Registration Rights Agreement, entered into as of October 31, 1995 and modified
pursuant to Amendment No. 1 (the "Registration Rights Agreement"), and wish to
amend the Registration Rights Agreement to add Union as an Investor.
Accordingly, the parties hereto hereby agree as follows:
A. DEFINITIONS. Except as herein otherwise expressly provided, terms
defined in the Stockholders Agreement are used herein as defined therein.
B. CONSENT. Austin Ventures, BT Capital, Growth Fund, and NationsBanc
hereby consent to the Company entering into that certain Stock Purchase
Agreement, dated as of December 27, 1995, by and among the Company and Union
(the "Union Stock Purchase Agreement"), and hereby waive the restrictions set
forth in Section C.1(e)(iii) of the Stockholders Agreement with respect to the
Union Stock Purchase Agreement.
C. ADDITIONAL INVESTOR. Upon consummation of the Union Stock Purchase
Agreement, Union shall become an "Investor" under the Stockholders Agreement and
under the Registration Rights Agreement, in each case entitled to all the
benefits accorded to an Investor under, and subject
<PAGE> 45
to all of the obligations imposed upon an Investor pursuant to, each such
Agreement as if Union had been one of the Investors that was an original
signatory party thereto (and, to the extent applicable, Union hereby assumes the
obligations of an Investor pursuant to each such Agreement).
D. NOTICES. For purposes of the Stockholders Agreement and the
Registration Rights Agreement, Union hereby agrees that all notices, demands or
other communications to be given to it shall be sent to it at the following
address:
Union Venture Corporation
445 South Figueroa Street, 13th Floor
Los Angeles, California 90071
Attn: Robert C. Dawson
Facsimile No. 213/629-5328
With a copy (which Arter & Hadden
shall not constitute 2 Park Plaza, Suite 700
notice) to: Irvine, California 92714
Attn: Michael P. Ridley, Esq.
Facsimile No. 714/252-0961
E. MISCELLANEOUS. Except as herein provided, the Stockholders Agreement
shall remain unchanged and in full force and effect. This Amendment No. 2 may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same amendatory instrument and any of the parties hereto
may execute this Amendment No. 2 by signing any such counterpart.
* * * *
- 2 -
<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2
to be executed as of the date first above written.
COMPANY:
CLASSIC COMMUNICATIONS, INC.
By: /s/ J. MERRITT BELISLE
----------------------------------
J. Merritt Belisle
Chief Executive Officer
BELISLE:
By: /s/ J. MERRITT BELISLE
----------------------------------
J. Merritt Belisle
SMITH:
By: /s/ STEPHEN S. SMITH
----------------------------------
Stephen S. Smith
SEACH:
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach
LIVINGSTON:
By: /s/ MARK LIVINGSTON
----------------------------------
Mark Livingston
- 3 -
<PAGE> 47
NOTEBOOM:
By: /s/ BRYAN D. NOTEBOOM
--------------------------------
Bryan D. Noteboom
AUSTIN VENTURES, L.P.
By: AV Partners, L.P.
Its: General Partner
By: /s/ JEFFERY C. GARVEY
--------------------------------
Jeffery C. Garvey
General Partner
AUSTIN VENTURES III-A, L.P.
By: AV Partners III, L.P.
Its: General Partner
By: /s/ JEFFERY C. GARVEY
--------------------------------
Jeffery C. Garvey
General Partner
AUSTIN VENTURES III-B, L.P.
By: AV Partners III, L.P.
Its: General Partner
By: /s/ JEFFERY C. GARVEY
--------------------------------
Jeffery C. Garvey
General Partner
- 4 -
<PAGE> 48
BT CAPITAL PARTNERS, INC.
By: /s/ ROBERT MARAKOVITS
---------------------------
Robert Marakovits
Managing Director
BOARD OF TRUSTEES OF TEXAS
GROWTH FUND - 1991 TRUST, AS
TRUSTEE
By: TGF Management Corp.
Its: Executive Director
By: /s/ JAMES J. KOZLOWSKI
---------------------------
James J. Kozlowski
President
NATIONSBANC CAPITAL CORP.
By: /s/ MICHAEL F. ELLIOTT
---------------------------
Michael F. Elliott
Senior Vice President
THE CHASE MANHATTAN BANK, N.A.
By: /s/ JOHN P. WHITE
---------------------------
John P. White
Vice President
- 5 -
<PAGE> 49
UNION VENTURE CORPORATION
By: /s/ ROBERT C. DAWSON
---------------------------
Robert C. Dawson
President
- 6 -
<PAGE> 50
AMENDMENT NO. 3, WAIVER, AND AGREEMENT
This AMENDMENT NO. 3, WAIVER, AND AGREEMENT (this "Agreement") is
entered into and is effective as of December 19, 1997, by and among the parties
to the Stockholders Agreement (described below) and Patti Kay Belisle ("Patti
Belisle"). This Agreement relates to the AMENDED AND RESTATED STOCKHOLDERS
AGREEMENT ("STOCKHOLDERS AGREEMENT") dated as of October 31, 1995, as amended,
by and among Classic Communications, Inc. ("Company"), J. Merritt Belisle
("Merritt Belisle"), Stephen S. Smith, Steven E. Seach, Mark Livingston, Bryan
D. Noteboom, Austin Ventures, L.P., Austin Ventures III-A, L.P., Austin Ventures
III-B, L.P., BT Capital Partners, Inc., Texas Growth Fund, NationsBanc Capital
Corp., The Chase Manhattan Bank, Union Venture Corporation, and certain
additional warrantholders of the Company. Capitalized terms used in this
Agreement but not otherwise defined have the meanings assigned to them in the
Stockholders Agreement.
Recitals
(i) This Agreement is entered into to effectuate certain agreements
between Merritt Belisle and Patti Belisle regarding the transfer of certain
shares of stock of the Company from Merritt Belisle to Patti Belisle in
connection with their divorce, and to replace a reference in the Stockholders
Agreement to the "1995 Stock Option Plan" of the Company, which was never
adopted, with a reference to the documents that were adopted and entered into in
lieu of the stock option plan. The Stockholders Agreement may be amended,
pursuant to Section D.13 thereof, by the holders of not less than 90% of the
outstanding shares of the Company's common stock and preferred stock,
respectively.
(ii) Patti Belisle becomes a party to the Stockholders Agreement in
anticipation of the possibility that she will be a holder of the shares in the
future. Upon delivery of the shares to Patti Belisle, they will be purchased
from her by the Company. The Company will deliver a promissory note to Patti
Belisle in payment for the shares, and the note will be secured by the shares
pursuant to the terms of a pledge agreement to be executed by the Company. In
case of an event of default on the Note or the pledge agreement, Patti Belisle
may become a holder of the shares. In anticipation of that eventuality, Patti
Belisle hereby becomes a party to the Stockholders Agreement.
(iii) In addition, the transfer of the shares by Merritt Belisle
requires the waiver by the Company and the other shareholders of certain
restrictions contained in the Stockholders Agreement.
Accordingly, the undersigned parties agree as follows:
A. AMENDMENT.
The definition of "Management Options" in Section A of the Stockholders
Agreement is amended to read in its entirety as follows:
<PAGE> 51
"Management Options" means the Company's 1996 Restricted Stock
Award Plan, and the Stock Exchange Agreement dated as of May 1, 1996,
by and among the Company, Merritt Belisle, Smith, Seach, Livingston,
and Noteboom.
B. ADDITIONAL PARTY.
1. On the effective date of this Agreement:
(a) Patti Belisle becomes an additional party to the
Stockholders Agreement, entitled to all benefits accorded to a Member of
Management under, and subject to all of the obligations imposed upon a Member of
Management pursuant to, the Stockholders Agreement as if she had been one of the
Members of Management that was an original signatory party thereto (and, to the
extent applicable, she assumes the obligations of a Member of Management
pursuant to the Stockholders Agreement); and
(b) All shares of Common Stock transferred to Patti Belisle by
Merritt Belisle are subject to the terms, conditions, and restrictions in the
Stockholders Agreement that are applicable to shares of Common Stock owned by
Members of Management, except the provisions waived in Section C of this
Agreement.
2. For purposes of the Stockholders Agreement, Patti Belisle agrees
that all notices to be given will be sent to her at the following address:
Ms. Patti Belisle
3401 Cherry Lane
Austin, Texas 78703
With a copy to: Fulbright & Jaworski
1301 McKinney, Suite 5100
Houston, Texas 77010
Attn: Robert S. Hoffman, Esq.
Facsimile No. 713/651-5246
C. WAIVER.
1. In connection with the transfer from Merritt Belisle to Patti
Belisle of 7,578 shares of Restricted Stock pursuant to the terms of Paragraph
B.2(a)(iii) of the Stockholders Agreement, the Company and its undersigned
stockholders waive, with respect to these shares only, the provisions of
Paragraph B.2(a)(iii) that:
(a) require the transferee of Restricted Stock to grant to the
transferor an irrevocable proxy coupled with an interest to vote all of the
shares of Restricted Stock so transferred; and
2
<PAGE> 52
(b) apply the terms of Paragraph B.2(d) of the Stockholders
Agreement to shares of Restricted Stock so transferred.
2. In connection with the transfer from Merritt Belisle to Patti
Belisle of 2,500 shares of Management/Investor Stock pursuant to the terms of
Paragraph B.3(b)(iii) of the Stockholders Agreement, the Company and its
undersigned stockholders waive, with respect to these shares only, the
provisions of Paragraph B.3(b)(iii)(D) that apply the terms of Paragraph B.2(d)
of the Stockholders Agreement to shares of Management/Investor Stock so
transferred.
D. GENERAL.
1. Continuing Effect. Except as provided herein, the Stockholders
Agreement remains unchanged and in full force and effect.
2. Governing Law. The corporate laws of the State of Delaware will
govern all questions concerning the relative rights of the Company and the other
parties to this Agreement. All other questions concerning the construction,
validity and interpretation of this Agreement shall be governed by the internal
laws of the State of Texas without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Texas or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Texas.
3. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which taken
together will constitute one and the same instrument.
4. Descriptive Headings. The descriptive headings in this Agreement are
inserted for convenience only and do not limit or otherwise affect any of the
terms hereof.
5. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
6. Binding Effect. The agreements in this Agreement by or on behalf of
any of the parties hereto will bind and inure to the benefit of the respective
heirs, personal representatives, successors and assigns of the parties hereto.
* * * * *
3
<PAGE> 53
EXECUTED as of the date and year first written above.
<TABLE>
<S> <C>
/s/ PATTI KAY BELISLE
- --------------------------------------- AUSTIN VENTURES III-A, L.P.
PATTI KAY BELISLE
By: AV Partners III, L.P.
Its: General Partner
/s/ J. MERRITT BELISLE
- --------------------------------------- By: /s/ JEFFERY C. GARVEY
J. MERRITT BELISLE ------------------------------------
Jeffery C. Garvey
General Partner
CLASSIC COMMUNICATIONS, INC.
By: /s/ STEVEN E. SEACH AUSTIN VENTURES III-B, L.P.
------------------------------------
Name: Steven E. Seach By: AV Partners III, L.P.
------------------------- Its: General Partner
Title: President
------------------------ By: /s/ JEFFERY C. GARVEY
------------------------------------
Jeffery C. Garvey
/s/ STEPHEN S. SMITH General Partner
- ---------------------------------------
STEPHEN S. SMITH
BT CAPITAL PARTNERS, INC.
/s/ STEVEN E. SEACH
- --------------------------------------- By: /s/ ROBERT MARAKOVITS
STEVEN E. SEACH ------------------------------------
Robert Marakovits
/s/ MARK LIVINGSTON Managing Director
- ---------------------------------------
MARK LIVINGSTON
BOARD OF TRUSTEES OF
/s/ BRYAN D. NOTEBOOM TEXAS GROWTH FUND - 1991 TRUST,
- --------------------------------------- AS TRUSTEE
BRYAN D. NOTEBOOM
By: TGF Management Corp.
Its: Executive Director
AUSTIN VENTURES, L.P.
By: /s/ JAMES J. KOZLOWSKI
By: AV Partners, L.P. ------------------------------------
Its: General Partner James J. Kozlowski
President
By: /s/ JEFFERY C. GARVEY
------------------------------------
Jeffery C. Garvey
General Partner
</TABLE>
4
<PAGE> 54
<TABLE>
<S> <C>
NATIONSBANC CAPITAL CORP.
By: /s/ ROBERT SHERIDAN III
------------------------------------
Robert Sheridan III
Senior Vice President
THE CHASE MANHATTAN BANK, N.A.
By: /s/ ROBERT SHERIDAN III
------------------------------------
Name: Robert Sheridan III
Vice President
UNIONBANCAL VENTURE
CORPORATION
By: /s/ WILLIAM GOOCH
------------------------------------
Name: William Gooch
-------------------------
Title: Vice President
------------------------
</TABLE>
5
<PAGE> 1
EXHIBIT 5.1
WINSTEAD
Suite 800 SECHREST (512) 474-4330
100 Congress Avenue & MINICK Telecopier (512) 370-2850
Austin, Texas 78701 A Professional Corporation
Attorneys & Counselors CARY FERCHILL
DALLAS HOUSTON AUSTIN Direct Dial: (512) 370-2844
MEXICO CITY [email protected]
September 17, 1998
Classic Communications, Inc.
515 Congress Avenue, Suite 2626
Austin, Texas 78701
Gentlemen:
We have acted as counsel to Classic Communications, Inc. (the
"Company") in connection with the Registration Statement on Form S-4 (the
"Registration Statement") to be filed with the Securities and Exchange
Commission in connection with the registration under the Securities Act of 1933,
as amended, of $114 million aggregate principal amount of 13 1/4% Senior
Discount Notes due 2009 of the Company (the "New Notes") to be offered and
issued by the Company under an Indenture dated as of July 29, 1998 by and among
the Company and BancOne, N.A., as Trustee.
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage or other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. The laws covered by the opinions
expressed herein are limited to the Federal laws of the United States, the laws
of the State of Texas, and the General Corporation Law of the State of Delaware.
Upon the basis of the foregoing, we are of the opinion that, upon
issuance thereof in the manner described in the Registration Statement the New
Notes will be valid and binding obligations of the Company, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles (regardless of whether the issue of
enforceability is considered in a proceeding in equity or at law).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus which is part of the Registration Statement.
Very truly yours,
WINSTEAD SECHREST & MINICK P.C.
By: /S/ CARY FERCHILL
------------------------------------
Cary Ferchill, Shareholder
<PAGE> 1
EXHIBIT 8.1
WINSTEAD
Suite 800 SECHREST (512) 474-4330
100 Congress Avenue & MINICK Telecopier (512) 370-2850
Austin, Texas 78701 A Professional Corporation
Attorneys & Counselors CARY FERCHILL
DALLAS HOUSTON AUSTIN Direct Dial: (512) 370-2844
MEXICO CITY [email protected]
September 17, 1998
Classic Communications, Inc.
515 Congress Avenue, Suite 2626
Austin, Texas 78701
Gentlemen:
We have acted as counsel in connection with the transactions described
in the Registration Statement on Form S-4 (the "Registration Statement") filed
with the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), on September 17,
1998, by Classic Communications, Inc., a Delaware corporation (the "Company"),
and described in the Company's Offer to Exchange 13 1/4% Senior Discount Notes
due 2009 (the "New Notes") for all outstanding 13 1/4% Senior Discount Notes due
2009 (the "Old Notes") set forth in the Prospectus (the "Prospectus") contained
within the Registration Statement. Capitalized terms used but not otherwise
defined herein shall have the meaning ascribed thereto in the Registration
Statement.
Our opinion is based on an examination of the Registration Statement,
the Prospectus, and such other documents, corporate records and materials as we
have deemed necessary or appropriate for the purposes of this opinion. We assume
that all transactions relating to the exchange pursuant to the Exchange Offer
will be carried out in accordance with the terms of the governing documents
without any amendments thereto or waiver of any terms thereof, and that such
documents represent the entire agreement of the parties thereto. We understand
the relevant facts to be as follows:
The Old Notes were originally issued and sold on July 29, 1998 in a
transaction not registered under the Securities Act, in reliance upon the
exemptions provided in Rule 144A under the Securities Act. Accordingly, the Old
Notes are generally subject to substantial transfer restrictions unless such
notes are registered pursuant to the Securities Act or unless an applicable
exemption from the registration requirements of the Securities Act is available.
Pursuant to an Exchange and Registration Rights Agreement dated as of July 29,
1998 (the "Registration Rights Agreement") between the Company and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as initial purchaser (the "Initial
Purchaser"), with respect to the Old Notes, the Company agreed to file within 60
days of the original issuance of the Old Notes to the Initial Purchaser (the
"Issuance Date") the registered Exchange Offer pursuant to which holders of the
Old Notes would receive, in exchange, the New Notes, which would be issued
without legends restricting the transfer thereof and use its best efforts to
cause such filing to become effective within 150 days after the Issuance Date.
Failure of the Company to comply with the requirements of the Registration
Rights Agreement results in an increase of one-quarter of one percent per annum
in the interest rate borne by the Old Notes. The New Notes will not be subject
to such provisions. In general, the New Notes will be
<PAGE> 2
Classic Communications, Inc.
September 17, 1998
Page 2
freely transferable after the Exchange Offer without further registration under
the Securities Act. Except as noted above, the terms of the New Notes are
identical to those of the Old Notes.
Based on the foregoing and subject to the assumptions, qualifications
and limitations contained herein, we hereby confirm that the statements set
forth in the Prospectus under the heading "Certain United States Federal Income
Tax Consequences" constitutes our opinion with respect to the material United
States Federal income tax consequences of the exchange pursuant to the Exchange
Offer, and the ownership and disposition of the Old Notes or the New Notes by
holders who hold such notes as capital assets. The possibility exists that
contrary positions may be taken by the Internal Revenue Service and that a court
may agree with such contrary position.
The foregoing opinion is specific to the transactions and the documents
referred to herein, and is based upon the facts known to us as of the date
hereof.
The foregoing opinion is predicated upon the Internal Revenue Code, the
regulations thereunder, the administrative and judicial interpretations of the
Internal Revenue Code and regulations, in each case as in effect on the date
hereof. Any change in applicable law or in any of the facts or other assumptions
upon which we have relied, may adversely affect such opinion.
We hereby consent to the filing with the Securities and Exchange
Commission of this opinion as an exhibit to Classic Communications, Inc.'s
Registration Statement on Form S-4 relating to the exchange of the Old Notes for
the New Notes and to the reference to our firm under the heading "Legal Matters"
in the Prospectus. 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
Securities Act.
Very truly yours,
WINSTEAD SECHREST & MINICK P.C.
By: /s/ CARY FERCHILL
-----------------------------------------
Cary Ferchill, Shareholder
<PAGE> 1
EXHIBIT 10.1
CLASSIC COMMUNICATIONS, INC.
EMPLOYMENT AGREEMENT
WITH J. MERRITT BELISLE
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of January 31, 1998, but is effective for all purposes as of the Commencement
Date (as hereinafter defined), by and between CLASSIC COMMUNICATIONS, INC., a
Delaware corporation, and CLASSIC CABLE, INC., a Delaware corporation (together,
the "Employer"), and J. MERRITT BELISLE, residing at 3414 Tarlton Lane, Austin,
Texas 78746 (the "Employee").
R E C I T A L S :
The Employer recognizes the important contributions that the Employee
has made to the Company as an officer and key employee, as currently evidenced
by an Employment Agreement, dated as of November 1, 1997 (the "1997 Agreement"),
between Classic Cable, Inc. and Employee.
The Employer wishes to take steps to assure that the Employer will
continue to have the Employee's services available to the Employer and its
subsidiaries, and the Employer and the Employee desire to terminate and replace
the 1997 Agreement.
In consideration for the foregoing, the mutual provisions contained
herein, and for other good and valuable consideration, the parties agree to
amend and restate in its entirety the 1997 Agreement, and agree with each other
as follows:
1. EMPLOYMENT. The Employer hereby employs the Employee, and the
Employee hereby accepts such employment, upon the terms and subject to the
conditions set forth in this Agreement.
2. TERM. The term of employment under this Agreement shall commence on
May 26, 1998 (the "Commencement Date") and shall continue through May 25, 1999,
provided, however, that beginning on May 27, 1998, and on each day thereafter,
the term of this Agreement shall be extended by one additional day, unless
either party to this Agreement gives the other written notice of termination of
employment, and further, provided, that upon a Successful Recapitalization (as
defined below), the term "May 25, 1999" above shall be amended to read "May 25,
2000".
3. COMPENSATION; REIMBURSEMENT.
(a) The Employer shall pay to the Employee as compensation for all
services rendered by the Employee during the term of this Agreement a basic
annualized salary of $200,000 per year
<PAGE> 2
(the "Basic Salary"), or such other amount as the parties may agree on from time
to time, payable in equal monthly installments or in other more frequent
installments, as determined by the Employer. The Board of Directors of the
Employer shall have the right to increase the Employee's compensation from time
to time by action of the Board of Directors. In addition, the Board of Directors
of the Employer, in its discretion, may, with respect to any year during the
term hereof, award a bonus or bonuses to the Employee in addition to the bonuses
provided for in Section 3(b). The compensation provided for in this Section 3(a)
shall be in addition to any pension or profit sharing payments set aside or
allocated for the benefit of the Employee.
(b) In addition to the Basic Salary paid pursuant to Section 3(a), the
Employer may pay as incentive compensation an annual bonus based upon the
Employee's performance, as determined each year by the Board of Directors of the
Employer.
(c) The Employer shall reimburse the Employee for all reasonable
expenses incurred by the Employee in the performance of his duties under this
Agreement; provided, however, that the Employee must furnish to the Employer an
itemized account, satisfactory to the Employer, in substantiation of such
expenditures.
(d) The Employee shall be entitled to continue the use of his current
corporate vehicle and such fringe benefits, including, but not limited to,
medical and insurance benefits, as may be provided from time to time by the
Employer to other senior officers of the Employer.
(e) As soon as possible after the effective date of this Agreement, the
Employer shall adopt a restricted stock award plan pursuant to which stock
awards will be granted for a total of 24,040 shares of the Employer's Common
Stock, or approximately 7.5 percent of the Employer's shares outstanding on the
date hereof, on a fully diluted basis. Restricted stock issued pursuant to such
awards shall be subject to a restriction that the first $38 of distributions,
whether dividends, upon liquidation, or otherwise shall be withheld by the
Employer and distributed to the other holders of Employer's Common Stock. Such
awards shall vest evenly on a monthly basis over three years (1/36 per month)
beginning on the effective date of a Successful Recapitalization (defined
below). Vesting of such awards shall accelerate upon death, disability, or a
Liquidation Event. Previous restricted stock awards made to Employee pursuant to
the Employer's 1996 Restricted Stock Award Plan shall be canceled upon issuance
of the new awards as provided herein.
(f) In addition to the compensation provided for in this Agreement, the
Employer and the Employee acknowledge that they have previously agreed to the
retention by Employer of Employee (or at Employee's direction, an entity
controlled by the Employee) to provide consulting services for which no
compensation is paid pursuant to this Agreement. Employee (or such entity) is to
receive a transaction fee of $300,000 upon a Successful Recapitalization prior
to September 1, 1998. "Successful Recapitalization" shall mean any issuance of
equity and/or debt securities by Classic Communications, Inc. and/or Classic
Cable, Inc. approved by the Board of Directors of the Employer. In addition, the
Employee (or such entity) and Steven E. Seach ("Seach") are to receive, in the
aggregate, a 1% transaction fee on the "Transaction Value" of each "Net
Additional Financing" by and all "M&A Activity" of Employer. Such 1% fee may be
allocated by Employee
-2-
<PAGE> 3
and Seach in such manner as they may agree between themselves. A "Net Additional
Financing" means any financing by the Employer or any of its subsidiaries,
whether equity or debt, to the extent that immediately subsequent to such
financing the Employer's total capitalization is greater than it was immediately
prior to such financing. "M&A Activity" means the acquisition, through the
purchase of assets, a merger, or otherwise, of cable television systems,
telephony systems, internet systems, and other communications and new media
services or products. A Net Additional Financing and M&A Activity do not include
any transaction included in or closed concurrently with the Successful
Recapitalization, the sale of securities pursuant to options or other rights
outstanding upon completion of the Successful Recapitalization, nor any
transaction deemed to be a Change of Control pursuant to Section 8(e)(ii)(B),
(C) or (D) below. It is the intent of the parties that if any transaction or
series of related transactions constitute both M&A Activity and a Net Additional
Financing, the 1% fee will not be paid on both the Net Additional Financing and
M&A Activity financed by the proceeds from the Net Additional Financing.
"Transaction Value" means (i) with respect to a Net Additional Financing", the
net amount by which the Employer's capitalization has increased, and (ii) with
respect to M&A Activity, the value of all consideration paid by the Employer or
any of its affiliated companies in the form of cash, stock, or other securities,
debt (including the assumption of debt and capital lease obligations), and other
property. The value of any securities (whether debt or equity) or other property
paid as consideration in connection with M&A Activity is determined as follows:
(i) the value of securities that are freely tradeable in an established public
market will be determined on the basis of the last closing market price prior to
the public announcement of the transaction constituting the M&A Activity; (ii)
the value of securities that are not freely tradeable or have no established
public market, or if the consideration utilized consists of property other than
securities, the value of such other property shall be the fair market value
thereof as mutually agreed upon by both parties to the transaction; and (iii) to
the extent such consideration is contingent upon the future performance of the
business purchased or sold, the Transaction Value will be calculated assuming
the financial projections are achieved.
4. DUTIES. The Employee is engaged as the Chairman of the Board and
Chief Executive Officer of the Employer and of the Employer's various
subsidiaries. The Employee shall be a member of the Boards of Directors of the
Employer and the Employer's subsidiaries. In addition, the Employee shall have
such other duties and hold such other offices as may from time to time be
reasonably assigned to him by the Board of Directors of the Employer.
5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF.
(a) During the term of his employment under this Agreement, the
Employee shall devote substantially all of his time, energy and attention during
regular business hours to the benefit and business of the Employer in performing
his duties pursuant to this Agreement.
(b) The Employee shall be entitled to vacations with pay and to such
personal and sick leave with pay in accordance with the policy of the Employer
as may be established from time to time by the Employer and applied to other
senior officers of the Employer.
-3-
<PAGE> 4
6. FACILITIES. The Employer shall provide the Employee with a fully
furnished office, and the facilities of the Employer shall be generally
available to the Employee in the performance of his duties pursuant to this
Agreement; it being understood and contemplated by the parties that all
equipment, supplies and office personnel required for performance of the
Employee's duties under this Agreement shall be supplied by the Employer.
7. TERMINATION ON DEATH, ILLNESS OR INCAPACITY.
(a) If a Successful Recapitalization shall have occurred, and if the
Employee dies during the term of his employment, the Employer shall pay to the
estate of the Employee the Basic Salary that would have otherwise been paid to
Employee through the end of the term of this Agreement (provided that the term
shall cease to be extended daily pursuant to Section 2 hereof upon the death of
Employee) plus any bonus compensation earned but not yet paid up to the end of
the month in which his death occurs. The Employer shall have no additional
financial obligation under this Agreement to the Employee or his estate. After
receiving the payments provided in this subparagraph (a), the Employee and his
estate shall have no further rights under this Agreement.
(b) (i) During any period of disability, illness or incapacity during
the term of this Agreement which renders the Employee at least temporarily
unable to perform the services required under this Agreement for a period which
does not exceed one hundred and eighty (180) continuous days in any one-year
period, the Employee shall receive the compensation payable under Section 3(a)
of this Agreement plus any bonus compensation earned but not yet paid, less any
benefits received by him under any disability insurance carried by or provided
by the Employer. Upon the Employee's permanent disability (as defined below),
Employee shall continue to receive the Basic Salary that would have otherwise
been paid to Employee through the end of the term of this Agreement, provided
that the term shall cease to be extended daily pursuant to Section 2 hereof upon
the permanent disability of Employee. Notwithstanding the continuation of the
Basic Salary as set forth above, the Employee shall continue to receive any
disability benefits to which he may be entitled under any disability income
insurance which may be carried by or provided by the Employer from time to time.
(ii) The term "permanent disability" as used in this Agreement
shall mean the inability of the Employee, as determined by the Board of
Directors of the Employer, by reason of physical or mental disability to perform
the duties required of him under this Agreement for a period of one hundred and
eighty (180) days in any one-year period. Successive periods of disability,
illness or incapacity will be considered separate periods unless the later
period of disability, illness or incapacity is due to the same or related cause
and commences less than six months from the ending of the previous period of
disability. Upon such determination, the Board of Directors may terminate the
Employee's employment under this Agreement upon ten (10) days' prior written
notice. If any determination of the Board of Directors with respect to permanent
disability is disputed by the Employee, the parties hereto agree to abide by the
decision of a panel of three physicians. The Employee and the Employer shall
each appoint one member, and the third member of the panel shall be appointed by
the other two members. The Employee agrees to make himself available for and
-4-
<PAGE> 5
to submit to examinations by such physicians as may be directed by the Employer.
Failure to submit to any such examination shall constitute a breach of a
material part of this Agreement.
8. OTHER TERMINATIONS.
(a) (i) The Employee may terminate his employment hereunder upon giving
at least ninety (90) days' prior written notice to the Employer. In addition,
the Employee shall have the right to terminate his employment hereunder on the
conditions and at the times provided for in Section 8(e) of this Agreement.
(ii) If the Employee gives notice pursuant to Section 8(a) above,
the Employer shall have the right to relieve the Employee, in whole or in part,
of his duties under this Agreement (without reduction in compensation through
the termination date).
(b) The Employer may terminate Employee's employment hereunder at any
time, without prior notice.
(c) If the Employer shall terminate the employment of the Employee
without good cause (as defined below) effective on a date earlier than the
termination date provided for in Section 2, the Employee shall have the
nonforfeitable right to receive, the Basic Salary, paid monthly, that he is
entitled to for the remainder of the term of this Agreement, and the Employer
shall continue to provide him with medical insurance coverage for the remainder
of the term of this Agreement; provided that, notwithstanding such termination
of employment, the Employee's covenants set forth in Section 10 and Section 11
are intended to and shall remain in full force and effect.
(d) (i) If the employment of the Employee is terminated for good cause,
or if the Employee voluntarily terminates his employment by written notice to
the Employer under Section 8(a) of this Agreement without reliance on Section
8(e), the Employer shall pay to the Employee any compensation earned but not
paid to the Employee prior to the effective date of such termination. Under such
circumstances, such payment shall be in full and complete discharge of any and
all liabilities or obligations of the Employer to the Employee hereunder, and
the Employee shall be entitled to no further benefits under this Agreement.
(ii) "Good cause" shall include:
(1) the Employee's conviction of a criminal
offense that has a material adverse effect upon the business or reputation or
the Employer or any affiliate of the Employer;
(2) commission by the Employee of a material
breach of his duty of loyalty to the Employer or any affiliate of the Employer;
and
(3) the Employee's willful failure or refusal to
perform his assigned duties, which willful refusal has had, or if continued,
could reasonably be expected to have, a material adverse effect on the Employer
or the affiliates of the Employer or their respective businesses or
-5-
<PAGE> 6
prospects, and which willful refusal has continued after Employee has received
at least two written warnings specifically advising him or his shortcomings and
providing him with an opportunity to resume performance in accordance with his
assigned duties.
(iii) Termination of the employment of the Employee for
reasons other than those expressly specified in this Agreement as good cause
shall be deemed to be a termination of employment "without good cause".
(e) (i) If a Change in Control of the Employer (as defined below) shall
occur, then the Employee shall have, instead of the further rights described
herein, the right to terminate his employment under this Agreement immediately
and the nonforfeitable right to receive, payable in a lump sum, the Basic Salary
that he is entitled to for the unexpired term of this Agreement, and the
Employer shall continue to provide him with medical insurance coverage for the
unexpired term of this Agreement; provided that, notwithstanding such
termination of employment, the Employee's covenants set forth in Section 10 and
Section 11 are intended to and shall remain in full force and effect.
(ii) "Change in Control" means:
(A) J. Merritt Belisle, Steven E. Seach, Austin Ventures,
L.P., a Delaware limited partnership, Austin Ventures III-A, L.P., a Delaware
limited partnership, Austin Ventures III-B, L.P., a Delaware limited
partnership, BT Capital Partners, Inc., a Delaware corporation, Texas Growth
Fund, a trust fund created by the Constitution of the State of Texas, and
NationsBanc Capital Corp., a Texas corporation, cease to own at least a majority
of the issued and outstanding shares of Employer's Common Stock.
(B) there is a sale of all or substantially all of Employer's
assets, or all or substantially all of Employer's capital stock, or one or more
of its subsidiaries, in one or more transactions for cash or freely salable
securities and a subsequent liquidation of the Employer in which its
stockholders receive liquidating distributions of such proceeds of sale after
payment or provision for the valid debts and liabilities of the Employer;
(C) there is a merger or consolidation of the Employer, or one
or more of its subsidiaries, with or into one or more corporations, limited
liability companies or partnerships in which the Employer, or its subsidiaries,
as the case may be, receive cash or freely salable securities for all of its or
their assets, and a subsequent liquidation of the Employer, or one or more of
its subsidiaries, in which the stockholders of the Employer, or its
subsidiaries, as the case may be, receive liquidating distributions of such
proceeds of sale, merger or consolidation after payment or provision for the
valid debts and liabilities of the Employer, or its subsidiaries, as the case
may be; or
(D) there is a merger or consolidation of the Employer or the
majority (based on the value of assets held by the subsidiaries) of the
Employer's subsidiaries, with or into another
-6-
<PAGE> 7
corporation, limited liability company or a partnership in which the
stockholders of the Employer or its subsidiaries, as the case may be, receive
cash or marketable securities for all of their stock.
(f) The provisions of Section 8(c) and Section 8(e) are mutually
exclusive and Employee shall be entitled to payment only under one of those
Sections.
(g) The parties agree that, because there can be no exact measure of
the damage that would occur to the Employee as a result of a termination by the
Employer of the Employee's employment without good cause, the payments and
benefits paid and provided pursuant to this Agreement shall be deemed to
constitute liquidated damages and not a penalty for the Employer's termination
of the Employee's employment without good cause, and the Employer agrees that
the Employee shall not be required to mitigate his damages.
9. DISCLOSURE. The Employee agrees that during the term of his
employment by the Employer, he will disclose and disclose only to the Employer
all material ideas, methods, plans, developments or improvements known by him
which relate directly or indirectly to the business of the Employer, whether
acquired by the Employee before or during his employment by the Employer.
Nothing in this Section 9 shall be construed as requiring any such communication
where the idea, plan, method or development is lawfully protected from
disclosure as a trade secret of a third party or by any other lawful prohibition
against such communication.
10. CONFIDENTIALITY. The Employee agrees to keep in strict secrecy and
confidence any and all information the Employee assimilates or to which he has
access during his employment by the Employer and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Employer. The Employee agrees that both during and after the term of his
employment by the Employer, he will not, without the prior written consent of
the Employer, disclose any such confidential information to any third person,
partnership, joint venture, company, corporation or other organization.
11. NON-COMPETITION; NON-SOLICITATION.
The Employee hereby acknowledges that, during and solely as a result of
his employment by the Employer, he has received and shall continue to receive:
(1) special training and education with respect to the operations of a cable
television company and other related matters, and (2) access to confidential
information and business and professional contacts. In consideration of the
special and unique opportunities afforded to the Employee by the Employer as a
result of the Employee's employment, as outlined in the previous sentence, the
Employee hereby agrees as follows:
(a) During a period ending two years following the termination of his
employment under this Agreement, the Employee shall not, without the prior
written consent of the Employer, (i) directly or indirectly engage in any
business that competes with the Employer or any Affiliate of the Employer in
their conduct of the cable television business, or otherwise receive
compensation for any services rendered regarding any aspect of the cable
television business anywhere within the service area of any cable television
system operated by the Employer or any Affiliate of the
-7-
<PAGE> 8
Employer, or (ii) engage or participate, directly or indirectly, in any business
which is substantially similar to that of the Employer or any Affiliate of the
Employer, including, without limitation, serving as a consultant, administrator,
officer, director, employee, manager, landlord, lender, guarantor, or in any
similar or related capacity or otherwise receive compensation for services
rendered regarding any aspect of the cable television business anywhere within
the service area of any cable television system operated by the Employer or any
Affiliate of the Employer. The Employee acknowledges that these limited
prohibitions are reasonable as to time, geographical area and scope of
activities to be restrained and that the limited prohibitions do not impose a
greater restraint than is necessary to protect the Employer's goodwill,
proprietary information and other business interests. The mere ownership of a de
minimis amount of securities in any competitive enterprise and exercise of
rights appurtenant thereto, and participation in management of any such
enterprise or business operation other than in connection with the competitive
operation of such enterprise, are not prohibited.
(b) During his employment with the Employer and, except as may be
otherwise herein provided, for a period of two (2) years following the
termination of his employment with the Employer, regardless of the reason for
such termination, the Employee agrees he will refrain from and will not,
directly or indirectly, as an individual, partner, officer, director,
stockholder, employee, advisor, independent contractor, joint venturer,
consultant, agent, representative, salesman or otherwise (1) solicit any of the
employees of the Employer to terminate their employment or (2) accept employment
with or seek remuneration by any of the clients or customers of the Employer
with whom the Employer did business during the term of the Employee's
employment.
(c) The period of time during which the Employee is prohibited from
engaging in certain business practices pursuant to Sections 11(a) or (b) shall
be extended by any length of time during which the Employee is in breach of such
covenants.
(d) It is understood by and between the parties hereto that the
foregoing restrictive covenants set forth in Sections 11(a) through (c) are
essential elements of this Agreement, and that, but for the agreement of the
Employee to comply with such covenants, the Employer would not have agreed to
enter into this Agreement. Such covenants by the Employee shall be construed as
agreements independent of any other provision in this Agreement. The existence
of any claim or cause of action of the Employee against the Employer, whether
predicated on this Agreement, or otherwise, shall not constitute a defense to
the enforcement by the Employer of such covenants.
(e) It is agreed by the Employer and Employee that if any portion of
the covenants set forth in this Section 11 are held to be invalid, unreasonable,
arbitrary or against public policy, then such portion of such covenants shall be
considered divisible both as to time and geographical area. The Employer and
Employee agree that, if any court of competent jurisdiction determines the
specified time period or the specified geographical area applicable to this
Section 11 to be invalid, unreasonable, arbitrary or against public policy, a
lesser time period or geographical area which is determined to be reasonable,
non-arbitrary and not against public policy may be enforced against the
Employee. The Employer and the Employee agree that the foregoing covenants are
appropriate and reasonable when considered in light of the nature and extent of
the business conducted by the Employer.
(f) Notwithstanding any provision of this Section 11 to the contrary,
during the term of this Agreement, the Employee may acquire, engage in business
with, and receive compensation from any other company or business, provided,
however, that (i) in the case of an acquisition of a business operating cable
television systems, telephony systems, internet systems, or other communication
or new media services or products, Employer must have been offered the
opportunity to acquire such business on terms and conditions not less favorable
than the terms upon which Employee purchases such business; (ii) such other
company or business shall not be in competition with Employer; and (iii)
Employee shall continue to devote substantially all of his time to the business
affairs of the Employer. The Employer will be deemed to have been afforded an
opportunity to purchase a business if, at least 60 days prior to any such
acquisition by the Employee, the Employer is presented a description of such
business and a detailed description of the terms upon which such business is to
be purchased, and the Board of Directors of the Employer (i) votes not to
acquire such business pursuant to such terms, (ii) fails to make a determination
whether to acquire such business within 20 days of receipt of such description
of such business and such terms, or (iii) terminates negotiations with such
business after initially determining to negotiate to acquire such business.
12. SPECIFIC PERFORMANCE. The Employee agrees that damages at law
will be an insufficient remedy to the Employer if the Employee violates the
terms of Sections 9, 10 or 11 of this Agreement and that the Employer would
suffer irreparable damage as a result of such violation. Accordingly, it is
agreed that the Employer shall be entitled, upon application to a court of
competent jurisdiction, to obtain injunctive relief to enforce the provisions of
such Sections, which injunctive relief shall be in addition to any other rights
or remedies available to the Employer. The Employee agrees to pay to the
Employer all costs and expenses incurred by the Employer relating to the
enforcement of the terms of Sections 9, 10 or 11 of this Agreement, including
reasonable fees and disbursements of counsel (both at trial and in appellate
proceedings).
13. COMPLIANCE WITH OTHER AGREEMENTS. The Employee represents and
warrants that the execution of this Agreement by him and his performance of his
obligations hereunder will not conflict with, result in the breach of any
provision of or the termination of or constitute a default under any Agreement
to which the Employee is a party or by which the Employee is or may be bound.
14. WAIVER OF BREACH. The waiver by the Employer of a breach of any of
the provisions of this Agreement by the Employee shall not be construed as a
waiver of any subsequent breach by the Employee.
15. ASSIGNMENT. The rights and obligations of the Employer under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Employer. This Agreement is a personal employment contract
and the rights, obligations and interests of the Employee hereunder may not be
sold, assigned, transferred, pledged or hypothecated.
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<PAGE> 9
reasonable when considered in light of the nature and extent of the business
conducted by the Employer.
(f) Notwithstanding any provision of this Section 11 to the contrary,
during the term of this Agreement, the Employee may acquire, engage in business
with, and receive compensation from any other company or business, provided,
however, that (i) in the case of an acquisition of a business operating cable
television systems, telephony systems, internet systems, or other communication
or new media services or products, Employer must have been offered the
opportunity to acquire such business on terms and conditions not less favorable
than the terms upon which Employee purchases such business; (ii) such other
company or business shall not be in competition with Employer; and (iii)
Employee shall continue to devote substantially all of his time to the business
affairs of the Employer. The Employer will be deemed to have been afforded an
opportunity to purchase a business if, at least 60 days prior to any such
acquisition by the Employee, the Employer is presented a description of such
business and a detailed description of the terms upon which such business is to
be purchased, and the Board of Directors of the Employer (i) votes not to
acquire such business pursuant to such terms, (ii) fails to make a determination
whether to acquire such business within 20 days of receipt of such description
of such business and such terms, or (iii) terminates negotiations with such
business after initially determining to negotiate to acquire such business.
12. SPECIFIC PERFORMANCE. The Employee agrees that damages at law will
be an insufficient remedy to the Employer if the Employee violates the terms of
Sections 9, 10 or 11 of this Agreement and that the Employer would suffer
irreparable damage as a result of such violation. Accordingly, it is agreed that
the Employer shall be entitled, upon application to a court of competent
jurisdiction, to obtain injunctive relief to enforce the provisions of such
Sections, which injunctive relief shall be in addition to any other rights or
remedies available to the Employer. The Employee agrees to pay to the Employer
all costs and expenses incurred by the Employer relating to the enforcement of
the terms of Sections 9, 10 or 11 of this Agreement, including reasonable fees
and disbursements of counsel (both at trial and in appellate proceedings).
13. COMPLIANCE WITH OTHER AGREEMENTS. The Employee represents and
warrants that the execution of this Agreement by him and his performance of his
obligations hereunder will not conflict with, result in the breach of any
provision of or the termination of or constitute a default under any Agreement
to which the Employee is a party or by which the Employee is or may be bound.
14. WAIVER OF BREACH. The waiver by the Employer of a breach of any of
the provisions of this Agreement by the Employee shall not be construed as a
waiver of any subsequent breach by the Employee.
15. ASSIGNMENT. The rights and obligations of the Employer under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Employer. This Agreement is a personal employment contract
and the rights, obligations and interests of the Employee hereunder may not be
sold, assigned, transferred, pledged or hypothecated.
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16. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, between the
Employer (or its subsidiaries) and Employee, with respect to the subject matter
hereof, including, without limitation, the 1996 Agreement and Section D.3 of the
Amended and Restated Stockholders Agreement dated as of October 31, 1995, among
Classic Communications, Inc., the Employee, and the other stockholders of
Classic Communications, Inc., as amended, which agreement provides for severance
compensation to the Employee upon termination of his employment with Classic
Communications, Inc. This Agreement may be changed only by an agreement in
writing signed by the party against whom any waiver, change, amendment,
modification or discharge is sought.
17. CONSTRUCTION AND INTERPRETATION.
(a) This Agreement shall be governed by and construed pursuant to the
laws of the State of Texas.
(b) The headings of the various sections in this Agreement are inserted
for convenience of the parties and shall not affect the meaning, construction or
interpretation of this Agreement.
(c) Any provision of this Agreement which is determined by a court of
competent jurisdiction to be prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or non-authorization without invalidating the
remaining provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction. In any such case, such
determination shall not affect any other provision of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect. If
any provision or term of this Agreement is susceptible to two or more
constructions or interpretations, one or more of which would render the
provision or term void or unenforceable, the parties agree that a construction
or interpretation which renders the term or provision valid shall be favored.
18. NOTICE. All notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy or
similar electronic transmission method; one working day after it is sent, if
sent by recognized expedited delivery service; and five days after it is sent,
if mailed, first class mail, certified mail, return receipt requested, with
postage prepaid. In each case notice shall be sent:
To the Employer: Classic Communications, Inc.
Classic Cable, Inc.
515 Congress Avenue, Suite 2626
Austin, Texas 78701
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With a copy to: Cary Ferchill
Winstead Sechrest & Minick P.C.
100 Congress Avenue, Suite 800
Austin, Texas 78701
To the Employee at his address herein above written.
19. VENUE; PROCESS. The parties to this Agreement agree that
jurisdiction and venue in any action brought pursuant to this Agreement to
enforce its terms or otherwise with respect to the relationships between the
parties shall properly lie in the District Court of the State of Texas in and
for Travis County. Such jurisdiction and venue are merely permissive;
jurisdiction and venue shall also continue to lie in any court where
jurisdiction and venue would otherwise be proper. The parties agree that they
will not object that any action commenced in the foregoing jurisdiction is
commenced in a forum non conveniens. The parties further agree that the mailing
by certified or registered mail, return receipt requested, of any process
required by any such court shall constitute valid and lawful service of process
against them, without the necessity for service by any other means provided by
statute or rule of court.
* * * *
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
CLASSIC COMMUNICATIONS, INC.
By: /s/ STEVEN E. SEACH
-----------------------------------
Steven E. Seach
President
CLASSIC CABLE, INC.
By: /s/ STEVEN E. SEACH
-----------------------------------
Steven E. Seach
President
By: /s/ J. MERRITT BELISLE
-----------------------------------
J. MERRITT BELISLE
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<PAGE> 1
EXHIBIT 10.2
CLASSIC COMMUNICATIONS, INC.
EMPLOYMENT AGREEMENT
WITH STEVEN E. SEACH
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of January 31, 1998, but is effective for all purposes as of the Commencement
Date (as hereinafter defined), by and between CLASSIC COMMUNICATIONS, INC., a
Delaware corporation, and CLASSIC CABLE, INC., a Delaware corporation (together,
the "Employer"), and STEVEN E. SEACH, residing at 10501 Coreopsis, Austin, Texas
78733 (the "Employee").
R E C I T A L S :
The Employer recognizes the important contributions that the Employee
has made to the Company as an officer and key employee, as currently evidenced
by an Employment Agreement, dated as of November 11, 1996 (the "1996
Agreement"), between the Classic Cable, Inc. and Employee.
The Employer wishes to take steps to assure that the Employer will
continue to have the Employee's services available to the Employer and its
subsidiaries, and the Employer and the Employee desire to terminate and replace
the 1996 Agreement.
In consideration for the foregoing, the mutual provisions contained
herein, and for other good and valuable consideration, the parties agree to
amend and restate in its entirety the 1996 Agreement, and agree with each other
as follows:
1. EMPLOYMENT. The Employer hereby employs the Employee, and the
Employee hereby accepts such employment, upon the terms and subject to the
conditions set forth in this Agreement.
2. TERM. The term of employment under this Agreement shall commence on
May 26, 1998 (the "Commencement Date") and shall continue through May 25, 2000,
provided, however, that beginning on May 27, 1998, and on each day thereafter,
the term of this Agreement shall be extended by one additional day, unless
either party to this Agreement gives the other written notice of termination of
employment.
3. COMPENSATION; REIMBURSEMENT.
(a) The Employer shall pay to the Employee as compensation for all
services rendered by the Employee during the term of this Agreement a basic
annualized salary of $350,000 per year
<PAGE> 2
(the "Basic Salary"), or such other amount as the parties may agree on from time
to time, payable in equal monthly installments or in other more frequent
installments, as determined by the Employer. The Board of Directors of the
Employer shall have the right to increase the Employee's compensation from time
to time by action of the Board of Directors. In addition, the Board of Directors
of the Employer, in its discretion, may, with respect to any year during the
term hereof, award a bonus or bonuses to the Employee in addition to the bonuses
provided for in Section 3(b). The compensation provided for in this Section 3(a)
shall be in addition to any pension or profit sharing payments set aside or
allocated for the benefit of the Employee.
(b) In addition to the Basic Salary paid pursuant to Section 3(a), the
Employer may pay as incentive compensation an annual bonus based upon the
Employee's performance, as determined each year by the Board of Directors of the
Employer.
(c) The Employer shall reimburse the Employee for all reasonable expenses
incurred by the Employee in the performance of his duties under this Agreement;
provided, however, that the Employee must furnish to the Employer an itemized
account, satisfactory to the Employer, in substantiation of such expenditures.
(d) The Employee shall be entitled to continue the use of his current
corporate vehicle and such fringe benefits, including, but not limited to,
medical and insurance benefits, as may be provided from time to time by the
Employer to other senior officers of the Employer.
(e) As soon as possible after the effective date of this Agreement, the
Employer shall adopt a restricted stock award plan pursuant to which stock
awards will be granted for a total of 24,040 shares of the Employer's Common
Stock, or approximately 7.5 percent of the Employer's shares outstanding on the
date hereof, on a fully diluted basis. Restricted stock issued pursuant to such
awards shall be subject to a restriction that the first $38 of distributions,
whether dividends, upon liquidation, or otherwise shall be withheld by the
Employer and distributed to the other holders of Employer's Common Stock. Such
awards shall vest evenly on a monthly basis over three years (1/36 per month)
beginning on the effective date of a Successful Recapitalization (defined
below). Vesting of such awards shall accelerate upon death, disability, or a
Liquidation Event. Previous restricted stock awards made to Employee pursuant to
the Employer's 1996 Restricted Stock Award Plan shall be canceled upon issuance
of the new awards as provided herein.
(f) In addition to the compensation provided for in this Agreement, the
Employer and the Employee acknowledge that they have previously agreed to the
retention by Employer of Employee (or at Employee's direction, an entity
controlled by the Employee) to provide consulting services for which no
compensation is paid pursuant to this Agreement, Employee (or such entity) is to
receive a transaction fee of $250,000 upon a Successful Recapitalization prior
to September 1, 1998. "Successful Recapitalization" shall mean any issuance of
equity and/or debt securities by Classic Communications, Inc. and/or Classic
Cable, Inc. approved by the Board of Directors of the Employer. In addition, the
Employee (or such entity) and J. Merritt Belisle ("Belisle") are to receive, in
the aggregate, a 1% transaction fee on the "Transaction Value" of each "Net
Additional Financing" by and all "M&A Activity" of Employer. Such 1% fee may be
allocated by Employee
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<PAGE> 3
and Belisle in such manner as they may agree between themselves. A "Net
Additional Financing" means any financing by the Employer or any of its
subsidiaries, whether equity or debt, to the extent that immediately subsequent
to such financing the Employer's total capitalization is greater than it was
immediately prior to such financing. "M&A Activity" means the acquisition,
through the purchase of assets, a merger, or otherwise, of cable television
systems, telephony systems, internet systems, and other communications and new
media services or products. A Net Additional Financing and M&A Activity do not
include any transaction included in or closed concurrently with the Successful
Recapitalization, the sale of securities pursuant to options or other rights
outstanding upon completion of the Successful Recapitalization, nor any
transaction deemed to be a Change of Control pursuant to Section 8(e)(ii)(B),
(C) or (D) below. It is the intent of the parties that if any transaction or
series of related transactions constitute both M&A Activity and a Net Additional
Financing, the 1% fee will not be paid on both the Net Additional Financing and
M&A Activity financed by the proceeds from the Net Additional Financing.
"Transaction Value" means (i) with respect to a Net Additional Financing", the
net amount by which the Employer's capitalization has increased, and (ii) with
respect to M&A Activity, the value of all consideration paid by the Employer or
any of its affiliated companies in the form of cash, stock, or other securities,
debt (including the assumption of debt and capital lease obligations), and other
property. The value of any securities (whether debt or equity) or other property
paid as consideration in connection with M&A Activity is determined as follows:
(i) the value of securities that are freely tradeable in an established public
market will be determined on the basis of the last closing market price prior to
the public announcement of the transaction constituting the M&A Activity; (ii)
the value of securities that are not freely tradeable or have no established
public market, or if the consideration utilized consists of property other than
securities, the value of such other property shall be the fair market value
thereof as mutually agreed upon by both parties to the transaction; and (iii) to
the extent such consideration is contingent upon the future performance of the
business purchased or sold, the Transaction Value will be calculated assuming
the financial projections are achieved.
4. DUTIES. The Employee is engaged as the President of the Employer and
of the Employer's various subsidiaries. The Employee shall be a member of the
Boards of Directors of the Employer and the Employer's subsidiaries. In
addition, the Employee shall have the duties of Chief Financial Officer and
shall have such other duties and hold such other offices as may from time to
time be reasonably assigned to him by the Board of Directors of the Employer.
5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF.
(a) During the term of his employment under this Agreement, the Employee
shall devote substantially all of his time, energy and attention during regular
business hours to the benefit and business of the Employer in performing his
duties pursuant to this Agreement.
(b) The Employee shall be entitled to vacations with pay and to such
personal and sick leave with pay in accordance with the policy of the Employer
as may be established from time to time by the Employer and applied to other
senior officers of the Employer.
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<PAGE> 4
6. FACILITIES. The Employer shall provide the Employee with a fully
furnished office, and the facilities of the Employer shall be generally
available to the Employee in the performance of his duties pursuant to this
Agreement; it being understood and contemplated by the parties that all
equipment, supplies and office personnel required for performance of the
Employee's duties under this Agreement shall be supplied by the Employer.
7. TERMINATION ON DEATH, ILLNESS OR INCAPACITY.
(a) If a Successful Recapitalization shall have occurred, and if the
Employee dies during the term of his employment, the Employer shall pay to the
estate of the Employee the Basic Salary that would have otherwise been paid to
Employee through the end of the term of this Agreement (provided that the term
shall cease to be extended daily pursuant to Section 2 hereof upon the death of
Employee) plus any bonus compensation earned but not yet paid up to the end of
the month in which his death occurs. The Employer shall have no additional
financial obligation under this Agreement to the Employee or his estate. After
receiving the payments provided in this subparagraph (a), the Employee and his
estate shall have no further rights under this Agreement.
(b) (i) During any period of disability, illness or incapacity during
the term of this Agreement which renders the Employee at least temporarily
unable to perform the services required under this Agreement for a period which
does not exceed one hundred and eighty (180) continuous days in any one-year
period, the Employee shall receive the compensation payable under Section 3(a)
of this Agreement plus any bonus compensation earned but not yet paid, less any
benefits received by him under any disability insurance carried by or provided
by the Employer. Upon the Employee's permanent disability (as defined below),
Employee shall continue to receive the Basic Salary that would have otherwise
been paid to Employee through the end of the term of this Agreement, provided
that the term shall cease to be extended daily pursuant to Section 2 hereof upon
the permanent disability of Employee. Notwithstanding the continuation of the
Basic Salary as set forth above, the Employee shall continue to receive any
disability benefits to which he may be entitled under any disability income
insurance which may be carried by or provided by the Employer from time to time.
(ii) The term "permanent disability" as used in this Agreement shall mean
the inability of the Employee, as determined by the Board of Directors of the
Employer, by reason of physical or mental disability to perform the duties
required of him under this Agreement for a period of one hundred and eighty
(180) days in any one-year period. Successive periods of disability, illness or
incapacity will be considered separate periods unless the later period of
disability, illness or incapacity is due to the same or related cause and
commences less than six months from the ending of the previous period of
disability. Upon such determination, the Board of Directors may terminate the
Employee's employment under this Agreement upon ten (10) days' prior written
notice. If any determination of the Board of Directors with respect to permanent
disability is disputed by the Employee, the parties hereto agree to abide by the
decision of a panel of three physicians. The Employee and the Employer shall
each appoint one member, and the third member of the panel shall be appointed by
the other two members. The Employee agrees to make himself available for and
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<PAGE> 5
to submit to examinations by such physicians as may be directed by the Employer.
Failure to submit to any such examination shall constitute a breach of a
material part of this Agreement.
8. OTHER TERMINATIONS.
(a) (i) The Employee may terminate his employment hereunder upon giving
at least ninety (90) days' prior written notice to the Employer. In addition,
the Employee shall have the right to terminate his employment hereunder on the
conditions and at the times provided for in Section 8(e) of this Agreement.
(ii) If the Employee gives notice pursuant to Section 8(a) above,
the Employer shall have the right to relieve the Employee, in whole or in part,
of his duties under this Agreement (without reduction in compensation through
the termination date).
(b) The Employer may terminate Employee's employment hereunder at any
time, without prior notice.
(c) If the Employer shall terminate the employment of the Employee
without good cause (as defined below) effective on a date earlier than the
termination date provided for in Section 2, the Employee shall have the
nonforfeitable right to receive, the Basic Salary, paid monthly, that he is
entitled to for the remainder of the term of this Agreement, and the Employer
shall continue to provide him with medical insurance coverage for the remainder
of the term of this Agreement; provided that, notwithstanding such termination
of employment, the Employee's covenants set forth in Section 10 and Section 11
are intended to and shall remain in full force and effect.
(d) (i) If the employment of the Employee is terminated for good cause,
or if the Employee voluntarily terminates his employment by written notice to
the Employer under Section 8(a) of this Agreement without reliance on Section
8(e), the Employer shall pay to the Employee any compensation earned but not
paid to the Employee prior to the effective date of such termination. Under such
circumstances, such payment shall be in full and complete discharge of any and
all liabilities or obligations of the Employer to the Employee hereunder, and
the Employee shall be entitled to no further benefits under this Agreement.
(ii) "Good cause" shall include:
(1) the Employee's conviction of a criminal offense
that has a material adverse effect upon the business or reputation or the
Employer or any affiliate of the Employer;
(2) commission by the Employee of a material breach
of his duty of loyalty to the Employer or any affiliate of the Employer; and
(3) the Employee's willful failure or refusal to
perform his assigned duties, which willful refusal has had, or if continued,
could reasonably be expected to have, a material adverse effect on the Employer
or the affiliates of the Employer or their respective businesses or
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<PAGE> 6
prospects, and which willful refusal has continued after Employee has received
at least two written warnings specifically advising him or his shortcomings and
providing him with an opportunity to resume performance in accordance with his
assigned duties.
(iii) Termination of the employment of the Employee for reasons
other than those expressly specified in this Agreement as good cause shall be
deemed to be a termination of employment "without good cause".
(e) (i) If a Change in Control of the Employer (as defined below) shall
occur, then the Employee shall have, instead of the further rights described
herein, the right to terminate his employment under this Agreement immediately
and the nonforfeitable right to receive, payable in a lump sum, the Basic Salary
that he is entitled to for the unexpired term of this Agreement, and the
Employer shall continue to provide him with medical insurance coverage for the
unexpired term of this Agreement; provided that, notwithstanding such
termination of employment, the Employee's covenants set forth in Section 10 and
Section 11 are intended to and shall remain in full force and effect.
(ii) "Change in Control" means:
(A) J. Merritt Belisle, Steven E. Seach, Austin Ventures, L.P., a
Delaware limited partnership, Austin Ventures III-A, L.P., a Delaware limited
partnership, Austin Ventures III-B, L.P., a Delaware limited partnership, BT
Capital Partners, Inc., a Delaware corporation, Texas Growth Fund, a trust fund
created by the Constitution of the State of Texas, and NationsBanc Capital
Corp., a Texas corporation, cease to own at least a majority of the issued and
outstanding shares of Employer's Common Stock.
(B) there is a sale of all or substantially all of Employer's
assets, or all or substantially all of Employer's capital stock, or one or more
of its subsidiaries, in one or more transactions for cash or freely salable
securities and a subsequent liquidation of the Employer, in which its
stockholders receive liquidating distributions of such proceeds of sale after
payment or provision for the valid debts and liabilities of the Employer;
(C) there is a merger or consolidation of the Employer, or one or
more of its subsidiaries with or into one or more corporations, limited
liability companies or partnerships in which the Employer, or its subsidiaries,
as the case may be, receive cash or freely salable securities for all of its or
their assets, and a subsequent liquidation of the Employer, or one or more of
its subsidiaries, in which the stockholders of the Employer, or its
subsidiaries, as the case may be, receive liquidating distributions of such
proceeds of sale, merger or consolidation after payment or provision for the
valid debts and liabilities of the Employer, or its subsidiaries, as the case
may be; or
(D) there is a merger or consolidation of the Employer or the
majority (based on the value of assets held by the subsidiaries) of the
Employer's subsidiaries, with or into another
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<PAGE> 7
corporation, limited liability company or a partnership in which the
stockholders of the Employer or its subsidiaries, as the case may be, receive
cash or marketable securities for all of their stock.
(f) The provisions of Section 8(c) and Section 8(e) are mutually
exclusive and Employee shall be entitled to payment only under one of those
Sections.
(g) The parties agree that, because there can be no exact measure of the
damage that would occur to the Employee as a result of a termination by the
Employer of the Employee's employment without good cause, the payments and
benefits paid and provided pursuant to this Agreement shall be deemed to
constitute liquidated damages and not a penalty for the Employer's termination
of the Employee's employment without good cause, and the Employer agrees that
the Employee shall not be required to mitigate his damages.
9. DISCLOSURE. The Employee agrees that during the term of his employment
by the Employer, he will disclose and disclose only to the Employer all material
ideas, methods, plans, developments or improvements known by him which relate
directly or indirectly to the business of the Employer, whether acquired by the
Employee before or during his employment by the Employer. Nothing in this
Section 9 shall be construed as requiring any such communication where the idea,
plan, method or development is lawfully protected from disclosure as a trade
secret of a third party or by any other lawful prohibition against such
communication.
10. CONFIDENTIALITY. The Employee agrees to keep in strict secrecy and
confidence any and all information the Employee assimilates or to which he has
access during his employment by the Employer and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Employer. The Employee agrees that both during and after the term of his
employment by the Employer, he will not, without the prior written consent of
the Employer, disclose any such confidential information to any third person,
partnership, joint venture, company, corporation or other organization.
11. NON-COMPETITION; NON-SOLICITATION.
The Employee hereby acknowledges that, during and solely as a result of his
employment by the Employer, he has received and shall continue to receive: (1)
special training and education with respect to the operations of a cable
television company and other related matters, and (2) access to confidential
information and business and professional contacts. In consideration of the
special and unique opportunities afforded to the Employee by the Employer as a
result of the Employee's employment, as outlined in the previous sentence, the
Employee hereby agrees as follows:
(a) During a period ending two years following the termination of his
employment under this Agreement, the Employee shall not, without the prior
written consent of the Employer, (i) directly or indirectly engage in any
business that competes with the Employer or any Affiliate of the Employer in
their conduct of the cable television business, or otherwise receive
compensation for any services rendered regarding any aspect of the cable
television business anywhere within the
-7-
<PAGE> 8
service area of any cable television system operated by the Employer or any
Affiliate of the Employer, or (ii) engage or participate, directly or
indirectly, in any business which is substantially similar to that of the
Employer or any Affiliate of the Employer, including, without limitation,
serving as a consultant, administrator, officer, director, employee, manager,
landlord, lender, guarantor, or in any similar or related capacity or otherwise
receive compensation for services rendered regarding any aspect of the cable
television business anywhere within the service area of any cable television
system operated by the Employer or any Affiliate of the Employer. The Employee
acknowledges that these limited prohibitions are reasonable as to time,
geographical area and scope of activities to be restrained and that the limited
prohibitions do not impose a greater restraint than is necessary to protect the
Employer's goodwill, proprietary information and other business interests. The
mere ownership of a de minimis amount of securities in any competitive
enterprise and exercise of rights appurtenant thereto, and participation in
management of any such enterprise or business operation other than in connection
with the competitive operation of such enterprise, are not prohibited.
(b) During his employment with the Employer and, except as may be
otherwise herein provided, for a period of two (2) years following the
termination of his employment with the Employer, regardless of the reason for
such termination, the Employee agrees he will refrain from and will not,
directly or indirectly, as an individual, partner, officer, director,
stockholder, employee, advisor, independent contractor, joint venturer,
consultant, agent, representative, salesman or otherwise (1) solicit any of the
employees of the Employer to terminate their employment or (2) accept employment
with or seek remuneration by any of the clients or customers of the Employer
with whom the Employer did business during the term of the Employee's
employment.
(c) The period of time during which the Employee is prohibited from
engaging in certain business practices pursuant to Sections 11(a) or (b) shall
be extended by any length of time during which the Employee is in breach of such
covenants.
(d) It is understood by and between the parties hereto that the
foregoing restrictive covenants set forth in Sections 11(a) through (c) are
essential elements of this Agreement, and that, but for the agreement of the
Employee to comply with such covenants, the Employer would not have agreed to
enter into this Agreement. Such covenants by the Employee shall be construed as
agreements independent of any other provision in this Agreement. The existence
of any claim or cause of action of the Employee against the Employer, whether
predicated on this Agreement, or otherwise, shall not constitute a defense to
the enforcement by the Employer of such covenants.
(e) It is agreed by the Employer and Employee that if any portion of
the covenants set forth in this Section 11 are held to be invalid, unreasonable,
arbitrary or against public policy, then such portion of such covenants shall be
considered divisible both as to time and geographical area. The Employer and
Employee agree that, if any court of competent jurisdiction determines the
specified time period or the specified geographical area applicable to this
Section 11 to be invalid, unreasonable, arbitrary or against public policy, a
lesser time period or geographical area which is determined to be reasonable,
non-arbitrary and not against public policy may be enforced against the
Employee. The Employer and the Employee agree that the foregoing covenants are
appropriate and
-8-
<PAGE> 9
reasonable when considered in light of the nature and extent of the business
conducted by the Employer.
(f) Notwithstanding any provision of this Section 11 to the contrary,
during the term of this Agreement, the Employee may acquire, engage in business
with, and receive compensation from any other company or business, provided,
however, that (i) in the case of an acquisition of a business operating cable
television systems, telephony systems, internet systems, or other communication
or new media services or products, Employer must have been offered the
opportunity to acquire such business on terms and conditions not less favorable
than the terms upon which Employee purchases such business; (ii) such other
company or business shall not be in competition with Employer; and (iii)
Employee shall continue to devote substantially all of his time to the business
affairs of the Employer. The Employer will be deemed to have been afforded an
opportunity to purchase a business if, at least 60 days prior to any such
acquisition by the Employee, the Employer is presented a description of such
business and a detailed description of the terms upon which such business is to
be purchased, and the Board of Directors of the Employer (i) votes not to
acquire such business pursuant to such terms, (ii) fails to make a determination
whether to acquire such business within 20 days of receipt of such description
of such business and such terms, or (iii) terminates negotiations with such
business after initially determining to negotiate to acquire such business.
12. SPECIFIC PERFORMANCE. The Employee agrees that damages at law will
be an insufficient remedy to the Employer if the Employee violates the terms of
Sections 9, 10 or 11 of this Agreement and that the Employer would suffer
irreparable damage as a result of such violation. Accordingly, it is agreed that
the Employer shall be entitled, upon application to a court of competent
jurisdiction, to obtain injunctive relief to enforce the provisions of such
Sections, which injunctive relief shall be in addition to any other rights or
remedies available to the Employer. The Employee agrees to pay to the Employer
all costs and expenses incurred by the Employer relating to the enforcement of
the terms of Sections 9, 10 or 11 of this Agreement, including reasonable fees
and disbursements of counsel (both at trial and in appellate proceedings).
13. COMPLIANCE WITH OTHER AGREEMENTS. The Employee represents and
warrants that the execution of this Agreement by him and his performance of his
obligations hereunder will not conflict with, result in the breach of any
provision of or the termination of or constitute a default under any Agreement
to which the Employee is a party or by which the Employee is or may be bound.
14. WAIVER OF BREACH. The waiver by the Employer of a breach of any of
the provisions of this Agreement by the Employee shall not be construed as a
waiver of any subsequent breach by the Employee.
15. ASSIGNMENT. The rights and obligations of the Employer under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Employer. This Agreement is a personal employment contract
and the rights, obligations and interests of the Employee hereunder may not be
sold, assigned, transferred, pledged or hypothecated.
-9-
<PAGE> 10
16. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, between the
Employer (or its subsidiaries) and Employee, with respect to the subject matter
hereof, including, without limitation, the 1996 Agreement and Section D.3 of the
Amended and Restated Stockholders Agreement dated as of October 31, 1995, among
Classic Communications, Inc., the Employee, and the other stockholders of
Classic Communications, Inc., as amended, which agreement provides for severance
compensation to the Employee upon termination of his employment with Classic
Communications, Inc. This Agreement may be changed only by an agreement in
writing signed by the party against whom any waiver, change, amendment,
modification or discharge is sought.
17. CONSTRUCTION AND INTERPRETATION.
(a) This Agreement shall be governed by and construed pursuant to the
laws of the State of Texas.
(b) The headings of the various sections in this Agreement are inserted
for convenience of the parties and shall not affect the meaning, construction or
interpretation of this Agreement.
(c) Any provision of this Agreement which is determined by a court of
competent jurisdiction to be prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or non-authorization without invalidating the
remaining provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction. In any such case, such
determination shall not affect any other provision of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect. If
any provision or term of this Agreement is susceptible to two or more
constructions or interpretations, one or more of which would render the
provision or term void or unenforceable, the parties agree that a construction
or interpretation which renders the term or provision valid shall be favored.
18. NOTICE. All notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy or
similar electronic transmission method; one working day after it is sent, if
sent by recognized expedited delivery service; and five days after it is sent,
if mailed, first class mail, certified mail, return receipt requested, with
postage prepaid. In each case notice shall be sent:
To the Employer: Classic Communications, Inc.
Classic Cable, Inc.
515 Congress Avenue, Suite 2626
Austin, Texas 78701
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<PAGE> 11
With a copy to: Cary Ferchill
Winstead Sechrest & Minick P.C.
100 Congress Avenue, Suite 800
Austin, Texas 78701
To the Employee at his address herein above written.
19. VENUE; PROCESS. The parties to this Agreement agree that
jurisdiction and venue in any action brought pursuant to this Agreement to
enforce its terms or otherwise with respect to the relationships between the
parties shall properly lie in the District Court of the State of Texas in and
for Travis County. Such jurisdiction and venue are merely permissive;
jurisdiction and venue shall also continue to lie in any court where
jurisdiction and venue would otherwise be proper. The parties agree that they
will not object that any action commenced in the foregoing jurisdiction is
commenced in a forum non conveniens. The parties further agree that the mailing
by certified or registered mail, return receipt requested, of any process
required by any such court shall constitute valid and lawful service of process
against them, without the necessity for service by any other means provided by
statute or rule of court.
* * * *
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
CLASSIC COMMUNICATIONS, INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
J. Merritt Belisle
Chief Executive Officer
CLASSIC CABLE, INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
J. Merritt Belisle
Chief Executive Officer
By: /s/ STEVEN E. SEACH
----------------------------------
STEVEN E. SEACH
-12-
<PAGE> 1
EXHIBIT 10.3
===============================================================================
CREDIT AGREEMENT
among
CLASSIC CABLE, INC.
as Borrower
THE LENDERS PARTIES HERETO,
UNION BANK OF CALIFORNIA, N.A.
and
GOLDMAN SACHS CREDIT PARTNERS L.P.
as Co-Arrangers
GOLDMAN SACHS CREDIT PARTNERS L.P.
as Syndication Agent
and
UNION BANK OF CALIFORNIA, N.A.
as Administrative and Documentation Agent
Dated as of July 29, 1998
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. DEFINITIONS...................................................... 2
1.1 Defined Terms................................................. 2
1.2 Other Definitional Provisions................................. 27
SECTION 2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT;
COMMITMENT AMOUNTS............................................... 28
2.1 Revolving Loans and Letters of Credit; Revolving Loan
Commitment Amounts............................................ 28
2.2 Term Loans; Term Loan Commitment.............................. 32
2.3 Issuance of Letters of Credit................................. 35
2.4 Optional Prepayments.......................................... 38
2.5 Mandatory Prepayments......................................... 38
2.6 Conversion and Continuation Options........................... 41
2.7 Minimum Amounts of Tranches................................... 42
2.8 Interest Rates and Payment Dates.............................. 42
2.9 Computation of Interest and Fees.............................. 43
2.10 Inability to Determine Interest Rate.......................... 44
2.11 Pro Rata Treatment and Payments............................... 45
2.12 Illegality.................................................... 45
2.13 Increased Costs............................................... 46
2.14 U.S. Taxes.................................................... 47
2.15 Indemnity..................................................... 49
2.16 Unused Commitment Fees........................................ 50
2.17 Mitigation of Costs........................................... 50
2.18 Registered Loans.............................................. 50
SECTION 3. REPRESENTATIONS AND WARRANTIES................................... 51
3.1 Organization and Good Standing................................ 51
3.2 Power and Authority........................................... 51
3.3 Validity and Legal Effect..................................... 51
3.4 No Violation of Laws or Agreements............................ 51
3.5 Title to Assets; Existing Encumbrances; Legal Names........... 52
3.6 Capital Structure; Equity Ownership; Subordinated Debt........ 52
3.7 Subsidiaries and Affiliates................................... 52
3.8 Material Contracts............................................ 53
3.9 Taxes and Assessments......................................... 53
3.10 Litigation and Legal Proceedings.............................. 54
3.11 Accuracy of Financial Information............................. 54
3.12 Accuracy of Other Information................................. 54
3.13 Compliance with Laws Generally................................ 55
3.14 ERISA Compliance.............................................. 55
3.15 Environmental Compliance...................................... 56
3.16 Federal Regulations........................................... 57
3.17 Fees and Commissions.......................................... 57
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
3.18 Representations and Warranties in Acquisition
Agreement..................................................... 57
3.19 Solvency...................................................... 57
3.20 Franchises.................................................... 57
3.21 The CATV Systems.............................................. 58
3.22 Rate Regulation............................................... 59
3.23 Investment Company Act; Public Utility Holding
Company Act................................................... 60
3.24 Nature of Business............................................ 60
3.25 Ranking of Loans.............................................. 61
SECTION 4. CONDITIONS PRECEDENT............................................. 61
4.1 Conditions to Closing Date.................................... 61
4.2 Conditions to Each Loan or Letter of Credit................... 65
4.3 Condition Subsequent.......................................... 66
SECTION 5. AFFIRMATIVE COVENANTS............................................ 66
5.1 Financial Statements.......................................... 66
5.2 Certificates; Other Information............................... 67
5.3 Payment of Obligations........................................ 69
5.4 Conduct of Business and Maintenance of Existence.............. 69
5.5 Maintenance of Property....................................... 70
5.6 Insurance..................................................... 70
5.7 Inspection of Property; Books and Records;
Discussions................................................... 70
5.8 Environmental Laws............................................ 71
5.9 Use of Proceeds............................................... 71
5.10 Compliance With Laws, Etc..................................... 72
5.11 Certain Obligations Respecting Subsidiaries;
Prohibitions on Certain Agreements............................ 72
5.12 Interest Rate Protection...................................... 73
5.13 Year 2000..................................................... 74
SECTION 6. NEGATIVE COVENANTS............................................... 74
6.1 Financial Condition Covenants................................. 74
6.2 Limitation on Indebtedness.................................... 76
6.3 Limitation on Liens........................................... 77
6.4 Limitation on Fundamental Changes............................. 78
6.5 Limitation on Sale of Assets.................................. 79
6.6 Limitation on Dividends....................................... 80
6.7 Limitation on Investments, Loans and Advances................. 80
6.8 Modifications of Certain Documents; Subordinated
Indebtedness; Certain Changes................................. 83
6.9 Transactions with Affiliates.................................. 84
6.10 Fiscal Year................................................... 84
6.11 Sale-Leaseback Transactions................................... 84
6.12 Management Fees............................................... 84
6.13 Lines of Business............................................. 84
6.14 Limitation on Equity Offerings................................ 85
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 7. EVENTS OF DEFAULT................................................ 85
SECTION 8. THE AGENT........................................................ 90
8.1 Appointment.................................................... 90
8.2 Delegation of Duties........................................... 91
8.3 Exculpatory Provisions......................................... 91
8.4 Reliance by the Agent.......................................... 91
8.5 Notice of Default.............................................. 92
8.6 Non-Reliance on the Agent and Other Lenders.................... 92
8.7 Indemnification................................................ 93
8.8 The Facility Agents in Their Individual Capacities............. 94
8.9 Successor Agent................................................ 94
8.10 Collateral Documents........................................... 94
SECTION 9. MISCELLANEOUS.................................................... 95
9.1 Amendments and Waivers......................................... 95
9.2 Notices........................................................ 96
9.3 No Waiver; Cumulative Remedies................................. 97
9.4 Survival of Representations and Warranties..................... 97
9.5 Payment of Expenses and Taxes.................................. 97
9.6 Successors and Assigns; Participations; Purchasing Lenders..... 99
9.7 Adjustments; Set-Off...........................................102
9.8 Counterparts...................................................103
9.9 Severability...................................................103
9.10 Integration....................................................103
9.11 GOVERNING LAW..................................................104
9.12 Acknowledgements...............................................104
9.13 Headings.......................................................104
9.14 Copies of Certificates, Etc....................................104
9.15 Treatment of Certain Information; Confidentiality..............104
9.16 Consent to Jurisdiction........................................105
9.17 WAIVER OF JURY TRIAL...........................................105
9.18 Interest Rates.................................................106
Exhibits
A-1 Form of Revolving Note
A-2 Form of Term Note
B Form of Assignment and Acceptance
C Form of Quarterly Officer's Report
D Form of Covenant Compliance Certificate
E Form of Continuation Notice
F Form of Letter of Credit Request
G Form of Regulatory Opinion
H Form of Borrowing Notice
Schedules
2.1 Commitments
</TABLE>
<PAGE> 5
3.1 Business Qualification Jurisdictions
3.5 Legal and Trade Names
3.7 Subsidiaries and Affiliates
3.8 Material Contracts
3.9 Net Operating Losses
3.10 Litigation
3.17 Certain Fees
3.20 Franchises
3.21 Certain Matters Relating to CATV Systems
3.22 Effective Competition with respect to CATV Systems
6.2 Indebtedness
6.3 Liens
6.7 Investments
<PAGE> 6
CREDIT AGREEMENT
----------------
THIS CREDIT AGREEMENT, dated as of July 29, 1998, among (1) CLASSIC
CABLE, INC., a Delaware corporation (the "Borrower"), (2) the several banks and
other financial institutions from time to time parties to this Agreement (the
"Lenders"), (3) UNION BANK OF CALIFORNIA, N.A. and GOLDMAN SACHS CREDIT PARTNERS
L.P., as Co-Arrangers, (4) GOLDMAN SACHS CREDIT PARTNERS L.P., as Syndication
Agent, (5) UNION BANK OF CALIFORNIA, N.A., as Documentation Agent and (6) UNION
BANK OF CALIFORNIA, N.A., as Administrative Agent for the Lenders hereunder (in
such capacity, the "Agent").
RECITALS
--------
A. Black Creek Communications, Inc., as buyer, and Cable One, Inc., as
seller ("Cable One") have entered into that certain Asset Purchase Agreement
dated as of May 14, 1998, the buyer's interest under which has been assigned to
Black Creek Communications, L.P., a Delaware limited partnership and a
wholly-owned subsidiary of the Borrower ("Black Creek"), pursuant to an
Assignment of Asset Purchase Agreement dated as of June 19, 1998 (such
agreement, as it amended by such Assignment and as it may be further amended
from time to time, the "Acquisition Agreement"). Pursuant to the Acquisition
Agreement Black Creek will purchase certain cable television systems and related
assets located in Kansas, Missouri, Oklahoma and Texas (such acquisition, the
"Cable One Acquisition") for a purchase price not more than $42,500,000 (as such
price may be adjusted pursuant to the Acquisition Agreement).
B. The Borrower has requested that the Lenders extend loans and make
available letters of credit to it from time to time, in an aggregate amount not
exceeding $125,000,000, for the purposes of (i) refinancing certain existing
indebtedness, (ii) consummating the Cable One Acquisition and additional
Permitted Acquisitions, (iii) funding working capital and capital expenditures
and (iv) funding general corporate purposes, in each case on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
<PAGE> 7
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"Access Lines": communication transmission lines that
connect customers of a Telephone System to switching centers that
are part of a Telephone System.
"Accountants": Ernst & Young LLP, or such other firm of
independent certified public accountants of recognized national
standing as shall be selected by the Borrower and satisfactory to
the Agent.
"Acquisition Agreement": as defined in the Recitals hereto.
"Affiliate": as to any Person, (a) any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person, (b) any Person who is a director, officer, shareholder or partner
(i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person
described in the preceding clause (a), (c) any spouse, immediate family member
or other relative who has the same principal residence of any Person described
in the preceding clauses (a) and (b), or (d) any trust in which any such Person
described in the preceding clauses (a), (b) or (c) is the principal beneficiary.
For purposes of this definition, "control" of a Person means the power, directly
or indirectly, either to (i) vote securities having 5% or more of the ordinary
voting power for the election of directors of such Person or (ii) direct or
cause the direction of the management and policies of such Person whether by
contract or otherwise.
"Agent": as defined in the preamble hereto.
"Aggregate Available Revolving Loan Commitment": the sum of
the Available Revolving Loan Commitments of each Lender.
"Aggregate Commitment": the sum of the Aggregate Revolving
Loan Commitment and the Aggregate Term Loan Commitment.
"Aggregate Revolving Loan Commitment": the sum of the
Revolving Loan Commitments set forth on the signature pages
hereto, as the same may be adjusted from time to time pursuant to
the provisions hereof.
"Aggregate Term Loan Commitment": the sum of the Term Loan
Commitments set forth on the signature pages hereto.
"Agreement": this Credit Agreement, as amended, waived,
supplemented or otherwise modified from time to time.
-2-
<PAGE> 8
"Annualized Operating Cash Flow": as at any date, the product of (i)
Operating Cash Flow for the fiscal quarter ending on or most recently ended
prior to such date times (ii) four; provided that with respect to any
calculation of Annualized Operating Cash Flow made as of March 31 of any fiscal
year, "Annualized Operating Cash Flow" shall be equal to the product of (x)
Operating Cash Flow for the two consecutive fiscal quarter period ending on
March 31 times (y) two.
"Applicable Lending Office": for any Lender, its offices for LIBOR
Loans, Base Rate Loans and participations in Letters of Credit, specified below
its signature on the signature pages hereof or in the Assignment and Acceptance
pursuant to which it became a party hereto, as the case may be, any of which
offices may, upon 10 days' prior written notice to the Agent and the Borrower,
be changed by such Lender.
"Applicable Revolving Loan Margin": with respect to
Revolving Loans, for each LIBOR Loan and for each Base Rate Loan
as set forth below:
<TABLE>
<CAPTION>
Revolving Loan
Leverage Level LIBOR Base Rate
-------------- ----- ---------
<S> <C> <C>
1(>=6.75:1) +2.250% +1.250%
2(<6.75:1->=6.25:1) +2.125% +1.125%
3(<6.25:1->=5.75:1) +2.000% +1.000%
4(<5.75:1->=5.25:1) +1.875% +0.875%
5(<5.25:1->=4.75:1) +1.750% +0.750%
6(<4.75:1) +1.625% +0.625%
</TABLE>
"Applicable Term Loan Margin": with respect to Term Loans,
for each LIBOR Loan and for each Base Rate Loan as set forth
below:
<TABLE>
<CAPTION>
Term Loan
Leverage Level LIBOR Base Rate
-------------- ----- ---------
<S> <C> <C>
1(>= 5.50:1) +2.625% +1.625%
2(< 5.50:1) +2.250% +1.250%
</TABLE>
"Applicable Margin": the Applicable Revolving Loan Margin or the
Applicable Term Loan Margin, as applicable.
"Asset Disposition": the sale, sale and leaseback, transfer,
conveyance, exchange, long-term lease accorded sales treatment under GAAP or
similar disposition (including by means of a merger, consolidation,
amalgamation, joint venture or other substantive combination) of any of the
Properties, business or assets (other than marketable securities, including
"margin stock" within the meaning of Regulation U, liquid investments and other
financial instruments but, including, without limitation,
-3-
<PAGE> 9
the assignment of any lease, license or permit relating to the Properties) of
the Borrower or any of its Subsidiaries to any Person or Persons other than to
the Borrower or any of its Wholly Owned Subsidiaries; provided that Asset
Dispositions shall not include the sale or other disposition in the ordinary
course of business and on ordinary business terms of assets in an aggregate
amount not exceeding $500,000.
"Assignment and Acceptance": an Assignment and Acceptance substantially
in the form of Exhibit B to this Agreement.
"Available Revolving Loan Commitment": with respect to each Lender
having a Revolving Loan Commitment on the date of determination thereof, the
amount by which (a) the Revolving Loan Commitment of such Lender on such date
exceeds (b) the principal sum of such Lender's (i) Revolving Loans outstanding,
(ii) Revolving Loan Commitment Percentage of the aggregate Letter of Credit
Amount of all Letters of Credit outstanding and (iii) Revolving Loan Commitment
Percentage of the aggregate amount of unreimbursed drawings under all Letters of
Credit on such date.
"Base Rate": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greater of (a) the Reference
Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. "Reference Rate" shall mean the rate of interest per
annum publicly announced from time to time by Union Bank of California, N.A. as
its "reference rate" in effect at its office in Los Angeles, California.
"Federal Funds Effective Rate" shall mean, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Agent from three
federal funds brokers of recognized standing selected by it. If, for any reason,
the Agent shall have determined (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Federal Funds Effective Rate
for any reason, including, without limitation, the inability or failure of the
Agent to obtain sufficient quotations in accordance with the terms hereof, the
Base Rate shall be determined without regard to clause (b) of the first sentence
of this definition until the circumstances giving rise to such inability no
longer exist. Any change in the Base Rate due to a change in the Reference Rate
or the Federal Funds Effective Rate shall be effective on the effective date of
such change in the Reference Rate or the Federal Funds Effective Rate,
respectively.
-4-
<PAGE> 10
"Base Rate Loans": Loans the rate of interest applicable to which is
based upon the Base Rate.
"Basic Subscribers": as at any date, Subscribers who subscribe to a
CATV System at the regular basic monthly subscription rate for such CATV System
to a single household Subscriber (exclusive of "secondary outlets," as such term
is commonly understood in the cable television industry), plus (b) the number of
Subscribers determined by dividing the aggregate dollar monthly amount billed to
bulk Subscribers (hotels, motels, apartment buildings, hospitals and the like),
by the regular basic monthly subscription rate for basic service charged by the
CATV System in which such bulk Subscriber is located.
"Belisle Note": that series of promissory notes made by J. Merritt
Belisle and payable to the Borrower in the aggregate original principal amount
of $196,998.
"Black Creek": as defined in the Recitals hereto.
"Borrower": as defined in the preamble hereto.
"Borrowing Notice": a notice from the Borrower to the Agent requesting
a borrowing of Loans, substantially in the form of Exhibit G hereto.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in the State of California or New York City are
authorized or required by law to close and which, in the case of a LIBOR Loan,
is a Eurodollar Business Day.
"Cable One Acquisition": as defined in the recitals hereto.
"Capital Expenditures": for any period, expenditures (including,
without limitation, the aggregate amount of Capitalized Lease Obligations
incurred during such period) made by the Borrower or any of its Subsidiaries to
acquire or construct fixed assets, plant and equipment (including renewals,
improvements and replacements, but excluding repairs and excluding also the
Acquisition or any Permitted Acquisition) during such period computed in
accordance with GAAP.
"Capitalized Lease Obligations": obligations for the payment of rent
for any real or personal property under leases or agreements to lease that, in
accordance with GAAP, have been or should be capitalized on the books of the
lessee and, for purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
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"Capital Stock": any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation), any and
all warrants, options or rights to purchase any of the foregoing or any other
securities convertible into any of the foregoing.
"Cash Collateral Deposit": cash deposits made by the Borrower to the
Agent, to be held by the Agent as Collateral in the Collateral Account pursuant
to the Security Agreement, for the reimbursement of drawings under Letters of
Credit.
"Cash Income Taxes": cash income taxes paid by the Borrower and its
Subsidiaries during the fiscal quarter most recently ended and the immediately
preceding three fiscal quarters.
"Casualty Event": with respect to any Property of any Person, any loss
of or damage to, or any condemnation or other taking of, such Property for which
such Person or any of its Subsidiaries receives insurance proceeds, or proceeds
of a condemnation award or other compensation.
"CATV System": any cable distribution system that receives broadcast
signals by antennae, microwave transmission, satellite transmission or any other
form of transmission and that amplifies such signals and distributes them to
Persons who pay to receive such signals.
"Co-Arranger": as defined in the preamble hereto.
"CCI": Classic Communications, Inc., a Delaware corporation.
"CCI Indenture": that certain Indenture dated as of July 29, 1998,
between the CCI and Banc One, N.A. as trustee, as it may be amended or otherwise
modified from time to time in accordance with the terms hereof.
"CCI Notes": $114,000,000 Classic Communications, Inc. Units Consisting
of 13 1/4% Senior Discount Notes due 2009 (consisting of $59,979,960 gross
proceeds) issued pursuant to the CCI Indenture.
"Classic Telephone": Classic Telephone, Inc., a Delaware corporation.
"Closing Date": the date on which the conditions precedent set forth in
Section 4.1 have been satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
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"Collateral": all of the property (tangible or intangible) purported to
be subject to the lien or security interest purported to be created by any
mortgage, deed of trust, security agreement, pledge agreement, assignment or
other security document heretofore or hereafter executed by the Borrower as
security for all or part of the Obligations.
"Collateral Account": as defined in Section 5 of the Security
Agreement.
"Collateral Documents": the Security Agreement, all notices of security
interests in deposit accounts requested by the Agent pursuant to the Security
Agreement, all Form UCC-1 Financing Statements and amendments thereto and any
other document encumbering the Collateral or evidencing or perfecting a security
interest therein for the benefit of the Lenders executed by the Borrower.
"Commitment Percentage": as to any Lender at any time, the percentage
of the Aggregate Commitment then constituted by such Lender's Commitments.
"Commitments": as to any Lender, any Revolving Loan Commitment and any
Term Loan Commitment held by it hereunder.
"Commonly Controlled Entity": as to any Person, an entity, whether or
not incorporated, which is under common control with such Person within the
meaning of Section 4001 of ERISA or is part of a group which includes such
Person and which is treated as a single employer under Section 414 of the Code.
"Communications Act": the Communications Act of 1934, as amended, and
the rules and regulations issued thereunder, as from time to time in effect.
"Continuation Notice": a request for continuation or conversion of a
Loan as set forth in Section 2.6, substantially in the form of Exhibit E.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Covenant Compliance Certificate": a certificate of a senior financial
officer of the Borrower substantially in the form of Exhibit D hereto.
"Cumulative Credit": as defined in the Subordinated Indenture.
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"Cumulative Interest Expense": as defined in the Subordinated
Indenture.
"Debt Offering": any issuance or sale by CCI, the Borrower or any of
their respective Subsidiaries of any debt securities.
"Debt Service": for any period, the sum, for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) in the case of Revolving Loans
under this Agreement, the aggregate amount of payments of principal of such
Loans that, giving effect to Commitment reductions scheduled to be made during
such period pursuant to Section 2.1(e), were required to be made pursuant to
this Agreement during such period plus (b) in the case of all other
Indebtedness, all regularly scheduled payments or regularly scheduled
prepayments of principal of Indebtedness (including, without limitation, the
principal component of any payments in respect of Capitalized Lease Obligations,
but excluding prepayments under Section 2.5 hereof) made during such period plus
(c) all Interest Expense for such period.
"Default": any of the events specified in Section 7, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"Documentation Agent": as defined in the preamble hereto.
"Dollars" and "$": dollars in lawful currency of the United States.
"Drawing Lender": as defined in Section 2.3(c).
"Employee Nonrecourse Guarantees": each Employee Nonrecourse Guarantee,
in form and substance reasonably satisfactory to the Co-Arrangers, made by each
Shareholder Employee in favor of the Agent, for the benefit of the Lenders, as
the same may be amended from time to time in accordance with the terms hereof.
"Employee Pledge Agreements": each Employee Pledge Agreement, in form
and substance reasonably satisfactory to the Co-Arrangers, made by each
Shareholder Employee in favor of the Agents for the benefit of the Lenders, as
the same may be amended from time to time in accordance within the terms hereof.
"Environmental Control Statutes": as defined in Section 3.15.
"Equity Offering": (a) the sale or issuance (or reissuance) by the
Borrower, any Subsidiary, or CCI of any equity interest (common stock, preferred
stock, partnership interests, limited
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<PAGE> 14
liability company interests or otherwise) or any options, warrants, convertible
securities or other rights to purchase such beneficial or equity interests, or
(b) the receipt by the Borrower, any Subsidiary or CCI of any capital
contribution (whether or not evidenced by any equity security); provided that
Equity Offering shall not include (i) any exercise of a warrant for which the
respective exercise price is nominal, (ii) any such issuance or sale by any
Subsidiary of the Borrower to the Borrower or any Wholly Owned Subsidiary of the
Borrower, (iii) any capital contribution by the Borrower or any Wholly Owned
Subsidiary of the Borrower to any Subsidiary of the Borrower or (iv) any such
issuance or sale of stock in the Borrower the proceeds of which are applied
concurrently with the receipt thereof (or within 10 Business Days thereafter) to
consummate a Permitted Acquisition pursuant to Section 6.7(h).
"Equity Rights": with respect to any Person, any subscriptions,
options, warrants, commitments, preemptive rights or agreements of any kind
(including, without limitation, any stockholders' or voting trust agreements)
for the issuance, sale, registration or voting of, or securities convertible
into, any additional shares of capital stock of any class, or partnership or
other ownership interests of any type in, such Person.
"Equityholder Agreements" each shareholder agreement, limited liability
company agreement, partnership agreement, voting agreement, buy-sell agreement,
option, warrant, put, call, or right of first refusal, and any other agreement
or instrument with conversion rights into equity of the Borrower or any
Subsidiary either (a) between the Borrower or any Subsidiary and any holder or
prospective holder of any equity interest of the Borrower or any Subsidiary
(including interests convertible into such equity) or (b) otherwise between any
two or more such holders of equity interests.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate": as to any Person, each trade or business including
such Person, whether or not incorporated, which together with such Person would
be treated as a single employer under Section 4001(a)(14) of ERISA.
"Eurodollar Business Day": any day on which banks are open for dealings
in Dollar deposits in the London Interbank Market.
"Event of Default": any of the events specified in Section 7, provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
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"Excess Cash Flow": for any period, the excess of (a) the sum of (i)
Operating Cash Flow for such period plus (ii) cash receipts during such period
in respect of any extraordinary or non-recurring gains to the extent not
required pursuant to Section 2.5(b) to be applied to the prepayment of the Loans
and reductions of the Commitments (or minus cash payments during such period in
respect of any extraordinary or non-recurring losses) over (b) the sum of (i)
Fixed Charges for such period (minus the amount of any Capital Expenditures to
the extent financed with the proceeds of Indebtedness incurred pursuant to
Section 6.2(g) during such period) plus (ii) the excess, if any, of Working
Investment at the end of such period over Working Investment at the beginning of
such period (or minus the excess, if any of Working Investment at the beginning
of such period over Working Investment at the end of such period).
"Existing Credit Agreement": the Amended and Restated Credit Agreement
dated as of October 31, 1995 among the Borrower and WTAC, as borrowers, the
lenders referred to therein, and The Chase Manhattan Bank, as agent for such
lenders.
"FCC": the Federal Communications Commission or any successor thereto.
"Facility Agent": as defined in Section 8.1.
"Federal Funds Effective Rate": as defined in the definition of "Base
Rate" contained in this Section 1.1.
"Fixed Charge Coverage Ratio": as at the last day of any fiscal
quarter, the ratio of Annualized Operating Cash Flow as at such last day to
Fixed Charges for the four quarter period ending on such day.
"Fixed Charges": for any period, the sum, for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (i) Debt Service for such period, (ii)
Capital Expenditures for such period and (iii) Cash Income Taxes for such
period.
"Franchise": a franchise, license, authorization or right by contract
or otherwise to construct, own, operate, promote, extend and/or otherwise
exploit any CATV System or Telephone System operated or to be operated by the
Borrower or any of its Subsidiaries granted by any state, county, city, town,
village or other local or state government authority or by the FCC. The term
"Franchise" shall include each of the Franchises set forth on Schedule 3.20
hereto.
"GAAP": generally accepted accounting principles in the United States
in effect from time to time. If, at any time, GAAP changes in a manner which
will materially affect the calculations
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determining compliance by the Borrower with any of the covenants in Section 6.1,
such covenants shall continue to be calculated in accordance with GAAP in effect
prior to such changes in GAAP.
"Governmental Authority": any nation or government, any federal, state
or other political subdivision thereof and any federal, state or local entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GSCP": Goldman Sachs Credit Partners L.P.
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
any obligation (without duplication) of (a) the guaranteeing person or (b)
another Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or
other obligations (the "primary obligations") of any other third Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds for the purchase or payment of any such primary obligation or to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lesser of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
"Guarantees": the guarantees made by each of the Guarantors and all
other guarantees executed by a guarantor in favor of the
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<PAGE> 17
Agent for the benefit of the Lenders, in form and substance reasonably
satisfactory to the Co-Arrangers, as the same may be amended or modified from
time to time in accordance with the terms hereof.
"Guarantor Collateral": all of the property (tangible or intangible)
purported to be subject to the lien or security interest purported to be created
by any mortgage, deed of trust, security agreement, pledge agreement, assignment
or other security document heretofore or hereafter executed by any Guarantor as
security for all or part of the Obligations or the Guarantees.
"Guarantor Collateral Documents": the Guarantor Security Agreements,
all notices of security interests in deposit accounts requested by the Agent
pursuant to the Guarantor Security Agreements, all Form UCC-1 Financing
Statements and amendments thereto and any other document encumbering the
Guarantor Collateral or evidencing or perfecting a security interest therein for
the benefit of the Lenders executed by any Guarantor.
"Guarantor Security Agreements": (i) each Subsidiary Security
Agreement, in form and substance reasonably satisfactory to the Co-Arrangers,
made by each Subsidiary in favor of the Agent, for the benefit of the Lenders,
(ii) the Pledge Agreement and (iii) each Employee Pledge Agreement, as the same
may be amended from time to time in accordance with the terms hereof.
"Guarantors": (i) each Subsidiary, (ii) CCI and (iii) each Shareholder
Employee.
"Hazardous Material": collectively, (a) any petroleum or petroleum
products, flammable materials, explosives, radioactive materials, asbestos, urea
formaldehyde foam insulation, and transformers or other equipment that contain
polychlorinated biphenyls ("PCB's"), (b) any chemicals or other materials or
substances that are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic substances",
"toxic pollutants", "contaminants", "pollutants" or words of similar import
under any Environmental Control Statute and (c) any other chemical or other
material or substance, exposure to which is now or hereafter prohibited, limited
or regulated under any Environmental Control Statute.
"Indebtedness": of any Person at any date, without duplication, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than trade liabilities (other than for
borrowed money) incurred in the ordinary course of business so long as such
trade liabilities are payable within 90 days of the date the respective
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<PAGE> 18
goods are delivered or the respective services are rendered) or which is
evidenced by a note, bond, debenture or similar instrument, (b) all obligations
of such Person under Capitalized Lease Obligations, (c) all obligations of such
Person in respect of acceptances issued or created for the account of such
Person, (d) all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become liable for
the payment thereof, (e) all obligations of such Person, whether absolute or
contingent, in respect of letters of credit opened for the account of such
Person (other than any letters of credit opened for the purpose of facilitating
the purchase of goods and services in the ordinary course of business and having
a term of not more than 360 days), (f) all obligations of such Person under
Non-Compete Agreements and (g) all Guarantee Obligations of such Person in
respect of any indebtedness, obligations or liabilities of any other Person of
the type referred to in clauses (a) through (g) of this definition.
"Initial Stockholders": collectively, (a) J. Merritt Belisle, (b)
NationsBanc Capital Investors, (c) Steven E. Seach, (d) BT Capital Partners,
Inc. and Austin Ventures, L.P.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Interest Expense": for any period, the sum, for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (i) all interest on Total Debt
(including, without limitation, the interest component of any payments in
respect of Capitalized Lease Obligations) which was paid, payable and/or accrued
for such period (without duplication of previous amounts and without including
"PIK" interest or similar interest, if any, which is not required under the
terms of the instrument creating such Indebtedness to be paid currently in
cash), (ii) all commitment, letter of credit or line of credit fees paid,
payable and/or accrued for such period (without duplication of previous amounts)
to any lender in exchange for such lender's commitment to lend, (iii) net
amounts payable (or receivable) under all Interest Rate Agreements and (iv) all
Restricted Payments made to CCI pursuant to Section 6.6(iii); provided, however,
that if, as at any date (a "calculation date"), fewer than four complete
consecutive fiscal quarters have elapsed subsequent to the Closing Date,
Interest Expense shall be calculated only for the portion of such period
commencing on the Closing Date and ending on the calculation date and shall then
be annualized by multiplying the amount of such Interest Expense by a fraction,
the numerator of which is 365 and denominator of which is the number of days
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during the period commencing on the day immediately following the Closing Date
through and including the calculation date.
"Interest Payment Date": (a) as to any Base Rate Loan, the last day of
each March, June, September and December to occur while the Loans are
outstanding, (b) as to any LIBOR Loan having an Interest Period of three months
or less, the last day of such Interest Period, (c) as to any LIBOR Loan having
an Interest Period longer than three months, each day which is at the end of
each three month-period within such Interest Period after the first day of such
Interest Period and the last day of such Interest Period and (d) for each of
(a), (b) and (c) above, on the day on which the Term Loans and the Revolving
Loans become due and payable in full and are paid or prepaid in full.
"Interest Period": with respect to any LIBOR Loan:
(a) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such LIBOR Loan and ending one, two,
three or six months thereafter, as selected by the Borrower in its notice of
borrowing or Continuation Notice, as the case may be, given with respect
thereto; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such LIBOR Loan and ending one, two,
three or six months thereafter, as selected by the Borrower by irrevocable
notice to the Agent not less than three Eurodollar Business Days prior to the
last day of the then current Interest Period with respect thereto;
provided that, all of the foregoing provisions relating to Interest Periods are
subject to the following:
(i) if any Interest Period pertaining to a LIBOR Loan would
otherwise end on a day that is not a Business Day, such Interest Period
shall be extended to the next succeeding Business Day unless the result
of such extension would be to carry such Interest Period into another
calendar month in which event such Interest Period shall end on the
immediately preceding Business Day;
(ii) any Interest Period that would otherwise extend beyond
the date final payment is due on the Term Loans or the Revolving Loans,
as applicable, shall end on the date of such final payment; and
(iii) any Interest Period pertaining to a LIBOR Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day
of a calendar month.
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"Interest Rate Agreement": any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge or arrangement which is designed solely to
protect against fluctuations in interest rates (and does not increase the
Indebtedness of the obligor outstanding at any time other than as a result of
fluctuations in interest rates) under which the Borrower is a party or a
beneficiary.
"Investment Banking Fee": pursuant to an agreement between J. Merritt
Belisle and Steven E. Seach, on the one hand, and the Borrower, on the other
hand, a fee to be paid by the Borrower to such individuals (i) on the Closing
Date in connection with the Acquisition in the aggregate amount of $550,000 and
(ii) thereafter from time to time in connection with the consummation of each
Permitted Acquisition, in an amount equal to not more than 1.0% of the purchase
price paid for such Permitted Acquisition.
"Lenders": as defined in the preamble hereto and Section 8.8 hereof.
"Letter of Credit": as defined in Section 2.1(a).
"Letter of Credit Amount": the stated maximum amount available to be
drawn under a particular Letter of Credit, as such amount may be reduced or
reinstated from time to time in accordance with the terms of such Letter of
Credit.
"Letter of Credit Request": a request by the Borrower for the issuance
of a Letter of Credit, on the Agent's standard form of Application for
Irrevocable Standby Letter of Credit, the current form of which is attached
hereto as Exhibit F, and containing terms and conditions satisfactory to the
Agent in its sole discretion.
"Leverage Level": the Revolving Loan Leverage Level or the Term Loan
Leverage Level, as applicable.
"LIBOR": with respect to any LIBOR Loan for any Interest Period
therefor, the arithmetic mean (rounded upwards, if necessary, to the nearest
1/16 of 1%), as determined by the Agent, of the rates per annum quoted by the
respective Reference Lenders at approximately 11:00 a.m. London time (or as soon
thereafter as practicable) on the date two Business Days prior to the first day
of such Interest Period for the offering by the respective Reference Lenders to
leading banks in the London interbank market of Dollar deposits having a term
comparable to such Interest Period and in an amount comparable to the principal
amount of the LIBOR Loan to be made by the respective Reference Lenders for such
Interest Period. If any Reference Lender is not participating in any LIBOR Loans
during any Interest Period
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therefor, LIBOR for such Loans for such Interest Period shall be determined by
reference to the amount of such Loans that such Reference Lender would have made
or had outstanding had it been participating in such Loan during such Interest
Period.
"LIBOR Adjusted Rate": with respect to each day during each Interest
Period pertaining to a LIBOR Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/100th of
1%):
LIBOR
---------------------------------
1.00 - LIBOR Reserve Requirements
"LIBOR Loans": Loans the rate of interest applicable to which is based
upon LIBOR.
"LIBOR Reserve Requirements": for any day as applied to a LIBOR Loan,
the aggregate (without duplication) of the maximum rates (expressed as a decimal
fraction) of reserve requirements in effect on such day (including, without
limitation, basic, supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto) dealing with
reserve requirements prescribed for eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such Federal Reserve System.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any Capitalized Lease Obligation having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).
"Loan": a Revolving Loan or a Term Loan.
"Loan Documents": this Agreement, the Notes, any Letter of Credit
Requests that are executed by the Borrower, the Collateral Documents, the
Guarantor Collateral Documents and the Guarantees and any other agreement
executed by an Obligor in connection therewith and herewith including, but not
limited to, UCC-1 Financing Statements, as such agreements and documents may be
amended, supplemented and otherwise modified from time to time in accordance
with the terms hereof.
"Majority Lenders": Lenders having at least 66-2/3% of the sum of (a)
the aggregate outstanding principal amounts of the
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Term Loans or, if the Term Loans shall not have been made, the aggregate
outstanding principal amount of the Term Loan Commitments, plus (b) the sum of
(i) the Aggregate Available Revolving Loan Commitment at such time plus (ii) the
aggregate outstanding principal amount of the Revolving Loans plus (iii) the
aggregate amount of all participations purchased by lenders in any outstanding
Letters of Credit or unreimbursed drawings under Letters of Credit at such time.
"Majority Revolving Loan Lenders": Revolving Loan Lenders having at
least 66-2/3% of the aggregate amount of the Revolving Commitments or, if the
Revolving Loan Commitments shall have terminated, Lenders holding at least
66-2/3% of the sum of (a) the aggregate unpaid principal amount of the Revolving
Loans plus (b) the aggregate amount of all participations purchased by Lenders
in any outstanding Letters of Credit or unreimbursed drawings under Letters of
Credit at such time.
"Margin Stock": as defined in Regulation U.
"Material Adverse Effect": a material adverse effect on (a) the
business, operations, property, financial condition, prospects, liabilities or
capitalization of the Borrower and its Subsidiaries taken as a whole, (b) the
ability of any Obligor to perform its respective obligations under the Loan
Documents, (c) the validity or enforceability of any of the Loan Documents or
the rights or remedies of the Agent and the Lenders hereunder or thereunder or
(d) the timely payment of the principal of or interest on the Loans or other
amounts payable in connection therewith.
"Material Contracts": as defined in Section 3.8.
"Maximum Senior Debt Ratio": as at any date, for the Borrower and its
Subsidiaries on a consolidated basis, the ratio of Senior Debt on such date
(calculated with reference to the last paragraph of Section 2.5(b)) to
Annualized Operating Cash Flow as at such date.
"Maximum Total Debt Ratio": as at any date, for the Borrower and its
Subsidiaries on a consolidated basis, the ratio of Total Debt on such date
(calculated with reference to the last paragraph of Section 2.5(b)) to
Annualized Operating Cash Flow as at such date.
"Multiemployer Plan": a plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Proceeds": (A) with respect to any Asset Disposition, the net
amount equal to the aggregate amount received in cash, and the fair market value
of any non-cash consideration received, in connection with such Asset
Disposition minus the sum of (a)
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the reasonable fees, commissions and other out-of-pocket expenses incurred by
the Borrower or any of its Subsidiaries in connection with such Asset
Disposition (other than amounts payable to Affiliates of the Person making such
disposition), (b) Indebtedness, other than the Loans, required to be paid as a
result of such Asset Disposition and (c) federal, state and local taxes incurred
and paid in connection with such Asset Disposition; (B) with respect to any
Equity Offering, the net amount equal to the aggregate amount received in cash
in connection with such Equity Offering minus the reasonable fees, commissions
and other out-of-pocket expenses incurred by the Borrower in connection with
such Equity Offering (other than amounts payable to Affiliates of the Person
making such Equity Offering); and (C) with respect to any Casualty Event, the
aggregate amount of proceeds of insurance, condemnation awards and other
compensation received by the Borrower and its Subsidiaries in respect of such
Casualty Event net of (i) reasonable expenses incurred by the Borrower and its
Subsidiaries in connection therewith and (ii) contractually required repayments
of Indebtedness to the extent secured by a Lien on such Property and any income
and transfer taxes payable by the Borrower and its Subsidiaries in respect of
such Casualty Event.
"Non-Compete Agreements": all agreements pursuant to which the Borrower
or any Subsidiary has agreed to make payments (whether in cash or in kind) to
another Person for the agreement of such Person not to compete with the Borrower
or such Subsidiary in a given area.
"Nonrecourse Guarantee": a Shareholder Nonrecourse Guarantee in form
and substance reasonably satisfactory to the Co-Arrangers, made by CCI in favor
of the Agent, for the benefit of the Lenders, as the same may be amended from
time to time in accordance with the terms hereof.
"Note": a Revolving Note or a Term Note, as the case may be, and
"Notes" shall mean the Revolving Notes and/or the Term Notes, as the case may
be.
"Obligations": the unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity of the Term Loans and
the Revolving Loans and interest accruing on or after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding and whether or not at a
default rate) the Notes, the obligation to reimburse drawings under Letters of
Credit (including the contingent obligation to reimburse any drawings under
outstanding Letters of Credit) and all other obligations and liabilities of the
Obligors to the Agent, the Co-Arrangers
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<PAGE> 24
and the Lenders, whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, this Agreement, the Notes, the Letters of Credit, any
other Loan Document and any other document made, delivered or given in
connection herewith or therewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all reasonable fees and disbursements of counsel (including
the allocated reasonable cost of internal counsel) to the Agent, the
Co-Arrangers or the Lenders that are required to be paid by the Borrower
pursuant to the terms of this Agreement) or otherwise.
"Obligor": the Borrower, each Guarantor and any other Person (other
than a Lender) obligated under any Loan Document.
"Operating Cash Flow": for any period, the sum, for the Borrower and
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) the aggregate gross operating
revenue for such period derived in the ordinary course of business in respect of
the CATV Systems and Telephone Systems, and the other businesses permitted
pursuant to Section 6.13, of the Borrower and its Subsidiaries (including
revenues arising from second outlets and remotes and advertising revenues, and
including pay-per-view revenues and installation fees, but excluding interest
income and unusual items) minus (b) all operating expenses for such period,
including, without limitation, technical, programming, selling and general
administration expenses incurred by the Borrower and its Subsidiaries, but
excluding (to the extent included in operating expenses) Interest Expense,
amortization, depreciation, income and withholding taxes, other non-cash charges
and extraordinary gains or losses plus (c) for each fiscal quarter of the
Borrower and its Subsidiaries ending on June 30, 1998, September 30, 1998,
December 31, 1998 and March 31, 1999, $125,000 plus (d) the effect of any
cancellation of the Belisle Note during such period (to the extent such effect
is included in operating expenses) plus (e) any Investment Banking Fee incurred
during such period (to the extent included in operating expenses) plus (f) for
any period ending prior to January 1, 2000, extraordinary bonuses paid to
employees of the Borrower or its Subsidiaries in an aggregate amount not to
exceed $500,000 in any fiscal year of the Borrower and its Subsidiaries.
Notwithstanding the foregoing, with respect to any calculation of
Operating Cash Flow for any periods occurring prior to consummation of the
Acquisition, such calculation shall be made (i) in compliance with Section
1.2(e) and (ii) for periods prior to July 1, 1998, such that the Acquisition is
included in such calculation for such period on a pro forma basis as if it
occurred on the first day of such period.
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<PAGE> 25
"Organic Documents": relative to any entity, its certificate or
articles of incorporation or organization, its by-laws or operating agreement,
any Equityholder Agreements, its partnership agreement, and any other agreements
or documents relating to the control or management of any such entity (whether
existing as corporation, a partnership, a limited liability company or
otherwise).
"Other Communications Business": any U.S. domestic internet service
provider, U.S. domestic data service provider, U.S. domestic long distance
services provider, U.S. domestic direct broadcast satellite services (DBS)
provider, U.S. domestic multichannel multipoint distribution services (MMDS)
provider or U.S. domestic local multipoint distribution services (LMDS)
provider.
"Participant": as defined in Section 9.6(b).
"Pay TV Units": the aggregate number of premium or pay television
services to which Subscribers subscribe.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA or any successor thereto.
"Permitted Acquisition": the acquisition (whether by way of purchase of
assets or stock, by merger or consolidation or otherwise) by the Borrower, or
any Wholly Owned Subsidiary of the Borrower, of any (i) U.S. domestic CATV
System or (ii) Other Communications Business.
"Person": any individual, firm, partnership, joint venture,
corporation, association, limited liability company, business enterprise trust,
unincorporated organization, government or department or agency thereof or other
entity, whether acting in an individual, fiduciary or other capacity.
"Plan": as to any Person, any plan (other than a Multiemployer Plan)
subject to Title IV of ERISA maintained for employees of such Person or any
ERISA Affiliate of such Person (and any such plan no longer maintained by such
Person or any of such Person's ERISA Affiliates to which such Person or any of
such Person's ERISA Affiliates has made or was required to make any
contributions within any of the five preceding years).
"Pledge Agreement": a Shareholder Pledge Agreement in form and
substance reasonably satisfactory to the Co-Arrangers, made by CCI in favor of
the Agent, for the benefit of the Lenders, as the same may be amended from time
to time in accordance with the terms hereof.
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<PAGE> 26
"Pro Forma Debt Service": as at the last day of any fiscal quarter,
Debt Service for the period of four consecutive fiscal quarters immediately
following such last day, determined under the assumptions that (i) the rate of
interest applicable to Indebtedness of the Borrower and its Subsidiaries during
such period will not change from the blended average rate of interest in effect
on such last day and (ii) all regularly scheduled payments or prepayments of
principal of Indebtedness (including, without limitation, the principal
component of any payments in respect of Capitalized Lease Obligations) required
to be made during such period will be made when due.
"Pro Forma Debt Service Coverage Ratio": as at the last day of any
fiscal quarter, the ratio of (a) Annualized Operating Cash Flow as at such last
day to (b) Pro Forma Debt Service as at such last day.
"Prohibited Transaction": with respect to any Plan, a prohibited
transaction (as defined in Section 406 of ERISA) with respect to such Plan.
"Properties": the collective reference to the real and personal
(tangible and intangible) property owned, leased, used, occupied or operated,
under license or permit, (i) by the Obligors (other than CCI and the Shareholder
Employees) and (ii) by CCI and/or the Shareholder Employees, to the extent
encumbered by the Pledge Agreement or the Employee Pledge Agreements, as
applicable.
"Purchasing Lenders": as defined in Section 9.6(c).
"Qualified Public Offering": an offer or offerings of common stock of
CCI under one or more effective registration statements under the Securities Act
of 1933, as amended, such that, after giving effect thereto, (i) at least 20% of
the common stock of CCI on a fully diluted basis (i.e., giving effect to the
exercise of any warrants, options and conversion and other rights) has been sold
pursuant to such offerings, and (ii) such offerings result in aggregate cash
proceeds being received by CCI of at least U.S. $25,000,000 exclusive of
underwriter's discounts and other expenses.
"Quarterly Officer's Report": a report of a senior financial officer of
the Borrower substantially in the form of Exhibit C hereto.
"Reference Lenders": Union Bank of California, N.A. and such other
Lenders, if any, that are from time to time party hereto as shall be specified
by the Borrower and agreed to by the Co-Arrangers as "Reference Lenders"
hereunder.
"Register": as defined in Section 9.6(d).
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<PAGE> 27
"Registered Loans": as defined in Section 2.18.
"Registered Notes": as defined in Section 2.18.
"Regulation D": Regulation D of the Board of Governors of the Federal
Reserve System, as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof and any successor regulation
thereto.
"Regulation U": Regulation U of the Board of Governors of the Federal
Reserve System, as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof and any successor regulation
thereto.
"Reorganization": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under PBGC regulations.
"Requirement of Law": as to any Person, the Organic Documents of such
Person, and any law, treaty, rule or regulation, determination or policy
statement or interpretation of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"Reserved Amount": with respect to any Asset Disposition, any
appropriate amount provided by the Borrower and its Subsidiaries as a reserve,
in accordance with GAAP, against any liabilities associated with such Asset
Disposition and retained by the Borrower or any of its Subsidiaries after such
Asset Disposition, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Disposition as reflected in a certificate of a senior financial
officer of the Borrower delivered to the Lenders at the time of such Asset
Disposition.
"Responsible Officer": with respect to the Borrower or any Subsidiary,
the chief executive officer, the president, any executive vice president, any
senior vice president or any vice president of such entity, or, with respect to
financial matters, the chief financial officer, treasurer or controller of such
entity.
"Restricted Payments": as defined in Section 6.6.
"Revolving Loan": as defined in Section 2.1(a).
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<PAGE> 28
"Revolving Loan Commitment": with respect to each Lender having a
Revolving Loan Commitment, its commitment listed as its "Revolving Loan
Commitment" in Schedule 2.1 hereto to make Revolving Loans and participate in
Letters of Credit hereunder through its Applicable Lending Office, as the same
shall be adjusted from time to time pursuant to this Agreement.
"Revolving Loan Commitment Expiration Date": January 31, 2007 or such
earlier date as the Aggregate Revolving Loan Commitment shall expire (whether by
acceleration, reduction to zero or otherwise).
"Revolving Loan Commitment Percentage": with respect to each Revolving
Loan Lender, the percentage equivalent of the ratio which such Revolving Loan
Lender's Revolving Loan Commitment bears to the Aggregate Revolving Loan
Commitment, as such Revolving Loan Lender's Revolving Loan Commitment and the
Aggregate Revolving Loan Commitment may be adjusted from time to time pursuant
to the terms hereof.
"Revolving Loan Lender": each Lender having a Revolving Loan Commitment
and/or which shall have (i) Revolving Loans outstanding and/or (ii)
participations in Letters of Credit which are outstanding.
"Revolving Loan Leverage Level": with respect to Revolving Loans, the
Leverage Level set forth opposite the applicable Maximum Total Debt Ratio in the
table below:
<TABLE>
<CAPTION>
Maximum Total Debt Ratio Leverage Level
- ------------------------ --------------
<S> <C>
greater than or equal to 6.75:1 1
less than 6.75:1 and greater than
or equal to 6.25:1 2
less than 6.25:1 and greater than
or equal to 5.75:1 3
less than 5.75:1 and greater than
or equal to 5.25:1 4
less that 5.25:1 and greater than
or equal to 4.75:1 5
less than 4.75:1 6
</TABLE>
"Revolving Note" and "Revolving Notes": as defined in Section 2.1(c).
"Security Agreement": the Security Agreement in form and substance
reasonably satisfactory to the Co-Arrangers made by the
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<PAGE> 29
Borrower in favor of the Agent, for the benefit of the Lenders, in respect of
the tangible and intangible personal property of the Borrower described therein,
as the same may be amended from time to time in accordance with the terms
hereof.
"Senior Debt": Total Debt other than Subordinated Indebtedness.
"Shareholder Employee": each of Ashley Kimery, Tracy Anderson and Chris
Calavitta.
"Single Employer Plan": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, that:
(i) the present fair salable value of such Person's assets is
in excess of the total amount of the probable liability on such
Person's liabilities;
(ii) such Person is able to pay its debts as they become due;
and
(iii) such Person does not have unreasonably small capital to
carry on such Person's business as theretofore operated and all
businesses in which such Person is about to engage.
"Subordinated Indebtedness": the Subordinated Notes.
"Subordinated Indenture": that certain Indenture dated as of July 29,
1998, between the Borrower and Chase Bank of Texas, National Association, as
trustee, as it may be amended or otherwise modified, or replaced pursuant to a
refinancing of the Subordinated Indebtedness permitted under Section 6.2(h),
from time to time in accordance with the terms hereof.
"Subordinated Notes": $125,000,000 Classic Cable, Inc. 9 7/8% Senior
Subordinated Notes due 2008 issued pursuant to the Subordinated Indenture, as
such notes may be refinanced in accordance with Section 6.2(h).
"Subscriber": a Person who subscribes to one or more of the cable
television services of the Borrower and its Subsidiaries and includes both Basic
Subscribers and Persons who subscribe to Pay TV Units, but excluding each such
Person whose account is more than 120 days past due.
"Subsidiary": as to any Person at any time of determination, a
corporation, partnership or other entity of which shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
board of
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<PAGE> 30
directors or other persons performing similar functions of such corporation,
partnership or other entity (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries
or Subsidiaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Borrower.
"Syndication Agent": as defined in the preamble hereto.
"Tax Sharing Agreement": a Tax Sharing Agreement, in form and substance
acceptable to the Agent, among CCI, the Borrower and each of its Subsidiaries,
as amended or modified from time to time in accordance with the terms hereof.
"Telephone System": any local telephone exchange providing telephone
and related services to customers by Access Lines.
"Term Loan": as defined in Section 2.2(a).
"Term Loan Commitment": with respect to each Lender having a Term Loan
Commitment, the commitment listed as its "Term Loan Commitment" in Schedule 2.1
hereto to make a Term Loan hereunder through its Applicable Lending Office, as
the same may be adjusted pursuant to the provisions hereof.
"Term Loan Commitment Percentage": with respect to each Term Loan
Lender, the percentage equivalent of the ratio which such Term Loan Lender's
Term Loan Commitment bears to the Aggregate Term Loan Commitment.
"Term Loan Lenders": each Lender having a Term Loan Commitment and/or
which shall have Term Loans outstanding.
"Term Loan Leverage Level": with respect to Term Loans, the Leverage
Level set forth opposite the applicable Maximum Total Debt Ratio in the table
below:
<TABLE>
<CAPTION>
Maximum Total Debt Ratio Leverage Level
- ------------------------ --------------
<S> <C>
greater than or equal to 5:50:1 1
less than 5:50:1 2
</TABLE>
"Term Loan Maturity Date": October 31, 2007 or such earlier date as the
Aggregate Term Loan Commitment shall expire (whether by acceleration, reduction
to zero or otherwise).
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<PAGE> 31
"Term Loan Reduction Dates": the dates on which scheduled principal
payments of the Term Loans are due, as set forth in the table in Section 2.2(d).
"Term Note" and "Term Notes": as defined in Section 2.2(c).
"Termination Event": (i) a Reportable Event, (ii) the institution of
proceedings to terminate a Single Employer Plan by the PBGC under Section 4042
of ERISA, (iii) the appointment by the PBGC of a trustee to administer any
Single Employer Plan or (iv) the existence of any other event or condition that
would reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment by the PBGC of a trustee to
administer, any Single Employer Plan.
"Total Debt": the aggregate principal amount of all Indebtedness of the
Borrower and its Subsidiaries (including subordinated indebtedness and
Capitalized Lease Obligations).
"Total Interest Coverage Ratio": as at the last day of any fiscal
quarter, the ratio of Annualized Operating Cash Flow as at such last day to
Interest Expense for the four quarter period ending on such day.
"Tranche": the collective reference to LIBOR Loans the Interest Periods
with respect to all of which begin on the same date and end on the same later
date (whether or not such LIBOR Loans shall originally have been made on the
same day).
"Transferee": as defined in Section 9.6(g).
"Type": as to any Term Loan or any Revolving Loan, its nature as a Base
Rate Loan or a LIBOR Loan.
"U.S. Person": as defined in Section 2.14.
"Weighted Average Life to Maturity": when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding aggregate
principal amount of such Indebtedness.
"Wholly Owned Subsidiary": with respect to any Person, any corporation,
partnership or other entity of which all of the equity securities or other
ownership interests (other than, in the case of a corporation, directors'
qualifying shares) are directly or indirectly owned or controlled by such Person
or one
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<PAGE> 32
or more Wholly Owned Subsidiaries of such Person. Notwithstanding the foregoing,
so long as Universal Cable Holding, Inc. holds at least 75% of the issued and
outstanding shares of stock of Universal Cable Communications Inc., Universal
Cable of Beaver, Oklahoma, Inc. and Universal Cable Midwest, Inc., each of such
entities shall be deemed to be a Wholly Owned Subsidiary of Universal Cable
Holding, Inc. for purposes hereof.
"Working Investment": as at any date of determination thereof, the sum,
for the Borrower and its Subsidiaries (determined on a consolidated basis,
without duplication, in accordance with GAAP) of the following: (a) the sum of
(i) the unpaid face amount of all accounts receivable as at such date plus (ii)
the aggregate amount of prepaid expenses and other current assets (other than
cash) as at such date (but excluding from prepaid expenses and current assets,
any current portion of programming rights) minus (b) the sum of (i) the unpaid
amount of all accounts payable as at such date plus (ii) the aggregate amount of
all accrued expenses as at such date (but excluding from accounts payable and
accrued expenses, the current portion of long-term debt, the aggregate principal
amount of Loans as at such date and all accrued interest and taxes).
"WTAC": WT Acquisition Corporation, a Delaware corporation.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have such defined meanings
when used in the Notes, any other Loan Document or any certificate or other
document made or delivered pursuant hereto or thereto.
(b) As used herein, in the Notes, in any other Loan Document, and in
any certificate or other document made or delivered pursuant hereto or thereto,
accounting terms not defined in Section 1.1 and accounting terms partly defined
in Section 1.1, to the extent not defined, shall have the respective meanings
given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(e) For the purpose of determining financial covenant compliance
hereunder for any period (including with respect to Permitted Acquisitions
pursuant to Section 6.7(h)(vi)), acquisitions, divestitures, and asset sales
occurring during such
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<PAGE> 33
period (or intended to occur during such period in the case of a potential
Permitted Acquisition) will be included in the calculations for such period on a
pro forma basis, and will be deemed to have occurred on the first day of such
period.
(f) So long as the Borrower and its Subsidiaries shall be included in
consolidated Federal income tax returns filed by CCI pursuant to the Tax Sharing
Agreement, whenever making determinations under this Agreement of the amount of
Federal income taxes payable during any period (or the amount of refunds in
respect of such taxes receivable during any period) by the Borrower and its
Subsidiaries, the amount of such taxes payable or receivable shall be deemed to
be equal to the amounts payable or receivable, as the case may be, in respect to
such taxes under the Tax Sharing Agreement without reference to whether CCI and
its Subsidiaries as an affiliated group shall in fact pay any amounts in respect
of Federal income taxes (or receive any amounts in respect of refunds of Federal
income taxes) during the relevant period.
SECTION 2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT; COMMITMENT
AMOUNTS
2.1 Revolving Loans and Letters of Credit; Revolving Loan Commitment
Amounts. (a) Subject to the terms and conditions hereof, each Lender having a
Revolving Loan Commitment severally agrees to (i) make loans on a revolving
credit basis through its Applicable Lending Office to the Borrower from time to
time from and including the Closing Date to but excluding the Revolving Loan
Commitment Expiration Date (each a "Revolving Loan", and collectively, the
"Revolving Loans") in accordance with the provisions of this Agreement and (ii)
participate through its Applicable Lending Office in letters of credit issued
for the account of the Borrower pursuant to Section 2.3 from time to time from
and including the Closing Date to but excluding the Revolving Loan Commitment
Expiration Date (each a "Letter of Credit", and collectively, the "Letters of
Credit"); provided, however, that the sum of (A) the aggregate principal amount
of all Revolving Loans outstanding, (B) the aggregate Letter of Credit Amount of
all Letters of Credit outstanding and (C) the aggregate amount of unreimbursed
drawings under all Letters of Credit shall not exceed the Aggregate Revolving
Loan Commitment at any time; and provided, further, that the sum of (x) the
aggregate Letter of Credit Amount of all Letters of Credit outstanding and (y)
the aggregate amount of unreimbursed drawings under all Letters of Credit shall
not exceed $5,000,000 at any time. Within the limits of each Revolving Loan
Lender's Revolving Loan Commitment, the Borrower may borrow, have Letters of
Credit issued for the Borrower' account, prepay Revolving Loans, reborrow
Revolving Loans, and have additional Letters of
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<PAGE> 34
Credit issued for the Borrower' account after the expiration of previously
issued Letters of Credit.
The principal amount of each Revolving Loan Lender's (A) Revolving Loan
and (B) participation in a Letter of Credit shall be in an amount equal to the
product of (i) such Revolving Loan Lender's Revolving Loan Commitment Percentage
and (ii) the total amount of the Revolving Loan or Revolving Loans, or the
Letter of Credit or Letters of Credit, requested; provided that in no event
shall any Revolving Loan Lender be obligated to make a Revolving Loan or
participate in a Letter of Credit if after giving effect to such Revolving Loan
or such participation the sum of such Revolving Loan Lender's (x) Revolving
Loans outstanding, (y) Revolving Loan Commitment Percentage of the aggregate
Letter of Credit Amount of all Letters of Credit outstanding and (z) Revolving
Loan Commitment Percentage of the aggregate amount of unreimbursed drawings
under all Letters of Credit would exceed its Revolving Loan Commitment or if the
amount of such requested Revolving Loan or such Revolving Loan Lender's
Revolving Loan Commitment Percentage of such Letter of Credit is in excess of
such Revolving Loan Lender's Available Revolving Loan Commitment.
(b) Subject to Sections 2.10 and 2.12, the Revolving Loans may from
time to time be (i) LIBOR Loans, (ii) Base Rate Loans or (iii) a combination
thereof, as determined by the Borrower and notified to the Agent in accordance
with either Section 2.1(d) or 2.6; provided that the Borrower shall cause any
LIBOR Loans borrowed during July or August 1998 to have an Interest Period
ending no later than August 31, 1998, and shall thereafter cause all Loans to be
Base Rate Loans for a period (the "Syndication Period") ending not earlier than
the day it receives notice from the Co-Arrangers to the effect that the initial
syndication of the Loans has been successfully completed (provided further that
the Syndication Period shall not exceed 10 Business Days). Each Revolving Loan
Lender may make or maintain its Revolving Loans or participate in Letters of
Credit to or for the account of the Borrower by or through any Applicable
Lending Office.
(c) The Revolving Loans made by each Revolving Loan Lender to the
Borrower shall be evidenced by a promissory note of the Borrower, substantially
in the form of Exhibit A-1 (a "Revolving Note"), with appropriate insertions
therein as to payee, date and principal amount, payable to the order of such
Revolving Loan Lender and representing the obligations of the Borrower to pay
the aggregate unpaid principal amount of all Revolving Loans made by such
Revolving Loan Lender to the Borrower pursuant to Section 2.1(a) or 2.3(c), with
interest thereon as prescribed in Sections 2.8 and 2.9. Each Revolving Loan
Lender is hereby authorized (but not required) to record the date and amount of
each payment or prepayment of principal of its Revolving Loans made to the
Borrower, each continuation thereof, each conversion of all or a portion thereof
to another Type and, in the case of
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<PAGE> 35
LIBOR Loans, the length of each Interest Period with respect thereto, in the
books and records of such Revolving Loan Lender, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded.
The failure of any Revolving Loan Lender to make any such recordation or
notation in the books and records of the Revolving Loan Lender (or any error in
such recordation or notation) shall not affect the obligations of the Borrower
hereunder or under the Revolving Notes. Each Revolving Note shall (i) be dated
the Closing Date, (ii) provide for the payment of interest in accordance with
Sections 2.8 and 2.9 and (iii) be stated to be payable in full on the Revolving
Loan Commitment Expiration Date.
(d) The Borrower shall give the Agent irrevocable written notice,
substantially in the form of a Borrowing Notice (which Borrowing Notice must be
received by the Agent prior to 10:00 A.M., Los Angeles time, one Business Day
prior to each proposed borrowing date or, if all or any part of the Revolving
Loans are requested to be made as LIBOR Loans, three Eurodollar Business Days
prior to each proposed borrowing date) requesting that the Revolving Loan
Lenders make the Revolving Loans on the proposed borrowing date and specifying
(i) the aggregate amount of Revolving Loans requested to be made, (ii) whether
the Revolving Loans are to be LIBOR Loans, Base Rate Loans or a combination
thereof and (iii) if the Revolving Loans are to be entirely or partly LIBOR
Loans, the respective amounts of each such Type of Revolving Loan and the
respective lengths of the initial Interest Periods therefor. On receipt of such
Borrowing Notice, the Agent shall promptly notify each Revolving Loan Lender
thereof not later than 11:00 A.M., Los Angeles time, on the date of receipt of
such notice. On the proposed borrowing date, not later than 10:00 A.M., Los
Angeles time, each Revolving Loan Lender shall make available to the Agent at
its office specified in Section 9.2 the amount of such Revolving Loan Lender's
pro rata share of the aggregate borrowing amount (as determined in accordance
with the second paragraph of Section 2.1(a)) in immediately available funds. The
Agent may, in the absence of notification from any Revolving Loan Lender that
such Revolving Loan Lender has not made its pro rata share available to the
Agent, on such date, credit the account of the Borrower on the books of such
office of the Agent with the aggregate amount of Revolving Loans.
(e) On each date set forth below, the Aggregate Revolving Loan
Commitment shall automatically reduce to the corresponding amount set forth
below:
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<PAGE> 36
<TABLE>
<CAPTION>
Reduced Aggregate
Effective Date of Reduction Revolving Loan Commitment
--------------------------- -------------------------
<S> <C>
March 31, 2001 $49,000,000
June 30, 2001 48,000,000
September 30, 2001 47,000,000
December 31, 2001 46,000,000
March 31, 2002 44,750,000
June 30, 2002 43,500,000
September 30, 2002 42,250,000
December 31, 2002 41,000,000
March 31, 2003 39,125,000
June 30, 2003 37,250,000
September 30, 2003 35,375,000
December 31, 2003 33,500,000
March 31, 2004 31,312,500
June 30, 2004 29,125,000
September 30, 2004 26,937,500
December 31, 2004 24,750,000
March 31, 2005 21,937,500
June 30, 2005 19,125,000
September 30, 2005 16,312,500
December 31, 2005 13,500,000
March 31, 2006 10,125,000
June 30, 2006 6,750,000
September 30, 2006 3,375,000
</TABLE>
In addition, the Borrower shall have the right at any time or from time
to time, subject to clauses (f) and (g) below, to terminate or reduce the
Aggregate Revolving Loan Commitment provided that, (i) the Borrower shall have
given the Agent ten Business Days' prior written notice thereof and (ii) each
partial reduction shall be in an aggregate amount at least equal to $1,000,000.
(f) Reductions of the Aggregate Revolving Loan Commitment pursuant to
this Section 2.1 or Section 2.5 shall automatically effect a reduction of the
Revolving Loan Commitment of each Revolving Loan Lender to an amount equal to
the product of (i) the Aggregate Revolving Loan Commitment of all Revolving Loan
Lenders, as reduced pursuant to this Section 2.1 or Section 2.5 and (ii) the
Revolving Loan Commitment Percentage of such Revolving Loan Lender immediately
prior to such reduction of the Aggregate Revolving Loan Commitment on such date.
(g) Upon each reduction or termination of the Aggregate Revolving Loan
Commitment, the Borrower shall (i) pay the unused commitment fee, payable
pursuant to Section 2.16, accrued on the amount of the Aggregate Revolving Loan
Commitment through the date of such reduction or termination, as the case may
be, (ii) prepay the amount, if any, by which the sum of (A) the
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aggregate unpaid principal amount of the Revolving Loans, (B) the aggregate
Letter of Credit Amount of all Letters of Credit outstanding and (C) the
aggregate amount of unreimbursed drawings under all Letters of Credit exceeds
the amount of the Aggregate Revolving Loan Commitment as so reduced (or, if the
Aggregate Revolving Loan Commitment is being terminated, prepay all of (A) the
aggregate unpaid principal amount of the Revolving Loans, (B) the aggregate
Letter of Credit Amount of all Letters of Credit outstanding and (C) the
aggregate amount of unreimbursed drawings under all Letters of Credit), together
in each case with accrued interest on the amount being prepaid to the date of
such prepayment (or, with respect to outstanding Letters of Credit, (x) make a
Cash Collateral Deposit in an amount equal to such excess to the extent such
excess is not corrected by the foregoing prepayment (in the case of a reduction)
or (y) made a Cash Collateral Deposit in an amount equal to the aggregate Letter
of Credit Amount of all Letters of Credit outstanding (in the case of a
termination)) and (iii) compensate the Revolving Loan Lenders for their funding
costs, if any, in accordance with Section 2.15.
(h) Neither the Agent nor any Revolving Loan Lender shall be
responsible for the obligation or Available Revolving Loan Commitment of any
other Revolving Loan Lender hereunder, nor will the failure of any Revolving
Loan Lender to comply with the terms of this Agreement relieve any other
Revolving Loan Lender or the Borrower of their obligations under this Agreement
and the Revolving Notes. Nothing herein shall be deemed to relieve any Revolving
Loan Lender from its obligation to fulfill its Commitments hereunder or to
prejudice any rights which the Borrower may have against any Revolving Loan
Lender as a result of any default by such Revolving Loan Lender hereunder.
(i) The Revolving Loan Commitment of each Revolving Loan Lender and the
Aggregate Revolving Loan Commitment shall terminate on the Revolving Loan
Commitment Expiration Date. All outstanding Revolving Loans shall be due and
payable, to the extent not previously paid in accordance with the terms hereof,
on the Revolving Loan Commitment Expiration Date.
2.2 Term Loans; Term Loan Commitment. (a) Subject to the terms and
conditions hereof, each Lender having a Term Loan Commitment severally agrees to
make a term loan (each, a "Term Loan" and, collectively, the "Term Loans") to
the Borrower on the Closing Date in a principal amount equal to the amount of
the Term Loan Commitment of such Lender.
(b) Subject to Sections 2.10 and 2.12, the Term Loans may from time to
time be (i) LIBOR Loans, (ii) Base Rate Loans or (iii) a combination thereof, as
determined by the Borrower and notified to the Agent in accordance with either
Section 2.2(e) or 2.6. Each Term Loan Lender may make or maintain its Term Loan
to
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<PAGE> 38
the Borrower by or through any Applicable Lending Office; provided that the
Borrower shall cause any LIBOR Loans borrowed during July or August 1998 to have
an Interest Period ending no later than August 31, 1998, and shall thereafter
cause all Loans to be Base Rate Loans during the Syndication Period (provided
further that the Syndication Period shall not exceed 10 Business Days).
(c) The Term Loan made by each Term Loan Lender to the Borrower shall
be evidenced by a promissory note of the Borrower, substantially in the form of
Exhibit A-2 (a "Term Note"), with appropriate insertions therein as to payee,
date and principal amount, payable to the order of such Term Loan Lender and
representing the obligations of the Borrower to pay the aggregate unpaid
principal amount of the Term Loan made by such Term Loan Lender to the Borrower
pursuant to Section 2.2(a), with interest thereon as prescribed in Sections 2.8
and 2.9. Each Term Loan Lender is hereby authorized (but not required) to record
the date and amount of each payment or prepayment of principal of its Term Loan
made to the Borrower, each continuation thereof, each conversion of all or a
portion thereof to another Type and, in the case of LIBOR Loans, the length of
each Interest Period with respect thereto, in the books and records of such Term
Loan Lender, and any such recordation shall constitute prima facie evidence of
the accuracy of the information so recorded. The failure of any Term Loan Lender
to make any such recordation or notation in the books and records of the Term
Loan Lender (or any error in such recordation or notation) shall not affect the
obligations of the Borrower hereunder or under the Term Notes. Each Term Note
shall (i) be dated the Closing Date, (ii) provide for the payment of interest in
accordance with Sections 2.8 and 2.9 and (iii) be stated to be payable in
installments of principal in accordance with, and subject to the provisions of,
Section 2.2(d).
(d) On each Term Loan Reduction Date, the Borrower shall repay the
principal of the Term Notes in an aggregate amount equal to the amount set forth
below opposite such Term Loan Reduction Date:
<TABLE>
<CAPTION>
Principal
Term Loan Reduction Date Payment
------------------------ ---------
<S> <C>
March 31, June 30, September 30 $187,500
and December 31, 2000
March 31, June 30, September 30 187,500
and December 31, 2001
March 31, June 30, September 30 187,500
and December 31, 2002
</TABLE>
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<PAGE> 39
<TABLE>
<S> <C>
March 31, June 30, September 30 187,500
and December 31, 2003
March 31, June 30, September 30 187,500
and December 31, 2004
March 31, June 30, September 30 187,500
and December 31, 2005
March 31, June 30, September 30 187,500
and December 31, 2006
March 31, 2007 187,500
June 30 and October 31, 2007 34,781,250
</TABLE>
; provided, that the final installment paid shall be in an amount equal to all
amounts owed by the Borrower on the Term Notes.
All outstanding Term Loans shall be due and payable, to the extent not
previously paid in accordance with the terms hereof, on the Term Loan Maturity
Date. The aggregate amount payable to any Term Loan Lender on any Term Loan
Reduction Date shall be determined in accordance with the provisions of Section
2.11.
(e) The Borrower shall give the Agent irrevocable written notice,
substantially in the form of a Borrowing Notice (which Borrowing Notice must be
received by the Agent prior to 10:00 A.M., Los Angeles time, one Business Day
prior to the Closing Date) requesting that the Term Loan Lenders make the Term
Loans on the Closing Date. Upon receipt of such Borrowing Notice the Agent shall
promptly notify each Term Loan Lender thereof not later than 11:00 A.M., Los
Angeles time, on the date of receipt of such Borrowing Notice. Not later than
10:00 A.M., Los Angeles time, on the Closing Date each Term Loan Lender shall
make available to the Agent at its office specified in Section 9.2 the amount of
such Term Loan Lender's Term Loan Commitment in immediately available funds. The
Agent may, in the absence of notification from any Term Loan Lender that such
Term Loan Lender has not made its pro rata share available to the Agent, on such
date, credit the account of the Borrower on the books of such office of the
Agent with the aggregate Term Loans.
(f) Neither the Agent nor any Term Loan Lender shall be responsible for
the obligations or Term Loan Commitment of any other Term Loan Lender hereunder,
nor will the failure of any Term Loan Lender to comply with the terms of this
Agreement relieve any other Term Loan Lender or the Borrower of their
obligations under this Agreement and the Term Notes. Nothing herein shall be
deemed to relieve any Term Loan Lender from its obligation to fulfill its
Commitment hereunder or to prejudice any rights which the Borrower may have
against any Term Loan
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<PAGE> 40
Lender as a result of any default by such Term Loan Lender hereunder.
2.3 Issuance of Letters of Credit.
(a) The Borrower shall be entitled to request the issuance of Letters
of Credit from time to time from and including the Closing Date to but excluding
the date which is two Business Days prior to the Revolving Loan Commitment
Expiration Date, by giving the Agent a Letter of Credit Request at least three
Business Days before the requested date of issuance of such Letter of Credit
(which shall be a Business Day). Any Letter of Credit Request received by the
Agent later than 10:00 a.m., Los Angeles time, shall be deemed to have been
received on the next Business Day. Each Letter of Credit Request shall be made
in writing, shall be signed by a Responsible Officer, shall be irrevocable and
shall be effective upon receipt by the Agent. Provided that a valid Letter of
Credit Request has been received by the Agent and upon fulfillment of the other
applicable conditions set forth in Section 4.2, the Agent will issue the
requested Letter of Credit from its office specified in Section 9.2. No Letter
of Credit shall have an expiration date later than two Business Days prior to
the Revolving Loan Commitment Expiration Date.
(b) Immediately upon the issuance of each Letter of Credit, the Agent
shall be deemed to have sold and transferred to each Revolving Loan Lender, and
each Revolving Loan Lender shall be deemed to have purchased and received from
the Agent, in each case irrevocably and without any further action by any party,
an undivided interest and participation in such Letter of Credit, each drawing
thereunder and the obligations of the Borrower under this Agreement in respect
thereof in an amount equal to the product of (i) such Revolving Loan Lender's
Revolving Loan Commitment Percentage and (ii) the maximum amount available to be
drawn under such Letter of Credit (assuming compliance with all conditions to
drawing). The Agent shall promptly advise each Revolving Loan Lender of the
issuance of each Letter of Credit, the Letter of Credit Amount of such Letter of
Credit, any change in the face amount or expiration date of such Letter of
Credit, the cancellation or other termination of such Letter of Credit and any
drawing under such Letter of Credit.
(c) The payment by the Agent of a draft drawn under any Letter of
Credit shall first be made from any Cash Collateral Deposit held by the Agent
with respect to such Letter of Credit. After any such Cash Collateral Deposit
has been applied, the payment by the Agent of a draft drawn under any Letter of
Credit shall constitute for all purposes of this Agreement the making by the
Agent in its individual capacity as a Lender hereunder (in such capacity, the
"Drawing Lender") of a Base Rate Loan in the amount of such payment (but without
any requirement of compliance with the conditions set forth in Section 4.2). In
the event that
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<PAGE> 41
any such Loan by the Drawing Lender resulting from a drawing under any Letter of
Credit is not repaid by the Borrower by 12:00 noon, Los Angeles time, on the day
of payment of such drawing, the Agent shall promptly notify each other Revolving
Loan Lender. Each Revolving Loan Lender shall, on the day of such notification
(or if such notification is not given by 3:00 p.m., Los Angeles time, on such
day, then on the next succeeding Business Day), make a Base Rate Loan, which
shall be used to repay the applicable portion of the Base Rate Loan of the
Drawing Lender with respect to such Letter of Credit drawing, in an amount equal
to the amount of such Revolving Loan Lender's participation in such drawing for
application to repay the Drawing Lender (but without any requirement of
compliance with the applicable conditions set forth in Section 4.2) and shall
deliver to the Agent for the account of the Drawing Lender, on the day of such
notification (or if such notification is not given by 3:00 p.m., Los Angeles
time, on such day, then on the next succeeding Business Day) and in immediately
available funds, the amount of such Base Rate Loan. In the event that any
Revolving Loan Lender fails to make available to the Agent for the account of
the Drawing Lender the amount of such Base Rate Loan, the Drawing Lender shall
be entitled to recover such amount on demand from such Revolving Loan Lender
together with interest thereon at the Federal Funds Effective Rate for each day
such amount remains outstanding.
(d) The obligations of the Borrower with respect to any Letter of
Credit, any Letter of Credit Request and any other agreement or instrument
relating to any Letter of Credit and any Base Rate Loan made under Section
2.3(c) shall be absolute, unconditional and irrevocable and shall be paid
strictly in accordance with the terms of the aforementioned documents under all
circumstances, including the following:
(i) any lack of validity or enforceability of any Letter of
Credit, this Agreement or any other Loan Document;
(ii) the existence of any claim, setoff, defense or other
right that the Borrower may have at any time against any beneficiary or
transferee of any Letter of Credit (or any Person for whom any such beneficiary
or transferee may be acting), the Agent, any Lender (other than the defense of
payment to a Lender in accordance with the terms of this Agreement) or any other
Person, whether in connection with this Agreement, any other Loan Document, the
transactions contemplated hereby or thereby or any unrelated transaction;
(iii) any statement or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect, or any statement therein being untrue or inaccurate in any respect
whatsoever; and
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<PAGE> 42
(iv) any exchange, release or nonperfection of any Collateral
or other collateral, or any release, amendment or waiver of or consent to
departure from any Guarantee, other Loan Document or other guaranty, for any of
the Obligations of the Borrower in respect of the Letters of Credit.
(e) The Borrower shall pay to the Agent for the account of the
Revolving Loan Lenders with respect to each Letter of Credit issued hereunder,
for the period from and including the day such Letter of Credit is issued to but
excluding the day such Letter of Credit expires, a letter of credit fee equal to
the product of (i) the Applicable Revolving Loan Margin for LIBOR Loans per
annum and (ii) the Letter of Credit Amount of such Letter of Credit from time to
time, such letter of credit fee to be payable quarterly in arrears on the last
day of each March, June, September and December and on the expiration date of
such Letter of Credit.
(f) The Borrower shall pay to the Agent for its own account, with
respect to each Letter of Credit issued hereunder, (i) for the period from and
including the day such Letter of Credit is issued to but excluding the day such
Letter of Credit expires, a fronting fee in respect of each Letter of Credit in
an amount equal to 1/4 of 1% per annum of the Letter of Credit Amount of such
Letter of Credit from time to time, such fronting fee to be payable quarterly in
arrears on the last day of each March, June, September and December and on the
expiration date of such Letter of Credit and (ii) from time to time such
additional fees and charges (including cable charges) as are generally
associated with letters of credit, in accordance with the Agent's standard
internal charge guidelines and the related Letter of Credit Request.
(g) The Borrower agrees to the provisions in the Letter of Credit
Request form; provided, however, that the terms of the Loan Documents shall take
precedence if there is any inconsistency between the terms of the Loan Documents
and the terms of said form.
(h) The Borrower assumes all risks of the acts or omissions of any
beneficiary or transferee of any Letter of Credit with respect to its use of
such Letter of Credit. Neither the Agent nor any Lender nor any of their
respective officers or directors shall be liable or responsible for (i) the use
that may be made of any Letter of Credit or any acts or omissions of any
beneficiary or transferee in connection therewith; or (ii) the validity,
sufficiency or genuineness of documents, or of any endorsement thereof, even if
such documents should prove to be in any or all respects invalid, insufficient,
fraudulent or forged. In furtherance and not in limitation of the foregoing, the
Agent may accept any document that appears on its face to be in order,
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<PAGE> 43
without responsibility for further investigation, regardless of any notice or
information to the contrary.
(i) The Borrower hereby indemnifies and holds harmless each Revolving
Loan Lender and the Agent from and against any and all claims and damages,
losses, liabilities, costs or expenses that such Lender or the Agent may incur
(or that may be claimed against such Lender or the Agent by any Person
whatsoever) by reason of or in connection with the execution and delivery or
transfer of or payment or refusal to pay by the Agent, as issuer of any Letter
of Credit; provided that the Borrower shall not be required to indemnify any
Lender or the Agent for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by (x) the willful
misconduct or gross negligence of the Agent, as issuer of such Letter of Credit,
in determining whether a request presented under any Letter of Credit complied
with the terms of such Letter of Credit or (y) in the case of the Agent, as
issuer of such Letter of Credit, the Agent's failure to pay under any Letter of
Credit after the presentation to it of a request strictly complying with the
terms and conditions of such Letter of Credit. Nothing in this Section 2.3 is
intended to limit the other obligations of the Borrower, any Lender, or the
Agent under this Agreement.
2.4 Optional Prepayments. The Borrower may at any time and from time to
time, prepay the Loans, in whole or in part, without premium or penalty, upon at
least three Business Days' irrevocable written notice, in the case of LIBOR
Loans, and upon at least one Business Day's irrevocable written notice, in the
case of Base Rate Loans, from the Borrower to the Agent, specifying the date and
amount of prepayment and whether the prepayment is of LIBOR Loans, Base Rate
Loans or a combination thereof, and, if of a combination thereof, the amount
allocable to each and whether the prepayment is of Term Loans or Revolving
Loans, or a combination thereof, and, if a combination thereof, the amount
allocable to each. Upon receipt of any such notice from the Borrower, the Agent
shall promptly notify each Lender thereof. If any such notice is given, the
amount specified in such notice shall be due and payable by the Borrower on the
date specified therein, together with accrued interest to such date on the
amount prepaid and any amounts payable pursuant to Section 2.15. Partial
prepayments of Term Loans shall be applied to the installments of principal
thereof in inverse order of maturity. Amounts prepaid on account of the Term
Loans may not be reborrowed. Partial prepayments of Loans shall be in an
aggregate principal amount of $1,000,000 and integral multiples of $250,000 in
excess thereof.
2.5 Mandatory Prepayments. (a) Excess Cash Flow. Not later than thirty
days after the delivery of annual audited financial statements of the Borrower
and its Subsidiaries for each fiscal year (commencing with the fiscal year
ending
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<PAGE> 44
December 31, 2000), the Borrower shall prepay the Loans (and such prepayment
shall be applied as set forth in Section 2.5(f)) in an aggregate amount equal to
the excess of (a) 75% of Excess Cash Flow for such fiscal year over (B) the
aggregate amount of prepayments of Term Loans made during such fiscal year
pursuant to Section 2.4.
(b) Sale of Assets. Without limiting the obligation of the Borrower to
obtain the consent of the Majority Lenders pursuant to Section 6.5 hereof to any
Asset Disposition not otherwise permitted hereunder, no later than five Business
Days prior to the occurrence of any such Asset Disposition, the Borrower will
deliver to the Lenders a statement, certified by a senior financial officer of
the Borrower in form and detail satisfactory to the Agent, of the estimated
amount of the Net Proceeds of such Asset Disposition and, to the extent such Net
Proceeds (when taken together with the Net Proceeds of all prior Asset
Dispositions as to which a prepayment has not yet been made under this paragraph
(b)) shall exceed $2,000,000, the Borrower shall prepay the Loans (and such
prepayment shall be applied as set forth in Section 2.5(f)) in an aggregate
amount equal to 100% of the Net Proceeds of such Asset Disposition (together
with 100% of the Net Proceeds of all prior Asset Dispositions as to which a
prepayment has not yet been made under this paragraph (b)).
Notwithstanding the foregoing, the Borrower shall not be required to
make a prepayment pursuant to this paragraph (b) with respect to the Net
Proceeds from any Asset Disposition in the event that the Borrower advises the
Agent at the time the Net Proceeds from such Asset Disposition are received that
it or its Subsidiary that consummated such Asset Disposition, as the case may
be, intends to reinvest such Net Proceeds into replacement assets pursuant to a
Permitted Acquisition (and for these purposes Reserved Amounts arising in
connection with any Asset Disposition shall be deemed to be a reinvestment in
replacement assets), so long as
(i) such Net Proceeds are held by the Agent in the Collateral
Account pending such reinvestment (and in that connection, the Agent
need not release such Net Proceeds except upon presentation of evidence
satisfactory to it that such Net Proceeds are to be so reinvested in
compliance with the provisions of this Agreement),
(ii) the Net Proceeds from any Asset Disposition are in fact
so reinvested within six months of such Asset Disposition (it being
understood that, in the event the Collateral Account shall hold Net
Proceeds from more than one Asset Disposition, such Net Proceeds shall
be deemed to be released in the same order in which such Asset
Dispositions occurred and any such Net Proceeds so held for more than
six months shall be forthwith applied to the
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<PAGE> 45
prepayment of Loans (and such prepayment shall be applied as
set forth in Section 2.5(f)) and
(iii)if the aggregate amount of Net Proceeds (together with
investment earnings thereon) so held at any time by the Agent pending
reinvestment as contemplated by this sentence shall exceed $10,000,000,
such excess amount shall be forthwith applied to the prepayment of
Loans (and such prepayment shall be applied as set forth in Section
2.5(f)).
Nothing in this paragraph (b) shall be deemed to obligate the Agent to
release any of such proceeds from the Collateral Account to the Borrower for
purposes of reinvestment as aforesaid upon the occurrence and during the
continuance of any Event of Default.
During any period in which amounts are on deposit in the Cash
Collateral Account pursuant to Section 2.5(b)(i), calculations of the Maximum
Total Debt Ratio and the Maximum Senior Debt Ratio with respect to such period
shall subtract from Total Debt and Senior Debt any such amounts (it being
understood that no such subtraction shall be made following any reinvestment
thereof as contemplated by Section 2.5(b)).
(c) Equity or Debt Offering. (i) Upon any Equity Offering made during
any period in which the Maximum Total Debt Ratio (measured as at the most
recently ended fiscal quarter of the Borrower) is greater than or equal to
5.75:1, the Borrower shall prepay the Loans (and such prepayment shall be
applied as set forth in Section 2.5(f)) in an aggregate amount such that the
Maximum Total Debt Ratio (as so measured) immediately after the application of
such prepayment is less than 5.75:1.
(ii) Upon any Debt Offering (other than those permitted under Section
6.2 hereof), and to which the Majority Lenders shall have consented, the
Borrower shall prepay the Loans (and such prepayment shall be applied as set
forth in Section 2.5(f)) in an aggregate amount equal to 100% of the Net
Proceeds thereof.
(d) Casualty Events. Upon the date 120 days following the receipt by
the Borrower or any of its Subsidiaries of the proceeds of insurance,
condemnation award or other compensation in respect of any Casualty Event
affecting any Property of the Borrower or any of its Subsidiaries (or upon such
earlier date as the Borrower or any such Subsidiary, as the case may be, shall
have determined not to repair or replace the Property affected by such Casualty
Event), the Borrower shall prepay the Loans (and such prepayment shall be
applied as set forth in section 2.5(f)) in an aggregate amount equal to 100% of
the Net Proceeds of such Casualty Event not theretofore applied (or committed to
be applied pursuant to executed construction contracts or equipment orders) to
the repair or replacement of such Property.
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<PAGE> 46
(e) Acquisition Agreements. Promptly following the receipt by the
Borrower or any of its Subsidiaries of the proceeds of any adjustment of the
purchase price, or an indemnity payment, under any acquisition agreement
(including the Acquisition Agreement) pursuant to which the Borrower or any
Subsidiary has made any acquisition, the Borrower will prepay the Revolving
Loans (to the extent of the outstanding balance thereof), provided that no such
prepayment shall be required to the extent the aggregate amount of such
adjustments pursuant to any acquisition agreement is less than $500,000.
(f) Application. (i) Each prepayment of the Loans pursuant to this
Section 2.5 shall be applied to the outstanding amounts of Term Loans and
Revolving Loans on a pro rata basis determined on the basis of the amount of
Term Loans, on the one hand, and Revolving Loans, on the other hand, outstanding
at the time of such prepayment. Each prepayment shall be accompanied by payment
in full of all accrued interest and accrued commitment fees thereon to and
including the date of such prepayment, together with any additional amounts
owing pursuant to Section 2.15. Each prepayment shall be accompanied by payment
in full of all accrued interest and accrued commitment fees thereon to and
including the date of such prepayment, together with any additional amounts
owing pursuant to Section 2.15.
(ii) Each prepayment of the Revolving Loans and each Cash Collateral
Deposit under this Section 2.5 shall be applied to permanently reduce the
Aggregate Revolving Loan Commitment pro rata with respect to each of the
scheduled reduction dates set forth in Section 2.1(e) remaining at such time.
If, at any time, the Revolving Loans are repaid in full, additional prepayments
hereunder shall be applied first, to make a Cash Collateral Deposit and
thereafter, to permanently reduce the Aggregate Revolving Loan Commitment by an
amount equal to what such prepayment would have been under this Section 2.5 if
Revolving Loans had been outstanding against which to apply such prepayment.
(iii) Each prepayment of the Term Loans shall be applied to scheduled
installments of principal of the Term Loans in inverse order of maturity. Such
prepaid Term Loans may not be reborrowed.
2.6 Conversion and Continuation Options. (a) The Borrower may elect
from time to time to convert LIBOR Loans to Base Rate Loans, by the Borrower
giving the Agent at least two Business Days' prior irrevocable written notice of
such election pursuant to a Continuation Notice. The Borrower may elect from
time to time to convert Base Rate Loans to LIBOR Loans by the Borrower giving
the Agent at least three Eurodollar Business Days' prior irrevocable written
notice of such election pursuant to a Continuation Notice. Any such notice of
conversion to LIBOR
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<PAGE> 47
Loans shall specify the length of the initial Interest Period or Interest
Periods therefor. Upon receipt of any such notice the Agent shall promptly
notify each Lender thereof. All or any part of outstanding LIBOR Loans and Base
Rate Loans may be converted as provided herein, provided that (i) any such
conversion may only be made if, after giving effect thereto, Section 2.7 shall
not have been contravened, (ii) no Term Loan may be converted into a LIBOR Loan
after the date that is one month prior to the due date of the final installment
of principal of the Term Loans, (iii) no Revolving Loan may be converted into a
LIBOR Loan after the date that is one month prior to the Revolving Loan
Commitment Expiration Date and (iv) the Borrower shall not have the right to
elect to continue at the end of the applicable Interest Period, or to convert
to, a LIBOR Loan if a Default shall have occurred and be continuing.
(b) Any LIBOR Loan may be continued as such upon the expiration of the
then current Interest Period with respect thereto by the Borrower giving notice
to the Agent, in accordance with the applicable provisions of the term "Interest
Period" set forth in Section 1.1, of the length of the next Interest Period to
be applicable to such LIBOR Loan, provided that no LIBOR Loan may be continued
as such (i) if, after giving effect thereto, Section 2.7 would be contravened,
(ii) after the date that is one month prior to the due date of the final
installment of principal of the Term Loans, (iii) after the date that is one
month prior to the Revolving Loan Commitment Expiration Date or (iv) if a
Default shall have occurred and be continuing and provided, further, that if the
Borrower shall fail to give any required notice as described above in this
Section or if such continuation is not permitted pursuant to the preceding
proviso, such Loans shall be automatically converted to Base Rate Loans on the
last day of such then-expiring Interest Period.
2.7 Minimum Amounts of Tranches. All borrowings, conversions and
continuations of Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, the aggregate principal amount of the Loans
comprising each Tranche (except Loans made pursuant to Section 2.3(c)) shall be
equal to $1,000,000 or a whole multiple of $100,000 in excess thereof and, in
any case, there shall not be more than 8 Tranches.
2.8 Interest Rates and Payment Dates. (a) Each LIBOR Loan shall bear
interest for each day during each Interest Period with respect thereto at a rate
per annum equal to the LIBOR Adjusted Rate plus (i) for LIBOR Loans which are
Revolving Loans, the Applicable Revolving Loan Margin and (ii) for LIBOR Loans
which are Term Loans, the Applicable Term Loan Margin.
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(b) Each Base Rate Loan shall bear interest at a rate per annum equal
to the Base Rate plus (i) for Base Rate Loans which are Revolving Loans, the
Applicable Revolving Loan Margin and (ii) for Base Rate Loans which are Term
Loans, the Applicable
Term Loan Margin.
(c) If any Event of Default shall have occurred and be continuing, all
amounts outstanding shall bear interest at a rate per annum which is the rate
described in paragraph (b) of this Section plus 2% from the date of the
occurrence of such Default until such Default is no longer continuing (after as
well as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment Date,
provided that interest accruing pursuant to paragraph (c) of this Section shall
be payable on demand.
(e) For purposes of determining the Applicable Margin for all Loans,
the letter of credit fees referred to in Section 2.3(e) and the commitment fee
referred to in Section 2.16, interest rates on the Loans and such fees shall be
calculated on the basis of the Maximum Total Debt Ratio set forth in the most
recent Covenant Compliance Certificate received by the Agent in accordance with
Section 5.2(a) (which Certificate shall be accompanied by the relevant financial
statements for such period). For accrued and unpaid interest and fees only (no
changes being made for interest or fee payments previously made), changes in
interest rates on the Loans, or in such fees, attributable to changes in the
Applicable Margin caused by changes in the Maximum Total Debt Ratio set forth in
the applicable Covenant Compliance Certificate shall be calculated upon the
delivery of a Covenant Compliance Certificate (accompanied by such financial
statements) and such change shall be effective from (and including) the day
which is two Business Days after receipt by the Agent of such Covenant
Compliance Certificate and financial statements. If, for any reason, the
Borrower shall fail to deliver a Covenant Compliance Certificate and such
financial statements when due in accordance with Section 5.1(a) and 5.2(a), and
such failure shall continue for a period of ten days, the Leverage Level shall
be deemed to be Revolving Loan Leverage Level 1 or Term Loan Leverage Level 1,
as applicable, retroactive to the date on which the Borrower should have
delivered such Covenant Compliance Certificate and such financial statements and
shall continue until a Covenant Compliance Certificate and financial statements
indicating a different Leverage Level is delivered to the Agent. Notwithstanding
the foregoing, there shall be no reductions in the Applicable Margin during any
period in which an Event of Default has occurred and is continuing.
2.9 Computation of Interest and Fees. (a) Interest on
Base Rate Loans (other than Base Rate Loans based on the Federal
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Funds Effective Rate) shall be calculated on the basis of a 365- (or 366-, as
the case may be), day year for the actual days elapsed and interest on LIBOR
Loans, unused commitment fees and all other Obligations of the Borrower shall be
calculated on the basis of a 360-day year for the actual days elapsed. The Agent
shall as soon as practicable notify the Borrower and the Lenders of each
determination of a LIBOR Adjusted Rate. Any change in the interest rate on a
Loan resulting from a change in the Base Rate or the LIBOR Reserve Requirements
shall become effective as of the opening of business on the day on which such
change in the Base Rate is announced or such change in the LIBOR Reserve
Requirements becomes effective, as the case may be. The Agent shall as soon as
practicable notify the Borrower and the Lenders of the effective date and the
amount of each such change in interest rate.
(b) If any Reference Lender's Commitment shall terminate or all of its
Loans shall be assigned for any reason whatsoever, such Reference Lender shall
thereupon cease to be a Reference Lender, and if, as a result of the foregoing,
there would only be one Reference Lender remaining, the Agent (after
consultation with the Borrower and the Co-Arrangers) shall, by notice to the
Borrower and the Lenders, designate another Lender reasonably acceptable to the
Borrower as a Reference Lender so that there shall at all times be at least two
Reference Lenders (provided that, notwithstanding the foregoing, (i) Union Bank
of California, N.A., shall be one of the Reference Lenders hereunder for so long
as it shall serve as Administrate Agent hereunder and (ii) Union Bank of
California, N.A., shall be the sole Reference Lender from the Closing Date until
one or more additional Reference Lenders shall be designated hereunder).
(c) Each Reference Lender shall use its best efforts to furnish
quotations of rates to the Agent as contemplated hereby. If any of the Reference
Lenders shall be unable or shall otherwise fail to supply such rates to the
Agent upon its request, the rate of interest shall be determined on the basis of
the quotations of the remaining Reference Lenders or Reference Lender.
(d) Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrower and
the Lenders in the absence of manifest error.
2.10 Inability to Determine Interest Rate. In the event that prior to
the first day of any Interest Period:
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower absent manifest error) that, by reason
of circumstances affecting the relevant
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market, adequate and reasonable means do not exist for ascertaining the LIBOR
Adjusted Rate for such Interest Period, or
(b) the Agent shall have received notice from the Majority Lenders
acting in good faith that the LIBOR Adjusted Rate determined or to be determined
for such Interest Period will not adequately and fairly reflect the cost to such
Lenders (as conclusively certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period, the Agent shall give telecopy
or telephonic notice thereof to the Borrower and the Lenders as soon as
practicable thereafter. If such notice is given (x) any LIBOR Loans requested to
be made on the first day of such Interest Period shall accrue interest at the
Base Rate, (y) Loans that were to have been converted on the first day of such
Interest Period to LIBOR Loans shall be continued as Base Rate Loans and (z) any
outstanding LIBOR Loans shall be converted, on the first day of such Interest
Period, to Base Rate Loans. Until such notice has been withdrawn by the Agent,
no further LIBOR Loans shall be made or continued as such, nor shall the
Borrower have the right to convert Base Rate Loans to LIBOR Loans.
2.11 Pro Rata Treatment and Payments. Each payment (including each
prepayment) by the Borrower on account of principal of and interest on the Loans
shall be made pro rata according to the respective outstanding principal and
interest amounts of such Loans then held by the Lenders. All payments (including
prepayments) to be made by the Borrower hereunder and under the Notes, whether
on account of principal, interest, fees or otherwise, shall be made without set
off or counterclaim and shall be made prior to 12:00 Noon, Los Angeles time, on
the due date thereof to the Agent, for the account of the applicable Lenders, at
the Agent's office specified in Section 9.2, in Dollars and in immediately
available funds. The Agent shall distribute such payments to the applicable
Lenders promptly upon receipt in like funds as received. If any payment
hereunder (other than payments on the LIBOR Loans) becomes due and payable on a
day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. If
any payment on a LIBOR Loan becomes due and payable on a day other than a
Eurodollar Business Day, the maturity thereof shall be extended to the next
succeeding Eurodollar Business Day (and interest shall continue to accrue
thereon at the applicable rate) unless the result of such extension would be to
extend such payment into another calendar month, in which event such payment
shall be made on the immediately preceding Eurodollar Business Day.
2.12 Illegality. Notwithstanding any other provision herein, if any
change after the Closing Date in any Requirement
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of Law or in the interpretation or application thereof shall make it unlawful
for any Lender or Applicable Lending Office to make or maintain LIBOR Loans as
contemplated by this Agreement, (a) the commitment of such Lender hereunder to
make LIBOR Loans, continue LIBOR Loans as such and convert Base Rate Loans to
LIBOR Loans shall forthwith be suspended during such period of illegality and
(b) the Loans of such Lender or Applicable Lending Office then outstanding as
LIBOR Loans, if any, shall be converted automatically to Base Rate Loans on the
respective last days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law. If any such conversion
of a LIBOR Loan occurs on a day which is not the last day of the then current
Interest Period with respect thereto, the Borrower shall pay to such Lender such
amounts, if any, as may be required pursuant to Section 2.15. To the extent that
a Lender's LIBOR Loans have been converted to Base Rate Loans pursuant to this
Section 2.12, all payments and prepayments of principal that otherwise would be
applied to such Lender's LIBOR Loans shall be applied instead to its Base Rate
Loans.
2.13 Increased Costs. (a) In the event that any change after the
Closing Date in any Requirement of Law or in the interpretation or application
thereof or compliance by any Lender with any request or directive (whether or
not having the force of law but, if not having the force of law, generally
applicable to and complied with by banks and financial institutions of the same
general type as such Lender in the relevant jurisdiction) from any central bank
or other Governmental Authority made subsequent to the date hereof:
(i) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirements against assets
held by, letters of credit or guarantees issued by, deposits or other
liabilities in or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of funds by, any
office of such Lender or Applicable Lending Office which is not
otherwise included in the determination of the LIBOR Adjusted Rate
hereunder; or
(ii) shall impose on such Lender or Applicable Lending Office any
other condition;
and the result of any of the foregoing is to increase the cost to the Agent of
issuing or maintaining any Letter of Credit by an amount which the Agent deems
to be material, or to such Lender or Applicable Lending Office, by an amount
which such Lender deems to be material, of making, converting into, continuing
or maintaining LIBOR Loans, or purchasing or maintaining any participation in a
Letter of Credit, or to reduce any amount receivable hereunder in respect
thereof then, in any such case, the Borrower shall immediately pay to the Agent,
for its own
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account or on behalf of such Lender or Applicable Lending Office, as applicable,
upon the demand of the Agent for itself or at the request of such Lender, as
applicable, any additional amounts necessary to compensate such Lender or the
Agent, as applicable, for such increased cost or reduced amount receivable. If
the Agent, any Lender or any Applicable Lending Office becomes entitled to claim
any additional amounts pursuant to this Section, it shall promptly notify the
Borrower, through the Agent, of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable pursuant to this
Section submitted by the Agent or such Lender or Applicable Lending Office,
through the Agent, to the Borrower shall be conclusive evidence of the accuracy
of the information so recorded, absent manifest error. This covenant shall
survive the termination of this Agreement, expiration of the Letters of Credit
and the payment of the Notes and all other amounts payable hereunder.
(b) If, after the date of this Agreement, the introduction of or any
change in any applicable law, rule, regulation or guideline regarding capital
adequacy, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or the National Association of Insurance
Commissioners or comparable agency charged with the interpretation or
administration thereof, affects the amount of capital required or expected to be
maintained by any Lender or any corporation controlling any Lender, and such
Lender (taking into consideration such Lender's or such corporation's policies
with respect to capital adequacy) determines that the amount of capital
maintained by such Lender or such corporation which is attributable to or based
upon the Loans, the Letters of Credit, the Commitments or this Agreement must be
increased as a consequence of such introduction or change by an amount deemed by
such Lender to be material, then, upon demand of the Agent at the request of
such Lender, the Borrower shall immediately pay to the Agent on behalf of such
Lender, additional amounts sufficient to compensate such Lender or such
corporation for the increased costs to such Lender or corporation of such
increased capital. Any such demand shall be accompanied by a certificate of such
Lender setting forth in reasonable detail the computation of any such increased
costs, which certificate shall be conclusive, absent manifest error. This
covenant shall survive the termination of this Agreement, expiration of the
Letters of Credit and the payment of the Notes and all other amounts payable
hereunder.
2.14 U.S. Taxes. (a) The Borrower agrees to pay to each Lender that is
not a U.S. Person such additional amounts as are necessary in order that the net
payment of any amount due to such non-U.S. Person hereunder after deduction for
or withholding in respect of any U.S. Taxes imposed with respect to such payment
(or in lieu thereof, payment of such U.S. Taxes by such non-U.S.
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Person), will not be less than the amount stated herein to be then due and
payable, provided that the foregoing obligation to pay such additional amounts
shall not apply:
(i) to any payment to any Lender hereunder (other than in respect of
any Registered Loan) unless such Lender is, on the date hereof (or on the date
it becomes a Lender hereunder as provided in Section 9.6(c) hereof) and on the
date of any change in the Applicable Lending Office of such Lender, either
entitled to submit a Form 1001 (relating to such Lender and entitling it to a
complete exemption from withholding on all interest to be received by it
hereunder in respect of the Loans) or Form 4224 (relating to all interest to be
received by such Lender hereunder in respect of the Loans),
(ii) to any payment to any Lender hereunder in respect of a Registered
Loan (a "Registered Holder"), unless such Registered Holder (or, if such
Registered Holder is not the beneficial owner of such Registered Loan, the
beneficial owner thereof) is, on the date hereof (or on the date such Registered
Holder becomes a Lender as provided in Section 9.6(c) hereof) and on the date of
any change in the Applicable Lending Office of such Lender entitled to submit a
Form W-8, together with an annual certificate (a "Tax Compliance Certificate")
stating that (x) such registered Holder (or beneficial owner, as the case may
be) is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, and
(y) such Registered Holder (or beneficial owner, as the case may be) shall
promptly notify the Borrower if at any time, such Registered Holder (or
beneficial owner, as the case may be) determines that it is no longer in a
position to provide such certificate to the Borrower (or any other form of
certification adopted by the relevant taxing authorities of the United States of
America for such purposes), or
(iii)to any U.S. Taxes imposed solely by reason of the failure by such
non-U.S. Person (or, if such non-U.S. Person is not the beneficial owner of the
relevant Loan, such beneficial owner) to comply with the applicable
certification, information, documentation or other reporting requirements
concerning the nationality, residence, identity or connections with the United
States of America of such non-U.S. Person (or beneficial owner, as the case may
be) if such compliance is required by statute or regulation of the United States
of America as a precondition to relief or exemption from such U.S. Taxes.
For the purposes of this Section 2.14(a), (A) "U.S. Person" shall mean
a citizen, national or resident of the United States of America, a corporation,
partnership or other entity created or organized in or under any laws of the
United States of America or any State thereof, or any estate or trust that is
subject to Federal income taxation regardless of the source of its income, (B)
"U.S. Taxes" shall mean any present or future tax, assessment
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or other charge or levy imposed by or on behalf of the United States of America
or any taxing authority thereof or therein, (C) "Form 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (D) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form relates) and (E) "Form W-8" shall mean Form W-8 (Certificate
of Foreign Status of the Department of Treasury of the United States of
America). Each of the Forms referred to in the foregoing clauses (C), (D) and
(E) shall include such successor and related forms as may from time to time be
adopted by the relevant taxing authorities of the United States of America to
document a claim to which such Form relates.
(b) Within 30 days after paying any amount to the Agent or any Lender
from which it is required by law to make any deduction or withholding, and
within 30 days after it is required by law to remit such deduction or
withholding to any relevant taxing or other authority, the Borrower shall
deliver to the Agent for delivery to such non-U.S. Person evidence satisfactory
to such Person of such deduction, withholding or payment (as the case may be).
2.15 Indemnity. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from and to pay each Lender within 5 Business Days of
such Lender's demand the amount of any liability, loss or expense arising from
the reemployment of funds obtained by it or from fees payable to terminate the
deposits from which such funds were obtained (including reasonable fees and
expenses of counsel) which such Lender may sustain or incur as a consequence of
(a) default by the Borrower in payment when due of the principal amount of or
interest on any LIBOR Loan, (b) default by the Borrower in making a borrowing
of, conversion into or continuation of LIBOR Loans after the Borrower has given
a notice requesting the same in accordance with the provisions of this
Agreement, (c) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (d) the making by the Borrower of a prepayment or conversion of
LIBOR Loans on a day which is not the last day of an Interest Period with
respect thereto. A Lender's certificate as to such liability, loss or expense
shall be deemed conclusive, absent manifest error. This covenant shall survive
the termination of this Agreement, expiration of the Letters of Credit and the
payment of the Notes and all other amounts payable hereunder.
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2.16 Unused Commitment Fees. The Borrower agrees to pay to the Agent
for the account of the Revolving Loan Lenders an unused commitment fee to be
shared pro rata among the Revolving Loan Lenders with respect to the Revolving
Loan Commitments for the period from and including the Closing Date to but
excluding the Revolving Loan Commitment Expiration Date, based on the average
daily aggregate amount of the unused Aggregate Revolving Loan Commitment from
time to time in effect and computed at the rate of (i) during any period in
which the Maximum Total Debt Ratio is less than 5.50:1, 0.375% per annum and
(ii) at all other times, 0.500% per annum. Such fee shall be payable quarterly
in arrears on the last day of each March, June, September and December and on
the Revolving Loan Commitment Expiration Date, commencing on the first such date
to occur after the Closing Date.
2.17 Mitigation of Costs. If any Lender, by changing its Applicable
Lending Office or taking any other reasonable action, so long as making such
change or taking such other action is not disadvantageous to it in any
financial, regulatory or other respect, can mitigate any adverse effect on the
Borrower under Section 2.10, 2.12, 2.13, or 2.14, such Lender shall take such
action.
2.18 Registered Loans. Notwithstanding the foregoing, any Lender that
is not a U.S. Person and is not a "bank" within the meaning of Section
881(c)(3)(a) of the Code may request the Borrower (through the Agent), and the
Borrower agrees to cause the Agent thereupon, to record on the Tax Register
referred to in Section 9.6(f) hereof any Loans held by such Lender under this
Agreement. The Borrower hereby designates the Agent to serve as the Borrower's
agent solely for purposes of maintaining the Tax Register. Loans recorded on the
Register ("Registered Loans") may not be evidenced by promissory notes other
than Registered Notes as defined below and, upon the registration of any Loan,
any promissory note (other than a Registered Note) evidencing the same shall be
null and void and shall be returned to the respective Borrower. The Borrower
agrees, at the request of any Lender that is the holder of Registered Loans, to
execute and deliver to such Lender a promissory note in registered form to
evidence such Registered Loans (i.e. containing the optional registered note
language as indicated in Exhibit A-1 or A-2 hereto, as the case may be) and
registered as provided in Section 9.6(f) hereof (herein, a "Registered Note"),
dated the date hereof, payable to such Lender and otherwise duly completed. A
loan once recorded on such Register may not be removed from the Register so long
as it remains outstanding and a Registered Note may not be exchanged for a
promissory note that is not a Registered Note.
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SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Loans and participate in the Letters of Credit, and to induce the Agent to issue
the Letters of Credit, the Borrower hereby represents and warrants to the Agent
and each Lender that:
3.1 Organization and Good Standing. The Borrower and each Subsidiary
(a) is duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization as indicated on Schedule 3.7, (b) has all
requisite power and authority (corporate, partnership, limited liability company
and otherwise) to own its properties and to conduct its business as now
conducted and as currently proposed to be conducted and (c) is duly qualified to
conduct business as a foreign organization and is currently in good standing in
each state and jurisdiction in which it conducts business. Each state and
jurisdiction in which the Borrower or any Subsidiary is or should be qualified
to conduct business is listed on Schedule 3.1 hereto.
3.2 Power and Authority. The Borrower and each Subsidiary has all
requisite power and authority under applicable law and under its Organic
Documents to (i) in the case of the Borrower, borrow hereunder, (ii) in case of
Black Creek, to consummate the Cable One Acquisition in accordance with the
terms of the Acquisition Agreement and (iii) to execute, deliver and perform its
respective obligations under the Loan Documents to which it is a party. All
actions, waivers and consents (corporate, regulatory and otherwise) necessary or
appropriate for Black Creek to consummate the Cable One Acquisition in
accordance with the terms of the Acquisition Agreement, and for the Borrower and
each Subsidiary to execute, deliver and perform the Loan Documents to which it
is a party have been taken and/or received.
3.3 Validity and Legal Effect. This Agreement constitutes, and the
other Loan Documents to which the Borrower or any Subsidiary is a party
constitute (or will constitute when executed and delivered), the legal, valid
and binding obligations of the Borrower or such Subsidiary, as applicable,
enforceable against it in accordance with the terms thereof, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights and (b) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3.4 No Violation of Laws or Agreements. The execution, delivery and
performance of the Loan Documents and the consummation of the Cable One
Acquisition in accordance with the terms of the Acquisition Agreement (a) will
not violate or contravene any Requirement of Law, (b) will not result in any
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material breach or violation of, or constitute a material default under, any
agreement or instrument by which the Borrower or any Subsidiary, or any of its
property, may be bound, and (c) will not result in or require the creation of
any Lien (other than those permitted by Section 6.3) upon or with respect to any
property of the Borrower or any Subsidiary, whether such property is now owned
or hereafter acquired.
3.5 Title to Assets; Existing Encumbrances; Legal Names. The Borrower
and each Subsidiary has good and marketable title to all of its real and
personal properties and assets, free and clear of any Liens (other than those
permitted by Section 6.3). Neither the Borrower nor any Subsidiary has used (or
permitted the filing of any financing statement under) any legal or operating
name at any time during the twelve consecutive calendar months immediately
preceding the execution of this Agreement, except as identified on Schedule 3.5
hereto.
3.6 Capital Structure; Equity Ownership; Subordinated Debt. The
authorized capital stock of the Borrower consists of an aggregate of 1,000
shares of common stock, par value $0.01 per share, all of which shares are duly
and validly issued and outstanding, and each of which shares is fully paid and
nonassessable. All of such issued and outstanding shares of common stock are
owned beneficially and of record by CCI. There are no outstanding Equity Rights
with respect to the Borrower or any Subsidiary and there are no outstanding
obligations of the Borrower or any of its Subsidiaries to repurchase, redeem, or
otherwise acquire any shares of capital stock of the Borrower, nor are there any
outstanding obligations of the Borrower or any of its Subsidiaries to make
payments to any Person, such as "phantom stock" payments, where the amount
thereof is calculated with reference to the fair market value or equity value of
Borrower or any of its Subsidiaries. The Borrower has the corporate power and
authority to issue the Subordinated Notes. The Subordinated Notes, when issued
and paid for, will be the legally valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability. The subordination provisions of the Subordinated
Notes will be enforceable against the holders thereof and the Loans and all
other monetary Obligations hereunder are and will be within the definition of
"Senior Indebtedness" included in such provisions. The Subordinated Notes, when
issued and sold, will either (a) have been registered or qualified under
applicable federal and state securities laws or (b) be exempt therefrom.
3.7 Subsidiaries and Affiliates. Schedule 3.7 hereto accurately and
completely discloses (i) each Subsidiary and
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Affiliate of the Borrower (other than its officers and directors), (ii) each
Person holding ownership interests in such Subsidiary and (iii) the nature of
the ownership interests held by each such Person and the percentage of ownership
of such Subsidiary represented by such ownership interests.
3.8 Material Contracts. Schedule 3.8 hereto accurately and completely
discloses each contract and agreement (including but not limited to site leases
and licenses and programming contracts, but excluding Franchises) material to
the financial condition or operation of the Borrower or any Subsidiary (each, a
"Material Contract," and collectively, the "Material Contracts"). Neither the
Borrower nor any Subsidiary has committed any unwaived breach or default under
any Material Contract, and the Borrower has no knowledge or reason to believe
that any other party to any Material Contract has committed any unwaived breach
or default thereof. Each of the Material Contracts is a legal, valid and binding
obligation of the Borrower or the Subsidiaries party thereto, enforceable in
accordance with its terms. Each of the Lenders and the Agent has received a
complete and correct copy of each Material Contract (including in each case all
exhibits, schedules and disclosure letters referred to therein or delivered
pursuant thereto, if any) and all amendments thereto and other side letters or
agreements affecting the terms thereof. Except for the Acquisition Agreement,
neither the Borrower nor any of its Subsidiaries is party to any agreements or
letters of intent providing for the acquisition or disposition of any assets
(including without limitation any CATV Systems or Telephone Systems) with a fair
market value of $100,000 or more.
3.9 Taxes and Assessments. (a) The Borrower and each Subsidiary has
timely filed all required tax returns and reports (federal, state and local) or
has properly filed for extensions of the time for the filing thereof. The
Borrower has no knowledge of any deficiency, penalty or additional assessment
due or appropriate in connection with any such taxes. All taxes (federal, state
and local) imposed upon the Borrower or any Subsidiary or any of its properties,
operations or income have been paid and discharged prior to the date when any
interest or penalty would accrue for the nonpayment thereof, except for those
taxes being contested in good faith by appropriate proceedings diligently
prosecuted and with adequate reserves reflected on the financial statements in
accordance with GAAP. There are no taxes imposed on the Borrower or its
Subsidiaries by any political subdivision or taxing authority due or payable
either on or by virtue of the execution and delivery by the Borrower, the
Subsidiaries, the Agent, or the Lenders of this Agreement or any other Loan
Document to which the Borrower or the Subsidiaries are party, or on any payment
to be made by the Borrower pursuant hereto or thereto.
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(b) The Borrower has net operating losses (within the meaning of
Section 172 of the Code) in an amount not less than that set forth in Schedule
3.9.
3.10 Litigation and Legal Proceedings. Except as disclosed on Schedule
3.10 hereto, there is no litigation, claim, investigation, administrative
proceeding, labor controversy or similar action that is pending or, to the
knowledge of the Borrower, threatened (i) with respect to any Loan Document or
the transactions contemplated thereby, (ii) with respect to the Cable One
Acquisition or the transactions contemplated by the Acquisition Agreement or
(iii) against the Borrower, any Subsidiary or any Property that (in the case of
this clause (iii)), if adversely resolved, could (either individually or in the
aggregate) have a Material Adverse Effect.
3.11 Accuracy of Financial Information. (a) All information previously
furnished to the Agent and the Lenders that was prepared by or on behalf of the
Borrower concerning the financial condition and operations of the Borrower or
any Subsidiary, including (i) the audited consolidated financial statements of
CCI and its Subsidiaries for the fiscal year ended December 31, 1997 (including,
separately stated, consolidating statements of income, retained earnings and
cash flows of CCI and its Subsidiaries), (ii) the unaudited consolidated
financial statements for CCI and its Subsidiaries for the fiscal quarter ended
March 31, 1998 and (iii) the unaudited pro forma condensed consolidated balance
sheet for CCI and it Subsidiaries, as at March 31, 1998 and unaudited pro forma
condensed consolidated statements of operations for the fiscal year ended on
December 31, 1997 and the 3-month period ended on March 31, 1998, in each case
prepared under the assumption that the Cable One Acquisition occurred on March
31, 1998, (A) have been prepared in accordance with GAAP consistently applied,
(B) are true, accurate and complete in all material respects, (C) fairly present
the financial condition of the organizations covered thereby as of the dates and
for the periods covered thereby and (D) disclose all material liabilities
(contingent and otherwise) of the Borrower and the Subsidiaries.
(b) Since December 31, 1997 there has been no event or condition
resulting in a Material Adverse Effect.
3.12 Accuracy of Other Information. All information contained in the
Confidential Information Memorandum relating to the Loans, and any application,
schedule, report, certificate, or any other document given to the Agent or any
Lender by the Borrower or any other Person in connection with the Loan Documents
is in all material respects true, accurate and complete, and no such Person has
omitted to state therein (or failed to include in any such document) any
material fact or any fact necessary to make such information not misleading.
All
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projections given to the Agent, the Co-Arrangers, or any Lender by the Borrower
or any other Person have been prepared with a reasonable basis and in good faith
making use of such information as was available at the date such projection was
made. The projections and pro forma financial information contained in such
materials are based upon good faith estimates and assumptions believed by the
Borrower to be reasonable at the time made and as of the Closing Date, it being
recognized that such projections as to future events are not to be viewed as
facts and that actual results during the period or periods covered by any such
projections may differ from the projected results.
3.13 Compliance with Laws Generally. The Borrower and each Subsidiary
is in compliance in all material respects with all Requirements of Law
applicable to it, its operations and its properties.
3.14 ERISA Compliance.
(a) The Borrower and each Subsidiary is in compliance in all
material respects with all applicable provisions of ERISA, and all rules,
regulations and orders implementing ERISA.
(b) Neither the Borrower nor any Subsidiary, or any ERISA
Affiliate thereof, maintains or contributes to (or has maintained or contributed
to) any Multiemployer Plan under which the Borrower, any Subsidiary or any ERISA
Affiliate thereof could have any withdrawal liability.
(c) Neither the Borrower nor any Subsidiary, or any ERISA
Affiliate thereof, sponsors or maintains any defined benefit pension plan under
which there is an accumulated funding deficiency within the meaning of Section
412 of the Code, whether or not waived.
(d) The liability for accrued benefits under each defined
benefit pension plan that will be sponsored or maintained by the Borrower, any
Subsidiary or any ERISA Affiliate thereof (determined on the basis of the
actuarial assumptions utilized by the PBGC) does not exceed the aggregate fair
market value of the assets under each such defined benefit pension plan.
(e) The aggregate liability of the Borrower, each Subsidiary
and each ERISA Affiliate thereof arising out of or relating to a failure of any
employee benefit plan within the meaning of Section 3(2) of ERISA to comply with
provisions of ERISA or the Code will not have a Material Adverse Effect.
(f) There does not exist any unfunded liability (determined on
the basis of actuarial assumptions utilized by the actuary for the plan in
preparing the most recent annual report) of the Borrower, any Subsidiary or any
ERISA Affiliate thereof
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under any plan, program or arrangement providing post-retirement, life or health
benefits.
(g) No Reportable Event and no Prohibited Transaction (as
defined in ERISA) has occurred or is occurring with respect to any plan with
which the Borrower or any Subsidiary is associated.
3.15 Environmental Compliance.
(a) The Borrower and each Subsidiary has received all permits
and filed all notifications necessary under and is otherwise in compliance in
all material respects with all federal, state and local laws, rules and
regulations governing the control, removal, storage, transportation, spill,
release or discharge of Hazardous Materials, including, without limitation, as
provided in the provisions of and the regulations under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendment and Reauthorization Act of 1986, (ii) the Solid Waste
Disposal Act, (iii) the Clean Water Act and the Clean Air Act, (iv) the
Hazardous Materials Transportation Act, (v) the Resource Conservation and
Recovery Act of 1976 and (vi) the Federal Water Pollution Control Act Amendments
of 1972 (all of the foregoing enumerated and nonenumerated statutes, including
without limitation any applicable state or local statutes, all as amended,
collectively, the "Environmental Control Statutes").
(b) Neither the Borrower nor any Subsidiary has given any
written or oral notice to the Environmental Protection Agency ("EPA") or any
state or local agency with regard to any actual or imminently threatened
removal, storage, transportation, spill, release or discharge of Hazardous
Wastes either (i) on properties owned or leased by the Borrower or such
Subsidiary or (ii) otherwise in connection with the conduct of its business and
operations.
(c) Neither the Borrower nor any Subsidiary has received
notice that it is potentially responsible for costs of clean-up of any actual or
imminently threatened spill, release or discharge of Hazardous Wastes pursuant
to any Environmental Control Statute.
(d) No judicial proceedings or governmental or administrative
action is pending, or, to the knowledge of the Borrower, threatened, under any
Environmental Control Statute to which the Borrower or any of its Subsidiaries
is named as a party with respect to the Properties or the business conducted at
the Properties, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any
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Environmental Control Statute with respect to the Properties or such business.
3.16 Federal Regulations. No Letter of Credit and no part of the
proceeds of any Loans are intended to be or will be used, directly or indirectly
for any purpose which violates the provisions of the Regulations of the Board of
Governors of the Federal Reserve System. If requested by any Lender or the
Agent, and in any event upon consummation of any acquisition involving the
purchase of stock by the Borrower or any Subsidiary, the Borrower will furnish
to the Agent and each Lender a statement to the foregoing effect in conformity
with the requirements of Form U-1 referred to in Regulation U.
3.17 Fees and Commissions. Except as disclosed on Schedule 3.17 hereto
or as required by Section 2.16 hereof or the letter referred to in Section
4.1(d), neither the Borrower nor any Subsidiary owes or will owe any fees or
commissions of any kind in connection with the Cable One Acquisition, this
Agreement or the transactions contemplated hereby or thereby, and the Borrower
does not know of any claim (or any basis for any claim) for any fees or
commissions in connection with the Cable One Acquisition, the Acquisition
Agreement, this Agreement or the transactions contemplated hereby or thereby.
3.18 Representations and Warranties in Acquisition Agreement. The Agent
has received a complete and correct copy of the Acquisition Agreement (including
all exhibits, schedules and disclosure letters referred to therein or delivered
or to be delivered pursuant thereto, if any) and all amendments thereto, waivers
relating thereto and other side letters or agreements affecting the terms
thereof. The Acquisition Agreement has been duly executed and delivered by the
parties thereto and is in full force and effect with no default thereunder. Each
representation and warranty in the Acquisition Agreement shall be deemed to be
made by the Borrower for the Lenders' benefit as if set forth herein at length.
3.19 Solvency. Immediately prior to and upon the execution of this
Agreement, the consummation of the Cable One Acquisition, the funding of the
Loans and the issuance of any Letters of Credit to be funded or issued on the
Closing Date, and the issuance of the Subordinated Notes, the Borrower and each
Guarantor was, is and will be Solvent.
3.20 Franchises. Set forth in Schedule 3.20 hereto is a complete and
correct list of all Franchises (identified by issuing authority, franchisee and
expiration date) owned by the Borrower and its Subsidiaries on the Closing Date,
or that will be owned by the Borrower and its Subsidiaries (after giving effect
to the Cable One Acquisition). The Borrower and each Subsidiary possesses or has
the right to use, or will possess or
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have the right to use (after giving effect to the Cable One Acquisition), all
such Franchises, and all copyrights, licenses, trademarks, service marks, trade
names or other rights, including licenses and permits granted by the FCC,
agreements with public utilities and microwave transmission companies, pole or
conduit attachment, use, access or rental agreements and utility easements that
are necessary for the conduct of the CATV Systems or Telephone Systems of the
Borrower and its Subsidiaries, except for such of the foregoing the absence of
which could not have a Material Adverse Effect on the Borrower or any of its
Subsidiaries, and each of such Franchises, copyrights, licenses, patents,
trademarks, service marks, trade names and rights is (or on the date of the
Cable One Acquisition will be) in full force and effect and no material default
has occurred and is continuing thereunder. No approval, application, filing,
registration, consent or other action of any local, state or federal authority
is required to enable the Borrower or any of its Subsidiaries to take advantage
of the rights and privileges intended to be conferred by any Franchise, except
for approvals, applications, filings, registrations, consents or other actions
that (if not made or obtained) could not have a Material Adverse Effect on the
Borrower or any of its Subsidiaries. Neither the Borrower nor any Subsidiary has
received any notice from the granting body or any governmental authority with
respect to any breach of any covenant under, or any default with respect to, any
Franchise.
3.21 The CATV Systems. (a) The Borrower and each Subsidiary, and the
CATV Systems owned by them (and, after giving effect to the Cable One
Acquisition, to be owned by them) are in compliance in all material respects
with all applicable federal, state and local laws, rules and regulations,
including without limitation, the Communications Act, the Cable Communications
Policy Act of 1984, the Cable Television Consumer Protection and Competition Act
of 1992, the Copyright Revision Act of 1976, and the rules and regulations of
the FCC and the United States Copyright Office, including, without limitation,
rules and laws governing system registration, use of aeronautical frequencies
and signal carriage, equal employment opportunity, cumulative leakage index
testing and reporting, signal leakage, and subscriber privacy. Without limiting
the generality of the foregoing:
(i) The communities included in the areas covered by the
Franchises covering CATV Systems have been registered with the FCC;
(ii) all of the annual performance tests on such CATV Systems
required under the rules and regulations of the FCC have been performed;
(iii)except as set forth in Schedule 3.21 hereto, such CATV
Systems currently meet or exceed the technical standards set
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forth in the rules and regulations of the FCC, including, without limitation,
the leakage limits contained in the 47 C.F.R. Section 76.605(a)(11);
(iv) except as set forth in Schedule 3.21 hereto, such CATV
Systems are being operated in compliance with the provisions of 47 C.F.R.
Section 76.610 through 76.619 (mid-band and super- band signal carriage),
including 47 C.F.R. Section 76.611 (compliance with the cumulative signal
leakage index);
(v) where required, appropriate authorizations from the FCC
have been obtained for the use of all aeronautical frequencies in use in such
CATV Systems and such CATV Systems are presently being operated in compliance
with such authorizations (and all required certificates, permits and clearances
from governmental agencies, including the Federal Aviation Administration, with
respect to all towers, earth stations, business radios and frequencies utilized
and carried by such CATV Systems have been obtained); and
(vi) all notices to subscribers of such CATV Systems required
by the rules and regulations of the FCC have been provided.
(b) All notices, statements of account, supplements and other documents
required under Section 111 of the Copyright Act of 1976 and under the rules of
the Copyright Office with respect to the carriage of off-air signals by the CATV
Systems owned by the Borrower and the Subsidiaries (and, after giving effect to
the Cable One Acquisition, to be owned by the Borrower and the Subsidiaries)
have been fully filed, and the proper amounts of copyright fees have been paid
on a timely basis, and each such CATV System qualifies for the compulsory
license under Section 111 of the Copyright Act of 1976.
(c) The carriage of all off-air signals by the CATV Systems owned by
the Borrower and the Subsidiaries (and, after giving effect to the Cable One
Acquisition, to be owned by the Borrower and the Subsidiaries) is permitted by
valid transmission consent agreements or by must-carry elections by
broadcasters.
(d) The Borrower and (to the best knowledge of the Borrower) Cable One
have complied in all material respects with their respective obligations with
regard to protecting the privacy rights of any past or present customers of the
CATV Systems owned by the Borrower and the Subsidiaries (and, after giving
effect to the Cable One Acquisition, to be owned by the Borrower and the
Subsidiaries).
3.22 Rate Regulation. The Borrower and (to the best of the knowledge of
the Borrower) Cable One have each reviewed and evaluated in detail the FCC rules
currently in effect (the "Rate
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Regulation Rules") implementing the rate regulation provisions of the Cable
Television Consumer Protection and Competition Act of 1992 (the "Rate Regulation
Act"). Based upon such review, completion by the Borrower and (to the best
knowledge of the Borrower) Cable One of all applicable worksheets contemplated
by the Rate Regulation Rules for each CATV System owned by the Borrower (or,
after giving effect to the Cable One Acquisition, to be owned by the Borrower):
(i) none of such CATV Systems are subject to effective
competition as of the date hereof other than as set forth on Schedule
3.22;
(ii) except as set forth in Schedule 3.22 hereto, no
franchising authority has notified the Borrower or any of its
Subsidiaries of its application to be certified to regulate rates as
provided in Section 76.910 of the Rate Regulation Rules;
(iii) except as set forth in Schedule 3.22 hereto, no
franchising authority has notified the Borrower or any of its
Subsidiaries that it has been certified and has adopted regulations
required to commence regulation as provided in Section 76.910(c)(2) of
the Rate Regulation Rules;
(iv) except to the extent that a franchising authority
regulates rates pursuant to the Rate Regulation Rules, such CATV
Systems may continue to charge their current rates in compliance with
the Rate Regulation Act and the Rate Regulation Rules;
(v) such CATV Systems are otherwise in material compliance
with the Rate Regulation Act and the Rate Regulation Rules applicable
to them; and
(vi) no reduction of rates or refunds to subscribers is
required thereunder as of the date hereof.
3.23 Investment Company Act; Public Utility Holding Company Act. (a)
Neither the Borrower nor any Subsidiary is an "investment company", or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
(b) Neither the Borrower nor any Subsidiary is a "holding company," or
an "affiliate" of a "holding company" or a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
3.24 Nature of Business. Neither the Borrower nor any of its
Subsidiaries is engaged in any material business other than as described in
Section 6.13.
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3.25 Ranking of Loans. This Agreement and the other Loan Documents to
which the Borrower is party, when executed, and the Loans, when borrowed, are
and will be the direct and general obligations of the Borrower. The Borrower's
obligations hereunder and thereunder rank and will rank at least pari passu in
priority of payment to all other Senior Debt and senior to all Subordinated
Indebtedness.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Closing Date. The agreement of each Lender to make
the Loans requested to be made by it on the Closing Date and participate in any
Letters of Credit issued on the Closing Date and the agreement of the Agent to
issue any Letters of Credit requested to be issued on the Closing Date are
subject to the satisfaction, immediately prior to or concurrently with the
making of such Loans and/or the issuance of and participation in such Letters of
Credit on the Closing Date, of the following conditions precedent:
(a) Credit Agreement. The Agent shall have received this Agreement,
executed and delivered by an officer of the Borrower as of the Closing Date,
with a counterpart for each Lender, and such officer shall be covered by an
incumbency certificate which shall have been executed and delivered to the
Agent.
(b) Other Loan Documents. The Agent shall have received the Term Notes,
the Revolving Notes, the Guarantees, the Guarantor Collateral Documents, the
Collateral Documents, and all UCC-1 Financing Statements and other agreements or
instruments required to create or perfect a security interest in the Collateral
and the Guarantor Collateral executed in connection herewith, in each case
executed and delivered by an officer of the relevant Obligor with a counterpart
for each Lender.
(c) Corporate Documents. Certified copies of the charter and by-laws
(or equivalent documents) of each Obligor which is a legal entity and of all
corporate authority (or equivalent authority) for each such Obligor (including,
without limitation, board of director resolutions and evidence of the
incumbency, including specimen signatures, of officers) with respect to the
execution, delivery and performance of such of the Loan Documents to which such
Obligor is intended to be a party and each other document to be delivered by
such Obligor from time to time in connection herewith and the extensions of
credit hereunder (and the Agent and each Lender may conclusively rely on such
certificate until it receives notice in writing from such Obligor to the
contrary).
(d) Fees and Costs. The Agent shall have received payment of (i) the
fees set forth in the fee side letter executed by the
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Borrower and the Co-Arrangers in connection herewith and (ii) such other fees,
costs and expenses, including reasonable legal fees, as are requested by the
Co-Arrangers to be paid on the Closing Date by the Borrower in connection with
this Agreement.
(e) Legal Opinions. The Agent shall have received, with a counterpart
for each Lender, the following executed legal opinions:
(i) the executed legal opinion of Winstead Sechrest & Minick
P.C., counsel to the Borrower and the Guarantors, in form and substance
satisfactory to the Co-Arrangers;
(ii) the executed legal opinion of regulatory counsel to the
Borrower and the Guarantors, in form and substance satisfactory to the
Co-Arrangers;
(iii) executed legal opinions of local counsel to the Borrower
and the Guarantors in the States of Kansas, Missouri, Oklahoma and
Arkansas in form and substance satisfactory to the Co-Arrangers; and
(iv) such other legal opinions as the Co-Arrangers may
reasonably request.
(f) Material Contracts. The Agent shall have received copies of (i) the
Acquisition Agreement, each Material Contract and each Equityholder Agreement
and (ii) the Subordinated Indenture and the CCI Indenture and each agreement,
instrument and opinion delivered in connection therewith, all of the foregoing
in form and substance satisfactory to the Agent and all as certified as true and
correct by a Responsible Officer of the Borrower.
(g) Tax Sharing Agreement. The Tax Sharing Agreement duly executed and
delivered by CCI, the Borrower and each of its Subsidiaries, together with
evidence that the "Tax Sharing Agreement" under and as defined in the Existing
Credit Agreement, shall have been simultaneously terminated.
(h) Lien Searches. The Agent shall have received (i) certified copies
of requests for information from all relevant jurisdictions, listing all
effective financing statements which name the Borrower or any Guarantor (or any
predecessor thereto), as debtor, together with copies of such financing
statements, none of which, except for Liens permitted by Section 6.3, shall
cover any of the Collateral or the Guarantor Collateral and (ii) searches of the
United States Patent and Trademark Office and the United States Copyright
Office, in form and substance reasonably satisfactory to the Agent.
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(i) Stock Certificates; Etc. The Agent shall have received (i) original
stock certificates representing all outstanding shares of stock of the Borrower
and each corporate Subsidiary, and all other stock or certificated interests in
limited liability companies pledged to the Agent pursuant to the Collateral
Documents or the Guarantor Collateral Documents, together with an undated stock
power for each of such certificates, duly executed in blank by a Shareholder
Employee, or an authorized officer of the relevant corporate pledgor (as
applicable) and (ii) such notices, acknowledgments and filings as may be
requested by the Agent with respect to limited liability company interests and
partnership interests.
(j) Good Standing Certificates. With respect to each Obligor which is a
legal entity, the Agent shall have received a certificate, dated a recent date,
of the Secretary of State of the state of formation of such Obligor and each
other jurisdiction where such Obligor is required to be qualified to do business
under such jurisdiction's law, certifying as to the existence and good standing
of, and the payment of taxes by, each such Obligor in such state.
(k) Subordinated Debt; Equity Investment. The Agent shall have received
a certificate of a senior financial officer of the Borrower (with respect to
clause (i)) and of the Borrower and CCI (with respect to clause (ii)) indicating
that (i) the Subordinated Notes have been issued and net cash proceeds have been
received therefor in the amount of $120,975,000 and (ii) the Borrower has, on
terms satisfactory to the Co-Arrangers, received an equity investment in an
amount not less than $23,000,000 from CCI as a result of the sale of the CCI
Notes.
(l) Existing Indebtedness. The Co-Arrangers shall have received
evidence satisfactory to them of (i) full repayment of all existing Indebtedness
of the Borrower and WTAC under the Existing Credit Agreement and the termination
of all guarantees and collateral pledges thereunder and (ii) release of all
Liens on the assets of Cable One (except any permitted by Section 6.3), or in
each case evidence that arrangements for such release satisfactory to the
Co-Arrangers shall have been made.
(m) Officer's Certificate. A certificate of a senior officer of the
Borrower, dated the Closing Date, to the effect set forth in the first sentence
of Section 4.2 hereof.
(n) Solvency Analysis. A certificate of a senior financial officer of
the Borrower to the effect that, to the best of such officer's knowledge, as of
the Closing Date and after giving effect to the initial extension of credit
hereunder and to the other transactions contemplated hereby, (i) the aggregate
value of all Properties of the Borrower and its Subsidiaries at their present
fair salable value (i.e., the amount that may be realized
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within a reasonable time, considered to be six months to one year, either
through collection or sale at the regular market value, conceiving the latter as
the amount that could be obtained for the Property in question within such
period by a capable and diligent businessman from an interested buyer who is
willing to purchase under ordinary selling conditions), exceed the amount of all
the debts and liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of the Borrower and its Subsidiaries, (ii) the
Borrower and its Subsidiaries will not, on a consolidated basis, have an
unreasonably small capital with which to conduct their business operations as
heretofore conducted and (iii) the Borrower and its Subsidiaries will have, on a
consolidated basis, sufficient cash flow to enable them to pay their debts as
they mature.
(o) Insurance Policies. The Agent shall have received evidence that the
insurance required by Section 5.6 is in full force and effect, together with
appropriate evidence showing the Agent as an additional named insured or loss
payee, as appropriate, all in form and substance reasonably satisfactory to the
Agent.
(p) Basic Subscribers; Cash Flow. After giving effect to the Cable One
Acquisition (i) the aggregate number of Basic Subscribers of the Borrower and
its Subsidiaries shall be at least equal to 190,000 and (ii) the aggregate
Annualized Cash Flow as at March 31, 1998 shall be at least equal to
$32,500,000, and the Agent shall have received a certificate of a Responsible
Officer of the Borrower to such effect.
(q) Acquisition. The Cable One Acquisition shall have been consummated
in accordance with the Acquisition Agreement, and the Agent shall have received
(i) a certificate of a Responsible Officer of the Borrower to the effect that
all material transactions contemplated by the Acquisition Agreement to be
consummated on or prior to the Closing Date have been consummated without
amendment, waiver or modification of the material terms thereof and (ii) the
legal opinions of counsel delivered under the Acquisition Agreement, and each
such opinion shall contain a statement or be accompanied by a letter addressed
to the Agent and the Lenders and dated such date, to the effect that Agent and
the Lenders may rely upon such opinion to the same extent as if it were
originally addressed to each of them, in form and substance satisfactory to the
Co-Arrangers.
(r) Acquisition Price. The aggregate consideration paid in connection
with the Cable One Acquisition shall not exceed $42,500,000, and the Agent shall
have received a certificate of a Responsible Officer of the Borrower to such
effect.
(s) Necessary Governmental Authorizations and Consents; Expiration of
Waiting Periods, Etc. The Borrower shall have
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obtained all governmental authorizations (including without limitation FCC
consents) and all consents of other Persons, in each case that are necessary or
advisable in connection with the Acquisition and the other transactions
contemplated by the Loan Documents and each of the foregoing shall be in full
force and effect, in each case other than those the failure to obtain or
maintain which, either individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. All applicable waiting periods shall
have expired without any action being taken or threatened by any competent
authority which would restrain, prevent or otherwise impose adverse conditions
on the Acquisition or the financing thereof. No action, request for stay,
petition for review or rehearing, reconsideration, or appeal with respect to any
of the foregoing shall be pending, and the time for any applicable agency to
take action to set aside its consent on its own motion shall have expired.
(t) Reference Lenders. The Agent shall have received a letter from the
Borrower specifying Union Bank of California, N.A. as the initial Reference
Lender hereunder.
(u) Debt Ratios. The Agent shall have received a certificate of a
senior financial officer of the Borrower setting forth, as of the Closing Date,
after giving effect to the Acquisition, the funding of all Loans to be made
hereunder on the Closing Date, the issuance of the Subordinated Notes and the
consummation of all other transactions contemplated hereby to occur on the
Closing Date, (i) the actual Maximum Total Debt Ratio (which shall not exceed
7:00:1) and (ii) the actual Maximum Senior Debt Ratio (which shall not exceed
4:00:1).
(v) Additional Proceedings. The Agent shall have received such other
approvals, opinions and documents as any Lender, through the Agent, may
reasonably request and all legal matters incident to the making of such Loans
and issuance of such Letters of Credit shall be reasonably satisfactory to the
Agent.
4.2 Conditions to Each Loan or Letter of Credit. The agreement of each
Lender to make each Loan and to participate in each Letter of Credit, and the
agreement of the Agent to issue each Letter of Credit, requested to be made,
issued or participated in by it is subject to the satisfaction, immediately
prior to or concurrently with the making of such Loan or the issuance or
participation in such Letter of Credit, of the following conditions precedent:
(a) Representations and Warranties; No Default. The following
statements shall be true and the Borrower's acceptance of the proceeds of such
Loan or its delivery of an executed Letter of Credit Request shall be deemed to
be a representation and warranty of the Borrower on the date of such Loan or as
of
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the date of issuance of such Letter of Credit, as applicable, that:
(i) The representations and warranties contained in this
Agreement and in each other Loan Document and certificate or other
writing delivered to the Lenders prior to, on or after the Closing Date
pursuant hereto and on or prior to the date for such Loan or the
issuance of such Letter of Credit are correct on and as of such date in
all material respects as though made on and as of such date except to
the extent that such representations and warranties expressly relate to
an earlier date; and
(ii) No Default has occurred and is continuing or would result
from the making of the Loan to be made on such date or the issuance of
such Letter of Credit as of such date.
(b) Legality. The making of such Loan or the issuance of such Letter of
Credit, as applicable, shall not contravene any law, rule or regulation
applicable to any Lender or any Obligor.
(c) Borrowing Notice/Letter of Credit Request. The Agent shall have
received a borrowing notice or Letter of Credit Request, as applicable, pursuant
to the provisions of this Agreement from the Borrower.
4.3 Condition Subsequent. The Agent shall have received, on or before
August 31, 1998, an opinion of Cole, Raywid & Braverman, regulatory counsel to
the Borrower and the Guarantors, substantially in the form of Exhibit G hereto
and with such reasonable qualifications and exceptions as shall be acceptable to
the Co-Arrangers.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that from and after the Closing Date, so
long as any Commitment remains in effect, any Note remains outstanding and
unpaid or any other amount is owing to any Lender or the Agent hereunder, or any
Letter of Credit remains outstanding:
5.1 Financial Statements. (a) As soon as available and in any event
within 45 days after the end of each quarterly fiscal period of each fiscal year
of the Borrower, the Borrower shall deliver to each Lender consolidated
statements of income, retained earnings and cash flows of CCI and its
Subsidiaries (provided that if CCI shall acquire any Subsidiary other than the
Borrower, such statements shall also be provided on a consolidating basis) for
such period and for the period from the beginning of the respective fiscal year
to the end of such
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period, and the related consolidated balance sheets of CCI and its Subsidiaries
(provided that if CCI shall acquire any Subsidiary other than the Borrower, such
balance sheet shall also be on a consolidating basis) as at the end of such
period, setting forth in each case in comparative form the corresponding
consolidated figures (or consolidating figures, if CCI shall have acquired such
a Subsidiary) for the corresponding periods in the preceding fiscal year (except
that, in the case of the balance sheets, such comparison shall be to the last
day of the prior fiscal year), accompanied by a certificate of a senior
financial officer of CCI and the Borrower, which certificate shall state that
said consolidated (or consolidating, if applicable) financial statements fairly
present the consolidated financial condition and results of operations of CCI,
the Borrower and its Subsidiaries, in each case in accordance with GAAP
consistently applied, as at the end of, and for, such period (subject to normal
year-end audit adjustments); and
(b) as soon as available and in any event within 120 days after the end
of each fiscal year of the Borrower, the Borrower shall deliver to each Lender
consolidated statements of income, retained earnings and cash flows of CCI and
its Subsidiaries (including, separately stated, consolidating statements of
income, retained earnings and cash flows of CCI and its Subsidiaries) for such
fiscal year and the related consolidated balance sheet of CCI and its
Subsidiaries (including, separately stated, a consolidating balance sheet of CCI
and its Subsidiaries) as at the end of such fiscal year, setting forth in
comparative form the corresponding consolidated figures (or consolidating
figures, if CCI shall have acquired such a Subsidiary) for the preceding fiscal
year, and accompanied by an opinion thereon of the Accountants, which opinion
shall state that said consolidated financial statements fairly present the
consolidated financial condition and results of operations of CCI and its
Subsidiaries as at the end of, and for, such fiscal year in accordance with
GAAP, and a statement of the Accountants to the effect that, in making the
examination necessary for their opinion, nothing came to their attention that
caused them to believe that the Borrower was not in compliance with Section 6.1,
insofar as such Section relates to accounting matters.
5.2 Certificates; Other Information. The Borrower shall
deliver to each Lender:
(a) within 45 days after the end of each quarterly fiscal period of
each fiscal year of the Borrower, (i) a Covenant Compliance Certificate and (ii)
a Quarterly Officer's Report;
(b) within five Business Days after the same are filed, copies of all
financial statements and reports which the Borrower, any Subsidiary or CCI may
make to, or file with, the
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Securities and Exchange Commission or any successor or analogous Governmental
Authority;
(c) promptly but, in any event, within five Business Days after receipt
thereof, copies of all financial reports (including, without limitation,
management letters), if any, submitted to the Borrower or any Subsidiary by the
Accountants in connection with any annual or interim audit of the books thereof;
(d) (i) as soon as available and in any event on or before December 31
of each fiscal year, a budget for the next following fiscal year setting forth
anticipated income, expense and capital expenditure items for each quarter
during such fiscal year, and (ii) quarterly, concurrently with the delivery of
the financial statements for each fiscal quarter during such fiscal year
pursuant to Section 5.1(a) above, a report setting forth a detailed comparison
to the budget referred to above;
(e) as soon as possible and in any event within five Business Days
after the occurrence of a Default or, in the good faith determination of a
Responsible Officer of the Borrower, a Material Adverse Effect, the written
statement by a Responsible Officer of the Borrower, setting forth the details of
such Default or Material Adverse Effect and the action which the Borrower
proposes to take with respect thereto;
(f) promptly, but in any event within 30 days after any change in the
senior management personnel of the Borrower or any Subsidiary, written notice of
such change;
(g) promptly but, in any event, within five Business Days after the
same become available, copies of all statements, reports and other information
which the Borrower or CCI sends to any holder of an equity interest therein;
(h) (A) as soon as possible and in any event within 30 days after the
Borrower knows or has reason to know that any Termination Event with respect to
any Plan has occurred, a statement of a Responsible Officer of the Borrower
describing such Termination Event and the action, if any, which the Borrower
proposes to take with respect thereto, (B) promptly and in any event within ten
days after receipt thereof by the Borrower or any ERISA Affiliate of the
Borrower from the PBGC, copies of each notice received by the Borrower or such
ERISA Affiliate of the PBGC's intention to terminate any Plan or to have a
trustee appointed to administer any Plan, (C) promptly and in any event within
30 days after the filing thereof with the Internal Revenue Service, copies of
each Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
with respect to each Single Employer Plan maintained for or covering employees
of the Borrower or any Subsidiary if the present value of the accrued benefits
under the Plan exceeds its assets by an amount in excess
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of $500,000 and (D) promptly and in any event within ten days after receipt
thereof by the Borrower or any ERISA Affiliate of the Borrower from a sponsor of
a Multiemployer Plan or from the PBGC, a copy of each notice received by the
Borrower or such ERISA Affiliates concerning the imposition or amount of
withdrawal liability under Section 4202 of ERISA or indicating that such
Multiemployer Plan may enter reorganization status under Section 4241 of ERISA;
(i) promptly after the commencement thereof, but in any event not later
than five Business Days after service of process with respect thereto on, or the
obtaining of knowledge by, the Borrower or any Subsidiary, notice of each
material action, suit or proceeding before any Governmental Authority;
(j) within five days following receipt by the Borrower or any
Subsidiary, copies of all notices received by the Borrower or such Subsidiary
under any Material Contract or any instrument, document or agreement relating to
any Subordinated Indebtedness, relating to any material default, any claimed
force majeure or any other material provision thereof;
(k) within five days following receipt by the Borrower or any
Subsidiary, copies of all notices received by the Borrower or such Subsidiary
from the Internal Revenue Service or other taxing authority relating to any
material dispute regarding deductions, audits or any other material matter;
(l) promptly after receipt thereof, copies of any notices received by
the Borrower or any of its Subsidiaries under any Franchise of a material
default by the Borrower or any of its Subsidiaries in the performance of its
obligations thereunder; and
(m) promptly, such additional financial and other information as any
Lender, through the Agent, may from time to time reasonably request.
5.3 Payment of Obligations. The Borrower shall, and shall cause each of
its Subsidiaries to, pay, discharge or otherwise satisfy at or before maturity
or before they become delinquent, as the case may be, all its obligations of
whatever nature, except where the failure to so satisfy such obligations would
not have a Material Adverse Effect or except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Borrower or its Subsidiaries, as the case may be.
5.4 Conduct of Business and Maintenance of Existence. The Borrower
shall, and shall cause each of its Subsidiaries to, (i) continue to engage in
business of the same general type as
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conducted by the Borrower and its Subsidiaries as of the Closing Date, (ii)
preserve, renew and keep in full force and effect its corporate, limited
liability company or partnership existence, as applicable, (iii) take all
reasonable action to maintain all rights, registrations, licenses, privileges
and franchises necessary or desirable in the normal conduct of its business, and
(iv) comply with all Contractual Obligations and Requirements of Law except to
the extent, in the case of this clause (iv), that failure to comply therewith
would not, in the aggregate, have a Material Adverse Effect.
5.5 Maintenance of Property. The Borrower shall, and shall cause each
of its Subsidiaries to, keep all property useful or necessary in its business in
good working order and condition (ordinary wear and tear excepted).
5.6 Insurance. The Borrower will, and will cause each of its
Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies, and with respect to Property and risks of a character
usually maintained by corporations engaged in the same or similar business
similarly situated, against loss, damage and liability of the kinds and in the
amounts customarily maintained by such corporations, provided that the Borrower
will in any event maintain (with respect to itself and each of its Subsidiaries)
casualty insurance and insurance against claims for damages with respect to
defamation, libel, slander, privacy or other similar injury to person or
reputation (including misappropriation of personal likeness), in such amounts as
are then customary for Persons engaged in the same or similar business similarly
situated (such insurance to cover claims arising out of events occurring before
and after the Closing Date), and shall designate the Agent as loss payee or
additional insured, as appropriate with respect to such insurance and cause such
insurance to provide for 30 days' prior written notice to Agent of any
modification or cancellation of such insurance.
5.7 Inspection of Property; Books and Records; Discussions. The
Borrower shall, and shall cause each of its Subsidiaries to, keep proper books
of records and account in which full, true and correct entries in conformity
with GAAP and all Requirements of Law shall be made of all material dealings and
transactions in relation to its business and activities; and upon reasonable
notice and at such reasonable times during usual business hours, permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of the Borrower and its
Subsidiaries with officers and employees of the Borrower and its Subsidiaries
and with its Accountants.
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5.8 Environmental Laws. The Borrower shall, and shall cause each of its
Subsidiaries to:
(a) Comply in all material respects with, and ensure compliance by all
tenants and subtenants, if any, with, all applicable Environmental Control
Statutes and obtain and comply in all material respects with any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Control Statutes;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Control Statutes and promptly comply in all material respects with
all lawful orders and directives of all Governmental Authorities regarding
Environmental Control Statutes except to the extent that the same are being
contested in good faith by appropriate proceedings; and
(c) Defend, indemnify and hold harmless the Agent and the Lenders, and
their respective employees, agents, officers and directors, from and against any
and all claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to the violation of,
noncompliance with or liability under any Environmental Control Statutes
applicable to the operations of the Borrower or any of its Subsidiaries, or the
Borrower's or any of such Subsidiaries' interest in Properties, or any orders,
requirements or demands of Governmental Authorities related thereto, including,
without limitation, attorneys' and consultants' fees, investigation and
laboratory fees, response costs, court costs and litigation expenses, except to
the extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor. This indemnity
shall continue in full force and effect regardless of the termination of this
Agreement.
5.9 Use of Proceeds. The Borrower will use the proceeds of the Loans,
and any Letters of Credit issued hereunder, as follows:
(i) the Term Loans shall be used in full on the Closing Date
(A) to refinance existing indebtedness of the Borrower and (B) to pay a portion
of the purchase price with regard to the Cable One Acquisition and expenses
associated therewith;
(ii) the Revolving Loans shall be used (A) to refinance
existing indebtedness of the Borrower, (B) to pay a portion of the purchase
price with regard to the Cable One Acquisition and expenses associated
therewith, (C) for capital expenditures,
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working capital and general corporate purposes and (D) to fund Permitted
Acquisitions; and
(iii) any Letters of Credit shall be used for general
corporate purposes.
Notwithstanding anything herein to the contrary, no Loan or Letter of Credit
will be used for the purchasing or carrying of any Margin Stock.
5.10 Compliance With Laws, Etc. The Borrower shall comply, and shall
cause each of its Subsidiaries to comply, in all material respects with all
applicable Requirements of Law, such compliance to include, without limitation
(i) paying before the same become delinquent all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
upon any of its Properties and (ii) paying all lawful claims which if unpaid
might become a Lien upon any of its Properties; provided, however, that neither
the Borrower nor any of its Subsidiaries shall be required to pay and discharge
or to cause to be paid and discharged any such tax, assessment, charge, levy or
claim so long as (A) the validity or applicability thereof is being contested in
good faith by appropriate proceedings and (B) the Borrower or such Subsidiary
shall, to the extent required by GAAP, have set aside on its books adequate
reserves with respect thereto.
5.11 Certain Obligations Respecting Subsidiaries; Prohibitions on
Certain Agreements. (a) The Borrower will cause each of its Subsidiaries
hereafter formed or acquired to execute and deliver to the Agent promptly upon
the formation or acquisition thereof (i) a Guarantee in form and substance
satisfactory to the Agent, guaranteeing the Obligations, (ii) a Guarantor
Security Agreement,in form an substance satisfactory to the Agent, granting to
the Agent, for the benefit of the Lenders, a security interest in the tangible
and intangible personal property of such Subsidiary, together with appropriate
Lien searches requested by the Agent indicating the Lenders' first priority Lien
on such personal property, (iii) UCC-1 Financing Statements, duly executed by
such Subsidiary, in form and substance satisfactory to the Agent and, in
connection with such deliveries, cause to be delivered to the Agent (A) the
stock certificates representing the issued and outstanding shares of stock of
such Subsidiaries, together with undated stock powers executed in blank, (B) a
favorable written opinion of counsel satisfactory to the Agent as to such
matters relating thereto as any Lender through the Agent may reasonably request,
in form and substance satisfactory to the Agent and (C) such other agreements,
instruments, approvals or other documents as any Lender through the Agent may
reasonably request and (iv) evidence acceptable to the Agent that the Borrower
and such Subsidiary are
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concurrently complying with Section 4.19 of the Subordinated Indenture.
(b) The Borrower will, and will cause each of its Subsidiaries to, take
such action from time to time as shall be necessary to ensure that the Borrower
and each of its Subsidiaries at all times own (subject only to the Liens of the
Collateral Documents and the Guarantor Collateral Documents) at least the same
percentage of the issued and outstanding shares of each class of stock of each
of its Subsidiaries (or the same percentage of such other equity interest, as
applicable) as is owned on the date hereof. In the event that any additional
shares of stock (or other equity interests) shall be issued by any Subsidiary,
the Borrower agrees forthwith to deliver (or cause to be delivered) to the Agent
pursuant to the Collateral Documents and the Guarantor Collateral Documents the
certificates evidencing such shares of stock, accompanied by undated stock
powers executed in blank (or take such other actions as necessary to perfect an
interest in such other equity interests) and to take such other action as the
Agent shall request to perfect the security interest created therein pursuant to
the Collateral Documents and the Guarantor Collateral Documents.
(c) Except for the documents executed in connection with the
Subordinated Indenture, the Borrower will not, and will not permit any of its
Subsidiaries to enter into any indenture, agreement, instrument or other
arrangement that, directly or indirectly, prohibits or restrains, or has the
effect of prohibiting or restraining, or imposes materially adverse conditions
upon, the incurrence or payment of indebtedness, the granting of Liens, the
declaration or payment of dividends, the making of loans, advances or
investments or the sale, assignment, transfer or other disposition of Property.
(d) The Borrower will cause all Telephone Systems owned by it or its
Subsidiaries to be held by Classic Telephone or one or more of its Subsidiaries.
5.12 Interest Rate Protection. The Borrower will, within 120 days of
the Closing Date and at all times thereafter, cause at least 50% of the
aggregate outstanding principal amount of the Indebtedness of the Borrower and
its Subsidiaries, together with the aggregate unused amount of the Commitments
to be either (i) subject to a fixed interest rate pursuant to the Subordinated
Indenture or (ii) subject to Interest Rate Agreements with one or more of the
Lenders (and/or with a bank or other financial institution having capital,
surplus and undivided profits of at least $500,000,000) on terms satisfactory to
the Co-Arrangers, in each case for a period of at least two years measured from
the Closing Date.
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5.13 Year 2000. The Borrower will take, and will cause its Subsidiaries
to take, all action necessary to assure that the Borrower's and each
Subsidiary's computer-based systems are able to operate effectively and process
data effectively, including data composed of or including dates on and after
January 1, 2000. At the request of the Agent, the Borrower will provide the
Lenders assurances reasonably acceptable to the Agent of the Borrower's and each
Subsidiary's capacity to deal with the foregoing.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that from and after the Closing Date, so
long as any Commitments remain in effect, any Note remains outstanding and
unpaid or any other amount is owing to any Lender or the Agent hereunder, or any
Letter of Credit remains outstanding:
6.1 Financial Condition Covenants. The Borrower shall not:
(a) Maximum Total Debt Ratio. As of the last day of any fiscal quarter,
permit the Maximum Total Debt Ratio to exceed the following levels during the
periods indicated:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date to and including June 30,
1999 7:00:1
July 1, 1999 to and including
December 31, 1999 6.90:1
January 1, 2000 to and including
December 31, 2000 6:75:1
January 1, 2001 to and including
December 31, 2001 6:50:1
January 1, 2002 to and including
December 31, 2002 6:00:1
January 1, 2003 and thereafter 5:50:1
</TABLE>
(b) Maximum Senior Debt Ratio. As of the last day of any fiscal
quarter, permit the Maximum Senior Debt Ratio to exceed the following levels
during the periods indicated:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date to and including
December 31, 1999 4:00:1
</TABLE>
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<TABLE>
<S> <C>
January 1, 2000 to and including
December 31, 2000 3:75:1
January 1, 2001 to and including
December 31, 2001 3:50:1
January 1, 2002 to and including
December 31, 2002 3:25:1
January 1, 2003 and thereafter 3:00:1
</TABLE>
(c) Total Interest Coverage Ratio. As of the last day of any fiscal
quarter, permit the Total Interest Coverage Ratio to be less than the following
levels during the periods indicated:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date to and including
December 31, 1999 1:40:1
January 1, 2000 to and including
December 31, 2000 1:50:1
January 1, 2001 to and including
December 31, 2001 1:60:1
January 1, 2002 and thereafter 1:75:1
</TABLE>
(d) Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio
as of the last day of any fiscal quarter, commencing with the fiscal quarter
beginning September 30, 2002, to be less than 1.05:1.
(e) Pro Forma Debt Service Coverage Ratio. As of the last day of any
fiscal quarter, permit the Pro Forma Debt Service Coverage Ratio to be less than
the following levels during the periods indicated:
<TABLE>
Period Ratio
------ -----
<S> <C>
Closing Date to and including
December 31, 2001 1:25:1
January 1, 2002 to and including
December 31, 20002 1:35:1
January 1, 2003 and thereafter 1:40:1
</TABLE>
(f) Maximum Capital Expenditures. Permit Capital Expenditures of the
Borrower and its Subsidiaries to be more than the following levels during the
periods indicated:
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<TABLE>
<CAPTION>
Period Maximum Amount
- ------ --------------
<S> <C>
Closing Date to December 31,
1998 $ 9,000,000
Fiscal Year Ending
December 31, 1999 $19,000,000
Fiscal Year Ending
December 31, 2000 $19,000,000
Fiscal Year Ending
December 31, 2001 $19,000,000
</TABLE>
Notwithstanding the foregoing, in the event the Borrower and its
Subsidiaries do not, in any fiscal year, exhaust such amount with respect to
such fiscal year, such excess amount may be used to make, or commit to make,
Capital Expenditures in the immediately following fiscal year, but not
thereafter.
6.2 Limitation on Indebtedness. The Borrower shall not create, incur,
assume or suffer to exist any Indebtedness, and shall not permit any of its
Subsidiaries to create, incur, assume or suffer to exist any Indebtedness,
except for:
(a) Indebtedness created hereunder and under the Notes and the other
Loan Documents;
(b) Indebtedness of the Borrower or any of its Subsidiaries outstanding
on the Closing Date and listed on Schedule 6.2 (and not referred to in any other
clause of this Section 6.2);
(c) the Subordinated Indebtedness;
(d) Indebtedness under any Interest Rate Agreement required pursuant to
Section 5.12;
(e) Indebtedness (i) evidenced by performance bonds issued in the
ordinary course of business or reimbursement obligations in respect thereof,
(ii) evidenced by a letter of credit facility related to insurance associated
with claims for work-related injuries or (iii) for bank overdrafts incurred in
the ordinary course of business that are promptly repaid, in an aggregate amount
(under clauses (i), (ii) and (iii)) not to exceed $1,000,000 at any one time
outstanding;
(f) Indebtedness of Wholly Owned Subsidiaries of the Borrower to the
Borrower or to other Wholly Owned Subsidiaries of the Borrower;
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(g) additional Indebtedness of the Borrower and its Subsidiaries not
referred to in clauses (a) - (f) above (including, without limitation,
Capitalized Lease Obligations and other Indebtedness secured by Liens permitted
by Section 6.3(b)) up to but not exceeding $2,000,000 at any one time
outstanding; and
(h) Indebtedness to the extent representing a replacement, renewal,
refinancing or extension (collectively, a "refinancing") of outstanding
Indebtedness of the Borrower or any Subsidiary, as the case may be, incurred in
compliance with clause (b) or (c) above; provided, however, that (i)
Indebtedness of the Borrower may not be refinanced under this clause (h) with
Indebtedness of any Subsidiary, (ii) any such refinancing shall not exceed the
sum of the principal amount or redemption payment value (or, if such
Indebtedness provides for a lesser amount to be due and payable upon a
declaration of acceleration thereof at the time of such refinancing, an amount
no greater than such lesser amount) of the Indebtedness being refinanced plus
the amount of accrued interest thereon and such reasonable fees and expenses
incurred in connection therewith, (iii) Indebtedness representing a refinancing
shall not mature prior to the stated maturity of the Indebtedness refinanced and
shall have a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Indebtedness being refinanced, (iv)
Subordinated Indebtedness may only be refinanced with Indebtedness subordinated
to the Obligations, and otherwise on terms, at least as favorable to the Lenders
as the Subordinated Indebtedness and (v) unsecured Indebtedness which is pari
passu with the Obligations may only be refinanced with unsecured Indebtedness,
which is either pari passu with the Obligation or subordinated to the
Obligations on terms at least as favorable to the Lenders as the Subordinated
Indebtedness.
6.3 Limitation on Liens. The Borrower shall not, and shall not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired, except for:
(a) Liens created hereunder or under any of the other Loan Documents;
(b) Liens on real and/or tangible personal Property acquired after the
date hereof (by purchase, construction or otherwise) by the Borrower or any of
its Subsidiaries, each of which Liens either (A) existed on such Property before
the time of its acquisition and was not created in anticipation thereof or (B)
was created solely for the purpose of securing Indebtedness representing, or
incurred to finance, refinance or refund, the cost (including the cost of
construction) of such Property; provided that (i) no such Lien shall extend to
or cover any Property of the Borrower or any such Subsidiary other than the
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Property so acquired and improvements thereon and (ii) the principal amount of
Indebtedness secured by any such Lien shall at no time exceed 100% of the fair
market value (as determined in good faith by a senior financial officer of the
Borrower) of such Property at the time it was acquired (by purchase,
construction or otherwise);
(c) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with respect
thereto are maintained on the books of the Borrower or its Subsidiaries, as the
case may be, in conformity with GAAP;
(d) Liens created by operation of law not securing the payment of
Indebtedness for money borrowed or guaranteed, including carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business which are not overdue for a period of
more than 30 days or which are being contested in good faith by appropriate
proceedings and Liens securing judgments but only to the extent, for an amount
and for a period not resulting in an Event of Default under Section 7(i);
(e) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(f) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, would not cause a Material Adverse Effect;
(h) Liens existing on the date hereof and referred to in Schedule 6.3
(and not referred to in any other clause of this Section 6.3); and
(i) Liens in favor of The Chase Manhattan Bank under the Existing
Credit Agreement, provided that such Liens shall have been released (and
evidence thereof provided to the Agent) within three Business Days following the
Closing Date.
6.4 Limitation on Fundamental Changes. The Borrower shall not, and
shall not permit any of its Subsidiaries to, (i) enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or
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dissolution), or (ii) convey, sell, lease, assign, transfer or otherwise dispose
of all or substantially all of its property, business or assets, or (iii)
acquire any business or Property from, or capital stock of, or be a party to any
acquisition of, any Person (except for purchases of equipment, programming
rights and other Property to be sold or used in the ordinary course of business)
except that, so long as no Default has occurred and is continuing or would
result therefrom:
(a) Black Creek may consummate the Cable One Acquisition on the Closing
Date in accordance with the terms of the Acquisition Agreement;
(b) the Borrower may consummate Permitted Acquisitions in accordance
with the terms of Section 6.7(h);
(c) any Subsidiary of the Borrower may be merged or consolidated with
or into: (i) the Borrower, if the Borrower shall be the continuing or surviving
corporation or (ii) any other Subsidiary; provided that if any such transaction
shall be between a Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned
Subsidiary shall be the continuing or surviving corporation; and
(d) any Subsidiary may sell, lease, transfer or otherwise dispose of
any or all of its Property (upon voluntary liquidation or otherwise) to the
Borrower or a Wholly Owned Subsidiary of the Borrower.
6.5 Limitation on Sale of Assets. The Borrower will not, nor will it
permit any of its Subsidiaries to, make any Asset Disposition except Asset
Dispositions of (i) obsolete or worn-out Property, tools or equipment no longer
used or useful in its business so long as the aggregate amount thereof sold in
any single fiscal year by the Borrower and its Subsidiaries shall not have a
fair market value in excess of $2,000,000 and (ii) CATV Systems, so long as the
aggregate fair market value of any CATV Systems sold under this clause (ii)
during any twelve-month period shall not exceed $2,000,000; provided that in
each case, (A) the Borrower makes the mandatory payment, if any, required
pursuant to Section 2.5(b), (B) no Default has occurred and is continuing or
would result from such Asset Disposition, (C) the Borrower or such Subsidiary,
as applicable, receives at least fair market value consideration for such Asset
Disposition, as determined in good faith by the Board of Directors (or similar
authority for a limited liability company or partnership) of the Borrower or
such Subsidiary, as applicable, and evidenced in a written resolution thereof,
(D) not less than 75% of the consideration received by the Borrower or such
Subsidiary, as applicable, is in the form of cash and (E) if such Asset
Disposition is of the Borrower's equity interest in a Subsidiary (or any
Subsidiary's equity interest in another Subsidiary), such
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Asset Disposition shall constitute a sale of all equity interests in such
Subsidiary. .
6.6 Limitation on Dividends. The Borrower shall not, and shall not
permit any of its Subsidiaries to (a) if a corporation, declare or pay any
dividend (other than dividends payable solely in common stock of the Borrower or
its Subsidiaries) on, or make any payment on account of, or set apart assets for
a sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of Capital Stock of
the Borrower or its Subsidiaries or any warrants or options to purchase any such
Capital Stock, whether now or hereafter outstanding, and (b) if a partnership or
a limited liability company, make any distribution with respect to the ownership
interests therein, or, in either case, any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of the Borrower or any Subsidiary (such declarations, payments,
setting apart, purchases, redemptions, defeasance, retirements, acquisitions and
distributions being herein called "Restricted Payments"), except that (i) any
Subsidiary (other than WTAC) may make Restricted Payments to the Borrower or to
any other Wholly Owned Subsidiary of the Borrower and (ii) commencing February
1, 2004, the Borrower may make Restricted Payments to CCI for the purpose of
permitting CCI to make regularly scheduled payments of interest on the CCI Notes
as required pursuant to the terms of the CCI Indenture as in effect on the
Closing Date; provided that in each case (A) no Default has occurred and is
continuing or would result from the making of such Restricted Payment, (B) the
aggregate amount of all Restricted Payments made on or after the Closing Date
shall not exceed an amount equal to the difference between (x) the Cumulative
Credit and (y) 1.4 times Cumulative Interest Expense (and the Agent shall have
received a certificate of a Responsible Officer of the Borrower setting forth
calculations supporting the condition described in this clause (y) and (C) with
respect to clause (ii) above, no such Restricted Payment shall be permitted
during any period in which the Maximum Total Debt Ratio equals or exceeds 5.50
to 1.00.
6.7 Limitation on Investments, Loans and Advances. The Borrower will
not, and will not permit any of its Subsidiaries to, make any advance, loan,
extension of credit or capital contribution to, or purchase any stock, bonds,
notes, debentures or other securities of or any assets constituting a business
unit of, or make any other investment in (any of the foregoing, an
"investment"), any Person, except for:
(a) investments permitted by Section 6.4(a) and (b);
(b) investments in marketable securities, liquid investments and other
financial instruments that are acquired for investment purposes and may be
readily sold or otherwise
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liquidated, that have a value which may be readily established and which are
investment grade;
(c) investments outstanding on the date hereof and identified in
Schedule 6.7;
(d) operating deposit accounts with banks;
(e) investments by the Borrower and its Subsidiaries in the Borrower
and its Subsidiaries;
(f) Interest Rate Agreements, provided that, without the limiting
obligation of the Borrower under Section 5.12, when entering into any Interest
Rate Agreement that at the time has, or at any time in the future may give rise
to, any credit exposure, the aggregate credit exposure under all Interest Rate
Agreements (including the Interest Rate Agreement being entered into) shall not
exceed $5,000,000;
(g) investments not referred to in any other clause of this Section 6.7
up to but not exceeding $2,000,000 in the aggregate; and
(h) Permitted Acquisitions, so long as:
(i) unless the Majority Lenders shall otherwise consent in
writing, (1) the aggregate purchase price of all Permitted Acquisitions
of CATV Systems shall not exceed $10,000,000 and (2) the aggregate
purchase price of all Permitted Acquisitions of Other Communications
Businesses shall not exceed $2,000,000;
(ii) such acquisition (if by purchase of assets, merger or
consolidation) shall be effected in such manner so that the acquired
CATV System and the related assets thereof, are owned either by the
Borrower or a Wholly Owned Subsidiary of the Borrower, and, if effected
by merger or consolidation involving the Borrower, the Borrower shall
be the continuing or surviving entity;
(iii) such acquisition (if by purchase of stock) shall be
effected in such manner so that the acquired entity becomes a Wholly
Owned Subsidiary of the Borrower;
(iv) the Borrower shall deliver to the Agent (which shall
promptly forward copies thereof to each Lender) (1) no later than five
Business Days prior to the consummation of each such acquisition (or
such earlier date as shall be five Business Days after the execution
and delivery thereof), executed counterparts of the respective
agreements or instruments pursuant to which such acquisition is to be
consummated (including, without limitation, any related
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management, non-compete, employment, option or other material
agreements), any schedules to such agreements or instruments and all
other material ancillary documents to be executed or delivered in
connection therewith and (2) promptly following request therefor,
copies of such other information or documents relating to each such
acquisition as the Agent or the Majority Lenders shall have reasonably
requested;
(v) the agreements, instruments and other documents referred
to in the foregoing clause (iv) shall provide that
(1) the entire amount of the consideration payable by
the Borrower and its Subsidiaries in connection with such
acquisition (other than customary post-closing adjustments and
indemnity obligations, and other than Indebtedness incurred in
connection with such acquisition that is permitted under
Section 6.2(g)) shall be payable on the date of such
acquisition,
(2) neither the Borrower nor any of its Subsidiaries
shall, in connection with such acquisition, assume or remain
liable in respect of (x) any Indebtedness of the seller or
sellers (except for Indebtedness permitted under Section
6.2(g)) or (y) other obligations of the seller or sellers
(except for obligations incurred in the ordinary course of
business in operating the CATV System so acquired and
necessary and desirable to the continued operation of such
CATV System), and
(3) all Property to be acquired in connection with
such acquisition shall be free and clear of any and all Liens,
except to the extent permitted by Section 6.3 hereof (and in
the event any such Property is subject to any Lien not
permitted by this clause (3) then concurrently with such
acquisition such Lien shall be released);
(vi) no later than five Business Days prior to the
consummation of such acquisition, the Borrower shall have delivered to
each Lender a Covenant Compliance Certificate prepared on a pro forma
basis in accordance with Section 1.2(e) and assuming that interest for
such period had been equal to the actual blended interest rate paid by
the Borrower during such period on the Loans);
(vii) the acquired CATV System shall be in a State in which
the Borrower and its Subsidiaries have CATV Systems on the Closing Date
(or another State contiguous thereto);
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(viii) concurrently with the consummation of such acquisition,
all actions (1) required under Section 5.11 and (2) required by the
Agent to perfect a security interest in all personal property assets
acquired shall have been taken (including but not limited to delivery
of an opinion of counsel to the Borrower and its Subsidiaries in form
and substance satisfactory to the Co-Arrangers with respect to such
perfection and with respect to regulatory compliance of the assets or
entity to be acquired); and
(ix) at the time of such acquisition and after giving effect
thereto, no Default shall have occurred and shall be continuing.
6.8 Modifications of Certain Documents; Subordinated Indebtedness;
Certain Changes. (a) The Borrower will not, nor will it permit any of its
Subsidiaries to, consent to any modification, supplement or waiver of any of the
provisions of (i) the Acquisition Agreement, (ii) the Tax Sharing Agreement,
(iii) any agreement, instrument or other document relating to the Subordinated
Indebtedness (including but not limited to the Subordinated Indenture) or (iv)
the Certificate of Incorporation of the Borrower or of Universal Cable Holding,
Inc., Universal Cable Communications Inc., Universal Cable of Beaver, Oklahoma,
Inc. and Universal Cable Midwest, Inc., without, in each case, the prior written
consent of the Majority Lenders.
(b) Neither the Borrower, nor any of its Subsidiaries, will purchase,
redeem, retire or otherwise acquire for value, or set apart any money for a
sinking, defeasance or other analogous fund for the purchase, redemption,
retirement or other acquisition of, or make any payment or prepayment of the
principal of or interest on, or any other amount owing in respect of, the
Subordinated Indebtedness; provided that the Borrower may make regularly
scheduled payments of interest on the Subordinated Notes as required pursuant to
the terms of the Subordinated Indenture as in effect on the Closing Date (it
being understood that no such payment shall be permitted if (i) a Default shall
have occurred and be continuing under Section 7(a), or (ii) for the period
described in the Subordinated Indenture, any other Default shall have occurred
and be continuing).
(c) The Borrower shall not designate any Indebtedness as "Designated
Senior Indebtedness" (as defined in Subordinated Indenture) for purposes of the
Subordinated Indenture without the
prior written consent of Majority Lenders.
(d) The Borrower will not, nor will it permit any of its Subsidiaries
to, change its legal, operating or trade names without the prior written consent
of the Agent.
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6.9 Transactions with Affiliates. The Borrower shall not, and shall not
permit any of its Subsidiaries to, enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of property, employee
compensation arrangements, or the rendering of any service, with any Affiliate
or any Subsidiary not a Wholly Owned Subsidiary unless (i) such transaction is
in the ordinary course of the Borrower's or such Subsidiary's business and is
upon terms no less favorable to the Borrower or such Subsidiary, as the case may
be, than it would obtain in a comparable arm's length transaction with a Person
not an Affiliate, (ii) in the event such transaction involves an aggregate
amount in excess of $1,000,000, the terms of such transaction are set forth in
writing and shall have been approved by a majority of the members of the Board
of Directors (or corresponding authority with respect to a limited liability
company or partnership) having no personal stake in such transaction (and such
majority determines that such transaction satisfies the criteria in clause (i)
above) and (iii) in the event such transaction involves an aggregate amount in
excess of $10,000,000, the Borrower has received a written opinion from a
nationally recognized independent investment banking firm, or nationally
recognized accounting or appraisal firm, that such transaction is fair to the
Borrower and its Subsidiaries from a financial point of view. Notwithstanding
any provision in this Section 6.9 to the contrary, the Borrower shall be
permitted to pay the Investment Banking Fee provided that no Default has
occurred and is continuing.
6.10 Fiscal Year. Borrower shall not permit its fiscal year or the
fiscal year of any of its Subsidiaries to end on a day other than December 31.
6.11 Sale-Leaseback Transactions. The Borrower shall not, and shall not
permit any of its Subsidiaries to, sell, assign or otherwise transfer any of its
Properties, rights or assets (whether now owned or hereafter acquired) to any
Person and thereafter directly or indirectly lease back the same or similar
property.
6.12 Management Fees. The Borrower shall not, and shall not permit any
of its Subsidiaries to, incur any management fees for services rendered.
Notwithstanding any provision in this Section 6.12 to the contrary, the Borrower
shall be permitted to pay the Investment Banking Fee provided that no Default
has occurred and is continuing.
6.13 Lines of Business. The Borrower will not, nor will it permit any
of its Subsidiaries to, engage to any substantial extent in any line or lines of
business activity other than the business of owning and operating (i) CATV
Systems, (ii) Telephone Systems (and businesses related to such Telephone
Systems) and (iii) Other Communications Businesses, provided that in any event
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at least 85% of the gross operating revenues of the Borrower and its
Subsidiaries shall be derived from the ownership and operation of U.S. domestic
CATV Systems.
6.14 Limitation on Equity Offerings. The Borrower will not, and will
not permit any Subsidiary to, make any Equity Offering of the ownership
interests of any Subsidiary (other than to the Borrower or a Wholly Owned
Subsidiary).
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall default in the payment when due (whether at
stated maturity or upon mandatory or optional prepayment) of any principal of or
interest on any Loan, any fee or any other amount payable by it hereunder or
under any other Loan Document; or
(b) Any representation or warranty made or deemed made by any Obligor
herein or in any other Loan Document or which is contained in any certificate,
document or financial or other statement furnished at any time under or in
connection with this Agreement or any other Loan Document shall prove to have
been incorrect in any material respect when made or deemed made; or
(c) The Borrower shall default in the observance or performance of any
agreement contained in Section 4.3, 5.2(e), 5.4(ii) or 5.9 or any provision of
Section 6; or CCI shall default in the performance of any of its obligations
under Section 24 of the Pledge Agreement; or
(d) Any Obligor shall default in the observance or performance of any
other agreement or obligation contained in this Agreement or the other Loan
Documents (or, in the case of CCI, in the performance of any of its obligations
in the Tax Sharing Agreement) (other than as provided in paragraphs (a) through
(c) of this Section), and such default shall continue unremedied for a period of
30 days after notice thereof from the Agent to the Borrower; or
(e) Any Guarantee shall cease, for any reason, to be in full force and
effect; or
(f) The Borrower, CCI or any other Obligor shall default in the payment
when due of principal of or interest on any Indebtedness (other than the Notes)
issued under the same indenture or other agreement, if the original principal
amount of Indebtedness covered by such indenture or agreement is $1,000,000 or
more, or in the payment when due of any amount under any
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Interest Rate Agreement; or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Indebtedness or
any event specified in any Interest Rate Agreement shall occur if the effect of
such event is to cause, or (with the giving of any notice or the lapse of time
or both) to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, such Indebtedness to become
due, or to be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise), prior to its stated maturity or to have the interest
rate thereon reset to a level so that securities evidencing such Indebtedness
trade at a level specified in relation to the par value thereof or, in the case
of an Interest Rate Agreement, to permit the payments owing under such Interest
Rate Agreement to be liquidated; or
(g) (i) The Borrower or any other Obligor shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or the Borrower or any
other Obligor shall make a general assignment for the benefit of its creditors;
or (ii) there shall be commenced against the Borrower or any other Obligor any
case, proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such adjudication
or appointment or (B) remains undismissed, undischarged, unstayed or unbonded
for a period of 60 days; or (iii) there shall be commenced against the Borrower
or any other Obligor any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) the Borrower or
any other Obligor shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) the Borrower or any other Obligor shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due or there shall be a general assignment for
the benefit of creditors; or
(h) (i) The Borrower or any Commonly Controlled Entity shall engage in
any non-exempt "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding
deficiency" (as
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defined in Section 302 of ERISA), whether or not waived, shall exist with
respect to any Plan, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate any Single Employer Plan, which
Reportable Event or commencement of proceedings or appointment of a trustee
would reasonably be expected to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA (other than a standard termination) or (v) the
Borrower or any Commonly Controlled Entity would reasonably be expected to incur
any liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan; and in each case regarding clauses (i)
through (v) above, such event or condition, together with all other such events
or conditions, if any, would reasonably be expected to result in a Material
Adverse Effect; or
(i) One or more judgments or decrees shall be entered against the
Borrower or any Subsidiary involving in the aggregate a liability (not paid or
fully covered by insurance where the insurer has admitted liability in respect
of such judgment) of $1,000,000 or more, or involving in the aggregate a
liability (regardless of insurance coverage) of $5,000,000 or more, and all such
judgments or decrees shall not have been vacated, discharged, stayed or bonded
pending appeal within 30 days from the entry thereof or in any event five days
before the date of any sale pursuant to such judgment or decree; or
(j) A reasonable basis shall exist for the assertion against the
Borrower or any of its Subsidiaries, or any predecessor in interest of the
Borrower or any of its Subsidiaries, of (or there shall have been asserted
against the Borrower or any of its Subsidiaries) any claims or liabilities,
whether accrued, absolute or contingent, based on or arising from the
generation, storage, transport, handling or disposal of Hazardous Materials by
the Borrower or any of its Subsidiaries, Affiliates or predecessors that, in the
judgment of the Majority Lenders is reasonably likely to be determined adversely
to the Borrower or any of its Subsidiaries, and the amount thereof (either
individually or in the aggregate) is reasonably likely to have a Material
Adverse Effect (insofar as such amount is payable by the Borrower or any of its
Subsidiaries but after deducting any portion thereof that is reasonably expected
to be paid by other creditworthy Persons jointly and severally liable therefor);
or
(k) Either one or more of the following events shall occur and be
continuing:
(i) the Borrower shall cease to be a Wholly Owned Subsidiary
of CCI;
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(ii) J. Merritt Belisle and Steven E. Seach shall cease for
any reason to be actively involved in the daily operation and strategic
direction of the business of the Borrower and its Subsidiaries (unless
a permanent replacement or replacements with equivalent knowledge and
experience in the cable television industry acceptable to the Majority
Lenders shall have been appointed within 90 days);
(iii) prior to a Qualified Public Offering, the Initial
Stockholders shall cease to own, collectively, on a fully diluted basis
(in other words, giving effect to the exercise of any warrants, options
and conversion and other rights), capital stock representing at least
75% of the votes that may be cast in an election of directors of CCI;
(iv) after a Qualified Public Offering either (x) the Initial
Stockholders shall cease to own, collectively, on a fully diluted basis
(in other words, giving effect to the exercise of any warrants, options
and conversion and other rights), capital stock representing at least
30% of the aggregate fair market value (or, if greater, the aggregate
liquidation value) of the capital stock of all classes of CCI and cease
to hold at least 30% of the aggregate shares of voting capital stock of
CCI (representing at least 30% of the votes that may be cast in an
election of directors of CCI) or (y) any person or group (within the
meaning of Rule 13d-5 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Section 13(d) and 14(d) of the
Exchange Act) (other than the Initial Stockholders) becomes, directly
or indirectly, in a single transaction or in a related series of
transactions by way of merger, consolidation or other business
combination or otherwise, the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than 30% of the capital stock of
CCI on a fully-diluted basis (in other words, giving effect to the
exercise of any warrants, options and conversion and other rights); or
(v) a majority of the Board of Directors of CCI and the
Borrower, respectively, shall no longer be composed of individuals (i)
who were members of said applicable Board on the Closing Date, (ii)
whose election or nomination to said applicable Board was approved by
individuals referred to in the preceding clause (i) constituting at the
time of such election or nomination at least a majority of said Board
or (iii) whose election or nomination to said Board was approved by the
Initial Stockholders; or
(l) Except for Franchises for CATV Systems that cover fewer than 5% of
the Subscribers of the Borrower and its Subsidiaries (determined as at the last
day of the most recent fiscal quarter
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for which a Quarterly Officers' Report shall have been delivered), one or more
Franchises relating to the CATV Systems of the Borrower and its Subsidiaries
shall be terminated or revoked such that the Borrower or such Subsidiary is no
longer able to operate such Franchises and retain the revenue received therefrom
or the Borrower or such Subsidiary or the grantors of such Franchises shall fail
to renew such Franchises at the stated expiration thereof such that the Borrower
or such Subsidiary is no longer able to operate such Franchises and retain the
revenue received therefrom; or
(m) The Liens created by the Collateral Documents and/or the Guarantor
Collateral Documents shall at any time not constitute valid and perfected Liens
on the collateral intended to be covered thereby (to the extent perfection by
filing, registration, recordation or possession is required herein or therein)
in favor of the Agent, free and clear of all other Liens (other than Liens
permitted under Section 6.3), or, except for expiration in accordance with its
terms, any of the Collateral Documents and/or the Guarantor Collateral Documents
shall for whatever reason be terminated or cease to be in full force and effect,
or the enforceability thereof shall be contested by any Obligor; or
(n) There shall be any amendment to the provisions of the Subordinated
Indenture or the CCI Indenture without the prior written consent of the Majority
Lenders or the Borrower or any Subsidiary shall fail to comply with the
subordination provisions of the Subordinated Indenture; or
(o) Any of the following shall occur and be continuing:
(i) Universal Cable Holding, Inc. shall cease to own
at least 75% of the issued and outstanding shares of common
stock of each of Universal Cable Communications Inc.,
Universal Cable of Beaver, Oklahoma, Inc. and Universal
Cable Midwest, Inc.,
(ii) Ashley Kimery, Tracy Anderson and/or Chris Calavitta,
collectively, shall cease to own at least 25% of the issued and
outstanding shares of common stock of each of Universal Cable
Communications Inc., Universal Cable of Beaver, Oklahoma, Inc. and
Universal Cable Midwest, Inc.,
(iii) Universal Cable Communications Inc., Universal Cable of
Beaver, Oklahoma, Inc. and Universal Cable Midwest, Inc. shall cease to
hold all of the issued and outstanding shares of Junior Stock of
Classic Cable Holding, Inc. and the Borrower shall cease to own all of
the issued and outstanding shares of Senior Stock of Classic Cable
Holding, Inc.; or
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(iv) Classic Cable Holding, Inc. shall cease to hold all of
the issued and outstanding shares of Junior Stock of WTAC and the
Borrower shall cease to hold all of the issued and outstanding shares
of Senior Stock of WTAC; or
(p) Any Subsidiary of the Borrower shall fail to be a member of the
same affiliated group of corporations filing consolidated returns for Federal
income tax purposes (within the meaning of Section 1504 of the Code);
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (g) above, automatically the Commitments to the Borrower and the
commitment to issue Letters of Credit shall immediately terminate and the Loans
made to the Borrower hereunder (with accrued interest thereon) and all other
Obligations shall immediately become due and payable, and (B) if such event is
any other Event of Default, with the consent of the Majority Lenders, the Agent
may, or upon the request of the Majority Lenders, the Agent shall, take any or
all of the following actions: (i) by notice to the Borrower declare the
Commitments to the Borrower and the commitment to issue Letters of Credit to be
terminated forthwith, whereupon such Commitments and the commitment to issue
Letters of Credit shall immediately terminate; and (ii) by notice of default to
the Borrower, declare the Loans (with accrued interest thereon) and all other
Obligations under this Agreement and the Notes to be due and payable forthwith,
whereupon (x) the same shall immediately become due and payable and (y) to the
extent any Letters of Credit are then outstanding, the Borrower shall make a
Cash Collateral Deposit in an amount equal to the aggregate Letter of Credit
Amount. In all cases, with the consent of the Majority Lenders, the Agent may
enforce any or all of the Liens and security interests and other rights and
remedies created pursuant to any Loan Document or available at law or in equity.
Except as expressly provided above in this Section, presentment, demand, protest
and all other notices of any kind are hereby expressly waived by the Borrower.
SECTION 8. THE AGENT
8.1 Appointment. Each Lender hereby irrevocably designates and appoints
Union Bank of California, N.A., as Agent for such Lender under this Agreement
and the other Loan Documents, and each such Lender irrevocably authorizes Union
Bank of California, N.A., as the Agent for such Lender, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Agent by the terms of this Agreement and the other Loan Documents,
together with such other powers as are reasonably incidental thereto. Each
Lender hereby appoints and authorizes each Co-Arranger and the
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Syndication Agent and Documentation Agent to act as its agent under and in
accordance with the terms of this Agreement. The obligations of the Co-Arrangers
and the Syndication Agent hereunder shall terminate upon completion of the
initial syndication of the Commitments. The Documentation Agent shall have no
obligations hereunder after the Closing Date. Notwithstanding any provision to
the contrary elsewhere in this Agreement, none of the Agent, the Syndication
Agent, the Documentation Agent or any Co-Arranger (each, a "Facility Agent" and
collectively the "Facility Agents") shall have any duties or responsibilities,
except those expressly set forth herein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against any Facility Agent.
8.2 Delegation of Duties. The Facility Agents may execute any of their
duties under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. No Facility Agent shall be responsible for
the negligence or misconduct of any agents or attorneys-in-fact selected by it
with reasonable care.
8.3 Exculpatory Provisions. No Facility Agent, nor any of such Facility
Agent's officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Loan
Document (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower, any
Subsidiary or any other Obligor or any officer thereof contained in this
Agreement or any other Loan Document or in any certificate, report, statement or
other document referred to or provided for in, or received by any Facility Agent
under or in connection with, this Agreement or any other Loan Document or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or the Notes or any other Loan Document or for any failure of
the Borrower, any Subsidiary or any other Obligor to perform its obligations
hereunder or thereunder. No Facility Agent shall be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower, any
Subsidiary or any other Obligor.
8.4 Reliance by the Agent. The Facility Agents shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or
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teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrower), the Accountants and independent
accountants and other experts selected by the Facility Agents. The Agent may
deem and treat the payee of any Note as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless it shall first receive such advice or concurrence of the Majority
Lenders, the Majority Revolving Loan Lenders or all Lenders, as it deems
appropriate, or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense (except those incurred solely as a
result of the Agent's gross negligence or willful misconduct) which may be
incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the Notes and the other Loan Documents in
accordance with a request of the Majority Lenders, the Majority Revolving Loan
Lenders or all Lenders, as may be required, and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders
and all future holders of the Notes.
8.5 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default hereunder unless the Agent has
received notice from a Lender or the Borrower referring to this Agreement,
describing such Default and stating that such notice is a "notice of default".
In the event that the Agent receives such a notice, the Agent shall give notice
thereof to the Lenders. The Agent shall take such action with respect to such
Default as shall be reasonably directed by the Majority Lenders, the Majority
Revolving Loan Lenders, or all Lenders as appropriate; provided that unless and
until the Agent shall have received such directions, the Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default as it shall deem advisable in the best interests of the
Lenders or as the Agent shall believe necessary to protect the Lenders'
interests in the Collateral or the Guarantor Collateral.
8.6 Non-Reliance on the Agent and Other Lenders. Each Lender expressly
acknowledges that no Facility Agent, nor any of such Facility Agent's officers,
directors, partners, employees, agents, attorneys-in-fact or Affiliates has made
any representations or warranties to it and that no act by any Facility Agent
hereafter taken, including any review of the affairs of the Borrower, any
Subsidiary or any other Obligor, shall be deemed to constitute any
representation or warranty by
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such Facility Agent to any Lender. Each Lender represents to each Facility Agent
that it has, independently and without reliance upon such Facility Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower, any Subsidiary and the other Obligors and made its own decision to
make its Loans, and participate in Letters of Credit, hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon any Facility Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower, its Subsidiaries and the other Obligors. Except for notices, reports
and other documents expressly required to be furnished to the Lenders by the
Agent hereunder, no Facility Agent shall have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of the Borrower, any Subsidiary or any other Obligor which may
come into the possession of such Facility Agent or any of its respective
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
8.7 Indemnification. The Lenders agree to indemnify each Facility Agent
in its capacity as such (to the extent not reimbursed by the Borrower, its
Subsidiaries or the other Obligors and without limiting the obligation of such
Persons to do so), ratably according to the respective amounts of their
Commitments, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs (including, without
limitation, the allocated cost of internal counsel), expenses or disbursements
of any kind whatsoever which may at any time (including, without limitation, at
any time following the payment of the Notes) be imposed on, incurred by or
asserted against such Facility Agent, in its capacity as a Facility Agent, but
not as a Lender hereunder, in any way relating to or arising out of this
Agreement, any of the other Loan Documents or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
or any action taken or omitted by such Facility Agent under or in connection
with any of the foregoing; provided that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements to the
extent they arise from the gross negligence or willful misconduct of the party
to be indemnified. The agreements in this Section shall
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survive the payment of the Notes and all other amounts payable hereunder and the
expiration of the Letters of Credit.
8.8 The Facility Agents in Their Individual Capacities. The Facility
Agents and their Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower, any Subsidiary and
the other Obligors as though the Facility Agents were not the Facility Agents
hereunder and under the other Loan Documents. With respect to the Agent, the
Loans made or renewed and the Letters of Credit issued or participated in by
such Facility Agent, and any Note issued to such Facility Agent shall have the
same rights and powers under this Agreement and the other Loan Documents as any
Lender and may exercise the same as though it were not a Facility Agent, and the
terms "Lender" and "Lenders" shall include each Agent in its individual
capacity.
8.9 Successor Agent. The Agent may resign as Agent upon 30 days' notice
to the Lenders. If the Agent shall resign as Agent under this Agreement and the
other Loan Documents, then the Majority Lenders shall appoint from among the
Lenders a successor agent for the Lenders, which successor agent (so long as no
Default has occurred and is continuing) shall be approved by the Borrower (which
consent shall not be unreasonably withheld), whereupon such successor agent
shall succeed to the rights, powers and duties of the Agent and the term "Agent"
shall mean such successor agent, effective upon its appointment, and the former
Agent's rights, powers and duties as Agent shall be terminated, without any
other or further act or deed on the part of such former Agent or any of the
parties to this Agreement or any holders of the Notes. After any retiring
Agent's resignation as Agent, the provisions of this Section shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement and the other Loan Documents. Further, if the Agent no
longer has any Loans, Letter of Credit participations or Commitments hereunder,
the Agent shall immediately resign and shall be replaced, and have the benefits,
as set forth in this Section 8.9. In addition, after the replacement of an Agent
hereunder, the retiring Agent shall remain a party hereto and shall continue to
have all the rights and obligations of an Agent under this Agreement with
respect to Letters of Credit issued by it prior to such replacement, but shall
not be required to issue additional Letters of Credit.
8.10 Collateral Documents. Anything contained in any of the Loan
Documents to the contrary notwithstanding, the Borrower, each Facility Agent and
each Lender hereby agree that (a) no Lender shall have any right individually to
realize upon any of the Collateral or Guarantor Collateral under any Loan
Document or to enforce any Guarantee, it being understood and agreed that all
powers, rights and remedies under the Collateral Documents and Guarantor
Collateral Documents and the Guarantees may be
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exercised solely by the Agent for the benefit of the Lenders in accordance with
the terms thereof, and (b) in the event of a foreclosure by the Agent on any of
the Collateral or Guarantor Collateral pursuant to a public or private sale, the
Agent or any Lender may be the purchaser of any or all of such Collateral or
Guarantor Collateral at any such sale and the Agent, as agent for and
representative of the Lenders (but not any Lender or Lenders in its or their
respective individual capacities unless the Majority Lenders shall otherwise
agree in writing) shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Collateral or Guarantor Collateral sold at any such public sale, to use and
apply any of the Obligations as a credit on account of the purchase price for
any such collateral payable by the Agent at such sale.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Except as otherwise expressly provided in
this Agreement, any provision of the Loan Documents may be modified or
supplemented only by an instrument in writing signed by the Borrower, the Agent
and the Majority Lenders, or by the Borrower and the Agent acting with the
consent of the Majority Lenders, and any provision of any Loan Document may be
waived by the Majority Lenders or by the Agent acting with the consent of the
Majority Lenders; provided, however, that no such waiver and no such amendment,
supplement or modification shall (i) (a) reduce the amount or extend the
maturity of any Note or any installment due thereon, or reduce the rate or
extend the time of payment of interest thereon, or reduce the amount or extend
the time of payment of any fee, indemnity or reimbursement payable to any Lender
hereunder, or change the amount of any Lender's Commitment, or amend, modify or
waive any provision of Section 2.4 or 2.5, in each case without the written
consent of the Lender affected thereby; or (b) amend, modify or waive any
provision of this Section 9.1 or reduce the percentage specified in or otherwise
modify the definition of Majority Lenders or Majority Revolving Loan Lenders, or
consent to the assignment or transfer by any Obligor of any of its rights and
obligations under this Agreement and the other Loan Documents (except as
permitted under Section 6.4); or (c) release any Obligor from any liability
under its respective Loan Documents; or (d) release any material portion of the
Collateral or any material portion of the Guarantor Collateral, except for any
Asset Disposition or release of Lien permitted by this Agreement or any other
Loan Document; or (e) amend, modify or waive, directly or indirectly, any of the
provisions of Section 2.1(h), 2.2(f) or 2.11; or (f) amend, modify or waive any
provision of this Agreement requiring the consent or approval of all Lenders, in
each case set forth in clauses (i)(b) through (i)(f) above without the written
consent of all the Lenders; or (ii) amend, modify or waive any provision
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of Section 4.2 with respect to the making of a Revolving Loan, or reduce the
percentage specified in, or otherwise modify the definition of, Majority
Revolving Loan Lenders, without the written consent of the Majority Revolving
Loan Lenders; or (iii) amend, modify or waive any provision of Section 8 without
the written consent of the Agent, Syndication Agent, Documentation Agent or any
Co-Arranger existing at such time, or any provision affecting the rights and
duties of the Agent as the issuer of Letters of Credit without the consent of
the then Agent. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding
upon the Borrower, the other Obligors, the Lenders, the Agent, each other
Facility Agent and all future holders of the Notes. In the case of any waiver,
the Borrower, the other Obligors, the Lenders, and each other Facility Agent
shall be restored to their former position and rights hereunder and under the
outstanding Notes and any other Loan Documents, and any Default waived shall be
deemed to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Default, or impair any right consequent thereon.
9.2 Notices. All notices, requests and demands or other communications
to or upon the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered by hand, or 3 days
after being deposited in the United States mail, certified and postage prepaid
and return receipt requested, or, in the case of telecopy notice, when received,
in each case addressed as follows in the case of the Borrower and the Agent, and
as set forth on the signature pages hereto, or in the Assignment and Acceptance
pursuant to which a Person becomes a party hereto, in the case of the Lenders,
or to such other address as may be hereafter notified by the respective parties
hereto and any future holders of the Notes:
The Borrower: Classic Cable, Inc.
515 Congress Avenue, Suite 2626
Austin, Texas 78701
Attention: Steven E. Seach
Telecopy: (512) 476-5204
The Agent: Union Bank of California, N.A
445 South Figueroa Street
Los Angeles, California 90071
Attention: Communications/Media Division
Telecopy: (213) 236-5747
provided that any notice, request or demand to or upon the Agent or the Lenders
pursuant to Section 2.1, 2.2, 2.3, 2.4 or 2.6 shall not be effective until
received.
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9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Agent or any Lender, any right, remedy, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
9.4 Survival of Representations and Warranties. All representations and
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Notes.
9.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or
reimburse the Agent and each Co-Arranger for all its reasonable costs and
out-of-pocket expenses (including travel and other expenses incurred by it or
its agents in connection with performing due diligence with regard hereto)
incurred in connection with the development, preparation and execution of, and
any amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, syndication efforts (whether
completed before or after the Closing Date) in connection with this Agreement
and the reasonable fees and disbursements of counsel to each Facility Agent, (b)
after the occurrence and during the continuance of a Default, to pay or
reimburse the Agent and each Lender for all its reasonable costs and
out-of-pocket expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the Notes, the other Loan
Documents and any such other documents or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or of any insolvency or bankruptcy proceeding, including,
without limitation, reasonable legal fees and disbursements of counsel to the
Agent and each Lender (including the allocated costs of internal counsel to the
Agent and the Lenders which costs are not in duplication of any costs of outside
counsel to the Agent and each Lender), (c) to pay, and indemnify and hold
harmless each Lender and each Facility Agent from any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
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in respect of, this Agreement, the Notes, the other Loan Documents and any such
other documents and (d) to pay, and indemnify and hold harmless each Lender and
each Facility Agent and the officers, partners, directors, employees, agents and
affiliates of any Facility Agent or Lender (collectively "Indemnitees") from and
against, any and all Indemnified Liabilities, provided, that the Borrower shall
have no obligation hereunder to any Facility Agent or any Lender with respect to
Indemnified Liabilities arising from the gross negligence or willful misconduct
of any Facility Agent or any Lender . As used herein, "Indemnified Liabilities"
means, collectively, any and all liabilities, obligations, losses, damages
(including natural resource damages), penalties, actions, judgments, suits,
claims (including environmental claims), costs (including the costs of any
investigation, study, sampling, testing, abatement, cleanup, removal,
remediation or other response action necessary to remove, remediate, clean up or
abate any activities relating to Hazardous Materials), expenses and
disbursements of any kind or nature whatsoever (including the reasonable fees
and disbursements of counsel for Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto, and any fees or expenses incurred by Indemnitees in
enforcing this indemnity), whether direct, indirect or consequential and whether
based on any federal, state or foreign laws, statutes, rules or regulations
(including securities and commercial laws, statutes, rules or regulations and
environmental laws), on common law or equitable cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted against any such
Indemnitee, in any manner relating to or arising out of this Agreement or the
other Loan Documents or the Acquisition Agreement or the transactions
contemplated hereby or thereby (including Lenders' agreement to make the Loans
hereunder or the use or intended use of the proceeds thereof or the issuance of
Letters of Credit hereunder or the use or intended use of any thereof, or any
enforcement of any of the Loan Documents (including any sale of, collection
from, or other realization upon any of the Collateral or the Guarantor
Collateral or the enforcement of the Guarantees)). (To the extent that the
undertakings to defend, indemnify, pay and hold harmless set forth in this
Section 9.5 may be unenforceable in whole or in part because they are violative
of any law or public policy, the Borrower shall contribute the maximum portion
that it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of
them.) The agreements in this Section shall survive repayment of the Notes and
all other amounts payable hereunder.
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9.6 Successors and Assigns; Participations; Purchasing Lenders.
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Lenders, the Agent, all future holders of the Notes and their
respective successors and assigns, except that the Borrower may not assign,
transfer or delegate any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking or
finance business and in accordance with applicable law, at any time sell to one
or more banks or other entities ("Participants") participating interests in any
Loan owing to such Lender, any Letter of Credit participated in by such Lender,
any Note held by such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan Documents; provided
that the holder of any such participation, other than an Affiliate of such
Lender, shall not be entitled to require such Lender to take or omit to take any
action hereunder except action directly affecting the extension of the maturity
of any portion of the principal amount of a Loan or Commitment, the expiration
of a Letter of Credit or any portion of interest or fees related thereto
allocated to such participation or a reduction of the principal amount or
principal payment amount of or the rate of interest payable on the Loans or any
fees related thereto or reduction of the amount to be reimbursed under any
Letter of Credit, or a release of any Obligor or any substantial portion of the
Collateral or the Guarantor Collateral or any increase in participation amounts.
In the event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any such Note and the participant in any such Letter of Credit for all purposes
under this Agreement and the other Loan Documents, and the Borrower and the
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and the other
Loan Documents. The Borrower agrees that if amounts outstanding under this
Agreement and the Notes are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement and any Note to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under this Agreement or any Note, provided that such
Participant shall only be entitled to such right of setoff if it shall have
agreed in the agreement pursuant to which it shall have acquired its
participating interest to share with the Lenders the proceeds
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thereof as provided in Section 9.7. The Borrower also agrees that each
Participant shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15
with respect to its participation in the Commitments and the Loans and the
Letters of Credit outstanding from time to time; provided, that no Participant
shall be entitled to receive any greater amount pursuant to such Sections than
the transferor Lender would have been entitled to receive in respect of the
amount of the participation transferred by such transferor Lender to such
Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to any of its
Affiliates or to any Lender, any Affiliate thereof or to one or more additional
lenders or financial institutions, which additional lenders shall be subject to
the consent of the Borrower, such consent not to be unreasonably withheld and
not to be required if a Default has occurred and is continuing ("Purchasing
Lenders") all or any part of its rights and obligations under this Agreement,
the Notes and the other Loan Documents pursuant to an Assignment and Acceptance
executed by such Purchasing Lender and such transferor Lender and delivered to
the Agent for its acceptance and recording in the Register (as defined in (d)
below), provided, that (i) any such sale must result in the Purchasing Lender
having at least $5,000,000 in aggregate amount of obligations under this
Agreement, the Notes and the other Loan Documents and (ii) each such assignment
by a Lender of its Revolving Loans, Revolving Note, Revolving Commitment or its
participation in Letters of Credit shall be in such manner so that the same
portion of its Revolving Loans, Revolving Note, Revolving Commitment and its
participation in Letters of Credit is assigned to the respective assignee. Upon
such execution, delivery, acceptance and recording, from and after the transfer
effective date determined pursuant to such Assignment and Acceptance, (x) the
Purchasing Lender thereunder shall be a party hereto and, to the extent provided
in such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Commitment as set forth therein, and (y) the transferor Lender
thereunder shall, to the extent of such assigned portion and as provided in such
Assignment and Acceptance, be released from its obligations under this Agreement
and the other Loan Documents (and, in the case of an Assignment and Acceptance
covering all or the remaining portion of a transferor Lender's rights and
obligations under this Agreement, such transferor Lender shall cease to be a
party hereto). Such Assignment and Acceptance shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment of Commitment
Percentages arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such transferor Lender under this
Agreement, the Notes and the other Loan Documents. On or prior
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to the transfer effective date determined pursuant to such Assignment and
Acceptance, the Borrower, at its own expense, shall execute and deliver to the
Agent in exchange for the surrendered Note or Notes a new Note or Notes to the
order of such Purchasing Lender in an amount equal to the Commitments assumed by
it pursuant to such Assignment and Acceptance, and if the transferor Lender has
retained a Commitment hereunder, new Notes to the order of the transferor Lender
in an amount equal to the Commitments retained by it hereunder. Such new Notes
shall be dated the Closing Date and shall otherwise be in the form of the Notes
replaced thereby. The Notes surrendered by the transferor Lender shall be
returned by the Agent to the Borrower marked "canceled."
(d) The Agent shall maintain at its address referred to in Section 9.2
a copy of each Assignment and Acceptance delivered to it and a register (the
"Register") for the recordation of the names and addresses of the Lenders and
the Commitments of, and principal amount of the Loans owing to, and, if
applicable, the Letters of Credit participated in by, each Lender from time to
time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as the owner of the Loans and the
participant in the Letters of Credit, if applicable, recorded therein for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed in
accordance with the terms hereof, together with payment to the Agent by the
Purchasing Lender (except in the case of a Lender assigning to its Affiliate and
assignments made by Goldman Sachs Credit Partners L.P. during the first 90 days
following the Closing Date) of a registration and processing fee of $2,500, the
Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the
effective date determined pursuant thereto record the information contained
therein in the Register.
(f) At the request of any Lender that is not a U.S. Person and is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code, the Borrower
shall cause the Agent to maintain a register (the "Tax Register") on which it
enters the name of such Lender as the registered owner of each Registered Loan
held by such Lender. A Registered Loan (and the Registered Note, if any,
evidencing the same) may be assigned or otherwise transferred in whole or in
part by registration of such assignment or transfer on the Tax Register (and
each Registered Note shall expressly so provide). Any assignment or transfer of
all or part of such Loan (and the Registered Note, if any, evidencing the same)
may be effected by registration of such assignment or transfer on the Tax
Register, together with the surrender of the Registered Note,
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if any, evidencing the same duly endorsed by (or accompanied by a written
instrument of assignment or transfer duly executed by) the holder of such
Registered Note, whereupon, at the request of the designated assignee(s) or
transferee(s), one or more new Registered Notes in the same aggregate principal
amount shall be issued to the designated assignee(s) or transferee(s). Prior to
the registration of assignment or transfer of any Registered Loan (and the
Registered Note, if any, evidencing the same), the Borrower and the Agent shall
treat the Person in whose name such Loan (and the Registered Note, if any,
evidencing the same) is registered as the owner thereof for the purpose of
receiving all payments thereon and for all other purposes, notwithstanding
notice to the contrary. The Tax Register shall be available for inspection by
the Borrower and any Lender that is a Registered Holder at any reasonable time
upon reasonable prior notice.
(g) The Borrower authorizes each Lender to disclose to any Participant
or Purchasing Lender (each, a "Transferee") and any prospective Transferee any
and all financial information in such Lender's possession concerning the
Borrower, its Subsidiaries, CCI, and their Affiliates which has been delivered
to such Lender by or on behalf of the Borrower pursuant to this Agreement or any
other Loan Document or which has been delivered to such Lender by or on behalf
of the Borrower in connection with such Lender's credit evaluation of the
Borrower, its Subsidiaries, CCI, and their Affiliates prior to becoming a party
to this Agreement.
(h) Nothing herein shall prohibit any Lender from pledging or assigning
any of its rights under its Notes, or, if applicable, its participation in any
Letter of Credit, to any Federal Reserve Bank in accordance with applicable law.
9.7 Adjustments; Set-Off.
(a) If any Lender (a "benefitted Lender") shall at any time receive any
payment of all or part of its Loans, its participations in Letters of Credit, or
interest thereon, or fees, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in Section 7(g), or otherwise), in a greater proportion
than any such payment to or collateral received by any other Lender, if any, in
respect of such other Lender's Loans, its participations in Letters of Credit,
or interest thereon, or fees, such benefitted Lender shall purchase for cash
from the other Lenders such portion of each such other Lender's Loans,
participations in Letters of Credit, or fees, or shall provide such other
Lenders with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such benefitted Lender to share the excess payment
or benefits of such collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or benefits
is thereafter
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recovered from such benefitted Lender, such purchase shall be rescinded, and the
purchase price and benefits returned, to the extent of such recovery, but
without interest. The Borrower agrees that each Lender so purchasing a portion
of another Lender's Loan or its participations in Letters of Credit may exercise
all rights of payment (including, without limitation, rights of set-off) with
respect to such portion as fully as if such Lender were the direct holder of
such portion.
(b) In addition to any rights and remedies of the Lenders provided by
law, with the prior consent of the Majority Lenders, each Lender shall have the
right, exercisable upon the occurrence and during the continuance of an Event of
Default and acceleration of the Obligations pursuant to Section 7, without prior
notice to the Borrower, any such notice being expressly waived by the Borrower
to the extent permitted by applicable law, to set-off and appropriate and apply
against any such Obligations any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims in any currency, in each case whether direct or indirect,
absolute or contingent, matured or unmatured, at any time held or owing by such
Lender or any branch or agency thereof or bank controlling such Lender to or for
the credit or the account of the Borrower. Each Lender agrees promptly to notify
the Borrower after any such set-off and application made by such Lender,
provided that the failure to give such notice shall not affect the validity of
such set-off and application.
9.8 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery by telecopier of an executed counterpart of a signature
page to this Agreement shall be effective as delivery of an originally executed
counterpart of this Agreement.
9.9 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.10 Integration. This Agreement represents the entire agreement of the
Borrower, the Agent and the Lenders with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by the
Agent or any Lender relative to the subject matter hereof not expressly set
forth or referred to herein or in the other Loan Documents.
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<PAGE> 109
9.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9.12 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the Notes and the other Loan Documents;
(b) no Facility Agent, and no Lender has any fiduciary relationship to
the Borrower solely by virtue of any of the Loan Documents, and the relationship
pursuant to the Loan Documents between the Facility Agents and the Lenders, on
one hand, and the Borrower on the other hand, is solely that of creditor and
debtor; and
(c) no joint venture exists among the Lenders or among the Borrower, on
one hand and the Lenders, on the other hand.
9.13 Headings. Section headings herein are included for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.
9.14 Copies of Certificates, Etc. Whenever the Borrower is required to
deliver notices, certificates, opinions, statements or other information
hereunder to the Agent for delivery to any Lender, it shall do so in such number
of copies as the Agent shall reasonably specify.
9.15 Treatment of Certain Information; Confidentiality.
(a) The Borrower acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Borrower or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by any Lender, or by one or more Subsidiaries or
affiliates of such Lender and the Borrower hereby authorizes each Lender to
share any information delivered to such Lender by the Borrower and its
Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such Subsidiary or affiliate,
it being understood that any such Subsidiary or affiliate receiving such
information shall be bound by the provisions of clause (b) below as if it were a
Lender hereunder. Such authorization shall survive the repayment of the
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<PAGE> 110
Loans, the expiration of the Letters of Credit and the termination of the
Commitments.
(b) Each Lender and the Agent agrees (on behalf of itself and each of
its affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with their customary
procedures for handling confidential information of the same nature and in
accordance with safe and sound banking practices, any non-public information
supplied to it by the Borrower pursuant to this Agreement that is identified by
the Borrower as being confidential at the time the same is delivered to the
Lenders or the Agent, provided that nothing herein shall limit the disclosure of
any such information (i) to the extent required by statute, rule, regulation or
judicial process, (ii) to counsel for any of the Lenders or the Agent, (iii) to
bank examiners or other regulatory authorities, auditors or accountants, (iv) to
the Agent or any other Lender, (v) in connection with any litigation to which
any one or more of the Lenders or the Agent is a party, (vi) to a subsidiary or
affiliate of such Lender as provided in clause (a) above or (vii) to any
assignee or participant (or prospective assignee or participant), and provided
further that in no event shall any Lender or the Agent be obligated or required
to return any materials furnished by the Borrower.
9.16 Consent to Jurisdiction. The Borrower, to the extent permitted by
applicable law, hereby irrevocably submits to the non-exclusive general
jurisdiction of the courts of the State of California, the courts of the United
States of America for the Central District of California and appellate courts
from any thereof in any legal action or proceeding arising out of or relating to
this agreement or any other Loan Document, and the borrower hereby irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such California or federal court. The Borrower hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum for the maintenance of such action or proceeding and any
objection to venue of such action or proceeding. Nothing in this Section shall
affect the right of the Agent to serve legal process in any manner permitted by
law or affect the right of the Agent to bring any action or proceeding against
the Borrower or its property in the courts of any other jurisdictions.
9.17 WAIVER OF JURY TRIAL. THE BORROWER, EACH FACILITY AGENT AND THE
LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR
ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH AND FOR ANY COUNTERCLAIM
THEREIN.
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9.18 Interest Rates.
(a) It is the intention of the parties hereto that the Loans made
hereunder shall conform strictly to applicable usury laws. Accordingly, none of
the terms and provisions contained in this Agreement or any of the other Loan
Documents shall ever be construed to create a contract to pay interest to the
Lenders for the use, forbearance or detention of money at a rate in excess of
the highest lawful rate applicable (the "Maximum Lawful Rate"), and that, for
purposes of this Section 9.16, "interest" shall include the aggregate of all
charges or other consideration which constitute interest under applicable laws
(whether or not denominated as interest) and are contracted for, taken,
reserved, charged or received under any of this Agreement or the other Loan
Documents or otherwise in connection with the transactions contemplated by this
Agreement and the other Loan Documents. If as a result of prepayment,
acceleration of maturity or otherwise, the effective rate of interest which
would otherwise be payable to any Lender under this Agreement or any other Loan
Document would exceed the Maximum Lawful Rate for the period during which the
principal amount of any Loan was outstanding, or if any Lender shall receive
moneys or other consideration that are deemed to constitute interest that would
increase the effective rate of interest payable by the Borrower to such Lender
under this Agreement or any other Loan Document to a rate in excess of the
Maximum Lawful Rate for the period during which the principal amount of any Loan
was outstanding, then (i) the amount of interest that would otherwise be payable
by the Borrower to such Lender under this Agreement and the other Loan Documents
shall be reduced to the Maximum Lawful Rate, and (ii) any interest paid by the
Borrower to such Lender in excess of the Maximum Lawful Rate shall be credited
by such Lender as an optional prepayment of the Loans (to be applied to the
principal of the Loans of such Lender in the order specified in Section 2.5(f),
provided that such amount shall not be applied to reduce such Lender's Revolving
Loan Commitment, if any) and, thereafter, shall be returned to the Borrower. All
calculations of the rate or amount of interest contracted for, taken, reserved,
charged or received by any Lender under any of this Agreement and the other Loan
Documents that are made for the purpose of determining whether such rate or
amount exceeds the Maximum Lawful Rate shall be made, to the extent permitted by
applicable law, by amortizing, prorating, allocating and spreading during the
full stated term of all of the Loans owed to such Lender.
(b) If at any time and from time to time (i) the amount of interest
payable to any Lender on any date would otherwise exceed the Maximum Lawful
Rate, the amount of interest payable to such Lender shall be limited to the
Maximum Lawful Rate pursuant to paragraph (a) above and (ii) in respect of any
subsequent interest computation period, the amount of interest otherwise payable
to such Lender would be less than the amount of interest
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payable to such Lender computed at the Maximum Lawful Rate, then the amount of
interest payable in respect of such subsequent computation period shall be
computed at the Maximum Lawful Rate until the earlier to occur of (x) the date
upon which the total amount of interest payable to such Lender shall equal the
total amount of interest that would have been payable to such Lender if the
total amount of interest had been computed without giving effect to paragraph
(a) above, or (y) payment in full of all Loans held by such Lender.
(c) Without limiting the application of Section 9.16 hereof, insofar as
the provisions of Article 5069-10.001 et seq., Title 79 of the Revised Civil
Statutes of Texas, 1925, as amended, are deemed applicable to the determination
of the Maximum Lawful Rate with respect to any of the Loans, the indicated rate
ceiling computed from time to time pursuant to Section (a) of such Article shall
apply to such Loans; provided that to the extent permitted by such Article, any
Lender may from time to time by notice to the Borrower revise the election of
such interest rate ceiling as such ceiling affects the then current or future
balances of the Loans and other obligations held by such Lender.
(d) Without limiting the application of Section 9.16, the provisions of
Chapter 342, Chapter 343 and Chapter 346 of the Texas Finance Code, as amended
shall not apply to this Agreement, the other Loan Documents or the transactions
contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
BORROWER
CLASSIC CABLE, INC.
By: /s/ J. MERRITT BELISLE
------------------------------
Name: J. Merritt Belisle
----------------------------
Title: Chief Executive Officer
---------------------------
AGENT
UNION BANK OF CALIFORNIA, N.A.,
as Agent
By: /s/ PETER C. CONNOY
------------------------------
Name: Peter C. Connoy
----------------------------
Title: Assistant Vice President
---------------------------
LENDERS
GOLDMAN SACHS CREDIT PARTNERS L.P., as a
Lender
By: /s/ JOHN URBAN
------------------------------
Name: John Urban
----------------------------
Title: Authorized Signatory
---------------------------
Address for Notices
c/o GOLDMAN, SACHS & CO.
85 Broad Street - 14th Floor
New York, New York 10004
Attention: Josef H. Norflus
Telephone: (212) 902-0428
Facsimile: (212) 357-4451
with a copy to:
<PAGE> 114
c/o GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York 10004
Attention: Kathy King
Telephone: 212-902-4425
Facsimile: 212-902-3757
Approved Lending Offices
Applicable Lending Office for Base Rate
Loans:
85 Broad Street - 14th Floor
New York, New York 10004
Applicable Lending Office for LIBOR
Loans:
85 Broad Street - 14th Floor
New York, New York 10004
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
By: /s/ PETER C. CONNOY
------------------------------
Name: Peter C. Connoy
----------------------------
Title: Assistant Vice President
---------------------------
Address for Notices
445 South Figueroa Street
Los Angeles, California 90071
Attention: William D. Gooch
Telephone: (213) 236-6908
Facsimile: (213) 236-5747
<PAGE> 115
Approved Lending Offices
Applicable Lending Office for Base
Rate Loans:
445 South Figueroa Street
Los Angeles, California 90071
Applicable Lending Office for LIBOR
Loans:
445 South Figueroa Street
Los Angeles, California 90071
Applicable Lending Office for
Participations in Letters of
Credit:
445 South Figueroa Street
Los Angeles, California 90071
<PAGE> 1
EXHIBIT 10.4
ASSET PURCHASE AGREEMENT
DATED MAY 14, 1998
BETWEEN
CABLE ONE, INC.
AND
BLACK CREEK COMMUNICATIONS, INC.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
ARTICLE 1 CERTAIN DEFINITIONS........................................ 1
ARTICLE 2 PURCHASE AND SALE.......................................... 6
Section 2.1 Covenant of Purchase and Sale; Assets...................... 6
Section 2.2 Excluded Assets............................................ 7
Section 2.3 Assumed and Retained Obligations and Liabilities........... 9
Section 2.4 Purchase Price............................................. 10
Section 2.5 Current Items Amount....................................... 10
Section 2.6 Calculation of Current Items Amount........................ 11
ARTICLE 3 RELATED MATTERS............................................ 12
Section 3.1 HSR Act Compliance......................................... 12
Section 3.2 Noncompetition Agreement................................... 13
Section 3.3 Bulk Sales................................................. 13
Section 3.4 Use of Names and Logos..................................... 13
Section 3.5 Transfer Taxes and Filing Fees............................. 13
Section 3.6 Allocation of Purchase Price............................... 13
ARTICLE 4 BUYER'S REPRESENTATIONS AND WARRANTIES..................... 14
Section 4.1 Organization of Buyer...................................... 14
Section 4.2 Authority.................................................. 14
Section 4.3 No Conflict; Consents...................................... 14
Section 4.4 Litigation................................................. 14
Section 4.5 Finders and Brokers........................................ 15
Section 4.6 Taxpayer Identification Number............................. 15
Section 4.7 Financing.................................................. 15
Section 4.8 Qualification.............................................. 15
Section 4.9 Buyer's Investigation...................................... 15
ARTICLE 5 SELLER'S REPRESENTATIONS AND WARRANTIES.................... 15
Section 5.1 Organization and Qualification of Seller................... 15
Section 5.2 Authority.................................................. 16
Section 5.3 No Conflict; Consents...................................... 16
Section 5.4 Title to Assets; Sufficiency............................... 16
Section 5.5 Franchises, Licenses, and Contracts........................ 16
Section 5.6 Employee Benefits.......................................... 17
Section 5.7 Employees.................................................. 17
Section 5.8 Litigation................................................. 18
Section 5.9 Tax Returns; Other Reports................................. 18
Section 5.10 Compliance with Legal Requirements......................... 18
Section 5.11 System Information......................................... 19
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.12 Environmental Matters...................................... 20
Section 5.13 Financial and Operational Information...................... 21
Section 5.14 No Adverse Change.......................................... 22
Section 5.15 Finders and Brokers........................................ 22
Section 5.16 Taxpayer Identification Number............................. 22
Section 5.17 Intangibles................................................ 22
Section 5.18 Accounts Receivable........................................ 22
Section 5.19 Bonds; Letters of Credit; Certificates of Insurance........ 22
Section 5.20 Rights in Assets........................................... 22
Section 5.21 Books and Records.......................................... 22
Section 5.22 Subscriber Count........................................... 23
ARTICLE 6 COVENANTS.................................................. 23
Section 6.1 Affirmative Covenants...................................... 23
Section 6.2 FCC Approval............................................... 24
Section 6.3 Employee Matters........................................... 24
Section 6.4 Certain Negative Covenants of Seller....................... 25
Section 6.5 Title Insurance............................................ 26
Section 6.6 Confidentiality............................................ 26
Section 6.7 Supplements to Schedules................................... 26
Section 6.8 Notification of Certain Matters............................ 28
Section 6.9 Commercially Reasonable Efforts............................ 28
Section 6.10 Subscriber Billing Services................................ 28
Section 6.11 Closing Date Financial Statements.......................... 28
Section 6.12 Leased Vehicles; Other Capital Leases...................... 28
Section 6.13 Duty of Good Faith and Fair Dealing........................ 29
Section 6.14 Franchise Renewals......................................... 29
ARTICLE 7 CONDITIONS PRECEDENT....................................... 29
Section 7.1 Conditions to Buyer's Obligations.......................... 29
Section 7.2 Conditions to Seller's Obligations......................... 31
ARTICLE 8 CLOSING.................................................... 32
Section 8.1 Closing; Time and Place.................................... 32
Section 8.2 Seller's Obligations....................................... 33
Section 8.3 Buyer's Obligations........................................ 34
ARTICLE 9 TERMINATION................................................ 36
Section 9.1 Termination Events......................................... 36
Section 9.2 Effect of Termination...................................... 36
ARTICLE 10 REMEDIES................................................... 36
Section 10.1 Specific Performance; Remedies Cumulative.................. 36
Section 10.2 Attorneys' Fees............................................ 37
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE 11 INDEMNIFICATION........................................... 37
Section 11.1 Indemnification by Seller................................. 37
Section 11.2 Indemnification by Buyer.................................. 37
Section 11.3 Indemnified Third Party Claim............................. 38
Section 11.4 Determination of Indemnification Amounts and
Related Matters........................................... 39
Section 11.5 Time and Manner of Certain Claims......................... 39
Section 11.6 Other Indemnification..................................... 39
ARTICLE 12 RETAINED FRANCHISES....................................... 40
Section 12.1 Retained Franchises....................................... 40
ARTICLE 13 MISCELLANEOUS............................................. 42
Section 13.1 Expenses.................................................. 42
Section 13.2 Brokerage................................................. 42
Section 13.3 Waivers................................................... 42
Section 13.4 Notices................................................... 42
Section 13.5 Entire Agreement; Amendments.............................. 44
Section 13.6 Binding Effect; Benefits.................................. 44
Section 13.7 Headings, Schedules, and Exhibits......................... 44
Section 13.8 Counterparts.............................................. 44
Section 13.9 Publicity................................................. 44
Section 13.10 Governing Law............................................. 45
Section 13.11 Third Parties; Joint Ventures............................. 45
Section 13.12 Construction.............................................. 45
Section 13.13 Risk of Loss.............................................. 45
Section 13.14 Late Payments............................................. 46
</TABLE>
-iii-
<PAGE> 5
DISCLOSURE SCHEDULES
AND EXHIBITS
<TABLE>
<S> <C> <C>
Schedule 2.1(a) Tangible Personal Property...............................
Schedule 2.1(b) Real Property............................................
Schedule 2.1(c) Franchises...............................................
Schedule 2.1(d) Licenses.................................................
Schedule 2.1(e) Contracts................................................
Schedule 2.2 Excluded Assets..........................................
Exhibit 3.2 Noncompetition Agreement.................................
Schedule 5.3 Consents.................................................
Schedule 5.4 Liens....................................................
Schedule 5.5 Franchises, Licenses and Contracts.......................
Schedule 5.7 Collective Bargaining Agreements and
Employee Benefits, Etc...................................
Schedule 5.8 Litigation...............................................
Schedule 5.9 Tax Matters..............................................
Schedule 5.10 Compliance with Legal Requirements.......................
Schedule 5.11 System Information.......................................
Schedule 5.12 Environmental Matters....................................
Schedule 5.19 Bonds; Letters of Credit; Certificates
of Insurance............................................
Schedule 5.20 Rights in Assets.........................................
Schedule 6.1 Promotions and Marketing Practices.......................
Schedule 6.4 Changes..................................................
Exhibit 7.1(f) Seller's Counsel Opinion.................................
Exhibit 7.1(g) Seller's FCC Counsel Opinion.............................
Exhibit 7.2(h) Buyer's Counsel Opinion..................................
Exhibit 8.2(a) Bill of Sale and Assignment..............................
Exhibit 12.1(d) Retained Franchises Escrow Agreement.....................
Exhibit 12.1(e) Retained Franchises Services Agreement...................
Exhibit 12.1(f) Parameters of Signed Agreement...........................
</TABLE>
<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of May 14, 1998 by and between Cable One, Inc., a Delaware corporation
("Seller"), and Black Creek Communications, Inc., a Delaware corporation
("Buyer").
RECITALS
A. Seller owns and operates cable television systems which are
franchised or hold other operating authority in and around the communities
listed on Attachment A (the "Systems").
B. Seller is willing to convey to Buyer, and Buyer is willing to
purchase from Seller, all of the assets comprising the Systems other than the
Excluded Assets (as hereinafter defined), upon the terms and conditions set
forth in this Agreement.
AGREEMENTS
In consideration of the mutual covenants and promises set forth herein,
Buyer and Seller agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms, whether in singular or
plural forms, shall have the following meanings:
"Agreement" means this Asset Purchase Agreement.
"Allocation" has the meaning given in Section 3.6.
"Antitrust Division" means the Antitrust Division of the United States
Department of Justice.
"Appraisal" has the meaning given in Section 3.6.
"Appraiser" has the meaning given in Section 3.6.
"Assets" has the meaning given in Section 2.1.
"Assumed Obligations and Liabilities" has the meaning given in Section
2.3.
"Basic Cable" means the lowest tier of service currently being
subscribed to by a subscriber of the Systems.
<PAGE> 7
"Basic Subscriber" shall mean the number derived as of any date for
each System, without duplication, equal to the aggregate of all of the following
which are receiving Basic Cable ("Basic Services") provided by the Systems: (a)
private residential customer accounts that are billed by individual unit at a
rate not less than the regular rate shown for Basic Cable on Schedule 5.11
(regardless of whether such accounts are in single family homes or in
individually billed units in apartment houses and other multi-unit buildings),
each of which shall be counted as one "Basic Subscriber"; and (b) all
commercial, bulk-billed and other accounts not billed by individual unit, such
as hotels, motels, apartment houses, condominiums, cooperatives or other
multi-family buildings, hospitals, prisons, and health centers, provided that
the number of "Basic Subscribers" serviced by each such account shall be deemed
to be an amount equal to the quotient of (x) the aggregate monthly Basic
Services revenue derived by that System from such accounts (excluding charges
for taxes, installation fees and other non-recurring items, and charges for
converter rental, remote control devices and other like charges for equipment);
provided that in no event shall such billings include more than a single month's
charges for any such single bulk and commercial account, in each case for the
last calendar month preceding the date of determination, divided by (y) the full
monthly price (without discount) for Basic Services (excluding charges for
taxes, installation fees and other non-recurring items, and charges for
converter rental, remote control devices and other like charges for equipment)
charged by that System to private residential customer accounts billed by
individual unit. Notwithstanding the foregoing, the term "Basic Subscriber"
shall not include (i) any commercial, residential or other subscriber, or any
billings to any of them, who is more than 60 days delinquent from the payment
due date on $5 dollars or more (excluding late fees), (ii) all subscribers and
all billings to any subscriber whose service is pending disconnection for any
reason, (iii) all subscribers and all billings to any subscribers who would be
pending disconnection under the Seller's disconnection policies but for the
Seller having written off or forgiven any past due amount (other than late fees)
in excess of $25.00 at any time within 30 days prior to the Closing Date, (iv)
all subscribers and all billings to any subscriber who has not paid at least one
full month's payment for Basic Services and all installation charges owed and
due, and (v) all subscribers and all billings to any subscriber who was
solicited within 60 days prior to the Closing Date to purchase such services by
any non-standard promotion or by offer of a discount other than those promotions
that are listed on Schedule 6.1.
"Bill of Sale" has the meaning given in Section 8.2(a).
"Cable Act" means Title VI of the Communications Act of 1934, as
amended, 47 U.S.C. Sections 151 et. seq., and all other provisions of the Cable
Communications Policy Act of 1984, Pub. L. No. 98-549, and the Cable Television
Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385, as such
statutes may be amended from time to time, and the rules and regulations
promulgated thereunder.
"CATV" means Community Antenna Television.
"CLI" means the Cumulative Leakage Index.
-2-
<PAGE> 8
"Closing" has the meaning given in Section 8.1.
"Closing Date" has the meaning given in Section 8.1
"Closing Time" means 11:59 p.m. Central time on the Closing Date.
"Code" shall mean the Internal Revenue Code of 1986, as amended and the
regulations thereunder, or any subsequent legislative enactment thereof, as in
effect from time to time.
"Communications Act" means the Communications Act of 1934, as amended.
"Contracts" has the meaning given in Section 2.1.
"Copyright Act" means the Copyright Act of 1976, as amended.
"Current Items Amount" has the meaning given in Section 2.5.
"Eligible Accounts Receivable" has the meaning given in Section 2.5.
"Employee Benefit Plan" means any pension, retirement, profit-sharing,
deferred compensation, vacation, severance, bonus, incentive, medical, vision,
dental, disability, life insurance or any other employee benefit plan as defined
in Section 3(3) of ERISA to which Seller contributes or which Seller sponsors or
maintains, or by which Seller is otherwise bound.
"ERISA" has the meaning given in Section 5.6.
"Excluded Assets" has the meaning given in Section 2.2.
"Expenses" has the meaning given in Section 2.5.
"FAA" means the Federal Aviation Administration.
"FCC" means the Federal Communications Commission.
"FTC" means the Federal Trade Commission.
"Final Adjustment Certificate" has the meaning given in Section 2.6.
"Franchise Renewals" has the meaning given in Section 7.1(p)
"Franchises" has the meaning given in Section 2.1.
-3-
<PAGE> 9
"Governmental Authority" means the United States of America, any state,
commonwealth, territory, or possession thereof, and any political subdivision or
quasi-governmental authority of any of the same.
"Hazardous Substances" has the meaning given in Section 5.12(d).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnitee" has the meaning given in Section 11.3.
"Indemnitor" has the meaning given in Section 11.3.
"Judgment" means any judgment, writ, order, injunction, award, or
decree of any court, judge, justice or magistrate, the FCC or any other
Governmental Authority.
"Leased Real Property" has the meaning given in Section 2.1.
"Legal Requirements" means applicable common law and any statute,
ordinance, code or other law, rule, regulation, or order enacted, adopted or
promulgated by any Governmental Authority, including, without limitation,
Judgments and the Franchises.
"Licenses" has the meaning given in Section 2.1.
"Lien" means any security agreement, financing statement filed with any
Governmental Authority, conditional sale or other title retention agreement, any
lease, consignment or bailment given for purposes of security, any lien,
security interest, mortgage, indenture, pledge, option, encumbrance, adverse
interest, constructive trust or other trust, claim, attachment, exception to or
defect in title or ownership interest (including but not limited to,
reservations, rights of entry, rights of first refusal, possibilities of
reverter, encroachments, easements, right of way, restrictive covenants, leases,
and licenses) of any kind, which otherwise constitutes an interest in or claim
against property or which affects marketability, whether arising pursuant to any
Legal Requirement, under any Contract or otherwise.
"Litigation" means any claim, action, suit, proceeding, arbitration,
investigation, hearing, or other similar activity or procedure that could result
in a Judgment.
"Losses" means any claims, losses, liabilities, damages, penalties,
costs, and expenses, including, without limitation, reasonable counsel fees and
costs and expenses incurred in the investigation, defense or settlement of any
claims covered by the indemnification, provided for in Article 11 hereof, but
shall in no event include incidental or consequential damages.
"Marcus Purchase Agreement" means the Asset Purchase Agreement, dated
March 30, 1998, between Seller and Marcus Cable Partners, L.P., and the
transactions contemplated thereby.
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"Noncompetition Agreement" has the meaning given in Section 3.3.
"Outside Closing Date" has the meaning given in Section 8.1.
"Owned Real Property" has the meaning given in Section 2.1.
"Pay TV" means premium programming services selected by and sold to
subscribers on a per-channel or per-program basis.
"Permitted Lien" means (i) liens for Taxes not yet due and payable or
being contested in good faith by appropriate proceedings; (ii) rights reserved
to any Governmental Authority to regulate the affected property; (iii) as to
leased Assets, interests of the lessors thereof and Liens affecting the
interests of the lessors thereof; (iv) inchoate materialmen's, mechanics',
workmen's, repairmen's or other like liens arising in the ordinary course of
business; (v) any Liens to be released at or prior to Closing as described on
Schedule 5.4; and (vi) as to any parcel of Owned Real Property or Leased Real
Property, any Liens that do not, in any material respect, individually or in the
aggregate, impair the use thereof as it is currently being used by Seller in the
ordinary course of the business or render title thereto unmerchantable or
uninsurable.
"Person" means any natural person, Governmental Authority, corporation,
general or limited partnership, joint venture, trust, association, limited
liability company, or unincorporated entity of any kind.
"Pole Attachment Agreements" means pole attachment authorizations and
agreements held by Seller that relate to a System and were granted by a public
utility, electric cooperative or similar utility, municipality or other
Governmental Authority.
"Prime Rate" has the meaning given in Section 13.14.
"Purchase Price" has the meaning given in Section 2.4.
"Qualified Intermediary" has the meaning given to it in the rules and
regulations promulgated pursuant to Section 1031 of the Code.
"Retained Employees" has the meaning given in Section 5.7(f).
"Retained Franchises" has the meaning given in Section 12.1(a).
"Retained Franchises Escrow Agreement" has the meaning given in Section
12.1.(d).
"Retained Franchises Services Agreement" has the meaning given in
Section 12.1(e).
"Retained Franchises Transfer Agreement" has the meaning given in
Section 12.1(e).
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"Systems" has the meaning given in Recital A.
"Taxes" means all levies and assessments imposed by any Governmental
Authority, including but not limited to income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes, and interest, penalties and other
government charges with respect thereto.
"Tier Cable" means the cable television services, other than Basic
Cable, described on Schedule 5.11.
ARTICLE 2
PURCHASE AND SALE
SECTION 2.1 COVENANT OF PURCHASE AND SALE; ASSETS. Subject to the terms
and conditions set forth in this Agreement, at Closing Seller shall sell,
convey, assign, and transfer to Buyer, and Buyer shall acquire from Seller, for
the Purchase Price, free and clear of all Liens (except for Permitted Liens),
all right, title and interest of Seller in all of the assets, properties, real
and personal, tangible and intangible, used, owned or leased by Seller in the
operation of the Systems, or in which Seller acquires any right, title or
interest, in any instance primarily with respect to the Systems, on or before
the Closing Time as the same shall exist on the Closing Date (the "Assets"),
including, without limitation, the following:
(a) Tangible Personal Property. All tangible personal property
of the Systems, including but not limited to towers, tower equipment,
antennae, above-ground and underground cable, distribution systems,
headend equipment, headend amplifiers, line amplifiers, feeder line
cable, distribution plant, programming signal decoders for each
satellite service which scrambles its signal, housedrops, including
disconnected housedrops, remote controls and other subscriber devices,
utility poles (if owned by Seller), local origination equipment,
vehicles and trailers, microwave equipment, converters, testing
equipment, office equipment, furniture, fixtures, supplies, inventory,
and other physical assets, including but not limited to the items
described on Schedule 2.1(a).
(b) Real Property. All interests in the Systems' real
property, including all improvements thereon owned by Seller, described
on Schedule 2.1(b), owned by Seller ("Owned Real Property") or leased
by Seller ("Leased Real Property").
(c) Franchises. All of the existing governmental
authorizations for construction, maintenance and operation of the
Systems (individually a "Franchise" and collectively the "Franchises")
presently held by Seller, as listed on Schedule 2.1(c).
(d) Licenses. The intangible CATV channel distribution rights,
cable television relay service (CARS), business radio and other
licenses, authorizations,
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or permits issued by the FCC or any other Governmental Authority
(excluding those listed on Schedule 2.1(c)) used in the operations of
the Systems and that are in effect as of the date hereof or entered or
obtained in the ordinary course of business between the date hereof and
the Closing Date, including, without limitation, the licenses,
authorizations and permits described on Schedule 2.1(d) (the
"Licenses").
(e) Contracts. The leases, private easements or rights of
access, contractual rights to easements, Pole Attachment Agreements or
joint line agreements, underground conduit agreements, crossing
agreements, bulk and commercial service agreements, must carry
elections, retransmission consent agreements and other contracts,
agreements or understandings relating to the Systems in effect as of
the date hereof or entered or obtained in the ordinary course of
business between the date hereof and the Closing Date (other than
Excluded Assets), including, without limitation, the leases,
agreements, and other contractual rights described on Schedule 2.1(e)
(the "Contracts") but expressly excluding any leases, agreements, and
other contractual rights described on Schedule 2.2.
(f) Accounts Receivable. All subscriber, trade and other
accounts receivable relating to the Systems.
(g) Books and Records. All engineering records, files, data,
drawings, blueprints, schematics, reports, lists, plans and processes
relating and maintained at the Systems, and all files of
correspondence, lists, records, and reports concerning subscribers and
prospective subscribers of the Systems, signal and program carriage,
and dealings with Governmental Authorities, including but not limited
to all reports filed by or on behalf of Seller with the FCC with
respect to the Systems, all correspondence between Seller and
Governmental Authorities relating to any of the Systems, and statements
of account filed by or on behalf of Seller with the U.S. Copyright
Office with respect to the Systems.
SECTION 2.2 EXCLUDED ASSETS. Notwithstanding the provisions of Section
2.1, the Assets shall not include the following, which shall be retained by
Seller (the "Excluded Assets"): (i) programming agreements (including cable
guide agreements) (other than those listed on Schedule 2.1(e), if any); (ii)
insurance policies and rights and claims thereunder; (iii) bonds, letters of
credit, surety instruments, and other similar items; (iv) cash and cash
equivalents; (v) any agreement, right, asset or property owned or leased by
Seller that is not primarily used in connection with its operation of the
Systems; (vi) all subscriber deposits and advance payments held by Seller as of
the Closing Time in connection with the operation of the Systems; (vii) all
claims, rights, and interest in and to any refunds of taxes or fees of any
nature, or other claims against third parties, relating to the operation of the
Systems prior to the Closing Time; (viii) the account books of original entry,
general ledgers and financial records used in connection with the Systems,
provided, however, that Seller shall provide to Buyer access, in connection with
litigation, administrative proceedings, payment of taxes, or any other valid
business reason to any
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of such books and records as may be in Seller's possession for a reasonable
period, not to exceed seven (7) years from the Closing Date, from time to time
upon reasonable notice from Buyer to Seller; (ix) subject to the provisions of
Section 3.4, Seller's trademarks, trade names, service marks, service names,
logos, and similar proprietary rights; and (x) the retransmission consent
agreements, must carry elections, and any other items described on Schedule 2.2.
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<PAGE> 14
SECTION 2.3 ASSUMED AND RETAINED OBLIGATIONS AND LIABILITIES.
(a) Assumed Obligations and Liabilities. At Closing or
thereafter when due, Buyer shall assume, pay, discharge, and perform
the following (the "Assumed Obligations and Liabilities"): (i) those
obligations and liabilities arising from events or circumstances
occurring after the Closing Time under or with respect to the
Franchises, Licenses, Owned Real Property, Leased Real Property and
Contracts; (ii) other obligations and liabilities of Seller to the
extent that there shall be an adjustment in favor of Buyer with respect
thereto pursuant to Section 2.5; and (iii) all obligations and
liabilities attributable to events or circumstances occurring after the
Closing Time and arising out of Buyer's ownership of the Assets or
operation of the Systems after Closing.
(b) Retained Obligations and Liabilities. All obligations and
liabilities arising out of or relating to the Assets or the Systems and
all other liabilities and obligations of Seller, other than the Assumed
Obligations and Liabilities, shall remain and be the obligations and
liabilities solely of Seller (collectively, the "Retained Obligations
and Liabilities"). Without limiting the generality of the foregoing,
Retained Obligations and Liabilities shall include the following:
(i) all obligations and liabilities arising out of or
relating to the Litigation and Judgments disclosed on Schedule
5.8 and any other Litigation arising out of facts,
circumstances or conditions existing or occurring before the
Closing Time, regardless of whether known or unknown, asserted
or unasserted, as of the Closing Time;
(ii) all obligations and liabilities, unless
specifically assumed by the Buyer, arising from events or
circumstances occurring before the Closing Time with respect
to the Franchises, Licenses, Contracts, Owned Real Property
and Leased Real Property, and any such obligations or
liabilities that arise after the Closing Time to the extent
that such obligations and liabilities relate to facts,
circumstances or conditions existing or occurring before the
Closing Time;
(iii) all obligations and liabilities for adjustments
of revenues from the Systems and for any rate refunds,
rollback, credit, penalty and/or interest payment required by
the FCC or local franchising authority relating to the rates
charged to customers of the Systems during and for any period
prior to the Closing Time;
(iv) any liability under any claim relating to the
period ending as of the Closing Time that is or, but for the
consummation
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of the transactions contemplated hereby, would have been
covered under any insurance policy of Seller, and all
liability associated with workmen's compensation claims that
relate to the period prior to the Closing Time, whether or not
reported or due or payable as of the Closing Time; and
(v) all obligations and liabilities with respect to
the Excluded Assets.
SECTION 2.4 PURCHASE PRICE. The aggregate consideration for the
Assets to be paid by Buyer pursuant to this Agreement shall consist of (i)
$41,900,000 (the "Purchase Price"), subject to adjustment as provided in Section
2.5 and, if necessary Section 12.1(c), which shall be payable to Seller (or,
upon Seller's written instructions, to the Qualified Intermediary designated by
Seller) at Closing by wire transfer of immediately available funds, and (ii) the
assumption by Buyer of the Assumed Obligations and Liabilities.
SECTION 2.5 CURRENT ITEMS AMOUNT. In addition to the payment by
Buyer of the Purchase Price, Buyer or Seller, as appropriate, shall pay to the
other the net amount of the adjust ments and prorations effected pursuant to
paragraphs 2.5(a), (b), and (c) (the "Current Items Amount").
(a) Eligible Accounts Receivable. Seller shall be entitled
to an amount equal to the face amount of all Eligible Accounts
Receivable that are not more than sixty (60) days (two billing cycles)
past due as of the Closing Time; provided, however, that neither any
finance charge nor any amount of $8.00 or less which amount otherwise
would be compromised or written off in the ordinary course of Seller's
business, consistent with past practice, shall cause such accounts
receivable to be considered more than two monthly billing cycles past
due. "Eligible Accounts Receivable" shall mean accounts receivable
resulting from Seller's provision of cable television service,
advertising or other services, leasing or rentals prior to the Closing
Time relating to the Systems. For purposes of making "past due"
calculations under this section, the monthly billing statements of
Seller shall be deemed to be due and payable on the first day of the
period during which the service to which such billing statements relate
is provided.
(b) Advance Payments and Deposits. Buyer shall be entitled
to an amount equal to the aggregate of (i) all deposits of subscribers
of the Systems, and all interest, if any, required to be paid thereon
as of the Closing Time, for converters, decoders, remote control
devices, and similar items, and (ii) all payments for services to be
rendered by Buyer to subscribers of the Systems after the Closing Time,
or for other services to be rendered by Buyer to other third parties
after the Closing Time for cable television service, cable television
commercials, channel leasing, or other services or rentals, to the
extent all obligations of Seller relating thereto are assumed by Buyer
at Closing.
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<PAGE> 16
(c) Expenses. As of the Closing Time, expenses of a
recurring nature that are incurred to benefit the Systems and are
incurred in the ordinary course of business (the "Expenses"), including
those set forth below, shall be prorated, in accordance with generally
accepted accounting principles, so that all such Expenses for periods
prior to the Closing Time shall be for the account of Seller, and all
such Expenses for periods after the Closing Time shall be for the
account of Buyer:
(i) all Expenses under the Franchises, the Licenses,
and the Contracts;
(ii) Taxes levied or assessed against any of the
Assets or payable with respect to cable television service
and related sales to the Systems' subscribers; expenses for
utilities, municipal assessments, rents and service charges,
and other goods or services furnished to the Systems;
(iii) copyright fees based on signal carriage by the
Systems; and
(iv) all other items of Expense relating to the
Systems;
provided, however, that Seller and Buyer shall not prorate any items of
Expense payable under or with respect to any Excluded Asset, all of
which shall remain and be solely for the account of Seller, and
provided further that there shall be no adjustment or proration for
capital expenditures made by Seller.
SECTION 2.6 CALCULATION OF CURRENT ITEMS AMOUNT. Initial and final
adjustments to the Purchase Price will be determined as follows:
(a) At least three business days prior to the Closing,
Seller will deliver to Buyer a report (the "Initial Adjustments
Report"), certified by an executive officer of Seller as being a
materially complete and accurate estimate, showing in reasonable
detail the initial determination of the adjustments referred to in
Section 2.5, which are calculated as of the Closing Date (or as of any
other date agreed by the parties) and any documents reasonably
necessary to substantiate the adjustments proposed in the Initial
Adjustments Report. The Initial Adjustments Report will include a
schedule setting forth the components of the Current Items Amount
(showing sums due and their respective aging as of the Closing Date).
Seller also will furnish to Buyer its billing report for the business
for the most current period as of the Closing Date.
(b) Within 60 days after the Closing, Seller will deliver
to Buyer a report (the "Final Adjustments Report"), similarly certified
by Seller, showing in reasonable detail the final determination of all
adjustments which were not
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<PAGE> 17
calculated as of the Closing Date and containing any corrections to the
Initial Adjustments Report, together with any documents reasonably
necessary to substantiate the adjustments proposed in the Final
Adjustments Report. Buyer will provide Seller with reasonable access to
all records which Buyer has in its possession and which are necessary
for Seller to prepare the Final Adjustments Reports.
(c) Within 30 days after receipt of the Final Adjustments Report,
Buyer will give Seller written notice of Buyer's objection, if any, to
the Final Adjustments Report. If Buyer makes any such objections, the
parties will agree on the amount, if any, which is not in dispute
within 30 days after Seller's receipt of Buyer's notice of objections
to the Final Adjustments Report. Any undisputed amount will serve as an
adjustment to the Purchase Price. The adjustment of the Purchase Price
(but excluding any amounts disputed), will be paid by Buyer to Seller,
or paid by Seller to Buyer, whichever the case may be, within 125 days
after the Closing Date or within five business days after agreement on
the undisputed portion of the Final Adjustments Report, if later. Any
disputed amounts will be determined within 120 days after the Closing
Date by the accounting firm of Ernst & Young, whose determination will
be conclusive. Seller and Buyer will bear the fees and expenses payable
to such firm in connection with such determination in reverse
proportion to the manner in which the disputed amounts are allocated by
such firm. The payment required after determination of all disputed
amounts will be made by the paying party to the receiving party by wire
transfer of immediately available funds within five business days after
the final determination.
ARTICLE 3
RELATED MATTERS
SECTION 3.1 HSR ACT COMPLIANCE. As soon as practicable after the
execution of this Agreement, but in any event no later than 45 days after such
execution, Buyer and Seller will complete and file, or cause to be completed and
filed, any notification and report required to be filed under the HSR Act and
such filing shall request early termination of the waiting period imposed by the
HSR Act. The parties shall use their commercially reasonable efforts to respond
as promptly as reasonably practicable to any inquiries received from the FTC and
the Antitrust Division for additional information or documentation and to
respond as promptly as reasonably practicable to all inquiries and requests
received from any other Governmental Authority in connection with antitrust
matters. The parties shall use their respective commercially reasonable efforts
to overcome any objections which may be raised by the FTC, the Antitrust
Division or any other Governmental Authority having jurisdiction over antitrust
matters. Each party will cooperate to prevent inconsistencies between their
respective filings and will furnish to each other such necessary information and
reasonable assistance as the other may reasonably request in connection with its
preparation of necessary filings or submissions under the HSR Act.
Notwithstanding the foregoing, no party shall be required to make any
significant change in the
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operations or activities of the business (or any material assets employed
therein) of such party or any of its affiliates, if a party determines in good
faith that such change would be materially adverse to the operations or
activities of the business (or any material assets employed therein) of such
party or any of its affiliates having significant assets, net worth or revenue.
Notwithstanding anything to the contrary in this Agreement, if either party
determines in its reasonable business judgment that a request for additional
information in connection with the HSR Act is unduly burdensome, either party
may terminate this Agreement by notifying the other party.
SECTION 3.2 NONCOMPETITION AGREEMENT. At the Closing, Seller shall
execute and deliver to Buyer a five-year noncompetition agreement in the form
of Exhibit 3.2.
SECTION 3.3 BULK SALES. Buyer and Seller each waives compliance by the
other with bulk sales Legal Requirements applicable to the transactions
contemplated hereby.
SECTION 3.4 USE OF NAMES AND LOGOS. For a period of not more than 60
days after Closing, Buyer shall be entitled to use the trademarks, trade names,
service marks, service names, logos, and similar proprietary rights of Seller to
the extent incorporated in or on the Assets, provided that Buyer shall use its
best efforts to remove all such names, marks, logos, and similar proprietary
rights from the Assets as soon as reasonably practicable following Closing.
SECTION 3.5 TRANSFER TAXES AND FILING FEES. Seller and Buyer shall each
pay one-half of (a) all real estate transfer taxes and real estate transfer
recording fees, if any, in connection with the transfer of Leased Real Property
or Owned Real Property, (b) all filing and application fees paid to Governmental
Authorities in connection with the transactions described in this letter, and
(c) all sales and transfer Taxes, if any, in connection with the transactions
contemplated hereunder. Each party shall indemnify and hold the other party
harmless from and against all Losses arising from Taxes for which it is liable
hereunder.
SECTION 3.6 ALLOCATION OF PURCHASE PRICE. Seller and Buyer will use
their best efforts to agree that the value of the Assets shall be as set forth
in an appraisal ("Appraisal") prepared by Bond & Pecaro, Inc. ("Appraiser") for
the purpose of Seller reporting the transaction contemplated by this Agreement
as part of a deferred like-kind exchange pursuant to Section 1031 of the Code.
The Appraiser shall perform the Appraisal prior to the Closing Date so that
Seller and Buyer may review the Appraisal and attempt to agree, prior to
Closing, upon the allocation ("Allocation") of the Purchase Price and the
Assumed Obligations and Liabilities to the individual assets or classes of
assets (within the meaning of Section 1031 and 1060 of the Code). The fees and
expenses of the Appraiser shall be shared equally by Seller and Buyer. Provided
that Seller and Buyer are able to agree that the value of the Assets is as set
forth in the Appraisal, Seller and Buyer, for purposes of Sections 1031 and 1060
of the Code, will (i) report the transactions contemplated by this Agreement in
accordance with the Appraisal and the Allocation; (ii) not take any position
inconsistent with the Appraisal or the Allocation; and (iii) file all returns
and reports with respect to the transaction contemplated by this Agreement,
including all federal, state and local returns, on a basis consistent with the
Appraisal and the Allocation. If, after good-faith efforts, Buyer and Seller are
unable to agree within 60 days after Closing that the Appraisal and the
Allocation
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correctly set forth the value of the Assets, then each party will be free to
report its own position to the Internal Revenue Service and other taxing
Governmental Authority. Seller and Buyer will promptly give to the other notice
of any disallowance or challenge of asset values by the Internal Revenue Service
or any taxing Governmental Authority.
ARTICLE 4
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer covenants, represents and warrants to Seller, as of the date of
this Agreement and as of Closing, as follows:
SECTION 4.1 ORGANIZATION OF BUYER. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own and lease
the properties and assets it currently owns and leases and to conduct its
activities as such activities are currently conducted. Buyer is duly qualified
to do business as a foreign corporation and is in good standing in all of the
jurisdictions where the Systems are located.
SECTION 4.2 AUTHORITY. Buyer has all requisite corporate power and
authority to execute, deliver, and perform this Agreement and consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated hereby by
Buyer have been duly and validly authorized by all necessary corporate action on
the part of Buyer. This Agreement has been duly and validly executed and
delivered by Buyer, and is the valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as may be limited
by applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies.
SECTION 4.3 NO CONFLICT; CONSENTS. Except as will not have a material
adverse effect on the ability of Buyer to perform its obligations hereunder, and
subject to compliance with the HSR Act, the execution, delivery, and performance
by Buyer of this Agreement do not and will not: (i) conflict with or violate any
provision of the articles of incorporation or bylaws of Buyer; (ii) violate any
provision of any Legal Requirement; (iii) conflict with, violate, result in a
breach of, or constitute a default under any contract, agreement, or
understanding to which Buyer is a party or by which Buyer or the assets or
properties owned or leased by it are bound or affected; or (iv) require any
consent, approval, or authorization of, or filing of any certificate, notice,
application, report, or other document with, any Governmental Authority or other
Person.
SECTION 4.4 LITIGATION. Except for any Litigation as may affect the
cable television industry (national or regional) generally, there is no
Litigation pending, or to Buyer's knowledge, threatened, by or against or
affecting or relating to Buyer or any of its affiliates in any court or before
any Governmental Authority or any arbitrator, which, if adversely determined,
would
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<PAGE> 20
restrain or materially hinder or delay the consummation of the transactions
contemplated by this Agreement or cause any of such transactions to be
rescinded.
SECTION 4.5 FINDERS AND BROKERS. Buyer has not employed any financial
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Seller will in any way
have any liability.
SECTION 4.6 TAXPAYER IDENTIFICATION NUMBER. Buyer's U.S. Taxpayer
Identification Number is as set forth in the introductory paragraph of this
Agreement.
SECTION 4.7 FINANCING. Buyer will have by the Closing Date adequate
financing to enable it to fulfill its obligations under this Agreement.
SECTION 4.8 QUALIFICATION. Buyer has no reason to believe that it would
not qualify as a transferee of the Franchises, Licenses and Contracts to be
assigned to it pursuant to this Agreement. Should Buyer become aware of any
facts that would cause Buyer not to so qualify, it will promptly notify Seller
in writing thereof and use its best efforts to prevent any such
disqualification.
SECTION 4.9 BUYER'S INVESTIGATION. Buyer hereby acknowledges that it
has conducted an investigation of the Systems, which investigation included
evaluation of the condition and performance of the physical plant and review of
the books, records and agreements of the Systems. Buyer acknowledges that Seller
makes no warranty, express or implied, as to the condition of the Assets except
as expressly set forth in this Agreement. Buyer has not relied upon, and Seller
shall not be liable for or bound in any manner by, any express or implied verbal
or written information, warranties, guarantees, promises, statements,
inducements, representations or opinions pertaining to the Systems or the
Assets, except as may be contained in this Agreement and certificates delivered
hereunder.
ARTICLE 5
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller covenants, represents and warrants to Buyer, as of the date of
this Agreement and as of Closing, as follows:
SECTION 5.1 ORGANIZATION AND QUALIFICATION OF SELLER. Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and has all requisite corporate power and
authority to own and lease the properties and assets it currently owns and
leases and to conduct its activities as such activities are currently conducted.
Seller is duly qualified to do business as a foreign corporation and is in good
standing in all of the jurisdictions where the Systems are located.
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SECTION 5.2 AUTHORITY. Seller has all requisite corporate power and
authority to execute, deliver, and perform this Agreement and consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated hereby on
the part of Seller have been duly and validly authorized by all necessary action
on the part of Seller. This Agreement has been duly and validly executed and
delivered by Seller, and constitutes the legal, valid and binding obligations of
Seller, enforceable against Seller in accordance with its terms, except as may
be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
SECTION 5.3 NO CONFLICT; CONSENTS. Except as described on Schedule 5.3
and subject to compliance with the HSR Act, the execution, delivery, and
performance by Seller of this Agreement do not and will not: (i) conflict with
or violate any provision of the articles of incorporation or bylaws of Seller;
(ii) violate any provision of any Legal Requirement; (iii) conflict with,
violate, result in a breach of, or constitute a default under any contract,
agreement or understanding to which Seller is a party or by which Seller or the
Assets are bound or affected; (iv) require any consent, approval or
authorization of, or filing of any certificate, notice, application, report, or
other document with, any Governmental Authority or other Person; or (v) result
in the creation or imposition of any Lien (other than a Permitted Lien) against
or upon any of the Assets; provided that, with respect to (ii), (iii), (iv) and
(v) of this Section 5.3, such prohibition shall not apply to a conflict,
violation, breach, default, consent, filing or imposition of any Lien that would
not materially impair the ability of Seller to perform hereunder or that would
not have a material adverse effect on the financial condition or the business
operations of the Systems considered as a whole.
SECTION 5.4 TITLE TO ASSETS; SUFFICIENCY. Seller has good and
marketable title to (or in the case of Assets that are leased, valid leasehold
interests in) and possession of all of the Assets, free and clear of all Liens,
except for (a) Permitted Liens, and (b) Liens described on Schedule 5.4, all of
which will be terminated, released or, in the case of rights of first refusal
listed on Schedule 5.20, waived, as appropriate, at or prior to the Closing
Date. The tangible Assets, taken as a whole, are in good operating condition and
repair, ordinary wear and tear excepted, and will permit the Systems to operate
in accordance with the material terms of the Franchises, the Licenses and the
Contracts. Except for the Excluded Assets, the Assets constitute all property
and rights, real and personal, tangible and intangible, necessary or required to
operate the Systems as currently operated and conduct the business of the
Systems as currently conducted.
SECTION 5.5 FRANCHISES, LICENSES, AND CONTRACTS. Seller has delivered
to Buyer true and complete copies of each of the Franchises, Licenses, and
Contracts and all amendments, assignments and consents thereto. The Franchises
contain all of the commitments and obligations of Seller to the applicable
Governmental Authority granting such Franchises with respect to the
construction, ownership and operation of the Systems. Except for the Licenses
and Contracts included in the Excluded Assets, Seller is not bound or affected
by any other material contract, agreement or understanding which relates to the
Systems. To Seller's knowledge, and except as described on Schedule 5.5, each of
the Franchises, Licenses and material Contracts is in full force and effect and
is valid, binding and enforceable in accordance with its terms. Except as
described
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on Schedule 5.5, there has not occurred any material default by Seller nor, to
Seller's knowledge, by any other Person under any of the Franchises, Licenses or
material Contracts.
SECTION 5.6 EMPLOYEE BENEFITS. Neither Seller nor any Employee Benefit
Plan (as defined in the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) maintained by Seller is in violation of the provisions of
ERISA; no reportable event, within the meaning of Sections 4043(c)(1), (2), (3),
(5), (6), (7), (10) or (13) of ERISA, has occurred and is continuing with
respect to any such Employee Benefit Plan; and no prohibited transaction, within
the meaning of Title I of ERISA, has occurred with respect to any such Employee
Benefit Plan. Buyer is not required under ERISA, the Code or any collective
bargaining agreement to establish, maintain or continue any Employee Benefit
Plan maintained by Seller or any affiliate of Seller.
SECTION 5.7 EMPLOYEES.
(a) Except as set forth on Schedule 5.7, there are no
collective bargaining agreements applicable to any person employed by
Seller that renders services in connection with the Systems, and Seller
has no duty to bargain with any labor organization with respect to any
such persons. There are not pending any unfair labor practice charges
against Seller, nor is there any demand for recognition, or any other
request or demand from a labor organization for representative status
with respect to any person employed by Seller that renders services in
connection with the Systems.
(b) Seller is in substantial compliance with all applicable
Legal Requirements respecting employment conditions and practices, has
withheld all amounts required by any applicable Legal Requirements or
Contracts to be withheld from the wages or salaries of its employees,
and is not liable for any arrears of wages or any Taxes or penalties
for failure to comply with any of the foregoing.
(c) Seller has not engaged in any unfair labor practice within
the meaning of the National Labor Relations Act and has not violated
any Legal Requirement prohibiting discrimination on the basis of race,
color, national origin, sex, religion, age, marital status, or handicap
in its employment conditions or practices. Except as set forth on
Schedule 5.7, there are no pending or, to Seller's knowledge,
threatened unfair labor practice charges or discrimination complaints
relating to race, color, national origin, sex, religion, age, marital
status, or handicap against Seller before any Governmental Authority
nor, to Seller's knowledge, does any basis therefor exist.
(d) There are no existing or, to Seller's knowledge,
threatened labor strikes, disputes, grievances or other labor
controversies affecting the Systems. There are no pending or, to
Seller's knowledge, threatened representation questions
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respecting Seller's employees. There are no pending or, to Seller's
knowledge, threatened arbitration proceedings under any Contract. To
Seller's knowledge, there exists no basis for any of the above.
(e) Except as set forth on Schedule 5.7, Seller is not a party
to any employment agreement, written or oral, relating to employees of
the Systems which cannot be terminated at will by Seller.
(f) Schedule 5.7 sets forth a true and complete list of the
names, titles and rates of compensation of all of the employees of the
Systems, and identifies with an asterisk any employees of the Systems
that Seller desires to retain after Closing ("Retained Employees").
SECTION 5.8 LITIGATION. Except as set forth on Schedule 5.8, there is
no Litigation or Judgment pending or, to Seller's knowledge, threatened against
Seller and, to Seller's knowledge, no facts or circumstances exist which could
reasonably be expected to give rise to any such Litigation or Judgment, which
will have a materially adverse affect on the financial condition or business
operations of the Systems, or which seeks or could result in the modification,
revocation, termination, suspension, or other limitation of any of the
Franchises, Licenses or material Contracts.
SECTION 5.9 TAX RETURNS; OTHER REPORTS. Seller has timely filed all
federal, state and local tax returns and other tax reports relating to the
Systems that are required to be filed on or prior to the date hereof, and has
timely paid all Taxes shown thereon to be due and payable. Except as set forth
on Schedule 5.9, Seller has received no notice of deficiency or assessment of
proposed deficiency or assessment from any taxing Governmental Authority
pertaining to the Systems. All Taxes with respect to Seller, the Assets, or the
business or operation of the Systems that are due and payable have been timely
paid by Seller.
SECTION 5.10 COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) Except as set forth in on Schedule 5.10, Seller has
substantially complied and is in substantial compliance with all Legal
Requirements applicable to it or to the Systems, including but not
limited to the Communications Act, the Cable Act, the Copyright Act,
the Occupational Safety and Health Act, and rules and regulations
promulgated thereunder. Except as set forth on Schedule 5.10, Seller
has not received notice from the FCC of any violation of its rules and
regulations insofar as they apply to the Systems.
(b) Seller has submitted to the FCC all filings, including,
without limitation, cable television registration statements, current
annual reports and aeronautical frequency usage notices, that are
required under the rules and regulations of the FCC. Seller is, with
respect to the Systems, certified as in compliance with the FCC's equal
opportunity rules. The Systems are in substantial
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compliance with signal leakage criteria prescribed by the FCC, and the
must-carry and retransmission consent provisions of the Cable Act and
the FCC rules and regulations promulgated thereunder.
(c) Seller has deposited with the U.S. Copyright Office all
statements of account and other documents and instruments, and paid all
royalties, supplemental royalties, fees and other sums to the U.S.
Copyright Office under the Copyright Act with respect to the business
and operations of the Systems as are required to obtain, hold and
maintain the compulsory license for cable television systems prescribed
in the Copyright Act. The Systems are in substantial compliance with
the Copyright Act and the rules and regulations of the U.S. Copyright
Office promulgated thereunder, except as to potential copyright
liability arising from the performance, exhibition or carriage of any
music on the Systems. Except as set forth on Schedule 5.10 or as may
affect the cable television industry generally, to the knowledge of
Seller, there is no inquiry, claim, action or demand pending before the
U.S. Copyright Office or from any other party that questions the
copyright filings or payments made by Seller with respect to any of the
Systems.
(d) All necessary FAA and FCC approvals have been obtained
with respect to the height and location of towers used in connection
with the operation of the Systems and are listed on Schedule 5.10 and
such towers are being operated in compliance in all material respects
with applicable FAA and FCC rules.
(e) A request for renewal has been timely filed pursuant to
Section 626(a) of the Cable Act with the proper Governmental Authority
with respect to any Franchise that expires within 36 months after the
date of this Agreement.
(f) Except as set forth on Schedule 5.10, as of the date of
this Agreement (i) to Seller's knowledge, the rates charged by Seller
to subscribers of the Systems for the "cable programming services tier"
(as such term is defined in the FCC's rate regulations) offered by the
Systems are in compliance with FCC rules and orders, (ii) to Seller's
knowledge, there are no rate complaints pending at the FCC with respect
to the Systems, and (iii) no local franchising authority is presently
regulating the "basic tier" rates being charged to subscribers of the
Systems nor has Seller received from any local franchising authority a
copy of any FCC Form 328 filed by such local franchising authority with
the FCC requesting rate regulation certification with respect to the
Systems.
SECTION 5.11 SYSTEM INFORMATION. Schedule 5.11 sets forth a
materially true and accurate description of the following information as of the
dates set forth in such schedule:
(i) the approximate number of miles of plant that will be
included in the Assets;
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(ii) the number of subscribers of each of the Systems as
reflected in Seller's billing reports;
(iii) a description of basic and optional or tier services
available from the Systems and the rates charged by Seller for each and
the number of subscribers receiving each optional or tier service;
(iv) the stations and signals carried by the Systems and the
channel position of each such signal and station;
(v) the MHz capacity of the Systems;
(vi) the channel capacity of the Systems; and
(vii) the disconnection policies of the Systems.
SECTION 5.12 ENVIRONMENTAL MATTERS.
(a) To Seller's knowledge, none of the Owned Real Property
or Leased Real Property is listed on the National Priorities Lists or
the Comprehensive Environmental Response, Compensation, Liability
Information System ("CERCLIS"), or is or has been the subject of any
"Superfund" evaluation or investigation, or any other investigation or
proceeding of any Governmental Authority evaluating whether any
remedial action is necessary to respond to any release of Hazardous
Substances on or in connection with the Owned Real Property or the
Leased Real Property.
(b) To Seller's knowledge, except as described on Schedule
5.12, (i) no surface impoundments or underground storage tanks are or
have been located in or on the Owned Real Property or Leased Real
Property, (ii) no parcel of the Real Property has been used at any time
as a gasoline service station or any other facility for storing,
pumping, dispensing or producing gasoline or any other petroleum
products or wastes, and (iii) no building or other structure on any
parcel of the Real Property contains asbestos. To Seller's knowledge,
there are no incinerators, septic tanks or cesspools on any parcel of
the Real Property, and all waste is discharged into a public sanitary
sewer system.
(c) To Seller's knowledge, Seller is in substantial
compliance with, and holds all permits, licenses and authorizations
required under, all Legal Requirements with respect to pollution or
protection of the environment, including Legal Requirements relating to
actual or threatened emissions, discharges, or releases of Hazardous
Substances into the ambient air, surface water, ground water, land, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Substances,
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insofar as they relate to the Owned Real Property or the Leased Real
Property. Seller has received no notice of, and to Seller's knowledge
there are no circumstances relating to, any past or present condition,
circumstance, activity, practice or incident (including without
limitation, the presence, use, generation, manufacture, disposal,
release or threat to release of any Hazardous Substances from or on the
Owned Real Property or Leased Real Property), that could interfere
with, prevent continued compliance with, or result in any material
Losses pursuant to, any Legal Requirement with respect to pollution or
protection of the environment, or that is reasonably likely to give
rise to any liability, based upon or related to the processing,
distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release, or threatened release
into the environment, of any Hazardous Substance on, from or
attributable to the Owned Real Property or Leased Real Property.
(d) "Hazardous Substances" has the meaning given in the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 (42 U.S.C.A. Sections 9601 et seq. ("CERCLA"), as amended, and
rules and regulations promulgated thereunder.
(e) Seller has provided Buyer with complete copies of (i) all
studies, reports, surveys or other materials either in Seller's
possession or known to Seller and to which Seller has access relating
to the presence or alleged presence of Hazardous Substances at, on or
affecting any parcel of Owned Real Property or Leased Real Property,
(ii) all notices or other materials either in Seller's possession or
known to Seller and to which Seller has access that were received from
any Governmental Authority having the power to administer or enforce
any Environmental Laws relating to current or past ownership, use or
operation of the Real Property or activities at any parcel of Owned
Real Property or Leased Real Property and (iii) all materials either in
Seller's possession or known to Seller and to which Seller has access
relating to any claim, allegation or action by any private third party
under any environmental law.
SECTION 5.13 FINANCIAL AND OPERATIONAL INFORMATION. Seller has
delivered to Buyer an unaudited balance sheet for each of the Systems as of
December 31, 1997 and unaudited statements of profit and loss for each of the
Systems for the twelve-month period then ended (the "System Financial
Statements"). The Systems' Financial Statements have been prepared in the
ordinary course of business, are based on the books and records of the Systems,
were prepared in accordance with generally accepted accounting principles
(except for the omission of notes thereto and subject to normal year-end
adjustments which will not be material in amount or effect), applied on a
consistent basis throughout the periods covered thereby, and present fairly, in
all material respects, the financial condition and results of operations of the
Systems as of the dates and for the periods indicated.
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SECTION 5.14 NO ADVERSE CHANGE. Since December 31, 1997, (i) there has
been no material adverse change in the financial condition or the business
operations of the Systems; (ii) the Systems have not been materially and
adversely affected as a result of any fire, explosion, accident, casualty, labor
trouble, flood, drought, riot, storm, condemnation, or act of God or public
force or otherwise; and (iii) Seller has not made any sale, assignment, lease or
other transfer of any of Seller's properties other than in the normal and usual
course of business.
SECTION 5.15 FINDERS AND BROKERS. Except for HPC Puckett & Company,
Seller has not employed any financial advisor, broker or finder or incurred any
liability for any financial advisory, brokerage, finder's or similar fee or
commission in connection with the transactions contemplated by this Agreement
for which Buyer will in any way have any liability.
SECTION 5.16 TAXPAYER IDENTIFICATION NUMBER. Seller's U.S. Taxpayer
Identification Number is as set forth in the introductory paragraph of this
Agreement.
SECTION 5.17 INTANGIBLES. Seller neither uses nor holds any copyrights,
trademarks, trade names, service marks, service names, logos, licenses, permits
or other similar intangible property rights and interests in the operations of
the Systems that do not incorporate the name "Cable One, Inc.," "Post-Newsweek
Cable," "Cablecom," or variations thereof. In the operation of the Systems,
Seller is not aware that it is infringing upon or otherwise acting adversely to
any such intangible property rights and interests owned by any other Person or
Persons, and there is no claim or action pending, or to Seller's knowledge
threatened, with respect thereto.
SECTION 5.18 ACCOUNTS RECEIVABLE. The accounts receivable relating to
the Systems are actual and bona fide receivables representing obligations for
the total dollar amount thereof shown on the books of Seller which resulted from
the regular course of Seller's business, and are fully collectible in accordance
with their terms, subject to no offset or reduction of any nature except for a
reserve for uncollectible accounts consistent with the reserve established by
Seller in its most recent balance sheet delivered to Buyer in accordance with
Section 5.13.
SECTION 5.19 BONDS; LETTERS OF CREDIT; CERTIFICATES OF INSURANCE.
Except as set forth on Schedule 5.19, there are no franchise, construction,
fidelity, performance, or other bonds or letters of credit posted, or
certificates of insurance issued, by Seller in connection with the Systems or
the Assets.
SECTION 5.20 RIGHTS IN ASSETS. Except as set forth in Schedule 5.20, no
person (including any Governmental Authority) has any right to acquire an
interest in the Systems or any material Asset (including any right of first
refusal or similar right), other than rights of condemnation or eminent domain
afforded by law (none of which have been exercised and no proceedings therefor
have been commenced).
SECTION 5.21 BOOKS AND RECORDS. All of the books, records, and accounts
of the business are in all material respects true and complete, are maintained
in accordance with good business practice and all applicable Legal Requirements,
accurately present and reflect in all
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material respects all of the transactions therein described, and are reflected
accurately in the System Financial Statements.
SECTION 5.22 SUBSCRIBER COUNT. The Systems are currently serving 29,273
Basic Subscribers.
ARTICLE 6
COVENANTS
SECTION 6.1 AFFIRMATIVE COVENANTS. Except as Buyer may otherwise
consent in writing, such consent not to be unreasonably withheld, between the
date of this Agreement and Closing Seller shall:
(a) (i) operate the Systems substantially in the ordinary and
usual course of business and in accordance with past practices,
including disconnection policies; (ii) maintain the tangible Assets in
good condition and repair, ordinary wear and tear excepted; (iii)
perform all of its obligations under all of the Franchises, Licenses
and Contracts without material breach or default; (iv) operate the
Systems in substantial compliance with applicable Legal Requirements;
and (v) in each case, unless Buyer otherwise requests in writing, use
its commercially reasonable efforts to (A) preserve the current
business organization of its Systems intact, including preserving
existing relationships with Persons having business with the Systems,
(B) keep available the services of its employees providing services in
connection with the Systems, (C) continue normal marketing,
advertising, and promotional expenditures and practices as described on
Schedule 6.1 with respect to the Systems, and (D) maintain inventories
of equipment and supplies at historic levels;
(b) give to Buyer and its counsel, accountants, and other
representatives, access upon reasonable prior notice during normal
business hours to the Systems, the Owned Real Property and Leased Real
Property, the Assets and Seller's books and records relating to the
Systems, provided, however, that such access shall not disrupt the
normal business operations of the Systems and Buyer will use
commercially reasonable efforts to limit the number of access requests.
(c) as soon as practicable after the date of this Agreement,
and at its expense, make all filings, and exercise commercially
reasonable efforts to obtain in writing as promptly as practicable all
approvals, authorizations and consents described on Schedule 5.3 and
waivers of rights of first refusal described on Schedule 5.20, and
deliver to Buyer copies thereof promptly upon receiving them; provided
that "commercially reasonable efforts" for this purpose shall not
require Seller to undertake extraordinary or unreasonable measures to
obtain such approvals and consents, including, without limitation, the
initiation or prosecution
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of legal proceedings or the payment of fees in excess of normal and
usual filing and processing fees; provided, further, that the costs and
expenses associated with the performance after the Closing Date of
obligations which are required by a third party as a condition of
granting its consent or approval and which obligations are accepted by
Buyer shall be borne solely by Buyer. In the event that Buyer's
cooperation is required to obtain such consents, Buyer shall be
responsible for its own out-of-pocket costs in connection therewith;
(d) promptly deliver to Buyer copies of quarterly financial
statements for the Systems and other reports with respect to the
operation of the Systems regularly prepared by Seller from the date
hereof until Closing;
(e) promptly inform Buyer in writing of any material adverse
change in the financial condition or business operations of the
Systems;
(f) continue to carry and maintain in full force and effect
its existing casualty and liability insurance through and including the
Closing Date;
(g) maintain its books, records and accounts with respect to
the Assets and the operation of the Systems in the usual, regular and
ordinary manner on a basis consistent with past practices; and
(h) duly and timely file a valid notice of renewal under
Section 626 of the Cable Act with the appropriate Governmental
Authority with respect to any Franchise that will expire within
thirty-six (36) months after any date between the date of this
Agreement and the Closing Date.
SECTION 6.2 FCC APPROVAL. Promptly after the execution of this
Agreement, Seller shall make application to the FCC for the consent and approval
of the FCC to the transfer of the ownership and operation of any FCC Licenses of
the Systems from Seller to Buyer.
SECTION 6.3 EMPLOYEE MATTERS.
(a) Seller shall terminate all of its employees (except for
the Retained Employees) who are employed with respect to the Systems
immediately prior to Closing. Seller shall be responsible for and shall
cause to be discharged and satisfied in full all amounts owed to any
employee of Seller who is employed with respect to the Systems through
the Closing Time, including wages, salaries, accrued vacation, any
employment, incentive, compensation or bonus agreements, any deferred
compensation plans, or other benefits or payments on account of
termination, and shall indemnify and hold Buyer harmless from any
Losses thereunder.
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(b) Buyer intends to offer employment to all of the employees
(except for the Retained Employees) of Seller who perform services with
respect to the operation of the Systems as of the Closing Date
provided, however, that nothing herein shall be deemed to create an
employment agreement with any employee or to guarantee any employee a
job for any period of time, all such employees being "at will." Not
later than 30 days prior to the Closing Date, Buyer shall notify those
employees (other than Retained Employees) whom Buyer intends to hire on
the Closing Date; the form and manner of such notification shall be
reasonably satisfactory to, and approved in advanced by, Seller and
shall specify the terms of employment, including compensation and all
benefits relating thereto. Not withstanding Section 6.3(a), Buyer shall
recognize the term of service with Seller of any former employee of
Seller hired by Buyer in determining such employee's eligibility and
vesting for purposes of participating in Buyer's employee benefit
plans. Buyer also shall permit any former employee of Seller hired by
Buyer to participate in Buyer's group medical plan without imposing any
preexisting condition limitations or waiting periods so long as such
employee was covered by Seller's health plan immediately prior to the
Closing.
(c) Notwithstanding anything to the contrary herein, from and
after the date of this Agreement and for a period of 24 months after
the Closing Date, Buyer shall not employ, or offer to employ, any
Retained Employee, unless such Person's employment by Seller has
terminated or Seller otherwise consents in writing to the making of
such offer.
SECTION 6.4 CERTAIN NEGATIVE COVENANTS OF SELLER. Between the date
hereof and Closing, Seller shall not solicit or participate in negotiations with
any third party with respect to the sale of the Assets or the Systems or any
transaction inconsistent with those contemplated hereby. Additionally, except as
Buyer may otherwise consent in writing (such consent not to be unreasonably
withheld), or as contemplated by this Agreement, between the date of this
Agreement and Closing Seller shall not (a) modify, terminate, renew, suspend, or
abrogate any Franchise, License or material Contract other than in the ordinary
course of business, (b) sell, assign, lease or otherwise dispose of any of the
Assets, unless such Assets are consumed or disposed of in the ordinary course of
business or disposed of in conjunction with the acquisition of replacement
property or are no longer used or useful in the business or operation of the
Systems, (c) create, assume, or permit to exist any Lien (except for Permitted
Liens) upon any Asset, (d) change customer rates for any tier of service or
charges for remotes or installations, or implement any re-tiering or repackaging
of cable television programming offered by the Systems, or change billing,
collection, installation, disconnect, marketing or promotional practices, other
than those changes described in Schedule 6.4, (e) seek amendments or
modifications to existing Franchises or Contracts or accept or agree to accede
to any material modification or amendment to, or any condition to the transfer
of, any of the Franchises, Contracts or Owned Real Property that will adversely
affect Buyer, (f) agree with any Governmental Authority to extend or to toll the
time limits applicable to such Governmental Authority's consideration of the FCC
Form 394, or (g) enter into any transaction or permit the taking of any action
that would result in any of
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Seller's representations and warranties contained in this Agreement not being
materially true and correct when made or at Closing; provided, however, that
with respect to clause (a) above, all such modified, renewed or new Licenses or
Contracts shall not involve either aggregate liabilities exceeding $10,000, or
any material non-monetary obligation.
SECTION 6.5 TITLE INSURANCE. Seller shall provide copies to Buyer of
any existing policies of title insurance on parcels of Owned Real Property and
Leased Real Property. Seller will reasonably cooperate with Buyer if Buyer
elects to obtain title insurance policies and boundary surveys indicating for
each surveyed parcel (i) access from public rights-of-way, (ii) all
improvements, and (iii) encroachments across the parcel's boundary lines by such
improvements or improvements by owners of adjacent parcels, for parcels of Owned
Real Property or Leased Real Property, it being understood that Buyer shall have
the sole responsibility for obtaining and paying for such policies. The
obtaining of title insurance shall not be a condition to the obligations of
Buyer to consummate the transactions contemplated hereunder.
SECTION 6.6 CONFIDENTIALITY. Any non-public information that either
party ("Recipient Party") may obtain from the other ("Disclosing Party") in
connection with this Agreement with respect to Disclosing Party or the Systems
shall be confidential and, unless and until Closing shall occur, Recipient Party
shall not disclose any such information to any third party (other than its
directors, officers, partners and employees, and representatives of its advisers
and lenders whose knowledge thereof is necessary in order to facilitate the
consummation of the transactions contemplated hereby) or use such information to
the detriment of Disclosing Party; provided that (a) Recipient may use and
disclose any such information once it has been publicly disclosed (other than by
Recipient Party in breach of its obligations under this Section) or that
rightfully has come into the possession of Recipient Party (other than from
Disclosing Party), and (b) to the extent that Recipient Party may become
compelled by Legal Requirements to disclose any of such information, Recipient
Party may disclose such information if it shall have used all reasonable
efforts, and shall have afforded Disclosing Party the opportunity, to obtain an
appropriate protective order, or other satisfactory assurance of confidential
treatment, for the information compelled to be disclosed. If this Agreement is
terminated, Recipient Party shall use all reasonable efforts to cause to be
delivered to Disclosing Party, and retain no copies of, any documents, work
papers and other materials obtained by Recipient Party or on its behalf from
Disclosing Party, whether so obtained before or after the execution hereof.
SECTION 6.7 SUPPLEMENTS TO SCHEDULES. Each of Seller and Buyer shall,
from time to time prior to Closing, supplement the Schedules to this Agreement
with additional information that, if existing or known to it on the date of this
Agreement, would have been required to be included in one or more Schedules to
this Agreement. For purposes of determining the satisfaction of any of the
conditions to the obligations of Buyer and Seller in Sections 7.1 and 7.2 and
the liability of Seller or of Buyer following Closing for breaches of its
representations and warranties under this Agreement, the Schedules to this
Agreement shall be deemed to include only (a) the information contained therein
on the date of this Agreement and (b) information added to the Schedules by
written supplements to such Schedules delivered prior to Closing by the party
making such amendment that (i) are accepted in writing by the other party (such
acceptance not
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to be unreasonably withheld) or (ii) reflect actions expressly permitted by this
Agreement to be taken prior to Closing.
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SECTION 6.8 NOTIFICATION OF CERTAIN MATTERS.
(a) Each party will promptly notify the other party in writing
of any fact, event, circumstance, action or omission (i) which, if
known at the date of this Agreement, would have been required to be
disclosed in or pursuant to this Agreement, or (ii) the existence or
occurrence of which would cause any of such party's representations or
warranties under this Agreement not to be true in any material respect,
and with respect to clause (ii), each party shall use commercially
reasonable efforts to remedy the same.
(b) Promptly upon becoming aware of such matter, each party
will notify the other party in writing of any fact, event,
circumstance, action or omission which constitutes a breach by the
other party of any of the representations or warranties made by the
other party in the performance of or compliance with any covenant,
agreement or obligation required to be performed or complied with prior
to the date of Closing.
SECTION 6.9 COMMERCIALLY REASONABLE EFFORTS. Each party shall use
commercially reasonable efforts to take all steps within its power, and will
cooperate with the other party, to cause to be fulfilled those of the conditions
to the other party's obligations to consummate the transactions contemplated by
this Agreement that are dependent upon its actions, and to execute and deliver
such instruments and take such other commercially reasonable actions as may be
necessary to carry out the intent of this Agreement and consummate the
transactions contemplated hereby.
SECTION 6.10 SUBSCRIBER BILLING SERVICES. Seller shall provide to
Buyer, upon Buyer's written request, subscriber billing services ("Transitional
Billing Services") in connection with the System for a period of up to 60 days
following the Closing Date to allow for conversion of existing billing
arrangements. Buyer shall notify Seller in writing at least 30 days prior to the
Closing Date as to whether it will require Transitional Billing Services. Buyer
shall promptly reimburse to Seller all costs actually and reasonably incurred by
Seller in providing the Transitional Billing Services, including but not limited
to allocation of overhead.
SECTION 6.11 CLOSING DATE FINANCIAL STATEMENTS. Promptly (but in any
event within 30 days) after Closing, Seller shall deliver to Buyer a true and
complete copy of the unaudited balance sheet for the Systems as of the Closing
Date and the unaudited statement of profit and loss for the Systems for the
period then ended, in each case in the report format in which the System
Financial Statements are presented.
SECTION 6.12 LEASED VEHICLES; OTHER CAPITAL LEASES. Seller will pay the
remaining balances on any leases for vehicles or capital leases included in the
Assets and will deliver title to such vehicles and other personal property free
and clear of all Liens (other than Permitted Liens) to Buyer at the Closing.
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SECTION 6.13 DUTY OF GOOD FAITH AND FAIR DEALING. Each party agrees
that it will act in good faith with regard to all matters that are the subject
of this Agreement, and will neither intentionally nor knowingly take any action
or omit to take any action at any time for the primary purpose of depriving the
other party unfairly of any right or benefit that the other party has at such
time under this Agreement.
SECTION 6.14 FRANCHISE RENEWALS. Buyer will use its commercially
reasonable efforts to, with Seller's reasonable assistance, obtain prior to
Closing a renewal or extension of the Franchises issued by the Cities of Purcell
and Noble, Oklahoma for terms extending at least to June 30, 2003. Buyer, with
Seller's reasonable assistance, shall be primarily responsible for negotiating
with the franchising authorities of the Cities of Purcell and Noble. Buyer shall
not agree to any change in such Franchises as a condition to obtaining any
renewal or extension without Seller's consent (such consent not to be
unreasonably withheld), unless such change is consistent with customary
practices in the cable television industry for cable systems of similar size and
would not increase the obligations or liabilities of Seller.
ARTICLE 7
CONDITIONS PRECEDENT
SECTION 7.1 CONDITIONS TO BUYER'S OBLIGATIONS. The obligations of Buyer
to consummate the transactions contemplated by this Agreement shall be subject
to the following conditions, any one or more of which may be waived by Buyer, in
its sole discretion:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Seller in this Agreement shall be
true and accurate in all material respects at and as of Closing with
the same effect as if made at and as of Closing, except for changes
contemplated under this Agreement and except for representations and
warranties made only at and as of a certain date.
(b) Performance of Agreements. Seller shall have performed in
all material respects all obligations and agreements and complied in
all material respects with all covenants in this Agreement to be
performed and complied with by it at or before Closing, and no event
which would constitute a material breach of the terms of this Agreement
on the part of Seller shall have occurred or be continuing.
(c) Officer's Certificate. Buyer shall receive a certificate
executed by an executive officer of Seller, dated as of Closing,
reasonably satisfactory in form and substance to Buyer, certifying that
the conditions specified in Sections 7.1(a) and (b) have been
satisfied.
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(d) Legal Proceedings. There shall be no Legal Requirement,
and no Judgment shall have been entered and not vacated by any
Governmental Authority of competent jurisdiction in any Litigation or
arising therefrom, which enjoins, restrains, makes illegal, or
prohibits consummation of the transactions contemplated by this
Agreement, and there shall be no Litigation pending or threatened that
seeks or that, if successful, would have the effect of, any of the
foregoing.
(e) HSR Act Compliance. All waiting periods under the HSR Act
applicable to the transactions contemplated hereby shall have expired
or been terminated.
(f) Seller's Counsel Opinion. Buyer shall have received an
opinion of Alan H. Silverman, general counsel to Seller, dated as of
Closing, in the form of Exhibit 7.1(f).
(g) Seller's FCC Counsel Opinion. Buyer shall have received an
opinion of Fleischman and Walsh, L.L.P., special communications counsel
to Seller, dated as of Closing, in the form of Exhibit 7.1(g).
(h) Consents. Buyer shall have received evidence that all
consents, approvals and authorizations identified on Schedule 5.3 as
Required Consents have been obtained and remain in full force and
effect; provided, however, that to the extent such Required Consents
relate to consents by the FCC to assignments of Licenses, this
condition shall be deemed met if such consents to assignment have been
requested prior to Closing and Buyer is entitled to operate the Systems
under such Licenses pursuant to conditional use authorizations until
the FCC's consent is received; and provided further that to the extent
such Required Consents relate to consents by a Governmental Authority
to assignments of the Franchises, this condition will be deemed met,
subject to the provisions of Article 12, if Seller has obtained
consents to assign Franchises covering a number of Basic Subscribers
equal to 85% of the aggregate number of Basic Subscribers served by the
Systems. A Required Consent from a Governmental Authority relating to
the assignment of a Franchise shall be deemed to have been received
upon satisfaction of the procedures set forth in Section 617 of the
Communications Act.
(i) Evidence of Authorizing Actions. Seller shall have
delivered to Buyer evidence reasonably satisfactory to Buyer to the
effect that Seller has taken all action necessary to authorize its
execution of this Agreement and the consummation of the transactions
contemplated hereby.
(j) Noncompetition Agreement. Seller shall have delivered to
Buyer the Noncompetition Agreement executed by Seller.
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(k) Lien Releases. Seller shall have delivered evidence that
all Liens (including those described on Schedule 5.4) affecting or
encumbering the Assets that are to be terminated, released or, in the
case of rights of first refusal listed on Schedule 5.20, waived, as
appropriate, prior to or as of the Closing Date have been so
terminated, released or waived.
(l) No Material Adverse Change. There shall not have been any
material adverse change in the Assets or the financial condition or the
operations of the Systems other than any change due to an event which
affects the cable television industry in general (except for any action
by Congress or the FCC that materially and adversely restricts Buyer's
ability to increase rates with respect to the Systems).
(m) Other Documents. All other documents and other items
required to be delivered under this Agreement to Buyer at or prior to
Closing shall have been delivered or shall be tendered at the Closing.
(n) Section 626 Notices. Seller shall have duly and timely
filed with the appropriate Governmental Authority all notices of
renewal required pursuant to Section 626 of the Cable Act with respect
to any Franchise that will expire within thirty-six (36) months after
any date between the date of this Agreement and the Closing Date.
(o) Minimum Number of Subscribers. Seller shall have delivered
to Buyer evidence that the Systems serve at least 95% of the Basic
Subscribers identified in Section 5.22.
(p) Franchise Matters. If a Franchise renewal or extension for
either the City of Purcell or the City of Noble ("Franchise Renewals")
has not been received by the Closing Date, Seller and Buyer shall
consummate the transactions contemplated hereby in accordance with
Article 12.
SECTION 7.2 CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of
Seller to consummate the transactions contemplated by this Agreement shall be
subject to the following conditions, any one or more of which may be waived by
Seller, in its sole discretion:
(a) Accuracy of Buyer's Representations and Warranties. The
representations and warranties of Buyer in this Agreement shall be true
and accurate in all material respects at and as of Closing with the
same effect as if made at and as of Closing, except for changes
contemplated under this Agreement and except for representations and
warranties made only at and as of a certain date.
(b) Performance of Obligations. Buyer shall have performed in
all material respects all obligations and agreements and complied in
all material
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respects with all covenants in this Agreement to be performed and
complied with by it at or before Closing and no event which would
constitute a material breach of the terms of this Agreement on the part
of Buyer shall have occurred or be continuing.
(c) Officer's Certificate. Seller shall have received a
certificate executed by an executive officer of Buyer, dated as of
Closing, reasonably satisfactory in form and substance to Seller,
certifying that the conditions specified in Sections 7.2(a) and (b)
have been satisfied.
(d) Legal Proceedings. There shall be no Legal Requirement,
and no Judgment shall have been entered and not vacated by any
Governmental Authority of competent jurisdiction in any Litigation or
arising therefrom, which enjoins, restrains, makes illegal, or
prohibits consummation of the transactions contemplated hereby, and
there shall be no Litigation pending or threatened that seeks or that,
if successful, would have the effect of any of, the foregoing.
(e) HSR Act Compliance. All waiting periods under the HSR Act
applicable to the transactions contemplated hereby shall have expired
or been terminated.
(f) Evidence of Authorizing Actions. Buyer shall have
delivered to Seller evidence reasonably satisfactory to Seller to the
effect that Buyer has taken all action necessary to authorize the
execution of this Agreement and the consummation of the transactions
contemplated hereby.
(g) Other Documents. All other documents and other items
required to be delivered under this Agreement to Seller at or prior to
Closing shall have been delivered or shall be tendered at the Closing.
(h) Buyer's Counsel Opinion. Seller shall have received an
opinion of Winstead Sechrest & Minick, P.C., counsel to Buyer, dated as
of Closing, in the form of Exhibit 7.2(h).
(i) Marcus Purchase Agreement. Each of the conditions to
Seller's obligations under the Marcus Purchase Agreement shall have
been satisfied or, with the prior written consent of Seller, waived.
ARTICLE 8
CLOSING
SECTION 8.1 CLOSING; TIME AND PLACE. Subject to the terms and
conditions of this Agreement, the closing of the transactions contemplated by
this Agreement ("Closing") shall be
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held at a place mutually agreed upon by the parties at 10:00 a.m., local time,
on June 30, 1998 or, if later, on the last calendar day (the "Closing Date") of
the calendar month in which the tenth (10th) business day after the conditions
set forth in Article 7 shall have been satisfied, or at such other place and
time as may be agreed upon by Seller and Buyer, but in no event later than the
date which is twelve (12) months after the last FCC Form 394 has been filed with
respect to the Systems (the "Outside Closing Date"). The transactions to be
consummated at Closing shall be deemed to have been consummated as of 11:59 p.m.
on the last calendar day of such calendar month. If the last calendar day of
such month is not a day on which financial institutions are open and operating,
then the Closing Date shall be the immediately following business day on which
financial institutions are open and operating. Buyer acknowledges that it is
Seller's desire that this transaction be part of a deferred like-kind exchange
under Section 1031 of the Code and that the Assets constitute the relinquished
assets (as such term is used in the Code) in such exchange. In order to assist
Seller in accomplishing such exchange, Buyer agrees that it shall use its
commercially reasonable efforts to ensure that Closing occurs prior to Seller's
purchase of replacement assets.
SECTION 8.2 SELLER'S OBLIGATIONS. At Closing, Seller shall deliver
or cause to be delivered to Buyer the following:
(a) Bill of Sale and Assignment. Executed counterparts of a
Bill of Sale and Assignment relating to the Assets in the form of
Exhibit 8.2(a) (the "Bill of Sale");
(b) Deeds. Special warranty deeds conveying to Buyer the Owned
Real Property;
(c) Officer's Certificate. The certificate described in
Section 7.1(c);
(d) Evidence of Authorizing Actions. Evidence reasonably
satisfactory to Buyer that Seller has taken all action necessary to
authorize the execution of this Agreement and the consummation of the
transactions contemplated hereby;
(e) Opinion of Seller's Counsel. The opinion described in
Section 7.1(f);
(f) Opinion of Seller's FCC Counsel. The opinion described in
Section 7.1(g);
(g) Vehicle Titles. Title certificates to all vehicles
included among the Assets, endorsed in blank, and separate bills of
sale and other title transfer documentation therefor, as required by
the laws of the state or such county in which such vehicles are titled;
(h) Possession. Actual possession and operating control of the
Systems;
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(i) Conditions Precedent. To the extent not described above,
all items set forth in Section 7.1;
(j) Documents and Records. All (i) existing blueprints,
schematics, working drawings, plans, specifications, projections,
statistics, engineering records, original plant records, System
construction and as-built maps relating to the Systems, and (ii)
customer lists, files and records used by the Seller in connection with
the operation of the Systems, including a list of all pending
subscriber hook-ups, disconnects and repair orders, supply orders and
any other lists pertinent to the operation of the Systems. Delivery of
the foregoing shall be deemed made to the extent such lists, files and
records are located as of the Closing Time at any of the offices
included in the Owned Real Property or the Leased Real Property;
(k) FIRPTA Certificate. An affidavit of Seller, under penalty
of perjury, stating Seller's United States taxpayer identification
number and that Seller is not a "foreign person" (as defined in the
Foreign Investment in Real Property Tax Act and applicable
regulations); and
(l) Other. Such other documents and instruments as shall be
reasonably necessary to effect the intent of this Agreement and
consummate the transactions contemplated hereby.
SECTION 8.3 BUYER'S OBLIGATIONS. At Closing, Buyer shall deliver or
cause to be delivered to Seller the following:
(a) Purchase Price. The Purchase Price, as adjusted in
accordance with Section 2.5 of this Agreement;
(b) Bill of Sale. Executed counterparts of the Bill of Sale;
(c) Officer's Certificate. The certificate described in
Section 7.2(c);
(d) Evidence of Authorizations. Evidence reasonably
satisfactory to Seller that Buyer has taken all action necessary to
authorize the execution of this Agreement and the consummation of the
transactions contemplated hereby;
(e) Buyer's Counsel Opinion. The opinion described in
Section 7.2(h);
(f) Conditions Precedent. To the extent not described above,
all items set forth in Section 7.2; and
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(g) Other. Such other documents and instruments as shall be
reasonably necessary to effect the intent of this Agreement and
consummate the transactions contemplated hereby.
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ARTICLE 9
TERMINATION
SECTION 9.1 TERMINATION EVENTS. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned as follows:
(a) at any time, by the mutual agreement of Buyer and Seller;
(b) by either Buyer or Seller upon written notice to the
other, if the other is in material breach or default of its respective
covenants, agreements, or other obligations herein, or if any of its
representations herein are not true and accurate in all material
respects when made or when otherwise required by this Agreement to be
true and accurate, and such breach, default or failure is not cured
within 30 days of receipt of notice that such breach, default or
failure exists or has occurred;
(c) by either Buyer or Seller upon written notice to the
other, if any conditions to its obligations set forth in Sections 7.1
and 7.2, respectively, shall not have been satisfied on or before the
Outside Closing Date, for any reason other than a breach or default by
such party of its respective covenants, agreements, or other
obligations hereunder, or any of its representations herein not being
true and accurate when made or when otherwise required by this
Agreement to be true and accurate;
(d) by Seller if (i) the Marcus Purchase Agreement is
terminated for any reason unless such termination is attributable
solely to a material breach by Seller of such agreement, or (ii) the
Marcus Purchase Agreement has been consummated; or
(d) as otherwise provided herein.
SECTION 9.2 EFFECT OF TERMINATION. If this Agreement shall be
terminated pursuant to Section 9.1, all obligations or liabilities of the
parties hereunder shall terminate, except for the obligations set forth in
Sections 6.6, 9.2, 10.2, 13.1, 13.2, and 13.9. Termination of this Agreement
pursuant to Section 9.1(b) shall not limit or impair any remedies that Buyer or
Seller may have with respect to a breach or default by the other of its
covenants, agreements or obligations hereunder.
ARTICLE 10
REMEDIES
SECTION 10.1 SPECIFIC PERFORMANCE; REMEDIES CUMULATIVE. Seller and
Buyer acknowledge that, if either is in material breach or default of its
covenants, agreements or
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obligations hereunder, the other would be irreparably damaged by such breach or
default and that, in addition to the other remedies that may be available at law
or in equity, the other party shall be entitled to specific performance of this
Agreement and injunctive relief. All rights and remedies under this Agreement
are cumulative of, and not exclusive of, any rights or remedies otherwise
available, and the exercise of any of such rights or remedies shall not bar the
exercise of any other rights or remedies.
SECTION 10.2 ATTORNEYS' FEES. In the event of any Litigation between
Seller and Buyer with respect to this Agreement or the transactions contemplated
hereby, the party prevailing under such Litigation shall be entitled, as part of
the Judgment rendered in such Litigation, to recover from the other party its
reasonable attorneys' fees and costs and expenses in such Litigation.
ARTICLE 11
INDEMNIFICATION
SECTION 11.1 INDEMNIFICATION BY SELLER. From and after Closing, Seller
shall indemnify and hold harmless Buyer from and against any and all Losses
arising out of or resulting from:
(a) any representations and warranties made by Seller in this
Agreement not being true and accurate when made or when required by
this Agreement to be true and accurate, except for Losses that relate
to any circumstance, act or omission constituting a breach of any
representation or warranty by Seller or failure by Seller to comply
with any of its covenants, agreements or obligations hereunder of which
Buyer has received notice and which Buyer has waived in writing;
(b) any breach or default by Seller in the performance of its
covenants, agreements, or obligations under this Agreement;
(c) any liabilities relating to employees of Seller working
for the Systems asserted under any federal, state or local law or
regulation or otherwise pertaining to any labor or employment matter
arising out of conditions existing or actions or events occurring prior
to the Closing Time; and
(d) all liabilities and obligations arising out of or relating
to the operation of the Systems prior to the Closing Time, including
without limitation the Retained Liabilities and Obligations.
SECTION 11.2 INDEMNIFICATION BY BUYER. From and after Closing, Buyer
shall indemnify and hold harmless Seller from and against any and all Losses
arising out of or resulting from:
(a) any representations and warranties made by Buyer in this
Agreement not being true and accurate when made or when required by
this Agreement to be true and accurate, except for Losses that relate
to any circumstance, act or omission
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constituting a breach of any representation or warranty by Buyer or
failure by Buyer to comply with any of its covenants, agreements or
obligations hereunder of which Seller has received notice and which
Seller has waived in writing;
(b) any breach or default by Buyer in the performance of its
covenants, agreements, or obligations under this Agreement;
(c) the Assumed Obligations and Liabilities;
(d) any liabilities relating to employees of Seller hired by
Buyer pursuant to Section 6.3 arising after the Closing Time asserted
under any federal, state or local law or regulation or otherwise
pertaining to any labor or employment matter arising out of actions or
events occurring subsequent to the Closing Time; and
(e) all liabilities and obligations arising out of or relating
to the operation of the Systems subsequent to the Closing Time.
SECTION 11.3 INDEMNIFIED THIRD PARTY CLAIM.
(a) If any Person not a party to this Agreement shall make any
demand or claim or file or threaten to file or continue any Litigation
with respect to which Buyer or Seller is entitled to indemnification
pursuant to Sections 11.1 or 11.2, respectively, then within ten days
after notice (the "Notice") by the party entitled to such
indemnification (the "Indemnitee") to the other (the "Indemnitor") of
such demand, claim or Litigation, the Indemnitor shall have the option,
at its sole cost and expense, to retain counsel for the Indemnitee
(which counsel shall be reasonably satisfactory to the Indemnitee) to
defend any such Litigation. If the Indemnitor shall fail to respond
within ten days after receipt of the Notice, the Indemnitee may retain
counsel and conduct the defense of such Litigation as it may in its
reasonable discretion deem proper, at the sole cost and expense of the
Indemnitor.
(b) The Indemnitee shall provide reasonable assistance to the
Indemnitor and provide access to its books, records and personnel as
the Indemnitor reasonably requests in connection with the investigation
or defense of the indemnified Losses. The Indemnitor shall promptly
upon receipt of reasonable supporting documentation reimburse the
Indemnitee for out-of-pocket costs and expenses incurred by the latter
in providing the requested assistance.
(c) With regard to Litigation of third parties for which Buyer
or Seller is entitled to indemnification under Sections 11.1 or 11.2,
such indemnification shall be paid by the Indemnitor upon: (i) the
entry of a Judgment against the Indemnitee and the expiration of any
applicable appeal period; (ii) the entry of an
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unappealable Judgment or final appellate Judgment against the
Indemnitee; or (iii) a settlement with the consent of the Indemnitor,
which consent shall not be unreasonably withheld, provided that no such
consent need be obtained if the Indemnitor fails to respond to the
Notice as provided in Section 11.3(a).
SECTION 11.4 DETERMINATION OF INDEMNIFICATION AMOUNTS AND RELATED
MATTERS.
(a) Seller's liability under Section 11.1 shall be limited to
Losses (excluding those Losses arising from the Retained Liabilities
and Obligations) exceeding in the aggregate $419,000 (the
"Deductible"), and Seller shall have no liability under Section 11.1
for Losses constituting the Deductible. Seller's liability under
Section 11.1 shall be limited to Losses not exceeding in the aggregate
$4,190,000.
(b) In calculating amounts payable to an Indemnitee hereunder,
the amount of the indemnified Losses shall be reduced by the amount of
any insurance proceeds paid to the Indemnitee for such Losses.
(c) Subject to the provisions of Section 11.3, all amounts
payable by the Indemnitor to the Indemnitee in respect of any Losses
under Sections 11.1 or 11.2 shall be payable by the Indemnitor as
incurred by the Indemnitee.
SECTION 11.5 TIME AND MANNER OF CERTAIN CLAIMS. Except for Retained
Liabilities and Obligations and as otherwise provided herein, the
representations, warranties and covenants of Buyer and Seller in this Agreement
shall survive Closing for a period of eighteen months (the "Survival Period")
except for representations, warranties and covenants relating to title and
Taxes, which shall survive until the expiration of the applicable statute of
limitations, and Buyer's and Seller's rights to make claims dated thereon shall
likewise expire and be extinguished on such dates. Neither Seller nor Buyer
shall have any liability under Sections 11.1 or 11.2, respectively, unless a
claim for Losses for which indemnification is sought thereunder is asserted by
the party seeking indemnification by written notice to the party from whom
indemnification is sought within the Survival Period. Notwithstanding anything
to the contrary herein, if the Closing occurs, neither Buyer nor Seller shall
have liability to the other (for indemnification or otherwise) for its breach of
or noncompliance with any covenant, agreement or obligation to the extent
required to be performed or complied with prior to the date of Closing and to
the extent the other party has knowledge of such breach or noncompliance on the
date of Closing and has expressly waived such breach or noncompliance in
writing.
SECTION 11.6 OTHER INDEMNIFICATION. The provisions of Sections 11.3 and
11.4 shall be applicable to any claim for indemnification made under any other
provision of this Agreement, and all references in Sections 11.3 and 11.4 to
Sections 11.1 and 11.2 shall be deemed to be references to such other provisions
of this Agreement.
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ARTICLE 12
RETAINED FRANCHISES
SECTION 12.1 RETAINED FRANCHISES. Notwithstanding anything to the
contrary herein, after satisfaction or waiver (by the party for whose benefit
the condition is imposed) of the conditions precedent to Buyer's obligation to
close as set forth in Section 7.1 hereof, and to Seller's obligation to close as
set forth in Section 7.2 hereof, it is understood and agreed as follows:
(a) If the Franchise Renewals or any of the Required Consents
for the transfer of the Franchises have not been received by the
Closing Date, Buyer and Seller shall consummate the transactions
contemplated hereby and any such Franchises (including all Assets used
or useful primarily in connection therewith, but excluding all
headends, towers, business offices, and other assets and properties
which are also used in connection with the operations of other
Franchises which are being transferred to Buyer) shall be retained by
Seller (the "Retained Franchises"), and shall be subsequently sold by
Seller and purchased by Buyer in accordance with the terms of this
Article 12.
(b) Those Franchises (including all Assets used or useful
primarily in connection therewith, including all headends, towers,
business offices, and other assets and properties used in connection
with the operations of such Franchises) with respect to which the
Required Consents shall have been obtained shall be sold by Seller and
purchased by Buyer at the Closing on the terms and conditions provided
for herein.
(c) At the Closing, Buyer shall pay to Seller a portion of the
Purchase Price to be determined by multiplying the Purchase Price by a
fraction (i) the numerator of which shall be the aggregate number of
Basic Subscribers served by all of the Franchises except for the
Retained Franchises as of the Closing Date and (ii) the denominator of
which shall be the number of Basic Subscribers served by all of the
Franchises (including the Retained Franchises) as of the Closing Date.
The product resulting therefrom, as adjusted pursuant to the final
sentence of this Section 12.1(c), shall be the Purchase Price paid at
Closing. At the Closing, the adjustments provided for in Section 2.5
hereof shall be made with respect to any Retained Franchise, as if such
Retained Franchise were being transferred on the Closing Date.
(d) At the Closing, with respect to the Retained Franchises,
Buyer shall deliver to Wachovia Bank (the "Retained Franchises Escrow
Agent") by wire transfer of immediately available federal funds, an
amount (the "Retained Franchises Escrow Amount") equal to the
difference between (i) the Purchase Price and (ii) the portion of the
Purchase Price to be paid at Closing, to be held in escrow
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(the "Retained Franchises Escrow") pursuant to the terms of an escrow
agreement substantially in the form of Exhibit 12.1(d) hereto (the
"Retained Franchises Escrow Agreement"). Upon any Retained Franchise
Transfer (as hereinafter defined), the Escrow Agent shall pay to Seller
an amount determined pursuant to the Retained Franchises Escrow
Agreement.
(e) For the period after the Closing that the parties agree to
and set forth in the Retained Franchises Services Agreement (as
hereinafter defined), Buyer and Seller shall use commercially
reasonable efforts to obtain any Required Consents or Franchise
Renewals which have not been obtained. After the Closing, as Required
Consents or Franchise Renewals are received, Seller shall promptly give
to Buyer notice of the actual time of transfer of such Retained
Franchises (a "Retained Franchises Transfer") with respect to those
Retained Franchises for which such Required Consents or Franchise
Renewals relate, which Retained Franchises Transfer shall be on the
business day immediately following the effective date of the Required
Consent or Franchise Renewal, and the parties hereto shall take all
commercially reasonable steps necessary or appropriate on their
respective parts to proceed with such Retained Franchises Transfer on
the terms and conditions provided for herein. During the term between
Closing and any Retained Franchises Transfer, the parties shall operate
under a services agreement, substantially in the form of Exhibit
12.1(e) attached hereto (the "Retained Franchises Services Agreement"),
with respect to the Retained Franchises. At the end of the mutually
agreed to period after the Closing (i) Buyer shall have no further
obligation hereunder to purchase any Retained Franchises that were not
purchased by Buyer at or prior to such time; (ii) Seller shall have no
obligation to sell any Retained Franchises that were not purchased by
Buyer at or prior to such time; (iii) the funds remaining in the
Retained Franchises Escrow shall be distributed in accordance with the
terms of the Retained Franchises Escrow Agreement; and (iv) Seller
shall retain any Retained Franchises not previously transferred to
Buyer.
(f) It is understood and agreed that if a headend, tower,
business office and other assets and properties serves both Franchises
which are being sold at a given time and any of the Retained
Franchises, the Assets related to such headend, tower, business office
and other assets and properties shall be conveyed to Buyer at the time
such Assets are first purchased by Buyer; provided that Buyer shall be
required to provide signal services to Seller pursuant to a mutually
agreeable signal agreement having the parameters set forth in Exhibit
12.1(f) hereto.
(g) The following provisions shall apply to any Retained
Franchises Transfer under this Agreement:
(i) The conditions precedent set forth in Sections
7.1 and 7.2 also shall apply at each Retained Franchises Transfer,
mutatis mutandis.
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(ii) Certificates and other documents contemplated by
this Agreement shall be delivered in the form and substance provided
for in this Agreement, modified as necessary or appropriate to reflect
the provisions of this Article 12 and to relate only to the Franchises
being transferred at a given time.
(h) The parties intend that legal and beneficial ownership and
control of, and managerial responsibility for (subject to the Retained
Franchises Services Agreement), any Retained Franchises shall remain
with Seller and shall not be transferred to Buyer until the applicable
Retained Franchises Transfer of such Retained Franchises, which shall
take place only if and when all conditions precedent thereto shall have
occurred. All pre-Closing covenants herein regarding a Retained
Franchise shall continue in full force and effect until the time of the
applicable Retained Franchises Transfer.
ARTICLE 13
MISCELLANEOUS
SECTION 13.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each of the parties shall pay its own expenses and the fees and
expenses of its counsel, accountants, and other experts in connection with this
Agreement.
SECTION 13.2 BROKERAGE. Seller shall indemnify and hold Buyer harmless
from and against any and all Losses arising from any employment by Seller of, or
services rendered to Seller by, any finder, broker, agency, or other
intermediary, in connection with the transactions contemplated hereby, or any
allegation of any such employment or services (including, but not limited to,
any expenses, fees or commissions due HPC Puckett & Company), and Buyer shall
indemnify and hold Seller harmless from and against any and all Losses arising
from any employment by Buyer of, or services rendered to Buyer by, any finder,
broker, agency, or other intermediary, in connection with the transactions
contemplated hereby, or any allegation of any such employment or services.
SECTION 13.3 WAIVERS. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party hereto, shall be deemed
to constitute a waiver by the party taking the action of compliance with any
representation, warranty, covenant or agreement contained herein or in any
document delivered pursuant hereto. The waiver by any party hereto of any
condition or of a breach of another provision of this Agreement shall not
operate or be construed as a waiver of any other condition or subsequent breach.
The waiver by any party of any of the conditions precedent to its obligations
under this Agreement shall not preclude it from seeking redress for breach of
this Agreement other than with respect to the condition so waived.
SECTION 13.4 NOTICES. All notices, requests, demands, applications,
services of process, and other communications which are required to be or may be
given under this Agreement shall be in writing and shall be deemed to have been
duly given if sent by facsimile transmission,
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<PAGE> 48
delivered by overnight or other courier service, or mailed, certified first
class mail, postage prepaid, return receipt requested, to the parties hereto at
the following addresses:
To Seller: Cable One, Inc.
4742 North 24th Street, Suite 270
Phoenix, AZ 85016
Attn: President
Telecopy: (602) 468-9216
Copies (which shall not constitute notice):
Cable One, Inc.
4742 North 24th Street
Suite 270
Phoenix, AZ 85016
Attn: Vice President & General Counsel
Telecopy: (602) 468-0116
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, NW
Sixth Floor
Washington, DC 20036
Attn: Stephen A. Bouchard
Telecopy: (202) 265-5706
To Buyer: Black Creek Communications, Inc.
c/o Classic Communications
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Attn: J. Merritt Belisle
Telecopy: (512) 476-5204
Copies (which shall not constitute notice):
Winstead Sechrest & Minick, P.C.
100 Congress Avenue, Suite 800
Austin, Texas 78701
Attn: Cary Ferchill
Telecopy: (512) 370-2841
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section. Such notice shall be effective,
(i) if delivered by courier service or
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<PAGE> 49
by facsimile transmission, upon actual receipt by the intended recipient, or
(ii) if mailed, upon the date of delivery as shown on the return receipt
therefor.
SECTION 13.5 ENTIRE AGREEMENT; AMENDMENTS. This Agreement embodies the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, oral or written,
with respect thereto. This Agreement may not be modified orally, but only by an
agreement in writing signed by the party or parties against whom any waiver,
change, amendment, modification, or discharge may be sought to be enforced.
SECTION 13.6 BINDING EFFECT; BENEFITS. This Agreement shall inure to
the benefit of and will be binding upon the parties hereto and their respective
heirs, legal representatives, successors, and permitted assigns. Except as
provided below, neither Buyer nor Seller shall assign this Agreement (by
transfer of control or otherwise) or delegate any of its duties hereunder to any
other Person without the prior written consent of the other. Buyer acknowledges
that it is the intention of the Seller to complete a like-kind exchange under
Section 1031 of the Code. Buyer agrees to cooperate in effectuating Seller's
intent as long as such cooperation does not substantially delay the Closing or
cause substantial additional expense to Buyer. Buyer agrees that Seller may
assign its right to payment of the Purchase Price under this Agreement to a
Qualified Intermediary, and Buyer agrees in such case to make payment of the
Purchase Price to the Qualified Intermediary. Buyer further agrees to take other
appropriate actions or execute documents, as may reasonably be requested by
Seller and as may be required in order to effectuate Seller's intent. Seller
agrees that Buyer may assign this Agreement, upon Buyer's receipt of Seller's
written consent (such consent not to be unreasonably withheld), to another
entity controlling, controlled by, or under common control with Buyer, provided,
however, that no such assignment shall release Buyer from its obligations
hereunder.
SECTION 13.7 HEADINGS, SCHEDULES, AND EXHIBITS. The section and other
headings contained in this Agreement are for reference purposes only and will
not affect the meaning or interpretation of this Agreement. Reference to
Schedules and Exhibits shall, unless otherwise indicated, refer to the Schedules
and Exhibits attached to this Agreement, which shall be incorporated in and
constitute a part of this Agreement by such reference.
SECTION 13.8 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which, when executed, shall be deemed to be an original
and all of which together will be deemed to be one and the same instrument.
SECTION 13.9 PUBLICITY. Seller and Buyer shall consult with and
cooperate with the other with respect to the content and timing of all press
releases and other public announcements, and any oral or written statements to
Seller's employees concerning this Agreement and the transactions contemplated
hereby. Neither Seller nor Buyer shall make any such release, announcement, or
statements without the prior written consent of the other, which shall not be
unreasonably withheld or delayed; provided, however, that Seller or Buyer may at
any time make any announcement required by Legal Requirements so long as such
party, promptly upon learning
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<PAGE> 50
of such requirement, notifies the other of such requirement and consults with
the other in good faith with respect to the wording of such announcement.
SECTION 13.10 GOVERNING LAW. The validity, performance, and enforcement
of this Agreement and all transaction documents, unless expressly provided to
the contrary, shall be governed by the laws of the State of Delaware without
giving effect to the principles of conflicts of law of such state. In accordance
with Title 6, Section 2708 of the Delaware Code Annotated, each party hereby
submits to the jurisdiction of the courts of Delaware and agrees to be served
with legal process from any of such courts. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection that it may have,
whether now or in the future, to the laying of venue in, or to the jurisdiction
of, any and each of such courts for the purpose of any such suit, action,
proceeding or judgment and further waives any claim that any such suit, action,
proceeding or judgment has been brought in an inconvenient forum.
SECTION 13.11 THIRD PARTIES; JOINT VENTURES. This Agreement constitutes
an agreement solely among the parties hereto, and, except as otherwise provided
herein, is not intended to and will not confer any rights, remedies,
obligations, or liabilities, legal or equitable, including any right of
employment, on any Person (including but not limited to any employee or former
employee of Seller) other than the parties hereto and their respective
successors or assigns, or otherwise constitute any Person a third party
beneficiary under or by reason of this Agreement. Nothing in this Agreement,
expressed or implied, is intended to or shall constitute the parties hereto
partners or participants in a joint venture.
SECTION 13.12 CONSTRUCTION. This Agreement has been negotiated by Buyer
and Seller and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party drafting this Agreement shall not apply in any
construction or interpretation of this Agreement.
SECTION 13.13 RISK OF LOSS. The risk of any loss or damage to the
Assets resulting from fire, theft or any other casualty (except reasonable wear
and tear) shall be borne by Seller at all times prior to the Closing Time. In
the event that any such loss or damage shall be sufficiently substantial so as
to preclude and prevent resumption of normal operations of a material portion of
the Systems within twenty days from the occurrence of the event resulting in
such loss or damage, Seller shall immediately notify Buyer in writing of its
inability to resume normal operations or to replace or restore the lost or
damaged property, and Buyer, at any time within ten days after receipt of such
notice, may elect by written notice to Seller either to (a) waive such defect
and proceed toward consummation of the transaction contemplated by this
Agreement in accordance with the terms hereof, or (b) terminate this Agreement.
If Buyer elects to so terminate this Agreement, Buyer and Seller shall stand
fully released and discharged of any and all obligations hereunder. If Buyer
shall elect to consummate the transactions contemplated by this Agreement
notwithstanding such loss or damage and does so, the Purchase Price shall be
reduced by the amount, mutually acceptable to Buyer and Seller, which is
estimated by the parties to equal the out-of-pocket costs and expenses that
Buyer incurs to repair or replace, in accordance with cable television industry
practices, such lost or damaged property after Closing, and Seller shall retain
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<PAGE> 51
all insurance proceeds payable as a result of the occurrence of the event
resulting in such loss or damage.
SECTION 13.14 LATE PAYMENTS. If either party fails to pay the other any
amounts when due under this Agreement, the amounts due will bear interest from
the due date to the date of payment at the annual rate publicly announced from
time to time by Citibank, N.A. at its prime rate (the "Prime Rate") plus 3%,
adjusted as and when changes in the Prime Rate are made.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 52
IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement as of
the date first written above.
SELLER:
CABLE ONE, INC.
By: /s/ THOMAS O. MIGHT
------------------------------------
Name: Thomas O. Might
Title: President
BUYER:
BLACK CREEK COMMUNICATIONS
By: /s/ J. MERRITT BELISLE
------------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
[Execution Page of the Asset Purchase Agreement,
dated May 14, 1998, between
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<PAGE> 53
ATTACHMENT A
KANSAS
- ------
Abilene
Beloit
Clay Center
Concordia
MISSOURI
- --------
Brookfield
Trenton
OKLAHOMA
- --------
Fort Sill
Hugo
Idabel
Purcell
TEXAS
- -----
Childress
Lampasas
Memphis
Wellington
<PAGE> 1
EXHIBIT 10.4(b)
ASSIGNMENT OF ASSET PURCHASE AGREEMENT
THIS ASSIGNMENT OF ASSET PURCHASE AGREEMENT (the "Assignment") is dated
as of June 19, 1998.
WHEREAS, Black Creek Communications, Inc., a Delaware corporation
("Assignor"), and Cable One, Inc., a Delaware corporation ("Cable One"), entered
into an Asset Purchase Agreement dated as of May 14, 1998 (the "Agreement"),
involving the purchase of certain cable television systems and related assets in
Kansas, Missouri, Oklahoma and Texas;
WHEREAS, Assignor has deemed it to be in the best interest of Assignor
to sell, assign, transfer, and convey to Black Creek Communications, L.P., a
Delaware limited partnership, its successors, legal representatives and assigns
("Assignee"), all of the Assignor's right, title and interest in, under and to
the Agreement;
WHEREAS, Cable One has deemed it to be in the best interest of Cable One
to consent to the sale, assignment, transfer, and conveyance to Assignee, all of
the Assignor's right, title and interest in, under and to the Agreement and
pursuant to Section 13.6 of the Agreement written consent of Cable One is
required to assign the Agreement;
WHEREAS, Black Creek Management, L.L.C., the General Partner of Black
Creek Communications L.P., and the members of Black Creek Management, L.L.C.
("Assignee's members") deem it to be in the best interest of Assignee for
Assignor to sell, assign, transfer, and convey to Assignee all of the Assignor's
right, title and interest in, under and to the Agreement;
NOW, THEREFORE, for and in consideration of One Dollar and other good
and valuable consideration, the receipt of which is hereby acknowledged,
Assignor does hereby assign to Assignee, and Assignee hereby assumes and
undertakes, all of Assignor's right, title, interest and obligations under the
Agreement.
Assignee assumes the Agreement and agrees to perform and observe all of
the covenants and conditions contained therein on Assignor's part to be
performed and observed.
Assignor does hereby indemnify and hold harmless Assignee against any
and all losses, costs, expenses (including reasonable attorney's fees),
penalties, taxes, fines, settlements, damages and judgments arising from
Assignor's breach of any covenant or warranty contained in the Agreement.
All of the terms and conditions set forth herein shall be binding upon
and inure to the benefit of the parties and their respective successors in
interest and permitted assigns.
This Assignment may not be changed, modified, discharged, or terminated
orally or in any other manner than by an agreement in writing signed by the
parties hereto or their respective successors or assigns.
<PAGE> 2
In the event of any conflict between the terms of this Assignment and
the terms of the Agreement, the terms of the Agreement shall control.
IN WITNESS WHEREOF, the parties have executed this Assignment by their
duly authorized representatives, to be effective as of the date first written
above.
AGREED AND CONSENTED TO:
CABLE ONE, INC.
By: /s/ THOMAS P. BASINGER
---------------------------------
Thomas P. Basinger
Vice President
ASSIGNOR:
BLACK CREEK COMMUNICATIONS, INC.
By: /s/ BRYAN D. NOTEBOOM
---------------------------------
Bryan D. Noteboom
Secretary
ASSIGNEE:
BLACK CREEK COMMUNICATIONS, L.P.
By: BLACK CREEK MANAGEMENT, L.L.C.
Its General Partner
By: CLASSIC CABLE, INC.
Its Managing Member
By: /s/ BRYAN D. NOTEBOOM
---------------------------------
Bryan D. Noteboom
Secretary
<PAGE> 3
STATE OF TEXAS )
COUNTY OF TRAVIS )
The foregoing instrument was ACKNOWLEDGED before me this 18th
day of June, 1998, by Bryan Noteboom, Secretary of Black Creek Communications,
Inc., a Delaware corporation, on behalf of said corporation.
Witness my hand and official seal.
[ S E A L ] /s/
---------------------------------------------
Notary Public in and for the State of Texas
STATE OF ARIZONA )
COUNTY OF MARICOPA )
The foregoing instrument was ACKNOWLEDGED before me this 18th
day of June, 1998, by Thomas P. Basinger, Vice President of Cable One, Inc., a
Delaware corporation, on behalf of said corporation.
Witness my hand and official seal.
[ S E A L ]
/s/
---------------------------------------------
Notary Public in and for the State of Arizona
STATE OF TEXAS )
COUNTY OF TRAVIS )
The foregoing instrument was ACKNOWLEDGED before me this 18th
day of June, 1998, by Bryan Noteboom, Vice President of Classic Cable, Inc., the
Managing Member of Black Creek Management, L.L.C., the General Partner of Black
Creek Communications, L.P., a Delaware limited partnership, on behalf of said
partnership.
Witness my hand and official seal.
[ S E A L ] /s/
---------------------------------------------
Notary Public in and for the State of Texas
<PAGE> 1
EXHIBIT 10.4(c)
AMENDMENT NO. 1
TO
ASSET PURCHASE AGREEMENT
DATED MAY 14, 1998
BY AND BETWEEN
CABLE ONE, INC. AND BLACK CREEK COMMUNICATIONS, INC.
This Amendment No. 1 (this "Amendment") to that certain Asset Purchase
Agreement dated May 14, 1998 (the "Agreement") by and between CABLE ONE, INC.
("Seller") and BLACK CREEK COMMUNICATIONS, L.P. ("Buyer") is entered into as of
this 15th day of July, 1998.
WHEREAS, Seller and Buyer desire to make certain changes to the
Agreement;
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, Seller and Buyer agree as follows:
1. The Agreement shall be amended to address an assignment of the
Agreement to Black Creek Communications, Inc. to Black Creek Communications,
L.P. The amended introduction shall read:
"THIS ASSET PURCHASE AGREEMENT (the "Agreement") was made and
entered into as of May 14, 1998 by and between Cable One, Inc., a
Delaware corporation ("Seller"), and Black Creek Communications, Inc.,
a Delaware corporation. On June 19, 1998, Black Creek Communications,
Inc., with the written consent of Seller, assigned the Agreement to
Black Creek Communications, L.P., a
Delaware limited partnership ("Buyer")."
2. Article 4, BUYER'S REPRESENTATIONS AND WARRANTIES, shall be amended
as follows:
a. Section 4.1, Organization of Buyer, shall be replaced in
its entirety with the following:
"Buyer is a limited partnership duly organized, validly
existing, and in good standing under the laws of the State of
Delaware, and has all requisite partnership power and
authority to own and lease the properties and assets it
currently owns and leases and to conduct its activities as
such activities are currently conducted. Buyer is duly
qualified to do business as a foreign partnership and is in
good standing in all of the jurisdictions where the Systems
are located. Black Creek Management, L.L.C., a duly organized
Delaware limited liability company, is the general partner of
Buyer."
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT - PAGE 1
<PAGE> 2
b. Section 4.2, Authority, shall be replaced in its entirety
with the following:
"Buyer has all requisite partnership power and authority to
execute, deliver, and perform this Agreement and consummate
the transactions contemplated hereby. The execution, delivery,
and performance of the Agreement and the consummation of the
transactions contemplated hereby by Buyer have been duly and
validly authorized by all necessary partnership action on the
part of Buyer. This Agreement has been duly and validly
executed and delivered by Buyer, and is the valid and binding
obligation of Buyer, enforceable against Buyer in accordance
with its terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors'
rights generally or the availability of equitable remedies."
c. Section 4.3, No Conflict; Consents, shall be replaced in
its entirety with the following:
"Except as will not have a material adverse effect on the
ability of Buyer to perform its obligations hereunder, and
subject to compliance with the HSR Act, the execution,
delivery, and performance by Buyer of this Agreement do not
and will not: (i) conflict with or violate any provision of
the certificate of limited partnership or partnership
agreement of Buyer; (ii) violate any provision of any Legal
Requirement; (iii) conflict with, violate, result in a breach
of, or constitute a default under any contract, agreement, or
understanding to which Buyer is a party or by which Buyer or
the assets or properties owned or leased by it are bound or
affected; or (iv) require any consent, approval, or
authorization of, or filing of any certificate, notice,
application, report, or other document with, any Governmental
Authority or other Person.
3. Section 7.2(c), Officer's Certificate, shall be replaced in its
entirety with the following:
"(c) Partnership Certificate. Seller shall have received a
certificate executed by the General Partner of Buyer, dated as of
Closing, reasonably satisfactory in form and substance to Seller,
certifying that the conditions specified in Sections 7.2(a) and (b)
have been satisfied."
4. Section 8.3(c), Officer's Certificate, shall be replaced in its
entirety with the following:
"(c) Partnership Certificate. The certificate described in
Section 7.2(c);
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT - PAGE 2
<PAGE> 3
5. Section 13.4, Notices. Delete the line: "To Buyer: Black Creek
Communications, Inc.". Insert the line "To Buyer: Black Creek Communications,
L.P."
6. Except as set forth herein, the Agreement remains in full force and
effect without additional modifications.
7. This Amendment No. 1 shall be deemed effective as of the 15th day of
July, 1998.
EXECUTED as of the date hereinabove written.
SELLER:
CABLE ONE, INC.
By: /s/ THOMAS O. MIGHT
----------------------------------
Name: Thomas O. Might
--------------------------------
Title: President
-------------------------------
BUYER:
BLACK CREEK COMMUNICATIONS,
L.P.
By: BLACK CREEK MANAGEMENT, L.L.C.
Its General Partner
By: /s/ BRYAN D. NOTEBOOM
----------------------------------
Name: Bryan D. Noteboom
--------------------------------
Title: Vice President
-------------------------------
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT - PAGE 3
<PAGE> 1
EXHIBIT 10.5
CLASSIC COMMUNICATIONS, INC.
1996 RESTRICTED STOCK AWARD PLAN
1. PURPOSE. This 1996 Restricted Stock Award Plan (the "Plan") of
Classic Communications, Inc., a Delaware corporation (the "Company"), for key
employees of the Company, is intended to advance the best interest of the
Company by providing the persons who have substantial responsibility for the
Company's management, success, and growth with additional incentive and by
increasing their proprietary interest in the success of the Company, thereby
encouraging them to remain in its employ or service.
2. DEFINITIONS. Whenever the following terms are used in the Plan, they
shall have the meaning specified below unless the context clearly indicates to
the contrary:
(a) Award - means an award of Restricted Stock granted
pursuant to the provisions of this Plan.
(b) Board - means the Board of Directors of the Company.
(c) Code - means the Internal Revenue Code of 1986, as
amended.
(d) Committee - means a committee consisting of not fewer than
two members of the Board appointed by the Board to administer the Plan,
or the Board in the event no committee has been appointed.
(e) Company Subsidiaries - means Classic Cable, Inc., a
Delaware corporation, Classic Telephone, Inc., a Delaware corporation,
Classic Acquisition, Inc., a Delaware corporation, Universal Cable
Holdings, Inc., a Delaware corporation ("Holdings"), Ponca Holdings,
Inc., a Delaware corporation, each of the Holdings Subsidiaries and any
other Person that is or becomes a Subsidiary of the Company after the
date hereof.
(f) Employee - means any employee (as defined in accordance
with the Regulations and Revenue Rulings then applicable under Section
3401(c) of the Code) of the Company, whether such employee is so
employed at the time this Plan is adopted or becomes so employed
subsequent to the adoption of the Plan.
(g) Grantee - means an Employee to whom an Award is granted.
(h) Person - means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization or a
governmental entity or any department, agency or political subdivision
thereof.
(i) Restricted Stock - means the shares of the Company's
Voting Common Stock, $.01 par value per share, subject to the terms,
conditions and restrictions set forth in this
<PAGE> 2
Plan, and such other securities as may be issued in connection with
Restricted Stock pursuant to Paragraph 9 hereof.
(j) "Subsidiary" - means as to any Person (I) any corporation
more than 50% of the outstanding voting securities of which are owned
by such Person or such Person's Subsidiary, directly or indirectly, and
(II) a partnership, limited liability company or other Person in which
such Person or such Person's Subsidiary holds a general partnership or
other equity interest sufficient to enable it to direct the management
and policies thereof.
(k) Termination of Employment - means the time, as determined
by the Committee, when the employee-employer relationship between the
Grantee and the Company is terminated for any reason including, but not
limited to, a termination by resignation, discharge, death, Total
Disability, or retirement.
(l) Total Disability - means the permanent inability of an
Employee as the result of accident or sickness to perform any and every
duty pertaining to the Employee's occupation or employment for which
the Employee is suited by reason of the Employee's previous training,
education, and experience.
(m) WTAC - means WT Acquisition Corporation, a Delaware
corporation.
(n) WTAC Subsidiaries - means Television Enterprises, Inc.,
De-Cal Cable, Inc., and Calco Construction Company, Inc., each a Texas
corporation, Transwestern Video, Inc., an Oklahoma corporation, and
W.K. Communications, Inc., a Kansas corporation, and any other Person
that is or becomes a Subsidiary of WTAC after the date hereof.
3. ADMINISTRATION. The Plan shall be administered by the Committee, and
all questions of interpretation and application of the Plan, or of Awards, shall
be subject to the determination of the Committee, which shall be final and
binding. Meetings of the Committee shall be held at such times and places as
shall be determined by the Committee. A majority of the members of the Committee
shall constitute a quorum for the transaction of business, and the vote of a
majority of those members present at any meeting shall decide any questions
brought before that meeting. In addition, the Committee may, by the unanimous
written consent of its members, take any action otherwise proper under the Plan.
No member of the Committee shall be liable for any act or omission of any other
member of the Committee or for any act or omission on his or her own part,
including but not limited to the exercise of any power or discretion given to
him or her under the Plan, except those resulting from his or her own gross
negligence or willful misconduct.
4. SHARES SUBJECT TO THE PLAN. The shares subject to the grant of
Awards pursuant to the Plan shall be shares of the Company's Voting Common
Stock, $0.01 par value per share (the "Common Stock"). The total amount of
Common Stock with respect to which Awards may be granted shall not exceed in the
aggregate 25,688 shares; provided, however, that such aggregate number of shares
shall be subject to adjustment in accordance with the provisions of Paragraph 9
hereof. Such shares may be treasury shares or authorized but unissued shares. In
the event that any outstanding Award granted under the Plan shall expire or
terminate, the shares of Common Stock unvested pursuant to such Award and the
Plan may again be subject to an Award under the Plan.
<PAGE> 3
5. ELIGIBILITY. The individuals who shall be eligible to participate in
the Plan shall be the key employees of the Company or of any corporation or
partnership in which the Company owns, directly or indirectly, 50% or more of
the total combined voting interest, as the Committee shall determine from time
to time.
6. GRANTS AND VESTING.
(a) The Committee shall from time to time in its absolute
discretion (i) select from among the eligible key Employees those to
whom Awards shall be granted, (ii) determine the number of shares of
Common Stock to be covered by such Awards, and (iii) determine the
terms and conditions of such Awards, consistent with the Plan. Each
Award shall be evidenced by a written award agreement, executed by the
Grantee and the Company, which shall contain such restrictions, terms
and conditions consistent with the provisions of this Plan as the
Committee may require. Shares awarded as Restricted Stock Awards shall
vest at such time or times and on such terms and conditions as the
Committee may determine, which times, terms and conditions shall be set
forth in such award agreement, which shall be substantially in the form
attached hereto as Exhibit A, or such other form as the Committee may
select.
(b) As soon as reasonably practicable after an Award is made
(and after the Grantee has executed an award agreement and any other
documents which the Committee, in its absolute discretion, may
require), the Restricted Stock subject to the Award shall be issued in
the name of the Grantee (upon payment by such Grantee of any cash
consideration required by the Committee) and delivered to the Secretary
(or other officer of the Company designated by the Committee) to be
held in escrow until such shares shall have vested in accordance with
the Award. Upon vesting in accordance with the applicable award
agreement or Paragraph 6(c) hereof, the Secretary shall, as soon as
practicable, deliver to the Grantee a stock certificate representing
the shares of the Common Stock which have vested and which, therefore,
are no longer Restricted Stock for purposes of this Plan.
(c) Without limiting the authority of the Committee under this
Paragraph 6(a), all Awards that remain outstanding shall vest in full
if (i) J. Merritt Belisle, Austin Ventures, L.P., a Delaware limited
partnership, Austin Ventures III-A, L.P., a Delaware limited
partnership, Austin Ventures III-B, L.P., a Delaware limited
partnership, BT Capital Partners, Inc., a Delaware corporation, Texas
Growth Fund, a trust fund created by the Constitution of the State of
Texas, and NationsBanc Capital Corp., a Texas corporation, cease to own
a majority of the issued and outstanding shares of Common Stock of the
Company, (ii) the Company registers not less than 10% of its Common
Stock pursuant to the Securities Act of 1933, as amended (the "Act"),
(iii) there is a sale of all or substantially all of the assets, or all
or substantially all of the capital stock, of (A) the Company or one or
more of the Company Subsidiaries, or (B) WTAC or one or more of the
WTAC Subsidiaries, in one or more transactions for cash or freely
salable securities and a subsequent liquidation of the Company or WTAC
in which their respective stockholders receive liquidating
distributions of such proceeds of sale after payment or provision for
the valid debts and liabilities of the Company or WTAC, as the case may
be, (iv) there is a merger or consolidation of (A) the Company or one
or more of the Company Subsidiaries, or (B) WTAC or one or more of the
WTAC Subsidiaries, with or into one or more corporations,
<PAGE> 4
limited liability companies or partnerships in which (I) the Company or
the Company Subsidiaries, or (II) WTAC or the WTAC Subsidiaries,
receive cash or freely salable securities for all of its or their
assets, as the case may be, and a subsequent liquidation of (A) the
Company or one or more of the Company Subsidiaries, or (B) WTAC or one
or more of the WTAC Subsidiaries, in which the stockholders of the
Company or WTAC, as the case may be, receive liquidating distributions
of such proceeds of sale, merger or consolidation after payment or
provision for the valid debts and liabilities of the Company or WTAC,
as the case may be, or (v) there is a merger or consolidation of the
Company with or into another corporation, limited liability company or
a partnership in which the Company's stockholders receive cash or
marketable securities for all of their stock of the Company.
7. TERMINATION OF EMPLOYMENT; DEATH OR PERMANENT DISABILITY OF GRANTEE.
(a) Except as may be otherwise expressly provided herein,
Awards shall terminate upon Termination of Employment for the reasons
set forth in Section B.2(d)(i) or (ii) of the Company's Stockholders
Agreement. In the event of death or Total Disability before total
vesting of an Award, such Award shall terminate one year following the
date of such death or Total Disability. In the event that a Termination
of Employment occurs for any reason other than death, Total Disability
or the reasons set forth in Section B.2(d)(i) or (ii) of the Company's
Stockholders Agreement, then an Award previously granted (and vesting
thereunder) shall continue in full force and effect.
(b) In the event of termination of vesting under an Award for
whatever reason, the Company shall deliver to the Grantee, or in the
case of the Grantee's death, his or her executors, administrators, or
any person or persons to whom his or her Award may be transferred, by
will or by the laws of descent and distribution, a stock certificate
representing the number of shares of Common Stock that have vested. All
Restricted Stock that has not vested shall be forfeited and
automatically be transferred to and be reacquired by the Company for a
cash consideration per share equal to the par value of each share.
8. STOCK TRANSFER RESTRICTIONS. No Restricted Stock shall be liable for
the debts, contracts or engagements of the Grantee or his successors in
interest, or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means, whether such
disposition be voluntary or involuntary or by operation of law or by judgment
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that nothing in this Paragraph 8 shall
prevent transfers by will or by the applicable laws of descent and distribution.
9. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. If, while there are
outstanding Awards, the Company shall effect (i) a subdivision or consolidation
of shares or other capital readjustment, the payment of a stock dividend, or
other increase or reduction of the number of shares of the Common Stock
outstanding without receiving compensation therefor in money, services, or
property, (ii) a merger of one or more corporations into the Company, or (iii)
the merger of the Company into or its consolidation with another corporation,
then the shares subject to the Plan as set forth in Paragraph 4 above and each
Award shall, at no additional cost, include the number and class of shares of
stock or other securities to which each Grantee is entitled as a result of
ownership of Restricted Stock pursuant to the terms of such subdivision,
consolidation, capital readjustment,
<PAGE> 5
stock dividend, increase or reduction of the number of shares of Common Stock,
or merger, as the case may be. If any such adjustment shall result in a
fractional-share interest being issuable, such fraction shall be disregarded.
Securities to which a Grantee is entitled as a result of ownership of Common
Stock which has vested and is no longer Restricted Stock shall not be subject to
the Plan or an award agreement except as provided in Paragraph 11 hereof.
Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of Restricted Shares then subject to
outstanding Awards.
10. RIGHTS AS STOCKHOLDER.
(a) Commencing on the date of the Award, the Grantee shall
have all the rights of a shareholder with respect to the shares of
Restricted Stock awarded to the Grantee, including the right to vote
the shares and receive all dividends and other distributions paid or
made with respect to the shares.
(b) If a Grantee receives rights or warrants with respect to
any shares which are Restricted Stock, such rights or warrants, or any
shares or other securities acquired by the exercise of such rights or
warrants, may be held, exercised, sold or otherwise disposed of by the
Grantee free and clear of the restrictions and obligations provided in
this Plan, except Paragraph 11 hereof.
11. REQUIREMENTS OF LAW.
(a) The shares of Restricted Stock that are acquired by a
Grantee pursuant to the terms of this Plan will not be registered with
the Securities and Exchange Commission pursuant to an effective
registration statement. Such Restricted Stock will be issued to a
Grantee in reliance upon the exemption from registration contained in
Section 4(2) of the Securities Act of 1933. Accordingly, (i) a Grantee
must bear the economic risk involved in the acquisition of such shares
for an indefinite period of time because such shares cannot be sold
unless they are subsequently registered under the Act or an exemption
from such registration is available, and (ii) stop transfer
instructions will be issued by the Company to its transfer agent with
respect to such shares of Restricted Stock. The Company shall not be
obligated to take any other affirmative action to comply with any law
or regulation of any governmental authority, in order to cause the
exercise of an Award or the issuance of shares pursuant thereto.
(b) At the time of the delivery to the Secretary of the
Restricted Stock awarded to Grantee, the Grantee may be required to
certify and agree in writing (i) that any shares of Restricted Stock
acquired by him pursuant to the Plan will not be sold except pursuant
to an effective registration statement under the Act unless the Company
has received an opinion of counsel satisfactory to it that such
transfer does not require registration under the Act and, for any sale
under Rule 144 under the Act, such evidence as the Company shall
request of
<PAGE> 6
compliance with that Rule, and (ii) that the Grantee is acquiring such
shares of Restricted Stock for his own account and not on behalf of any
other person or for further distribution.
(c) Certificates representing Restricted Stock shall bear a
legend to the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN TERMS, CONDITIONS AND RESTRICTIONS SET FORTH IN THE
1996 RESTRICTED STOCK AWARD PLAN OF THE COMPANY AND THE AWARD
AGREEMENT EXECUTED PURSUANT THERETO, COPIES OF WHICH ARE ON
FILE IN THE PRINCIPAL EXECUTIVE OFFICE OF THE CORPORATION.
SUCH SHARES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
FEDERAL SECURITIES ACT OF 1933 (THE "ACT") OR THE APPLICABLE
STATE SECURITIES LAWS AND ARE "RESTRICTED SECURITIES" WITHIN
THE MEANING OF RULE 144 PROMULGATED UNDER THE ACT. THE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLYING
WITH RULE 144, IN THE ABSENCE OF EFFECTIVE REGISTRATION UNDER
THE ACT OR OTHER COMPLIANCE UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS.
(d) Certificates representing Common Stock which has vested
but which was initially granted pursuant to the Plan shall bear a
legend to the following effect for as long as counsel to the Company
advises that such legend is necessary or advisable:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER THE FEDERAL SECURITIES ACT OF
1933 (THE "ACT") OR THE APPLICABLE STATE SECURITIES LAWS AND
ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144
PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLYING WITH RULE 144, IN THE ABSENCE OF
EFFECTIVE REGISTRATION UNDER THE ACT OR OTHER COMPLIANCE UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS.
(e) The restrictions imposed by this Paragraph 11 shall remain
in effect after the end of any vesting period and after the termination
of the Plan. No reference elsewhere in this Plan to lapse of
restrictions shall impair the continued validity of the restrictions
imposed by this Paragraph 11.
12. EMPLOYMENT OBLIGATIONS. The granting of an Award shall not impose
upon the Company any obligation to employ or continue to employ any Grantee, and
the right of the Company to terminate the employment of any officer or other
employee shall not be diminished or affected by reason of the fact that an Award
has been granted to him or her.
<PAGE> 7
13. AMENDMENT OR TERMINATION OF PLAN. The Board may modify, revise or
terminate this Plan at any time and from time to time; provided, however, that
without the approval of the holders of at least a majority of the outstanding
shares of Common Stock, the Board may not: (i) increase the aggregate number of
shares which may be issued pursuant to Awards under the Plan except pursuant to
Paragraph 9 hereof; (ii) change the class of employees eligible to receive
Awards; or (iii) materially increase the benefits accruing to participants under
the Plan.
14. WRITTEN AGREEMENT. Each Award granted hereunder shall be embodied
in a written award agreement that shall be subject to the terms and conditions
prescribed above, and shall be signed by the Grantee and by the Chairman of the
Board, the Chief Executive Officer or the President of the Company for and in
the name and on behalf of the Company. Such award agreement shall contain such
other provisions as the Committee in its discretion shall deem advisable.
15. INDEMNIFICATION OF COMMITTEE. The Company shall indemnify each
present and future member of the Committee against, and each member of the
Committee shall be entitled without further act on his or her part to indemnity
from the Company for, all expenses (including the amount of judgments and the
amount of approved settlements made with a view to the curtailment of costs of
litigation, other than amounts paid to the Company itself) reasonably incurred
by him or her in connection with or arising out of any action, suit or
proceeding in which he or she may be involved by reason of his or her being or
having been a member of the Committee, whether or not he or she continues to be
such member of the Committee at the time such expenses are incurred; provided,
however, that such indemnity shall not include any expenses incurred by any such
member of the Committee (i) in respect of matters as to which he or she shall be
finally adjudged in any such action, suit or proceeding to have been guilty of
gross negligence or willful misconduct in the performance of his or her duty as
such member of the Committee, or (ii) in respect of any matter in which any
settlement is effected, in an amount in excess of the amount approved by the
Company on the advice of its legal counsel; and provided further, that no right
of indemnification under the provisions set forth herein shall be available to
or enforceable by any such member of the Committee unless, within 60 days after
institution of any such action, suit or proceeding, he or she shall have offered
the Company, in writing, the opportunity to handle and defend same at its own
expense. The foregoing right of indemnification shall inure to the benefit of
the heirs, executors or administrators of each such member of the Committee and
shall be in addition to all other rights to which such member of the Committee
may be entitled as a matter of law, contract or otherwise.
16. CERTAIN FEDERAL TAX ASPECTS. The Plan is neither qualified under
Section 401(a) of the Code nor subject to the provisions of the Employee
Retirement Income Security Act of 1974.
17. EFFECTIVE DATE OF PLAN. The Plan shall become effective as of May
1, 1996.
<PAGE> 1
EXHIBIT 10.6
CLASSIC COMMUNICATIONS, INC.
1998 RESTRICTED STOCK AWARD PLAN
1. PURPOSE. This 1998 Restricted Stock Award Plan (the "Plan") of
Classic Communications, Inc., a Delaware corporation (the "Company"), for key
employees of the Company and its Subsidiaries, is intended to advance the best
interest of the Company by providing the persons who have substantial
responsibility for the Company's management, success, and growth with additional
incentive and by increasing their proprietary interest in the success of the
Company, thereby encouraging them to remain in its employ or service.
2. DEFINITIONS. Whenever the following terms are used in the Plan, they
shall have the meaning specified below unless the context clearly indicates to
the contrary:
(a) Award - means an award of Restricted Stock granted
pursuant to the provisions of this Plan.
(b) Board - means the Board of Directors of the Company.
(c) Code - means the Internal Revenue Code of 1986, as
amended.
(d) Committee - means a committee consisting of not fewer than
two members of the Board appointed by the Board to administer the Plan,
or the Board in the event no committee has been appointed.
(e) Common Stock - means the Company's Voting Common Stock,
$0.01 par value per share.
(f) Employee - means any employee (as defined in accordance
with the Regulations and Revenue Rulings then applicable under Section
3401(c) of the Code) of the Company or its Subsidiaries, whether such
employee is so employed at the time this Plan is adopted or becomes so
employed subsequent to the adoption of the Plan.
(g) Grantee - means an Employee to whom an Award is granted.
(h) Person - means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization or a
governmental entity or any department, agency or political subdivision
thereof.
(i) Restricted Stock - means shares of Common Stock, subject
to the terms, conditions and restrictions set forth in this Plan, and
such other securities as may be issued in connection with Restricted
Stock pursuant to Paragraph 9 hereof.
<PAGE> 2
(j) Subsidiary - means as to any Person (i) any corporation
more than 50% of the outstanding voting securities of which are owned
by such Person or such Person's Subsidiary, directly or indirectly, and
(ii) a partnership, limited liability company or other Person in which
such Person or such Person's Subsidiary holds a general partnership or
other equity interest sufficient to enable it to direct the management
and policies thereof.
(k) Termination of Employment - means the time, as determined
by the Committee, when the employee-employer relationship between the
Grantee and the Company is terminated for any reason including, but not
limited to, a termination by resignation, discharge, death, Total
Disability, or retirement.
(l) Total Disability - means the permanent inability of an
Employee as the result of accident or sickness to perform any and every
duty pertaining to the Employee's occupation or employment for which
the Employee is suited by reason of the Employee's previous training,
education, and experience.
3. ADMINISTRATION. The Plan shall be administered by the Committee, and
all questions of interpretation and application of the Plan, or of Awards, shall
be subject to the determination of the Committee, which shall be final and
binding. Meetings of the Committee shall be held at such times and places as
shall be determined by the Committee. A majority of the members of the Committee
shall constitute a quorum for the transaction of business, and the vote of a
majority of those members present at any meeting shall decide any questions
brought before that meeting. In addition, the Committee may, by the unanimous
written consent of its members, take any action otherwise proper under the Plan.
No member of the Committee shall be liable for any act or omission of any other
member of the Committee or for any act or omission on his or her own part,
including but not limited to the exercise of any power or discretion given to
him or her under the Plan, except those resulting from his or her own gross
negligence or willful misconduct.
4. SHARES SUBJECT TO THE PLAN. The shares subject to the grant of
Awards pursuant to the Plan shall be shares of Common Stock. The total amount of
Common Stock with respect to which Awards may be granted shall not exceed in the
aggregate 484,418 shares; provided, however, that such aggregate number of
shares shall be subject to adjustment in accordance with the provisions of
Paragraph 9 hereof. Such shares may be treasury shares or authorized but
unissued shares. In the event that any outstanding Award granted under the Plan
shall expire or terminate, the shares of Restricted Stock unvested pursuant to
such Award and the Plan may again be subject to an Award under the Plan.
5. ELIGIBILITY. The individuals who shall be eligible to participate in
the Plan shall be the key employees of the Company and its Subsidiaries, as the
Committee shall determine from time to time.
6. GRANTS AND VESTING.
(a) The Committee shall from time to time in its absolute
discretion (i) select from among the eligible key Employees those to
whom Awards shall be granted,
2
<PAGE> 3
(ii) determine the number of shares of Common Stock to be covered by
such Awards, and (iii) determine the terms and conditions of such
Awards, consistent with the Plan. Each Award shall be evidenced by a
written award agreement, executed by the Grantee and the Company, which
shall contain such restrictions, terms and conditions consistent with
the provisions of the Plan as the Committee may require. Shares awarded
as Restricted Stock Awards shall vest at such time or times and on such
terms and conditions as the Committee may determine, which times, terms
and conditions shall be set forth in such award agreement, which shall
be substantially in the form attached hereto as Exhibit A, or such
other form as the Committee may select.
(b) As soon as reasonably practicable after an Award is made
(and after the Grantee has executed an award agreement and any other
documents which the Committee, in its absolute discretion, may
require), the Restricted Stock subject to the Award shall be issued in
the name of the Grantee (upon payment by such Grantee of any cash
consideration required by the Committee) and delivered to the Secretary
(or other officer of the Company designated by the Committee) to be
held in escrow until such shares shall have vested in accordance with
the Award. Upon vesting in accordance with the applicable award
agreement or Paragraph 6(c) hereof, the Secretary shall, as soon as
practicable, deliver to the Grantee (or his successors in interest) a
stock certificate representing the shares of the Common Stock that have
vested and that, therefore, are no longer Restricted Stock for purposes
of the Plan.
(c) Without limiting the authority of the Committee under
Paragraph 6(a) hereof, all Awards that remain outstanding shall vest in
full if (i) J. Merritt Belisle, Steven E. Seach, Austin Ventures, L.P.,
a Delaware limited partnership, Austin Ventures III-A, L.P., a Delaware
limited partnership, Austin Ventures III-B, L.P., a Delaware limited
partnership, BT Capital Partners, Inc., a Delaware corporation, Texas
Growth Fund, a trust fund created by the Constitution of the State of
Texas, and NationsBanc Capital Corp., a Texas corporation, cease to own
a majority of the issued and outstanding shares of Common Stock of the
Company, (ii) the Company registers not less than 51% of its Common
Stock pursuant to the Securities Act of 1933, as amended (the "Act"),
(iii) there is a sale of all or substantially all of the assets, or all
or substantially all of the capital stock, of the Company, or one or
more of its Subsidiaries, in one or more transactions for cash or
freely salable securities and a subsequent liquidation of the Company
in which its stockholders receive liquidating distributions of such
proceeds of sale after payment or provision for the valid debts and
liabilities of the Company, (iv) there is a merger or consolidation of
the Company, or one or more of its Subsidiaries, with or into one or
more corporations, limited liability companies or partnerships in which
the Company, or its Subsidiaries, as the case may be, receive cash or
freely salable securities for all of its or their assets, and a
subsequent liquidation of the Company, or one or more of its
Subsidiaries, in which the stockholders of the Company receive
liquidating distributions of such proceeds of sale, merger or
consolidation after payment or provision for the valid debts and
liabilities of the Company, (v) there is a merger or consolidation of
the Company, or the majority of its Subsidiaries (based on the value of
assets held by the Subsidiaries), with or into another corporation,
limited liability company or a partnership in which the Company's
stockholders receive cash
3
<PAGE> 4
or marketable securities for all of their stock of the Company, or (vi)
upon the death or disability of Employee.
7. TERMINATION OF EMPLOYMENT; DEATH OR PERMANENT DISABILITY OF GRANTEE.
(a) Except as may be otherwise expressly provided herein,
Awards shall terminate upon Termination of Employment for any reason
other than death or permanent disability (as defined in the Employment
Agreement).
(b) All Restricted Stock that has not vested at the time an
Award expires or terminates for whatever reason shall be forfeited and
automatically be transferred to and be reacquired by the Company for a
cash consideration per share equal to the par value of each share.
8. STOCK TRANSFER RESTRICTIONS. No Restricted Stock shall be liable for
the debts, contracts or engagements of the Grantee or his successors in
interest, or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means, whether such
disposition be voluntary or involuntary or by operation of law or by judgment
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that nothing in this Paragraph 8 shall
prevent transfers by will or by the applicable laws of descent and distribution.
9. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. If, while there are
outstanding Awards, the Company shall effect (i) a subdivision or consolidation
of shares or other capital readjustment, the payment of a stock dividend, or
other increase or reduction of the number of shares of the Common Stock
outstanding without receiving compensation therefor in money, services, or
property, (ii) a merger of one or more corporations into the Company, or (iii)
the merger of the Company into or its consolidation with another corporation,
then the shares subject to the Plan as set forth in Paragraph 4 above and each
Award shall, at no additional cost, include the number and class of shares of
stock or other securities to which each Grantee is entitled as a result of
ownership of Restricted Stock pursuant to the terms of such subdivision,
consolidation, capital readjustment, stock dividend, increase or reduction of
the number of shares of Common Stock, or merger, as the case may be. All such
stock or other securities issued with respect to Restricted Stock shall be
subject to the restrictions of and shall vest in accordance with the terms of
the Plan and the Award relating to such Restricted Stock. If any such adjustment
shall result in a fractional-share interest being issuable, such fraction shall
be disregarded. Securities to which a Grantee is entitled as a result of
ownership of Common Stock which has vested and is no longer Restricted Stock
shall not be subject to the Plan or an award agreement except as provided in
Paragraph 11 hereof.
Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of Restricted Shares then subject to
outstanding Awards.
4
<PAGE> 5
10. RIGHTS AS STOCKHOLDER.
(a) Commencing on the date of the Award, the Grantee shall
have all the rights of a shareholder with respect to the shares of
Restricted Stock awarded to the Grantee, including the right to vote
the shares and receive all dividends and other distributions paid or
made with respect to the shares.
(b) If a Grantee receives rights or warrants with respect to
any shares that are Restricted Stock, such rights or warrants, or any
shares or other securities acquired by the exercise of such rights or
warrants, may be held, exercised, sold or otherwise disposed of by the
Grantee free and clear of the restrictions and obligations provided in
the Plan, except Paragraph 11 hereof.
11. REQUIREMENTS OF LAW.
(a) The shares of Restricted Stock that are acquired by a
Grantee pursuant to the terms of the Plan will not be registered with
the Securities and Exchange Commission pursuant to an effective
registration statement. Such Restricted Stock will be issued to a
Grantee in reliance upon the exemption from registration contained in
Section 4(2) of the Act. Accordingly, (i) a Grantee must bear the
economic risk involved in the acquisition of such shares for an
indefinite period of time because such shares cannot be sold unless
they are subsequently registered under the Act or an exemption from
such registration is available, and (ii) stop transfer instructions
will be issued by the Company to its transfer agent with respect to
such shares of Restricted Stock. The Company shall not be obligated to
take any other affirmative action to comply with any law or regulation
of any governmental authority in order to cause the exercise of an
Award or the issuance of shares pursuant thereto.
(b) At the time of the delivery to the Secretary of the
Restricted Stock awarded to Grantee or at the time all or a portion of
an Award vests and Common Stock is delivered by the Secretary to the
Grantee (or his successors in interest) pursuant to Paragraph 6(b)
hereof, the Grantee may be required to certify and agree in writing (i)
that any shares of Restricted Stock or Common Stock acquired by him
pursuant to the Plan will not be sold except pursuant to an effective
registration statement under the Act unless the Company has received an
opinion of counsel satisfactory to it that such transfer does not
require registration under the Act and, for any sale under Rule 144
under the Act, such evidence as the Company shall request of compliance
with that Rule, and (ii) that the Grantee is acquiring such shares of
Restricted Stock for his own account and not on behalf of any other
person or for further distribution.
(c) Certificates representing Restricted Stock shall bear a
legend to the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN TERMS, CONDITIONS AND RESTRICTIONS SET FORTH IN THE
1998 RESTRICTED STOCK
5
<PAGE> 6
AWARD PLAN OF THE COMPANY AND THE AWARD AGREEMENT EXECUTED
PURSUANT THERETO, COPIES OF WHICH ARE ON FILE IN THE PRINCIPAL
EXECUTIVE OFFICE OF THE CORPORATION. SUCH SHARES HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER THE FEDERAL SECURITIES ACT OF
1933 (THE "ACT") OR THE APPLICABLE STATE SECURITIES LAWS AND
ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144
PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLYING WITH RULE 144, IN THE ABSENCE OF
EFFECTIVE REGISTRATION UNDER THE ACT OR OTHER COMPLIANCE UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS.
(d) Certificates representing Common Stock that has vested
pursuant to an Award or the Plan shall bear a legend to the following
effect for as long as counsel to the Company advises that such legend
is necessary or advisable:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER THE FEDERAL SECURITIES ACT OF
1933 (THE "ACT") OR THE APPLICABLE STATE SECURITIES LAWS AND
ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144
PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLYING WITH RULE 144, IN THE ABSENCE OF
EFFECTIVE REGISTRATION UNDER THE ACT OR OTHER COMPLIANCE UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS.
(e) The restrictions imposed by this Paragraph 11 shall remain
in effect after the end of any vesting period and after the termination
of the Plan. No reference elsewhere in the Plan to lapse of
restrictions shall impair the continued validity of the restrictions
imposed by this Paragraph 11.
12. EMPLOYMENT OBLIGATIONS. The granting of an Award shall not impose
upon the Company any obligation to employ or continue to employ any Grantee, and
the right of the Company to terminate the employment of any officer or other
employee shall not be diminished or affected by reason of the fact that an Award
has been granted to him or her.
13. AMENDMENT OR TERMINATION OF PLAN. The Board may modify, revise or
terminate this Plan at any time and from time to time; provided, however, that
without the approval of the holders of at least a majority of the outstanding
shares of Common Stock, the Board may not: (i) increase the aggregate number of
shares that may be issued pursuant to Awards under the Plan except pursuant to
Paragraph 9 hereof; (ii) change the class of employees eligible to receive
Awards; or (iii) materially increase the benefits accruing to participants under
the Plan.
6
<PAGE> 7
14. WRITTEN AGREEMENT. Each Award granted hereunder shall be embodied
in a written award agreement that shall be subject to the terms and conditions
prescribed above, and shall be signed by the Grantee and by the Chairman of the
Board, the Chief Executive Officer or the President of the Company for and in
the name and on behalf of the Company. Such award agreement shall contain such
other provisions as the Committee in its discretion shall deem advisable.
15. INDEMNIFICATION OF COMMITTEE. The Company shall indemnify each
present and future member of the Committee against, and each member of the
Committee shall be entitled without further act on his or her part to indemnity
from the Company for, all expenses (including the amount of judgments and the
amount of approved settlements made with a view to the curtailment of costs of
litigation, other than amounts paid to the Company itself) reasonably incurred
by him or her in connection with or arising out of any action, suit or
proceeding in which he or she may be involved by reason of his or her being or
having been a member of the Committee, whether or not he or she continues to be
such member of the Committee at the time such expenses are incurred; provided,
however, that such indemnity shall not include any expenses incurred by any such
member of the Committee (i) in respect of matters as to which he or she shall be
finally adjudged in any such action, suit or proceeding to have been guilty of
gross negligence or willful misconduct in the performance of his or her duty as
such member of the Committee, or (ii) in respect of any matter in which any
settlement is effected, in an amount in excess of the amount approved by the
Company on the advice of its legal counsel; and provided further, that no right
of indemnification under the provisions set forth herein shall be available to
or enforceable by any such member of the Committee unless, within 60 days after
institution of any such action, suit or proceeding, he or she shall have offered
the Company, in writing, the opportunity to handle and defend same at its own
expense. The foregoing right of indemnification shall inure to the benefit of
the heirs, executors or administrators of each such member of the Committee and
shall be in addition to all other rights to which such member of the Committee
may be entitled as a matter of law, contract or otherwise.
16. CERTAIN FEDERAL TAX ASPECTS. The Plan is neither qualified under
Section 401(a) of the Code nor subject to the provisions of the Employee
Retirement Income Security Act of 1974. Each Grantee is responsible for his or
her own taxes with respect to any Award. The Company has not offered any tax
advice with respect to any Award of Restricted Stock, and each Grantee is
encouraged to seek his own tax counsel.
17. EFFECTIVE DATE OF PLAN. The Plan shall become effective as of July
29, 1998.
7
<PAGE> 8
EXHIBIT A
CLASSIC COMMUNICATIONS, INC.
1998 RESTRICTED STOCK AWARD PLAN
AWARD AGREEMENT
THIS AGREEMENT, made as of July 29, 1998, is between CLASSIC
COMMUNICATIONS, INC., a Delaware corporation (the "Company"), and _____________
____________________ (the "Grantee").
WHEREAS, the Board of Directors of the Company has awarded to the
Grantee a total of _________ shares of the Company's Voting Common Stock, $0.01
par value per share (the "Restricted Stock"), subject to the restrictions set
forth in the 1998 Restricted Stock Award Plan (the "Plan") and this Agreement;
and
WHEREAS, the Grantee has agreed to accept the shares of Restricted
Stock awarded to the Grantee subject to the terms, conditions and restrictions
set forth in the Plan and this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
a. Grantee accepts the award of _________ shares of Restricted Stock
made to Grantee by the Committee (as defined in the Plan), subject to the
restrictions set forth in the Plan and which shall vest as follows: evenly on a
monthly basis over three years (1/36 per month) beginning on the date hereof.
b. Grantee certifies and agrees that the shares of Restricted Stock are
being acquired by Grantee in accordance with and subject to the terms,
conditions, and restrictions of the Plan, including, without limitation,
Paragraphs 7 and 11 thereof, and this Agreement. Grantee explicitly agrees that
the shares of Restricted Stock acquired by Grantee will not be sold except
pursuant to an effective registration statement under the Securities Act of 1933
(the "Act") unless the Company has received (i) an opinion of counsel
satisfactory to it to the effect that such transfer does not require
registration under the Act, and (ii) for any sale under Rule 144 of the Act,
such evidence of compliance with that Rule as the Company shall request. Grantee
certifies that he is acquiring the Restricted Stock for his own account and not
on behalf of any other person or for further distribution.
c. Notwithstanding the provisions of the Company's Common Stock or any
other agreement to the contrary, Grantee agrees that in the event of
distributions with respect to the Company's Common Stock, the Grantee shall be
entitled to $3.77 less per share in cumulative distributions than the amount
otherwise payable to other holders of Common Stock. In the event that any
dividend is distributed to the holders of Common Stock, the first $3.77 of such
cumulative dividends with respect to each of Grantee's Restricted Stock shall be
withheld by the Company and instead shall be distributed totally to the other
holders of Common Stock.
d. The provisions of this Agreement shall be applicable to the
Restricted Stock and to any shares or other securities of the Company or another
corporation that may be acquired by the
<PAGE> 9
Grantee as a result of a stock dividend, stock split, recapitalization,
reclassification, combination of shares, or the adjustment in the capital stock
of the Company or otherwise, or as a result of a reorganization, merger,
consolidation or other reorganization affecting the shares of Restricted Stock.
e. This Agreement shall be binding upon and inure to the benefit of the
Company and the Grantee, and the Company's successors and assigns.
f. This Agreement may not be modified, amended, renewed, or terminated,
nor may any term, condition, or breach of any term or condition be waived,
except by a writing signed by the party or parties sought to be bound by such
modification, amendment, renewal, termination or waiver. Any waiver of any term,
condition, or breach of any term or condition shall not operate as a waiver of
breach of the same term or condition for the future, or of any subsequent
breach.
g. In the event of the invalidity of any part or provision of this
Agreement, such invalidity shall not affect the enforceability of any other part
or provision of this Agreement.
CLASSIC COMMUNICATIONS, INC.
By:
------------------------------------
J. Merritt Belisle
Chief Executive Officer
---------------------------------------
, Grantee
------------------
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Historical Pro Forma Historical Pro Forma
-------------------------------------------- ----------- -------------- ------------
For Six Months
For the Year Ended December 31, Ended June 30,
------------------------------------------------------ ----------------------------
1993 1994 1995 1996 1997 1997 1997 1998 1998
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes, minority
interest and extraordinary item (2,424) (3,596) (12,860) (18,910) (20,042) (31,398) (7,364) (10,208) (16,593)
Fixed Charges:
Interest expense 3,141 4,975 14,199 20,633 21,299 30,899 9,998 10,497 15,639
Interest portion of rental expense 88 113 264 428 464 464 232 232 232
Dividends on unconsolidated subsidiary - - - 101 101 - 50 50 -
------ ------ ------- ------- ------- ------- ------ ------- -------
Earnings 805 1,492 1,603 2,252 1,822 (35) 2,916 571 (722)
Fixed charges:
Interest expense 3,141 4,975 14,199 20,633 21,299 30,899 9,998 10,497 15,639
Interest portion of rental expense 88 113 264 428 464 464 232 232 232
Dividends on unconsolidated subsidiary - - - 101 101 - 50 50 -
------ ------ ------- ------- ------- ------- ------ ------- -------
Total Fixed Charges 3,229 5,088 14,463 21,162 21,864 31,363 10,280 10,779 15,871
Ratio of Earnings to Fixed Charges n/a n/a n/a n/a n/a n/a n/a n/a n/a
Earnings inadequate to cover fixed charges:
Fixed Charges 3,229 5,088 14,463 21,162 21,864 31,363 10,280 10,779 15,871
Earnings 805 1,492 1,603 2,252 1,822 (35) 2,916 571 (722)
------ ------ ------- ------- ------- ------- ------ ------- -------
Amount earnings inadequate (2,424) (3,596) (12,860) (18,910) (20,042) (31,398) (7,364) (10,208) (16,593)
====== ====== ======= ======= ======= ======= ====== ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
CLASSIC CABLE, INC. d/b/a Classic Cable
Delaware
CLASSIC CABLE HOLDING, INC. d/b/a Classic Cable
Delaware
PONCA HOLDINGS, INC. d/b/a Classic Cable
Delaware
CLASSIC TELEPHONE, INC. d/b/a Classic Cable
Delaware
UNIVERSAL CABLE HOLDING, INC. d/b/a Classic Cable
Delaware
UNIVERSAL CABLE COMMUNICATIONS INC. d/b/a Classic Cable
Delaware
UNIVERSAL CABLE OF BEAVER, OKLAHOMA, INC. d/b/a Classic Cable
Delaware
UNIVERSAL CABLE MIDWEST, INC. d/b/a Classic Cable
Delaware
WT ACQUISITION CORPORATION d/b/a Classic Cable
Delaware
W.K. COMMUNICATIONS, INC. d/b/a Classic Cable
Kansas
TELEVISION ENTERPRISES, INC. d/b/a Classic Cable
Texas
BLACK CREEK COMMUNICATIONS, L.P. d/b/a Classic Cable
Delaware
BLACK CREEK MANAGEMENT, L.L.C. d/b/a Classic Cable
Delaware
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated April 10, 1998 (except Note 14, as to which the date is
August 14, 1998) in the Registration Statement (Form S-4 No. 333-00000) and the
related Prospectus of Classic Communications, Inc. dated , 1998.
/s/ ERNST & YOUNG LLP
Austin, Texas
September 16, 1998
<PAGE> 1
EXHIBIT 25.1
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
BANK ONE, N.A.
Not Applicable 31-4148768
(State of Incorporation (I.R.S. Employer
if not a national bank) Identification No.)
100 East Broad Street, Columbus, Ohio 43271-0181
(Address of trustee's principal (Zip Code) executive offices)
c/o Bank One Trust Company, NA
100 East Broad Street
Columbus, Ohio 43271-0181
(614) 248-5811
(Name, address and telephone number of agent for service)
Classic Communications, Inc.
(Exact name of obligor as specified in its charter)
Delaware 74-2761505
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
515 Congress Avenue, Suite 2626 78701
Austin, Texas (Zip Code)
(Address of principal executive
office)
13 1/4% Senior Discount Notes due 2009
(Title of the Indenture securities)
<PAGE> 2
GENERAL
1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Cleveland, Cleveland, Ohio
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System,
Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee.
16. LIST OF EXHIBITS
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF
ELIGIBILITY AND QUALIFICATION. (EXHIBITS IDENTIFIED IN PARENTHESES, ON
FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS
EXHIBITS HERETO.)
Exhibit 1 - A copy of the Articles of Association of the trustee as now in
effect.
Exhibit 2 - A copy of the Certificate of Authority of the trustee to commence
business, see Exhibit 2 to Form T-1, filed in connection with Form S-3
relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due
2003, Securities and Exchange Commission File No. 33-50709.
Exhibit 3 - A copy of the Authorization of the trustee to exercise corporate
trust powers, see Exhibit 3 to Form T-1, filed in connection with Form
S-3 relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due
2003, Securities and Exchange Commission File No. 33-50709.
-1-
<PAGE> 3
Exhibit 4 - A copy of the Bylaws of the trustee as now in effect.
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Exhibit 7 - Report of Condition of the trustee as of the close of business on
June 30, 1998, published pursuant to the requirements of the
Comptroller of the Company, see attached.
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
Items 3 through 15 are not answered pursuant to General Instruction B which
requires responses to Item 1, 2 and 16 only, if the obligor is not in
default.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, Bank One, NA, a national banking association organized
under the National Banking Act, has duly caused this statement of eligibility
and qualification to be signed on its behalf by the undersigned, there-unto duly
authorized, all in Columbus, Ohio, on ________________1998.
Bank One, NA
By: /s/ David Knox
------------------------------
-2-
<PAGE> 4
Exhibit I
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION
For the purpose of organizing an association to carry on the business
of banking under the laws of the United States, the following Articles of
Association are entered into:
FIRST. The title of this Association shall be BANK ONE, COLUMBUS,
NATIONAL ASSOCIATION.
SECOND. The main office of the Association shall be in Columbus, County
of Franklin, State of Ohio. The general business of the Association shall be
conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five Directors, the exact number of
Directors within such minimum and maximum limits to be fixed and determined from
time-to-time by resolution of the shareholders at any annual or special meeting
thereof, provided, however, that the Board of Directors, by resolution of a
majority thereof, shall be authorized to increase the number of its members by
not more than two between regular meetings of the shareholders. Each Director,
during the full term of his directorship, shall own, as qualifying shares, the
minimum number of shares of either this Association or of its parent bank
holding company in accordance with the provisions of applicable law. Unless
otherwise provided by the laws of the United States, any vacancy in the Board of
Directors for any reason, including an increase in the number thereof, may be
filled by action of the Board of Directors.
FOURTH. The annual meeting of the shareholders for the election of
Directors and the transaction of whatever other business may be brought before
said meeting shall be held at the main office of this Association or such other
place as the Board of Directors may designate, on the day of each year specified
therefor in the By-Laws, but if no election is held on that day, it may be held
-3-
<PAGE> 5
on any subsequent business day according to the provisions of law; and all
elections shall be held according to such lawful regulations as may be
prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this Association shall
be 2,073,750 shares of common stock of the par value of Ten Dollars ($10) each;
but said capital stock may be increased or decreased from time-to-time, in
accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the
Association shall have the preemptive or preferential right of subscription to
any share of any class of stock of this Association, whether now or hereafter
authorized or to any obligations convertible into stock of this Association,
issued or sold, nor any right of subscription to any thereof other than such, if
any, as the Board of Directors, in its discretion, may from time-to-time
determine and at such price as the Board of Directors may from time-to-time fix.
This Association, at any time and from time-to-time, may authorize and
issue debt obligations, whether or not subordinated, without the approval of the
shareholders.
SIXTH. The Board of Directors shall appoint one of its members
President of the Association, who shall be Chairman of the Board, unless the
Board appoints another director to be the Chairman. The Board of Directors shall
have the power to appoint one or more Vice Presidents and to appoint a Secretary
and such other officers and employees as may be required to transact the
business of this Association.
The Board of Directors shall have the power to define the duties of the
officers and employees of this Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof, to regulate the manner in which any increase of the capital of this
Association shall be made; to manage and administer the business and affairs of
this Association; to make all By-Laws that it may be lawful for them to make;
and generally to do and perform all acts that it may be legal for a Board of
Directors to do and perform.
-4-
<PAGE> 6
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of the City of
Columbus, Ohio, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of this Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue
until terminated in accordance with the laws of the United States.
NINTH. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than 10 percent of the stock of
this Association, may call a special meeting of shareholders at any time. Unless
otherwise provided by the laws of the United States, a notice of the time, place
and purpose of every annual and special meeting of the shareholders shall be
given by first-class mail, postage prepaid, mailed at least ten days prior to
the date of such meeting to each shareholder of record at his address as shown
upon the books of this Association.
TENTH. Every person who is or was a Director, officer or employee of
the Association or of any other corporation which he served as a Director,
officer or employee at the request of the Association as part of his regularly
assigned duties may be indemnified by the Association in accordance with the
provisions of this paragraph against all liability (including, without
limitation, judgments, fines, penalties and settlements) and all reasonable
expenses (including, without limitation, attorneys' fees and investigative
expenses) that may be incurred or paid by him in connection with any claim,
action, suit or proceeding, whether civil, criminal or administrative (all
referred to hereafter in this paragraphs as "Claims") or in connection with any
appeal relating thereto in which he may become involved as a party or otherwise
or with which he may be threatened by reason of his being or having been a
Director, officer or employee of the Association or such other corporation, or
by reason of any action taken or omitted by him in his capacity as such
Director,
-5-
<PAGE> 7
officer or employee, whether or not he continues to be such at the time such
liability or expenses are incurred, provided that nothing contained in this
paragraph shall be construed to permit indemnification of any such person who is
adjudged guilty of, or liable for, willful misconduct, gross neglect of duty or
criminal acts, unless, at the time such indemnification is sought, such
indemnification in such instance is permissible under applicable law and
regulations, including published rulings of the Comptroller of the Currency or
other appropriate supervisory or regulatory authority, and provided further that
there shall be no indemnification of directors, officers, or employees against
expenses, penalties, or other payments incurred in an administrative proceeding
or action instituted by an appropriate regulatory agency which proceeding or
action results in a final order assessing civil money penalties or requiring
affirmative action by an individual or individuals in the form of payments to
the Association. Every person who may be indemnified under the provisions of
this paragraph and who has been wholly successful on the merits with respect to
any Claim shall be entitled to indemnification as of right. Except as provided
in the preceding sentence, any indemnification under this paragraph shall be at
the sole discretion of the Board of Directors and shall be made only if the
Board of Directors or the Executive Committee acting by a quorum consisting of
Directors who are not parties to such Claim shall find or if independent legal
counsel (who may be the regular counsel of the Association) selected by the
Board of Directors or Executive Committee whether or not a disinterested quorum
exists shall render their opinion that in view of all of the circumstances then
surrounding the Claim, such indemnification is equitable and in the best
interests of the Association. Among the circumstances to be taken into
consideration in arriving at such a finding or opinion is the existence or
non-existence of a contract of insurance or indemnity under which the
Association would be wholly or partially reimbursed for such indemnification,
but the existence or non-existence of such insurance is not the sole
circumstance to be considered nor shall it be wholly determinative of whether
such indemnification shall be made. In addition to such finding or opinion, no
indemnification under this paragraph shall be made unless the Board of Directors
or the Executive Committee acting by a quorum consisting of Directors who are
not parties to such Claim shall find or if independent legal counsel (who may be
the regular counsel of the Association) selected by the Board of Directors or
Executive Committee whether or not a
-6-
<PAGE> 8
disinterested quorum exists shall render their opinion that the Director,
officer or employee acted in good faith in what he reasonably believed to be the
best interests of the Association or such other corporation and further in the
case of any criminal action or proceeding, that the Director, officer or
employee reasonably believed his conduct to be lawful. Determination of any
Claim by judgment adverse to a Director, officer or employee by settlement with
or without Court approval or conviction upon a plea of guilty or of nolo
contenders or its equivalent shall not create a presumption that a Director,
officer or employee failed to meet the standards of conduct set forth in this
paragraph. Expenses incurred with respect to any Claim may be advanced by the
Association prior to the final disposition thereof upon receipt of an
undertaking satisfactory to the Association by or on behalf of the recipient to
repay such amount unless it is ultimately determined that he is entitled to
indemnification under this paragraph. The rights of indemnification provided in
this paragraph shall be in addition to any rights to which any Director, officer
or employee may otherwise be entitled by contract or as a matter of law.
Every person who shall act as a Director, officer or employee of this
Association shall be conclusively presumed to be doing so in reliance upon the
right of indemnification provided for in this paragraph.
ELEVENTH. These Articles of Association may be amended at any regular
or special meeting of the shareholders by the affirmative vote of the holders of
a majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.
-7-
<PAGE> 9
Exhibit 4
BY-LAWS
OF
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLE I
MEETING OF SHAREHOLDERS
SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the
Shareholders of the Bank for the election of Directors and for the transaction
of such business as may properly come before the meeting shall be held at its
main banking house, or other convenient place duly authorized by the Board of
Directors, on the third Monday of January of each year, or on the next
succeeding banking day, if the day fixed falls on a legal holiday. If from any
cause, an election of directors is not made on the day fixed for the regular
meeting of shareholders or, in the event of a legal holiday, on the next
succeeding banking day, the Board of Directors shall order the election to be
held on some subsequent day, as soon thereafter as practicable, according to the
provisions of law; and notice thereof shall be given in the manner herein
provided for the annual meeting. Notice of such annual meeting shall be given by
or under the direction of the Secretary or such other officer as may be
designated by the Chief Executive Officer by first-class mail, postage prepaid,
to all shareholders of record of the Bank at their respective addresses as shown
upon the books of the Bank mailed not less than ten days prior to the date fixed
for such meeting.
SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders
of this Bank may be called at any time by the Board of Directors or by any three
or more shareholders owning, in the aggregate, not less than ten percent of the
stock of this Bank. The notice of any special meeting of the shareholders called
by the Board of Directors, stating the time, place and purpose of the meeting,
shall be given by or under the direction of the Secretary, or such other officer
as is designated by the Chief Executive Officer, by first-class mail, postage
prepaid, to all shareholders of record of the Bank at their respective addresses
as shown upon the books of the Bank, mailed not less than ten days prior to the
date fixed for such meeting.
Any special meeting of shareholders shall be conducted and its
proceedings recorded in the manner prescribed in these By-Laws for annual
meetings of shareholders.
SECTION 1.03. SECRETARY OF SHAREHOLDERS' MEETING. The Board of
Directors may designate a person to be the Secretary of the meetings of
shareholders. In the absence of a presiding officer, as designated in these
By-Laws, the Board of Directors may designate a person to act as the presiding
officer. In the event the Board of Directors fails to designate a person to
preside at a meeting of shareholders and a Secretary of such meeting, the
shareholders present or represented shall elect a person to preside and a person
to serve as Secretary of the meeting.
-8-
<PAGE> 10
The Secretary of the meetings of shareholders shall cause the returns
made by the judges and election and other proceedings to be recorded in the
minute book of the Bank. The presiding officer shall notify the directors-elect
of their election and to meet forthwith for the organization of the new board.
The minutes of the meeting shall be signed by the presiding officer and
the Secretary designated for the meeting.
SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as
many as three shareholders to be judges of the election, who shall hold and
conduct the same, and who shall, after the election has been held, notify, in
writing over their signatures, the secretary of the shareholders' meeting of the
result thereof and the names of the Directors elected; provided, however, that
upon failure for any reason of any judge or judges of election, so appointed by
the directors, to serve, the presiding officer of the meeting shall appoint
other shareholders or their proxies to fill the vacancies. The judges of
election at the request of the chairman of the meeting, shall act as tellers of
any other vote by ballot taken at such meeting, and shall notify, in writing
over their signatures, the secretary of the Board of Directors of the result
thereof.
SECTION 1.05. PROXIES. In all elections of Directors, each shareholder
of record, who is qualified to vote under the provisions of Federal Law, shall
have the right to vote the number of shares of record in his name for as many
persons as there are Directors to be elected, or to cumulate such shares as
provided by Federal Law. In deciding all other questions at meetings of
shareholders, each shareholder shall be entitled to one vote on each share of
stock of record in his name. Shareholders may vote by proxy duly authorized in
writing. All proxies used at the annual meeting shall be secured for that
meeting only, or any adjournment thereof, and shall be dated, and if not dated
by the shareholder, shall be dated as of the date of receipt thereof. No officer
or employee of this Bank may act as proxy.
SECTION 1.06. QUORUM. Holders of record of a majority of the shares of
the capital stock of the Bank, eligible to be voted, present either in person or
by proxy, shall constitute a quorum for the transaction of business at any
meeting of shareholders, but shareholders present at any meeting and
constituting less than a quorum may, without further notice, adjourn the meeting
from time to time until a quorum is obtained. A majority of the votes cast shall
decide every question or matter submitted to the shareholders at any meeting,
unless otherwise provided by law or by the Articles of Association.
-9-
<PAGE> 11
ARTICLE II
DIRECTORS
SECTION 2.01. MANAGEMENT OF THE BANK. The business of the Bank shall be
managed by the Board of Directors. Each director of the Bank shall be the
beneficial owner of a substantial number of shares of BANC ONE CORPORATION and
shall be employed either in the position of Chief Executive Officer or active
leadership within his or her business, professional or community interest which
shall be located within the geographic area in which the Bank operates, or as an
executive officer of the Bank. A director shall not be eligible for nomination
and re-election as a director of the Bank if such person's executive or
leadership position within his or her business, professional or community
interests which qualifies such person as a director of Bank terminates. The age
of 70 is the mandatory retirement age as a director of the Bank. When a person's
eligibility as director of the Bank terminates, whether because of change in
share ownership, position, residency or age, within 30 days after such
termination, such person shall submit his resignation as a director to be
effective at the pleasure of the Board provided, however, that in no event shall
such person be nominated or elected as a director. Provided, however, following
a person's retirement or resignation as a director because of the age
limitations herein set forth with respect to election or re-election as a
director, such person may, in special or unusual circumstances, and at the
discretion of the Board, be elected by the directors as a Director Emeritus of
the Bank for a limited period of time. A Director Emeritus shall have the right
to participate in board meetings but shall be without the power to vote and
shall be subject to re-election by the Board at its organizational meeting
following the Bank's annual meeting of shareholders.
SECTION 2.02. QUALIFICATIONS. Each director shall have the
qualification prescribed by law. No person elected a director may exercise any
of the powers of his office until he has taken the oath of such office.
SECTION 2.03. TERM OF OFFICE/VACANCIES. A director shall hold office
until the annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to his prior
death, resignation, or removal from office. Whenever any vacancy shall occur
among the directors, the remaining directors shall constitute the directors of
the Bank until such vacancy is filled by the remaining directors, and any
director so appointed shall hold office for the unexpired term of his or her
successor. Notwithstanding the foregoing, each director shall hold office and
serve at the pleasure of the Board.
SECTION 2.04. ORGANIZATION MEETING. The directors elected by the share-
holders shall meet for organization of the new board at the time fixed by the
presiding officer of the annual meeting. If at the time fixed for such meeting
there is no quorum present, the Directors in attendance may adjourn from time to
time until a quorum is obtained. A majority of the number of Directors elected
by the shareholders shall constitute a quorum for the transaction of business.
-10-
<PAGE> 12
SECTION 2.05. REGULAR MEETINGS. The regular meetings of the Board of
Directors shall be held on the third Monday of each calendar month excluding
March and July, which meeting will be held at 4:00 p.m. When any regular meeting
of the Board falls on a holiday, the meeting shall be held on such other day as
the Board may previously designate or should the Board fail to so designate, on
such day as the Chairman of the Board of President may fix. Whenever a quorum is
not present, the directors in attendance shall adjourn the meeting to a time not
later than the date fixed by the Bylaws for the next succeeding regular meeting
of the Board.
SECTION 2.06. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held at the call of the Chairman of the Board or President,
or at the request of two or more Directors. Any special meeting may be held at
such place in Franklin County, Ohio, and at such time as may be fixed in the
call. Written or oral notice shall be given to each Director not later than the
day next preceding the day on which special meeting is to be held, which notice
may be waived in writing.
The presence of a Director at any meeting of the Board shall be deemed
a waiver of notice thereof by him. Whenever a quorum is not present the
Directors in attendance shall adjourn the special meeting from day to day until
a quorum is obtained.
SECTION 2.07. QUORUM. A majority of the Directors shall constitute a
quorum at any meeting, except when otherwise provided by law; but a lesser
number may adjourn any meeting, from time-to-time, and the meeting may be held,
as adjourned, without further notice. When, however, less than a quorum as
herein defined, but at least one-third and not less than two of the authorized
number of Directors are present at a meeting of the Directors, business of the
Bank may be transacted and matters before the Board approved or disapproved by
the unanimous vote of the Directors present.
SECTION 2.08. COMPENSATION. Each member of the Board of Directors shall
receive such fees for, and transportation expenses incident to, attendance at
Board and Board Committee Meetings and such fees for service as a Director
irrespective of meeting attendance as from time to time are fixed by resolution
of the Board; provided, however, that payment hereunder shall not be made to a
Director for meetings attended and/or Board service which are not for the Bank's
sole benefit and which are concurrent and duplicative with meetings attended or
board service for an affiliate of the Bank for which the Director receives
payment; and provided further, that payment hereunder shall not be made in the
case of any Director in the regular employment of the Bank or of one of its
affiliates.
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SECTION 2.09. EXECUTIVE COMMITTEE. There shall be a standing committee
of the Board of Directors known as the Executive Committee which shall possess
and exercise, when the Board is not in session, all powers of the Board that may
lawfully be delegated. The Executive Committee shall also exercise the powers of
the Board of Directors in accordance with the Provisions of the "Employees
Retirement Plan" and the "Agreement and Declaration of Trust" as the same now
exist or may be amended hereafter. The Executive Committee shall consist of not
fewer than four board members, including the Chairman of the Board and President
of the Bank, one of whom, as hereinafter required by these By-laws, shall be the
Chief Executive Officer. The other members of the Committee shall be appointed
by the Chairman of the Board or by the President, with the approval of the Board
and shall continue as members of the Executive Committee until their successors
are appointed, provided, however, that any member of the Executive Committee may
be removed by the Board upon a majority vote thereof at any regular or special
meeting of the Board. The Chairman or President shall fill any vacancy in the
Committee by the appointment of another Director, subject to the approval of the
Board of Directors. The regular meetings of the Executive Committee shall be
held on a regular basis as scheduled by the Board of Directors. Special meetings
of the Executive Committee shall be held at the call of the Chairman or
President or any two members thereof at such time or times as may be designated.
In the event of the absence of any member or members of the Committee, the
presiding member may appoint a member or members of the Board to FILL the place
or places of such absent member or members to serve during such absence. Not
fewer than three members of the Committee must be present at any meeting of the
Executive Committee to constitute a quorum, provided, however that with regard
to any matters on which the Executive Committee shall vote, a majority of the
Committee members present at the meeting at which a vote is to be taken shall
not be officers of the Bank and, provided further, that if, at any meeting at
which the Chairman of the Board and President are both present, Committee
members who are not officers are not in the majority, then the Chairman of the
Board or President, which ever of such officers is not also the Chief Executive
Officer, shall not be eligible to vote at such meeting and shall not be
recognized for purposes of determining if a quorum is present at such meeting.
When neither the Chairman of the Board nor President are present, the Committee
shall appoint a presiding officer. The Executive Committee shall keep a record
of its proceedings and report its proceedings and the action taken by it to the
Board of Directors.
SECTION 2.10 COMMUNITY REINVESTMENT ACT AND COMPLIANCE POLICY
COMMITTEE. There shall be a standing committee of the Board of Directors known
as the Community Reinvestment Act and Compliance Policy Committee the duties of
which shall be, at least once in each calendar year, to review, develop and
recommend policies and programs related to the Bank's Community Reinvestment Act
Compliance and regulatory compliance with all existing statutes, rules and
regulations affecting the Bank under state and federal law. Such Committee shall
provide and promptly make a full report of such review of current Bank policies
with regard to Community Reinvestment Act and regulatory compliance in writing
to the Board, with recommendations, if any, which may be necessary to correct
any unsatisfactory conditions. Such Committee may, in its discretion, in
fulfilling its duties, utilize the Community Reinvestment Act officers of the
Bank, Banc One Ohio Corporation and Banc One Corporation and may engage
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<PAGE> 14
outside Community Reinvestment Act experts, as approved by the Board, to review,
develop and recommend policies and programs as herein required. The Community
Reinvestment Act and regulatory compliance policies and procedures established
and the recommendations made shall be consistent with, and shall supplement, the
Community Reinvestment Act and regulatory compliance programs, policies and
procedures of Banc One Corporation and Banc One Ohio Corporation. The Community
Reinvestment Act and Compliance Policy Committee shall consist of not fewer than
four board members, one of whom shall be the Chief Executive Officer and a
majority of whom are not officers of the Bank. Not fewer than three members of
the Committee, a majority of whom are not officers of the Bank, must be present
to constitute a quorum. The Chairman of the Board or President of the Bank,
whichever is not the Chief Executive Officer, shall be an ex officio member of
the Community Reinvestment Act and Compliance Policy Committee. The Community
Reinvestment Act and Compliance Policy Committee, whose chairman shall be
appointed by the Board, shall keep a record of its proceedings and report its
proceedings and the action taken by it to the Board of Directors.
SECTION 2.11. TRUST COMMITTEES. There shall be two standing Committees
known as the Trust Management Committee and the Trust Examination Committee
appointed as hereinafter provided.
SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint such
special committees from time to time as are in its judgment necessary in the
interest of the Bank.
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ARTICLE III
OFFICERS, MANAGEMENT STAFF AND EMPLOYEES
SECTION 3.01. OFFICERS AND MANAGEMENT STAFF.
(a)
The officers of the Bank shall include a President, Secretary and
Security Officer and may include a Chairman of the Board, one or more
Vice Chairmen, one or more Vice Presidents (which may include one or
more Executive Vice Presidents and/or Senior Vice Presidents) and one
or more Assistant Secretaries, all of whom shall be elected by the
Board. All other officers may be elected by the Board or appointed in
writing by the Chief Executive Officer. The salaries of all officers
elected by the Board shall be fixed by the Board. The Board from
time-to-time shall designate the President or Chairman of the Board
to serve as the Bank's Chief Executive Officer.
(b)
The Chairman of the Board, if any, and the President shall be elected
by the Board from their own number. The President and Chairman of the
Board shall be re-elected by the Board annually at the organizational
meeting of the Board of Directors following the Annual Meeting of
Shareholders. Such officers as the Board shall elect from their own
number shall hold office from the date of their election as officers
until the organization meeting of the Board of Directors following
the next Annual Meeting of Shareholders, provided, however, that such
officers may be relieved of their duties at any time by action of the
Board in which event all the powers incident to their office shall
immediately terminate.
(c)
Except as provided in the case of the elected officers who are
members of the Board, all officers, whether elected or appointed,
shall hold office at the pleasure of the Board. Except as otherwise
limited by law or these By-laws, the Board assigns to Chief Executive
Officer and/or his designees the authority to appoint and dismiss any
elected or appointed officer or other member of the Bank's management
staff and other employees of the Bank, as the person in charge of and
responsible for any branch office, department, section, operation,
function, assignment or duty in the Bank.
(d)
The management staff of the Bank shall include officers elected by
the Board, officers appointed by the Chief Executive Officer, and
such other persons in the employment of the Bank who, pursuant to
written appointment and authorization by a duly authorized officer of
the Bank, perform management functions and have management
responsibilities. Any two or more offices may be held by the same
person except that no person shall hold the office of Chairman of the
Board and/or President and at the same time also hold the office of
Secretary.
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<PAGE> 16
(e)
The Chief Executive Officer of the Bank and any other officer of the
Bank, to the extent that such officer is authorized in writing by the
Chief Executive Officer, may appoint persons other than officers who
are in the employment of the Bank to serve in management positions
and in connection therewith, the appointing officer may assign such
title, salary, responsibilities and functions as are deemed
appropriate by him, provided, however, that nothing contained herein
shall be construed as placing any limitation on the authority of the
Chief Executive Officer as provided in this and other sections of
these By-Laws.
SECTION 3.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of
the Bank shall have general and active management of the business of the Bank
and shall see that all orders and resolutions of the Board of Directors are
carried into effect. Except as otherwise prescribed or limited by these By-Laws,
the Chief Executive Officer shall have full right, authority and power to
control all personnel, including elected and appointed officers, of the Bank, to
employ or direct the employment of such personnel and officers as he may deem
necessary, including the fixing of salaries and the dismissal of them at
pleasure, and to define and prescribe the duties and responsibility of all
Officers of the Bank, subject to such further limitations and directions as he
may from time-to-time deem proper. The Chief Executive Officer shall perform
all duties incident to his office and such other and further duties, as may,
from time-to-time, be required of him by the Board of Directors or the
shareholders. The specification of authority in these By-Laws wherever and to
whomever granted shall not be construed to limit in any manner the general
powers of delegation granted to the Chief Executive Officer in conducting the
business of the Bank. The Chief Executive Officer or, in his absence, the
Chairman of the Board or President of the Bank, as designated by the Chief
Executive Officer, shall preside at all meetings of shareholders and meetings of
the Board. In the absence of the Chief Executive Officer, such officer as is
designated by the Chief Executive Officer shall be vested with all the powers
and perform all the duties of the Chief Executive Officer as defined by these
By-Laws. When designating an officer to serve in his absence, the Chief
Executive Officer shall select an officer who is a member of the Board of
Directors whenever such officer is available.
SECTION 3.03. POWERS OF OFFICERS AND MANAGEMENT STAFF. The Chief
Executive Officer, the Chairman of the Board, the President, and those officers
so designated and authorized by the Chief Executive Officer are authorized for
an on behalf of the Bank, and to the extent permitted by law, to make loans and
discounts; to purchase or acquire drafts, notes, stock, bonds, and other
securities for investment of Funds held by the Bank; to execute and purchase
acceptances; to appoint, empower and direct all necessary agents and attorneys;
to sign and give any notice required to be given; to demand payment and/or to
declare due for any default any debt or obligation due or payable to the Bank
upon demand or authorized to be declared due; to foreclose any mortgages, to
exercise any option, privilege or election to forfeit, terminate, extend or
renew any lease; to authorize and direct any proceedings for the collection of
any money or for the enforcement of any right or obligation; to adjust, settle
and compromise all claims of every kind and description in favor of or against
the Bank, and to give receipts, releases and discharges therefor; to borrow
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<PAGE> 17
money and in connection therewith to make, execute and deliver notes, bonds or
other evidences of indebtedness; to pledge or hypothecate any securities or
any stocks, bonds, notes or any property real or personal held or owned by the
Bank, or to rediscount any notes or other obligations held or owned by the Bank,
to employ or direct the employment of all personnel, including elected and
appointed officers, and the dismissal of them at pleasure, and in furtherance of
and in addition to the powers hereinabove set forth to do all such acts and to
take all such proceedings as in his judgment are necessary and incidental to the
operation of the Bank.
Other persons in the employment of the Bank, including but not limited
to officers and other members of the management staff, may be authorized by the
Chief Executive Officer, or by an officer so designated and authorized by the
chief Executive Officer, to perform the powers set forth above, subject,
however, to such limitations and conditions as are set forth in the
authorization given to such persons.
SECTION 3.04. SECRETARY. The Secretary or such other officers as may be
designated by the Chief Executive Officer shall have supervision and control of
the records of the Bank and, subject to the direction of the Chief Executive
Officer, shall undertake other duties and functions usually performed by a
corporate secretary. Other officers may be designated by the Chief Executive
Officer or the Board of Directors as Assistant Secretary to perform the duties
of the Secretary.
SECTION 3.05. EXECUTION OF DOCUMENTS. The Chief Executive Officer,
Chair-man of the Board, President, any officer being a member of the Bank's
management staff who is also a person in charge of and responsible for any
department within the Bank and any other officer to the extent such officer is
so designated and authorized by the Chief Executive Officer, the Chairman of the
Board, the President, or any other officer who is a member of the Bank's
management staff who is in charge of and responsible for any department within
the Bank, are hereby authorized on behalf of the Bank to sell, assign, lease,
mortgage, transfer, deliver and convey any real or personal property now or
hereafter owned by or standing in the name of the Bank or its nominee, or held
by this Bank as collateral security, and to execute and deliver such deeds,
contracts, leases, assignments, bills of sale, transfers or other papers or
documents as may be appropriate in the circumstances; to execute any loan
agreement, security agreement, commitment letters and financing statements and
other documents on behalf of the Bank as a lender; to execute purchase orders,
documents and agreements entered into by the Bank in the ordinary course of
business, relating to purchase, sale, exchange or lease of services, tangible
personal property, materials and equipment for the use of the Bank; to execute
powers of attorney to perform specific or general functions in the name of or on
behalf of the Bank; to execute promissory notes or other instruments evidencing
debt of the Bank; to execute instruments pledging or releasing securities for
public funds, documents submitting public fund bids on behalf of the Bank and
public fund contracts; to purchase and acquire any real or personal property
including loan portfolios and to execute and deliver such agreements, contracts
or other papers or documents as may be appropriate in the circumstances; to
execute any indemnity and fidelity bonds, proxies or other papers or documents
of like or different character necessary, desirable or incidental to the conduct
of its banking business; to execute and deliver settlement
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<PAGE> 18
agreements or other papers or documents as may be appropriate in connection with
a dismissal authorized by Section 3.01(c) of these By-laws; to execute
agreements, instruments, documents, contracts or other papers of like or
difference character necessary, desirable or incidental to the conduct of its
banking business; and to execute and deliver partial releases from and
discharges or assignments of mortgages, financing statements and assignments or
surrender of insurance policies, now or hereafter held by this Bank.
The Chief Executive Officer, Chairman of the Board, President, any
officer being a member of the Bank's management staff who is also a person in
charge of and responsible for any department within the Bank, and any other
officer of the Bank so designated and authorized by the Chief Executive Officer,
Chairman of the Board, President or any officer who is a member of the Bank's
management staff who is in charge of and responsible for any department within
the Bank are authorized for and on behalf of the Bank to sign and issue checks,
drafts, and certificates of deposit; to sign and endorse bills of exchange, to
sign and countersign foreign and domestic letters of credit, to receive and
receipt for payments of principal, interest, dividends, rents, fees and payments
of every kind and description paid to the Bank, to sign receipts for property
acquired by or entrusted to the Bank, to guarantee the genuineness of signatures
on assignments of stocks, bonds or other securities, to sign certifications of
checks, to endorse and deliver checks, drafts, warrants, bills, notes,
certificates of deposit and acceptances in all business transactions of the
Bank.
Other persons in the employment of the Bank and of its subsidiaries,
including but not limited to officers and other members of the management staff,
may be authorized by the Chief Executive Officer, Chairman of the Board,
President or by an officer so designated by the Chief Executive Officer,
Chairman of the Board, or President to perform the acts and to execute the
documents set forth above, subject, however, to such limitations and conditions
as are contained in the authorization given to such person.
SECTION 3.06. PERFORMANCE BOND. All officers and employees of the Bank
shall be bonded for the honest and faithful performance of their duties for such
amount as may be prescribed by the Board of Directors.
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ARTICLE IV
TRUST DEPARTMENT
SECTION 4.01. TRUST DEPARTMENT. Pursuant to the fiduciary powers
granted to this Bank under the provisions of Federal Law and Regulations of the
Comptroller of the Currency, there shall be maintained a separate Trust
Department of the Bank, which shall be operated in the manner specified herein.
SECTION 4.02. TRUST MANAGEMENT COMMITTEE. There shall be a standing
Committee known as the Trust Management Committee, consisting of at least five
members, a majority of whom shall not be officers of the Bank. The Committee
shall consist of the Chairman of the Board who shall be Chairman of the Com-
mittee, the President, and at least three other Directors appointed by the Board
of Directors and who shall continue as members of the Committee until their
successors are appointed. Any vacancy in the Trust Management Committee may be
filled by the Board at any regular or special meeting. In the event of the
absence of any member or members, such Committee may, in its discretion, appoint
members of the Board to fill the place of such absent members to serve during
such absence. Three members of the Committee shall constitute a quorum. Any
member of the Committee may be removed by the Board by a majority vote at any
regular or special meeting of the Board. The Committee shall meet at such times
as it may determine or at the call of the Chairman, or President or any two
members thereof.
The Trust Management Committee, under the general direction of the
Board of Directors, shall supervise the policy of the Trust Department which
shall be formulated and executed in accordance with Law, Regulations of the
Comptroller of the Currency, and sound fiduciary principles.
SECTION 4.03. TRUST EXAMINATION COMMITTEE. There shall be a standing
Committee known as the Trust Examination Committee, consisting of three
directors appointed by the Board of Directors and who shall continue as members
of the committee until their successors are appointed. Such members shall not be
active officers of the Bank. Two members of the Committee shall constitute a
quorum. Any member of the Committee may be removed by the Board by a majority
vote at any regular or special meeting of the Board. The Committee shall meet at
such times as it may determine or at the call of two members thereof.
This Committee shall, at least once during each calendar year and
within fifteen months of the last such audit, or at such other time(s) as may be
required by Regulations of the Comptroller of the Currency, make suitable audits
of the Trust Department or cause suitable audits to be made by auditors
responsible only to the Board of Directors, and at such time shall ascertain
whether the Department has been administered in accordance with Law, Regulations
of the Comptroller of the Currency and sound fiduciary principles.
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<PAGE> 20
The Committee shall promptly make a full report of such audits in
writing to the Board of Directors of the Bank, together with a recommendation as
to what action, if any, may be necessary to correct any unsatisfactory
condition. A report of the audits together with the action taken thereon shall
be noted in the Minutes of the Board of Directors and such report shall be a
part of the records of this Bank.
SECTION 4.04. MANAGEMENT. The Trust Department shall be under the
management and supervision of an officer of the Bank or of the trust affiliate
of the Bank designated by and subject to the advice and direction of the Chief
Executive Officer. Such officer having supervisory responsibility over the Trust
Department shall do or cause to be done all things necessary or proper in
carrying on the business of the Trust Department in accordance with provisions
of law and applicable regulations.
SECTION 4.05. HOLDING OF PROPERTY. Property held by the Trust
Department may be carried in the name of the Bank in its fiduciary capacity, in
the name of Bank, or in the name of a nominee or nominees.
SECTION 4.06. TRUST INVESTMENTS. Funds held by the Bank in a fiduciary
capacity awaiting investment or distribution shall not be held uninvested or
undistributed any longer than is reasonable for the proper management of the
account and shall be invested in accordance with the instrument establishing a
fiduciary relationship and local law. Where such instrument does not specify the
character or class of investments to be made and does not vest in the Bank any
discretion in the matter, funds held pursuant to such instrument shall be
invested in any investment which corporate fiduciaries may invest under local
law.
The investments of each account in the Trust Department shall be kept
separate from the assets of the Bank, and shall be placed in the joint custody
or control of not less than two of the officers or employees of the Bank or of
the trust affiliate of the Bank designated for the purpose by the Trust
Management Committee.
SECTION 4.07. EXECUTION OF DOCUMENTS. The Chief Executive Officer,
Chairman of the Board, President, any officer of the Trust Department, and such
other officers of the trust affiliate of the Bank as are specifically designated
and authorized by the Chief Executive Officer, the President, or the officer in
charge of the Trust Department, are hereby authorized, on behalf of this Bank,
to sell, assign, lease, mortgage, transfer, deliver and convey any real property
or personal property and to purchase and acquire any real or personal property
and to execute and deliver such agreements, contracts, or other papers and
documents as may be appropriate in the circumstances for property now or
hereafter owned by or standing in the name of this Bank, or its nominee, in any
fiduciary capacity, or in the name of any principal for whom this Bank may now
or hereafter be acting under a power of attorney, or as agent and to execute and
deliver partial releases from any discharges or assignments or mortgages and
assignments or surrender of insurance policies, to execute and deliver deeds,
contracts, leases, assignments, bills of sale, transfers or such other papers
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or documents as may be appropriate in the circumstances for property now or
hereafter held by this Bank in any fiduciary capacity or owned by any principal
for whom this Bank may now or hereafter be acting under a power of attorney or
as agent; to execute and deliver settlement agreements or other papers or
documents as may be appropriate in connection with a dismissal authorized by
Section 3.01(c) of these By-laws; provided that the signature of any such person
shall be attested in each case by any officer of the Trust Department or by any
other person who is specifically authorized by the Chief Executive Officer, the
President or the officer in charge of the Trust Department.
The Chief Executive Officer, Chairman of the Board, President, any
officer of the Trust Department and such other officers of the trust affiliate
of the Bank as are specifically designated and authorized by the Chief Executive
Officer, the President, or the officer in charge of the Trust Department, or any
other person or corporation as is specifically authorized by the Chief Executive
Officer, the President or the officer in charge of the Trust Department, are
hereby authorized on behalf of this Bank, to sign any and all pleadings and
papers in probate and other court proceedings, to execute any indemnity and
fidelity bonds, trust agreements, proxies or other papers or documents of like
or different character necessary, desirable or incidental to the appointment of
the Bank in any fiduciary capacity and the conduct of its business in any
fiduciary capacity; also to foreclose any mortgage, to execute and deliver
receipts for payments of principal, interest, dividends, rents, fees and
payments of every kind and description paid to the Bank; to sign receipts for
property acquired or entrusted to the Bank; also to sign stock or bond
certificates on behalf of this Bank in any fiduciary capacity and on behalf of
this Bank as transfer agent or registrar; to guarantee the genuineness of
signatures on assignments of stocks, bonds or other securities, and to
authenticate bonds, debentures, land or lease trust certificates or other forms
of security issued pursuant to any indenture under which this Bank now or
hereafter is acting as Trustee. Any such person, as well as such other persons
as are specifically authorized by the Chief Executive Officer or the officer in
charge of the Trust Department, may sign checks, drafts and orders for the
payment of money executed by the Trust Department in the course of its business.
SECTION 4.08. VOTING OF STOCK. The Chairman of the Board, President,
any officer of the Trust Department, any officer of the trust affiliate of the
Bank and such other persons as may be specifically authorized by Resolution of
the Trust Management Committee or the Board of Directors, may vote shares of
stock of a corporation of record on the books of the issuing company in the name
of the Bank or in the name of the Bank as fiduciary, or may grant proxies for
the voting of such stock of the granting if same is permitted by the instrument
under which the Bank is acting in a fiduciary capacity, or by the law applicable
to such fiduciary account. In the case of shares of stock which are held by a
nominee of the Bank, such shares may be voted by such person(s) authorized by
such nominee.
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ARTICLE V
STOCKS AND STOCK CERTIFICATES
SECTION 5.01. STOCK CERTIFICATES. The shares of stock of the Bank shall
be evidenced by certificates which shall bear the signature of the Chairman of
the Board, the President, or a Vice President (which signature may be engraved,
printed or impressed), and shall be signed manually by the Secretary, or any
other officer appointed by the Chief Executive Officer for that purpose.
In case any such officer who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be such before such
certificate is issued, it may be issued by the Bank with the same effect as if
such officer had not ceased to be such at the time of its issue. Each such
certificate shall bear the corporate seal of the Bank, shall recite on its fact
that the stock represented thereby is transferable only upon the books of the
Bank properly endorsed and shall recite such other information as is required by
law and deemed appropriate by the Board. The corporate seal may be facsimile
engraved or printed.
SECTION 5.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank
shall be transferable only upon the stock transfer books of the Bank and except
as hereinafter provided, no transfer shall be made or new certificates issued
except upon the surrender for cancellation of the certificate or certificates
previously issued therefor. In the case of the loss, theft, or destruction of
any certificate, a new certificate may be issued in place of such certificate
upon the furnishing of any affidavit setting forth the circumstances of such
loss, theft, or destruction and indemnity satisfactory to the Chairman of the
Board, the President, or a Vice President. The Board of Directors, or the Chief
Executive Officer, may authorize the issuance of a new certificate therefor
without the furnishing of indemnity. Stock Transfer Books, in which all
transfers of stock shall be recorded, shall be provided.
The stock transfer books may be closed for a reasonable period and
under such conditions as the Board of Directors may at any time determine for
any meeting of shareholders, the payment of dividends or any other lawful
purpose. In lieu of closing the transfer books, the Board may, in its
discretion, fix a record date and hour constituting a reasonable period prior to
the day designated for the holding of any meeting of the shareholders or the day
appointed for the payment of any dividend or for any other purpose at the time
as of which shareholders entitled to notice of and to vote at any such meeting
or to receive such dividend or to be treated as shareholders for such other
purpose shall be determined, and only shareholders of record at such time shall
be entitled to notice of or to vote at such meeting or to receive such dividends
or to be treated as shareholders for such other purpose.
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ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. SEAL. The impression made below is an impression of the
seal adopted by the Board of Directors of BANK ONE, NA f/k/a Bank One, Columbus,
NA. The Seal may be affixed by any officer of the Bank to any document executed
by an authorized officer on behalf of the Bank, and any officer may certify any
act, proceedings, record, instrument or authority of the Bank.
SECTION 6.02. BANKING HOURS. Subject to ratification by the Executive
Committee, the Bank and each of its Branches shall be open for business on such
days and during such hours as the Chief Executive Officer of the Bank shall,
from time to time, prescribe.
SECTION 6.03. MINUTE BOOK. The organization papers of this Bank, the
Articles of Association, the returns of the judges of elections, the By-Laws and
any amendments thereto, the proceedings of all regular and special meetings of
the shareholders and of the Board of Directors, and reports of the committees of
the Board of Directors shall be recorded in the minute book of the Bank. The
minutes of each such meeting shall be signed by the presiding Officer and
attested by the secretary of the meetings.
SECTION 6.04. AMENDMENT OF BY-LAWS. These By-Laws may be amended by
vote of a majority of the Directors.
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EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
CONSENT
The undersigned, designated to act as Trustee under the Indenture for
Classic Communications, Inc. described in the attached Statement of Eligibility
and Qualification, does hereby consent that reports of examinations by Federal,
State, Territorial, or District Authorities may be furnished by such authorities
to the Commission upon the request of the Commission.
This Consent is given pursuant to the provision of Section 321(b) of
the Trust Indenture Act of 1939, as amended.
Bank One, NA
Dated: September 16, 1998
By: /s/ David Knox
---------------------------------
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<TABLE>
<S> <C>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Federal Financial Institutions Examination Council Expires March 31, 2001
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[1]
Please refer to page I,
Table of Contents, for
the required disclosure
of estimated burden.
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Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices - FFIEC 031
Report at the close of business June 30, 1998 19980830
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(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State This report form is to be filed by banks with branches and
member banks); 12 U.S.C. Section 1817 (State nonmember consolidated subsidiaries in U.S. territories and possessions,
banks); and 12 U.S.C. Section 161 (National banks). Edge or Agreement subsidiaries, foreign branches, consolidated
foreign subsidiaries, or International Banking Facilities.
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NOTE: The Reports of Condition and Income must be signed by The Reports of Condition and Income are to be prepared in
an authorized officer and the Report of Condition must be accordance with Federal regulatory authority instructions.
attested to by not less than two directors (trustees) for
State nonmember banks and three directors for State member
and National Banks.
We, the undersigned directors (trustees), attest to
I, C. William Willen, Vice President the correctness of the Report of Condition
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Name and Title of Officer Authorized to Sign Report and declare that it has been examined by us and to
the best of our knowledge and belief has been prepared
of the named bank do hereby declare that the Reports of in conformance with the instructions issued by the
Condition and Income (including the supporting schedules) appropriate Federal regulatory authority and is
for this report date have been prepared in conformance true and correct.
with the instructions issued by the appropriate Federal
regulatory authority and are true to the best of my /s/ ILLEGIBLE
knowledge and belief. -----------------------------------------------------
Director (Trustee)
/s/ C. William Willen
- ------------------------------------------------------------- /s/ DAVID P. LAUER
Signature of Officer Authorized to Sign Report -----------------------------------------------------
Director (Trustee)
July 30, 1998 /s/ ILLEGIBLE
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Date of Signature Director (Trustee)
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Submission of Reports (if other than EDS) must transmit the bank's
computer data file to EDS.
Each bank must prepare its Reports of Condition and
Income either: For electronic filing assistance, contact EDS Call
Report Services, 2150 N. Prospect Ave., Milwaukee,
(a) in electronic form and then file the computer data WI 53202, telephone (800) 255-1571.
file directly with the banking agencies' collection
agent, Electronic Data Systems Corporation (EDS), by To fulfill the signature and attestation requirement for the
modem or on computer diskette; or Reports of Condition and Income for this report date, attach
(b) in hard-copy (paper) form and arrange for another this signature page to the hard-copy record of the completed
party to convert the paper report to electronic form. report that the bank places in its files.
That party
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FDIC Certificate Number: 08559 Bank One, NA
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(RCRI 9050) Legal Title of Bank (TEXT 9010)
Columbus
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City (TEXT 9130)
OH 43271
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State Abbrev. (TEXT 9200) Zip Code (TEXT 9220)
Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Bank One FFIEC031
100 East Broad Street, OH1-1066 Vendor ID: D Cert #: 06659 RC-1
Columbus, OH 43271 Transit # 04400037
Transmitted to EDS as 0118176 on 07/30/98 at 14:49:31 CST
[11]
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 1998
ALL SCHEDULES ARE TO BE REPORTED IN THOUSANDS OF DOLLARS. UNLESS OTHERWISE
INDICATED, REPORT THE AMOUNT OUTSTANDING AS OF THE LAST BUSINESS DAY OF THE
QUARTER.
SCHEDULE RC - BALANCE SHEET
<TABLE>
<CAPTION>
C400 <-
Dollar Amounts in Thousands
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<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): RCFD
a. Noninterest-bearing balances and currency and coin(1)................................. 0081 1,119,075 1.a
b. Interest bearing balances(2).......................................................... 0071 1,100 1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A)............................ 1754 148,018 2.a
b. Available-for-sale securities (from Schedule RC-B, column D).......................... 1773 2,283,548 2.b
3. Federal funds sold and securities purchased under agreements to resell..................... 1350 151,956 3.
4. Loans and lease financing receivables: RCFD
a. Loans and leases, net of unearned income (from Schedule RC-C)........ 2122 18,384,478 4.a
b. LESS: Allowance for loan and lease losses............................ 3123 434,295 4.b
c. LESS: Allocated transfer risk reserve................................ 3128 0 4.c
d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b RCFD
and 4.c).............................................................................. 2125 18,880,183 4.d
5. Trading assets (from Schedule RC-D)........................................................ 3545 0 5.
6. Premises and fixed assets (including capitalized leases)................................... 2145 174,111 6.
7. Other real estate owned (from Schedule RC-M)............................................... 2150 10,051 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule
RC-M)...................................................................................... 2130 46,978 8.
9. Customers' liability to this bank on acceptances outstanding............................... 2155 3,438 9.
10. Intangible assets (from Schedule RC-M)..................................................... 2143 126,980 10.
11. Other assets (from Schedule RC-F).......................................................... 2160 2,226,391 11.
12. Total assets (sum of items 1 through 11)................................................... 2170 25,222,096 12.
</TABLE>
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(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 27
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Bank One, N.A. FFIEC 031
100 East Broad Street, OH1-1066 Vendor ID: D Cert #: 06659 RC-2
Columbus, OH 43271 Transit #: 04400037
Transmitted to EDS as 0118178 on 07/30/98 at 14:49:31 CST
[12]
</TABLE>
SCHEDULE RC -- CONTINUED
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
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RCON
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<S> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, RCON
----
part I)...................................................RCON 2200 14,545,555 13.a.
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(1) Noninterest-bearing(1)............................... 6631 3,972,359 13.a.1
(2) Interest-bearing..................................... 6636 10,573,196 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs RCFN
----
(from Schedule RC-E, part II).............................RCFN 2200 743,180 13.b.
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(1) Noninterest-bearing.................................. 6631 0 13.b.1
(2) Interest-bearing..................................... 6638 743,180 RCFD 13.b.2
----
14. Federal funds purchased and securities sold under agreements to repurchase........... 2800 4,545,870 14.
RCON
15. a. Demand notes issued to the U.S. Treasury.......................................... 2840 80,375 15.a.
RCFD
b. Trading liabilities (from Schedule RC-D).......................................... 3548 0 15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
a. With a remaining maturity of one year or less..................................... 2332 826,516 16.a.
b. With a remaining maturity of more than one year through three years............... A547 201,120 16.b.
c. With a remaining maturity of more than three years................................ A548 589,932 16.c.
17. Not applicable
18. Bank's liability on acceptances executed and outstanding............................. 2920 3,436 18.
19. Subordinated notes and debentures(2)................................................. 3200 729,296 19.
20. Other liabilities (from Schedule RC-G)............................................... 2930 1,076,372 20.
21. Total liabilities (sum of items 13 through 20)....................................... 2948 23,321,832 21.
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus........................................ 3838 0 23.
24. Common stock......................................................................... 3230 127,044 24.
25. Surplus (exclude all surplus related to preferred stock)............................. 3839 820,601 25.
26. a. Undivided profits and capital reserves............................................ 3632 937,647 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities............ 8434 15,171 26.b.
27. Cumulative foreign currency translation adjustments.................................. 3284 0 27.
28. Total equity capital (sum of items 23 through 27).................................... 3210 1,900,463 28.
29. Total liabilities and equity capital (sum of items 21 and 28)........................ 3300 25,222,095 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best
describes the most comprehensive level of auditing work performed for the bank RCFD Number
---- ------
by independent external auditors as of any date during 1997.......................... 6724 N/A M.1
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1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required
by state chartering authority)
</TABLE>
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(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 JUN-30-1998
<CASH> 616 1,845
<SECURITIES> 0 0
<RECEIVABLES> 5,531 5,018
<ALLOWANCES> 762 182
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,992 7,297
<PP&E> 96,850 101,051
<DEPRECIATION> 28,211 33,716
<TOTAL-ASSETS> 220,412 211,093
<CURRENT-LIABILITIES> 11,608 11,290
<BONDS> 0 0
0 0
26,705 29,119
<COMMON> 28 28
<OTHER-SE> (12,838) (25,370)
<TOTAL-LIABILITY-AND-EQUITY> 220,412 211,093
<SALES> 0 0
<TOTAL-REVENUES> 60,995 32,214
<CGS> 0 0
<TOTAL-COSTS> 62,953 31,989
<OTHER-EXPENSES> (3,215) (64)
<LOSS-PROVISION> 762 182
<INTEREST-EXPENSE> 21,299 10,497
<INCOME-PRETAX> (20,041) (10,208)
<INCOME-TAX> (7,347) (1,041)
<INCOME-CONTINUING> (12,694) (9,167)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (12,694) (9,167)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
