<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 13, 1999
REGISTRATION NO. 333-63641
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 8
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
CLASSIC COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
DELAWARE 4841 74-2630019
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification Number)
incorporation or
organization)
</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)
---------------------
J. MERRITT BELISLE
CHIEF EXECUTIVE OFFICER
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:
TIMOTHY E. YOUNG, ESQ. BRUCE A. CHEATHAM, ESQ.
WINSTEAD SECHREST & MINICK P.C. WINSTEAD SECHREST & MINICK P.C.
100 CONGRESS AVE., SUITE 800 1201 ELM STREET, SUITE 5400
AUSTIN, TEXAS 78701 DALLAS, TEXAS 75270
512/370-2804 214/745-5213
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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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<PAGE> 2
[CLASSIC CABLE LOGO]
PROSPECTUS
EXCHANGE OFFER FOR
$114,000,000
13 1/4% SENIOR DISCOUNT NOTES DUE 2009
Terms of Exchange Offer
- Expires 5:00 p.m., New York City time, , 1999, unless
extended
- Not subject to any condition other than that the exchange offer not
violate applicable law or any applicable interpretation of the Staff of
the Securities and Exchange Commission
- All outstanding notes that are validly tendered and not validly withdrawn
will be exchanged
- Tenders of outstanding notes may be withdrawn any time prior to the
expiration of the exchange offer
- The exchange of notes will not be a taxable exchange for U.S. federal
income tax purposes
- We will not receive any proceeds from the exchange offer
- The terms of the notes to be issued are substantially identical to the
outstanding notes, except for certain transfer restrictions and
registration rights relating to the outstanding notes
- As of June 30, 1999, on a pro forma basis, we had approximately $478.8
million of senior indebtedness
IMPORTANT NOTICE TO HOLDERS
Classic has agreed to repurchase all of the outstanding notes at a price equal
to 101% of their accreted value, plus any accrued and unpaid interest, as a
result of a change in control of Classic. The offer to repurchase terminates at
the close of business on September 1, 1999. Please see "Change of Control Offer"
on page 8 for more information.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE NOTES TO BE DISTRIBUTED IN THE EXCHANGE OFFER, NOR
HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
, 1999
<PAGE> 3
WHERE YOU CAN FIND MORE INFORMATION
As a result of this exchange offer, we will become subject to the
informational requirements of the Securities Exchange Act of 1934. As a result,
we will be required to file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any of these reports, statements and other information
that we may file at the SEC's public reference rooms in Washington, D.C., New
York, New York, and Chicago, Illinois. Please call 1-800-SEC-0330 for further
information on the public reference rooms. Our filings will also be available to
the public from commercial document retrieval services and at the web site
maintained by the SEC at http://www.sec.gov.
We have filed a registration statement on Form S-4 to register with the SEC
the exchange notes to be issued in exchange for the old notes. This prospectus
is part of that registration statement. As allowed by the SEC's rules, this
prospectus does not contain all of the information you can find in the
registration statement or the exhibits to the registration statement.
FORWARD-LOOKING STATEMENTS
The statements, other than statements of historical fact, included in this
prospectus are forward-looking statements. Forward-looking statements generally
can be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "intend," "estimate," "anticipate," "plan," "seek," or
"believe." We believe that the expectations reflected in such forward-looking
statements are accurate. However, we cannot assure you that such expectations
will occur. Our actual future performance could differ materially from such
statements. Factors that could cause such or contribute to such differences
include, but are not limited to:
- the uncertainties and/or potential delays associated with respect to
integrating Buford following the Buford acquisition;
- our ability to acquire additional cable systems on terms favorable to us;
- the passage of legislation or court decisions adversely affecting the
cable industry;
- our ability to repay our outstanding indebtedness;
- competition in the cable industry;
- the advent of new technology; and
- seasonality.
You should not unduly rely on these forward-looking statements, which speak
only as of the date of this prospectus. Except as required by law, we are not
obligated to publicly release any revisions to these forward-looking statements
to reflect events or circumstances occurring after the date of this prospectus
or to reflect the occurrence of unanticipated events. Important factors that
could cause our actual results to differ materially from our expectations are
discussed under "Risk Factors" and elsewhere in this prospectus. All subsequent
written and oral forward-looking statements attributable to Classic, or persons
acting on its behalf, are expressly qualified in their entirety by the
statements in those sections.
<PAGE> 4
SUMMARY
The following summary is intended to highlight certain information
contained elsewhere in this prospectus. This summary is not intended to be a
complete statement of all material facts of the offering and is qualified in its
entirety by the more detailed information and historical and pro forma financial
information, including the notes relating to that information, appearing
elsewhere in this prospectus. Except as otherwise required by the context, the
information presented in this prospectus concerning Classic and its business
gives effect to the acquisition of Buford Group, Inc. by our subsidiary, Classic
Cable, Inc. and the other acquisitions completed by either Classic Cable or
Buford prior to the date of this prospectus. Reference should be made to the
"Selected Historical Consolidated Financial Data -- Classic Communications,
Inc.," "Selected Historical Consolidated Financial Data -- Buford Group, Inc.,"
and "Unaudited Pro Forma Consolidated Financial Information" for the definition
of certain financial terms appearing throughout this prospectus.
THE EXCHANGE OFFER
Exchange Notes............. The forms and terms of the exchange notes are
identical in all material respects to the terms of
the old notes, except for certain transfer
restrictions, registration rights and liquidated
damages provisions relating to the old notes. These
are described elsewhere in this prospectus under
"Description of the Notes and "The Exchange Offer."
The Exchange Offer......... We are offering to exchange up to $114,000,000 of
the exchange notes for up to $114,000,000 of the
old notes. Old notes may be exchanged only in
$1,000 increments.
Expiration Date; Withdrawal
of Tender.................. Unless we extend the exchange offer, it will expire
at 5:00 p.m., New York City time, on ,
1999. We will not extend this time period to a date
later than , 1999. You may withdraw any
old notes you tender pursuant to the exchange offer
at any time prior to , 1999. We will
return, as promptly as practicable after the
expiration or termination of the exchange offer,
any old notes not accepted for exchange for any
reason without expense to you.
Certain Conditions to the
Exchange Offer........... The exchange offer is subject to the following
conditions, which we may waive.
These conditions permit us to refuse acceptance of
the old notes or to terminate the exchange offer
if:
- a lawsuit is instituted or threatened in a court
or before a government agency which may impair
our ability to proceed with the exchange offer;
- a law, statute, rule or regulation is proposed or
enacted or interpreted by the SEC which may
impair our ability to proceed with the exchange
offer; or
- any governmental approval is not received which
we think is necessary to consummate the exchange
offer.
Procedures for Tendering
Old Notes................ If you wish to accept the exchange offer, you must
complete, sign and date the letter of transmittal
in accordance with the instructions, and deliver
the letter of transmittal, along with the old notes
and any other
1
<PAGE> 5
required documentation, to the exchange agent. By
executing the letter of transmittal, you will
represent to us that, among other things:
- any exchange notes you receive will be acquired
in the ordinary course of your business;
- you have no arrangement with any person to
participate in the distribution of the exchange
notes; and
- you are not an affiliate of Classic or, if you
are an affiliate, you will comply with the
registration and prospectus delivery requirements
of the Securities Act of 1933 to the extent
applicable.
If you hold your old notes through The Depository
Trust Corporation and wish to participate in the
exchange offer, you may do so through The
Depository Trust Corporation's Automated Tender
Offer Program. By participating in the exchange
offer, you will agree to be bound by the letter of
transmittal as though you had executed such letter
of transmittal.
Interest on the Exchange
Notes...................... Interest on the exchange notes will not accrue
until August 1, 2003. No additional interest will
be paid on the old notes tendered and accepted for
exchange.
Payment of Interest........ Cash interest will not accrue on the exchange notes
prior to August 1, 2003, at which time cash
interest will accrue on the exchange notes at a
rate of 13 1/4% per annum, is payable semi-annually
in arrears on each February 1 and August 1,
commencing on February 1, 2004.
Special Procedures for
Beneficial Owners.......... If you are a beneficial owner whose old notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
wish to tender such old notes in the exchange
offer, please contact the registered holder as soon
as possible and instruct them to tender on your
behalf and comply with our instructions set forth
elsewhere in this prospectus.
Guaranteed Delivery
Procedure.................. If you wish to tender your old notes, you may, in
certain instances, do so according to the
guaranteed delivery procedures set forth elsewhere
in this prospectus under "The Exchange
Offer -- Guaranteed Delivery Procedures."
Registration Rights
Agreement.................. We sold the old notes to the initial purchaser in a
transaction exempt from the registration
requirements of the Securities Act on July 29,
1998. At that time, Classic and the initial
purchaser entered into a registration rights
agreement which grants the holders of the old notes
certain exchange and registration rights. This
exchange offer satisfies those rights, which
terminate upon consummation of the exchange offer.
You will not be entitled to any exchange or
registration rights with respect to the exchange
notes.
Certain Federal Tax
Considerations........... With respect to the exchange of the old notes for
the exchange notes:
- the exchange will not constitute a taxable
exchange for U.S. federal income tax purposes;
- you will not recognize gain or loss upon receipt
of the exchange notes;
2
<PAGE> 6
- you must include the original issue discount in
gross income to the same extent as the old notes;
and
- you will be able to tack the holding period of
the exchange notes to the holding period of the
old notes.
Use of Proceeds............ We will not receive any proceeds from the exchange
of notes pursuant to the exchange offer.
Exchange Agent............. We have appointed Bank One, N.A., as the exchange
agent for the exchange offer. The address and
telephone number of the exchange agent are Bank
One, N.A., 235 West Schrock Road, Westerville, Ohio
43271-0184, Attention: Corporate Trust Operations,
telephone (800) 346-5153.
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<PAGE> 7
TERMS OF THE NOTES
The form and terms of the exchange notes are substantially the same as the
form and terms of the old notes, except that the exchange notes are registered
under the Securities Act. As a result, the exchange notes will not bear legends
restricting their transfer and will not contain the registration rights and
liquidated damages provisions contained in the old notes.
Issuer..................... Classic Communications, Inc.
Securities Offered......... $114,000,000 aggregate principal amount of 13 1/4%
Senior Discount Notes due 2009.
Maturity................... August 1, 2009.
Interest Payment Dates..... February 1 and August 1 of each year, commencing
February 1, 2004.
Sinking Fund............... None.
Optional Redemption........ Except as described below and under "Description of
the Notes -- Repurchase at the Option of Holders --
Change of Control," we may not redeem the notes
prior to August 1, 2003. After August 1, 2003, we
may redeem any amount of the notes at any time at
the respective redemption prices, together with
accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time prior to
August 1, 2001, we may redeem all of the original
aggregate principal amount of the notes with the
cash proceeds of one or more equity offerings or a
strategic equity investment. Should we do so, we
would be required to pay a redemption price equal
to 113.25% of the accreted value of the notes to be
redeemed, together with accrued and unpaid
interest, if any, to the date of redemption.
Change of Control.......... Upon the occurrence of a change of control (as
defined), the holders of the notes have the right
to require us to repurchase the notes at a price
equal to 101% of the accreted value of the notes,
together with accrued and unpaid interest, if any,
to the date of repurchase. In the event of a change
of control, Classic may not have sufficient funds
available to repurchase the exchange notes.
On July 28, 1999, a change of control (as defined)
of Classic occurred. Accordingly, Classic has
offered to repurchase all outstanding notes at a
price equal to 101% of their accreted value,
together with accrued and unpaid interest, if any,
to the date of repurchase. This offer to repurchase
expires at the close of business on September 1,
1999. See "Change of Control Offer" below.
Ranking.................... The notes will be unsecured and will rank without
preference with all existing and future unsecured
indebtedness of Classic, and senior to all future
subordinated indebtedness of Classic. The notes will
also be subordinate to all existing and future
liabilities of Classic's subsidiaries.
4
<PAGE> 8
Restrictive Covenants...... The indenture under which the exchange notes will
be issued and the old notes were issued limits:
- the incurrence of additional indebtedness by us
and our subsidiaries;
- the payment of dividends on, and redemption of,
our capital stock and our subsidiaries' capital
stock and the redemption of our and our
subsidiaries' subordinated obligations;
- investments;
- sales of assets and subsidiary stock;
- transactions with affiliates;
- sale and leaseback transactions; and
- liens.
In addition, the indenture limits our ability to
engage in consolidations, mergers and transfers of
substantially all of our assets and also contains
certain restrictions on distributions from our
subsidiaries. All of these limitations and
prohibitions are subject to a number of important
qualifications and exceptions.
Absence of a Public Market
for the Exchange Notes..... In general, you may freely transfer the exchange
notes. However, there are exceptions to this
general statement. Holders may not freely transfer
the exchange notes if:
- they acquire the exchange notes outside of their
ordinary course of business;
- they have an arrangement with any person to
participate in the distribution of the exchange
notes; or
- they are an affiliate of Classic.
Further, the exchange notes will be new securities
for which there will not initially be a market. As a
result, the development or liquidity of any market
for the exchange notes may not occur. The initial
purchaser has advised us that it currently intends
to make a market in the exchange notes. However, you
should be aware that the initial purchaser is not
obligated to do so. In the event such a market may
develop, the initial purchaser may discontinue it at
any time without notice. We do not intend to apply
for a listing of the exchange notes on any
securities exchange or on any automated dealer
quotation system.
5
<PAGE> 9
OUR BUSINESS
We are a growth oriented cable operator focused on non-metropolitan markets
in the central United States. We have experienced growth in subscribers,
revenues and cash flows, primarily through the successful execution and
integration of over 20 acquisitions of clustered cable systems in nine
contiguous states. Pro forma for the acquisition of Buford Group, Inc., and
assuming completion of other recently publicly announced transactions by other
companies in the cable television industry, we believe we are the 14th largest
cable operator in the United States, with systems that pass approximately
609,000 homes and serve approximately 359,000 basic subscribers.
Through the acquisition of clustered non-metropolitan cable systems, and by
upgrading these cable systems, we are building a regional platform for the
delivery of digital cable and high-speed Internet access to the homes and
businesses of our customers. We believe that our strategy combines the
attractive characteristics of the non-metropolitan cable market segment with the
growth opportunity of broadband services and the Internet. The combination of
attractive market characteristics and the successful execution of our
acquisition strategy has enabled us to achieve high growth rates and attractive
EBITDA margins.
OUR STRATEGY
Our business strategy is to:
- Focus on attractive non-metropolitan markets: We plan to continue to
focus on growing communities in or around county seats, which generally
tend to have more robust household growth, higher income per household
and a stronger business foundation than do other non-metropolitan
markets.
- Expand and improve clusters through selective acquisitions: We plan to
continue to leverage our experience in acquiring and integrating cable
systems by continuing our acquisition growth strategy when attractive
cable systems are available for acquisition at reasonable valuations.
- Focus on community relations and customer satisfaction: We plan to
maintain and enhance our relationships with the local communities in
which we operate and utilize Buford's state-of-the-art call center to
complement our existing service to our customers.
- Increase the revenue-generating bandwidth of our cable plant: We plan to
continue to upgrade our cable plant aggressively and systematically,
utilizing the most cost-effective and appropriate technology.
- Implement our broadband services: We plan to continue to offer enhanced
video services and begin offering high-speed Internet access in selected
systems, a move which we believe will improve our competitiveness and
increase our revenues and cash flows.
RAPIDLY CONSOLIDATING INDUSTRY
Consolidation in the cable industry over the past three years has been
driven by the benefits derived from scale, including operating efficiencies,
increased advertising sales and the ability to deploy new broadband applications
efficiently. This consolidation has accelerated recently with the emergence of
the Internet as a mass medium for disseminating information, entertainment and
commerce. We believe that cable companies with broadband capacity are the
leaders in the race to become the high-speed data service providers of choice to
the consumer. Recent investments and acquisitions by AT&T, Microsoft, and
Charter Communications have validated cable's position as a preferred broadband
solution.
While this consolidation has taken place primarily among large-scale
metropolitan operators, attention has expanded recently to non-metropolitan
markets. Smaller independent operators understand the value created through
consolidation and are beginning to make themselves available to be merged or
acquired. Additionally, metropolitan focused consolidators are beginning to sell
their non-metropolitan area systems.
6
<PAGE> 10
We believe that these circumstances create an opportunity for us to continue and
accelerate our focused strategy to consolidate attractive non-metropolitan cable
assets.
PROVEN MANAGEMENT TEAM
J. Merritt Belisle, our Chief Executive Officer, and Steven E. Seach, our
President and Chief Financial Officer, founded Classic 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.
As a result of the Buford acquisition, our management team has been further
enhanced by the addition of several key members of Buford's management team,
including Ron Martin, who became our Executive Vice President of Operations, and
Kay Monigold, who became our Executive Vice President of Administration. Mr.
Martin and Ms. Monigold have been in the cable industry for over 25 years and 18
years, respectively.
Members of our management team collectively own or have the right to
acquire approximately 15% of the common stock of Classic and up to an additional
10% of Classic's common stock has been set aside for issuance to management
pursuant to options granted to them.
THE BUFORD ACQUISITION
On July 28, 1999, our subsidiary Classic Cable acquired Buford Group, Inc.,
which operates cable television systems in Arkansas, Louisiana, Missouri and
Texas, for approximately $300 million in cash. The Buford cable systems serve
approximately 172,000 basic subscribers and, we believe, represent an excellent
geographic and strategic fit with our existing cable systems. In addition, we
believe that the Buford acquisition provides other benefits, including an
opportunity to reduce programming costs, consolidate headends and enhance
customer service. The Buford acquisition was financed through certain financing
arrangements, consisting of a $250.0 million new credit facility and the
issuance of $150.0 million of Classic Cable's senior subordinated notes due
2009. See "Description of Other Indebtedness." In addition, we contributed
approximately $95.7 million in cash to Classic Cable pursuant to the Brera
Classic equity investment. See "--The Brera Classic Equity Investment."
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THE BRERA CLASSIC EQUITY INVESTMENT
In connection with the Buford acquisition, we received $100.0 million from
Brera Classic, L.L.C., $95.7 million of which we contributed in cash to Classic
Cable, $3.3 million of which was paid to Brera Classic pursuant to management
and advisory fee agreements, and $1.0 million was paid to Brera Classic to
reimburse Brera Classic for certain of its fees and expenses incurred in
connection with the Brera Classic equity investment. This equity investment was
financed through the sale of our common stock to Brera Classic. Brera Classic is
an indirect subsidiary of Brera Capital Partners Limited Partnership. Brera
Capital Partners is a $650 million private equity investment firm based in New
York. Brera Capital Partners invests in a limited number of industries,
including telecommunications and media. Brera Capital Partners prefers to invest
alongside management teams to assist them in achieving the operating and
financial goals of their companies. Brera Classic now owns approximately 64% of
the outstanding capital stock of Classic, subject to dilution in connection with
the issuance of options to certain members of our management team. See "Certain
Relationships and Related Transactions" and "Principal Stockholders."
CHANGE OF CONTROL OFFER
On July 28, 1999, we had a change of control (as defined in the indenture
governing the notes) upon the sale of approximately 64% of our outstanding
capital stock to Brera Classic as part of the Brera Classic equity investment.
Accordingly, as required by the indenture governing the notes, we have offered
to repurchase all outstanding notes at a price equal to 101% of the accreted
value of the notes, together with accrued and unpaid interest, if any, to the
date of repurchase. The offer to repurchase expires at the close of business on
September 1, 1999.
YOU CANNOT TENDER YOUR NOTES FOR REPURCHASE WITH THE LETTER OF TRANSMITTAL
ACCOMPANYING THIS PROSPECTUS.
To obtain the letter of transmittal and other information relating to the
change of control offer, you must contact the Depositary at the address and the
telephone numbers set forth below:
The Depositary and Paying Agent for the Change of Control Offer is:
Bank One, N.A.
---------------------
By Mail, Hand or Overnight
Courier:
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By Registered or Certified By Overnight Courier: By Hand Delivery:
Mail:
235 West Schrock Road 235 West Schrock Road 235 West Schrock Road
P.O. Box 710184 Westerville, Ohio 43081 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
---------------------
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<PAGE> 12
Any questions or requests for assistance or additional copies of this offer
to purchase, the letter of transmittal and the notice of guaranteed delivery
relating to the change of control offer may also be directed to Classic at the
telephone number and location listed below. You may also contact your broker,
dealer, commercial bank or trust company for assistance concerning the offer.
CLASSIC COMMUNICATIONS, INC.
515 Congress Ave.
Suite 2626
Austin, TX 78701
(512) 476-9095
Attention: Corporate Secretary
RISK FACTORS
You should consider carefully the information set forth under the caption
"Risk Factors" beginning on page 16 and all the other information set forth in
this prospectus before deciding whether to participate in the exchange offer.
------------------------
Our principal executive offices are located at 515 Congress Avenue, Suite
2626, Austin, Texas 78701. Our telephone number is (512) 476-9095, and our
Internet Web site is www.classic-cable.com. The information on our Web site is
not a part of this prospectus.
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SUMMARY PRO FORMA FINANCIAL AND OPERATING DATA
The following table presents summary pro forma financial and operating data
about us. The unaudited pro forma data give effect to the Brera Classic equity
investment, Classic Cable's new credit facility, the Buford acquisition, and the
completed acquisitions as if all of these transactions had been consummated on
January 1, 1998 in the case of the income statement and cash flow data and on
June 30, 1999 with respect to the balance sheet data. The pro forma data have
been derived from the Unaudited Pro Forma Consolidated Financial Information of
Classic and Buford, which is included elsewhere in this prospectus. The
unaudited pro forma data do 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 are they necessarily indicative of
results that may be obtained in the future. You should read this information
together with "Selected Historical Consolidated Financial Data -- Classic
Communications, Inc.," "Selected Historical Consolidated Financial
Data -- Buford Group, Inc.," "Unaudited Pro Forma Consolidated Financial
Information," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Classic's and Buford's consolidated financial
statements and the notes relating to those statements included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -------------
(IN THOUSANDS, EXCEPT
SUBSCRIBER DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................................... $149,897 $ 77,684
Costs and expenses.......................................... 97,289 44,686
Depreciation and amortization............................... 66,257 34,989
-------- --------
Operating loss.............................................. (13,649) (1,991)
Interest expense............................................ (51,743) (25,947)
Other income (expense)...................................... (896) (63)
-------- --------
Loss before income tax benefit.............................. (66,288) (28,001)
Income tax benefit.......................................... 2,156 210
-------- --------
Net loss.................................................... $(64,132) $(27,791)
======== ========
BALANCE SHEET DATA:
Total cash and cash equivalents............................. -- $ 7,368
Total assets................................................ -- 570,592
Total debt.................................................. -- 516,242
Total liabilities........................................... -- 545,079
Total stockholders' equity.................................. -- 25,513
OTHER FINANCIAL DATA:
Cash flows from operating activities........................ $ 21,435 $ 17,901
Cash flows from investing activities........................ (408,179) (16,061)
Cash flows from financing activities........................ 379,599 (5,347)
Adjusted EBITDA(1).......................................... 61,604(2) 32,886
Adjusted EBITDA margin(3)................................... 41.1% 42.3%
Ratio of net debt to annualized Adjusted EBITDA(4).......... -- 7.7x
Ratio of Adjusted EBITDA to interest expense................ -- 1.3x
Ratio of Adjusted EBITDA to cash interest expense........... -- 1.3x
Capital expenditures........................................ $ 34,228 $ 15,548
Deficiency of earnings to fixed charges(5).................. (66,288) (28,001)
</TABLE>
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<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -------------
(IN THOUSANDS, EXCEPT
SUBSCRIBER DATA)
<S> <C> <C>
OPERATING DATA:
Homes passed(6)............................................. 612,624 609,107
Basic subscribers(7)........................................ 361,428 358,969
Basic penetration(8)........................................ 59.0% 58.9%
Digital subscribers......................................... 1,454 3,060
Premium subscribers(9)...................................... 194,106 189,769
Premium penetration(10)..................................... 53.7% 52.9%
Average monthly basic revenue per basic subscriber(11)...... $ 28.02 $ 30.15
Average monthly total revenue per basic subscriber(12)...... $ 34.44 $ 36.35
</TABLE>
- ---------------
(1) Adjusted EBITDA is defined as operating income (loss) plus depreciation and
amortization plus non-cash operating charges. Non-cash operating charges
consist of Classic's compensation on restricted stock of $1,108,000 and
$663,000 as well as Buford's compensation relating to stock appreciation
rights of $7,888,000 and $(775,000) for the periods ended December 31, 1998
and June 30, 1999, respectively. Adjusted EBITDA is presented because
management believes it is a widely accepted financial indicator of a
company's ability to incur and service debt. We believe that Adjusted
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 to the statement of
cash flows as a measure of liquidity, is not intended to represent funds
available for dividends, reinvestment or other discretionary uses, and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles. Adjusted EBITDA measures presented may not be comparable to
similarly titled measures presented by other companies.
(2) Adjusted EBITDA for 1998 was reduced by $775,000 of fees paid to certain
members of the executive management team in connection with completed
acquisition and financing transactions. Without these fees, Adjusted EBITDA
would have been $62,379,000.
(3) Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of
revenues. This measurement is used by management, and is commonly used in
the cable television industry, to analyze and compare cable television
companies on the basis of operating performance. We believe that Adjusted
EBITDA margin is not intended to be a performance measure that should be
regarded as an alternative either to operating income or net income as
prepared in accordance with generally accepted accounting principles.
Adjusted EBITDA measures presented may not be comparable to similarly
titled measures presented by other companies.
(4) Net debt represents total debt less total cash and cash equivalents.
(5) Deficiency of earnings consists of loss before income tax benefit and
extraordinary loss. Fixed charges consist of interest expense and the
interest portion of rental expense.
(6) Homes passed refers to estimates by us of the approximate number of
dwelling units in a particular community that can be connected to our cable
television distribution system without any further extension of principal
transmission lines.
(7) 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 basis in which the total monthly bill for the account
is divided by the basic monthly charge for a single outlet in the area.
(8) Penetration is calculated as the number of basic subscribers as a
percentage of homes passed.
(9) For the Classic systems, premium subscribers are the number of subscribers
who pay a monthly fee for premium channels. Multiplexing of premium
channels is counted as one subscriber. For the Buford systems, multiplexing
of premium channels is counted as one subscriber for each premium channel
received.
(10) Premium penetration is calculated as the number of premium subscribers as a
percentage of basic subscribers.
(11) Average monthly basic revenue per basic subscriber equals revenues from
basic subscriptions of cable systems during the respective period divided
by the months in the period and divided by the weighted average number of
our basic subscribers for the respective period.
(12) 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 our basic subscribers
for such respective period.
11
<PAGE> 15
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA -- CLASSIC COMMUNICATIONS, INC.
The following table presents summary historical financial and operating
data about Classic. You should read this information together with "Selected
Historical Consolidated Financial Data -- Classic Communications, Inc.,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Classic's consolidated financial statements and the notes
relating to those statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(AUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues......................................... $ 59,821 $ 60,995 $ 69,802 $ 32,214 $ 39,286
Costs and expenses............................... 33,553 36,555 42,070 19,038 22,760
Depreciation and amortization.................... 27,510 27,832 30,531 14,169 18,096
-------- -------- -------- -------- --------
Operating loss................................... (1,242) (3,392) (2,799) (993) (1,570)
Interest expense................................. (20,633) (21,299) (24,442) (10,497) (14,992)
Gain on sale of cable systems.................... 4,901 3,644 -- -- --
Write-off of abandoned telephone operations...... (2,994) (500) (220) -- --
Other income (expense)........................... -- 71 192 64 15
-------- -------- -------- -------- --------
Loss before income tax benefit and extraordinary
loss........................................... (19,968) (21,476) (27,269) (11,426) (16,547)
Income tax benefit............................... 6,802 7,347 1,930 1,041 --
Extraordinary loss............................... -- -- (5,524) -- --
-------- -------- -------- -------- --------
Net loss......................................... $(13,166) $(14,129) $(30,863) $(10,385) $(16,547)
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Total cash and cash equivalents.................. $ 653 $ 616 $ 2,779 $ $ 638
Total assets..................................... 245,922 220,162 254,604 -- 243,576
Total debt....................................... 197,504 191,990 282,842 -- 288,292
Total liabilities................................ 219,232 206,643 301,392 -- 306,248
Total redeemable preferred stock................. 22,726 26,705 -- -- --
Total stockholders' equity....................... 3,965 (13,186) (46,788) -- (62,672)
OTHER FINANCIAL DATA:
Cash flows from operating activities............. $ 7,933 $ 7,892 $ 14,262 4,666 5,727
Cash flows from investing activities............. 3,387 (1,341) (57,245) (4,219) (8,521)
Cash flows from financing activities............. (12,155) (6,588) 45,146 756 653
Adjusted EBITDA(1)............................... 27,326 25,498(2) 28,840(3) $ 13,652 $ 17,189
Adjusted EBITDA margin(4)........................ 45.7% 41.8% 41.3% 42.4% 43.8%
Ratio of net debt to annualized Adjusted
EBITDA(5)...................................... -- -- -- -- 8.4x
Ratio of Adjusted EBITDA to interest expense..... -- -- -- 1.1x
Ratio of Adjusted EBITDA to cash interest
expense........................................ -- -- -- -- 1.1x
Capital expenditures............................. $ 8,212 $ 10,135 $ 13,759 $ 4,201 $ 8,008
Deficiency of earnings to fixed charges(6)....... (19,968) (21,476) (27,269) $(11,426) $(16,547)
OPERATING DATA (END OF PERIOD, EXCEPT AVERAGE):
Homes passed(7).................................. 259,181 254,649 296,995 254,449 293,478
Basic subscribers(8)(9).......................... 171,657 165,737 188,871 163,243 185,170
Basic penetration(9)(10)......................... 66.2% 65.1% 63.6% 64.2% 63.1%
Digital subscribers.............................. -- -- 200 -- 1,480
Premium subscribers(11).......................... 62,458 63,819 71,702 63,389 67,501
Premium penetration(12).......................... 36.4% 38.5% 38.0% 38.8% 36.5%
Average monthly basic revenue per basic
subscriber(13)................................. $ 22.77 $ 25.22 $ 27.87 $ 27.42 $ 29.35
Average monthly total revenue per basic
subscriber(14)................................. $ 27.68 $ 30.14 $ 33.24 $ 32.55 $ 34.85
</TABLE>
12
<PAGE> 16
- ---------------
(1) Adjusted EBITDA is defined as operating loss plus depreciation and
amortization plus non-cash operating charges. Non-cash operating charges
for the years ended December 31, 1996, 1997 and 1998 and the six month
periods ended June 30, 1998 and 1999 related to compensation on restricted
stock and were $1,058,000, $1,058,000, $1,108,000, $476,000 and $663,000,
respectively. Adjusted EBITDA is presented because we believe it is a
widely accepted financial indicator of a company's ability to incur and
service debt. We believe that Adjusted 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 to the statement of cash flows as a measure of
liquidity, is not intended to represent funds available for dividends,
reinvestment or other discretionary uses, and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles. Adjusted EBITDA
measures presented may not be comparable to similarly titled measures
presented by other companies.
(2) Adjusted EBITDA for 1997 was reduced by legal, consultant and other fees
totaling $1,411,000 incurred in connection with the settlement of certain
claims that arose in conjunction with divorce proceedings of one of our
officers as well as $400,000 in fees paid to certain members of our
management team in connection with completed acquisition and divestiture
transactions. Without these fees, Adjusted EBITDA would have been
$27,309,000.
(3) Adjusted EBITDA for 1998 was reduced by $775,000 of fees paid to certain
members of our executive management team in connection with completed
acquisition and financing transactions. Without these fees, Adjusted EBITDA
would have been $29,615,000.
(4) Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of
revenues. This measurement is used by us, and is commonly used in the cable
television industry, to analyze and compare cable television companies on
the basis of operating performance. We believe that Adjusted EBITDA margin
is not intended to be a performance measure that should be regarded as an
alternative either to operating income or net income as prepared in
accordance with generally accepted accounting principles. Adjusted EBITDA
measures presented may not be comparable to similarly titled measures
presented by other companies.
(5) Net debt represents total debt less total cash and cash equivalents.
(6) Deficiency of earnings consists of loss before income tax benefit and
extraordinary loss. Fixed charges consist of interest expense and the
interest portion of rental expense.
(7) Homes passed refers to estimates by us of the approximate number of
dwelling units in a particular community that can be connected to our 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 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 calculated as the number of basic subscribers as a
percentage of homes passed.
(11) Premium subscribers are the number of subscribers who pay a monthly fee for
premium channels. Multiplexing of premium channels is counted as one
subscriber.
(12) Premium penetration is calculated as the number of premium subscribers as a
percentage of basic subscribers.
(13) Average monthly basic revenue per basic subscriber equals revenues from
basic subscriptions of cable systems during the respective period divided
by the months in the period and divided by the weighted average number of
our basic subscribers for the respective period.
(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 our basic subscribers
for the respective period.
13
<PAGE> 17
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA -- BUFORD GROUP, INC.
The following table presents summary historical financial and operating
data about Buford. You should read this information together with "Selected
Historical Consolidated Financial Data -- Buford Group, Inc.," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Buford's consolidated financial statements and the notes relating to those
statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(AUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.......................................... $ 49,561 $ 58,136 $ 70,475 $ 32,943 $ 38,398
Costs and expenses................................ 32,932 40,858 51,168 24,547 22,433
Depreciation and amortization..................... 17,175 17,753 21,399 10,137 12,105
-------- -------- -------- -------- --------
Operating income (loss)........................... (546) (475) (2,092) (1,741) 3,860
Interest expense.................................. (5,345) (5,787) (7,919) (3,681) (4,095)
Gain on sale of cable systems..................... 5,418 -- -- -- --
Other income (expense)............................ 344 859 (221) 73 (78)
-------- -------- -------- -------- --------
Loss before income taxes and cumulative effect of
change in accounting principle.................. (129) (5,403) (10,232) (5,349) (313)
Income tax benefit (expense)...................... (94) 315 226 (25) 210
Cumulative effect of change in accounting
principle, net of taxes......................... -- -- -- -- (207)
-------- -------- -------- -------- --------
Net loss.......................................... $ (223) $ (5,088) $(10,006) $ (5,374) $ (310)
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Total assets...................................... $117,676 $143,932 $175,953 -- $166,602
Total debt........................................ 60,053 85,000 118,000 -- 112,000
Total liabilities................................. 69,182 97,008 131,147 -- 122,881
Total stockholders' equity........................ 48,493 46,924 44,806 -- 43,721
OTHER FINANCIAL DATA:
Cash flows from operating activities.............. $ 13,628 $ 16,872 $ 20,334 $ 8,470 $ 8,527
Cash flows from investing activities.............. (20,289) (39,683) (53,151) (40,969) (7,540)
Cash flows from financing activities.............. (10,927) 24,947 32,830 30,000 (6,000)
Adjusted EBITDA(1)................................ 18,087 20,797 27,195 11,946 15,190
Adjusted EBITDA margin(2)......................... 36.5% 35.8% 38.6% 36.3% 39.6%
Capital expenditures.............................. $ 15,593 $ 22,042 $ 20,469 $ 10,980 $ 7,540
Deficiency of earnings to cover fixed
charges(3)...................................... (129) (5,403) (10,232) (5,349) (313)
OPERATING DATA (END OF PERIOD, EXCEPT AVERAGE):
Homes passed(4)................................... 234,994 270,430 315,629 307,974 315,629
Basic subscribers(5).............................. 131,148 143,829 172,557 172,923 173,799
Basic penetration(6).............................. 55.8% 53.2% 54.7% 56.2% 55.1%
Digital subscribers............................... -- 65 1,254 604 1,580
Premium subscribers(7)............................ 92,247 99,644 122,404 122,668 122,268
Premium penetration(8)............................ 70.3% 69.3% 70.9% 70.9% 70.4%
Average monthly basic revenue per basic
subscriber(9)................................... $ 24.80 $ 26.31 $ 28.17 $ 28.27 $ 30.94
Average monthly total revenue per basic
subscriber(10).................................. $ 32.05 $ 33.68 $ 35.64 $ 33.52 $ 37.84
</TABLE>
14
<PAGE> 18
- ---------------
(1) Adjusted EBITDA is defined as operating income (loss) plus depreciation and
amortization plus non-cash operating charges. Non-cash operating charges
for the years ended December 31, 1996, 1997 and 1998 and the six month
periods ended June 30, 1998 and 1999 related to employee stock compensation
were $1,458,000, $3,519,000, $7,888,000, $3,550,000 and a credit of
($775,000), respectively. Adjusted EBITDA is presented because we believe
it is a widely accepted financial indicator of a company's ability to incur
and service debt. We believe that Adjusted 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 to cash provided by operations as a measure of
liquidity, is not intended to represent funds available for dividends,
reinvestment or other discretionary uses, and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles. Adjusted EBITDA
measures presented may not be comparable to similarly titled measures
presented by other companies.
(2) Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of
revenues. This measurement is used by us, and is commonly used in the cable
television industry, to analyze and compare cable television companies on
the basis of operating performance. We believe that Adjusted EBITDA margin
is not intended to be a performance measure that should be regarded as an
alternative either to operating income or net income as prepared in
accordance with generally accepted accounting principles. Adjusted EBITDA
measures presented may not be comparable to similarly titled measures
presented by other companies.
(3) Deficiency of earnings consists of loss before income tax benefit (expense)
and cumulative effect of change in accounting principle. Fixed charges
consist of interest expense and the interest portion of rental expense.
(4) Homes passed refers to estimates by us of the approximate number of
dwelling units in a particular community that can be connected to our cable
television distribution system without any further extension of principal
transmission lines.
(5) 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 basis in which the total monthly bill for the account
is divided by the basic monthly charge for a single outlet in the area.
(6) Penetration is calculated as the number of basic subscribers as a
percentage of homes passed.
(7) Each premium channel received is counted as a separate premium subscriber.
(8) Premium penetration is calculated as the number of premium subscribers as a
percentage of basic subscribers.
(9) Average monthly basic revenue per basic subscriber equals revenues from
basic subscriptions of cable systems during the respective period divided
by the months in the period and divided by the weighted average number of
Buford's basic subscribers for the respective period.
(10) 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 Buford's basic
subscribers for the respective period.
15
<PAGE> 19
RISK FACTORS
In addition to the other information set forth in this prospectus, you
should carefully review the following risk factors before deciding to
participate in the exchange offer.
WE ARE A HOLDING COMPANY AND ARE DEPENDENT ON THE OPERATIONS OF OUR
SUBSIDIARIES.
We are a holding company and are dependent on the cash flow generated by
our direct and indirect operating subsidiaries. We must rely on dividends or
other intercompany transfers from our operating subsidiaries to generate the
funds necessary to meet debt service and other obligations, including the
payment of principal and interest on the notes. The ability of our subsidiaries
to pay dividends or make other payments will be subject to applicable state
laws.
WE DEPEND UPON OUR SUBSIDIARIES FOR FUNDS NECESSARY TO MAKE PAYMENTS ON THE
NOTES.
We have no operations of our own. Consequently, we will rely on dividends
from Classic Cable, and hence the cash flow of Classic Cable, in order to meet
our debt service obligations. The debt instruments of Classic Cable severely
restrict, among other things, the payment of dividends, the making of loans by
Classic Cable or its subsidiaries to us and our ability to purchase exchange
notes tendered pursuant to a change of control offer.
As a result of the relationship between Classic Cable and us, our
creditors, including the holders of the exchange notes, will effectively rank
junior to all creditors of Classic Cable, including the bank lenders under
Classic Cable's new credit facility, the holders of the senior subordinated
notes of Classic Cable and the trade creditors of Classic Cable and its
subsidiaries, notwithstanding that the exchange notes will be our senior
obligations. Accordingly, in the event of the dissolution, bankruptcy,
liquidation or reorganization of Classic Cable and/or us, the holders of the
exchange notes may not receive any amounts with respect to the exchange notes
until after the payment in full of the claims of creditors of Classic Cable. As
of June 30, 1999, pro forma for the Buford acquisition, the aggregate amount of
indebtedness and other obligations of Classic Cable and its subsidiaries, to
which the holders of the exchange notes will be structurally subordinated, would
have been approximately $478.8 million.
The exchange notes will not be secured by any of our assets. We will pledge
all of the capital stock of Classic Cable to collateralize borrowings of Classic
Cable under its new credit facility. If Classic Cable becomes insolvent or is
liquidated, or if payment under its new credit facility is accelerated, the
lenders under Classic Cable's new credit facility would be entitled to exercise
the remedies available to a secured lender under applicable law and pursuant to
Classic Cable's new credit facility. Accordingly, these lenders have a prior
claim on our assets.
WE HAVE SIGNIFICANT DEBT WHICH MAY LIMIT FUNDS AVAILABLE TO OPERATE AND COMPETE
EFFECTIVELY.
We, along with our subsidiary Classic Cable, have a significant amount of
debt outstanding. As of June 30, 1999, pro forma for the Buford acquisition, we
would have owed approximately $516.2 million under our various debt agreements.
The maximum amount of senior debt that we would have been able to borrow on that
date was $75.0 million, subject to limitations contained in Classic Cable's new
credit facility. Under Classic Cable's new credit facility, Classic Cable will
be required to make minimum principal payments totaling approximately $2.9
million beginning in 2001, increasing to $19.8 million by 2007, with all unpaid
amounts due by 2008. You should be aware that this significant amount of debt
could have important consequences to you as a holder of the notes, including the
following:
- We may be unable to obtain additional financing for working capital,
capital expenditures, acquisitions and general corporate purposes;
- A significant portion of Classic Cable's cash flow from operations must
be dedicated to the repayment of indebtedness, which will reduce the
amount of cash it has available for other purposes;
16
<PAGE> 20
- We may be disadvantaged as compared to our competitors as a result of the
significant amount of debt we now owe; and
- Our ability to adjust to changing market conditions and our ability to
withstand competition may be hampered by the amount of debt we now owe.
It may also make us more vulnerable in a market downturn.
Our earnings on a pro forma basis were not sufficient to cover our fixed
charges by $66.3 million for the year ended December 31, 1998 and by $28.0
million for the six months ended June 30, 1999. However, you should know that
these amounts reflect non-cash charges totaling approximately $75.3 million for
the year ended December 31, 1998 and $34.9 million for the six months ended June
30, 1999, primarily from depreciation and amortization.
DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND OUR SUBSIDIARIES WILL BE ABLE TO
INCUR SUBSTANTIALLY MORE DEBT. THIS COULD FURTHER EXACERBATE THE RISKS
ASSOCIATED WITH OUR SUBSTANTIAL LEVERAGE.
We and our subsidiaries will be able to incur substantial additional
indebtedness in the future. The terms of the indenture do not fully prohibit us
or our subsidiaries from doing so. Classic Cable's new credit facility permits
additional borrowing of up to $75.0 million, and all of those borrowings will be
senior to the notes. If new debt is added to our and our subsidiaries' current
debt levels, the related risks that we and they now face could intensify. See
"Description of Other Indebtedness" and "Description of the Notes."
WE MAY NOT HAVE ENOUGH CASH TO SERVICE OUR INDEBTEDNESS AND TO FUND OUR CAPITAL
EXPENDITURES AND ACQUISITIONS.
Our ability to make payments on and to refinance our indebtedness,
including these notes, and to fund planned capital expenditures and acquisitions
will depend on Classic Cable's ability to generate cash in the future. This, to
a certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control.
We cannot assure you that Classic Cable's business will generate sufficient
cash flow from operations and that currently anticipated cost savings and
operating improvements will be realized on schedule in an amount sufficient to
enable us to pay our indebtedness, including indebtedness under these notes, or
to fund our other liquidity needs. We may need to refinance all or a portion of
our indebtedness, including these notes, on or before maturity. We cannot assure
you that we will be able to refinance any of our indebtedness, including Classic
Cable's credit facility and these notes, on commercially reasonable terms or at
all.
IF THE OPERATIONS OF THE COMPANIES CLASSIC CABLE ACQUIRES ARE NOT SUCCESSFULLY
INTEGRATED WITH ITS OPERATIONS, OUR FINANCIAL RESULTS MAY BE ADVERSELY AFFECTED.
The benefits we anticipate in the combination of Classic Cable and Buford
may not be realized if combining Classic Cable's business and Buford's business
cannot be accomplished in an efficient and effective manner. This combination
will require, among other things, the integration of management philosophies and
personnel, arrangements with third party vendors, standardization of training
programs, realization of operating efficiencies and effective coordination of
sales and marketing and financial reporting efforts. Acquisitions in general
pose a number of special risks for us, including adverse short-term effects on
our reported operating results, diversion of management's attention, and
unanticipated problems or legal liabilities. Future acquisitions and the
integration of other companies' operations into ours may not be successful or
accomplished efficiently. If we fail to integrate Buford's operations
successfully, Classic Cable's operations and our financial results could be
affected, both materially and adversely.
17
<PAGE> 21
IF WE CANNOT ADEQUATELY MANAGE OUR INCREASED SIZE RESULTING FROM CLASSIC CABLE'S
ACQUISITION OF BUFORD, ITS FUTURE OPERATIONS MAY BE ADVERSELY AFFECTED.
Classic Cable's operations approximately doubled with the purchase of
Buford. Its future operations depend largely upon its ability to manage this
sizeable and growing business successfully. In addition, Classic Cable's
management team now manages a larger number of cable operations than it has
previously operated. If we fail to manage the size and the growth of Classic
Cable's business, a material adverse effect could result.
WE MAY CONTINUE TO INCUR NET LOSSES.
We had a pro forma consolidated net loss of $64.1 million for the year
ended December 31, 1998 and a pro forma net loss of $27.8 million for the six
months ended June 30, 1999. We expect to continue to incur net losses for the
foreseeable future. These losses reflect significant depreciation and
amortization charges and interest expense on debt we incurred. We cannot assure
you that we will become profitable in the foreseeable future, if ever. You
should also be aware that there are restrictions and limitations on our ability
to utilize our net operating losses for federal income tax purposes in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations -- Classic Communications."
OUR DEBT AGREEMENTS MAY SIGNIFICANTLY LIMIT OR PROHIBIT US FROM ENGAGING IN
CERTAIN TRANSACTIONS.
The indenture and Classic Cable's new credit facility impose significant
operating and financial restrictions on us and our subsidiaries.
The loan documents Classic Cable signed to borrow money to acquire Buford
impose significant restrictive covenants on Classic Cable and require Classic
Cable to maintain specified financial ratios and satisfy certain financial
tests. Classic Cable's ability to meet these financial ratios and tests may be
affected by events beyond its control and, as a result, we cannot assure you
that Classic Cable will be able to meet such tests. In addition, the
restrictions contained in Classic Cable's new credit facility could limit its
ability to obtain future financing, make needed capital expenditures, withstand
a future downturn in its business or in the economy or otherwise conduct
necessary corporate activities. Classic Cable's failure to comply with the
restrictions in the indenture and its new credit facility could lead to a
default under the terms of those documents. In the event of such a default, the
lenders could declare all amounts borrowed and all amounts due under other
instruments that contain certain provisions for cross-acceleration or cross-
default due and payable. In addition, the lenders could terminate their
commitments to lend to Classic Cable in the future. If that occurs, we cannot
assure you that we would be able to make payments on our notes or that we would
be able to find additional alternative financing. Even if we could obtain
additional alternative financing, we cannot assure you that it would be on terms
that are favorable or acceptable to us.
You should also be aware that the existing indebtedness under Classic
Cable's new credit facility is secured by substantially all of Classic Cable's
and its subsidiaries' assets. Should a default or acceleration of this
indebtedness occur, the holders of this indebtedness could sell the assets to
satisfy all or a part of what is owed. For additional information, please refer
to the sections in this prospectus entitled "Description of the Notes -- Certain
Covenants" and "Description of Other Indebtedness -- New Credit Facility."
WE MAY BE REQUIRED TO REPURCHASE OUR OUTSTANDING NOTES.
The Brera Classic equity investment constituted a change of control that
required us to offer to repurchase our outstanding old notes at a purchase price
equal to 101% of the accreted value of such notes plus accrued and unpaid
interest. The holders of these notes may tender them to us for repurchase
through September 1, 1999. We cannot assure you that some or all of the holders
of those notes will not require us to repurchase their notes, and we cannot
assure you that we will have enough funds to pay for all of the notes. We have
not arranged for financing to repurchase these notes. See "Management's
Discussion and
18
<PAGE> 22
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources -- Pro Forma for the Buford Acquisition and Other Completed
Acquisitions."
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
OF CONTROL OFFER REQUIRED BY THE INDENTURE TO PURCHASE THESE NOTES.
If a change of control occurs after the change of control resulting from
consummation of the Brera Classic equity investment, we will be required to make
an offer to purchase all of the exchange notes then outstanding. We will be
required to purchase the exchange notes at 101% of their accreted value, plus
accrued and unpaid interest to the date of repurchase. If a change of control
occurs, we cannot be sure that we will have enough funds to pay for all of the
notes. If we are required to purchase the notes, we will need to secure
third-party financing if we do not have available funds to meet our purchase
obligations. However, we cannot assure you that we will be able to secure such
financing on favorable terms, if at all.
Also, our financing arrangements will restrict our ability to repurchase
the notes, including pursuant to a change of control. Furthermore, a change of
control will result in an event of default under Classic Cable's new credit
facility and may lead to an acceleration of any other senior indebtedness it may
have at that time. The restrictions on Classic Cable would require it to pay its
new credit facility and any other senior indebtedness in full before it could
pay dividends enabling us to repurchase our outstanding notes. See "-- We may be
required to repurchase our outstanding notes. . ." and "Description of the
Notes -- Repurchase at the Option of Holders -- Change of Control." The
inability to purchase all of the tendered notes would constitute an event of
default under the indenture.
BRERA CLASSIC WILL BE OUR CONTROLLING STOCKHOLDER.
As a result of making the Brera Classic equity investment, Brera Classic
beneficially owns approximately 64% of our issued and outstanding shares of
common stock. Brera Classic now controls us and has the ability to elect the
majority of our directors. The board, in turn, may appoint new senior management
and approve any actions requiring the approval of our stockholders. These
actions include adopting amendments to our certificate of incorporation and
approving mergers or sales of substantially all of our assets. The interests of
Brera Classic, Classic and their respective affiliates may conflict with the
interests of the holders of the notes.
OUR BUSINESS DEPENDS ON A LIMITED NUMBER OF KEY PERSONNEL. THE LOSS OF ANY ONE
OF THESE COULD ADVERSELY AFFECT OUR BUSINESS.
Our continued success is highly dependent upon the personal efforts and
abilities of our senior management, including J. Merritt Belisle, our Chief
Executive Officer, and Steven E. Seach, our President and Chief Financial
Officer. Although we have employment contracts with these officers, we cannot
assure you that their services will continue to be available to us and the loss
of either one of them could impact us in a negative way.
WE MAY NOT BE ABLE TO CONTINUE OUR ACQUISITION STRATEGY.
A significant element of our growth strategy is to expand by acquiring
cable television systems 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. We cannot assure you that we will be able to identify and
acquire additional cable systems or that we will be able to finance significant
acquisitions in the future. See "Business -- Our Strategy."
WE CANNOT ASSURE YOU THAT OUR FRANCHISES WILL BE RENEWED OR THAT A FRANCHISE
AUTHORITY WILL NOT GRANT A FRANCHISE IN OUR MARKETS TO A COMPETITOR.
Our business is dependent upon the retention and renewal of our local
franchises. Franchises typically impose conditions relating to the operation of
cable television systems, including requirements relating to
19
<PAGE> 23
the payment of fees, system bandwidth capacity, customer service requirements,
franchise renewal and termination. Historically, franchises have been renewed
for cable operators that have provided satisfactory services and have complied
with the terms of their franchises. We may not be able to retain or renew such
franchises, or renew these franchises on terms as favorable to us as our
existing franchises. Furthermore, it is possible that a franchise authority
might grant a franchise to another cable company or other telecommunications
provider seeking to provide cable services. The non-renewal or termination of
franchises relating to a significant portion of our subscribers could have a
material adverse effect on our results of operations. See
"Business -- Franchises."
OUR BUSINESS IS SUBJECT TO COMPREHENSIVE LEGISLATION AND GOVERNMENT REGULATION.
The cable television industry is subject to extensive regulation at the
federal and local levels, and in some cases, at the state level. The 1984 Cable
Act, the 1992 Cable Act and the 1996 Telecom 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 and 1996 Telecom
Act has been allocated between the FCC and state or local regulatory
authorities. We cannot predict the effect that ongoing or future developments
may have on the cable communications industry or on our operations and we cannot
assure you that our revenues and results of operations will not be adversely
affected in the future by regulation of cable system rates.
A federal district court in Oregon recently held that, as a condition of
approving AT&T's acquisition of TCI's cable franchises, the City of Portland had
the authority to require AT&T to provide competing Internet and other on-line
services providers with open access to AT&T's cable platforms. This case has
been appealed. Similar conditions could be imposed upon us, either pursuant to a
local franchising authority's approval of a merger or other transaction between
us and another company or through future regulatory or legislative developments
at the federal, state or local level. On the other hand, future regulatory or
legislative developments at the federal or state level could limit the authority
of local franchising authorities to impose such conditions. Restrictions along
these lines, if upheld or enacted, could prohibit us from entering into
exclusive access agreements with affiliated, and possibly unaffiliated, Internet
providers.
A number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies. Although no state in which we currently
operate has enacted state level regulation, we cannot assure you that the states
in which we do operate will not enact such regulation, or that we will not
acquire any other cable systems in a state that does regulate our business. See
"Legislation and Regulation -- State and Local Regulation." Government
regulations at any level may affect our ability to obtain a sufficient return on
our investments. Furthermore, the regulations are changing rapidly to allow
significantly increased competition among various service providers. As a
result, we cannot predict the eventual effect of these regulations. See
"Legislation and Regulation." We closed the Buford acquisition and the Brera
Classic equity investment using temporary licenses from the FCC in certain
limited instances. While we do not anticipate problems in obtaining final
approval, our ability to operate some of our systems could be significantly
impaired if we cannot obtain final approval. With respect to a small number of
other licenses, additional filings will be required to ensure compliance with
the FCC's foreign ownership restrictions.
THE CABLE TELEVISION INDUSTRY IS EXTREMELY COMPETITIVE AND WE CANNOT PREDICT
WHETHER WE WILL BE SUCCESSFUL IN REMAINING COMPETITIVE.
Because our franchises are non-exclusive, there is the potential for
competition with our cable 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 systems, known as DBS, and multichannel multipoint
distribution service systems, known as wireless cable, because these systems use
low-power microwave frequencies to transmit video programming over the air to
customers. Within the home video programming market, we compete with other cable
franchise holders and with DBS and wireless cable providers. In recent years,
the FCC has adopted
20
<PAGE> 24
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 through conventional-, medium- and high-powered satellites. Several
companies offer DBS service. 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 local
broadcast signals. Legislation to amend the Copyright Act to authorize carriage
of local broadcast signals by DBS providers has passed both chambers of Congress
and is currently pending before a conference committee.
In addition, recent FCC and judicial decisions and federal legislation has
enabled 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. We 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 us. Various local exchange carriers 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
cable 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. As a result,
we cannot predict the effect that ongoing or future developments might have on
the cable industry. See "Business -- Competition" and "Legislation and
Regulation."
WE COULD BE ADVERSELY AFFECTED IF OUR OR OUR VENDORS' COMPUTER SYSTEMS ARE NOT
YEAR 2000 COMPLIANT.
Year 2000 issues exist when dates are recorded in computers using two
digits, rather than four, and are then used for arithmetic operations,
comparisons or sorting. A two-digit recording may recognize a date using "00" as
1900 rather than 2000, which could cause our computer systems to perform
inaccurate computations. We may not be able to identify all systems with Year
2000 problems. Moreover, the costs to correct these problems may be substantial.
Also we may not be able to correct the problems we identify. You should be aware
that Year 2000 issues relate not only to our systems, but also to those used by
our suppliers. We anticipate that system replacements and modifications will
resolve any Year 2000 issues that may exist with our suppliers or their
suppliers. However, we cannot assure you that such replacements or modifications
will be completed successfully or on time and, as a result, any failure to
complete such modifications on time could materially affect our financial and
operating results in a negative way. For additional information regarding the
Year 2000 issue and the potential impact on our business, refer to the section
in this prospectus entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Year 2000 Compliance."
YOU MAY FIND IT DIFFICULT TO SELL YOUR NOTES.
Currently, there is no public market for the notes. We do not intend to
apply for listing of the notes on any securities exchange or on any automated
dealer quotation system. Although the initial purchaser has informed us that it
intends to make a market in the notes, it is not obligated to do so and may
discontinue any such market at any time without notice. In addition, such market
making activity may be limited during the exchange offer or during an offering
under a shelf registration statement should we decide to file one. As a result,
we can make no assurances to you as to the development or liquidity of any
market for the notes, your ability to sell the notes, or the price at which you
may be able to sell the notes. Future trading prices of the notes will depend on
many factors, including, among other things, prevailing interest rates, our
operating results and the market for similar securities. Historically, the
market for securities similar to the notes, including non-investment grade debt,
has been subject to disruptions that have caused substantial volatility in the
prices of such securities. We cannot assure you that, if a market develops, it
will not be subject to similar disruptions.
21
<PAGE> 25
THE OLD NOTES WERE ISSUED AT A DISCOUNT, WHICH MAY RESULT IN ADVERSE
CONSEQUENCES TO A HOLDER OF THE NOTES AND CLASSIC.
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 exchange notes and the issue price of
the old notes, will accrue from the issue date of the old note and generally
will be includible 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 exchange notes will be subject to the high yield discount
obligation rules which will defer and may in part eliminate our ability to
deduct the original issue discount attributable to the exchange notes.
Accordingly, our after tax cash flow might be less than if the original issue
discount on the notes were deductible when it accrues. See "United States
Federal Income Tax Considerations." Similar results may apply under state tax
laws.
If a bankruptcy case is commenced by or against Classic or Classic Cable
under the Federal Bankruptcy Code after the issuance of the exchange notes, the
claim of a holder of exchange 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.
22
<PAGE> 26
USE OF PROCEEDS
We will receive no cash proceeds from the exchange pursuant to the exchange
offer. The exchange offer is intended to satisfy our obligations under the
registration rights agreement.
The net proceeds to Classic and Classic Cable from the offering of the old
notes of Classic and the old notes of Classic Cable, along with the proceeds
from the senior credit agreement, were approximately $280.2 million and were
used to
- fund the acquisition of certain assets of Cable One, Inc. ($41.7
million),
- redeem existing preferred stock and accrued dividends ($31.0 million),
- retire the outstanding subordinated debt and accrued interest ($4.5
million),
- repay the senior credit agreement in effect at that time and other
outstanding debt ($190.3 million) and interest ($2.6 million) and
- pay fees and expenses of these transactions ($10.1 million).
The preferred stock accrued dividends at rates ranging from 8% to 15% and
had mandatory redemption requirements in 2001 and 2005. The subordinated debt
accrued interest at rates ranging from 7.5% to 15% and matured in 2002 and 2007.
The senior credit agreement accrued interest at the LIBOR rate plus an
applicable margin. Principal payments were to begin in 1999 with the balance due
in 2005.
23
<PAGE> 27
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Financial Information is
based on the audited and unaudited financial statements of Classic and Buford
included elsewhere in this prospectus, and unaudited financial information of
certain systems acquired by Classic Cable in July 1998 from Cable One and
certain systems acquired by Buford in April 1998. The unaudited pro forma
adjustments are based upon available information and certain assumptions that we
believe are reasonable. The Unaudited Pro Forma Consolidated Financial
Information and accompanying notes should be read in conjunction with the
historical financial statements of Classic and Buford and the respective notes
to those statements, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" appearing elsewhere in this prospectus.
The Unaudited Pro Forma Consolidated Balance Sheet has been prepared to
give effect to the financing we entered into in connection with the Buford
acquisition as if it had occurred on June 30, 1999. The Unaudited Pro Forma
Consolidated Statements of Operations have been prepared to give effect to the
Buford acquisition and the other acquisitions completed by both Classic Cable
and Buford during 1998 as if they had occurred on January 1, 1998. All
acquisitions are accounted for under the purchase method of accounting. The
Unaudited Pro Forma Consolidated Financial Information reflects our allocation
of the purchase price for the Buford acquisition based upon our current
estimates of the values of the assets to be acquired and liabilities assumed.
The final purchase price and the allocation of that price may vary as additional
information is obtained and, accordingly, the ultimate allocation may differ
from those used in the Unaudited Pro Forma Consolidated Financial Information.
The Unaudited Pro Forma Consolidated Financial Information does not purport
to be indicative of the results that would have been obtained had the
transactions been completed as of the assumed date and for the periods presented
or that may be obtained in the future. The Unaudited Pro Forma Consolidated
Financial Information is included in this prospectus for informational purposes,
and while we believe that it may be helpful in understanding our combined
operations for the periods indicated, you should not unduly rely on the
information.
24
<PAGE> 28
CLASSIC COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASSIC
COMMUNICATIONS BUFORD ADJUSTMENTS PRO FORMA
-------------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................... $ 638 $ 2,890 $ 3,840(w) $ 7,368
Accounts receivable, net.................... 5,136 2,846 -- 7,982
Prepaid expenses............................ 1,341 484 -- 1,825
Property, plant and equipment............... 135,177 208,268 (85,059)(d)(l) 258,386
Accumulated depreciation.................... (47,486) (96,913) 96,913(e) (47,486)
-------- -------- -------- --------
87,691 111,355 11,854 210,900
Deferred financing costs, net............... 9,028 142 14,370(f)(u)(w) 23,540
Other assets................................ -- 2,444 -- 2,444
Intangible assets:
Subscriber relationships.................. 95,367 -- 82,042(m) 177,409
Franchise rights.......................... 71,500 54,417 31,877(g)(n) 157,794
Noncompete agreements..................... 8,425 7,434 (441)(h)(o) 15,418
Goodwill.................................. 40,865 3,203 (1,741)(i)(p) 42,327
-------- -------- -------- --------
216,157 65,054 111,737 392,948
Less accumulated amortization............... (76,415) (18,613) 18,613(j) (76,415)
-------- -------- -------- --------
139,742 46,441 130,350 316,533
-------- -------- -------- --------
Total assets....................... $243,576 $166,602 $160,414 $570,592
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable.......................... $ 489 $ 491 -- $ 980
Subscriber deposits and unearned income... 5,203 2,341 -- 7,544
Accrued expenses.......................... 5,465 7,073 -- 12,538
Accrued interest.......................... 5,731 -- -- 5,731
Long-term debt............................ 288,292 112,000 $115,950(k)(q)(s)(t) 516,242
Deferred taxes, net....................... 1,068 976 -- 2,044
-------- -------- -------- --------
Total liabilities.................. 306,248 122,881 115,950 545,079
Stockholders' equity:
Common stock, voting...................... 17 1 64(a)(r1) 82
Common stock, nonvoting................... 15 -- -- 15
Additional paid-in capital................ 29,207 14,058 81,625(b)(r2)() 124,890
Accumulated deficit....................... (91,911) 29,662 (37,225)(c)(v)(x) (99,474)
-------- -------- -------- --------
Total stockholders' equity......... (62,672) 43,721 44,464 25,513
-------- -------- -------- --------
Total liabilities and stockholders'
equity........................... $243,576 $166,602 $160,414 $570,592
======== ======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Balance Sheet.
25
<PAGE> 29
CLASSIC COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999
(DOLLARS IN THOUSANDS)
The following pro forma adjustments to the unaudited consolidated balance
sheet assume the Buford acquisition and the related financing had been
consummated on June 30, 1999.
The Buford 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, based upon valuations that are not yet complete. Accordingly, the
allocations of the purchase price may change upon completion of the acquisition.
The estimated purchase price of Buford and the preliminary allocations are
as follows:
<TABLE>
<S> <C> <C>
Purchase price of Buford.................................... $ 297,783
=========
Eliminate Buford equity:
(a) Common stock................................................ $ 1
(b) Additional paid-in capital.................................. 14,058
(c) Accumulated deficit......................................... 29,662
---------
Total Buford equity......................................... 43,721
Eliminate historical property, plant and equipment:
(d) Costs....................................................... (208,268)
(e) Accumulated deprecation..................................... 96,913
Eliminate historical intangible assets:
(f) Deferred financing costs.................................... (142)
(g) Franchise rights............................................ (54,417)
(h) Noncompete agreements....................................... (7,434)
(i) Goodwill and other intangible assets........................ (3,203)
(j) Accumulated amortization.................................... 18,613
(k) Eliminate long-term debt not assumed........................ 112,000
Adjustments to record assets at fair value:
(l) Property, plant and equipment............................... 123,209
(m) Subscriber relationships.................................... 82,042
(n) Franchise rights............................................ 86,294
(o) Noncompete agreements....................................... 6,993
(p) Goodwill.................................................... 1,462
---------
Total....................................................... $ 297,783
=========
</TABLE>
26
<PAGE> 30
Sources and uses of funds for the Buford acquisition are as follows:
<TABLE>
<S> <C> <C>
SOURCES OF FUNDS:
(q) The offering of new subordinated notes by Classic Cable..... $ 150,000
(r) The Brera Classic equity investment (net of fees of and
expense reimbursements to Brera Classic):
(1) Common stock, voting.................................... 65
(2) Additional paid-in capital.............................. 95,683
(s) New Classic Cable credit facility........................... 175,000
---------
Total sources of funds...................................... $ 420,748
=========
USES OF FUNDS:
(t) Retirement of existing credit facility...................... $ 97,050
Buford acquisition.......................................... 297,783
Fees and expenses:
(u) Deferred financing costs.................................... 16,875
(v) Other transaction costs..................................... 5,200
(w) Working capital............................................. 3,840
---------
Total uses of funds......................................... $ 420,748
=========
</TABLE>
(x) Concurrent with the Buford acquisition, we will write off unamortized
deferred financing costs of $2,363 related to the existing credit facility.
The charge for the write off will be reflected as an extraordinary charge in
the income statement for the period during which the Buford acquisition is
closed. No such charge is included in the pro forma income statement
information presented in this prospectus.
27
<PAGE> 31
CLASSIC COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BUFORD
CLASSIC CABLE 1998 TOTAL PRO
COMMUNICATIONS ONE BUFORD ACQUISITION ADJUSTMENTS FORMA
-------------- ------ -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................ $ 69,802 $6,564 $ 70,475 $3,056 -- $149,897
Operating expenses:
Programming................. 17,840 1,831 18,339 708 -- 38,718
Plant and operating......... 8,437 815 6,937 397 -- 16,586
General and
administrative............ 11,295 1,037 16,183 557 -- 29,072
Marketing and advertising... 850 97 345 -- -- 1,292
Corporate overhead.......... 3,648 -- 9,364 99 $ (1,490)(a) 11,621
Depreciation and
amortization.............. 30,531 529 21,399 750 13,048(b) 66,257
-------- ------ -------- ------ -------- --------
Total operating
expenses............. 72,601 4,309 72,567 2,511 11,558 163,546
-------- ------ -------- ------ -------- --------
Operating income (loss)......... (2,799) 2,255 (2,092) 545 (11,558) (13,649)
Interest expense................ (24,442) -- (7,919) (34) (19,348)(c) (51,743)
Other income (expense).......... (28) (648) (221) 1 -- (896)
-------- ------ -------- ------ -------- --------
Income (loss) before income
taxes......................... (27,269) 1,607 (10,232) 512 (30,906) (66,288)
Income tax benefit.............. 1,930 -- 226 -- --(d) 2,156
-------- ------ -------- ------ -------- --------
Net Income (loss)............... $(25,339) $1,607 $(10,006) $ 512 $(30,906) $(64,132)
======== ====== ======== ====== ======== ========
</TABLE>
See the Notes to the Unaudited Pro Forma Consolidated Statement of Operations.
28
<PAGE> 32
CLASSIC COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASSIC
COMMUNICATIONS BUFORD ADJUSTMENTS PRO FORMA
-------------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues...................................... $ 39,286 $38,398 -- $ 77,684
Operating expenses:
Programming.............................. 10,427 10,430 -- 20,857
Plant and operating...................... 4,401 3,377 -- 7,778
General and administrative............... 5,755 8,461 -- 14,216
Marketing and advertising................ 452 237 -- 689
Corporate overhead....................... 1,725 (72) $ (507)(a) 1,146
Depreciation and amortization............ 18,096 12,105 4,788(b) 34,989
-------- ------- -------- --------
Total operating expenses............ 40,856 34,538 4,281 79,675
-------- ------- -------- --------
Income (loss) from operations................. (1,570) 3,860 (4,281) (1,991)
Interest expense.............................. (14,992) (4,095) (6,860)(c) (25,947)
Other income (expense)........................ 15 (78) -- (63)
-------- ------- -------- --------
Loss before income taxes...................... (16,547) (313) (11,141) (28,001)
Income tax benefit............................ -- 210 --(d) 210
-------- ------- -------- --------
Net loss...................................... $(16,547) $ (103) $(11,141) $(27,791)
======== ======= ======== ========
</TABLE>
See the Notes to Unaudited Pro Forma Consolidated Statements of Operations.
29
<PAGE> 33
CLASSIC COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
The accompanying Unaudited Pro Forma Consolidated Statements of Operations
for the year ended December 31, 1998 and the six months ended June 30, 1999
reflect the pro forma adjustments described below as if the Buford acquisition
and the related financing as well as acquisitions completed in 1998 by Classic
Cable and Buford all occurred on January 1, 1998. The Unaudited Pro Forma
Consolidated Statements of Operations combine the historical results of
operations of Classic with those of Buford and the completed acquisitions. These
statements reflect the following adjustments for the period indicated:
(a) Classic Cable has formulated a restructuring plan whereby certain
identified employees of Buford's corporate management will be terminated.
The functions of these employees were duplicative with those of Classic
Cable and there is no expectation that the revenues generated by the Buford
systems will be adversely affected by the restructuring plan. The costs
associated with these employees was $1,490 and $507 for the year ended
December 31, 1998 and the six months ended June 30, 1999, respectively.
(b) Represents pro forma adjustments to depreciation and amortization
in connection with the Buford acquisition and the completed acquisitions.
The depreciation and amortization expense of property, plant and equipment
and intangible assets acquired, net of elimination of depreciation and
amortization expense on historical assets, is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
1998 JUNE 30, 1999
------------ -------------
<S> <C> <C>
Depreciation and amortization expense on the purchased basis
of property, plant and equipment and intangible assets
acquired.................................................. $ 35,726 $ 16,893
Elimination of historical depreciation and amortization
expense................................................... (22,678) (12,105)
-------- --------
Total adjustment to depreciation and
amortization.................................... $ 13,048 $ 4,788
======== ========
</TABLE>
The property, plant, and equipment and intangible assets acquired in
connection with the Buford acquisition are estimated below:
<TABLE>
<CAPTION>
DEPRECIATION/
AMORTIZATION
PERIOD
(YEARS)
-------------
<S> <C> <C>
Land........................................................ $ 888 --
Buildings................................................... 3,909 30
Leasehold improvements...................................... 818 7
Vehicles.................................................... 3,766 5
Cable television distribution systems....................... 43,940 12
UHF system.................................................. 9,280 7
Mobile radio equipment...................................... 364 7
Headend electronics......................................... 26,406 7
Headend tower and antennae.................................. 11,077 7
Microwave equipment......................................... 4,657 7
Shop and test equipment..................................... 5,517 7
Drops....................................................... 9,622 7
Furniture and fixtures...................................... 1,608 7
Office equipment............................................ 986 7
Computer hardware and equipment............................. 322 4
Computer software........................................... 49 3
</TABLE>
30
<PAGE> 34
<TABLE>
<CAPTION>
DEPRECIATION/
AMORTIZATION
PERIOD
(YEARS)
-------------
<S> <C> <C>
Subscriber relationships.................................... 82,042 12
Franchise rights............................................ 86,294 8
Noncompete agreements....................................... 6,993 5
Goodwill.................................................... 1,462 20
--------
$300,000
========
</TABLE>
(c) Represents:
- interest expense on the new credit facility using a current
interest rate of 7.75% and 8.00% for the Term A and the Term B
loans, respectively, per annum,
- interest expense on the notes using a rate of 9.375% per annum,
- amortization expense of deferred financing fees related to the
new debt under our financing,
- elimination of historical interest expense related to Buford's
debt not assumed, and
- elimination of historical interest expense from the repayment of
the current credit facility with proceeds from the financing and
elimination of the related amortization of deferred financing
costs, as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- ----------------
<S> <C> <C>
Interest expense on the new Classic Cable credit facility... $ 13,813* $ 6,907*
Interest expense on the new subordinated Classic Cable
notes..................................................... 14,063 7,032
Full year interest expense on exchange notes................ 12,653 --
Amortization expense of deferred financing fees related to
the financing............................................. 1,869 934
Elimination of historical interest expense on the current
credit facility and subordinated debt and related
amortization of deferred financing costs.................. (23,050) (8,013)
-------- -------
Total increase to interest expense................ $ 19,348 $ 6,860
======== =======
</TABLE>
- ---------------
* The total effect of a 1/8% variance in the interest rate would be $219 and
$109, respectively.
(d) Represents the:
- tax effect of pro forma adjustments,
- recognition of tax expense for the acquired systems which were
historically not allocated tax expense by their former parent,
and
- the effect of recording a valuation allowance on excess deferred
tax assets arising from pro forma adjustments.
31
<PAGE> 35
We record a tax benefit only to the extent existing deferred tax
liabilities reverse within the appropriate period to offset deferred tax assets.
These reversing liabilities will be fully recognized in 1998, and a valuation
allowance remains on 100% of the remaining deferred tax assets. As a result, the
ratable tax benefit to be realized is limited, resulting in an effective rate of
less than 5%.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
1998 JUNE 30, 1999
------------ -------------
<S> <C> <C>
Total pro forma adjustments................................. (30,906) (11,141)
Tax rate.................................................... 34% 34%
------- -------
10,508 3,788
Total Cable One and the Buford 1998 acquisition pre tax
income.................................................... 2,119 --
Tax rate.................................................... 34% 34%
------- -------
(720) --
Effect of valuation allowance............................... (9,788) (3,788)
------- -------
Total adjustment to income tax benefit...................... -- --
======= =======
</TABLE>
32
<PAGE> 36
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA --
CLASSIC COMMUNICATIONS, INC.
The following table presents selected historical financial data about
Classic. You should read this information together with "Summary Historical
Financial and Operating Data -- Classic Communications, Inc.," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
Classic's consolidated financial statements and the notes relating to those
statements included elsewhere in this prospectus.
Classic's selected historical financial data as of and for each of the five
years in the period ended December 31, 1998 have been derived from Classic's
consolidated financial statements, which have been audited and reported upon by
Ernst & Young LLP. The historical data for the six months ended June 30, 1998
and 1999 have been derived from Classic's unaudited financial statements. The
unaudited financial statements contain all adjustments, consisting of normal
recurring accruals, which Classic considers necessary for a fair presentation of
its financial position and results of operations for these periods.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues......................................... $16,019 $ 36,677 $ 59,821 $ 60,995 $ 69,802 $ 32,214 $ 39,286
Costs and expenses............................... 8,372 18,911 33,553 36,555 42,070 19,038 22,760
Depreciation and amortization.................... 6,383 16,427 27,510 27,832 30,531 14,169 18,096
------- -------- -------- -------- -------- -------- --------
Operating income (loss).......................... 1,264 1,339 (1,242) (3,392) (2,799) (993) (1,570)
Interest expense................................. (4,975) (14,199) (20,633) (21,299) (24,442) (10,497) (14,992)
Gain on sale of cable systems.................... 115 -- 4,901 3,644 -- -- --
Write-off of abandoned telephone operations...... -- -- (2,994) (500) (220) -- --
Other income (expense)........................... -- -- -- 71 192 64 15
------- -------- -------- -------- -------- -------- --------
Loss before income tax benefit, minority interest
and extraordinary loss......................... (3,596) (12,860) (19,968) (21,476) (27,269) (11,426) (16,547)
Income tax benefit............................... 1,121 4,533 6,802 7,347 1,930 1,041 --
Extraordinary loss............................... -- (4,054) -- -- (5,524) -- --
Minority interest in net loss of subsidiary...... 46 -- -- -- -- -- --
------- -------- -------- -------- -------- -------- --------
Net loss......................................... $(2,429) $(12,381) $(13,166) $(14,129) $(30,863) $(10,385) $(16,547)
======= ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (END OF PERIOD):
Total assets..................................... $96,136 $271,516 $245,922 $220,162 $254,604 -- $243,576
Total debt....................................... 58,161 207,706 197,504 191,990 282,842 -- 288,292
Total liabilities................................ 78,251 232,531 219,232 206,643 301,392 -- 306,248
Total redeemable preferred stock................. 12,332 19,260 22,726 26,705 -- -- --
Total stockholders' equity....................... 5,553 19,725 3,965 (13,186) (46,788) -- (62,672)
</TABLE>
33
<PAGE> 37
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA -- BUFORD GROUP, INC.
The following table presents selected historical financial data about
Buford. You should read this information together with "Summary Historical
Financial and Operating Data -- Buford Group, Inc.," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and Buford's
consolidated financial statements and the notes relating to those statements
included elsewhere in this prospectus.
The selected data presented below under the headings "Income Statement
Data" and "Balance Sheet Data," for and as of the end of each of the years in
the five-year period ended December 31, 1998 are derived from Buford's
consolidated financial statements, which financial statements have been audited
by KPMG LLP, independent certified public accountants. The consolidated
financial statements as of December 31, 1998 and 1997, and for each of the years
in the three-year period ended December 31, 1998, and the auditors' report
thereon, are included elsewhere in this prospectus. The historical data for the
six months ended June 30, 1998 and 1999 have been derived from Buford's
unaudited financial statements. The unaudited financial statements contain all
adjustments, consisting of normal recurring accruals, which Buford considers
necessary for a fair presentation of Buford's financial position and results of
operations for these periods.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues........................................ $ 37,032 $ 49,558 $ 49,561 $ 58,136 $ 70,475 $ 32,943 $ 38,398
Costs and expenses.............................. 26,755 32,965 32,932 40,858 51,168 24,547 22,433
Depreciation and amortization................... 13,670 17,379 17,175 17,753 21,399 10,137 12,105
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)......................... (3,393) (786) (546) (475) (2,092) (1,741) 3,860
Interest expense................................ (2,823) (6,332) (5,345) (5,787) (7,919) (3,681) (4,095)
Gain on sale of cable systems................... -- 8,506 5,418 -- -- -- --
Other income (expense).......................... 191 1,443 344 859 (221) 73 (78)
-------- -------- -------- -------- -------- -------- --------
Loss before income tax benefit (expense) and
cumulative effect of change in accounting
principle..................................... (6,025) 2,831 (129) (5,403) (10,232) (5,349) (313)
Income tax benefit (expense).................... 3,027 7,235 (94) 315 226 (25) 210
Cumulative effect of change in accounting
principle..................................... -- -- -- -- -- -- (207)
-------- -------- -------- -------- -------- -------- --------
Net income (loss)............................... $ (2,998) $ 10,066 $ (223) $ (5,088) $(10,006) $ (5,374) $ (310)
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (END OF PERIOD):
Total assets.................................... $127,702 $127,379 $117,676 $143,932 $175,953 -- $166,602
Total debt...................................... 72,110 70,643 60,053 85,000 118,000 -- 112,000
Total liabilities............................... 91,773 80,122 69,182 97,008 131,147 -- 122,881
Total stockholders' equity...................... 35,969 47,257 48,493 46,924 44,806 -- 43,721
</TABLE>
34
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides additional information regarding our
financial condition and results of operations for each of the years ended
December 31, 1996, 1997 and 1998 and the six months ended June 30, 1998 and
1999. This discussion should be read in conjunction with "Selected Historical
Consolidated Financial Data -- Classic Communications, Inc.," "Selected
Historical Consolidated Financial Data -- Buford Group, Inc.," "Unaudited Pro
Forma Consolidated Financial Information" and both Classic's and Buford's
consolidated financial statements and the notes relating to those statements
appearing elsewhere in this prospectus. During their existence, both Classic
Cable and Buford have completed multiple acquisitions and divestitures of cable
systems. As a result, we believe that period-to-period comparisons of their
financial results to date are not necessarily meaningful and should not be
relied upon as an indication of future performance.
OVERVIEW
As a result of the Buford acquisition and assuming completion of other
recently publicly announced transactions by other companies in the cable
television industry, we believe we are the 14th largest cable television
operator in the United States. We own, operate and develop cable television
systems in selected non-metropolitan markets across nine contiguous states
primarily located in the central United States. Since 1992, we have completed
and integrated over 20 acquisitions. As of June 30, 1999, our collective systems
passed approximately 609,000 homes and served approximately 359,000 basic
subscribers.
We have developed a plan to integrate the operation of Buford's cable
systems with Classic Cable's cable systems. The major initiatives of this plan
are to (A) eliminate duplicative general and administrative expenses, (B)
enhance our customer service program with the addition of Buford's call center
and satellite-based communications service system, (C) reduce duplicative
service costs pursuant to our "clustering" philosophy, and (D) increase the
quality of programming services in the acquired systems.
Revenues. Revenues are primarily attributable to monthly subscription fees
charged to subscribers for our 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, 1999, our collective systems served approximately 359,000 basic
subscribers and approximately 192,000 premium units, representing a basic
penetration rate of approximately 59% and a premium penetration rate of
approximately 53%. The table below sets forth for the periods indicated the
percentage of our total revenues attributable to the various sources:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1998 1999
------------ ----------------
<S> <C> <C>
Basic............................................ 84.0% 84.7%
Premium.......................................... 11.2 11.0
Other............................................ 4.8 4.3
----- -----
Total revenues......................... 100.0% 100.0%
===== =====
</TABLE>
35
<PAGE> 39
Operating Expenses. Our operating expenses consist of (A) programming fees,
(B) plant and operating costs, (C) general and administrative expenses and (D)
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 us. We benefit from our membership
in an industry cooperative with over 10 million basic subscribers that 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, accounting and administrative personnel, franchise fees and expenses
related to billing, payment processing, and office administration.
Corporate Overhead. Corporate overhead consists primarily of expenses
incurred by our executive management, 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 our financing activities, have contributed to our net losses. We
believe that such net losses are common for the cable television industry.
RESULTS OF OPERATIONS -- CLASSIC COMMUNICATIONS
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1999
----------------------- -----------------------
AMOUNT % OF REVENUES AMOUNT % OF REVENUES
------- ------------- ------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................... $32,214 100.0% $39,286 100.0%
Operating expenses:
Programming................................... 8,218 25.5 10,427 26.5
Plant and operating........................... 3,865 12.0 4,401 11.2
General and administrative.................... 5,357 16.6 5,755 14.6
Marketing and advertising..................... 339 1.1 452 1.2
Corporate overhead................................. 1,259 3.9 1,725 4.4
Depreciation and amortization...................... 14,169 44.0 18,096 46.1
------- ----- ------- -----
Loss from operations..................... $ (993) (3.1)% $(1,570) (4.0)%
======= ===== ======= =====
</TABLE>
Revenues. Revenues increased $7.1 million, or 22%, for the six months ended
June 30, 1999, as compared to the corresponding prior year period. Basic
revenues increased by $6.0 million due to increased subscribers of approximately
23,000 and basic rate increases. The increase in subscribers was due to the
acquisition of systems from Cable One in July 1998. In addition, there was a
rate increase of approximately 7% affecting approximately two-thirds of our
customers in February 1999 which resulted in an increase in basic revenues per
subscriber of 7% from $27.42 to $29.35 period to period. Classic Cable has
historically increased rates in February in order to offset increases in
operating costs such as programming which occur primarily in January of each
year.
Operating Expenses. Operating expenses increased $8.1 million, or 24%, for
the six months ended June 30, 1999, as compared to the corresponding prior year
period. Programming expense increased $2.2 million due to the continued
escalation in rates charged by programming vendors as well as an increase in the
subscriber base over the same period in 1998. Depreciation and amortization
expense for the six months ended June 30, 1999 was $18.1 million, an increase of
$3.9 million over the same period in 1998. The increase represents the effect of
acquisitions and capital expenditures.
36
<PAGE> 40
Other Income and Expenses. Interest expense increased $4.5 million, or 43%,
for the six months ended June 30, 1999, as compared to the corresponding prior
year period. This increase is primarily the result of the debt issued in
conjunction with the July 1998 financing.
Income Tax Benefit. The income tax benefit decreased $1.0 million for the
six months ended June 30, 1999, as compared to the corresponding prior year
period. No tax benefit was recognized in 1999. The effective tax rates for the
six months ended June 30, 1999 and June 30, 1998 differ from the statutory rates
primarily due to an increase in the valuation allowance on deferred tax assets.
Net Loss. As a result of the above described fluctuations in Classic's
results of operations, the net loss of $16.5 million for the six months ended
June 30, 1999 increased by $6.2 million, as compared to the net loss of $10.4
million for the corresponding prior year period.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
----------------------- -----------------------
AMOUNT % OF REVENUES AMOUNT % OF REVENUES
------- ------------- ------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................... $60,995 100.0% $69,802 100.0%
Operating expenses:
Programming................................... 14,916 24.5 17,840 25.6
Plant and operating........................... 7,622 12.5 8,437 12.1
General and administrative.................... 9,257 15.2 11,295 16.2
Marketing and advertising..................... 438 0.7 850 1.2
Corporate overhead............................... 4,322 7.1 3,648 5.2
Depreciation and amortization.................... 27,832 45.6 30,531 43.7
------- ----- ------- -----
Loss from operations..................... $(3,392) (5.6)% $(2,799) (4.0)%
======= ===== ======= =====
</TABLE>
Revenues. Revenues for the year ended December 31, 1998 were $69.8 million,
an improvement of $8.8 million over revenues for the year ended December 31,
1997. Basic revenues improved by $7.4 million, or 14.7%, while average monthly
basic revenues per subscriber increased from $25.22 to $27.87, or 10.5%. 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, as well as revenue generated from the systems acquired from Cable
One on July 29, 1998. The majority of the remaining systems also had rate
increases during 1998. The change in basic subscribers for the year ended
December 31, 1998 is primarily due to the acquisition of systems from Cable One
in 1998 and 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 equivalent basic unit 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 13.7%, from $10.2 million for the year ended
December 31, 1997 to $11.6 million for the year ended December 31, 1998, due in
large part to continued promotion of pay-per-view events.
Operating Expenses. Operating expenses for the year ended December 31, 1998
were $38.4 million, an increase of $6.2 million, or 19.2%, over operating
expenses for the year ended December 31, 1997. An escalation in rates charged by
certain programming vendors as well as increases in copyright fees and premium
units were largely responsible for the $2.9 million increase in programming
costs over programming costs for the year ended December 31, 1997. Plant and
operating expenses increased from $7.6 million for the year ended December 31,
1997 to $8.4 million for the year ended December 31, 1998, reflecting increases
in technical wages and benefits, plant power, and amounts paid to outside
contractors to update our subscriber database. General and administrative
expenses increased from $9.3 million for the year ended December 31, 1997 to
$11.3 million for the year ended December 31, 1998 due to increases in
37
<PAGE> 41
administrative wages and benefits, telephone, property taxes and bad debt
expense. General and administrative expense as a percentage of revenue increased
during this period from 15.2% to 16.2%. Marketing expenses for the year ended
December 31, 1998 were $0.9 million, an increase of 94.1% over marketing
expenses for the year ended December 31, 1997. The majority of this increase
relates to increased spending associated with our marketing initiatives. As a
percentage of revenues, operating expenses increased slightly from 52.8% for the
year ended December 31, 1997 to 55.0% for the year ended December 31, 1998.
Corporate Overhead. Corporate overhead decreased $0.7 million, or 15.6%,
from $4.3 million for the year ended December 31, 1997 to $3.6 million for the
year ended December 31, 1998 due primarily to a reduction in litigation costs
compared to the year ended December 31, 1997.
Depreciation and Amortization. Depreciation and amortization expense for
the year ended December 31, 1998 was $30.5 million, an increase of $2.7 million
over depreciation and amortization expense for the year ended December 31, 1997.
The increase is largely reflective of the inclusion of fixed assets placed into
service during 1997 and 1998.
Income Tax Benefit. The income tax benefit decreased from $7.3 million for
year ended December 31, 1997 to $1.9 million for the year ended December 31,
1998. The pre-tax loss increased in 1998. However, the effective tax rate
decreased. The effective tax rate decreased from 34.2% for the year ended
December 31, 1997 to 7.1% for the year ended December 31, 1998. This decrease is
primarily due to an increase in the valuation allowance against deferred tax
assets.
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................................. 2,213 3.7 4,322 7.1
Depreciation and amortization...................... 27,510 46.0 27,832 45.6
------- ----- ------- -----
Loss from operations..................... $(1,242) (2.1)% $(3,392) (5.6)%
======= ===== ======= =====
</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 equivalent
basic unit 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, Classic Cable 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
38
<PAGE> 42
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.
Operating Expenses. Operating expenses increased $893,000, 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 $569,000, 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 our aforementioned new marketing initiatives. As a percentage of revenues,
operating expenses increased slightly, from 52.4% for the year ended December
31, 1996 to 52.9% for the year ended December 31, 1997.
Corporate Overhead. Corporate overhead for the year ended December 31,
1997, was $4.3 million, an increase of $2.1 million over the year ended December
31, 1996. The increase was largely reflective of costs incurred in conjunction
with divorce proceedings with one of Classic's officers. Classic agreed to
repurchase certain stock of Classic 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 $1.4 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
of 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 the year ended December 31, 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.
Income Tax Benefit. The benefit for income taxes increased from $6.8
million in 1996 to $7.3 million in 1997, primarily due to the increase in the
pre-tax loss from operations in 1997 and an increase in the effective tax rate
from 34.1% to 34.2% in 1996 and 1997, respectively.
Total deferred tax liabilities and total deferred tax assets decreased by
$12.9 million and $6.3 million, respectively, from 1996 to 1997. Approximately
$8.1 million of the decrease in deferred tax liabilities relates to taxable
temporary differences, primarily recurring book depreciation, and amortization
in excess of tax. The remaining $4.8 million decrease in deferred tax
liabilities relates to the increase in tax basis of assets held by one of our
subsidiaries as a result of a deferred intercompany gain recognized during 1997.
Approximately $4.9 million of the decrease in total deferred tax assets relates
primarily to the utilization of net operating losses to offset taxable income
generated by the taxable temporary differences noted above. Total deferred tax
assets also decreased by $1.5 million due to the expiration of certain net
operating losses in 1997.
The expiration of net operating losses in 1997 had no impact on the
provision for income taxes since a valuation allowance had previously been
provided for these loss carryforwards. The deferred tax asset for the expired
net operating loss carryforwards and the related valuation allowance were
reduced accordingly.
39
<PAGE> 43
The net effect of the above item resulted in a current federal tax expense
of $0.3 million for alternative minimum tax and a deferred tax benefit of $7.6
million for the reduction in net deferred tax liabilities.
RESULTS OF OPERATIONS -- BUFORD
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Revenues. Revenues for the six months ended June 30, 1999 were $38.4
million, an improvement of $5.5 million, or 17%, over revenues of $32.9 million
for the corresponding prior year period. Revenues for the six months ended June
30, 1999 included the revenues for the systems acquired in late April 1998.
Average monthly basic revenue per basic subscriber increased 7% from $28.27 in
the first six months of 1998 to $30.94 in the first six months of 1999.
Operating Expenses. Operating expenses increased $2.3 million from $20.2
million for the six months ended June 30, 1998 to $22.5 million for the six
months ended June 30, 1999. Programming costs for the six months ended June 30,
1999 increased $1.7 million, or 19%, over the corresponding prior year period to
$10.4 million. The increase was due primarily to the acquisition of subscribers
in late April 1998 and an increase in the number and quality of programming
services offered by Buford. Plant and operating expenses totaled $3.4 million
for the six months ended June 30, 1999 and June 30, 1998. Plant and operating
expenses as a percent of revenues decreased from 10% for the six months ended
June 30, 1998 to 9% for the six months ended June 30, 1999 reflecting the
continued benefits derived from Buford's cluster strategy. General and
administrative expenses for the six months ended June 30, 1999 were $8.5
million, up $0.6 million, or 7%, over the corresponding prior year period. The
increase was due primarily to cable systems and subscribers acquired in 1998. As
a percentage of revenues, general and administrative expenses decreased from 24%
for the six months ended June 30, 1998 to 22% for the six months ended June 30,
1999. Marketing and advertising expenses for the six months ended June 30, 1999
and 1998 were relatively flat at $0.2 million.
Corporate Overhead. Corporate overhead for the six months ended June 30,
1999 was $(0.1) million, a decrease over the six months ended June 30, 1998 of
approximately $4.4 million due primarily to compensation expense related to
employee stock appreciation rights in 1998. The management group's appreciation
rights are tied to the appreciation in the market value of Buford's common
stock. Buford recorded a credit of approximately $0.7 million during the six
months ended June 30, 1999 to corporate overhead based on the actual payments
made upon consummation of the sale. Buford recorded compensation expense of $3.6
million in the six months ended June 30, 1998 related to these appreciation
rights. Excluding the compensation expense relating to these appreciation
rights, corporate overhead decreased by approximately $0.2 million for the six
months ended June 30, 1999 as compared to the six months ended June 30, 1998.
Depreciation and Amortization. Depreciation and amortization expense for
the six months ended June 30, 1999 was $12.1 million, an increase of $2 million
or 19% over the corresponding prior year period. The increase is due primarily
to the inclusion of the tangible and intangible assets acquired during 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenues. Revenues in 1998 were $70.5 million, an improvement of $12.4
million, or 21.3%, over revenues in 1997. The improvement was due primarily to
basic rate increases during the first half of 1998 as well as revenue generated
from the systems acquired in late April 1998. Buford has historically increased
rates in the majority of its systems during the first half of the year in order
to offset increases in its operating costs such as programming which occur in
January of each year. Average monthly basic revenue per basic subscriber
increased 7.1%, from $26.31 for the year ended December 31, 1997 to $28.17 for
the year ended December 31, 1998.
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Operating Expenses. Operating expenses in 1998 were $41.8 million, an
increase of $5.8 million, or 16.1%, over operating expenses for the year ended
December 31, 1997. The continued escalation in rates charged by programming
vendors as well as increases in copyright fees and premium units were largely
responsible for the $4.0 million increase in programming costs over 1997. Plant
and operating expenses increased from $6.6 million for the year ended December
31, 1997 to $6.9 million for the year ended December 31, 1998, reflecting
increases in technical wages and benefits and amounts paid to outside
contractors. General and administrative expenses increased from $14.9 million
for the year ended December 31, 1997 to $16.2 million for the year ended
December 31, 1998 due to increases in administrative wages and benefits and
utility expense. Marketing and advertising expenses for the year ended December
31, 1998 were $0.3 million, an increase of 50.0% over marketing and advertising
expenses for the year ended December 31, 1997. The majority of this increase
relates to increased spending associated with Buford's marketing initiatives.
Corporate Overhead. Corporate overhead increased $4.5 million, or 91.8%,
from $4.9 million for the year ended December 31, 1997 to $9.4 million for the
year ended December 31, 1998 due primarily to an increase in compensation
expense related to employee stock appreciation rights from $3.5 million for the
year ended December 31, 1997 to $7.9 million for the year ended December 31,
1998.
Depreciation and Amortization. Depreciation and amortization expense for
the year ended December 31, 1998 was $21.4 million, an increase of $3.6 million
over depreciation and amortization expense for the year ended December 31, 1997.
The increase is largely reflective of the inclusion of fixed assets acquired and
those placed into service during 1997 and 1998.
Income Tax Benefit. Income tax benefit of $0.2 million was recorded for
the year ended December 31, 1998 versus $0.3 million for the year ended December
31, 1997. This decrease is primarily due to an increase in the valuation
allowance against deferred tax assets.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues. Revenues for the year ended December 31, 1997 were $58.1
million, an improvement of $8.5 million, or 17.1%, over revenues of $49.6
million for the year ended December 31, 1996. This increase was primarily due to
basic rate increases implemented during the first half of the year, and
acquisitions of cable systems in Arkansas and Texas. Average monthly basic
revenue per basic subscriber increased 6.1% from $24.80 for the year ended
December 31, 1996 to $26.31 for the year ended December 31, 1997.
Operating Expenses. Operating expenses increased $6.0 million, or 20.0%,
from $30.0 million for the year ended December 31, 1996 to $36.0 million for the
year ended December 31, 1997. Programming costs for the year ended December 31,
1997 were 14.3 million, an increase of $2.7 million, or 23.3%, over the year
ended December 31, 1996. This increase was due to the acquisition of several
cable systems, increased subscriber rates and the expanded channel lineups in
many of Buford's markets. Plant and operating expenses increased $0.9 million,
or 15.8%, to $6.6 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 the year ended
December 31, 1997 were $14.9 million, an increase of $2.3 million, or 18.3%,
over general and administrative expenses for the year ended December 31, 1996.
The increase was due primarily to an increase in bad debt expense and telephone
expense which were related to the consolidation of regional offices into the
Buford Call Center facility in Tyler, Texas. Marketing and advertising expenses
for the year ended December 31, 1997 and December 31, 1996 were flat at $0.2
million.
Corporate Overhead. Corporate overhead for the year ended December 31,
1997 was $4.9 million, an increase of $2.0 million over the year ended December
31, 1996. The increase was largely reflective of an increase in compensation
expense related to employee stock appreciation rights from $1.5 million for the
year ended December 31, 1996 to $3.5 million for the year ended December 31,
1997.
Depreciation and Amortization. Depreciation and amortization expense for
the year ended December 31, 1997, was $17.8 million, an increase of $0.6 million
over depreciation and amortization
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expense for the year ended December 31, 1996. The increase is due primarily to
the inclusion of fixed assets placed into service during the year.
Income Tax Benefit. The benefit for income taxes was $0.3 million for the
year ended December 31, 1997 versus tax expense of $0.1 million for the year
ended December 31, 1996, primarily due to the increase in the pre-tax loss from
operations in 1997.
LIQUIDITY AND CAPITAL RESOURCES
CLASSIC -- HISTORICAL
Since Classic's inception, Classic has been supported through debt
financings and equity raised through sales of equity to institutional equity
investors. Capital stock of Classic is owned by institutional investors,
including Austin Ventures, L.P., NationsBanc Capital Corp., The Texas Growth
Fund, BT Capital Partners, Inc., and certain members of its bank group led by
The Chase Manhattan Bank and Union Bank Ventures. These institutional investors
have contributed approximately $34.1 million of total equity financing to
Classic. At June 30, 1999, Classic had aggregate consolidated indebtedness of
approximately $288.3 million. This debt and equity financing was utilized
primarily in the acquisition of cable television systems.
Our net cash provided by operations was $14.3 million in 1998 compared to
$7.9 million in 1997 and $7.9 million in 1996. Our net cash provided by (used
in) investing activities was $(57.2) million, $(1.3) million and $3.4 million in
1998, 1997 and 1996, respectively. Our net cash provided by (used in) financing
amounted to $45.1 million, $(6.6) million and $(12.2) million, in 1998, 1997 and
1996, respectively. Our Adjusted EBITDA increased to $28.8 million in 1998 from
$25.5 million in 1997 and $27.3 million in 1996. Adjusted EBITDA as a percentage
of revenue changed to 41.3% in 1998 from 41.8% in 1997, and 45.7% in 1996.
Included in Adjusted EBITDA for the year ended December 31, 1997 were charges of
$1.4 million for divorce litigation costs and $0.4 million for special bonuses
paid to executive officers. Included in Adjusted EBITDA for the year ended
December 31, 1998 were special bonuses paid to executive officers of $0.8
million.
For the three years ended December 31, 1998, our capital expenditures,
other than those related to acquisitions, were approximately $32.1 million.
Capital expenditures 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.
BUFORD -- HISTORICAL
For the three years ended December 31, 1998, Buford's capital expenditures,
other than those related to acquisitions, were approximately $58.1 million.
Capital expenditures include expansion and improvements of existing cable
properties, plant and equipment upgrades, as well as cable line drops, line
plant extensions and installations of services to new subscribers.
Since its inception, Buford has been supported by commercial banking
institutions and insurance company funding. At June 30, 1999, Buford had
aggregate consolidated indebtedness of $112.0 million, all of which will be
repaid on the date of acquisition. Borrowings bear interest at the banks'
floating rates, LIBOR, or a combination thereof as selected by Buford, plus a
margin dependent on Buford's leverage ratio. The weighted average effective
interest rate at June 30, 1999 was 6.2%. The bank credit agreement has a final
maturity date of June 30, 2005, with quarterly principal payments beginning
September 30, 1999.
Buford's net cash provided by operations was $20.3 million in 1998 compared
to $16.9 million in 1997 and $13.6 million in 1996. Buford's net cash provided
by (used in) investing activities was ($53.2 million), ($39.7 million) and $20.3
million in 1998, 1997 and 1996, respectively. Buford's net cash provided by
(used in) financing amounted to $32.8 million, $24.9 million and ($10.9 million)
in 1998, 1997 and 1996, respectively. Buford's Adjusted EBITDA increased to
$27.2 million in 1998 from $20.8 million in 1997 and $18.1 million in 1996.
Adjusted EBITDA as a percentage of revenue changed to 38.6% in 1998 from 35.8%
in 1997 and 36.5% in 1996.
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PRO FORMA FOR THE BUFORD ACQUISITION AND OTHER COMPLETED ACQUISITIONS
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, we have pursued, and continue to pursue,
a business strategy that includes selective acquisitions. We have funded our
working capital requirements, capital expenditures and acquisitions through a
combination of internally generated funds, long- and short-term borrowings, and
equity contributions. We intend to continue to finance these expenditures from
similar sources.
We financed the Buford acquisition through certain financing arrangements,
consisting of a $250.0 million new credit facility and the issuance of $150.0
million of senior subordinated notes due 2009. See "Description of Other
Indebtedness." In addition, approximately $95.7 million in cash was contributed
to us by Classic Communications pursuant to the Brera Classic equity investment.
See "Brera Classic Equity Investment." The sources and uses of funds for the
Buford acquisition was as follows:
<TABLE>
<S> <C> <C>
SOURCES OF FUNDS:
(q) The offering of new subordinated notes...................... $150,000
(r) The Brera Classic equity investment (net of fees of and
expense reimbursements to Brera Classic).................... 95,748
(s) New credit facility......................................... 175,000
--------
Total sources of funds...................................... $420,748
========
USES OF FUNDS:
(t) Retirement of existing credit facility...................... $ 97,050
Buford acquisition.......................................... 297,783
Fees and expenses:
(u) Deferred financing costs.................................... 16,875
(v) Other transaction costs..................................... 5,200
(w) Working capital............................................. 3,840
--------
Total uses of funds......................................... $420,748
========
</TABLE>
The amount set forth above under the caption "Other transaction costs"
represents compensation-related payments related to the Buford acquisition and
the Brera Classic equity investment.
Following the Buford acquisition, we have debt service requirements
increasing from approximately $40 million a year to $54 million over the next
eight years. During this time, we anticipate capital expenditures averaging
approximately $40 million a year. Debt covenants dictate that Classic Cable
maintain certain ratios related to debt balances and operating results in
addition to limiting the amount that can be used for capital expenditures. Funds
to support Classic Cable's operations and pay the anticipated debt service and
capital expenditure requirements are anticipated to be primarily generated from
its operating activities and from additional financing activities. On June 30,
1999, we had $75.0 million available under Classic Cable's line of credit
subject to some limitations.
The Brera Classic equity investment constituted a change of control that
required us to offer to repurchase the notes at a purchase price equal to 101%
of the accreted value of the notes plus accrued and unpaid interest. The holders
of these notes may tender them to us for repurchase through September 1, 1999
pursuant to the change of control offer. Because these notes are trading at a
premium substantially higher than 101%, we have made no provision to repurchase
the outstanding notes in the event the holders require us to repurchase them.
See "Description of Other Indebtedness." Although we do not expect that the
holders will require us to repurchase these notes, we cannot assure you that
some or all of them will not do so.
We have formulated a capital expenditures plan to spend by August 2003
approximately:
- $100.0 million to establish a technical standard of 550-750 MHz bandwidth
capacity, or 78 analog channels, in cable television systems serving
approximately 75% of our basic subscribers and headend consolidation;
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- $45.0 million for ongoing maintenance and replacement, for installations
and extensions to improve the cable plant related to customer growth; and
- $15.0 million for the purchase of additional addressable converters and
headend equipment to support the deployment of digital services. See
"Business."
Our ability to make payments on and to refinance our indebtedness,
including the exchange notes, and to fund planned capital expenditures will
depend on our ability to generate cash in the future. This, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond our control.
Based on Classic Cable's current level of operations and anticipated cost
savings and operative improvements, we believe Classic Cable's cash flow from
operations, available cash and available borrowings under its credit facility,
will be adequate to meet our future liquidity needs for at least the next few
years.
We cannot assure you, however, that Classic Cable's business will generate
sufficient cash flow from operations, that currently anticipated cost savings
and operative improvements will be realized on schedule or that future
borrowings will be available to us under Classic Cable's credit facility in an
amount sufficient to enable us to pay our indebtedness, including these notes,
or to fund our other liquidity needs. We may need to refinance all or a portion
of our indebtedness, including these notes on or before maturity. We cannot
assure you that we will be able to refinance any of our indebtedness, including
Classic Cable's credit facility and these notes, on commercially reasonable
terms or at all. See "Risk Factors."
INFLATION
Certain of our 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, these
changes historically have not had a material adverse effect on our results of
operations.
YEAR 2000 COMPLIANCE
Through 1999, most large companies will be facing 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. We have begun taking measures to address this problem. However,
we have not yet completed the assessment of the potential impact of Year 2000 on
our key business applications, operational systems, or relationships with key
business partners. We have initiated an extensive assessment of Year 2000
readiness relative to our information system and communications technology. In
addition, we have engaged an outside consultant in performing this evaluation
and expect that it will be completed by the end of the third quarter of 1999. We
cannot estimate what the total cost will be to implement our remediation efforts
for our critical operational systems, but it is possible that such costs will be
material.
We have also started an ongoing program to review the status of key
supplier Year 2000 compliance efforts. While we believe we are taking all
appropriate steps to insure Year 2000 compliance, there can be no assurance that
these key partners, which may include third-party vendors and service providers,
will complete their own Year 2000 compliance projects in a timely manner and
that failure to do so will not have an adverse impact on our business. Further,
until we have completed our Year 2000 assessment, we cannot determine whether a
contingency plan is required nor the timetable for establishment of such a plan.
The lack of contingency plans could prevent us from resolving Year 2000 issues
in a timely and efficient manner, and could heighten the risk that the Year 2000
problem may have a material adverse effect on our financial condition and
results of operations.
The Year 2000 problem is pervasive 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 condition.
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BUSINESS
COMPANY OVERVIEW
We are a growth oriented cable operator focused on non-metropolitan markets
in the central United States. We have experienced growth in subscribers,
revenues and cash flows, primarily through the successful execution and
integration of over 20 acquisitions of clustered cable systems in nine
contiguous states. Pro forma for the acquisition of Buford Group, Inc. and
assuming completion of other recently publicly announced transactions by other
companies in the cable television industry, we believe we are the 14th largest
cable operator in the United States, with systems that pass approximately
609,000 homes and serve approximately 359,000 basic subscribers.
We believe that there are significant operating, competitive and economic
advantages in acquiring and owning systems in non-metropolitan markets. In
pursuing our business strategy, we have focused our acquisition efforts on cable
television systems in growing non-metropolitan markets and have sought to build
geographic clusters of these systems. Because of poor reception of broadcast
television signals, customers often require cable television service in these
markets to receive a full complement of off-air broadcast stations, such as ABC,
NBC, CBS, and FOX. These off-air broadcast stations represent approximately 31%
of overall television viewing. In addition, there are typically fewer
competitive entertainment alternatives in these markets. As the leading
multi-channel video provider in our markets, we have capitalized on these market
characteristics by generating predictable revenue streams and EBITDA.
Approximately 80% of our cable subscribers reside in a county seat or are
located within a 30-mile radius of a county seat. These markets typically have
(A) larger populations, (B) more favorable demographics, (C) higher growth
characteristics, and (D) stronger economic activity than do other non-
metropolitan markets. We have created clusters of cable television systems
around these markets and believe that clustering cable systems provides
significant operating and cost advantages. We own and manage 539 cable systems
in nine contiguous states. Approximately 70% of our customers are located on
approximately 26% of our headends. This level of clustering allows us to deploy
our technical staff, vehicle fleet, and shared resources more efficiently,
resulting in lower operating and capital costs and improved customer response
time. Clustering also allows us to:
- manage the workforce and allocate personnel more effectively;
- address the specific customer service and programming needs of our
customers;
- introduce digital cable services and other new services in a cost
effective manner;
- increase the number of households reached with existing marketing
budgets;
- increase the benefits of local and regional community relations efforts;
and
- manage political relationships at the local and state level.
We believe that providing superior customer service and developing strong
community relations are key elements to our long-term success and enable us to
maintain our subscribers, support our rates, and foster good working
relationships with local administrators. We seek to achieve a high level of
customer satisfaction by employing a well-trained staff of customer service
representatives and experienced field technicians. We operate two call centers
located in Tyler, Texas, and Plainville, Kansas, which offer 24-hour, 7-day per
week coverage to all of our customers on a toll-free basis. We believe that the
combination of these call centers provides us with redundancy safeguards and a
platform for further growth.
J. Merritt Belisle, our Chief Executive Officer, and Steven E. Seach, our
President and Chief Financial Officer, founded Classic in 1992 and have
assembled a management team with significant business experience operating cable
television systems and providing quality customer service to cable
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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.
As a result of the Buford acquisition, our management team has been further
enhanced by the addition of several key members of Buford's management team,
including Ron Martin, who became our Executive Vice President of Operations and
Kay Monigold, who became our Executive Vice President of Administration. Mr.
Martin and Ms. Monigold have been in the cable industry for over 25 years and 18
years, respectively.
Members of our management team collectively own or have the right to
acquire approximately 15% of our common stock and up to an additional 10% of our
common stock will be set aside for issuance to management pursuant to options
granted to them.
Since our inception, we have been supported through debt financings and
equity raised through sales to institutional equity investors. Our capital stock
is owned by institutional investors, including Austin Ventures, L.P., Brera
Classic, NationsBanc Capital Corp., The Texas Growth Fund, BT Capital Partners,
Inc., and certain members of our existing bank group led by The Chase Manhattan
Bank and Union Bank Ventures. These institutional investors have contributed
approximately $134.1 million of total equity financing to us. At June 30, 1999,
on a pro forma basis, we had long-term debt of approximately $516.2 million.
This debt and equity financing was utilized primarily in the acquisition of
cable television systems.
OUR STRATEGY
FOCUS ON ATTRACTIVE NON-METROPOLITAN MARKETS
We have followed a systematic approach to acquiring, consolidating,
operating and developing cable television systems based on the primary goal of
increasing our operating cash flow while maintaining the quality of our
services. Our business strategy has focused on serving growing non-metropolitan
communities in the central United States. For example, approximately 80% of our
cable subscribers reside in a county seat or within a 30-mile radius of 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 and
Claritus, Inc., total households in the top 97 systems owned by us are projected
to grow by approximately 9.4%, versus the national average of 5.7%, from 1997 to
2002. Those 97 systems currently serve approximately 60.1% of our total
subscribers. We believe that our cable systems generally involve less
competition than systems serving large urban cities, especially for services
such as high speed Internet access. It is our goal to continue to focus on
growing non-metropolitan areas.
EXPAND AND IMPROVE CLUSTERS THROUGH SELECTIVE ACQUISITIONS
To date, we have sought to acquire cable television systems in communities
that are in close geographic proximity to other cable television systems owned
or managed by us in order to maximize the economies of scale and operating
efficiencies associated with "clusters" of systems. We plan to continue our
clustering strategy by pursuing opportunities to purchase cable television
systems in our 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, we expect to pursue opportunities
to exchange certain of our cable systems for other cable television properties
to promote our clustering strategy further. Factors likely to be considered by
us 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 our operations.
In order to offer Internet access on a full-scale residential and
commercial basis in the communities we serve, we are actively seeking to acquire
incumbent Internet service providers in and around our markets. We believe that
acquiring the expertise from an incumbent Internet service provider would allow
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us to offer services in the most effective and timely manner enabling us to
capitalize on the immediate, viable Internet opportunities in our markets. We
are 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 COMMUNITY RELATIONS AND CUSTOMER SATISFACTION
We believe that providing superior customer service and enhancing the
quality of life in the communities we serve are the key elements to our ultimate
long-term success. Our high level of service enables us to maintain subscribers
and support our rates. It is our goal to achieve a high level of customer
satisfaction by employing a well-trained staff of customer service
representatives and experienced field technicians.
Our Tyler, Texas call center offers 24-hour, 7-day per week coverage to
existing Buford customers on a toll-free basis. The call center utilizes four
T-1 lines and can handle up to 80 incoming calls at any given time. We believe
the call center can accommodate 250,000 subscribers with our current facilities.
The call center complex, including hardware and software, was designed to be
rapidly and cost-effectively increased in scale to manage up to approximately
2.0 million subscribers.
The Tyler, Texas call center administers all phases of on-site service at a
customer's home, including dispatching the order, confirming that service has
been completed and updating the billing system and the customer's records to
reflect completion of the service. We utilize a satellite-based system to track
and dispatch our service vehicles throughout the service territory. The Qualcomm
OmniTRACS system provides real-time, constant two-way communications between the
call center and service vehicles. The system utilizes a base unit at the call
center that sends and receives messages via satellite from receiver/transmitters
installed atop each service vehicle.
Our call center in Plainville, Kansas also offers 24-hour, 7-day per week
coverage to existing Classic 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 telephone switch we own. 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 volume.
We believe customer service is further enhanced by our 44 local offices'
ability to coordinate technical service and installation appointments more
effectively and to respond quickly to customer inquiries. We also believe that
local offices increase the effectiveness of our customer retention efforts,
community relations endeavors, and marketing campaigns. Our 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.
In addition, we employ bilingual customer service representatives to serve our
Spanish-speaking subscriber base.
We are dedicated to fostering strong community relations in the communities
we serve. The cornerstone of our community relations strategy is our Classic
Scholarship Fund, which has provided meaningful financial assistance to hundreds
of graduating high school seniors within our service areas over the past three
years. We install and provide free cable television service and Internet access
to public schools, government buildings, and public libraries in our franchise
areas. We believe that our relations with the communities we serve are good.
We maintain a site on the World Wide Web (http://www.classic-cable.com) to
help communicate and interact with our online customers. Our website was
designed to help our customers make intelligent television viewing choices and
to acquaint our customers with us and our corporate mission.
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INCREASE THE REVENUE-GENERATING BANDWIDTH OF OUR CABLE PLANT
Through our capital improvement program, we plan to upgrade our cable plant
aggressively and systematically utilizing cost-effective and appropriate
technology for the market served. These upgrades include:
- Traditional rebuild to a 550-750 MHz bandwidth capacity in selected
systems;
- The deployment of digital compression services such as Headend in The
Sky(R), known as HITS, a digital compression service developed by
National Digital Television Center, Inc., a subsidiary of
Tele-Communications, Inc., and TVN Entertainment Digital Service, known
as TVN;
- The deployment of fiber optic cable; and
- The consolidation of headends.
We believe that these technical upgrades create additional revenue
opportunities, enhance operating efficiencies, increase customer satisfaction,
improve franchise relationships and solidify our position as the dominant
provider of multi-channel video services in our markets. We seek to benefit from
the capital improvement program by generating additional revenue from:
- Expanded tiers of basic programming;
- Multiplexed premium services;
- Pay-per-view movies and events;
- Digital music;
- On-screen navigators;
- Home shopping services;
- High-speed data services;
- Internet access; and
- Advertising.
IMPLEMENT OUR BROADBAND SERVICES
Digital services. Depending on the size of the system, we intend to offer
digital video services through either a digital headend or through
direct-to-home solution. In larger systems, we provide enhanced digital video in
our upgraded and certain other systems using either HITS or TVN. HITS enables us
to deliver video services such as:
- pay-per-view programming;
- on-screen programming navigators;
- multiplexed premium channels such as HBO-Family and HBO-Signature;
- digital music; and
- multiple tiers of niche satellite basic programming.
TVN also offers a similar digital compression service which provides a
robust line up of pay-per-view programming, digital quality music channels, and
the on-screen programming navigator. This digital delivery method provides for a
more flexible, customized product and improved channel lineups and may
potentially allow for more flexibility in pricing and packaging.
For systems with fewer than 2,000 subscribers, or other systems whose
headends are uneconomical to upgrade, we intend to use a digital satellite
alternative to provide a more robust cable product offering. Whether through the
resale of digital programming from a DBS provider or HITS-2-Home, we can offer
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customers over 140 additional channels. For example, HITS has recently developed
a seamlessly delivered digital satellite programming overlay product direct to
the home. This product, HITS-2-Home, is expected to offer customers a comparable
programming selection currently offered by HITS to the headend.
We believe that these enhanced digital video services will allow us to
provide digital services comparable to DBS at a lower cost. We have introduced
the HITS or TVN digital product in 7 systems which in the aggregate pass
approximately 64,000 homes, representing approximately 39,000 cable subscribers.
As of June 30, 1999, we had approximately 3,100 digital customers. We plan to
offer digital cable service in 23 additional markets, serving approximately
63,000 additional subscribers over the next few months.
Internet services. We believe 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. We believe that these markets have limited appeal to the larger
telecommunications companies and that our technical platform will provide these
services at higher speeds and lower cost, giving us a competitive advantage over
other telecommunication providers in the markets in which we operate. For
example, a 10 megabit cable modem provides Internet access at download speeds
350 times faster than typical 28.8 kilobit dial-up telephone modem connections.
We have introduced Internet access via the cable modem in selected systems and
will seek to complement this service with the telephone modem connection through
acquisitions of local Internet service providers.
As part of our strategy to deliver Classic-branded advanced data services
in communities we serve, we have entered into a non-exclusive agreement with
High Speed Access Corporation, known as HSA. HSA provides a comprehensive
turnkey solution for high speed Internet access via cable modems to residential
and commercial end users. HSA will provide speed to market, call center/help
desk support, national and local marketing assistance, engineering and network
design, cable modems and supporting headend equipment. The Com21 modem that HSA
currently uses is system flexible, capable of being deployed in a one-way, or
telco return, or two-way scenario. In return for these services, we will receive
a 50% split of gross customer revenue. Our initial launch plan will include 43
additional systems representing approximately 253,000 homes passed within the
next twelve months. Presently, we have six active sites passing approximately
17,000 homes.
SYSTEM LOCATION
We operate cable television systems in non-metropolitan markets across nine
contiguous states in the central United States. The following table illustrates
our relative rank in each of the states we operate based on total number of
subscribers:
<TABLE>
<CAPTION>
EQUIVALENT
HOMES BASIC BASIC STATE
STATE PASSED UNITS PENETRATION RANK
- ----- ------------ ---------- ----------- -----
<S> <C> <C> <C> <C>
Texas......................................... 274,325 141,310 52% 5
Arkansas...................................... 96,728 61,907 64 4
Oklahoma...................................... 81,270 49,880 61 6
Missouri...................................... 67,288 38,841 58 6
Kansas........................................ 50,965 34,977 69 3
Louisiana..................................... 27,381 18,586 68 8
Colorado...................................... 5,157 5,312 103 7
Nebraska...................................... 3,389 2,166 64 12
New Mexico.................................... 2,604 1,655 64 11
------- ------- -----
Subtotals................................ 609,107 354,634 58%
=====
CCT...................................... 4,335
------- -------
Totals.............................. 609,107 358,969
======= =======
</TABLE>
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<PAGE> 53
As part of the Buford acquisition, we acquired Correctional Cable
Television, Inc., known as CCT. CCT is the largest provider of programming
services to the prison market, serving 90 correctional facilities in 18 states,
reaching more than 70,000 inmates. CCT provides programming services through
company-owned and installed modified headends under three to five year
contracts. CCT's EBITDA has grown at a compounded annual rate of approximately
40% during the last three years. CCT's continued growth will be driven by
increased penetration of the prison market, which consists of approximately
2,000 federal, state and juvenile facilities.
MARKETING, PROGRAMMING AND RATES
Our marketing programs and campaigns are based upon a variety of cable
services creatively packaged and tailored to appeal to our different markets and
segments within each market. We routinely survey our customer base to ensure
that it is meeting the demands of our customers and stays abreast of our
competition in order to counter competitors' promotional campaigns effectively.
We use 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.
We have various contracts to obtain basic, satellite and premium
programming for our cable 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, we are a member of a programming
consortium consisting of small to medium sized multiple cable systems operators
and individual cable systems serving, in the aggregate, over ten 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.
We do not have long-term programming contracts for the supply of a substantial
amount of our programming. In cases where we do have such contracts, they are
generally for fixed periods of time ranging from one to five years and are
subject to negotiated renewal. While we believe that our relations with our
programming suppliers are generally good, the loss of contracts with certain of
our programming suppliers would have a material adverse effect on our 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. For the year ended
December 31, 1998 and the six months ended June 30, 1999, programming costs as a
percentage of revenues were 26% and 27%, respectively. We cannot assure you that
our programming costs will not increase substantially in the near future or that
other materially adverse terms will not be added to our programming contracts.
Our cable systems offer our 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 us
varies among the cable systems depending upon each system's channel capacity and
viewer interests. Primarily for competitive reasons, we generally attempt to
offer a single level of basic service containing all broadcast and
satellite-delivered programming. In a few systems, however, we do offer multiple
tiers of cable television programming. We also offer premium programming
services, both on a per-channel basis and in many systems as part of premium
service packages designed to enhance our 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, 1999, our monthly full basic service rates for residential customers ranged
from $18.00 to $35.45 and per-channel premium service rates, not including
special promotions, ranged from $5.95 to $12.00 per service. At June 30, 1999,
the weighted average price for our monthly full basic service was approximately
$30.28.
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A one-time installation fee, which we may wholly or partially waive during
a promotional period, is usually charged to new customers. We charge monthly
fees for converters and remote control tuning devices. In addition, we also
charge 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, we derive modest revenues from the sale of
local spot advertising time on locally originated and satellite-delivered
programming. We also derive 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.
We also derive revenue from the sale of programming featuring movies and
special events to customers on a pay-per-view basis. We believe that we will be
able to further increase our pay-per-view penetration rates and revenue as we
continue to deploy addressable technology in upgraded systems and in systems
where we launch a digital compression service.
While we plan to offer advanced telecommunications services in certain of
our cable systems, we anticipate that monthly customer fees derived from
multi-channel video services will continue to constitute the large majority of
our total revenues for the foreseeable future.
TECHNICAL OVERVIEW
We endeavor to maintain high technical performance standards in all of our
cable systems. To accomplish this, we have embarked on our capital improvement
plan to upgrade our cable systems selectively. This program, which involves the
use of fiber optic technology, will (A) expand channel capacities, (B) enhance
signal quality, (C) improve technical reliability, (D) augment address ability,
and (E) provide a platform to develop high-speed data services and Internet
access. We believe that such technical upgrades create additional revenue
opportunities, enhance operating efficiencies, increase customer satisfaction,
improve franchising relations and solidify our position as the dominant provider
of video services in the markets in which we operate. Before committing the
capital to upgrade or rebuild a system, we carefully assess:
- the existing technical reliability and picture quality of the system;
- basic subscribers' demand for more channels;
- requirements in connection with franchise renewals;
- programming alternatives offered by our competitors;
- customers' demand for other cable television and broadband
telecommunications services; and
- the return on investment of any such capital outlay.
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<PAGE> 55
Currently, our subscribers, on average, are served by systems with an
analog capacity of 44 channels with 33 channels in use. The table below
summarizes our existing technical profile, as of June 30, 1999:
<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.............. 18 240 124 62 95 539
Miles of plant................. 169 4,578 4,596 3,097 4,144 16,584
Homes passed................... 7,001 145,782 164,570 99,536 192,218 609,107
Basic subscribers.............. 3,383 79,694 95,221 54,802 121,534 354,634(1)
% of total basic subscribers... 1.0% 22.5% 26.9% 15.5% 34.1% 100.0%
Basic subscribers per plant
mile......................... 20.0 17.4 20.7 17.7 29.3 21.4
Premium subscribers............ 1,000 35,331 42,514 38,480 72,444 189,769
Premium penetration............ 29.6% 46.1% 43.3% 66.3% 59.6% 53.5%
</TABLE>
-------------------------
(1) Does not include approximately 4,300 equivalent basic units
related to CCT.
Our capital improvement plan contemplates the investment of approximately
$160.0 million over the next four years as follows:
- $100.0 million to establish a technical standard of 550-750 MHz bandwidth
capacity in cable television systems serving approximately 75% of our
basic subscribers and headend consolidation;
- $45.0 million for ongoing maintenance and replacement, for installations
and extensions to the cable plant related to customer growth; and
- $15.0 million for the purchase of additional addressable converters and
headend equipment to support the deployment of digital services.
The table below summarizes our expected technical profile upon completion
of the capital 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(1)........... -- 206 113 38 182 539
Miles of plant................. -- 3,013 1,873 1,043 10,655 16,585
Homes passed................... -- 90,548 65,255 31,764 421,660 609,107
Basic subscribers.............. -- 45,438 29,892 12,266 267,038 354,634(2)
% of total basic subscribers... -- 12.9% 8.4% 3.4% 75.3% 100.0%
Basic subscribers per plant
mile......................... -- 15.1 15.6 11.8 25.1 21.4
Premium subscribers............ -- 20,265 14,144 11,270 144,090 189,769
Premium penetration............ -- 44.6% 47.3% 91.9% 54.0% 53.5%
</TABLE>
-------------------------
(1) The analysis above does not reflect the impact of anticipated
headend consolidations achieved through the selective deployment
of fiber optic technology.
(2) Does not include approximately 4,300 equivalent basic units
related to CCT.
With the exception of 11 systems, we do not currently use addressable
technology. We utilize 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 cable system improvement program contemplates
the use of addressable set-top boxes in selected analog upgraded systems, in
addition to digital addressable technology. This service transmits digitally
compressed signals of niche satellite programming, multiplexed premium services,
pay-per-view movies and digital music for reception by cable systems, which in
turn deliver them to their subscribers.
Our 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 our cable television systems. Fiber optic
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<PAGE> 56
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. We expect to use fiber backbone architecture selectively to
eliminate headend facilities and to reduce amplifier cascades, thereby improving
picture quality, system reliability and headend and maintenance expenditures.
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 expand channel capacity significantly given that
up to 12 digital channels can be carried in the bandwidth of one analog channel
(6 MHz).
We own or lease 617 towers that are used to receive off-air broadcast
signals from the nearest urban transmit site or via intermittent microwave relay
stations. Our towers range from 15 feet to 600 feet in height and 138 of our
towers are at least 200 feet in height. We lease tower space to cellular
telephone, personal communications services paging and other transmission
companies for a fixed monthly charge typically dictated by long-term contract.
FRANCHISES
Cable television systems are typically constructed and operated under
non-exclusive franchises granted by local governmental authorities. These
franchises typically contain conditions, such as:
- time limitations on commencement and completion of construction;
- conditions of service, including number of channels, types of programming
and the provision of free service to schools and certain other public
institutions; and
- 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 -- Federal Regulation -- Cable Rate Regulation."
At June 30, 1999, pro forma for the Buford acquisition, we held 695
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 cable systems range from 0% to 5% of the gross revenues generated by the
cable 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. Our franchises can
be terminated by the franchising authority prior to the stated expiration date
for uncured breaches by us of material provisions.
The following table sets forth the number of franchises by year of
franchise expiration and the approximate number and percentage of basic
subscribers at June 30, 1999:
<TABLE>
<CAPTION>
NUMBER % OF NUMBER % OF
OF TOTAL OF TOTAL
YEAR OF FRANCHISE EXPIRATION FRANCHISES FRANCHISES SUBSCRIBERS SUBSCRIBERS
- ---------------------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Prior to 2000............................... 29 4.2% 26,395 7.4%
2000 to 2003................................ 177 25.5 84,695 23.9
After 2003.................................. 489 70.3 243,544 68.7
--- ----- ------- -----
Total............................. 695 100.0% 354,634 100.0%
=== ===== ======= =====
</TABLE>
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." We believe that we
have good relationships with our franchising communities. To date, we have never
had a franchise revoked or
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<PAGE> 57
terminated. Additionally, no request made by us 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 -- Federal Regulation -- Cable Rate Regulation."
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 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
1940's and early 1950's 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 1960's, 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 from
Chicago, various channels, such as Cable News Network, Music Television, the USA
Network, Turner Network Television, and Entertainment and Sports Programming
Network, programming originated locally by the cable television system, such as
public, government 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, 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. These 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.
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<PAGE> 58
COMPETITION
Cable television systems face competition from (A) alternative methods of
receiving and distributing television signals, such as off-air television
broadcast programming, direct broadcast satellite services, known as "DBS,"
wireless cable services, and (B) other sources of news, information and
entertainment, such as newspapers, movie theaters, live sporting events, on-line
computer services and home video products. Our 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 to us. 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. We currently face direct competition from traditional
overbuilds in two systems passing approximately 2,500 homes.
In recent years, the FCC and 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 satellite dishes as small as 18
inches 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 systems can also provide
high speed Internet access. 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 two DBS providers. DBS providers
are significant competition to cable service providers, including us.
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 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, known as 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. Our strategy of providing pay-per-view and
perhaps satellite niche programming via digital services in certain of our cable
systems is designed to combat digital satellite service competition. "Bundling"
of our video service with advanced telecommunications services in certain of the
cable systems may also be an effective tool for competing with DSS. 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 both DBS providers are now attempting to do so
in certain major markets, and legislation is now pending that may remove the
existing legal obstacle.
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<PAGE> 59
Cable television systems also compete with wireless program distribution
services such as multichannel multipoint distribution service, or MMDS, which
use low power microwaves to transmit video programming and high speed data
services, including Internet access, over the air to customers. Additionally,
the FCC licensed new frequencies in the 28 MHz band for a new multichannel
wireless video service similar to MMDS, known as Local Multipoint Distribution
Service, or 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 significantly increase the channel
capacity of these wireless distribution services. 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.
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 local exchange carriers, commonly referred to as 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 or MMDS transmission. Several telephone companies have begun seeking
cable television franchises from local governmental authorities and constructing
cable television systems. 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 our cable
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. We believe, however, that the non-metropolitan
markets in which we provide or expect 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 a 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." We believe that significant growth opportunities exist for us by
establishing cooperative rather than competitive relationships with LECs within
our service areas, to the extent permitted by law.
The entry of electric utility companies into the cable television business,
as now authorized by the 1996 Telecom Act, could also have an adverse effect on
our business. Well-capitalized businesses from outside the cable industry may
also 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 xDSL
services by LECs and other common carriers provide 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.
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<PAGE> 60
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 our operations.
EMPLOYEES
At June 30, 1999, Classic Cable and Buford employed approximately 670
full-time employees and 51 part-time employees. None of our employees is
represented by a labor union. We consider our relations with our 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.
Our 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 cable
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. Our distribution systems consist primarily of coaxial cable
and related electronic equipment. As the upgrades are completed, the cable
systems will incorporate fiber optic cable. Subscriber equipment consists of
taps, house drops and converters. We own our distribution systems, various
office fixtures, test equipment and certain service vehicles. The physical
components of the cable systems require maintenance and periodic upgrading to
keep pace with technological advances.
Our 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.
We own or lease parcels of real property for signal reception sites, such
as antenna towers and headends, microwave complexes and business offices,
including our principal executive offices. We believe that our properties, both
owned and leased, are in good condition and are suitable and adequate for our
business operations as presently conducted.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which we are or Classic
Cable is a party or to which any of our or their respective properties are
subject.
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<PAGE> 61
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, us 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. We believe that the regulation of our 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 our operations.
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. Below, you will find
a brief summary of certain of these federal regulations as adopted to date.
Cable Rate Regulation
The 1992 Cable Act imposed an extensive rate regulation regime on the cable
television industry. Under that regime, local franchise authorities had primary
responsibility for administering the basic service tier. The FCC directly
administered rate regulation of cable programming service tiers, which included
all video programming distributed over a system that is not part of the basic
service tier. Although the 1996 Telecom Act preserves local franchise authority
to regulate the basic service tier, it eliminated FCC authority to regulate
cable programming service tier rates as of March 31, 1999. Accordingly, the FCC
is no longer able to act on cable programming service tier rate increases that
occur after that date.
Federal law nonetheless continues to govern certain aspects of local rate
regulation. For example, federal law requires that the basic service tier be
offered to all cable subscribers. Recent FCC regulations adopted pursuant to the
1996 Telecom Act define "effective competition" and "small cable operator" for
purposes of exempting certain cable systems' basic tier from rate regulation.
Additional federal regulations require cable systems to permit customers to
purchase video programming on a per channel or per program basis without
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
is available until a cable system obtains the technical capability, but not
later than December 2002.
Although the 1996 Telecom Act eliminated FCC rate regulation of the higher
tiers, local franchising authorities, known in the industry as LFAs, continue to
have authority over the regulation of the lowest level of cable -- the basic
service tier, commonly known as BST. For regulatory purposes, the BST contains
local broadcast stations and public, educational, and government, or PEG, access
channels and other services the system operator chooses to include in the same
package with these channels. Before an LFA begins BST rate regulation, it must
certify to the FCC that it will follow applicable federal rules, and
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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 we operate have elected
to certify to regulate rates, and we believe that the FCC's existing "small
systems order" will afford us additional flexibility to adjust our rates. The
small systems order, and related FCC rules, provides a more simplified and
liberal cost of service rate justification to eligible small system operators,
such as us. However there can be no assurance that our revenues and results of
operations will not be adversely affected in the future by regulation of cable
system rates.
Franchise Fees
Federal law allows franchising authorities to 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, however, many LFA's seek
analogous fees under separate telecommunications service franchises. LFA
authority to collect these telecommunications franchise fees is the subject of
litigation.
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 made
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 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 and Broadband Services
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
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prescribed formula if the operator provides telecommunications service, as well
as cable service, over its plant. The FCC has clarified that a cable operator's
favorable pole rates are not endangered by the provision of non-cable services
such as 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.
These regulations were upheld by the U.S. Supreme Court in January 1999,
although the unbundled network element requirements are subject to an FCC
proceeding. 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 us or our business cannot be determined at this time.
Cable entry into markets for broadband services such as Internet access may
be affected by the regulatory landscape now being fashioned by the FCC and state
and local regulators. In recent months, some local franchise authorities have
imposed conditions on their approval of transfers of control, including those
involving such major transactions as AT&T's acquisition of TCI's cable
franchises. For example, the City of Portland, Oregon required AT&T to provide
competing Internet and other on-line service providers with open access to its
newly acquired cable platforms. This decision was upheld on appeal before a
federal district court, although that decision is on appeal. Numerous other
franchise authorities are considering imposing similar requirements, either
during transfer or renewal processes or by promulgating regulations pursuant to
their general franchise authority. In addition, a petition for declaratory
ruling has been filed with the FCC requesting a determination that cable service
providers must provide leased access channels to Internet service providers.
Similar conditions could be imposed upon us, either pursuant to a local
franchising authority's approval of a merger or other transaction between us and
another company, through the franchise renewal process, or through future
developments at the federal, state or local level. Likewise, future regulatory
or legislative developments could limit or preempt the authority of franchise
authorities to impose mandated access conditions.
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. We currently have telephone overbuilds in two systems passing
approximately 2,500 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.
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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
under the 1984 Cable Act. However, in a January 1999 decision, the U.S. Court of
Appeals for the Fifth Circuit held that the 1996 Telecom Act did not preempt
state franchise laws that might be applicable to these systems. 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 eliminated the
statutory ban and directed 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, 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 satellite master antenna television systems, or SMATV systems.
Permitted arrangements in effect as of October 5, 1992, were 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 maintains certain reporting requirements for multiple
system operators, known as MSOs, 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, a
rulemaking proceeding to examine, among other issues, whether any limitations
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on cable-DBS cross-ownership are warranted in order to prevent anticompetitive
conduct in the video services market remains pending before the FCC.
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, limit
direct and indirect foreign ownership of interests in FCC broadcast and common
carrier radio licenses, although the FCC may conclude that this indirect 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, known as
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 update its technical standards periodically 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
reaffirmed an order implementing regulations intended to promote the commercial
availability of navigation devices, including set-top converters. The rules
apply generally to all multichannel video programming distributors, or MVPDs,
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 all analog equipment and navigation devices that operate throughout the
continental United States and are commercially available from unaffiliated
sources, such as equipment used by DBS services. The order requires that the
security 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.
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. We
may operate systems that utilize poles owned by cooperatively and government
owned utilities. None of the states in which we operate cable systems has
certified to the FCC that it regulates the rates, terms and conditions for pole
attachments. With respect to Buford's operations, Louisiana has certified to the
FCC that it regulates pole attachments. In the absence of state regulation, and
except for cooperatively or government owned poles, the FCC administers such
pole attachment rates through use of a formula which it has devised. As directed
by the 1996 Telecom
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Act, the FCC has adopted a new rate formula for any attaching party, including
cable systems, which offers telecommunications services. This new formula will
result in significantly higher attachment rates for cable systems which choose
to offer such services, or permit their transmission on their cable systems, 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 and several parties have filed petitions for
review at the FCC and in federal appellate courts. A 1997 proceeding to consider
whether certain elements of the existing rate formula should be adjusted also
remains pending before the FCC. 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 us or
our 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, known as must carry, or negotiating for payments for granting
permission to the cable operator to carry the station, known as 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: (A) a 50-mile radius from the station's city of license; or (B) 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 limit a cable systems' programming offerings, and retransmission
consent demands may require substantial payments or other concessions. Either
option has a potentially adverse affect on our 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.
Access Channels
LFAs can include franchise provisions requiring cable operators to 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. The FCC has initiated a proceeding to consider whether the leased
access requirement applies to cable modem internet access services offered by
cable operators.
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
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satellite distributed 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 revised its program access
complaint procedures. Among other revisions, the order increased sanctions for
violation of the program access rules. The FCC has, in subsequent decisions,
declined to broaden the scope of the rules to include terrestrially delivered
programming.
Inside Wiring
In October 1997, the FCC 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, or MDUs. The
rules allow MDU owners 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, if ultimately adopted, 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
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, many of which have been 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;
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- 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. We will continue to
develop strategies to attempt 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 our business. However, no assurances can be given that we 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 our business.
The FCC has the authority to enforce its regulations through the imposition
of substantial fines, the issuance of cease and desist orders and/or the
imposition of other administrative sanctions, such as the revocation of FCC
licenses needed to operate certain transmission facilities used in connection
with cable operations.
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 our ability
to obtain suitable programming and could substantially increase the cost of
programming that remained available for distribution to our customers. We 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.
Recently, the U.S. District Court of the Southern District of New York ruled
that, on an interim basis, cable operators must pay ASCAP the same fees paid to
BMI for locally originated programming, PEG, leased access and local
advertising. Although we cannot predict the ultimate outcome of these industry
negotiations and litigation or the amount of any license fees we may be required
to pay for past and future use of ASCAP-controlled music, we do not believe
these license fees will be material to our operations.
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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 fails to comply with material provisions. The terms
and conditions of franchises vary materially from jurisdiction to jurisdiction.
Each franchise generally contains provisions governing cable operations, service
rates, franchise fees, system construction and maintenance obligations, system
channel capacity, design and technical performance, customer service standards,
and indemnification protections. 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 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. We have generally had good
experiences with our 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.
In July 1999, the U.S. District Court for the District of Oregon held that
the City of Portland, Oregon had the authority to require AT&T Corp. to provide
cable modem services to competitors on a non-discriminatory basis. AT&T has
sought expedited review of this decision in the 9th Circuit Court of Appeals.
OTHER MATTERS
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
Executive officers, key operations managers and outside directors of
Classic are as follows:
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND
DIRECTORS OF CLASSIC COMMUNICATIONS AGE POSITION
- ----------------------------------- --- --------
<S> <C> <C>
Alberto Cribiore............................. 53 Director and Chairman of the Board
J. Merritt Belisle........................... 43 Director and Chief Executive Officer
Steven E. Seach.............................. 42 Director, President and Chief Financial
Officer
Ronald W. Martin............................. 47 Executive Vice President of Operations
Kevin P. McCabe.............................. 56 Executive Vice President and Chief
Accounting Officer
Elizabeth Kay Monigold....................... 46 Executive Vice President of
Administration
Lisa A. Hook................................. 41 Director
David Webb................................... 46 Director
Martin D. Payson............................. 63 Director
</TABLE>
Alberto Cribiore, founder and Managing Principal of Brera Capital Partners
was appointed Chairman of the Board upon the closing of the Brera Classic equity
investment. Prior to forming Brera in 1997, Mr. Cribiore was Co-President and
Partner at Clayton, Dubilier & Rice, Inc. which he joined in 1985 as one of
three principal shareholders. He had previously been a Senior Vice President at
Warner Communications, where he was responsible for mergers, acquisitions and
divestitures. Mr. Cribiore is a cum laude graduate of Bocconi University in
Milan, Italy and holds degrees in Business Administration and Economics. He is
currently a Director of Riverwood International Corporation and Hansberger
Group, Inc. Mr. Cribiore also serves as the Chairman of the Board and Director
of Global Decisions Group, LLC, the parent company of Cambridge Energy Research
Associates and MCM Group, Inc. Mr. Cribiore serves as one of Brera Classic's
designees to our Board. See "Certain Relationships and Related Transactions --
1999 Stockholders' Agreement."
J. Merritt Belisle, our Chief Executive Officer and Director, founded
Classic in March 1992. 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, 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. Mr. Belisle serves as one
of our directors pursuant to his position as our Chief Executive Officer. See
"Certain Relationships and Related Transactions -- 1999 Stockholders'
Agreement."
Steven E. Seach, our President and Chief Financial Officer and Director,
assisted Mr. Belisle in the founding of Classic in March 1992. Mr. Seach became
a member of the Board of Classic in 1998. Mr. Seach became our President in
October 1996 and, through August 1998, was substantially responsible for our
operations. From March 1992 to June 1994, Mr. Seach served as an advisor to
Classic and its Board of Directors for strategic, operational and financial
matters. Mr. Seach became our Chief Financial Officer in July 1994. Prior to his
association with us, Mr. Seach spent 12 years in the corporate 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. Mr. Seach serves as one of our directors pursuant to the 1999
Stockholders' Agreement. See "Certain Relationships and Related
Transactions -- 1999 Stockholders' Agreement."
Ronald W. Martin, who became our Executive Vice President of Operations
upon the closing of the Buford acquisition, is responsible for all of our system
operating and marketing functions. Since 1993, he has served as Buford's
Executive Vice President and Chief Operating Officer. A graduate of Dakota
Weslayan, he joined Buford in 1973 as Business Manager for KXON-TV in Mitchell,
South Dakota, later
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serving in the same position at KFSM-TV in Fort Smith, Arkansas. He joined
Buford's corporate staff in 1976, serving as Internal Auditor and Personnel
Administrator. In 1981, Mr. Martin was named Vice President of Human Resources
and Administration for Buford. Mr. Martin is a Board Member and past Chairman of
the National Cable Television Cooperative and serves on the CTAM Digital
Committee.
Kevin P. McCabe, our Executive Vice President and Chief Accounting Officer
joined us in February 1999. Mr. McCabe was an advisor to us from October 1998 to
February 1999. From October 1995 until February 1999, Mr. McCabe was a principal
in The Austin Advisory, a financial consulting firm. He was employed by
Uniquest, Inc. from March 1994 to September 1995. From 1991 to 1994, Mr. McCabe
was Vice President, Controller of Dell Computer Corporation. Mr. McCabe spent 15
years at KPMG LLP, the last five years as a partner. He subsequently held
increasingly responsible financial management positions at General Foods,
Colgate-Palmolive and John Wiley & Sons. Mr. McCabe received a BS in management
from Boston College.
Elizabeth Kay Monigold, who became our Executive Vice President of
Administration upon the closing of the Buford acquisition, is responsible for
all of our human resources, legal, information systems and risk management
functions, as well as operating responsibility for CCT. Since 1993, she served
as Buford's Executive Vice President and Chief Administrative Officer. Ms.
Monigold joined Buford in 1981 and served in numerous capacities including the
evaluation of new business opportunities such as data, telephony, digital and
other new technologies. Ms. Monigold earned a BBA in Business Management from
The University of Texas at Tyler.
Lisa A. Hook, a Principal of Brera Capital Partners, was appointed Director
upon the closing of the Brera Classic equity investment. Prior to joining Brera
Classic in 1998, Ms. Hook was a Managing Director of Alpine Capital Group, a
telecommunications and media venture capital firm. From 1989 to 1996, Ms. Hook
served in a number of senior executive level positions at Time Warner Inc.,
including Executive Vice President/Chief Operating Officer of Time Warner
Telecom and Special Advisor to the Vice Chairman. From 1987 to 1989, Ms. Hook
served as the Legal Advisor to the Chairman of the Federal Communications
Commission. From 1985 to 1987, Ms. Hook served as a senior attorney at Viacom
International, responsible for Viacom Cable. Prior to joining Viacom, Ms. Hook
was an attorney with the law firm of Hogan & Hartson. Ms. Hook received her BA
from Duke University and her JD from the Dickinson School of Law. Ms. Hook
serves as one of Brera Classic's designees to our Board. See "Certain
Relationships and Related Transactions -- 1999 Stockholders' Agreement."
David Webb, a Principal of Brera Capital Partners, was appointed Director
upon the closing of the Brera Classic equity investment. Prior to joining Brera
Classic in 1999, Mr. Webb was a Managing Director in the investment banking
division of Merrill Lynch, which he joined in 1981. Mr. Webb was the head of the
firm's Global Financial Sponsors Group, and a member of the investment banking
division's U.S. Operating Committee. Mr. Webb received a BA with honors from the
University of North Carolina, where he was a Morehead Scholar, and an MBA from
the Darden School of the University of Virginia. He is the director of the Homes
for Homeless Inc. Mr. Webb serves as one of Brera Classic's designees to our
Board. See "Certain Relationships and Related Transactions -- 1999 Stockholders'
Agreement."
Martin D. Payson, the Chairman of Latin Communications Group, Inc., a
privately-held Spanish language media company, was appointed Director upon the
closing of the Brera Classic equity investment. Previously, Mr. Payson was Vice
Chairman of Time Warner Inc. and a member of its board of directors. Before the
merger of Warner Communications Inc. and Time, Inc., Mr. Payson held the
position of Office of the President and General Counsel of Warner
Communications. Mr. Payson is a director of Delta Financial Corp. and Panavision
Inc., as well as several privately-held companies and philanthropic
organizations. Mr. Payson received his AB from Cornell University and his LLB
cum laude from New York University School of Law. Mr. Payson serves as one of
Brera Classic's designees to our Board. See "Certain Relationships and Related
Transactions -- 1999 Stockholders' Agreement."
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<PAGE> 72
1999 STOCKHOLDERS' AGREEMENT
Effective July 28, 1999, Classic, Brera Classic, BT Capital Partners, Inc.,
Austin Ventures, L.P., BA SBIC Management, L.L.C., as the successor in interest
to NationsBanc Capital Corp., J. Merritt Belisle, Steven E. Seach and certain
other stockholders of Classic entered into a stockholders' agreement. This
agreement provides, among other things, that, until such time as the parties to
the stockholders' agreement together own less than 30% of the outstanding common
stock of Classic, the parties have agreed to vote their common stock to cause
the board of directors to consist of seven members, being four members
designated by Brera Classic, the chief executive officer of Classic, initially
J. Merritt Belisle, and two other individuals to be designated by Austin
Ventures, L.P., Austin Ventures III-A, L.P., Austin Ventures III-B, L.P., BA
SBIC Management, L.L.C., BT Capital Partners, Inc., and The Texas Growth Fund.
One of the two individuals to be named by such stockholders will be Steven E.
Seach for so long as he is employed by us. Such stockholders have not yet
designated an individual to serve as the seventh member of the board of
directors.
OTHER CORPORATE PERSONNEL
Bryan D. Noteboom, our Vice President of Finance & Administration, has been
with us since our inception and coordinates our 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 a licensed Certified Public Accountant.
Mark Rowe, our Corporate Controller, joined us in 1998 and coordinates our
accounting function, including SEC reporting and budgeting. Prior to joining us,
Mr. Rowe worked as an audit manager at Ernst & Young LLP, serving a number of
telecommunication industry clients. Mr. Rowe earned a BBA in Accounting from The
University of Texas at Austin in 1990 and is a licensed Certified Public
Accountant.
Ashley M. Kimery, our Corporate Treasurer, joined us in 1995 and currently
oversees our cash management and tax functions. Prior to joining us, Ms. Kimery
worked for seven years in both the audit and tax departments at Ernst & Young
LLP. Ms. Kimery earned a BBA in Accounting from Texas A&M University in 1987, an
MPA in Tax from The University of Texas at Austin in 1991 and is a licensed
Certified Public Accountant.
John Ellis, our Management Information Systems Manager, has over 25 years
experience in information technology and is responsible for the development,
implementation and operation of all software and hardware network interfaces for
us. Mr. Ellis joined Buford in 1981 and was instrumental in the network design
of the Tyler, Texas call center. Mr. Ellis is currently serving on the CableLabs
Year 2000 Committee.
Ronald G. Jansonius, our Advanced Technology Manager, has been with us
since 1996 and is responsible for directing our 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.
KEY OPERATIONS PERSONNEL
Nita M. Basgall, our Regional Manager, has been with us since our inception
and oversees all operational, technical and local marketing aspects of our
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.
Arl Cope, our Regional Manager, joined Buford in 1987 and is responsible
for the oversight of all operational, technical and local marketing aspects of
certain of our systems in Arkansas, southern Missouri, and northern Louisiana. A
30 year veteran of the cable television industry, Mr. Cope currently serves as
Secretary/Treasurer of the Arkansas Cable Telecommunications Association and has
been a Board Member since 1989.
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William E. Flowers, Jr., our Regional Manager, has over 18 years of
experience in the cable television industry and oversees all operational,
technical and local marketing aspects of our systems in the western and
panhandle regions of Texas and in New Mexico. Mr. Flowers joined us in August
1998.
Steve Lowe, our Regional Manager, has over 25 years in the cable television
industry and oversees all operational, technical and local marketing aspects of
our systems in central and east Texas and central Louisiana. Prior to joining
Buford in 1988, Mr. Lowe constructed, owned and operated cable systems in
western Oklahoma. Mr. Lowe currently serves on the Board of Directors of the
Texas Cable Television Association.
Ron Schaeffer, our General Manager of CCT, is responsible for the operation
of existing business and the development of new business within CCT. Mr.
Schaeffer joined Buford in 1992 and has been instrumental in the development of
the Satellite Education Network, which is designed to provide interactive
educational services to prisons. Mr. Schaeffer is a graduate of New York
University.
David D. Walker, our Regional Manager, has over 28 years of experience in
the cable television industry and oversees all operational, technical and local
marketing aspects of certain of our systems in Missouri, Oklahoma, and Arkansas.
Mr. Walker serves on the Board of Directors of the Arkansas Cable
Telecommunications Association.
Rowdy O. Whittington, our Plant Integrity Manager, oversees our system
technical compliance standards. Mr. Whittington also manages the operations of a
select number of systems in Colorado. Mr. Whittington has over 12 years of
experience in the cable television industry.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers are the executive officers of Classic Cable and hold
the same offices. Other than the executive officers of Classic and Classic Cable
who are also directors, no other directors of Classic or Classic Cable receive
any compensation for serving as a director. The following table summarizes the
compensation for services rendered which Classic paid to the Chief Executive
Officer, President and other executive officers as to whom the total annual
compensation exceeded $100,000 in 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
---------------------------------------------- RESTRICTED
OTHER ANNUAL STOCK
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS(2)(3)
--------------------------- ---- ------ ----- --------------- ------------
<S> <C> <C> <C> <C> <C>
J. Merritt Belisle........... 1998 $200,000 $361,539(4) $6,607 $ 49,609
Chief Executive Officer
Steven E. Seach.............. 1998 $277,084 $258,302(5) $6,607 $659,471
President and Chief
Financial Officer
Gilbert W. Nichols(6)........ 1998 $103,332 $ 44,101 $3,563 $ --
Vice President of
Operations
</TABLE>
- ---------------
(1) Amounts reported as other annual compensation represent our contribution
under our 401(k) plan and/or vehicle fringe benefits.
(2) The executive officers of Classic received restricted stock, options, stock
appreciation rights or other compensation during 1996 under the 1996 Stock
Restricted Plan. See "-- 1996 Restricted Stock Plan." On July 29, 1998,
Messrs. Belisle and Seach held 229,050 shares and 67,283 shares of
restricted stock, respectively, and each of Messrs. Belisle and Seach
exchanged their existing shares of restricted stock for 242,209 new shares
of restricted stock with revised vesting terms and other restrictions. See
"-- 1998 Restricted Stock Plan." Long-term compensation amounts are
calculated by multiplying the number of 1998 restricted shares issued by the
per share value of Classic's unrestricted stock as of the date of issuance,
less an amount equal to the number of 1996 restricted
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shares exchanged therefor multiplied by the per share value of Classic's
unrestricted stock on the date of issuance.
(3) As of December 31, 1998, Messrs. Belisle and Seach each owned 242,209
restricted shares of Classic's common stock. These shares vested upon the
consummation of the Brera Classic equity investment. The total value of all
restricted stock owned by Messrs. Belisle and Seach was approximately
$913,000 each, computed without taking into consideration any of the
restrictions. Messrs. Belisle and Seach are entitled to dividends in respect
of their restricted shares in the same manner as the holders of unrestricted
shares, but only to the extent that such dividends exceed the distribution
thresholds applicable thereto. See "-- 1998 Restricted Stock Plan."
(4) Includes a transaction fee of $300,000 paid pursuant to a pre-existing
employment agreement in connection with the acquisition of certain
properties from Cable One in July 1998, and the related financings.
(5) Includes a transaction fee of $250,000 paid pursuant to a pre-existing
employment agreement in connection with the acquisition of certain
properties from Cable One in July 1998, and the related financings.
(6) Mr. Nichols resigned effective March 19, 1999.
1996 RESTRICTED STOCK PLAN
Certain members of management own restricted stock subject to the terms of
our 1996 Restricted Stock Plan. Pursuant to the 1996 Plan, we may, from time to
time, grant restricted stock to our officers and other key employees upon the
terms, conditions and provisions of the 1996 Plan. Concurrent with the adoption
of the 1996 Plan, we granted a total of 517,626 shares of common stock as of
such date, of which only 144,940 shares are currently outstanding. These shares
vested upon the consummation of the Brera Classic equity investment. One-half of
such shares of restricted stock is subject to a distribution threshold equal to
$9.93 per share, i.e., the first $9.93 of distributions with respect to such
shares is to be withheld and distributed instead to the other holders of common
stock, and one-fourth of the shares is subject to a distribution threshold of
$19.06 per share and one-fourth to a distribution threshold of $29.78 per share.
1998 RESTRICTED STOCK 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 his
existing shares under the 1996 Plan for 242,209 shares of restricted common
stock pursuant to the 1998 Plan, each representing approximately 6.8% of common
stock on a fully diluted basis. These shares vested upon the consummation of the
Brera Classic equity investment. All of such shares of restricted common stock
are subject to a distribution threshold equal to $3.77 per share.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
At the closing of the Brera Classic equity investment, J. Merritt Belisle
and Steven E. Seach each entered into an employment agreement with us, on
substantially similar terms with their former employment agreements. In
connection with the consummation of the Brera Classic equity investment, Mr.
Belisle was paid $780,000 and Mr. Seach was paid $700,000 under their former
employment agreements. Each of the new employment agreements provides for their
continued employment with us for a continuing two year period at all times.
Messrs. Belisle and Seach are each to be paid an annual salary of $350,000 per
year. Each new employment agreement provides that upon termination by us without
cause, the employee will be entitled to the pre-payment of all remaining
compensation and benefits under the agreement, i.e., two years' of base
compensation and benefits. Each employment agreement also prohibits the employee
from competing with us during his term of employment and for a period of two
years thereafter.
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Under their new employment agreements, Messrs. Belisle and Seach were each
granted a stock option to purchase 279,874 shares of common stock at an exercise
price of $14.57 per share, which vests on a monthly basis over a three-year
period, or immediately in the event of a sale of all the stock for cash or
securities by merger, tender offer, stock purchase or an initial public offering
of our common stock.
In addition, Messrs. Belisle and Seach will each also receive a second
stock option to purchase 279,874 shares of common stock, to vest over a
three-year period commencing on the date of a sale of all of the stock involving
an initial public offering or a stock-for-stock merger or immediately upon the
closing of a sale of all of the common stock for cash or a sale of substantially
all of our assets. The price of the second option is the gross sale price per
share of common stock in our initial public offering or, in connection with a
sale of stock or assets, an amount equal to $14.57 per share increased by 14%
per annum from the consummation of the Brera Classic equity investment to the
date of such a sale.
The employment agreements of Messrs. Belisle and Seach in effect prior to
the consummation of the Brera Classic equity investment provided for a
transaction fee of 1% to be paid on the value of all mergers, acquisitions, or
dispositions of assets or subsidiaries by us that consummated during their term
of employment. Messrs. Belisle and Seach each received a transaction fee of $1.5
million related to the consummation of the Buford acquisition. The new
employment agreements do not contain a provision for transaction fees to be paid
to Messrs. Belisle and Seach.
We expect to enter into employment agreements with Ronald W. Martin and
Elizabeth Kay Monigold. These employment agreements will relate to their
employment by us as the Executive Vice President of Operations and the Executive
Vice President of Administration, respectively, and will be for a one year
period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our Board of Directors as a whole determines the compensation of our
executive officers. J. Merritt Belisle, our Chief Executive Officer, and Steven
E. Seach, our 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
LOANS TO AFFILIATES
During 1998, Classic had outstanding subordinated indebtedness, including
accrued interest, in the amount of approximately $4.5 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. 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 acquired by us. We repaid such indebtedness and
redeemed the preferred stock from the holders thereof out of the proceeds
received from a previous issuance of senior subordinated notes.
In 1997, we advanced approximately $200,000 to Mr. Belisle, which has been
forgiven.
STOCKHOLDER VOTING AGREEMENTS
Brera Classic entered into stockholder voting agreements with Austin
Ventures, L.P., BT Capital Partners, Inc., The Texas Growth Fund, BA SBIC
Management, L.L.C., as the successor in interest to NationsBanc Capital Corp.,
J. Merritt Belisle, Steven E. Seach, and Bryan Noteboom, who collectively held
approximately 80.4% of the fully diluted common stock, before giving effect to
the Brera Classic equity investment. The stockholder voting agreements required
the stockholders to vote in favor of the Brera Classic equity investment, which
was consummated on July 28, 1999.
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1995 STOCKHOLDERS AGREEMENT
Each member of management holding shares of our common stock in October
1995 executed a stockholders agreement with us and our other shareholders dated
as of October 15, 1995. The stockholders agreement generally provides us with a
right of first refusal in the event of proposed sales of common stock owned by
the members of management, and upon any termination of a management
stockholder's employment, to repurchase any common stock owned by such
management stockholder. The stockholders agreement contains certain rights of
the management stockholders to participate in sales of common stock and certain
obligations of the management stockholders to sell their common stock in the
case of a sale for cash of all outstanding common stock. Finally, the management
stockholders are required to vote their common stock to elect to our Board of
Directors the directors nominated by the other stockholders under the
stockholders agreement. This stockholders agreement terminated for our existing
stockholders entering into the 1999 stockholders agreement. The 1995
stockholders agreement, and all rights and obligations of the management
stockholders thereunder described above, will also terminate following an
initial public offering of common stock meeting certain criteria.
1999 STOCKHOLDERS' AGREEMENT
Effective July 28, 1999, Classic, Brera Classic, BT Capital Partners, Inc.,
Austin Ventures, L.P., BA SBIC Management, L.L.C., as the successor in interest
to NationsBanc Capital Corp., J. Merritt Belisle, Steven E. Seach and certain
other stockholders of Classic entered into the 1999 stockholders' agreement
which subjects the equity securities these stockholders hold in Classic to a
right of first offer to us and other stockholders party to the stockholders'
agreement. The agreement also provides that the other stockholders party to the
agreement are entitled to participate in any proposed sale under the right of
first offer on a pro-rata basis. The agreement contains preemptive purchase
rights in favor of the stockholders party to the stockholders' agreement in the
event we issue or sell additional equity securities in Classic, other than in an
initial public offering. Further, until such time as the parties to the
stockholders' agreement together own less than 30% of the outstanding common
stock of Classic, the parties have agreed to vote their common stock to cause
the board of directors to consist of seven members, being four members
designated by Brera Classic, the chief executive officer of Classic, initially
J. Merritt Belisle, and two other individuals to be designated by Austin
Ventures, L.P., Austin Ventures III-A, L.P., Austin Ventures III-B, L.P., BA
SBIC Management, L.L.C., BT Capital Partners, Inc., and The Texas Growth Fund.
One of the two individuals to be named by such stockholders will be Steven E.
Seach for so long as he is employed by us.
MANAGEMENT AND ADVISORY FEE AGREEMENT
As part of the Brera Classic equity investment, Classic and Brera Classic
entered into an agreement pursuant to which Brera Classic was paid a transaction
fee of $3 million upon closing of the Brera Classic equity investment in
consideration for arranging the equity investment. The agreement further
provides that we will pay Brera Classic an annual fee of $250,000 in
consideration for transactional assistance and advice provided to us until we
are sold or complete an initial public offering, the first payment of which was
made at the closing of the Buford acquisition.
BRERA CLASSIC INVESTMENT AGREEMENT
Classic and Brera Classic entered into an Investment Agreement whereby
Classic agreed to issue and sell 6,490,734 shares of Classic voting common stock
for an aggregate purchase price of $100 million. Pursuant to the Investment
Agreement, Classic agreed to pay all fees and expenses of Brera Classic's legal
counsel, financial advisors, accountants and third party consultants in an
amount up to $750,000. In addition to the $750,000 paid to Brera Classic at the
closing of the Buford acquisition for its fees and expenses of counsel,
accountants, advisors and consultants, Classic approved and paid an additional
$252,000 of Brera Classic's closing costs.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock by (A) each executive officer and director, (B)
each stockholder known by us to beneficially own 5.0% or more of such common
stock, and (C) all directors and officers as a group.
<TABLE>
<CAPTION>
PERCENT OF FULLY-
VOTING NON VOTING FULLY-DILUTED DILUTED
COMMON COMMON COMMON COMMON
BENEFICIAL OWNER(1) SHARES(3) SHARES(3) WARRANTS(4) SHARES STOCK(5)
- ------------------- --------- ---------- ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Brera Classic(2).................... 6,490,734 -- -- 6,490,734 64.4%
BT Capital Partners, Inc. .......... 1,326 735,986 30,225 767,537 7.6
Austin Ventures, L.P.(6)............ 735,987 -- -- 735,987 7.3
BA SBIC Management, L.L.C.(7)....... 6,631 542,995 152,418 702,044 6.9
J. Merritt Belisle.................. 244,862 -- -- 244,862 2.4
Steven E. Seach..................... 244,862 -- -- 244,862 2.4
Lisa A. Hook(8)..................... 6,490,734 -- -- 6,490,734 64.4
Alberto Cribiore(9)................. 6,490,734 -- -- 6,490,734 64.4
David Webb(10)...................... 6,490,734 -- -- 6,490,734 64.4
All directors and officers as a
group............................. 7,724,402 1,278,981 182,643 9,185,576 91.0%
</TABLE>
- ---------------
(1) The address for Brera Classic, Lisa Hook, Alberto Cribiore, and David Webb
is 712 Fifth Avenue, 34th Floor, New York, New York 10009. The address for
Austin Ventures, L.P. is 1300 Norwood Tower, 114 West 7th Street, Austin,
Texas 78701. The address for BT Capital Partners, Inc. is 130 Liberty
Street, 25th Floor, New York, New York 10006. The address for BA SBIC
Management L.L.C. 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) Brera Classic has sold non-voting equity interests in Brera Classic equal
to 19.85% of its investment in us to certain institutions and individuals
including affiliates of Goldman, Sachs & Co. and The Chase Manhattan Bank.
(3) All shares of non-voting common stock are convertible into shares of voting
common stock without cost and without advance notice by the holders
thereof. As a result, we believe that such shares should be taken into
account in considering voting interests in us.
(4) Warrants are for shares of common stock which may be acquired at $.001 per
share pursuant to a warrant which is exercisable at any time.
(5) Assumes exercise of all outstanding warrants.
(6) 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.
(7) BA SBIC Management L.L.C. is the successor in interest to NationsBanc
Capital Corp.
(8) Lisa Hook is a director of Classic and a manager of Brera Classic. Ms. Hook
is not the registered holder of any shares and disclaims the beneficial
ownership of the shares listed above except to the extent of her indirect
interest in the assets of the nominal shareholder, if any.
(9) Alberto Cribiore is a director of Classic and a manager of Brera Classic.
Mr. Cribiore 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.
(10) David Webb is a director of Classic and a manager of Brera Classic. Mr.
Webb 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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DESCRIPTION OF OTHER INDEBTEDNESS
NEW CREDIT FACILITY
We have no operations of our own. Consequently, we will rely on dividends
from Classic Cable, and hence the cash flow of Classic Cable, in order to meet
our debt service obligations. In order to finance a portion of the Buford
acquisition purchase price, Classic Cable entered into a new credit facility,
agented by Goldman Sachs Credit Partners L.P., Union Bank of California, N.A.
and The Chase Manhattan Bank pursuant to which Classic Cable may borrow up to
$250.0 million. The new credit facility consists of the following:
<TABLE>
<CAPTION>
MAXIMUM
MAXIMUM ALTERNATE
LIBOR BASE RATE
NEW CREDIT FACILITY AMOUNT TENOR SPREAD(1) SPREAD(1)
- ------------------- ------ --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Revolving Credit Facility............ $ 75.0 8.0 years 250 bps 150 bps
Term Loan A Facility................. 75.0 8.0 years 250 bps 150 bps
Term Loan B Facility................. 100.0 8.5 years 275 bps 175 bps
------
Total Facility............. $250.0
======
</TABLE>
- ---------------
(1) Pricing subject to a leverage-based pricing grid.
The $75.0 million eight year revolving credit facility will be made
available to Classic Cable for working capital, capital expenditures,
refinancing debt and general corporate purposes, including acquisitions. Up to
$25.0 million may be used to redeem Classic Cable's 2008 notes put by the
noteholders as a result of the change of control. The $175.0 million in term
loan facilities, comprised of the $75.0 million eight year term loan A facility
and the $100.0 million eight and one-half year term loan B facility, were drawn
at the closing of the Buford acquisition to fund Classic Cable's purchase of
Buford and to refinance debt and pay certain other costs associated with the
Buford acquisition.
The term loan A facility is payable as follows:
<TABLE>
<CAPTION>
TERM A REDUCTION DATE PRINCIPAL PAYMENT
- --------------------- -----------------
<S> <C>
December 31, 2001 $ 1,875,000
March 31, June 30, September 30 and December 31, 2002 1,406,250
March 31, June 30, September 30 and December 31, 2003 1,875,000
March 31, June 30, September 30 and December 31, 2004 2,812,500
March 31, June 30, September 30 and December 31, 2005 3,750,000
March 31, June 30, September 30 and December 31, 2006 4,687,500
March 31 and July 31, 2007 7,500,000
</TABLE>
The term loan B facility is payable as follows:
<TABLE>
<CAPTION>
TERM B REDUCTION DATE PRINCIPAL PAYMENT
- --------------------- -----------------
<S> <C>
December 31, 2001 $ 250,000
March 31, June 30, September 30 and December 31, 2002 250,000
March 31, June 30, September 30 and December 31, 2003 250,000
March 31, June 30, September 30 and December 31, 2004 250,000
March 31, June 30, September 30 and December 31, 2005 250,000
March 31, June 30, September 30 and December 31, 2006 250,000
March 31, June 30, September 30 and December 31, 2007 250,000
January 31, 2008 93,750,000
</TABLE>
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<PAGE> 79
The new credit facility is secured by a perfected first priority security
interest in substantially all of Classic Cable's personal property, including,
without limitation, the capital stock of Classic Cable's direct and indirect
subsidiaries. The new credit facility is unconditionally guaranteed by each of
Classic Cable's direct and indirect domestic subsidiaries. In addition, the new
credit facility will be subject to several customary negative covenants as well
as financial covenants, including
- a maximum total debt ratio,
- a maximum senior debt ratio,
- a minimum interest coverage ratio,
- a pro forma debt service coverage ratio, and
- a maximum capital expenditures amount.
The new credit facility also provides an additional $100.0 million
incremental facility on a term loan basis, with amortization no faster and
interest rates no higher than those applicable to the term loan B facility. This
incremental facility will share ratably and equally in all collateral and
guarantees which secure the new credit facility. The incremental credit facility
may be used to redeem Classic Cable's 2008 notes put by the noteholders pursuant
to the change of control offer made as a result of the Brera Classic equity
investment. Classic Cable's ability to borrow under this incremental facility
terminates on the earlier of September 11, 1999, or the date on which the
indenture governing the notes requires redemption to take place.
NEW SUBORDINATED NOTES
Another portion of the Buford acquisition price was financed by the
issuance of $150.0 million in principal amount of 9 3/8% senior subordinated
notes due 2009. The new subordinated notes have the following basic terms:
Maturity...................... August 1, 2009.
Interest...................... Annual rate -- 9 3/8%.
Payment frequency -- every six months on
February 1 and August 1.
First payment -- February 1, 2000.
Guarantors.................... The new subordinated notes will be guaranteed
by each of our current and future domestic
restricted subsidiaries. Each guarantor is our
wholly owned subsidiary. If we cannot make
payments on the notes when they are due, the
guarantors must make them instead.
Ranking....................... These new subordinated notes and the subsidiary
guarantees are senior subordinated debts and
rank equally with the notes and the exchange
notes.
They rank behind all of our and our guarantors'
current and future indebtedness, other than
trade payables, except indebtedness, including
the notes and exchange notes, that expressly
provides that it is not senior to the new
subordinated notes and the related subsidiary
guarantees.
Optional Redemption........... On or after August 1, 2004, we may redeem some
or all of the new subordinated notes at any
time at the redemption prices then in effect
(12-month period beginning August 1, 2004 --
104.688%; 2005 -- 103.125%; 2006 -- 101.562%;
and 2007 and thereafter -- 100.000%).
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<PAGE> 80
Before August 1, 2002, we may redeem up to 35%
of the notes ever issued under the indenture
with the proceeds of one or more public equity
offerings by, or strategic equity investments
in, Classic Cable or Classic at the redemption
price of 109.375%.
Mandatory Offer to
Repurchase.................... If we sell assets under some circumstances, or
experience specific kinds of changes of
control, we must offer to repurchase the new
subordinated notes at the redemption prices of
100% and 101%, respectively.
Basic Covenants of
Indenture..................... We issued the new subordinated notes under an
indenture with Chase Bank of Texas, National
Association. The indenture, among other things,
restricts our ability and the ability of our
subsidiaries to:
- borrow money;
- pay dividends on stock or repurchase stock;
- make investments;
- use assets as security in other transactions;
- sell certain assets or merge with or into
other companies; and
- engage in certain transactions with
affiliates.
Registration Rights........... We have agreed to offer to exchange the new
subordinated notes for a new issue of identical
debt securities registered under the Securities
Act as evidence of the same underlying
obligation of indebtedness. We have also agreed
to provide a shelf registration statement to
cover resales of the new subordinated notes
under certain circumstances. If we fail to
satisfy these obligations, we have agreed to
pay special interest to holders of the new
subordinated notes under specified
circumstances.
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<PAGE> 81
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
At the time we issued the old notes, we agreed to file a registration
statement to register the exchange of the old notes for the exchange notes on or
before September 27, 1998 and to use our reasonable best efforts to cause such
registration statement to become effective under the Securities Act on or before
November 26, 1998. In the event that applicable interpretations of the staff of
the SEC do not permit Classic to effect the exchange offer, or if certain
holders of the old notes notify Classic that they are not eligible to
participate in, or would not receive freely tradeable exchange notes in exchange
for tendered old notes pursuant to, the exchange offer, Classic will use its
reasonable best efforts to cause to become effective a shelf registration
statement with respect to the resale of the old notes and to keep the shelf
registration statement effective until two years after the issue date. Classic
is now obligated to pay cash interest increases to holders of the old notes
until the exchange offer registration statement is declared effective.
Each holder of the old notes that wishes to exchange old notes for exchange
notes will be required to represent that
- any exchange notes received will be acquired in the ordinary course of
its business,
- it has no arrangement with any person to participate in the distribution
of the exchange notes, and
- it is not an "affiliate," as defined in Rule 405 of the Securities Act,
of Classic or, if it is an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act
to the extent applicable.
RESALE OF EXCHANGE NOTES
Based on interpretations by the staff of the SEC set forth in no-action
letters issued to third-parties, Classic believes that, except as described
below, exchange notes issued pursuant to the exchange offer in exchange for old
notes may be offered for resale, resold and otherwise transferred by any holder
thereof, other than a holder which is an "affiliate" of Classic 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 such exchange notes are acquired in the ordinary course of such holder's
business and such holder does not intend to participate and has no arrangement
or understanding with any person to participate in the distribution of such
exchange notes. Any holder who tenders in the exchange offer with the intention
or for the purpose of participating in a distribution of the exchange notes
cannot rely on such interpretation by the staff of the SEC and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Unless an exemption from
registration is otherwise available, any such resale transaction should be
covered by an effective registration statement containing the selling security
holder's information required by Item 507 of Regulation S-K under the Securities
Act. This prospectus may be used for an offer to resell, resale or other
retransfer of exchange notes only as specifically set forth herein. Only
broker-dealers who acquired the old notes as a result of market-making
activities or other trading activities may participate in the exchange offer.
Each broker-dealer that receives exchange notes for its own account 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, must acknowledge
that it will deliver a prospectus in connection with any resale of such exchange
notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, Classic will accept for exchange any and all
old notes properly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on , 1999. Classic will issue $1,000 principal
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<PAGE> 82
amount of exchange notes in exchange for each $1,000 principal amount of
outstanding old notes surrendered pursuant to the exchange offer. Old notes may
be tendered only in $1,000 increments.
The form and terms of the exchange notes will be the same as the form and
terms of the old notes except that the exchange notes will be registered under
the Securities Act and will not bear legends restricting their transfer. The
exchange notes will evidence the same debt as the old notes. The exchange notes
will be issued under and entitled to the benefits of the indenture, which also
authorized the issuance of the old notes, such that both series will be treated
as a single class of debt securities under the indenture. See "Description of
the Notes."
The exchange offer is not conditioned upon any minimum aggregate principal
amount of old notes being tendered for exchange.
As of the date of this prospectus, $114.0 million of the old notes are
outstanding. This prospectus, together with the letter of transmittal, is being
sent to all registered holders of old notes. There will be no fixed record date
for determining registered holders of old notes entitled to participate in the
exchange offer.
Classic intends to conduct the exchange offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Securities Exchange Act of 1934, and the rules and regulations of the SEC
thereunder. Old notes that are not tendered for exchange in the exchange offer
will remain outstanding and continue to accrue interest and will be entitled to
the rights and benefits such holders have under the indenture and the
Registration Rights Agreement.
Classic will be deemed to have accepted for exchange properly tendered
notes when, as and if Classic shall have given oral or written notice of
acceptance to the exchange agent and complied with the provisions of the
Registration Rights Agreement. The exchange agent will act as agent for the
tendering holders for the purposes of receiving the exchange notes from Classic.
Classic expressly reserves the right to amend or terminate the exchange offer,
and not to accept for exchange any old notes not accepted for exchange, upon the
occurrence of any of the conditions specified below under "-- Certain Conditions
to the Exchange Offer."
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. Classic will pay all charges and expenses, other
than certain applicable taxes described below, in connection with the exchange
offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date is 5:00 p.m., New York City time on ,
1999, unless Classic, in its reasonable discretion, extends the exchange offer,
in which case the expiration date will mean the latest date and time to which
the exchange offer is extended.
In order to extend the exchange offer, Classic will notify the exchange
agent of any extension by oral or written notice and will issue a press release
notifying the registered holders of old notes of such extension, each prior to
9:00 a.m., New York City time, on the next business day after the expiration
date.
Classic reserves the right, in its reasonable discretion,
- to delay accepting any old notes for exchange, to extend the exchange
offer or to terminate the exchange offer if any of the conditions set
forth below under "-- Certain Conditions to the Exchange Offer" have not
been satisfied, by giving oral or written notice of such delay, extension
or termination to the exchange agent, or
- to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of old notes. If the exchange offer is
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<PAGE> 83
amended in a manner determined by Classic to constitute a material change,
Classic will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders, and Classic will
extend the exchange offer, depending upon the significance of the amendment and
the manner of disclosure to the registered holders, if the exchange offer would
otherwise expire during such period.
Without limiting the manner in which Classic may choose to make a public
announcement of any delay, extension, amendment or termination of the exchange
offer, Classic has no obligation to publish, advertise or otherwise communicate
any such public announcement, other than by making a timely release to an
appropriate news agency.
If Classic extends the period of time during which the exchange offer is
open, or if Classic is delayed in accepting for exchange of, or in issuing and
exchanging the exchange notes for, any old notes, or is unable to accept for
exchange of, or issue exchange notes for, any old notes pursuant to the exchange
offer for any reason, then, without prejudice to Classic's rights under the
exchange offer, the exchange agent may, on our behalf, retain all old notes
tendered, and such old notes may not be withdrawn except as otherwise provided
below in "-- Withdrawal of Tenders." The right to delay acceptance for exchange
of, or the issuance and the exchange of the exchange notes for, any old notes is
subject to applicable law, including Rule 14e-1(c) under the Exchange Act, which
requires that Classic either deliver the exchange notes or return the old notes
deposited by or on behalf of the holders thereof promptly after termination or
withdrawal of the exchange offer.
INTEREST ON THE NOTES
As a result of the registration default referred to above, the old notes
now bear interest at a rate of 1% per annum on the accreted value of the old
notes, although the payment of such interest is not due until February 1, 2004.
Interest on the old notes accepted for exchange will cease to accrue upon
issuance of the exchange notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the exchange offer, Classic will not be
required to accept for exchange, or exchange any exchange notes for, any old
notes, and may terminate the exchange offer before the expiration date, if:
- any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the exchange offer
which, in Classic's reasonable judgment, might materially impair the
ability of Classic to proceed with the exchange offer; or
- any law, statute, rule or regulation is proposed, adopted or enacted, or
any existing law, statute, rule or regulation is interpreted by the staff
of the SEC, which, in Classic's reasonable judgment, might materially
impair the ability of Classic to proceed with the exchange offer; or
- any governmental approval has not been obtained, which approval Classic
shall, in its reasonable discretion, deem necessary for the consummation
of the exchange offer as contemplated hereby.
If Classic determines in its reasonable discretion that any of these
foregoing conditions are not satisfied, Classic may
- refuse to accept any old notes and return all old notes to the tendering
holders,
- extend the exchange offer and retain all old notes tendered prior to the
expiration of the exchange offer, subject, however, to the rights of
holders to withdraw such old notes, or
- waive such unsatisfied conditions with respect to the exchange offer and
accept all properly tendered old notes which have not been withdrawn.
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<PAGE> 84
If such waiver constitutes a material change to the exchange offer, Classic
will promptly disclose such waiver by means of a prospectus supplement that will
be distributed to the registered holders of the old notes and Classic will
extend the exchange offer for a period of five to ten business days, depending
on the significance of the waiver and the manner of disclosure to the registered
holders, if the exchange offer would otherwise expire during such five to ten
day business period.
The foregoing conditions are for the sole benefit of Classic and may be
asserted by Classic regardless of the circumstances giving rise to any such
condition or may be waived by Classic in whole or in part at any time and from
time to time in its reasonable discretion. The failure by Classic 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 which may be asserted
at any time and from time to time.
In addition, Classic will not accept for exchange any old notes tendered,
and no exchange 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.
PROCEDURES FOR TENDERING
Subject to the terms and conditions hereof and the letter of transmittal,
only a holder of old notes may tender such old notes in the exchange offer. To
tender in the exchange offer, a holder must complete, sign and date the letter
of transmittal, or facsimile thereof, have the signature thereon guaranteed if
required by the letter of transmittal, and mail or otherwise deliver such letter
of transmittal or such facsimile to the exchange agent prior to 5:00 p.m., New
York City time, on the expiration date or, in the alternative, comply with The
Depository Trust Corporation's Automated Tender Offer Program procedures
described below. In addition, either:
- old notes must be received by the exchange agent along with the letter of
transmittal, or
- a timely confirmation of book-entry transfer, which we call a book-entry
confirmation, of such old notes, if such procedure is available, into the
exchange agent's account at The Depository Trust Corporation, which we
call the book-entry transfer facility, pursuant to the procedure for
book-entry transfer described below or properly transmitted agent's
message, as defined below, must be received by the exchange agent prior
to the expiration date, or
- 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 below
under "-- Exchange Agent" prior to 5:00 p.m., New York City time, on the
expiration date.
The tender by a holder which is not withdrawn prior to the expiration date
will constitute an agreement between such holder and Classic 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, 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 Classic. Holders may
request their respective brokers, dealers, commercial banks, trust companies or
other nominees to effect the above 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 such
registered holder of old notes to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such owner's own behalf, such owner
must, prior to completing and executing the letter of transmittal and delivering
such owner's old notes, either make appropriate arrangements to register
ownership of the old notes in such owner's name or obtain a properly completed
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<PAGE> 85
bond power from the registered holder of old notes. The transfer of registered
ownership may take considerable time and may not be able to be completed prior
to the Expiration Date.
Signatures on a letter of transmittal and a notice of withdrawal described
below must be guaranteed by an eligible institution, as defined below, unless
the old notes are tendered (A) by a registered holder who has not completed the
box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on the letter of transmittal, or (B) for the account of an eligible institution.
In the event that signatures on a letter of transmittal or a notice of
withdrawal are required to be guaranteed, such guarantor must be an eligible
institution, which means a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act which is a member of one of the recognized signature
guarantee programs identified in the letter of transmittal.
If the letter of transmittal is signed by a person other than the
registered holder of any old notes listed therein, such old notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such old notes
with the signature thereon guaranteed by an eligible institution.
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 unless waived by Classic, provide
evidence satisfactory to Classic of their authority so to act must be submitted
with the letter of transmittal.
The exchange agent and The Depository Trust Corporation have confirmed that
any financial institution that is a participant in The Depository Trust
Corporation's system may utilize The Depository Trust Corporation's Automated
Tender Offer Program to tender. Accordingly, participants in The Depository
Trust Corporation's Automated Tender Offer Program may, in lieu of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, electronically transmit their acceptance of the exchange offer
by causing The Depository Trust Corporation to transfer the old notes to the
exchange agent in accordance with The Depository Trust Corporation's Automated
Tender Offer Program procedures for transfer. The Depository Trust Corporation
will then send an agent's message to the exchange agent. The term "agent's
message" means a message transmitted by The Depository Trust Corporation
received by the exchange agent and forming part of the book-entry confirmation,
which states
- that The Depository Trust Corporation has received an express
acknowledgment from a participant in The Depository Trust Corporation's
Automated Tender Offer Program that is tendering old notes which are the
subject of such book entry confirmation,
- that such participant has received and agrees to be bound by the terms of
the letter of transmittal, or, in the case of an agent's message relating
to guaranteed delivery, that such participant has received, and agrees to
be bound by the applicable notice of guaranteed delivery, and
- that the agreement may be enforced against such participant.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance of tendered old notes and withdrawal of tendered old notes
will be determined by Classic in its reasonable discretion, which determination
will be final and binding. Classic reserves the absolute right to reject any and
all old notes not properly tendered or any old notes Classic's acceptance of
which would, in the opinion of counsel for Classic, be unlawful. Classic also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular old notes. Classic'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 Classic shall determine. Although Classic intends to notify holders of
defects or irregularities with respect to tenders of old notes, neither Classic,
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
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<PAGE> 86
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 holder, unless otherwise provided in the
letter of transmittal, as soon as practicable following the expiration date.
In all cases, issuance of exchange 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 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 and all
other required documents. If any tendered old notes are not accepted for
exchange 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 non-exchanged 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.
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 system may make book-entry delivery of old notes 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 notes may be effected through book-entry transfer at the book-entry
transfer facility, the letter of transmittal or facsimile thereof, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the exchange agent at the address set
forth below under "-- Exchange Agent" on or prior to the expiration date or, if
the guaranteed delivery procedures described below are to be complied with,
within the time period provided under such procedures. Delivery of documents to
the book-entry transfer facility does not constitute delivery to the exchange
agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their old notes and (A) whose old notes are not
immediately available, or (B) who cannot deliver their old notes, the letter of
transmittal or any other required documents to the exchange agent prior to the
expiration date, may effect a tender if:
- The tender is made through an eligible institution;
- Prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed notice of
guaranteed delivery by facsimile transmission, mail or hand delivery,
setting forth the name and address of the holder, the registered
number(s) of such old notes and the principal amount of old notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within three (3) New York Stock Exchange trading days after the
expiration date, the letter of transmittal, or facsimile thereof,
together with the old notes 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
- Such properly completed and executed letter of transmittal, or facsimile
thereof, or properly transmitted agent's message as well as all 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 (3) New York
Stock Exchange trading days after the expiration date.
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Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their old notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, 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 to be effective, (A) a written notice of withdrawal must
be received by the exchange agent at one of the addresses set forth below
under "-- Exchange Agent," or (B) holders must comply with the appropriate
procedures of The Depository Trust Company's Automated Tender Offer Program
system. Any such notice of withdrawal must specify the name of the person having
tendered the old notes to be withdrawn, identify the old notes to be withdrawn,
including the principal amount of such old notes, and, where certificates for
old notes have been transmitted, specify the name in which such old notes were
registered, if different from that of the withdrawing holder. If certificates
for old notes have been delivered or otherwise identified to the exchange agent,
then, prior to the release of such certificates, the withdrawing holder must
also submit the serial numbers of the particular certificates to be withdrawn
and a signed notice of withdrawal with signatures guaranteed by an eligible
institution unless such holder is an eligible institution. If old notes have
been tendered pursuant to the procedure for book-entry transfer described above,
any notice of withdrawal must specify the name and number of the account at the
book-entry transfer facility to be credited with the withdrawn old notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility, including time of receipt, of such notices will
be determined by Classic, 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 which
have been tendered for exchange but which are not exchanged for any reason will
be returned to the holder thereof without cost to such holder, 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 above, such old notes will be credited to an account
maintained with such book-entry transfer facility for the old notes, 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 described under "-- Procedures for Tendering" above at any time prior
to the expiration date.
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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.)
FEES AND EXPENSES
Classic 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 Classic.
The estimated cash expenses to be incurred in connection with the exchange
offer will be paid by Classic and are estimated in the aggregate to be $250,000,
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
Classic to register exchange 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.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of old notes who do not exchange their old notes for exchange notes
pursuant to the exchange offer will continue to be subject to the restrictions
on transfer of such old notes, as set forth (A) in the legend thereon as a
consequence of the issuance of the old notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws, and (B) otherwise set forth in the
offering memorandum dated July 29, 1998, distributed in connection with the
offering of the old notes. In general, the old notes may not be offered or sold
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. Classic does not currently anticipate that it will
register the old notes under the Securities Act.
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DESCRIPTION OF THE NOTES
GENERAL
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the word
"Classic" refers only to Classic and not to any of its subsidiaries.
Classic will issue the notes under an indenture among itself, the
Subsidiary Guarantors and Bank One, N.A., as trustee. The terms of the notes
include those stated in the indenture and those made part of the indenture by
reference to the Trust Indenture Act of 1939.
The following description is a summary of the material provisions of the
indenture. It does not restate the indenture in its entirety. Although we
believe that we have disclosed in this prospectus all the material provisions of
the indenture, we urge you to read the indenture because it, and not this
description, defines your rights as holders of these notes. We have filed copies
of the indenture as an exhibit to the registration statement which includes this
prospectus.
The Classic common stock issued in conjunction with the Classic private
offering is not being registered with the exchange 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
- February 1, 1999;
- the date on which a registration statement with respect to a registered
exchange offer for the exchange notes is declared effective under the
Securities Act;
- the occurrence of an Event of Default under the indenture; or
- such earlier date as determined by the initial purchaser in its sole
discretion. The date of the occurrence of an event specified above is
referred to as the "Separability Date."
BRIEF DESCRIPTION OF THE NOTES
The Notes
The notes:
- are senior unsecured obligations of Classic;
- rank equally in right of payment to all existing and future Senior
Indebtedness of Classic; and
- are senior in right of payment with all existing and future unsecured
senior subordinated and subordinated Indebtedness of Classic.
As of June 30, 1999, Classic had total pro forma Senior Indebtedness of
approximately $478.8 million. As indicated above and as discussed in detail
below under the subheading "Ranking," payments on the notes rank equally in
right of payment to Senior Indebtedness. The indenture will permit us to incur
additional Senior Indebtedness.
PRINCIPAL, MATURITY AND INTEREST
The notes will be issued in an aggregate principal amount at maturity of up
to $114.0 million and will mature on August 1, 2009. The old notes were, and the
exchange 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 "United States Federal Income Tax Considerations."
No cash interest will accrue on the notes until August 1, 2003.
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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
Classic 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 Classic, payment
of interest, if any, may be made by check mailed to the registered holders of
the notes at their registered addresses.
The 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 indebtedness evidenced by the notes:
- is a senior unsecured obligations of Classic,
- ranks without preference to all existing and future Senior Indebtedness,
and
- is senior in right of payment with all existing and future unsecured
senior subordinated and subordinated Indebtedness of Classic.
Classic, on an unconsolidated basis, has no Indebtedness outstanding other
than the old notes.
Substantially all of the operations of Classic are conducted through its
Subsidiaries and, therefore, Classic is dependent upon the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the notes.
The notes are effectively subordinated to all Indebtedness and other liabilities
and commitments of Classic's Subsidiaries. Claims of creditors of Classic's
Subsidiaries, including trade creditors, secured creditors and creditors holding
Indebtedness and guarantees issued by the Subsidiaries, and claims of preferred
stockholders, if any, of the Subsidiaries generally will have priority with
respect to the assets and earnings of such Subsidiaries over the claims of
creditors of Classic, including holders of the notes. At June 30, 1998, the
total pro forma liabilities of Classic's Subsidiaries was approximately $478.8
million, including trade payables.
Although the indenture limits the incurrence of Indebtedness of certain of
Classic's Subsidiaries, the limitation is subject to a number of significant
qualifications. In addition, the indenture does not impose any limitation on the
incurrence by the Subsidiaries of liabilities that are not considered
Indebtedness under the indenture. See "-- Certain Covenants -- Limitation on
Indebtedness."
The indenture limits, but does not prohibit, the incurrence by Classic and
its Subsidiaries of additional Indebtedness. Furthermore, the indenture
prohibits the incurrence by Classic of Indebtedness that is subordinated in
right of payment to any Senior Indebtedness of Classic and senior in right of
payment to the notes.
The holders of Senior Indebtedness are entitled to receive payment in full
before the noteholders are entitled to receive any payment upon:
- any payment or distribution of the assets of Classic upon a total or
partial liquidation, dissolution, reorganization or similar proceeding
relating to Classic; or
- in a bankruptcy, insolvency, receivership or similar proceeding relating
to Classic.
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Until the Senior Indebtedness is paid in full, any payment or distribution
to which the noteholders would be entitled, but for the subordination provisions
of the indenture, will be made to the holders of the Senior Indebtedness.
As a result of the subordination provisions in the indenture, creditors of
Classic who are holders of Senior Indebtedness may recover more, ratably, than
the noteholders in the event of insolvency.
OPTIONAL REDEMPTION
The notes are redeemable, at Classic's option, in whole or in part, at any
time after August 1, 2003 and prior to maturity. The notes may be redeemed 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, under this provision on or prior to August 1, 2001, Classic
may on one or more occasions redeem all of the notes with the Net Cash Proceeds
of one or more Equity Offerings of or Strategic Equity Investment in Classic, 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
redemption under this provision must occur within 45 days following the closing
of any such Equity Offering or Strategic Equity Investment.
Upon the occurrence of a Change of Control, Classic 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. Classic may not redeem notes pursuant to this paragraph
if it has made a Change of Control Offer with respect to such Change of Control.
In the event that less than all of the notes are redeemed pursuant to an
optional redemption, 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 will state the portion of the principal amount to be
redeemed and a new note or notes in principal amount equal to the unredeemed
principal portion will be issued. 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
Classic has deposited with the paying agent for the notes funds in satisfaction
of the applicable redemption price pursuant to the indenture.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a change of control, each holder of notes shall have
the right to require Classic to repurchase all or any part of such holder's
notes pursuant to an offer described below at a purchase price equal to 101% of
the Accreted Value thereof plus any accrued and unpaid interest, if any,
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thereon to the date of repurchase. The Brera Classic equity investment resulted
in a change of control under the indenture.
A "change of control" means the occurrence of any of the following events:
- 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 Classic;
- Classic consolidates with, or merges with or into, another Person, other
than a Wholly Owned Restricted Subsidiary, or Classic or any its
Subsidiaries sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of the assets of Classic and its
Subsidiaries, determined on a consolidated basis, to any Person, other
than Classic or any Wholly Owned Restricted Subsidiary;
- Classic is liquidated or dissolved or adopts a plan of liquidation or
dissolution, whether or not otherwise in compliance with the provisions
of the indenture; or
- a majority of the members of the Board of Directors of Classic shall
consist of Persons who are not Continuing Members.
Within 30 days of the occurrence of a change of control, Classic is
required to mail, to the trustee and to each holder of the notes a notice
stating:
- that the change of control offer is being made pursuant to this covenant
and that all notes tendered will be accepted for payment;
- 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;
- that any note not tendered will continue to accrue interest;
- that, unless Classic defaults in the payment of the change of control
payment, any notes accepted for payment pursuant to the change of control
offer will cease to accrue interest after the change of control payment
date;
- that holders accepting the offer to have their notes purchased pursuant
to a change of control offer will be required to surrender the exchange
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;
- 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;
- 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
exchange 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
- the name and address of the paying agent.
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On the change of control payment date, Classic will be required, to the
extent lawful, to
- accept for payment notes or portions thereof tendered pursuant to the
change of control offer,
- deposit with the paying agent money sufficient to pay the purchase price
of all notes or portions thereof so tendered, and
- 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 Classic.
The paying agent will promptly mail to each holder of notes so accepted
payment in an amount equal to the purchase price for such notes, and Classic
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. Classic 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.
Classic 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 indenture and purchases all
notes or portions thereof validly tendered and not withdrawn under such change
of control offer. Classic 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 Classic 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 Classic 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 Classic and its
Subsidiaries to another Person or group may be uncertain.
If a change of control offer is made, we cannot assure you that Classic
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
Classic Cable restricts Classic Cable from paying dividends or making
distributions to Classic. See "-- Ranking." The failure of Classic 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 Classic to repurchase such
holder's notes upon a change of control may deter a third party from acquiring
Classic in a transaction which constitutes a change of control.
The provisions of the indenture do not afford holders of the notes the
right to require Classic to repurchase the notes in the event of a highly
leveraged transaction or certain transactions with Classic's management or its
Affiliates, including a reorganization, restructuring, merger or similar
transaction, including, in certain circumstances, an acquisition of Classic by
management or its affiliates, involving Classic that may adversely affect
holders of the notes, if such transaction is not a transaction defined as a
change of control. A transaction involving Classic's management or its
Affiliates, or a transaction involving a recapitalization of Classic, will
result in a change of control if it is the type of transaction specified by such
definition.
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Asset Sales
The Classic Indenture provides that Classic shall not, and shall not permit
any Restricted Subsidiary to, consummate an Asset Sale unless (A) Classic 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 Classic and
evidenced in a board resolution; and (B) not less than 75% of the consideration
received by Classic 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, Classic 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 Classic; provided, that,
- after giving effect thereto, Classic or its Restricted Subsidiary owns a
majority of such Voting Stock and
- such acquisition is otherwise made in accordance with the Classic
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"), Classic 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, Classic 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:
(1) the assumption by the transferee of Indebtedness of Classic, other than
Indebtedness that is subordinated to the notes and other than any
Disqualified Equity Interest of Classic, or Indebtedness of any
Restricted Subsidiary and the release of Classic or such Restricted
Subsidiary from all liability on such Indebtedness in connection with
such Asset Sale;
(2) securities received by Classic or any Restricted Subsidiary from the
transferee that are converted by Classic or such Restricted Subsidiary
into cash within 20 days of the applicable Asset Sale, to the extent of
the cash received; and
(3) any liabilities, as shown on Classic's or such Restricted Subsidiary's
most recent balance sheet, of Classic 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 Classic or any such Restricted
Subsidiary from further liability.
When the aggregate amount of Excess Proceeds exceeds $10 million or more,
Classic will apply the Excess Proceeds to the repayment of the notes and any
other Pari Passu Indebtedness outstanding with similar provisions requiring
Classic to make an offer to purchase such Indebtedness with the proceeds from
any Asset Sale as follows:
- Classic will make an offer to purchase (an "Offer") from all holders of
the Discount notes in accordance with the procedures set forth in the
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
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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
- to the extent required by such Pari Passu Indebtedness to permanently
reduce the principal amount of such Pari Passu Indebtedness, Classic 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 Note Amount;
provided that in no event will Classic 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 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, Classic 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 Classic is required to make an Offer, Classic 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 Classic 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 Classic, 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.
Classic 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 Classic Cable restricts Classic
Cable from paying dividends or making any distribution to Classic. If Classic is
unable to obtain dividends or receive distributions from Classic Cable
sufficient to permit repurchase of the notes pursuant to an Offer, Classic will
not have the financial resources to make an Offer.
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EVENTS OF DEFAULT
An Event of Default is defined in the indenture as
(1) a default in any payment of interest on any note when due, continued
for 30 days,
(2) 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,
(3) the failure by Classic to comply with its obligations under "-- Certain
Covenants -- Merger or Sales of Assets,"
(4) the failure by Classic 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,
(5) the failure by Classic to comply for 60 days after notice with its
other agreements contained in the indenture,
(6) the failure by Classic or any Restricted Subsidiary of Classic 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"),
(7) certain events of bankruptcy, insolvency or reorganization of Classic
or any Restricted Subsidiary of Classic (the "bankruptcy provisions"),
or
(8) any judgment or decree for the payment of money in excess of $5 million
is rendered against Classic or any Restricted Subsidiary of Classic 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 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 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 Classic and the trustee, may rescind and annul such declaration and
its consequences if (A) Classic has paid or deposited with the trustee a sum
sufficient to pay
(1) all sums paid or advanced by the trustee under the indenture and the
reasonable compensation, expenses, disbursements and advances of the
trustee, its agents and counsel,
(2) all overdue interest on all notes then outstanding,
(3) 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
(4) to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate borne by the notes;
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(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
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 indenture and its consequences, except a
default (A) 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 (B) in respect of a covenant or provision which under the 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 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 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.
Classic is required to notify the trustee within five business days of the
occurrence of any Default. Classic 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 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 indenture. Subject to the provisions of the
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 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 indenture provides that, so long as any of the notes remain
outstanding, Classic shall not, and shall not permit any Restricted Subsidiary
to, make any Restricted Payment if
(1) 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;
(2) immediately after giving effect to such Restricted Payment, Classic
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
(3) 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 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
(1) any dividend, whether made in cash, property or securities, on or with
respect to any Equity Interests of Classic or of any Restricted
Subsidiary, other than any dividend made to Classic or another Wholly
Owned Restricted Subsidiary or any dividend payable in Equity Interests
of Classic or any Restricted Subsidiaries; or
(2) any distribution, whether made in cash, property or securities, on or
with respect to any Equity Interests of Classic or of any Restricted
Subsidiary, other than any distribution made to Classic or another
Wholly Owned Subsidiary or any distribution payable in Equity Interests
of Classic or any Restricted Subsidiary; or
(3) any redemption, repurchase, retirement or other direct or indirect
acquisition of any Equity Interests of Classic 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
(4) 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
(5) any Investment, other than a Permitted Investment.
The provisions of the first paragraph of this covenant shall not prevent
(1) the retirement of any of Classic's Equity Interests in exchange for, or
out of the proceeds of, the substantially concurrent sale, other than
to a Subsidiary of Classic or an employee stock ownership plan or to a
trust established by Classic or any Subsidiary of Classic for the
benefit of its employees, of Equity Interests of Classic, other than
any Disqualified Equity Interest, provided that the Net Cash Proceeds
from the issuance are excluded from clause (A) of the definition of
Cumulative Credit;
(2) 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 Classic indenture;
(3) 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;
(4) 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 Classic or any employee stock ownership plan or to a
trust established by Classic or any Subsidiary of Classic, for the
benefit of its employees, of Equity Interests of Classic, other than
any Disqualified Equity Interest; and
(5) the making and consummation of (A) an Offer in accordance with the
provisions of the indenture with any Excess Proceeds or (B) a Change of
Control Offer with respect to the notes in accordance with the
provisions of the Classic Indenture; provided, however, that in the
case of clause (2) above, 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 indenture, Restricted
Payments made pursuant to clause (2) above shall be included in such
calculation.
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Limitation on Indebtedness
The indenture provides that Classic 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 Classic 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:
(1) Indebtedness under the notes and the indenture;
(2) Indebtedness of Classic and the Restricted Subsidiaries outstanding on
the Issuance Date and listed on a schedule to the Classic Indenture,
other than Indebtedness described in clauses (1), (3), (4), (6) and
(10) of this paragraph;
(3) Indebtedness of (A) any Wholly Owned Restricted Subsidiary owed to or
issued to and held by Classic or any Restricted Subsidiary and (B)
Classic 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 Classic's obligations under the indenture and the
notes; provided, however, that an incurrence of Indebtedness that is
not permitted by this clause (3) shall be deemed to have occurred upon
(x) any sale or other disposition of any Indebtedness of Classic or a
Restricted Subsidiary referred to in this clause (3) to any Person,
other than Classic or a Wholly Owned Restricted Subsidiary, such that
such Restricted Subsidiary ceases to be a Restricted Subsidiary or (y)
any designation of a Restricted Subsidiary which holds Indebtedness of
Classic as an Unrestricted Subsidiary;
(4) Guarantees by any Restricted Subsidiary of Indebtedness of Classic
permitted in accordance with the provisions of the indenture;
(5) 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;
(6) Indebtedness of Classic or any Restricted Subsidiary to the extent
representing a replacement, renewal, refinancing or extension
(collectively, a "refinancing") of outstanding Indebtedness of Classic
or any Restricted Subsidiary, as the case may be, incurred in
compliance with clause (1), (2), (5), (7), or (9) of this paragraph of
this covenant; provided, however, that
- Indebtedness of Classic may not be refinanced under this clause (6)
with Indebtedness of any Restricted Subsidiary,
- 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,
- Indebtedness representing a refinancing of Indebtedness of Classic
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,
- Subordinated Obligations of Classic may only be refinanced with
Subordinated Obligations of Classic, and
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- Other Pari Passu Debt which is unsecured may only be refinanced with
unsecured Indebtedness, which is either Other Pari Passu Debt or
Subordinated Obligations;
(7) Indebtedness of Classic 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 Classic or such Restricted Subsidiary in an
aggregate principal amount not to exceed $10 million at any time
outstanding;
(8) Indebtedness incurred and outstanding on or prior to the date on which
such Restricted Subsidiary was acquired by Classic, 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 Classic; 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;
(9) Indebtedness of Classic 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;
(10) Indebtedness under the Classic Cable notes and the related indenture;
and
(11) In addition to any indebtedness described in clauses (1) through (10)
above, Indebtedness of Classic or any of the Restricted Subsidiary so
long as the aggregate principal amount of all such indebtedness
incurred pursuant to this clause 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 (1) through (9) above
or is entitled to be incurred pursuant to the first paragraph of this covenant,
Classic 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) Classic 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 Classic (an "Affiliate Transaction") unless
(1) the terms of such transaction are no less favorable to Classic 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;
(2) 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 (1) above, and
(3) in the event such Affiliate Transaction involves an aggregate amount in
excess of $10 million, Classic has received a written opinion from a
nationally recognized independent investment
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banking firm, or nationally recognized accounting or appraisal firm,
that such Affiliate Transaction is fair to Classic and its Restricted
Subsidiaries from a financial point of view.
(B) The provisions of the foregoing paragraph (A) shall not prohibit
(1) any Restricted Payment permitted to be made pursuant to the covenant
"-- Limitation on Restricted Payments,"
(2) 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
indenture,
(3) the grant of stock options or similar rights to employees and directors
of Classic in the ordinary course of business pursuant to plans
approved by the Board of Directors, and otherwise permitted under the
indenture,
(4) loans or advances to employees in the ordinary course of business in
accordance with the past practices of Classic or its Restricted
Subsidiaries, but in any event not to exceed $1.0 million in the
aggregate outstanding at any one time,
(5) the payment of reasonable fees to directors of Classic and its
Restricted Subsidiaries who are not employees of Classic or its
Restricted Subsidiaries,
(6) any transaction between Classic and a Wholly Owned Subsidiary or
between Wholly Owned Subsidiaries, or
(7) the payment of Investment Banking Fees.
Limitation on Sale or Issuance of Capital Stock of Restricted Subsidiaries
Classic (A) will not, and will not permit any Restricted Subsidiary of
Classic 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 Classic or a Wholly Owned Restricted Subsidiary, unless
- such transfer, conveyance, sale, lease or other disposition is of all the
Equity Interest of such Restricted Subsidiary, and
- 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 law, shares of its Equity
Interest constituting directors' qualifying shares to any Person other than to
Classic or Wholly Owned Restricted Subsidiary.
Limitation on Sale/Leaseback Transactions
Classic will not, and will not permit any Restricted Subsidiary to, enter
into any Sale/Leaseback Transaction with respect to any property unless
(1) Classic 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 "-- Limitation on Liens,"
(2) the net cash proceeds received by Classic 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 Classic and certified in an Officers' Certificate to the
Trustee, of such property, and
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(3) the transfer of such property is permitted by, and Classic 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 indenture provides that Classic 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 Classic 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
(1) Liens securing the Indebtedness under the Senior Credit Agreement;
(2) Liens, if any, in effect on the date of the indenture;
(3) Liens in favor of governmental bodies to secure progress or advance
payments;
(4) 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;
(5) Liens securing the notes;
(6) Liens securing Indebtedness of Classic in an amount not to exceed $5
million at any time outstanding;
(7) Other Permitted Liens; and
(8) any extension, renewal or replacement of any Lien referred to in
clauses (1) through (7) above, 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 indenture provides that Classic shall not (A) permit any Restricted
Subsidiary to guarantee any Indebtedness of Classic 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, Classic and the
trustee execute and deliver a supplemental indenture causing such Restricted
Subsidiary to guarantee Classic's obligations under the indenture and the
exchange notes to the same extent that such Restricted Subsidiary guaranteed
Classic's obligations under the Other Indebtedness, including waiver of
subrogation, if any, except that
- such guarantee need not be secured unless required pursuant to
"-- Limitation on Liens" and
- 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 Classic, of all of
Classic'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
indenture and such Restricted Subsidiary is released from all guarantees, if
any, by it of other Indebtedness of Classic or any Restricted Subsidiaries and,
with respect
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to any guarantees created after the date of the indenture, the release by the
holders of the Indebtedness of Classic 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 Classic 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 indenture provides that Classic 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
(1) pay dividends in cash or otherwise or make any other distributions to
Classic or any Restricted Subsidiary on its Equity Interests;
(2) pay any Indebtedness owed to Classic or any Restricted Subsidiary;
(3) make loans or advances or guarantee any such loans or advances, to
Classic or any Restricted Subsidiary;
(4) transfer any of its properties or assets to Classic or any Restricted
Subsidiary;
(5) grant Liens on the assets of Classic or any Restricted Subsidiary in
favor of the holders of the notes; or
(6) guarantee the notes or any renewals or refinancings thereof (any of the
actions described above is referred to herein as a "Specified Action");
except for
(1) 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 Classic or
any other Restricted Subsidiary;
(2) such encumbrances or restrictions arising under refinancing
indebtedness permitted by clause (6) 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;
(3) customary provisions restricting the assignment of any contract of
Classic or any Restricted Subsidiary;
(4) with respect to clause (4) 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;
(5) restrictions pursuant to the senior credit agreement; and
(6) restrictions pursuant to the notes of Classic Cable and the indenture
under which such notes were issued.
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Limitation on Unrestricted Subsidiaries
Classic may designate after the Issuance Date any Subsidiary, other than a
Subsidiary which is a guarantor, as an "Unrestricted Subsidiary" under the
Classic Indenture (a "Designation") only if:
(1) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(2) Classic 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 (A) the net book value of
Classic's interest in such Subsidiary calculated in accordance with
GAAP or (B) the Fair Market Value of Classic's interest in such
Subsidiary as determined in good faith by Classic's board of directors;
(3) Classic would be permitted under the Classic 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;
(4) such Unrestricted Subsidiary does not own any Equity Interest in any
Restricted Subsidiary of Classic which is not simultaneously being
designated an Unrestricted Subsidiary;
(5) 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
(6) such Unrestricted Subsidiary is not a party to any agreement, contract,
arrangement or understanding at such time with Classic or any
Restricted Subsidiary unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to Classic or such
Restricted Subsidiary than those that might be obtained at the time
from Persons who are not Affiliates of Classic 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, Classic 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 Classic Indenture
in the Designation Amount.
The Classic Indenture also provides that Classic shall not and shall not
cause or permit any Restricted Subsidiary to at any time (A) 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 (B) be directly or indirectly
liable for any Indebtedness of any Unrestricted Subsidiary. For purposes of the
foregoing, the Designation of a Subsidiary of Classic as an Unrestricted
Subsidiary shall be deemed to be the designation of all of the Subsidiaries of
such Subsidiary as Unrestricted Subsidiaries.
Classic may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(1) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation;
(2) 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 indenture;
and
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(3) 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, Classic 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 Classic delivered to the trustee certifying compliance
with the foregoing provisions.
Reports
The indenture provides that, whether or not Classic is subject to Section
13(a) or 15(d) of the Exchange Act or any successor provision thereto, Classic
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 Classic would have been required to
file with the SEC pursuant to Section 13(a) or 15(d) or any successor provision
thereto if Classic was so subject on or prior to the respective dates (the
"Required Filing Dates") by which Classic would have been required to file such
documents if Classic was so subject. Classic 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,
- 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
- file with the trustee, copies of the annual reports, quarterly reports
and other documents which Classic 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 Classic
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. Classic 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 Classic. Classic will also comply with
Section 314(a) of the Trust Indenture Act of 1939. 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, Classic 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 indenture provides that Classic 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 Classic on a
consolidated basis, unless
(1) either (A) Classic shall be the continuing Person, or (B) the Person
formed by or surviving any such consolidation or merger, if other than
Classic, 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;
(2) the surviving Person, if other than Classic, expressly assumes by
supplemental indenture all the obligations of Classic under the notes
and the indenture;
(3) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing;
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(4) 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
(5) Classic 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 indenture.
In addition, each Subsidiary Guarantor shall not, and Classic 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 Classic 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 Classic or
any Subsidiary Guarantor, unless clauses (1) through (5) above are satisfied
with respect to such Subsidiary Guarantor, rather than Classic.
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 Classic is not the Surviving Person and the Surviving Person is to assume
all the obligations of Classic under the notes and the indenture pursuant to a
supplemental indenture, such Surviving Person shall succeed to, and be
substituted for, and may exercise every right and power of Classic and Classic
would be discharged from its obligations under the 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 indenture. Reference is made to the indenture for the
full definition of all such terms as well as any other capitalized terms used
herein for which no definition is provided.
"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:
(A) 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>
(B) if the specified date occurs between two Semiannual Accrual Dates,
the Accreted Value will equal the sum of (1) the Accreted Value for the
Semiannual Accrual Date immediately preceding such specified date and (2)
an amount equal to the product of (x) the Accreted Value for the
immediately following Semiannual Accrual Date less the Accreted Value for
the immediately preceding Semiannual Accrual Date multiplied by (y) 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.
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"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 (A) any Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, Classic; (B) any spouse, immediate family member or other relative
who has the same principal residence as any Person described in clause (A)
above; (C) any trust in which any such Persons described in clauses (A) and (B)
above has a beneficial interest; and (D) 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
- 1.0% of the then outstanding principal amount of such note, and
- 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
Classic, 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 (A) an Investment by Classic 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 Classic or
any Restricted Subsidiary, or (B) any acquisition by Classic 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 Classic or any Wholly Owned Restricted Subsidiary, in one
transaction or a series of related transactions, of
(1) any Equity Interest of any Restricted Subsidiary,
(2) any material license, franchise or other authorization of Classic or
any Restricted Subsidiary,
(3) any assets of Classic or any Restricted Subsidiary which constitute
substantially all of an operating unit, a division or a line of
business of Classic or any Restricted Subsidiary, or
(4) any other property or asset of Classic or any Restricted Subsidiary
outside of the ordinary course of business.
For the purposes of this definition, the term "Asset Sale" shall not
include
(1) 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 -- Limitation on Liens"
above,
(2) 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 Classic or any Restricted Subsidiary, as the case may be,
(3) any transaction consummated in compliance with "-- Certain
Covenants -- Limitation on Restricted Payments" above, and
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(4) 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
(1) United States dollars;
(2) 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;
(3) 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;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) 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
(6) 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 (1) through (5) above.
"Consolidated Income Tax Expense" means, with respect to Classic for any
period, the provision for federal, state, local and foreign income taxes payable
by Classic 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 Classic and the
Restricted Subsidiaries for any period, without duplication, the sum of (A) the
interest expense of Classic 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 (B) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by
Classic 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 Classic 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 Classic 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,
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(1) 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;
(2) 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 Classic or any Restricted
Subsidiary;
(3) 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 Classic or any Restricted Subsidiary;
(4) net income (loss) of any other Person combined with Classic or any
Restricted Subsidiary on a "pooling of interests" basis attributable to
any period prior to the date of combination;
(5) 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;
(6) the cumulative effect of a change in accounting principles after the
date of the Indenture; and
(7) 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
Classic and the Restricted Subsidiaries outstanding as of such date of
determination, including the liquidation value of all Disqualified Equity
Interest, less the obligations of Classic 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
(A) was a member of the Board of Directors of Classic on the date of the
Indenture, (B) was nominated for election or elected to the Board of Directors
of Classic with the affirmative vote of a majority of the Continuing Members who
were members of the Board of Directors of Classic at the time of such nomination
or election of (C) is a representative of, or was approved by, a Permitted
Holder.
"Cumulative Credit" means the sum of (A) the aggregate Net Cash Proceeds
received by Classic from the issue or sale, other than to a Subsidiary, of
Equity Interests, other than Disqualified Equity Interest, of Classic on or
after the Issuance Date, plus (B) the principal amount, or, if less, accreted
amount determined in accordance with generally accepted accounting principles,
of any Indebtedness of Classic which has been converted into or exchanged for
Equity Interests of Classic on or after the Issuance Date, plus (C) 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 (D) 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 Classic
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.
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"Cumulative Interest Expense" means the aggregate amount of Consolidated
Interest Expense paid or accrued of Classic 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 (A) the Consolidated
Total Indebtedness as of the date of calculation (the "Determination Date") to
(B) 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,
(1) 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;
(2) 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
(3) if Classic or any Restricted Subsidiary shall have in any manner (A)
acquired, including through an Asset Acquisition or the commencement of
activities constituting such operating business, or (B) disposed of,
including by way of an Asset Sale or the termination or discontinuance
of activities constituting such operating business, any operating
business during such Measurement Period or after the end of such period
and on or prior to such Determination Date, such calculation will be
made on a pro forma basis in accordance with 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 Classic for
cash, with gross proceeds to Classic 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:
(1) 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
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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;
(2) all Capitalized Lease Obligations of such Person and all Attributable
Debt in respect of Sale/ Leaseback Transactions entered into by such
Person;
(3) 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;
(4) 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 (1)
through (3) 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;
(5) 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;
(6) all obligations of the type referred to in clauses (1) through (5)
above 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;
(7) all obligations of the type referred to in clauses (1) through (6)
above 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
(8) 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 Classic 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, Classic no longer
owns, directly or indirectly, greater than 50% of the outstanding Voting Equity
Interests of such Restricted Subsidiary, Classic 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 Classic, on the other hand, a
fee to be paid by Classic to such individuals (A) upon the consummation of the
Financing Plan in the aggregate amount of $550,000 and (B) thereafter from time
to time in connection with the consummation of acquisitions or financings by
Classic in an amount equal to 1.0% of the purchase price paid for such
acquisitions.
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"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.
"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
(1) 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,
(2) 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,
(3) 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
(4) 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 Classic
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
Classic 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
(1) as to which neither Classic 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
(2) the incurrence of which will not result in any recourse against any of
the assets of either of Classic 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 Classic 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 Classic from Classic
Cable and (B) Consolidated Net Income for such period increased, without
duplication, by the sum of
(1) Consolidated Income Tax Expense accrued for such period to the extent
deducted in determining Consolidated Net Income for such period;
(2) Consolidated Interest Expense for such period to the extent deducted in
determining Consolidated Net Income for such period; and
(3) 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
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requires the accrual of, or a reserve for, cash charges for any future
period, of Classic 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 Classic in respect of
investment banking or transaction fees in connection with acquisitions or
financings of, or advisory services to, Classic, 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 Classic in an
aggregate principal amount not to exceed $200,000.
"Other Pari Passu Debt" means Indebtedness of Classic that does not
constitute Subordinated Obligations and is not senior in right of payment to the
notes.
"Other Permitted Liens" means
(1) 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;
(2) 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;
(3) 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 Classic or its Subsidiaries;
(4) 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 Classic 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;
(5) Liens resulting from the pledge by Classic of Equity Interests in any
Subsidiary in connection with the Senior Credit Agreement;
(6) Liens resulting from the pledge by Classic of Equity Interests in an
Unrestricted Subsidiary in any circumstance where recourse to Classic
is limited to the value of the Equity Interests so pledged;
(7) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security;
(8) 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;
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(9) leases or subleases granted to third Persons not interfering with the
ordinary course of business of Classic;
(10) deposits made in the ordinary course of business to secure liability
to insurance carriers;
(11) 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;
(12) Liens on the assets of Classic to secure hedging agreements with
respect to Indebtedness permitted by the indenture to be incurred;
(13) attachment or judgment Liens not giving rise to a Default or an Event
of Default; and
(14) 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
(1) Cash Equivalents;
(2) Investments in prepaid expenses, negotiable instruments held for
collection and lease, utility and workers' compensation, performance
and other similar deposits;
(3) the extension of credit to vendors, suppliers and customers in the
ordinary course of business;
(4) Investments existing as of the date of the indenture, and any
amendment, modification, extension or renewal thereof to the extent
such amendment, modification, extension or renewal does not require
Classic or any Restricted Subsidiary to make any additional cash or
non-cash payments or provide additional services in connection
therewith;
(5) Hedging Agreements;
(6) any Investment for which the sole consideration provided is Equity
Interests of Classic;
(7) any Investment consisting of a guarantee permitted under clause (5) of
the second paragraph of "-- Certain Covenants -- Limitation on
Indebtedness" above;
(8) Investments in Classic, 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 Classic or a Wholly Owned Restricted Subsidiary;
provided, however, that such Person's primary business is a Related
Business;
(9) loans and advances to officers, directors and employees of Classic 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;
(10) any acquisition of assets solely in exchange for the issuance of
Equity Interests of Classic; and
(11) other Investments made after the date of the indenture, in addition to
any Permitted Investments described in clauses (1) through (10) above,
in an aggregate amount at any one time outstanding not to exceed $1
million.
"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
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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 Classic other than an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby Classic or a Restricted Subsidiary transfers
such property to a Person and Classic 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 Classic, 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
(1) Indebtedness evidenced by the notes,
(2) Indebtedness that is subordinate or junior in right of payment to any
Indebtedness of Classic,
(3) Indebtedness which when incurred and without respect to any election
under Section 1111(b) of Title 11 United States Code, is without
recourse to Classic,
(4) Indebtedness which is represented by Redeemable Capital Stock,
(5) any liability for foreign, federal, state, local or other taxes owed or
owing by Classic to the extent such liability constitutes Indebtedness,
(6) Indebtedness of Classic to a Subsidiary or any other Affiliate of
Classic or any of such Affiliate's Subsidiaries,
(7) 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
Classic, and amounts owed by Classic for compensation to employees or
services rendered to Classic,
(8) that portion of any Indebtedness which at the time of issuance is
issued in violation of the indenture, and
(9) 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 Classic 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 Classic of more than $1 billion or,
if not a public company, had total revenues of more than $5 billion during its
previous fiscal year.
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"Subordinated Obligations" means, with respect to Classic, any Indebtedness
of Classic 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 Classic 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 the 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 Classic, 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 Classic 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 (A) as to which neither Classic nor
any Restricted Subsidiary is directly or indirectly liable, by virtue of Classic
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
Classic 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, Classic 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 (B) which, upon
the occurrence of a default with respect thereto, does not result in, or permit
any holder of any Indebtedness of Classic or any Subsidiary to declare, a
default on such Indebtedness of Classic 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
(1) 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
(2) the then outstanding aggregate principal amount of such Indebtedness.
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"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 Classic or by one or more Wholly Owned Restricted Subsidiaries
or by Classic 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.
NO LIABILITY OF MANAGERS, OFFICERS, EMPLOYEES, OR SHAREHOLDERS
No manager, director, officer, employee, member, shareholder, partner or
incorporator of Classic or any Subsidiary, as such, will have any liability for
any obligations of Classic under the notes or the Classic 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 indenture provides that Classic 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 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,
(1) 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
(2) Classic has delivered to the trustee an opinion of counsel, as
specified in the indenture, to the effect that (A) defeasance or
covenant defeasance, as the case may be, will not require registration
of Classic, 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 (B) 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 INDENTURE
From time to time, Classic and the trustee may, without consent of holders
of the notes, enter into one or more supplemental indentures for certain
specified purposes, including
(1) providing for a successor or successors to Classic,
(2) adding guarantees, releasing guarantors when permitted by the
indenture,
(3) providing for security for the notes,
(4) adding to the covenants of Classic,
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(5) surrendering any right or power conferred upon Classic,
(6) providing for uncertificated notes in addition to or in place of
certificated notes,
(7) making any change that does not adversely affect the rights of any note
holder, and
(8) complying with any requirement of the Trust Indenture Act or curing
certain ambiguities, defects or inconsistencies.
The indenture contains provisions permitting Classic 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 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
(1) 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;
(2) 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;
(3) 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
(4) reduce the aforesaid percentage of notes, the consent of the holders of
which is required for any such 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 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 indenture provides that Classic will deliver to the trustee within 120
days after the end of each fiscal year of Classic 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 exchange notes will be represented by one or more permanent global
exchange 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, The Depositary Trust Corporation
("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
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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 exchange notes represented by such Global Note for
all purposes under the Indenture and the exchange 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 Classic 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 Classic, 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.
Classic 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. Classic 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.
Classic 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 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."
Classic 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 Classic nor the trustee
will have any responsibility for the performance by DTC, Euroclear or Cedel Bank
or their respective
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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 Classic within
90 days, Classic 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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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a summary of certain U.S. federal income tax consequences
associated with the exchange of old notes for exchange notes pursuant to the
exchange offer, and does not purport to be a complete analysis of all potential
tax effects. This summary is based upon the Internal Revenue Code of 1986, as
amended, existing and proposed regulations thereunder, published rulings and
court decisions, all as in effect and existing on the date hereof and all of
which are subject to change at any time, which change may be retroactive. The
summary is not binding on the Internal Revenue Service or on the courts, and no
ruling will be requested from the Internal Revenue Service on any issues
described below. There can be no assurance that the Internal Revenue Service
will not take a different position concerning the matters discussed below.
This summary applies only to those persons who are the initial holders of
old notes, who acquired old notes for cash and who hold old notes as capital
assets. It does not address the tax consequences to taxpayers who are subject to
special rules, such as financial institutions, tax-exempt organizations,
insurance companies and persons who are not "U.S. Holders", or the effect of any
applicable U.S. federal estate and gift tax laws or state, local or foreign tax
laws. For purposes of this summary, a "U.S. Holder" means a beneficial owner of
an old note who purchased the old note pursuant to the offering that is for U.S.
federal income tax purposes
- a citizen of the United States;
- a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof;
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
- a trust if (A) a court within the United States is able to exercise
primary supervision over the administration of the trust, and (B) one or
more U.S. fiduciaries have the authority to control all substantial
decisions of the trust.
EXCHANGE OFFER
The exchange of old notes for exchange notes pursuant to the exchange offer
should not constitute a taxable exchange for U.S. federal income tax purposes.
Accordingly, a U.S. Holder should not recognize gain or loss upon the receipt of
exchange notes pursuant to the exchange offer, and a U.S. holder should be
required to include interest on the exchange notes in gross income in the manner
and to the extent interest income was includible under the old notes. A U.S.
holder's holding period for the exchange notes should include the holding period
of the old notes exchanged therefor, and such holder's adjusted basis in the
exchange notes should be the same as the basis of the old notes exchanged
therefor immediately before the exchange.
The foregoing discussion is included herein for general information only.
Accordingly, each holder should consult with its own tax advisors concerning the
tax consequences of the exchange offer with respect to its particular situation,
including the application and effect of state, local and foreign income and
other tax laws.
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PLAN OF DISTRIBUTION
Based on interpretations by the SEC set forth in no-action letters issued
to third parties, Classic believes that exchange notes issued pursuant to the
exchange offer in exchange for the old notes may be offered for resale, resold
and otherwise transferred by holders thereof, other than any holder which is (A)
an "affiliate" of Classic within the meaning of Rule 405 under the Securities
Act, (B) a broker-dealer who acquired notes directly from Classic, or (C)
broker-dealers who acquired notes as a result of market-making or other trading
activities, without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that such exchange notes are acquired
in the ordinary course of such holders' business, and such holders are not
engaged in, and do not intend to engage in, and have no arrangement or
understanding with any person to participate in, a distribution of such exchange
notes. However, broker-dealers receiving exchange notes in the exchange offer
will be subject to a prospectus delivery requirement with respect to resales of
such exchange notes. To date, the SEC has taken the position that these
broker-dealers may fulfill their prospectus delivery requirements with respect
to transactions involving an exchange of securities such as the exchange
pursuant to the exchange offer, other than a resale of an unsold allotment from
the sale of the old notes to the initial purchasers, with the prospectus
contained in the exchange offer registration statement. Pursuant to the exchange
and registration rights agreement, Classic has agreed to permit these
broker-dealers to use this prospectus in connection with the resale of such
exchange notes. Classic has agreed that, for a period of 120 days after the
expiration date, it will make this prospectus, and any amendment or supplement
to this prospectus, available to any broker-dealer that requests such documents
in the letter of transmittal.
Each holder of the old notes who wishes to exchange its old notes for
exchange notes in the exchange offer will be required to make certain
representations to Classic as set forth in "The Exchange Offer -- Purpose and
Effect of the Exchange Offer."
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange 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 exchange notes received in
exchange for old notes where such old notes were acquired as a result of
market-making activities or other trading activities. Classic has agreed that,
for a period of 120 days after the consummation of the exchange offer, it will
use its commercially reasonable efforts to make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until , 1999, all dealers effecting
transactions in the exchange notes may be required to deliver a prospectus.
Classic will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such exchange notes. Any broker-dealer
that resells exchange notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such exchange notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of exchange
notes and any commission 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 consummation of the exchange offer,
Classic 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. Classic has agreed to pay all
expenses
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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 the holders of the Securities, including any
broker-dealers, against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the exchange notes will be passed upon by Winstead Sechrest
& Minick P.C., Austin, Texas.
EXPERTS
The consolidated financial statements of Classic Communications, Inc. at
December 31, 1998 and 1997, and for each of the three years in the period ended
December 31, 1998, 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.
The consolidated financial statements of Buford Group, Inc. and
subsidiaries as of December 31, 1998 and 1997, and for each of the years in the
three-year period ended December 31, 1998, have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CLASSIC COMMUNICATION, INC.
Audited Annual Financial Statements
Report of Independent Auditors......................... F-2
Consolidated Balance Sheets as of December 31, 1998 and
1997.................................................. F-3
Consolidated Statements of Operations for the years
ended December 31, 1998, 1997, and 1996............... F-4
Consolidated Statements of Stockholders' Deficit for
the years ended December 31, 1998, 1997, and 1996..... F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997, and 1996............... F-6
Notes to Consolidated Financial Statements............. F-7
Unaudited Interim Financial Statements
Unaudited Consolidated Balance Sheet as of June 30,
1999.................................................. F-18
Unaudited Consolidated Statements of Operations for the
six months ended June 30, 1999 and 1998............... F-19
Unaudited Consolidated Statements of Cash Flows for the
six months ended June 30, 1999 and 1998............... F-20
Notes to Unaudited Consolidated Financial Statements... F-21
BUFORD GROUP, INC.
Audited Annual Financial Statements
Independent Auditors' Report........................... F-23
Consolidated Balance Sheets as of December 31, 1998 and
1997.................................................. F-24
Consolidated Statements of Operations for the years
ended December 31, 1998, 1997, and 1996............... F-25
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1998, 1997, and 1996......... F-26
Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997, and 1996............... F-27
Notes to Consolidated Financial Statements............. F-28
Unaudited Interim Financial Statements
Unaudited Condensed Consolidated Balance Sheet as of
June 30, 1999......................................... F-36
Unaudited Condensed Consolidated Statements of
Operations for the six months ended June 30, 1999 and
1998.................................................. F-37
Unaudited Condensed Consolidated Statements of Cash
Flows for the six months ended June 30, 1999 and
1998.................................................. F-38
Notes to Unaudited Condensed Consolidated Financial
Statements............................................ F-39
</TABLE>
F-1
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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, 1998 and 1997, and
the related consolidated statements of operations, stockholders' deficit and
cash flows for each of the three years in the period ended December 31, 1998.
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, 1998 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, 1998 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
March 30, 1999
F-2
<PAGE> 126
CLASSIC COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 2,779 $ 616
Accounts receivable, net.................................... 5,474 4,519
Prepaid expenses............................................ 424 607
Property, plant and equipment............................... 127,169 96,850
Less accumulated depreciation............................... (39,977) (28,211)
-------- --------
87,192 68,639
Deferred financing costs, net............................... 8,919 4,494
Intangible assets:
Subscriber relationships.................................. 95,180 82,364
Franchise rights.......................................... 71,464 59,149
Noncompete agreements..................................... 8,425 12,104
Goodwill.................................................. 40,435 39,695
Other..................................................... 140 228
-------- --------
215,644 193,540
Less accumulated amortization............................. (65,828) (52,253)
-------- --------
149,816 141,287
-------- --------
Total assets........................................ $254,604 $220,162
-------- --------
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 647 $ 772
Subscriber deposits and unearned income................... 4,846 3,507
Other accrued expenses.................................... 6,106 5,922
Accrued interest.......................................... 5,883 1,534
Long-term debt............................................ 282,842 187,967
Subordinated debt......................................... -- 4,023
Deferred taxes, net....................................... 1,068 2,918
-------- --------
Total liabilities................................... 301,392 206,643
15% PIK Redeemable Senior Preferred Stock: $.01 par value;
redemption price -- $1,000 per share plus accrued and
unpaid dividends (1998 -- none; 1997 -- $1,880,159);
1998 -- 20,000 shares authorized, none issued and
outstanding; 1997 -- 20,000 shares authorized, 5,000
issued and outstanding at net issue price plus accrued PIK
stock dividends of 1,880 shares........................... -- 5,978
15% PIK Redeemable Junior Preferred Stock: $.01 par value;
redemption price -- $1,000 per share plus accrued and
unpaid dividends (1998 -- none; 1997 -- $5,585,969);
1998 -- 35,000 shares authorized, none issued and
outstanding; 1997 -- 35,000 shares authorized, 14,815
issued and outstanding at net issue price plus accrued PIK
stock dividends of 5,586 shares........................... -- 19,435
8% PIK 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 (1998 -- none; 1997 -- $25,548); 1998 -- 12,670
shares authorized, none issued and outstanding;
1997 -- 12,670 shares authorized, issued and outstanding
at net issue price........................................ -- 1,292
Stockholders' deficit:
Common Stock, Voting, convertible to Nonvoting Common
Stock: $.01 par value; 1998 -- 5,442,000 shares
authorized, 1,720,608 issued and outstanding;
1997 -- 3,142,922 authorized, 621,532 issued and
outstanding............................................. 17 6
Common Stock, Nonvoting, convertible to Voting Common
Stock: $.01 par value; 1998 -- 4,503,000 shares
authorized, 1,528,261 issued and outstanding;
1997 -- 2,600,108 authorized, 2,185,532 issued and
outstanding............................................. 15 22
Additional paid-in capital................................ 28,544 31,287
Accumulated deficit....................................... (75,364) (44,501)
-------- --------
Total stockholders' deficit......................... (46,788) (13,186)
-------- --------
Total liabilities, redeemable preferred stock and
stockholders' deficit............................... $254,604 $220,162
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 127
CLASSIC COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues.................................................... $ 69,802 $ 60,995 $ 59,821
Operating expenses:
Programming............................................... 17,840 14,916 15,106
Plant and operating....................................... 8,437 7,622 7,308
General and administrative................................ 11,295 9,257 8,688
Marketing and advertising................................. 850 438 238
Corporate overhead........................................ 3,648 4,322 2,213
Depreciation and amortization............................. 30,531 27,832 27,510
-------- -------- --------
Total operating expenses.......................... 72,601 64,387 61,063
-------- -------- --------
Loss from operations........................................ (2,799) (3,392) (1,242)
Interest expense............................................ (24,442) (21,299) (20,633)
Gain on sale of cable system................................ -- 3,644 4,901
Write-off of abandoned telephone operations and accrual of
related costs............................................. (220) (500) (2,994)
Other income................................................ 192 71 --
-------- -------- --------
Loss before income taxes and extraordinary item
(27,269) (21,476) (19,968)
Income tax benefit.......................................... 1,930 7,347 6,802
-------- -------- --------
Loss before extraordinary item.............................. (25,339) (14,129) (13,166)
Extraordinary loss on extinguishment of debt................ (5,524) -- --
-------- -------- --------
Net loss.......................................... $(30,863) $(14,129) $(13,166)
======== ======== ========
Loss applicable to common stockholders...................... $(35,274) $(18,209) $(16,734)
======== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 128
CLASSIC COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
VOTING NONVOTING COMMON STOCK
COMMON STOCK COMMON STOCK CLASS A TOTAL
------------------ ------------------ ---------------- ADDITIONAL STOCKHOLDERS'
SHARES SHARES SHARES PAID-IN ACCUMULATED EQUITY
ISSUED AMOUNT ISSUED AMOUNT ISSUED AMOUNT CAPITAL DEFICIT (DEFICIT)
--------- ------ --------- ------ ------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995..................... 646,901 $ 6 1,642,537 $17 10,075 $ -- $36,909 $(17,206) $ 19,726
Conversion of common
stock.................. (542,995) (5) 542,995 5 -- -- -- -- --
Restricted stock
awards................. 258,813 3 -- -- -- -- (3) -- --
Stock exchange........... 258,813 2 -- -- (10,075) -- (2) -- --
Compensation on
restricted stock....... 1,058 1,058
Expenses related to
equity transactions.... -- -- -- -- -- -- (85) -- (85)
Accretion of discount on
preferred stock........ -- -- -- -- -- -- (237) -- (237)
Dividends on preferred
stock.................. -- -- -- -- -- -- (3,331) -- (3,331)
Net loss................. -- -- -- -- -- -- -- (13,166) (13,166)
--------- --- --------- --- ------- ---- ------- -------- --------
Balance at December 31,
1996..................... 621,532 6 2,185,532 22 -- -- 34,309 (30,372) 3,965
Compensation on
restricted stock....... 1,058 1,058
Accretion of discount on
preferred stock........ -- -- -- -- -- -- (237) -- (237)
Dividends on preferred
stock.................. -- -- -- -- -- -- (3,843) -- (3,843)
Net loss................. -- -- -- -- -- -- -- (14,129) (14,129)
--------- --- --------- --- ------- ---- ------- -------- --------
Balance at December 31,
1997..................... 621,532 6 2,185,532 22 -- -- 31,287 (44,501) (13,186)
Issuance of common
stock.................. 355,258 4 -- -- -- -- 1,336 -- 1,340
Conversion of common
stock.................. 657,271 6 (657,271) (6) -- -- -- -- --
Compensation on
restricted stock....... -- -- -- -- -- -- 1,108 -- 1,108
Exchange of restricted
common stock........... 188,085 2 -- -- -- -- (2) -- --
Repurchase of treasury
stock.................. (101,538) (1) -- -- -- -- (773) -- (774)
Accretion of discount on
preferred stock........ -- -- -- -- -- -- (1,869) -- (1,869)
Dividends on preferred
stock.................. -- -- -- -- -- -- (2,542) -- (2,542)
Net loss................. -- -- -- -- -- -- -- (30,863) (30,863)
Other.................... -- -- -- (1) -- -- (1) -- (2)
--------- --- --------- --- ------- ---- ------- -------- --------
Balance at December 31,
1998..................... 1,720,608 $17 1,528,261 $15 -- $ -- $28,544 $(75,364) $(46,788)
========= === ========= === ======= ==== ======= ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 129
CLASSIC COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
1998 1997 1996
--------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $ (30,863) $(14,129) $(13,166)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Provision for bad debts................................... 971 1,248 1,491
Depreciation.............................................. 12,041 10,285 9,491
Amortization of intangibles............................... 18,352 17,547 18,019
Amortization of deferred financing costs.................. 1,181 1,373 1,491
Discount accretion on bank debt........................... 3,589 457 490
PIK interest on senior subordinated promissory Notes...... 435 517 446
Gain on sales of cable systems............................ -- (3,644) (4,901)
Non-cash compensation..................................... 1,108 1,058 1,058
Deferred tax benefit...................................... (1,850) (7,593) (6,804)
Extraordinary loss........................................ 5,524 -- --
Changes in working capital, net of acquisition amounts:
Change in accounts receivable.......................... (1,841) (321) (3,952)
Change in prepaids and other assets.................... 166 126 754
Change in other accruals and payables.................. 1,100 413 2,685
Change in accrued interest............................. 4,349 555 831
--------- -------- --------
Net cash provided by operating activities................... 14,262 7,892 7,933
INVESTING ACTIVITIES
Acquisition of cable television systems..................... (43,486) -- (367)
Purchases of property, plant and equipment.................. (13,759) (10,135) (8,212)
Payments for other intangibles.............................. -- (323) (467)
Net proceeds from sale of cable systems..................... -- 6,189 12,433
Net proceeds from litigation settlement..................... -- 2,928 --
--------- -------- --------
Net cash provided by (used in) investing activities......... (57,245) (1,341) 3,387
FINANCING ACTIVITIES
Proceeds from long-term debt................................ 281,208 759 2,208
Repayments of long-term debt................................ (190,308) (7,246) (13,345)
Repayments of subordinated indebtedness..................... (4,458) -- --
Repayment of promissory notes............................... (650) -- --
Financing costs............................................. (9,455) -- (232)
Redemption of preferred stock............................... (31,023) -- --
Cash dividends paid on preferred stock...................... (93) (101) (101)
Sales of common stock....................................... 50 -- (85)
Repurchase of common stock.................................. (125) -- --
Purchase of subsidiary stock................................ -- -- (600)
--------- -------- --------
Net cash provided by (used in) financing activities......... 45,146 (6,588) (12,155)
--------- -------- --------
Increase (decrease) in cash and cash equivalents............ 2,163 (37) (835)
Cash and cash equivalents at beginning of year.............. 616 653 1,488
--------- -------- --------
Cash and cash equivalents at end of year.................... $ 2,779 $ 616 $ 653
========= ======== ========
Cash taxes paid............................................. $ 166 $ 1 $ 5
Cash interest paid.......................................... $ 15,247 $ 18,397 $ 17,367
Non-cash investing and financing activities:
PIK dividends on preferred stock.......................... $ 2,475 $ 3,742 $ 3,229
Accretion of discount on preferred stock.................. $ 1,869 $ 237 $ 237
</TABLE>
See accompanying notes.
F-6
<PAGE> 130
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION
Classic Communications, Inc. and its subsidiaries (collectively, the
"Company") acquire, develop and operate cable television systems throughout the
United States.
2. ACQUISITIONS AND DISPOSITIONS OF CABLE TELEVISION SYSTEMS
Acquisitions
In December 1998, the Company acquired certain assets of TCA Cable Partners
in exchange for a cable television system in Texas (with a fair value of
approximately $0.6 million) and cash consideration of $2.4 million.
In July 1998, the Company acquired certain assets of Cable One, Inc. (the
"Cable One Acquisition") serving communities in four states for approximately
$41.7 million in cash and the assumption of $0.2 million in net operating
liabilities. The purchase was financed from proceeds of the Company's private
debt offering.
The above acquisitions were accounted for using the purchase method and,
accordingly, the operating results of the systems acquired have been included in
the Company's consolidated financial statements since the date of acquisition.
Dispositions
During 1998, the Company sold or disposed of some smaller systems that did
not fit into the Company's long-term strategic plans.
In April and May 1997, the Company sold certain cable television systems in
Kansas and Oklahoma for $5.7 million, net of selling expenses. The net pretax
gain from the sales was approximately $3.6 million.
In September 1996, the Company sold certain cable television systems in
Arkansas for cash consideration of $12.4 million, net of selling expenses. The
net pretax gain from the sale was approximately $5.2 million.
PRO FORMA INFORMATION
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>
YEAR ENDED
DECEMBER 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Revenues.................................................... $ 76,418 $ 72,177
Net loss before extraordinary item.......................... $(23,916) $(10,072)
Net loss.................................................... $(29,440) $(10,072)
</TABLE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and all of its wholly-owned and majority-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
F-7
<PAGE> 131
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
Service income includes subscriber service revenues and charges for
installations and connections and is recognized in the period in which the
services are provided to the customers. Subscriber services paid for in advance
are recorded as income when earned.
Initial installation revenue is recognized as revenue when the service is
performed, 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.
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................... 7-12 years
Office furniture and equipment.......................... 3-7 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.
Deferred Financing Costs
Deferred financing costs are being amortized to interest expense using the
interest method over the terms of the related debt.
Intangible Assets
The useful lives of the specific intangible assets are as follows:
<TABLE>
<S> <C>
Subscriber relationships................................ 5-15 years
Franchise rights........................................ 7-10 years
Noncompete agreements................................... 5 years
Goodwill................................................ 5-40 years
</TABLE>
Intangible assets are being amortized using the straight-line method over
their estimated useful lives.
Impairment of Long-Lived Assets
The Company periodically reviews the carrying amounts of property, plant
and equipment, identifiable intangible assets and goodwill both purchased in the
normal course of business and acquired through acquisition to determine whether
current events or circumstances, as defined in Financial Accounting Standards
Board Statement No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of, warrant adjustments to such carrying
amounts by considering, among other things, the future cash inflows expected to
result from the use of the asset and its eventual disposition less the future
cash outflows expected to be necessary to obtain those inflows. An impairment
loss would be measured by comparing the fair value of the asset with its
carrying amount. Any write-down is treated as a permanent reduction in the
carrying amount of the assets. Management reviews the
F-8
<PAGE> 132
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
valuation and amortization periods of goodwill on a periodic basis, taking into
consideration any events or circumstances which might result in diminished fair
value or revised useful life. No events or circumstances have occurred to
warrant a diminished fair value or reduction in the useful life of goodwill.
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 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.
Fair Value of Financial Instruments
The carrying amounts of certain of the Company's financial instruments,
including cash and cash equivalents, accounts receivable, accounts payable and
other accrued liabilities, approximate fair value because of their short
maturities. All bank debt agreements carry variable interest rates and their
carrying value is considered to approximate fair value. The estimated fair value
of the Company's bonds is based on quoted market prices. The carrying amount of
the Company's bonds was $186.5 million and the fair value was $198.4 million at
December 31, 1998.
The Company utilizes interest rate cap and interest rate swap agreements to
manage interest rate exposures. The principal objective of such agreements is to
minimize the risks and/or costs associated with financial activities. The
Company does not utilize financial instruments for trading or other speculative
purposes. The counterparties to these contractual arrangements are major
financial institutions with which the Company also has other financial
relationships. The Company is exposed to credit loss in the event of
nonperformance by these counterparties. However, the Company does not anticipate
nonperformance by the other parties, and no material loss would be expected from
their nonperformance.
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
F-9
<PAGE> 133
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
4. ACCOUNTS RECEIVABLE
Accounts receivable consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------
1998 1997
------ ------
<S> <C> <C>
Accounts receivable, trade.................................. $5,211 $4,570
Accounts receivable, other.................................. 588 211
Less allowance for doubtful accounts........................ (325) (262)
------ ------
Accounts receivables, net of allowance...................... $5,474 $4,519
====== ======
</TABLE>
The activity in the Company's allowance for doubtful accounts for the
periods ending December 31, 1998, 1997 and 1996 is as follows (in thousands):
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END
FOR THE PERIOD ENDED OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
- -------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
December 31, 1998.......................... $262 $ 971 $ (908) $325
December 31, 1997.......................... $513 $1,248 $(1,499) $262
December 31, 1996.......................... $249 $1,491 $(1,227) $513
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1997
-------- --------
<S> <C> <C>
Land........................................................ $ 1,152 $ 1,021
Buildings and improvements.................................. 3,262 2,107
Vehicles.................................................... 6,061 4,088
Cable television distribution systems....................... 106,373 83,499
Office furniture, tools and equipment....................... 3,858 2,499
Construction in progress.................................... 6,463 3,636
-------- --------
127,169 96,850
Less accumulated depreciation............................... (39,977) (28,211)
======== ========
$ 87,192 $ 68,639
======== ========
</TABLE>
F-10
<PAGE> 134
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT
Balances of amounts outstanding under the Company's various debt agreements
are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1997
-------- --------
<S> <C> <C>
13.25% Senior Discount Notes................................ $114,000 $ --
Unamortized discount...................................... (51,963) --
9.875% Senior Subordinated Notes............................ 125,000 --
Unamortized discount...................................... (563) --
1998 Credit Agreement
Term loans................................................ 75,000 --
Revolving loans........................................... 20,800 --
1995 Senior Credit Agreement
Term A loan............................................... -- 18,324
Term B loan............................................... -- 58,184
Line of credit notes...................................... -- 112,717
Unamortized discount...................................... (1,892)
Other....................................................... 568 634
-------- --------
$282,842 $187,967
======== ========
</TABLE>
In July 1998, the Company issued $114.0 million of 13.25% Senior Discount
Notes due 2009 and its wholly owned subsidiary, Classic Cable, issued $125.0
million of 9.875% Senior Subordinated Notes due 2008. Net of the applicable
discounts and the fair value of the common stock sold along with the Senior
Discount Notes, proceeds from these issues were $60.0 million and $124.4
million, respectively. Interest payments on the Senior Discount Notes do not
commence until 2004. Interest payments on the Senior Subordinated Notes begin in
1999. Concurrent with the offering, Classic Cable entered into the 1998 Credit
Agreement. The 1998 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 2000. The Company
may be subject to mandatory prepayments based upon operating results, sales of
assets, equity or debt offerings or other events. Interest is based upon either
a LIBOR rate plus an applicable margin or, at the option of the Company, a base
rate plus an applicable margin. Proceeds from the 1998 Credit Agreement totaled
$95.8 million.
In connection with the early extinguishment of the Senior Credit Agreement,
an extraordinary loss of $5.5 million was recorded related to the write-off of
unamortized deferred financing costs and discount.
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. Proceeds of $3.77 per share were
allocated to the sale of the shares. A discount of $1.3 million was recorded in
connection with common stock issued. This per share amount represents the fair
value of the stock as of the date of the offering.
The 1998 Credit Agreement is collateralized by a security interest in
essentially all the assets of Classic Cable. The Company has no operations of
its own. Consequently, it will rely on dividends and cash flow of Classic Cable
to meet its debt service obligations. The terms of the Credit Agreement restrict
certain activities of Classic Cable, including the incurrence of additional
indebtedness and the payment of certain dividends. Accordingly, substantially
all the assets and operations of Classic Cable are restricted as to transfer to
the Company and may not be available for dividends and/or debt service of the
Company.
F-11
<PAGE> 135
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the 1998 Credit Agreement, the Company is required to
pay a quarterly commitment fee that can range from 0.375% to 0.500% per annum on
the unused portion of the revolving loan commitment.
The 1995 Senior Credit Agreement consisted of a $20,000,000 Term A Loan, a
$65,000,000 Term B Loan and Line of Credit Notes not to exceed $130,000,000.
Interest was based upon either a LIBOR rate plus an applicable margin or, at the
option of the Company, a base rate plus an applicable margin. The 1995 Senior
Credit Agreement was amended in 1997. A fee of approximately $1 million was paid
to the bank equal to 0.5% of the outstanding Term Loans and Line of Credit
Notes. This amount is included as a component of interest expense in 1997.
The Company utilizes interest rate cap and interest rate swap agreements to
limit the impact of increases in interest rates on its floating rate debt. The
agreements require premium payments to counterparties based upon a notional
principal amount. No such agreements were outstanding at December 31, 1998 or
1997. Interest rate cap agreements entitle the Company to receive from the
counterparties the amounts, if any, by which the selected market interest rates
exceed the strike rates stated in the agreements. Interest rate swap agreements
are used by the Company to change the interest rate of their debt from variable
rate to fixed rate. The swap is a contractual agreement between the Company and
another party to exchange payments periodically over the life of the agreement
based upon the interest rates of the underlying debt over the period of the
agreement. The differential to be paid or received is accrued and recognized as
an adjustment of interest expense related to the debt (the accrual accounting
method). The premium paid for both types of agreements is amortized to interest
expense over the life of the agreement.
Maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
1999..................................................... $ 118
2000..................................................... 1,200
2001..................................................... 750
2002..................................................... 750
2003..................................................... 750
Thereafter............................................... 331,800
--------
$335,368
========
</TABLE>
7. SUBORDINATED DEBT
Subordinated debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------
1998 1997
---- ------
<S> <C> <C>
7.5% Junior Subordinated Promissory Notes(A)................ $-- $ 295
15% Senior Subordinated Promissory Note(B).................. -- 3,728
--- ------
$-- $4,023
=== ======
</TABLE>
- ---------------
(A) The Junior Subordinated Promissory Notes (the "Interest Notes") bore
interest at 7.5% per annum. The Interest Notes had no required principal
payments other than upon maturity on July 7, 2002. The interest on the
Interest Notes was deferred until maturity. The Interest Notes and accrued
interest were paid in full in July 1998.
(B) The Senior Subordinated Promissory Note (the "Senior Note") bore interest
at 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
F-12
<PAGE> 136
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interest under the Senior and PIK Notes was due on December 31, 2007. The
Senior Note, the PIK Notes and accrued interest were paid in full in July
1998.
8. CAPITAL STOCK
Shares Reserved
At December 31, 1998, 152,418 shares of Voting Common Stock and 183,435
shares of Nonvoting Common Stock were reserved for the exercise of the Common
Stock Purchase Warrants.
Common Stock
In 1996, the Company issued 258,813 shares of restricted Voting Common
Stock to complete an exchange for 10,075 shares of Class A Common Stock that was
initiated in October 1995. The 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. The amount by which the fair value of the restricted
Voting Common Stock exceeded the fair value of the Class A Common Stock is
recorded as compensation expense ratably over the vesting period. The fair value
of the restricted Voting Common Stock and the Class A Common Stock was
determined as of the issuance date by an independent valuation.
The Company has the 1996 and 1998 Restricted Stock Award Plans ("the
Plans") whereby employees may be granted shares of the Company's Voting Common
Stock. The stock awards will generally vest over a three to four year period. In
addition, upon any distribution event, the restricted stock stockholders will be
entitled to either $29.78 less per share, $19.06 less per share or $3.77 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 743,231
shares under the Plans, all of which have been awarded. The fair value of the
awards is recorded as compensation expense ratably over the vesting period. The
fair value was determined by an independent valuation.
The following table summarizes the activity of the Company's restricted
stock:
<TABLE>
<CAPTION>
DISTRIBUTION THRESHOLDS
--------------------------------------
$29.78 $19.06 $9.93 $3.77 TOTAL
------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995....... -- -- -- -- --
Class A Common Stock Exchange.... -- -- 258,813 -- 258,813
1996 Restricted Stock Award
Plan.......................... 129,407 129,406 -- -- 258,813
------- ------- -------- ------- --------
Balance at December 31, 1996....... 129,407 129,406 258,813 -- 517,626
No activity in 1997.............. -- -- -- -- --
------- ------- -------- ------- --------
Balance at December 31, 1997....... 129,407 129,406 258,813 -- 517,626
Repurchase of stock.............. -- -- (76,350) -- (76,350)
1998 Restricted Stock Award Plan:
Shares exchanged.............. (93,171) (93,171) (109,991) -- (296,333)
Shares awarded................ -- -- -- 484,418 484,418
Other......................... (2) (1) -- -- (3)
------- ------- -------- ------- --------
Balance at December 31, 1998....... 36,234 36,234 72,472 484,418 629,358
======= ======= ======== ======= ========
Shares vested at December 31,
1998............................. 27,176 27,176 54,354 67,280 175,986
======= ======= ======== ======= ========
</TABLE>
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 Plans. The restrictions on the shares are transferable.
F-13
<PAGE> 137
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Preferred Stock
In July 1998, the Company redeemed the outstanding shares of TVE Preferred
Stock at a redemption price per share of $100 plus accrued and unpaid dividends.
In July 1998, the Company redeemed the outstanding shares of Senior and
Junior Preferred Stock at a redemption price per share of $1,000 plus accrued
and unpaid dividends.
Stock Purchase Warrants
At December 31, 1998 and 1997, there were warrants outstanding to acquire
335,853 common shares at $.001 per share which expire beginning 2004 through
2006. No warrants have been exercised as of December 31, 1998. 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.
Voting Rights
At December 31, 1998, 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.
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.
Dividends on Common Stock shall be paid at such times as may be declared by
the Board of Directors. Through December 31, 1998, no such dividends had been
declared.
F-14
<PAGE> 138
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES
Significant components of income tax benefit from continuing operations are
as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Current:
Federal............................................... $ (80) $ 246 $ --
State................................................. -- -- 2
------- ------- -------
Total Current................................. (80) 246 2
Deferred:
Federal............................................... (1,536) (6,304) (5,649)
State................................................. (314) (1,289) (1,155)
------- ------- -------
Total Deferred................................ (1,850) (7,593) (6,804)
------- ------- -------
Income tax benefit............................ $(1,930) $(7,347) $(6,802)
======= ======= =======
</TABLE>
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
-------------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Tax at U.S. statutory rate................................ (34.0)% (34.0)% (34.0)%
State taxes, net of federal benefit....................... (3.9) (3.8) (3.9)
Increase in valuation allowance........................... 27.8 -- --
Nondeductible items....................................... 3.0 3.6 3.8
----- ----- -----
(7.1)% (34.2)% (34.1)%
===== ===== =====
</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 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1998 1997
-------- -------
<S> <C> <C>
Deferred tax liabilities:
Book over tax basis of depreciable assets................. $ 698 $ 2,091
Book over tax basis of assets that are amortizable for
tax.................................................... 3,144 5,414
-------- -------
Total deferred tax liabilities.................... 3,842 7,505
Deferred tax assets:
Net operating loss carryforwards:
Acquired............................................... 4,880 4,880
Other.................................................. 13,411 6,807
Other....................................................... 1,847 561
-------- -------
Total deferred tax assets......................... 20,138 12,248
Less valuation allowance.................................... (17,364) (7,661)
-------- -------
Net deferred tax assets........................... 2,774 4,587
-------- -------
Net deferred tax liabilities...................... $ 1,068 $ 2,918
======== =======
</TABLE>
F-15
<PAGE> 139
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1998, the Company had net operating loss carryforwards of
$47,771,000 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, which could result in
expiration of the loss carryforward before utilization.
Approximately $7.6 million of the total valuation allowance as of December
31, 1998 was previously 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.
During 1997, a subsidiary of the Company filed an amended income tax return
for a period prior to its acquisition. This 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 sponsors a defined contribution pension plan, a 401(k) plan.
Participation in this plan is available to substantially all employees.
Employees may contribute up to 15% of their pay. The Company will match employee
contributions for an amount up to 3% of each employee's base salary. Costs of
the plan, including the Company's matching contributions, were $149,000,
$114,000 and $89,000 for the years ended December 31, 1998, 1997 and 1996,
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
$2,994,000 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.
In November 1998, the Company settled certain litigation related to these
transactions. Terms of the settlement included the sale of certain cable
television systems in Kansas, the granting of a five year right of first refusal
for the sale of certain other cable television systems in Kansas, and a five
year non-competition agreement. In addition, the Company received cash
consideration of $348,000 in 1999 in connection with the settlement. The
settlement resulted in a loss of approximately $220,000.
12. SETTLEMENT OF CLAIMS
In February 1998, the Company settled claims that arose in conjunction with
divorce proceedings of an officer of the Company. The Company purchased certain
stock of the Company in which the officer's wife held a community property
interest and provided monetary consideration for the release of the claims. The
Company acquired and canceled 101,538 shares of the Company's Common Stock
(76,350 of which were restricted stock). The related expenses, including legal,
consultant and other fees of approximately $1,411,000 are included in corporate
overhead expenses in 1997.
F-16
<PAGE> 140
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. The net proceeds of $3
million were recorded as a reduction of goodwill.
13. 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, 1998, approximate annual minimum aggregate rentals under such
leases were $1,206,000 in 1999, $1,004,000 in 2000, $954,000 in 2001, $891,000
in 2002, $873,000 in 2003 and $287,000 thereafter. Rent expense was $1,285,000,
$1,160,000 and $1,071,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
Litigation
The Company is involved in various legal proceedings that 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 and results of
operations of the Company.
F-17
<PAGE> 141
CLASSIC COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
1999
--------
<S> <C>
ASSETS
Cash and cash equivalents................................... $ 638
Accounts receivable, net.................................... 5,136
Prepaid expenses............................................ 1,341
Property, plant, and equipment.............................. 135,177
Less accumulated depreciation............................... (47,486)
--------
87,691
Deferred financing costs, net............................... 9,028
Intangible assets:
Subscriber relationships.................................. 95,367
Franchise rights.......................................... 71,500
Noncompete agreements..................................... 8,425
Goodwill.................................................. 40,865
--------
216,157
Less accumulated amortization............................... (76,415)
--------
139,742
--------
Total assets......................................... $243,576
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable.......................................... $ 489
Subscriber deposits and unearned income................... 5,203
Accrued expenses.......................................... 5,465
Accrued interest.......................................... 5,731
Long-term debt............................................ 288,292
Deferred taxes, net....................................... 1,068
--------
Total liabilities.................................... 306,248
Stockholders' equity:
Common Stock, voting...................................... 17
Common Stock, nonvoting................................... 15
Additional paid-in capital................................ 29,207
Accumulated deficit....................................... (91,911)
--------
Total stockholders' equity........................... (62,672)
--------
Total liabilities and stockholders' equity........... $243,576
========
</TABLE>
See accompanying notes.
F-18
<PAGE> 142
CLASSIC COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
-------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues.................................................... $ 39,286 $ 32,214
Operating expenses:
Programming............................................... 10,427 8,218
Plant and operating....................................... 4,401 3,865
General and administrative................................ 5,755 5,357
Marketing and advertising................................. 452 339
Corporate overhead........................................ 1,725 1,259
Depreciation and amortization............................. 18,096 14,169
-------- --------
Total operating expenses............................... 40,856 33,207
-------- --------
Loss from operations........................................ (1,570) (993)
Interest expense............................................ (14,992) (10,497)
Other income (expense)...................................... 15 64
-------- --------
Loss before taxes........................................... (16,547) (11,426)
Income tax benefit.......................................... -- 1,041
-------- --------
Net loss.................................................... $(16,547) $(10,385)
======== ========
Loss applicable to common stockholders...................... $(16,547) $(12,850)
======== ========
</TABLE>
See accompanying notes.
F-19
<PAGE> 143
CLASSIC COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $(16,547) $(10,385)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Provision for bad debt................................. 386 365
Depreciation........................................... 7,509 5,505
Amortization of intangibles............................ 10,587 8,678
Amortization of deferred financing costs............... 421 660
Discount accretion on long-term debt................... 4,267 217
Non-cash compensation.................................. 663 476
PIK interest on Senior Subordinated Promissory Notes... -- 232
Change in operating assets and liabilities:
Accounts receivable.................................. (48) (363)
Prepaid expenses..................................... (917) 236
Accounts payable..................................... (158) (450)
Subscriber deposits and unearned income.............. 357 574
Accrued expenses..................................... (641) (687)
Accrued interest..................................... (152) 649
Deferred taxes....................................... -- (1,041)
-------- --------
Net cash provided by (used in) operating activities....... 5,727 4,666
INVESTING ACTIVITIES
Payments for other intangibles............................ (513) (18)
Purchase of property, plant and equipment................. (8,008) (4,201)
-------- --------
Net cash used in investing activities..................... (8,521) (4,219)
FINANCING ACTIVITIES
Proceeds from long-term debt.............................. 5,500 1,665
Repayments of long-term debt.............................. (4,317) (82)
Financing costs........................................... (530) --
Cash dividends paid on preferred stock.................... -- (51)
Exchanges and conversions of common stock................. -- (2)
Repurchase of common stock................................ -- (774)
-------- --------
Net cash provided by financing activities................. 653 756
-------- --------
Change in cash and cash equivalents....................... (2,141) 1,203
Cash and cash equivalents at beginning of period.......... 2,779 616
-------- --------
Cash and cash equivalents at end of period................ $ 638 $ 1,819
======== ========
</TABLE>
See accompanying notes.
F-20
<PAGE> 144
CLASSIC COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1999
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Classic
Communications, Inc. ("CCI"), have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. 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, 1999 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1999.
2. ACCOUNTS RECEIVABLE
The activity in CCI's allowance for doubtful accounts for the six months
ending June 30, 1999 and 1998 is as follows (in thousands):
<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, 1999.......................... $325 $386 $385 $326
June 30, 1998.......................... 260 365 374 251
</TABLE>
3. INCOME TAXES
CCI did not record an income tax benefit for the six months ended June 30,
1999. The effective tax rates for the six months ended June 30, 1999 and June
30, 1998 differ primarily due to an increase in the valuation allowance on
deferred tax assets. CCI believes it is more likely than not that such deferred
tax assets will not be utilized in the near term.
CCI'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.
4. SUBSEQUENT EVENT
Acquisition
In July 1999, CCI acquired Buford Group, Inc., which operates cable
television systems in Arkansas, Louisiana, Missouri, and Texas, for
approximately $300 million (the "Buford Acquisition"). The purchase was financed
from (a) the sale of 6.5 million shares of CCI's stock for $100 million, (b)
proceeds of a private debt offering, and (c) proceeds from the refinancing of
CCI's bank agreement. See Debt Offering below.
The following summarized unaudited pro forma financial information assumes
the Buford Acquisition had occurred on January 1, 1999 and 1998, 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,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues.................................................... $ 77,684 $ 74,777
Loss before cumulative effect of change in accounting
principle................................................. $(27,791) $(31,002)
Net loss.................................................... $(27,998) $(31,002)
</TABLE>
F-21
<PAGE> 145
Debt Offering
In July 1999, CCI (through its wholly owned subsidiary, Classic Cable)
issued $150 million of 9.375% Senior Subordinated Notes due 2009. Concurrently
with the offering, Classic Cable entered into an Amended and Restated Credit
Agreement. The proceeds from these transactions and the sale of CCI stock were
approximately $425 million and were used to (a) fund the acquisition of Buford
Group, Inc., (b) repay the 1998 Credit Agreement and (c) pay fees and expenses
of these transactions.
The Amended and Restated Credit Agreement consists of (a) a $75 million
revolving credit facility which matures in 2007, (b) a $75 million Term A loan
facility which matures in 2007, (c) a $100 million Term B loan facility which
matures in 2008, and (d) a non-committed $100 million Term C loan facility which
matures in 2008. Mandatory payments commence in 2001. Interest is based upon
either a LIBOR rate plus an applicable margin or, at the option of CCI, a base
rate plus an applicable margin.
Change of Control Offering
CCI's sale of stock met the definition of a Change of Control as defined in
the indenture to both the Classic Communications 13.25% Senior Discount Notes
due 2009 and the Classic Cable 9.875% Senior Subordinated Notes due 2008. As a
result, CCI and Classic Cable have initiated offers to repurchase these notes at
a price equal to 101% of their principal amount (or accreted value in the case
of the Discount Notes), together with accrued and unpaid interest, if any, to
the date of purchase. The offers are expected to expire in September 1999.
Classic Cable expects to purchase any of its tendered notes with proceeds of the
Amended and Restated Credit Agreement. CCI has not arranged financing to
purchase any of its tendered notes.
F-22
<PAGE> 146
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
BUFORD GROUP, INC.:
We have audited the accompanying consolidated balance sheets of Buford
Group, Inc. and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Buford
Group, Inc. and subsidiaries as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998 in conformity with generally accepted accounting
principles.
KPMG LLP
Dallas, Texas
March 5, 1999
F-23
<PAGE> 147
BUFORD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 7,903 $ 7,890
Accounts receivable, net.................................... 2,878 2,514
Prepaid expenses............................................ 166 342
Property, plant and equipment............................... 200,727 166,886
Less accumulated depreciation and amortization.............. (87,483) (71,198)
-------- --------
113,244 95,688
Intangible assets:
Franchise rights.......................................... 54,417 35,767
Noncompetition agreements................................. 7,434 7,434
Excess cost over net assets of acquired companies......... 2,114 2,114
Other..................................................... 2,116 2,031
-------- --------
66,081 47,346
Less accumulated amortization............................... (16,705) (12,001)
-------- --------
49,376 35,345
Other assets................................................ 2,386 2,153
-------- --------
$175,953 $143,932
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $ 1,033 $ 1,209
Deposits and unearned revenues.............................. 2,234 1,984
Accrued expenses............................................ 8,642 7,052
Long-term obligations....................................... 118,000 85,000
Deferred federal income taxes............................... 1,238 1,763
-------- --------
Total liabilities...................................... 131,147 97,008
-------- --------
Stockholders' equity:
Common stock, $1 par value. Authorized 2,000 shares;
issued and outstanding 1,000 shares.................... 1 1
Additional capital........................................ 14,833 6,945
Retained earnings......................................... 29,972 39,978
-------- --------
Total stockholders' equity............................. 44,806 46,924
Commitments and contingencies...............................
-------- --------
$175,953 $143,932
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-24
<PAGE> 148
BUFORD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Cable television revenues................................... $ 70,475 $58,136 $49,561
Operating expenses:
Programming............................................... 18,339 14,349 11,596
Plant and operating....................................... 6,937 6,567 5,705
General and administrative................................ 16,183 14,910 12,557
Marketing and advertising................................. 345 174 176
Corporate overhead........................................ 9,364 4,858 2,898
Depreciation and amortization............................. 21,399 17,753 17,175
-------- ------- -------
72,567 58,611 50,107
-------- ------- -------
Operating loss......................................... (2,092) (475) (546)
-------- ------- -------
Other income (expense):
Interest expense.......................................... (7,919) (5,787) (5,345)
Interest income........................................... 307 324 521
Gain (loss) on sales of assets............................ (165) 829 5,655
Other, net................................................ (363) (294) (414)
-------- ------- -------
(8,140) (4,928) 417
-------- ------- -------
Loss before income taxes............................... (10,232) (5,403) (129)
Income tax benefit (expense)................................ 226 315 (94)
-------- ------- -------
Net loss............................................... $(10,006) $(5,088) $ (223)
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-25
<PAGE> 149
BUFORD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
COMMON ADDITIONAL RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
------ ---------- -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995.................... $1 $ 1,968 $ 45,289 $ 47,258
Employee stock appreciation..................... -- 1,458 -- 1,458
Net loss........................................ -- -- (223) (223)
-- ------- -------- --------
Balance at December 31, 1996.................... 1 3,426 45,066 48,493
Employee stock appreciation..................... -- 3,519 -- 3,519
Net loss........................................ -- -- (5,088) (5,088)
-- ------- -------- --------
Balance at December 31, 1997.................... 1 6,945 39,978 46,924
Employee stock appreciation..................... -- 7,888 -- 7,888
Net loss........................................ -- -- (10,006) (10,006)
-- ------- -------- --------
Balance at December 31, 1998.................... $1 $14,833 $ 29,972 $ 44,806
== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-26
<PAGE> 150
BUFORD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(10,006) $ (5,088) $ (223)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization........................ 21,399 17,753 17,175
Non-cash interest expense............................ 171 168 --
(Gain) loss on sales of assets....................... 165 (829) (5,655)
Employee stock appreciation expense.................. 7,888 3,519 1,458
Deferred federal income tax expense (benefit)........ (525) (449) 94
Changes in assets and liabilities, excluding
acquisitions and dispositions:
Accounts receivable............................. (364) (1,031) 484
Prepaid expenses................................ 176 (30) (47)
Federal income taxes receivable................. -- -- 1,040
Accounts payable and accrued expenses........... 1,414 1,908 (522)
Deposits and unearned revenue................... 250 1,418 79
Other........................................... (234) (467) (255)
-------- -------- --------
Net cash provided by operating activities....... 20,334 16,872 13,628
-------- -------- --------
Cash flows from investing activities:
Acquisitions of cable systems............................. (29,900) (17,771) (18,350)
Additions to property, plant and equipment................ (20,469) (22,042) (15,593)
Additions to intangible assets............................ (3,139) (1,098) --
Net proceeds from sale of assets.......................... 357 -- --
Net proceeds from disposition of cable systems............ -- 1,228 13,654
-------- -------- --------
Net cash used in investing activities........... (53,151) (39,683) (20,289)
-------- -------- --------
Cash flows from financing activities:
Proceeds from long-term obligations....................... 33,000 25,000 4,260
Payments of long-term obligations......................... -- (53) (14,850)
Payment of debt issuance costs............................ (170) -- (337)
-------- -------- --------
Net cash provided by (used in) financing
activities................................... 32,830 24,947 (10,927)
Net increase (decrease) in cash and cash equivalents........ 13 2,136 (17,588)
Cash and cash equivalents at beginning of year.............. 7,890 5,754 23,342
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 7,903 $ 7,890 $ 5,754
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE> 151
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION
Buford Group, Inc. and subsidiaries (the "Company") are engaged in cable
television operations within the United States. The Company owns and operates
cable television systems primarily in Texas, Louisiana, Arkansas, and Missouri.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Buford Group,
Inc. and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
During 1998, the Company purchased the remaining 76.8% of Friendship Cable,
Ltd. ("FCL"), a Texas limited partnership in which the Company had held a 1%
general partner interest and limited partner interests aggregating 22.2%. The
accounts of FCL for 1998 and 1997 are consolidated because the Company, as
general partner, is required to fund deficits incurred during the period from
inception to January 1, 2000, and certain shareholders of the Company controlled
the limited partner interests of FCL through the date of the Company's
acquisition of the remaining interests. In prior years, allocated net losses to
the limited partners had reduced their capital accounts to zero.
(c) REVENUE RECOGNITION
Revenues from basic and premium services are recognized when the related
services are provided.
Installation revenues are recognized to the extent of direct selling costs
incurred. The remainder, if any, is deferred and amortized to income over the
estimated average period that customers are expected to remain connected to the
cable television system.
(d) STATEMENTS OF CASH FLOWS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
The Company uses the indirect method to present cash flows from operating
activities. Supplemental disclosures of cash flow information follow:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Interest paid............................................... $7,593,000 $4,588,000
========== ==========
Income taxes paid........................................... $ 250,000 $ 59,000
========== ==========
</TABLE>
(e) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost, including all direct
cost and certain indirect costs of construction of cable television transmission
and distribution systems, and the cost of new customer installations.
Maintenance and repairs are charged to expense as incurred and equipment
replacements and betterments are capitalized. The Company charges depreciation
to operations on a straight-line basis over the estimated useful lives of the
related property and equipment as follows:
<TABLE>
<S> <C>
Cable distribution equipment........................... 3 - 12 years
Furniture, fixtures, automobiles and other............. 3 - 12 years
Buildings and improvements............................. 5 - 20 years
</TABLE>
F-28
<PAGE> 152
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(f) INTANGIBLE ASSETS
The excess cost over net identifiable tangible and intangible assets of
acquired companies is being amortized on a straight-line basis over the
estimated economic lives of 40 years. Franchise rights purchased in connection
with cable television operations are being amortized on a straight-line basis
over 5 to 15 years. The costs of noncompetition agreements are being amortized
on a straight-line basis over the terms of the respective agreements.
The Company assesses the recoverability of intangible assets as well as the
related amortization lives by determining whether the carrying value of the
intangible assets can be recovered over the remaining lives through projected
undiscounted future cash flows. To the extent that such projections indicate
that undiscounted future cash flows are not expected to be adequate to recover
the carrying amounts of the related intangible assets, such carrying amounts are
adjusted for impairment to a level commensurate with the estimated fair value of
the underlying assets.
(g) FEDERAL INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount more likely than not to be realized.
Income tax expense is the total of tax payable for the period and the change
during the period in deferred tax assets and liabilities.
(h) DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Any derivative financial
instruments are used to manage well-defined interest rate risks related to the
Company's outstanding debt.
Any costs of interest rate agreements are initially recognized as assets
and amortized to interest expense over the lives of the agreements using the
interest method. Under all interest rate agreements, the differential to be paid
or received is recognized as an adjustment to interest expense. During the years
ended December 31, 1998, 1997 and 1996, the Company recognized net expenses of
$39,000, $38,000 and $59,000, respectively, under its interest rate agreements
(see note 6).
The carrying amounts of cash equivalents, accounts receivable and accounts
payable reported in the accompanying consolidated financial statements
approximate fair value due to their short maturities. The outstanding borrowings
under the Company's credit agreement (note 6) bear interest at current market
rates, and thus, the carrying amount of debt approximates estimated fair value.
The fair value of the interest rate agreements (note 6) was approximately
$(449,000) at December 31, 1998, which represents the estimated amount, based on
dealer quotations, that the Company would pay, excluding accrued interest, to
terminate the contracts at December 31, 1998, taking into account the current
unrealized loss on open contracts.
(i) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
F-29
<PAGE> 153
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
(j) COMPREHENSIVE INCOME
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income," in the first
quarter of 1998, which required companies to disclose comprehensive income
separately from net income. Comprehensive income is defined as the change in
equity during a period from transactions and other events and circumstances from
non-ownership sources. It includes all changes in equity during a period, except
those resulting from investments by owners and distributions to owners. The
adoption of this statement had no effect on the Company at December 31, 1998,
because the Company has no elements of other comprehensive income. Accordingly,
comprehensive income and net income are the same amount for each period
presented.
(2) ACQUISITIONS AND DISPOSITIONS
In April 1998, the Company acquired cable systems from three unaffiliated
parties for $29.9 million. In April and May 1997, the Company acquired cable
systems from unaffiliated parties for $17.8 million. During 1996, the Company
acquired cable systems from unaffiliated parties for $18.4 million.
The acquisitions were accounted for as purchases and, accordingly, the
purchase prices were allocated to tangible and intangible assets based on
estimated fair values at the dates of the acquisitions. Operating results of the
acquired systems are included in the accompanying financial statements from the
dates of acquisition. Net assets acquired as a result of these acquisitions
included $15.6 million, $7.4 million and $7.0 million in franchise rights and
$14.3 million, $10.4 million and $11.4 million in property, plant and equipment
during 1998, 1997 and 1996, respectively.
On October 1, 1996, the Company sold all of its cable television systems
operating in North Carolina for a cash purchase price of $11.8 million,
resulting in a gain of $4.7 million. Additionally, on October 1, 1996, the
Company sold cable television system assets of a consolidated partnership
(70%-owned) for a total cash price of $2.1 million, resulting in a gain of
$717,000.
In September 1998, the Company acquired the remaining 76.8% of FCL for $2.8
million. The Company accounted for this transaction as a purchase business
combination, and accordingly, allocated the purchase price to FCL's assets
(primarily intangible assets) based on their estimated fair values.
Unaudited pro forma operating results as though the 1998 and 1997
acquisitions discussed above had occurred on January 1, 1997, with adjustments
to give effect to amortization of franchises, depreciation of property, plant
and equipment, interest expense and certain other adjustments is as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1998 1997
-------- -------
(UNAUDITED)
<S> <C> <C>
Revenues.................................................... $ 73,531 $67,354
Operating income (loss)..................................... (1,630) 1,801
Net loss.................................................... (10,177) (4,831)
</TABLE>
F-30
<PAGE> 154
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(3) ACCOUNTS RECEIVABLE
Accounts receivable consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1997
------ ------
<S> <C> <C>
Accounts receivable, trade.................................. $2,665 $2,417
Accounts receivable, other.................................. 627 554
------ ------
3,292 2,971
Less allowance for doubtful accounts........................ (414) (457)
------ ------
$2,878 $2,514
====== ======
</TABLE>
(4) OTHER ASSETS
The Company is the named beneficiary on life insurance policies for key
management members. The cash surrender value of the policies is recorded net of
policy loans of $5,977,000 and $5,553,000 at December 31, 1998 and 1997,
respectively. The net amounts of $2,153,000 and $1,837,000 at December 31, 1998
and 1997, respectively, are included in other assets in the accompanying
consolidated balance sheets.
(5) PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment and accumulated depreciation and
amortization follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Cable distribution equipment................................ $188,264 $155,119
Furniture, fixtures, automobiles and other.................. 8,572 7,520
Buildings, land and improvements............................ 3,891 4,247
-------- --------
200,727 166,886
Less accumulated depreciation and amortization.............. (87,483) (71,198)
-------- --------
Property, plant and equipment, net..................... $113,244 $ 95,688
======== ========
</TABLE>
(6) LONG-TERM OBLIGATIONS
The Company had outstanding borrowings of $118,000,000 and $85,000,000 at
December 31, 1998 and 1997, respectively, under a credit agreement with banks
providing for up to $140,000,000 of borrowings. Borrowings bear interest at the
bank's floating rate, the London Interbank Offered Rate ("LIBOR"), or a
combination thereof as selected by the Company, plus a margin dependent on the
Company's leverage ratio (as defined in the credit agreement). The weighted
average effective interest rate at December 31, 1998 and 1997 was 6.75%. The
Company must pay an annual commitment fee ranging from .25% to .375% of the
unfunded portion of the commitment. Borrowings under the credit agreement are
secured by the common stock of the Company and its subsidiaries. The credit
agreement contains certain provisions which limit the Company as to additional
indebtedness, sales of assets, liens, guarantees, investments and acquisitions.
Additionally, the Company must maintain certain specified financial ratios.
On April 30, 1998, the bank amended the credit agreement to extend the
final maturity date to June 30, 2005. Beginning September 30, 1999, and
quarterly thereafter through June 30, 2005, the
F-31
<PAGE> 155
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
commitment amount is to be reduced by quarterly amounts ranging from $2,655,000
to $12,685,000. Additionally, on or before April 30 of each year, commencing
April 30, 2000, the Company is required to make mandatory payments equal to 50%
of the excess cash flow for the previous fiscal year, if any, as defined in the
credit agreement.
In accordance with the credit agreement, the Company has interest rate
agreements with various banks to reduce the impact of changes in interest rates.
At December 31, 1998, the Company had three interest rate collar agreements
expiring in May 1999, October 1999 and June 2000 with a bank covering notional
principal amounts of $10,000,000, $10,000,000 and $15,000,000, respectively.
These agreements have maximum cap rates of 8.20%, 7.50% and 6.55%, respectively,
and each has a minimum floor rate of 5.65%. The Company also had an interest
rate swap agreement with a bank covering a notional amount of $25,000,000, with
a fixed rate of 5.73%, which expires in January 2000.
The Company is exposed to credit loss in the event of nonperformance of the
other parties to the above agreements; however, the Company does not anticipate
nonperformance by such counterparties.
As of December 31, 1998, principal payments due on indebtedness in future
years was as follows (in thousands):
<TABLE>
<S> <C>
1999...................................................... $ 5,310
2000...................................................... 10,620
2001...................................................... 15,340
2002...................................................... 18,880
Thereafter................................................ 67,850
</TABLE>
(7) ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1997
------ ------
<S> <C> <C>
Accrued programming......................................... $2,970 $1,312
Accrued property taxes...................................... 1,704 1,389
Accrued payroll and benefits................................ 1,279 1,764
Accrued interest............................................ 514 938
Accrued other............................................... 2,175 1,649
------ ------
$8,642 $7,052
====== ======
</TABLE>
(8) INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1998, 1997
and 1996 includes the following (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ----
<S> <C> <C> <C>
Current -- State............................................ $ 250 $ 134 $--
Current -- Federal.......................................... 49 -- --
Deferred -- Federal......................................... (525) (449) 94
----- ----- ---
$(226) $(315) $94
===== ===== ===
</TABLE>
F-32
<PAGE> 156
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
Actual income tax expense (benefit) differs from the "expected" income tax
expense (benefit) (computed by applying the U.S. federal corporate tax rate of
35% to the loss before income taxes) as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -----
<S> <C> <C> <C>
Computed expected tax benefit........................... $(3,581) $(1,891) $ (45)
Change in the valuation allowance....................... 394 328 1
Revision of prior year estimate......................... 299 -- (252)
Employee stock appreciation............................. 2,760 1,231 509
Other................................................... (98) 17 (119)
------- ------- -----
$ (226) $ (315) $ 94
======= ======= =====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1998 and 1997 are presented as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 8,616 $ 5,992
Alternative minimum tax credit carryforwards.............. 5,692 5,692
Investment in partnerships................................ -- 1,593
Deferred compensation..................................... -- 116
Other..................................................... 968 670
------- -------
Total gross deferred tax assets...................... 15,276 14,063
Less valuation allowance.................................. (4,764) (4,370)
------- -------
Net deferred tax assets.............................. 10,512 9,693
------- -------
Deferred tax liabilities:
Property and equipment, principally due to differences in
depreciation........................................... $11,118 $10,898
Other..................................................... 632 558
------- -------
Total gross deferred tax liabilities................. 11,750 11,456
------- -------
Net deferred tax liability........................... $(1,238) $(1,763)
======= =======
</TABLE>
The net changes in the valuation allowance for 1998, 1997 and 1996 were
increases of $394,000, $328,000, and $1,000, respectively. The Company has
recognized deferred tax assets to the extent such assets can be realized through
future reversals of existing temporary differences.
At December 31, 1998, the Company had approximately $24,596,000 of tax net
operating loss carryforwards which expire in years 2007 through 2012. In
addition, the Company had approximately $5,700,000 of alternative minimum tax
credit carryforwards available to reduce future regular federal income taxes
over an indefinite period.
(9) LEASE OBLIGATIONS
Total rental expense for operating leases was $1,427,000, $1,433,000 and
$1,264,000 in 1998, 1997 and 1996, respectively. Included in these amounts are
payments for pole rental agreements amounting to $1,313,000, $1,306,000 and
$1,102,000 in 1998, 1997 and 1996, respectively. Pole rental agreements may be
terminated by either party by written notice ranging up to ninety days. The
remaining operating lease agreements are primarily for office space and annual
minimum aggregate rentals under such leases are not considered material.
F-33
<PAGE> 157
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(10) EMPLOYEE BENEFIT PLANS
In January 1992, the Company established a savings plan to provide elective
employee and employer contributions under Section 401(k) of the Internal Revenue
Code. Under the terms of the plan, the Company may make voluntary contributions
to the plan matching employee contributions in percentages and discretionary
amounts as determined by the Board of Directors. The Company made matching and
discretionary contributions to the plan of $423,000, $459,000 and $397,000 in
1998, 1997 and 1996, respectively.
Under the terms of the Buford Television Partnership Agreement (the
"Agreement") effective January 1, 1994, a new partnership, Buford Television
Partnership ("BTP"), was formed to hold the outstanding shares of the Company.
Under the terms of this Agreement, the stockholders on January 1, 1994
contributed 100% of their shares to the Partnership. Key employees were granted
12% ownership of future appreciation in the market value of the Company's common
stock, as defined in the Agreement, through appreciation percentages. These
appreciation percentages have none of the rights associated with ownership of
the common stock of the Company, such as voting or dividend rights, and will
have no value outside the context of the Agreement. However, the partners of
BTP, which include the key employees, have voting rights in the management of
BTP, the purpose of which is to acquire, manage, vote, pledge, hold and dispose
of the Company's stock and to perform all duties necessary to accomplish the
purposes of BTP. On December 1, 1997, the Agreement was amended whereby 620
shares of the Company's common stock were withdrawn from BTP by the principal
stockholders, leaving BTP with 380 shares of the Company's common stock, or 38%
ownership. However, the aforementioned key employees still retain 12% ownership
of the future appreciation in the market value of 100% of the Company's common
stock. Participants have vested 20% each year in the accumulated value of their
appreciation percentages, and became fully vested as of December 31, 1998. The
Company records expense for the accumulated value of the common stock
appreciation based on vesting criteria over the five year vesting period, and
subsequently, will continue to record expense based on the fully vested status
of the key employees and changes in fair value of the Company's common stock.
For the years ended December 31, 1998, 1997 and 1996, the Company recognized
$7,888,000, $3,519,000 and $1,458,000, respectively, in expense related to the
Agreement. The cumulative amount recorded pursuant to this agreement was
$14,833,000 as of December 31, 1998.
The Company has agreements with several employees that provide for amounts
to be paid to such employees in the event of a sale of certain cable systems'
assets. The amounts to be paid are based on several factors, including
historical cash flow. No amounts have been recorded related to these agreements
as the Company has not consummated a sale of any of the cable systems' assets
covered by these agreements.
(11) CONTINGENCIES
In October 1992, Congress enacted the Cable Television Consumer Protection
and Competition Act of 1992 (the "1992 Cable Act"). During May 1993, pursuant to
authority granted to it under the 1992 Cable Act, the Federal Communications
Commission ("FCC") issued its rate regulation rules which became effective
September 1, 1993. These rate regulation rules required cable systems in
franchised areas serving at least 1,000 customers, which receive certification
and are not subject to effective competition, as defined, to set rates for basic
and cable programming services, as well as related equipment and installations,
pursuant to general cost-of-service standards or FCC prescribed benchmarks. The
Act also entailed quality service criteria and must carry/retransmission
requirements.
F-34
<PAGE> 158
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
On February 1, 1996, Congress passed The Telecommunications Act of 1996
(the "1996 Act") which was signed into law on February 6, 1996. This new law
altered federal, state and local laws and regulations for telecommunications
providers and services, including the Company. Several aspects of the 1996 Act
impact cable television, including the elimination of regulation of the cable
programming service tier for certain smaller cable providers, including the
Company.
The Company believes that it has complied with all provisions of the 1992
Cable Act and the 1996 Act including the rate setting provisions promulgated by
the FCC.
(12) SUBSEQUENT EVENT (UNAUDITED)
In May 1999, the Company and its stockholders entered into an agreement to
sell all of the common stock of the Company to Classic Cable, Inc. for
approximately $302.3 million.
F-35
<PAGE> 159
BUFORD GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents................................... $ 2,890
Accounts receivable, net of allowance for doubtful accounts
of $398................................................... 2,846
Prepaid expenses............................................ 484
Property, plant and equipment............................... 208,268
Less accumulated depreciation and amortization.............. (96,913)
--------
111,355
Intangible assets:
Franchise rights....................................... 54,417
Noncompetition agreements.............................. 7,434
Excess cost over net assets of acquired companies...... 2,114
Other.................................................. 1,089
--------
65,054
Less accumulated amortization............................... (18,613)
--------
46,441
Other assets................................................ 2,586
--------
$166,602
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $ 491
Deposits and unearned revenues.............................. 2,341
Accrued expenses............................................ 7,073
Long-term obligations....................................... 112,000
Deferred federal income taxes............................... 976
--------
Total liabilities................................. 122,881
--------
Stockholders' equity:
Common stock, $1 par value. Authorized 2,000 shares;
issued and outstanding 1,000 shares................... 1
Additional capital..................................... 14,058
Retained earnings...................................... 29,662
--------
Total stockholders' equity........................ 43,721
Commitments and contingencies...............................
--------
$166,602
========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-36
<PAGE> 160
BUFORD GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -----------------
1999 1998 1999 1998
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Cable television revenues.............................. $19,537 $17,680 $38,398 $32,943
------- ------- ------- -------
Operating expenses:
Programming.......................................... 5,213 4,657 10,430 8,762
Plant and operating.................................. 1,683 1,688 3,377 3,345
General and administrative........................... 4,301 4,239 8,461 7,936
Marketing and advertising............................ 128 57 237 150
Corporate overhead................................... (430) 2,250 (72) 4,354
Depreciation and amortization........................ 6,378 5,267 12,105 10,137
------- ------- ------- -------
17,273 18,158 34,538 34,684
------- ------- ------- -------
Operating income (loss)........................... 2,264 (478) 3,860 (1,741)
------- ------- ------- -------
Other income (expense):
Interest expense..................................... (2,001) (2,089) (4,095) (3,681)
Interest income...................................... 74 90 166 172
Other, net........................................... (175) (77) (244) (99)
------- ------- ------- -------
(2,102) (2,076) (4,173) (3,608)
------- ------- ------- -------
Loss before income taxes and cumulative effect of
change in accounting principle.................. 162 (2,554) (313) (5,349)
Income tax benefit (expense)........................... 123 131 210 (25)
------- ------- ------- -------
Loss before cumulative effect of change in
accounting principle............................ 285 (2,423) (103) (5,374)
Cumulative effect of change in accounting principle,
net of income tax benefit of $52..................... -- -- 207 --
------- ------- ------- -------
Net loss.......................................... 285 $(2,423) $ (310) $(5,374)
======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-37
<PAGE> 161
BUFORD GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (310) $ (5,374)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization........................ 12,105 10,137
Non-cash interest expense............................ 12 42
Employee stock appreciation expense.................. (775) 3,550
Deferred federal income tax benefit.................. (210) (274)
Cumulative effect of change in accounting
principle........................................... 207 --
Changes in assets and liabilities:
Accounts receivable............................... 32 (718)
Prepaid expenses.................................. (318) (188)
Accounts payable and accrued expenses............. (2,111) 1,272
Deposits and unearned revenues.................... 107 201
Other............................................. (212) (178)
------- --------
Net cash provided by operating activities......... 8,527 8,470
------- --------
Cash flows from investing activities:
Additions to property, plant and equipment................ (7,540) (10,980)
Acquisition of cable systems.............................. -- (29,900)
Other..................................................... -- (89)
------- --------
Net cash used in investing activities............. (7,540) (40,969)
------- --------
Cash flows from financing activities:
Proceeds from long-term obligations....................... -- 30,000
Payments of long-term obligations......................... (6,000) --
------- --------
Net cash provided by (used in) financing
activities...................................... (6,000) 30,000
------- --------
Net decrease in cash and cash equivalents................... (5,013) (2,499)
Cash and cash equivalents at beginning of period............ 7,903 7,890
------- --------
Cash and cash equivalents at end of period.................. $ 2,890 $ 5,391
======= ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-38
<PAGE> 162
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(1) GENERAL AND BASIS OF PRESENTATION
(a) ORGANIZATION
Buford Group, Inc. and subsidiaries are engaged in cable television
operations within the United States. The Company owns and operates cable
television systems primarily in Texas, Louisiana, Arkansas, and Missouri.
(b) PRINCIPLES OF CONSOLIDATION
The unaudited condensed consolidated financial statements include the
accounts of Buford Group, Inc. and its subsidiaries (the "Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation.
(c) INTERIM FINANCIAL INFORMATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements of the Company contain all adjustments,
consisting only of those of a normal recurring nature, necessary to present
fairly the Company's financial position as of March 31, 1999, and the results of
operations and cash flows for the three months ended March 31, 1999 and 1998.
These results are not necessarily indicative of the results to be expected for
the full fiscal year.
(d) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(e) COMPREHENSIVE INCOME
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income," in the first
quarter of 1998, which required companies to disclose comprehensive income
separately from net income. Comprehensive income is defined as the change in
equity during a period from transactions and other events and circumstances from
non-ownership sources. It includes all changes in equity during a period, except
those resulting from investments by owners and distributions to owners. The
adoption of this statement had no effect on the Company at December 31, 1998,
because the Company has no elements of other comprehensive income. Accordingly,
comprehensive income and net income are the same amount for each period
presented.
(2) RECENT ACCOUNTING PRONOUNCEMENT
The Company adopted the provisions of Statement of Position 98-5 ("SOP
98-5"), "Reporting on the Costs of Start-up Activities," effective as of January
1, 1999. This pronouncement requires that costs of start-up activities,
including organizational costs, should be expensed as incurred. As a result of
adopting SOP 98-5, the Company recorded a charge of $259,000, less tax benefit
of $52,000, as the cumulative effect of recording the change in accounting
principle as of January 1, 1999.
F-39
<PAGE> 163
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(3) CONTINGENCIES
In October 1992, Congress enacted the Cable Television Consumer Protection
and Competition Act of 1992 (the "1992 Cable Act"). During May 1993, pursuant to
authority granted to it under the 1992 Cable Act, the Federal Communications
Commission ("FCC") issued its rate regulation rules which became effective
September 1, 1993. These rate regulation rules required cable systems in
franchised areas serving at least 1,000 customers, which receive certification
and are not subject to effective competition, as defined, to set rates for basic
and cable programming services, as well as related equipment and installations,
pursuant to general cost-of-service standards or FCC prescribed benchmarks. The
Act also entailed quality service criteria and must carry/retransmission
requirements.
On February 1, 1996, Congress passed The Telecommunications Act of 1996
(the "1996 Act") which was signed into law on February 6, 1996. This new law
altered federal, state and local laws and regulations for telecommunications
providers and services, including the Company. Several aspects of the 1996 Act
impact cable television, including the elimination of regulation of the cable
programming service tier for certain smaller cable providers, including the
Company.
The Company believes that it has complied with all provisions of the 1992
Cable Act and the 1996 Act including the rate setting provisions promulgated by
the FCC.
(4) SUBSEQUENT EVENTS
In May 1999, the Company and its shareholders entered into an agreement to
sell the common stock of the Company to Classic Cable, Inc. On July 29, 1999,
the sale was consummated for a total selling price of approximately $297.8
million. In connection with the Buford Television Partnership Agreement (the
"Agreement"), the Buford Television Partnership granted ownership in 12% of
future appreciation in the market value of the Company's common stock, to
certain key employees. At December 31, 1998, the Company had accrued an
estimated liability under this agreement of approximately $14.8 million. The key
employees covered by the Agreement received approximately $14.1 million in
satisfaction of their rights under the agreement at the time of sale.
Accordingly, the Company recorded a credit of approximately $.7 million to
corporate overhead expense during the three months ending June 30, 1999.
Additionally, the Company paid out approximately $2.6 million to certain
employees under separate agreements that provided for payments in the event of
the sale of certain cable systems' assets. The Company has not recognized
expense at June 30, 1999 related to these agreements as such amounts are payable
only upon consummation of a sale of cable system assets and were recognized when
the sale closed.
F-40
<PAGE> 164
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CLASSIC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CLASSIC SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
UNTIL , 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THE UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................... 1
Risk Factors.......................... 16
Use of Proceeds....................... 23
Unaudited Pro Forma Consolidated
Financial Information............... 24
Selected Historical Consolidated
Financial Data -- Classic
Communications, Inc. ............... 33
Selected Historical Consolidated
Financial Data -- Buford Group,
Inc................................. 34
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 35
Business.............................. 45
Legislation and Regulation............ 58
Management............................ 67
Certain Relationships and Related
Transactions........................ 72
Principal Stockholders................ 74
Description of Other Indebtedness..... 75
The Exchange Offer.................... 78
Description of the Notes.............. 86
United States Federal Income Tax
Considerations...................... 118
Plan of Distribution.................. 119
Legal Matters......................... 120
Experts............................... 120
Index to Historical Financial
Statements.......................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
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
------------------------
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 165
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>
2.1 -- Securities Purchase Agreement among Classic Cable, Inc.
and Buford Group, Inc. dated as of May 11, 1999.
3.1 -- Amended and Restated Certificate of Incorporation of
Classic Communications, Inc., dated as of October 30,
1995.
</TABLE>
II-1
<PAGE> 166
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
3.1(b) -- Certificate of Amendment to Amended and Restated
Certificate of Incorporation of Classic Communications,
Inc. dated July 21, 1998.
*3.1(c) -- Certificate of Amendment to Amended and Restated
Certificate of Incorporation of Classic Communications,
Inc. dated July 28, 1999.
*3.2 -- Amended and Restated Bylaws of Classic Communications,
Inc.
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 13 1/4 Senior Discount Note due 2009.
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).
*4.4 -- First Supplemental Indenture, dated as of July 28, 1999,
between Classic Cable, Inc., as Issuer, the Subsidiary
Guarantors named thereon, as Guarantors, and Chase Bank
of Texas, National Association, as Trustee.
5.1(a) -- Opinion of Winstead Sechrest & Minick P.C. dated
September 17, 1998 regarding the enforceability and
issuance of the securities, including consent.
5.1(b) -- Opinion of Winstead Sechrest & Minick P.C. dated November
10, 1998 regarding the enforceability and issuance of the
securities, including consent.
8.1(a) -- Opinion of Winstead Sechrest & Minick P.C. dated
September 17, 1998 regarding federal income tax matters,
including consent.
8.1(b) -- Opinion of Winstead Sechrest & Minick P.C. dated November
10, 1998 regarding 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 -- Employment Agreement dated as of July 28, 1999 by and
between Classic Communications, Inc., Classic Cable, Inc.
and J. Merritt Belisle.
*10.4 -- Employment Agreement dated as of July 28, 1999 by and
between Classic Communications, Inc., Classic Cable, Inc.
and Steven E. Seach.
10.5 -- 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.
*10.6 -- Amended and Restated Credit Agreement dated July 28, 1999
among Classic Cable, Inc., as Borrower, the Lenders
Parties thereto, Goldman Sachs Credit Partners, L.P., as
Lead Arranger and Syndication Agent, and The Chase
Manhattan Bank, as Documentation Agent, and Union Bank of
California, N.A., as Administrative Agent.
*10.7 -- Facilities Commitment Letter, dated June 24, 1999,
between Classic Cable, Inc. and Goldman Sachs Credit
Partners L.P.
10.8 -- Asset Purchase Agreement dated May 14, 1998 by and
between Cable One, Inc. and Black Creek Communications,
Inc.
</TABLE>
II-2
<PAGE> 167
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
10.8(b) -- Assignment of Asset Purchase Agreement dated June 19,
1998.
10.8(c) -- Amendment No. 1 to Asset Purchase Agreement dated July
15, 1998.
10.9 -- 1996 Restricted Stock Award Plan of Classic
Communications, Inc.
10.10 -- 1998 Restricted Stock Award Plan of Classic
Communications, Inc.
10.10(a) -- Restricted Stock Award Agreement dated July 29, 1998 by
and between J. Merritt Belisle and Classic
Communications, Inc.
10.10(b) -- Restricted Stock Award Agreement dated July 29, 1998 by
and between Steven E. Seach and Classic Communications,
Inc.
10.11 -- Investment Agreement dated as of May 24, 1999 between
Brera Classic, LLC and Classic Communications, Inc.
10.12 -- Management and Advisory Fee Agreement dated May 24, 1999.
10.13 -- Stockholder Voting Agreements dated effective May 24,
1999, among Brera Classic, L.L.C. and Austin Ventures,
L.P., BT Capital Partners, Inc., The Texas Growth Fund,
BA SBIC Management, L.L.C., as the successor in interest
to NationsBanc Capital Corp., J. Merritt Belisle, Steven
E. Seach, and Bryan Noteboom.
*10.14 -- Stockholders' Agreement, dated as of July 28, 1999, by
and among Classic Communications, Inc., Brera Classic,
LLC and the additional parties named therein.
*10.15 -- Registration Rights Agreement, dated as of July 28, 1999,
among Classic Communications, Inc., Brera Classic, LLC,
and the additional parties named therein.
*10.16 -- Purchase Agreement, dated July 21, 1999, by and among
Classic Cable, Inc. and Goldman, Sachs & Co., Donaldson,
Lufkin & Jenrette Securities Corporation and Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
*10.17 -- Exchange and Registration Rights Agreement, dated July
28, 1999, by and between Classic Cable, Inc. and Goldman,
Sachs & Co., Donaldson, Lufkin & Jenrette Securities
Corporation and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
*10.18 -- Indenture for $150,000,000 9 3/8% Senior Subordinated
Notes due 2009, dated as of July 28, 1999 between Classic
Cable, Inc., as Issuer, the Guarantors listed on Schedule
1 thereto, and Chase Bank of Texas, National Association,
as Trustee.
*10.19 -- Form of Global 9 3/8% Senior Subordinated Note due 2009.
*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).
*23.3 -- Consent of KPMG LLP.
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.
99.2 -- Form of Notice of Guaranteed Delivery with respect to the
Exchange Offer.
</TABLE>
- ---------------
* Filed herewith
II-3
<PAGE> 168
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.
- -------- ----------- ----
<S> <C> <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.
(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.
II-4
<PAGE> 169
(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-5
<PAGE> 170
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 8 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of Austin,
State of Texas, on the 13th day of August 1999.
CLASSIC COMMUNICATIONS, INC.
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Classic Communications, Inc.,
do hereby constitute and appoint Steven E. Seach and J. Merritt Belisle, and
each and either of them, our true and lawful attorneys-in-fact and agents, to do
any and all acts and things in our names and on our behalf in our capacities as
directors and officers and to execute any and all instruments for us and in our
name in the capacities indicated below, which said attorneys and agents, or
either of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
registration statement, or any registration statement for this offering that is
to be effective upon filing pursuant to Rule 462(b) under the Securities Act of
1933, including specifically, but without limitation, power and authority to
sign for us or any of us in our names in the capacities indicated below, any and
all amendments (including post-effective amendments) hereto; and we do hereby
ratify and confirm all that said attorneys and agents, or any of them, shall do
or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 8 to 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>
Chairman of the Board
- -----------------------------------------------------
Alberto Cribiore
/s/ J. MERRITT BELISLE Chief Executive Officer and August 13, 1999
- ----------------------------------------------------- Director (Principal Executive
J. Merritt Belisle Officer)
/s/ STEVEN E. SEACH President and Chief Financial August 13, 1999
- ----------------------------------------------------- Officer and a Director
Steven E. Seach (Principal Financial Officer
and Principal Accounting
Officer)
/s/ LISA A. HOOK Director August 13, 1999
- -----------------------------------------------------
Lisa A. Hook
/s/ DAVID WEBB Director August 13, 1999
- -----------------------------------------------------
David Webb
Director
- -----------------------------------------------------
Martin D. Payson
</TABLE>
II-6
<PAGE> 171
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CLASSIC COMMUNICATIONS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ -- $ --
Investment in and advances to affiliates.................... 13,142,000 16,339,000
Deferred financing costs, net............................... 2,465,000 --
------------ ------------
Total assets...................................... $ 15,607,000 $ 16,339,000
============ ============
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT
Liabilities:
Accrued interest.......................................... $ -- $ 90,000
Subordinated debt......................................... -- 4,023,000
Long-term debt............................................ 62,038,000 --
Deferred taxes, net....................................... 51,000 --
Amounts due to parent..................................... 306,000 --
------------ ------------
Total liabilities................................. 62,395,000 4,113,000
15% PIK Redeemable Senior Preferred Stock................. -- 5,978,000
15% PIK Redeemable Junior Preferred Stock................. -- 19,434,000
Common stock, Voting...................................... 17,000 6,000
Common stock, Nonvoting................................... 15,000 22,000
Paid in capital........................................... 28,544,000 31,287,000
Accumulated deficit....................................... (75,364,000) (44,501,000)
------------ ------------
Total stockholders' deficit....................... (46,788,000) (13,186,000)
------------ ------------
Total liabilities, redeemable preferred stock and
stockholders' deficit........................... $ 15,607,000 $ 16,339,000
============ ============
</TABLE>
S-1
<PAGE> 172
CLASSIC COMMUNICATIONS, INC.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Interest expense................................. $ (3,754,000) $ (539,000) $ (469,000)
Interest in loss of subsidiary................... (26,700,000) (13,787,000) (12,866,000)
------------ ------------ ------------
Loss before taxes................................ (30,454,000) (14,326,000) (13,335,000)
Income tax benefit (expense)..................... (409,000) 198,000 169,000
------------ ------------ ------------
Net loss......................................... $(30,863,000) $(14,128,000) $(13,166,000)
============ ============ ============
</TABLE>
S-2
<PAGE> 173
CLASSIC COMMUNICATIONS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------
1998 1997 1996
----------- -------- ------------
<S> <C> <C> <C>
Cash from operations................................. $ 265,000 $ -- $ 85,000
Investing activities
Capital contribution to subsidiary................. (22,764,000) -- --
----------- -------- ------------
Net cash used in investing activities................ (22,764,000) -- --
Financing activities
Expenses related to equity financings.............. -- -- (85,000)
Proceeds from long-term debt....................... 59,981,000 -- --
Repayments of long-term debt....................... (16,000) -- --
Repayment of subordinated indebtedness............. (4,458,000) -- --
Repayment of promissory notes...................... (650,000) -- --
Redemption of preferred stock...................... (29,756,000) -- --
Financing costs.................................... (2,527,000) -- --
Sale of common stock............................... 50,000 -- --
Repurchase of common stock......................... (125,000) -- --
----------- -------- ------------
Net cash provided by (used in) financing
activities......................................... 22,499,000 -- (85,000)
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> 174
CLASSIC COMMUNICATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1998
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. LONG-TERM DEBT
Balance of amounts outstanding under the Company's debt agreement is as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1997
-------- --------
<S> <C> <C>
13.25% Senior Discount Notes................................ $114,000 $ --
Unamortized discount...................................... (51,962) --
-------- --------
$ 62,038 $ --
======== ========
</TABLE>
In July 1998, the Company issued $114.0 million of 13.25% Senior Discount
Notes due 2009. Net of the applicable discounts and the fair value of the common
stock sold along with the Senior Discount Notes, proceeds from this issue were
$60.0 million. Interest payments on the Senior Discount Notes do not commence
until 2004.
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. Proceeds of $3.77 per share were
allocated to the sale of the shares. A discount of $1.3 million was recorded in
connection with common stock issued. This per share amount represents the fair
value of the stock as of the date of the offering.
3. SUBORDINATED DEBT
Subordinated debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1998 1997
------ ------
<S> <C> <C>
7.5% Junior Subordinated Promissory Notes(A)................ $ -- $ 295
15% Senior Subordinated Promissory Note (B)................. -- 3,727
------ ------
$ -- $4,023
====== ======
</TABLE>
- ---------------
(A) The Junior Subordinated Promissory Notes (the "Interest Notes") bore
interest at 7.5% per annum. The Interest Notes had no required principal
payments other than upon maturity on July 7, 2002. The interest on the
Interest Notes was deferred until maturity. The Interest Notes and
accrued interest were paid in full in July 1998.
(B) The Senior Subordinated Promissory Note (the "Senior Note") bore interest
at 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 was due on December 31,
2007. The Senior Note, the PIK Notes and accrued interest was paid in
full in July 1998.
S-4
<PAGE> 175
EXHIBIT LIST
<TABLE>
<CAPTION>
EXHIBIT
NO. NAME
------- ----
<C> <S>
2.1 -- Securities Purchase Agreement among Classic Cable, Inc.
and Buford Group, Inc. dated as of May 11, 1999.
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.
*3.1(c) -- Certificate of Amendment to Amended and Restated
Certificate of Incorporation of Classic Communications,
Inc. dated July 28, 1999.
*3.2 -- Amended and Restated Bylaws of Classic Communications,
Inc.
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 13 1/4 Senior Discount Note due 2009.
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).
*4.4 -- First Supplemental Indenture, dated as of July 28, 1999,
between Classic Cable, Inc., as Issuer, the Subsidiary
Guarantors named thereon, as Guarantors, and Chase Bank
of Texas, National Association, as Trustee.
5.1(a) -- Opinion of Winstead Sechrest & Minick P.C. dated
September 17, 1998 regarding the enforceability and
issuance of the securities, including consent.
5.1(b) -- Opinion of Winstead Sechrest & Minick P.C. dated November
10, 1998 regarding the enforceability and issuance of the
securities, including consent.
8.1(a) -- Opinion of Winstead Sechrest & Minick P.C. dated
September 17, 1998 regarding federal income tax matters,
including consent.
8.1(b) -- Opinion of Winstead Sechrest & Minick P.C. dated November
10, 1998 regarding 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 -- Employment Agreement dated as of July 28, 1999 by and
between Classic Communications, Inc., Classic Cable, Inc.
and J. Merritt Belisle.
*10.4 -- Employment Agreement dated as of July 28, 1999 by and
between Classic Communications, Inc., Classic Cable, Inc.
and Steven E. Seach.
10.5 -- 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.
*10.6 -- Amended and Restated Credit Agreement dated July 28, 1999
among Classic Cable, Inc., as Borrower, the Lenders
Parties thereto, Goldman Sachs Credit Partners, L.P., as
Lead Arranger and Syndication Agent, and The Chase
Manhattan Bank, as Documentation Agent, and Union Bank of
California, N.A., as Administrative Agent.
</TABLE>
<PAGE> 176
<TABLE>
<CAPTION>
EXHIBIT
NO. NAME
------- ----
<C> <S>
*10.7 -- Facilities Commitment Letter, dated June 24, 1999,
between Classic Cable, Inc. and Goldman Sachs Credit
Partners L.P.
10.8 -- Asset Purchase Agreement dated May 14, 1998 by and
between Cable One, Inc. and Black Creek Communications,
Inc.
10.8(b) -- Assignment of Asset Purchase Agreement dated June 19,
1998.
10.8(c) -- Amendment No. 1 to Asset Purchase Agreement dated July
15, 1998.
10.9 -- 1996 Restricted Stock Award Plan of Classic
Communications, Inc.
10.10 -- 1998 Restricted Stock Award Plan of Classic
Communications, Inc.
10.10(a) -- Restricted Stock Award Agreement dated July 29, 1998 by
and between J. Merritt Belisle and Classic
Communications, Inc.
10.10(b) -- Restricted Stock Award Agreement dated July 29, 1998 by
and between Steven E. Seach and Classic Communications,
Inc.
10.11 -- Investment Agreement dated as of May 24, 1999 between
Brera Classic, LLC and Classic Communications, Inc.
10.12 -- Management and Advisory Fee Agreement dated May 24, 1999.
10.13 -- Stockholder Voting Agreements dated effective May 24,
1999, among Brera Classic, L.L.C. and Austin Ventures,
L.P., BT Capital Partners, Inc., The Texas Growth Fund,
BA SBIC Management, L.L.C., as the successor in interest
to NationsBanc Capital Corp., J. Merritt Belisle, Steven
E. Seach, and Bryan Noteboom.
*10.14 -- Stockholders' Agreement, dated as of July 28, 1999, by
and among Classic Communications, Inc., Brera Classic,
LLC and the additional parties named therein.
*10.15 -- Registration Rights Agreement, dated as of July 28, 1999,
among Classic Communications, Inc., Brera Classic, LLC,
and the additional parties named therein.
*10.16 -- Purchase Agreement, dated July 21, 1999, by and among
Classic Cable, Inc. and Goldman, Sachs & Co., Donaldson,
Lufkin & Jenrette Securities Corporation and Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
*10.17 -- Exchange and Registration Rights Agreement, dated July
28, 1999, by and between Classic Cable, Inc. and Goldman,
Sachs & Co., Donaldson, Lufkin & Jenrette Securities
Corporation and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
*10.18 -- Indenture for $150,000,000 9 3/8% Senior Subordinated
Notes due 2009, dated as of July 28, 1999 between Classic
Cable, Inc., as Issuer, the Guarantors listed on Schedule
1 thereto, and Chase Bank of Texas, National Association,
as Trustee.
*10.19 -- Form of Global 9 3/8% Senior Subordinated Note due 2009.
*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).
*23.3 -- Consent of KPMG LLP.
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.
99.2 -- Form of Notice of Guaranteed Delivery with respect to the
Exchange Offer.
</TABLE>
- ---------------
* Filed herewith
<PAGE> 1
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. 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 15,000,000. Such
shares shall be divided into 55,000 shares Preferred Stock , $.01 par
value per share (the "Preferred Stock") and 14,945,000 shares of Common
Stock (the "Common Stock"), which shall be further divided into two
classes, 10,442,000 of which shall have voting rights, $.01 par value
per share ("Voting Common Stock"), and 4,503,000 of which shall have no
voting rights, except as may be required by statute, $.01 par value per
share ("Nonvoting Common Stock").
Shares of Preferred Stock may be issued from time to time in
one or more series, each of which is to have a distinctive serial
designation as determined in the resolution(s) or such certificate(s)
of designations providing for the issuance of such Preferred Stock from
time to time.
Each series of Preferred Stock:
A. may have such number of shares;
B. may have such voting powers or may be without voting
powers;
C. may be subject to redemption at such time or times
and at such price;
D. may be entitled to receive dividends (which may be
cumulative or noncumulative) at such rate or rates,
or such conditions, from such date or dates, and at
such times, and payable in preference to, or in such
relation to, the dividends payable on any other class
or classes or series of stock;
E. may have such rights upon the dissolution of, or upon
any distribution of the assets of, the Corporation;
F. may be made convertible into, or exchangeable for,
shares of any other class or classes, or of any other
series of the same class or of any
<PAGE> 2
other class or classes, of stock of the Corporation
at such price or prices or at such rates of exchange,
and with adjustments;
G. may be entitled to the benefit of a sinking fund or
purchase fund to be applied to the purchase or
redemption of shares of such series in such amount or
amounts;
H. may be entitled to the benefit of conditions and
restrictions upon the creation of indebtedness of the
Corporation or any subsidiary, upon the issuance of
any additional stock (including additional shares of
such series or of any other series) and upon the
payment of dividends or the making of other
distributions on, and the purchase, redemption or
other acquisition by the Corporation of stock of any
class; and
I. may have such other relative, participating, optional
or other special rights, and qualifications,
limitations or restrictions thereof;
as in such instance is stated in the resolution(s) of the board of
directors or such certificate(s) of designations providing for the
issuance of such Preferred Stock. Except where otherwise set forth in
such resolution(s) or such certificate(s) of designations, the number
of shares comprising such series may be increased or decreased (but not
below the number of shares then outstanding) from time to time by like
action of the board of directors.
Shares of any series of Preferred Stock which have been
redeemed (whether through the operation of a sinking fund or otherwise)
or purchased by the Corporation, or which, if convertible or
exchangeable, have been converted into or exchanged for shares of stock
of any other class or classes will have the status of authorized but
unissued shares of Preferred Stock and may be reissued as a part of the
series of which they were originally a part or may be reclassified and
reissued as part of a new series of Preferred Stock created by
resolution(s) or such certificate(s) of designations of the board of
directors or as part of any other series of Preferred Stock, all
subject to the conditions or restrictions on issuance set forth in the
resolution or resolutions adopted by the board of directors providing
for the issuance of any series of Preferred Stock and to any filing
required by law.
Except as otherwise provided by law, the resolution(s) of the
board of directors or such certificate(s) of designations providing for
the issuance of any series of Preferred Stock, Common Stock will have
the exclusive right to vote for the election of directors and for all
other purposes. Each holder of Common Stock will be entitled to one
vote for each share held.
Subject to all of the rights of Preferred Stock or any series
thereof, the holders of Common Stock will be entitled to receive, when,
as and if declared by the board of directors, out of funds legally
available therefor, dividends payable in cash, in stock or otherwise.
<PAGE> 3
Upon any liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, and subject to the
rights of the holders of Preferred Stock, the remaining net assets of
the Corporation will be distributed pro rata to the holders of Common
Stock in accordance with their respective rights and interests.
3. Article 5 of the Amended and Restated Certificate of Incorporation
of the corporation is hereby deleted in its entirety.
4. Articles 8(a) is amended and restated in its entirety as follows:
(a) At all meetings of the Board of Directors of the
Corporation, a majority of the entire Board 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 the Certificate of Incorporation.
5. 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.
IN WITNESS WHEREOF, I, the undersigned, being the Chief Executive
Officer of the corporation and authorized to executed this Certificate of
Amendment to the Amended and Restated Certificate of Incorporation, do hereby
declare and certify that this is my act and deed and the facts herein stated are
true, and accordingly have hereunto set by my hand this ___ day of July, 1999.
CLASSIC COMMUNICATIONS, INC.
By: /s/ J. Merritt Belisle
-----------------------------------
J. Merritt Belisle
Chief Executive Officer
Attest:
/s/ Bryan D. Noteboom
- ------------------------------
Bryan D. Noteboom, Secretary
<PAGE> 1
CLASSIC COMMUNICATIONS, INC.
AMENDED AND RESTATED BYLAWS
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.
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
<PAGE> 2
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.
2
<PAGE> 3
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 eight (8).
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.
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
3
<PAGE> 4
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, 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.
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 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
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<PAGE> 5
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.
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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 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.
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<PAGE> 7
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 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
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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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<PAGE> 1
CLASSIC CABLE, INC.,
as Issuer,
the SUBSIDIARY GUARANTORS named herein,
as Guarantors
and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
as Trustee
FIRST SUPPLEMENTAL INDENTURE
Dated as of July 28, 1999
to
INDENTURE
Dated as of July 29, 1998
between
CLASSIC CABLE, INC., as Issuer
the SUBSIDIARY GUARANTORS named therein, as Guarantors
and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as Trustee
$125,000,000
9 7/8% SENIOR SUBORDINATED NOTES DUE 2008
<PAGE> 2
This FIRST SUPPLEMENTAL INDENTURE, dated as of July 28, 1999 (the
"First Supplemental Indenture"), is entered into by and among Classic Cable,
Inc., a Delaware corporation (the "Issuer"), the existing subsidiary guarantors
of the Issuer set forth on Schedule 1 attached hereto (the "Classic
Subsidiaries"), Buford Group, Inc., a Delaware corporation ("Buford"), each
subsidiary of Buford set forth on Schedule 2 attached hereto, (the "Buford
Subsidiaries") and Chase Bank of Texas, National Association, a national banking
association, as Trustee (the "Trustee").
WHEREAS, the Issuer has heretofore executed and delivered to the
Trustee an Indenture dated as of July 29, 1998 (the "Indenture"), providing for
the issuance of its 9 7/8% Senior Subordinated Notes due 2008 (the "Initial
Securities") and, when and if issued as provided in the Registration Rights
Agreement, its 9 7/8% Senior Subordinated Notes due 2008, Series B (the
"Exchange Securities" and, together with the Initial Securities, the
"Securities"); and
WHEREAS, the Issuer has entered into that certain securities purchase
agreement, dated May 11, 1999, among the Issuer and Buford, whereby the Issuer
will acquire all of the issued and outstanding stock of Buford (the
"Acquisition"); and
WHEREAS, the Acquisition will be completed on July 28, 1999, at which
time Buford will become a wholly owned subsidiary of the Issuer; and
WHEREAS, the Issuer desires, following the consummation of the
Acquisition and pursuant to Section 4.19 of the Indenture, that Buford and each
of the Buford Subsidiaries become Restricted Subsidiaries (as defined in the
Indenture) under the Indenture; and
WHEREAS, Buford and each of the Buford Subsidiaries agree, for
sufficient consideration hereby acknowledged, to each become a Subsidiary
Guarantor (as defined in the Indenture) by guaranteeing the obligations of the
Issuer under the Indenture in accordance with the terms thereof; and
WHEREAS, pursuant to Section 11.07 of the Indenture, the addition of
Buford and the Buford Subsidiaries as Subsidiary Guarantors (as defined in the
Indenture) is permitted under the Indenture; and
WHEREAS, Buford and the Buford Subsidiaries have each been duly
authorized by their respective Boards of Directors to enter into, execute and
deliver this First Supplemental Indenture;
NOW, THEREFORE, for and in consideration of the premises and covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Issuer, each
Subsidiary Guarantor and the Trustee agree as follows:
SECTION 1. The Trustee hereby consents to the addition of Buford and the Buford
Subsidiaries as Subsidiary Guarantors under the Indenture.
SECTION 2. Simultaneously with the closing of the Acquisition (the "Effective
Time"), Buford and each of the Buford Subsidiaries shall become, and each
Classic subsidiary that was a
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<PAGE> 3
Subsidiary Guarantor under the Indenture shall remain and continue to be, a
Subsidiary Guarantor under and as defined in the Indenture. At the Effective
Time, Buford and each of the Buford Subsidiaries shall assume all the
obligations of a Subsidiary Guarantor under the Securities and the Indenture,
and each of them hereby, jointly and severally, unconditionally guarantees the
full and prompt payment of the principal of, premium, if any, and interest on
the Securities under the Indenture in accordance with the terms of the
Securities and the Indenture.
SECTION 3. Except as expressly supplemented by this First Supplemental
Indenture, the Indenture and the Securities issued thereunder are in all
respects ratified and confirmed and all of the rights, remedies, terms,
conditions, covenants and agreements of the Indenture and Securities issued
thereunder shall remain in full force and effect. Capitalized terms used herein
but not defined herein shall have the meaning provided in the Indenture.
SECTION 4. This First Supplemental Indenture is executed and shall constitute an
indenture supplemental to the Indenture and shall be construed in connection
with and as part of the Indenture. This First Supplemental Indenture shall be
governed by and construed in accordance with the laws of the jurisdiction that
governs the Indenture and its construction.
SECTION 5. This First Supplemental Indenture may be executed in any number of
counterparts, each of which shall be deemed to be an original for all purposes;
but such counterparts shall together be deemed to constitute but one and the
same instrument.
SECTION 6. Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this First
Supplemental Indenture may refer to the Indenture without making specific
reference to this First Supplemental Indenture, but nevertheless all such
references shall include this First Supplemental Indenture unless the context
otherwise requires.
SECTION 7. This First Supplemental Indenture shall be deemed to have become
effective upon the date first above written.
SECTION 8. In the event of a conflict between the terms of this First
Supplemental Indenture and the Indenture, this First Supplemental Indenture
shall control.
SECTION 9. The Trustee shall not be responsible in any manner whatsoever for or
in respect of the validity or sufficiency of this First Supplemental Indenture
or for or in respect of the recitals contained herein, all of which recitals are
made solely by the Issuer and the Subsidiary Guarantors.
REMAINDER OF PAGE IS INTENTIONALLY LEFT BLANK
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this First Supplemental
Indenture to be duly executed, and their respective corporate seals, if any, to
be hereunder affixed and attested, all as of the day and year first above
written.
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
as Trustee
By:
Name: Cary W. Gilliam
Title: Vice President
CLASSIC CABLE, INC.
By:
Name: Steven E. Seach
Title: President and
Chief Financial Officer
CLASSIC CABLE HOLDING, INC.
By:
Name:
Title:
PONCA HOLDINGS, INC.
By:
Name:
Title:
CLASSIC TELEPHONE, INC.
By:
Name:
Title:
4
<PAGE> 5
UNIVERSAL CABLE HOLDINGS, INC.
By:
Name:
Title:
UNIVERSAL CABLE COMMUNICATIONS,
INC.
By:
Name:
Title:
UNIVERSAL CABLE OF BEAVER,
OKLAHOMA, INC.
By:
Name:
Title:
UNIVERSAL CABLE MIDWEST, INC.
By:
Name:
Title:
WT ACQUISITION CORPORATION
By:
Name:
Title:
W.K. COMMUNICATIONS, INC.
By:
Name:
Title:
5
<PAGE> 6
TELEVISION ENTERPRISES, INC.
By:
Name:
Title:
BLACK CREEK MANAGEMENT, LLC
By:
Name:
Title:
BLACK CREEK COMMUNICATIONS, L.P.
By:
Name:
Title:
BUFORD GROUP, INC.
By:
Name:
Title:
FRIENDSHIP CABLE OF TEXAS, INC.
By:
Name:
Title:
BUFORD TELEVISION, INC.
By:
Name:
Title:
6
<PAGE> 7
CALLCOM 24, INC.
By:
Name:
Title:
CORRECTIONAL CABLE TV, INC.
By:
Name:
Title:
FRIENDSHIP CABLE OF ARKANSAS, INC.
By:
Name:
Title:
BUFORD TELEVISION INC. OF FORT SMITH
By:
Name:
Title:
7
<PAGE> 8
SCHEDULE 1 TO
FIRST SUPPLEMENTAL INDENTURE
CLASSIC SUBSIDIARIES
Classic Cable Holding, Inc., a Delaware corporation
Ponca Holdings, Inc., a Delaware corporation
Classic Telephone, Inc., a Delaware corporation
Universal Cable Holdings, Inc., a Delaware corporation
Universal Cable Communications, Inc., a Delaware corporation
Universal Cable of Beaver, Oklahoma, Inc., a Delaware corporation
Universal Cable Midwest, Inc., a Delaware corporation
WT Acquisition Corporation, a Delaware corporation
W.K. Communications, Inc., a Kansas corporation
Television Enterprises, Inc., a Texas corporation
Black Creek Management, LLC, a Delaware limited liability company
Black Creek Communications, L.P., a Delaware limited partnership
Schedule 1 to First Supplemental Indenture, Solo Page
<PAGE> 9
SCHEDULE 2 TO
FIRST SUPPLEMENTAL INDENTURE
CLASSIC SUBSIDIARIES
Buford Group, Inc.
Friendship Cable of Texas, Inc., a Texas corporation
Buford Television, Inc., a Texas corporation
CallCom 24, Inc., a Texas corporation
Correctional Cable TV, Inc., a Texas corporation
Friendship Cable of Arkansas, Inc., a Texas corporation
Buford Television Inc. of Fort Smith, an Arkansas corporation
Schedue 2 to First Supplemental Indenture, Solo Page
<PAGE> 1
EMPLOYMENT AGREEMENT
WITH J. MERRITT BELISLE
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into as of July 28, 1999, 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 (collectively, 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 Employer as an officer and key employee, as currently
evidenced by an Employment Agreement, dated as of January 31, 1998 (the "1998
Agreement"), between the Employer, Classic Cable, Inc. and Employee.
The Employer wishes to take steps to ensure 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 1998 Agreement as of the Closing (as defined as that certain Investment
Agreement, dated as of May 24, 1999, between the Employer and Brera Classic, LLC
(the "Investment Agreement")).
In consideration of 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 1998 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 the date of the Closing (the "Commencement Date") and shall continue
through July ___, 2001, provided, however, that beginning on the Commencement
Date, 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.
<PAGE> 2
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 (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, split-dollar life insurance, medical and other insurance
benefits, as may be provided from time to time by the Employer to other senior
officers of the Employer.
(e) The Employer will use all reasonable efforts
to have the appropriate provisions of this Agreement approved by the Employer's
shareholders, or take such other actions reasonably required to restructure the
payments hereunder in order to avoid taxes under Section 280G of the Internal
Revenue Code of 1986, as amended.
4. Duties. The Employee is engaged as the Chief Executive
Officer of the Employer and of the Employer's various subsidiaries. The Employee
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<PAGE> 3
shall be a member of the Boards of Directors of the Employer and the Employer's
subsidiaries for so long as he is employed by the Employer. 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.
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 in
Austin, Texas.
7. Termination on Death, Illness or Incapacity.
(a) 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
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<PAGE> 4
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), the
Employee shall continue to receive the Basic Salary that would have otherwise
been paid to the 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 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) and Section 8(f) 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
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<PAGE> 5
whole or in part, of his duties under this Agreement (without reduction in
compensation through the termination date set forth in the notice to the
Employer).
(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, matching 401-K
contributions consistent with past practice (to the extent permitted by law),
health insurance and other existing benefits, 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 Sections 10 and 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 without reliance on Section 8(e) or Section 8(f), 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, Sections 9 or 11 of this Agreement,
Section 2.3 of the Registration Rights Agreement, or the material
obligations under the Stockholder Agreement; provided, however, that
Employee shall have received written notice of such breach, providing
him an opportunity to cure such breach within ten (10) days of receipt
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<PAGE> 6
of such warning and such breach is not cured within such time frame;
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 prospects, and which
willful refusal has continued after Employee has received at least one
written warning specifically advising him or his shortcomings and
providing him with an opportunity to resume performance in accordance
with his assigned duties and such shortcomings are not cured within ten
(10) days of receipt of such written warning.
(e) If (1) the Board of Directors of the
Employer elects to employ an executive chairman, or other executive officer to
whom the Employee would report, who is not a present member or employee of Brera
Capital Partners, LCC, and who will play a significant role in the Employer's
management and will receive a significant salary or an equity investment in the
Employer and (2) Employee determines, within ten (10) days of receiving notice
of the Board of Directors desire to employ such executive chairman, that such
individual is not reasonably acceptable to Employee to serve on such position,
then the Employee may, at his election, terminate his employment hereunder
during such ten (10) day period, and have such termination treated as a
termination without good cause by the Employer for all purposes of this
Agreement.
(f) If the Employer elects to terminate the
employment of Steven Seach without good cause (as defined in his Employment
Agreement with the Employer, dated as of the date hereof), then the Employee
may, at his election, terminate his employment hereunder within ten (10) days of
receiving notice of such termination of Steven Seach from the Employer, and have
such termination treated as a termination without good cause by the Employer for
all purposes of this Agreement.
(g) If the Employee's employment with the
Employer is terminated by the Employer without good cause or by the Employee
pursuant to Section 8(e) or Section 8(f), then all of the Employee's stock
options, and unvested common stock of the Employer will vest immediately. If the
Employee's employment with the Employer is terminated by the Employer with good
cause or by the Employee other than pursuant to Section 8(e) or Section 8(f),
then all of the
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<PAGE> 7
Employee's unvested stock options shall no longer be eligible for vesting or
exercise. All vested stock options will be exercisable in accordance with their
terms.
(h) 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 starting on the date hereof
and ending two years following the termination of his employment under this
Agreement, the
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<PAGE> 8
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 states in which any cable
television system is operated by the Employer or any Affiliate of the Employer;
provided, however, that the Employee may participate as a passive investor in
businesses which are similar to that of the Employer so long as the investment
is limited to not more than 10% of the ownership interests of such entity;
provided further, that the Employee may continue to invest in Mid-South
Telecommunications Company, 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 states in which any cable television
system is 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.
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<PAGE> 9
(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 the 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.
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 Section 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 Section 9, 10 or 11 of this Agreement, including
reasonable fees and disbursements of counsel (both at trial and in appellate
proceedings).
13. Put and Call Provisions with Respect to Employee.
(a) Termination without Good Cause. If the
Employee's employment with the Employer is terminated by the Employer without
good cause or
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<PAGE> 10
by the Employee pursuant to Section 8(e) or Section 8(f), (i) the Employer shall
have the right 180 days after such termination (or, in the case of termination
by the Employee pursuant to Section 8(e), upon termination) to redeem from the
Employee, and the Employee shall have the obligation to permit the Employer to
redeem (a "Call"), all or part of the Employer's common stock owned by the
Employee and his "family members" (as defined in the Stockholders Agreement
dated as of July , 1999 among the Employer, the Employee and certain other
stockholders of the Employer), including all stock the Employee is entitled to
purchase under the stock options granted hereunder (collectively, the "Employee
Shares"), and (ii) for a period of 60 days from the date of such termination,
the Employee shall have the right to require the Employer to redeem, and the
Employer shall have the obligation to redeem, subject to the existence of
legally available funds therefore (a "Put"), all or part of the Employee Shares.
The purchase price of each share of the Employee Shares purchased pursuant to a
Put exercised hereunder shall be equal to its Fair Market Value on the date of
the Employee's termination. The purchase price of each share of the Employee
Shares purchased pursuant to a Call shall be equal to its Fair Market Value on
the date the Call is exercised. Notwithstanding the foregoing, any payment in
respect of a Put or a Call under this Section 13(a) shall be subject to any
covenant restrictions on such payment that might exist in the Employer's credit
agreements or indentures as from time to time in effect. If any Put or Call
pursuant to this Section 13(a) is prohibited by any covenant restrictions on
such payments under the Employer's credit agreements or indentures, the Employer
will use all reasonable efforts to obtain a waiver of such covenant
restrictions.
(b) Resignation; Permanent Disability. In the
event that Employee's employment with the Employer is terminated because he
resigns or because of his Permanent Disability, the Employer shall have the
right for a period of 60 days from the date of such termination to Call all of
the Employee Shares owned by Employee and members of his "family group". The
purchase price the Employee Shares purchased pursuant to a Call exercised
pursuant to this Section 13(b) shall be equal to its Fair Market Value on the
date of Employee's termination.
(c) Termination for Good Cause. In the event
that Employee's employment with the Employer is terminated for "good cause," the
Employer shall have the right to Call all or part of the Employee Shares owned
directly or indirectly by Employee and members of his "family group" as of the
date of his termination. The purchase price for all such Employee Shares shall
be equal to the Fair Market Value of the Employee Shares acquired by the
Employer.
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<PAGE> 11
(d) Notice and Delivery. The closing with
respect to any Put or Call of Employee Shares pursuant to this Section 13 shall
occur within 30 days of the delivery of a Put notice and 30 days within delivery
of a Call notice. The Employee and the Employer each agree to negotiate in good
faith determine the Fair Market Value of any Employee Shares to be purchased by
the Employer pursuant to this Section 13.
(e) Definitions.
(i) "Appraiser" means an independent
investment bank of national reputation.
(ii) "Appraised Value" means the value of
Employee Shares determined by one or more Appraisers. In the event that the
Employer and Employee cannot agree as to Fair Market Value for purposes of this
Agreement within 30 days of the event giving rise to the need to determine Fair
Market Value, the Employer and the Employee shall select an Appraiser to
determine Fair Market Value. If the Employer and the Employee cannot agree on
any one Appraiser within 10 days, the Employer and the Employee shall each
select an Appraiser within 5 days after such 10 day period and those two
Appraisers will select a third Appraiser within 5 days, the cost of which will
be split on an equal basis by the Employer and the Employee. The Appraisers will
be directed to determine Fair Market Value as soon as reasonably practicable,
but in no event later than 30 days from the date of their selection. If more
than one Appraiser is retained to determine Fair Market Value, Appraised Value
shall mean the average of the values determined by the Appraisers.
(iii) "Fair Market Value" means (A) as to
securities traded in the organized securities markets, the Market Value; and (B)
as to all securities not traded in the securities markets and other property,
the fair market value of such securities of property as determined in good faith
by the Board of Directors of the Employer; provided, however, if Employee and
the Employer cannot agree upon the fair market value of the Employee Shares to
be repurchased such fair market value will be determined as set forth below. In
the event that Employee and the Employer are unable to agree upon the Fair
Market Value of such securities or other property, then the Fair Market Value of
such securities or property will be the Appraised Value.
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<PAGE> 12
(iv) "Market Value" as of a certain date
means, per share of common stock:
(1) the average of the
last sale prices, regular way, on the 20 consecutive business days
immediately preceding such date or, if there shall have been no sale on
any such day, the average of the closing bid and asked prices on such
date, in each case as officially reported on the principal national
securities exchange on which such common stock is at the time listed or
admitted to trading, or
(2) if such common
stock is not then listed or admitted to trading on any national
securities exchange, but is designated as a national market system
security by the NASD, the last trading price of the common stock on
such date, or if there shall have been no trading on such date or if
the common stock is not so designated, the average of the reported
closing bid and asked prices on such 20 days as shown by the NASD
automated quotation system.
14. Stock Options
(a) The Employee will be granted two stock
options to purchase common stock of Classic Communications, Inc. (the "Common
Stock") upon completion of the Closing. The stock options will have a ten (10)
year term. The first stock option will entitle Employee to purchase 279,874
shares of Common Stock at an exercise price of $14.57 per share and will vest
(i) on a monthly basis over a three-year period (1/36 per month) (subject to
accelerated vesting pursuant to this Agreement) or (ii) immediately upon closing
of a Liquidity Event which involves a sale of all of the Common Stock of the
Employee for cash or a sale of all or substantially all of the assets of the
Employer. The second stock option will entitle Employee to purchase 279,874
shares of Common Stock at the Liquidity Event Exercise Price (as defined below)
and will vest (y) on a monthly basis over a three-year period (1/36 per month)
which begins on the date of the closing of a Liquidity Event (as defined below)
which involves an initial public offering or a stock-for-stock merger or (z)
immediately upon the closing of a Liquidity Event which involves a sale of all
of the Common Stock of the Employee for cash or a sale of all or substantially
all of the assets of the Employer.
(b) For purposes of this Section 14, (i) the
term "Liquidity Event" means the sale of all of the outstanding Common Stock for
cash, stock or
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<PAGE> 13
other securities by merger, tender offer, stock purchase or otherwise, the sale
of all or substantially all of the assets of the Employer, or an initial public
offering of the Employer's Common Stock; and (ii) the term "Liquidity Event
Exercise Price" shall mean (A) the gross sale price per share of Common Stock in
the initial public offering of the Employer's Common Stock and (B) in the event
the Liquidity Event involves a sale of the Employer's stock or assets, an amount
equal to $14.57 per share increased by 14% per annum from the Closing to the
date of the closing of such Liquidity Event.
(c) If the Employer 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 Employer, or (iii) the merger of the Employer into or its consolidation with
another corporation, then the shares subject to the stock options as set forth
in this Section 14 shall, at no additional cost, include the number and class of
shares of stock or other securities to which the Employee is entitled 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, and the exercise price shall be adjusted
accordingly. If any such adjustment shall result in a fractional-share interest
being issuable, such fraction shall be disregarded.
15. 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.
16. 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.
17. 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> 14
18. 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 1998 Agreement.
Employee agrees that he has no further rights under the 1998 Agreement or under
any other employment agreement or consulting agreement with Employer or any of
its affiliates provided that the Employee has been paid his accrued and unpaid
transaction compensation of $1,500,000 whether or not there has been any change
of control and additional compensation due upon a change of control in the
amount of $780,000(1) in connection with previous agreements. 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.
19. Construction and Interpretation.
(a) Notwithstanding the choice of law provisions
in the Investment Agreement and the other Transaction Agreements (as defined in
the Investment Agreement) 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.
- ----------------------------
(1)$700,000 for Steve.
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<PAGE> 15
20. 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.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
With copies to: Winstead Sechrest & Minick P.C.
100 Congress Avenue
Suite 800
Austin, TX 78701
Attention: Timothy E. Young
And copies to: Brera Classic, LLC
712 Fifth Avenue
34th Floor
New York, NY 10019
Attention: Lisa A. Hook
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<PAGE> 16
And copies to: Skadden, Arps, Slate, Meagher & Flom
(Illinois)
333 W. Wacker Drive
Suite 2300
Chicago, Illinois 60606
Attention: Peter C. Krupp
To the Employee: at the address dated in the preamble hereto
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<PAGE> 17
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
------------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
CLASSIC CABLE, INC.
By: /s/ Steven E. Seach
------------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
J. MERRITT BELISLE
/s/ J. Merritt Belisle
------------------------------------------
17
<PAGE> 1
EMPLOYMENT AGREEMENT
WITH STEVEN E. SEACH
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of July 28, 1999, 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
(collectively, 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 Employer as an officer and key employee, as currently evidenced
by an Employment Agreement, dated as of January 31, 1998 (the "1998 Agreement"),
between the Employer, Classic Cable, Inc. and Employee.
The Employer wishes to take steps to ensure 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 1998 Agreement as of the Closing (as defined as that certain Investment
Agreement, dated as of May 24, 1999, between the Employer and Brera Classic, LLC
(the "Investment Agreement")).
In consideration of 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 1998 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
the date of the Closing (the "Commencement Date") and shall continue through
July ___, 2001, provided, however, that beginning on the Commencement Date, 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.
<PAGE> 2
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 (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, split-dollar life insurance, medical and other insurance benefits, as may be
provided from time to time by the Employer to other senior officers of the
Employer.
(e) The Employer will use all reasonable efforts to have the
appropriate provisions of this Agreement approved by the Employer's
shareholders, or take such other actions reasonably required to restructure the
payments hereunder in order to avoid taxes under Section 280G of the Internal
Revenue Code of 1986, as amended.
4. Duties. The Employee is engaged as the President of the Employer and
of the Employer's various subsidiaries. The Employee shall be a
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<PAGE> 3
member of the Boards of Directors of the Employer and the Employer's
subsidiaries for so long as he is employed by the Employer. 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.
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 in
Austin, Texas.
7. Termination on Death, Illness or Incapacity.
(a) 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
3
<PAGE> 4
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), the
Employee shall continue to receive the Basic Salary that would have otherwise
been paid to the 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 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) and
Section 8(f) of this Agreement.
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<PAGE> 5
(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 set forth in the notice to the Employer).
(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, matching 401-K contributions
consistent with past practice (to the extent permitted by law), health insurance
and other existing benefits, 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 Sections 10 and 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 without reliance
on Section 8(e) or Section 8(f), 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,
Sections 9 or 11 of this Agreement, Section 2.3 of the Registration
Rights Agreement, or the material obligations under the Stockholder
Agreement; provided, however, that
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<PAGE> 6
Employee shall have received written notice of such breach, providing
him an opportunity to cure such breach within ten (10) days of receipt
of such warning and such breach is not cured within such time frame;
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 prospects, and which willful refusal has continued after
Employee has received at least one written warning specifically
advising him or his shortcomings and providing him with an opportunity
to resume performance in accordance with his assigned duties and such
shortcomings are not cured within ten (10) days of receipt of such
written warning.
(e) If (1) the Board of Directors of the Employer elects to employ
an executive chairman, or other executive officer to whom the Employee would
report, who is not a present member or employee of Brera Capital Partners, LCC,
and who will play a significant role in the Employer's management and will
receive a significant salary or an equity investment in the Employer and (2)
Employee determines, within ten (10) days of receiving notice of the Board of
Directors desire to employ such executive chairman, that such individual is not
reasonably acceptable to Employee to serve on such position, then the Employee
may, at his election, terminate his employment hereunder during such ten (10)
day period, and have such termination treated as a termination without good
cause by the Employer for all purposes of this Agreement.
(f) If the Employer elects to terminate the employment of J. Merritt
Belisle without good cause (as defined in his Employment Agreement with the
Employer, dated as of the date hereof), then the Employee may, at his election,
terminate his employment hereunder within ten (10) days of receiving notice of
such termination of Steven Seach from the Employer, and have such termination
treated as a termination without good cause by the Employer for all purposes of
this Agreement.
(g) If the Employee's employment with the Employer is terminated by
the Employer without good cause or by the Employee pursuant to Section 8(e) or
Section 8(f), then all of the Employee's stock options, and unvested common
stock of the Employer will vest immediately. If the Employee's employment with
the Employer is terminated by the Employer with good cause or by the
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<PAGE> 7
Employee other than pursuant to Section 8(e) or Section 8(f), then all of the
Employee's unvested stock options shall no longer be eligible for vesting or
exercise. All vested stock options will be exercisable in accordance with their
terms.
(h) 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:
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<PAGE> 8
(a) During a period starting on the date hereof and 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 states in which any cable
television system is operated by the Employer or any Affiliate of the Employer;
provided, however, that the Employee may participate as a passive investor in
businesses which are similar to that of the Employer so long as the investment
is limited to not more than 10% of the ownership interests of such entity;
provided, further that the Employee may continue to invest in Mid-South
Telecommunications Company, 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 states in which any cable television
system is 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.
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<PAGE> 9
(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 the
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.
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
Section 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 Section 9, 10 or 11 of this Agreement, including reasonable fees
and disbursements of counsel (both at trial and in appellate proceedings).
13. Put and Call Provisions with Respect to Employee.
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<PAGE> 10
(a) Termination without Good Cause. If the Employee's employment
with the Employer is terminated by the Employer without good cause or by the
Employee pursuant to Section 8(e) or Section 8(f), (i) the Employer shall have
the right 180 days after such termination (or, in the case of termination by the
Employee pursuant to Section 8(e), upon termination) to redeem from the
Employee, and the Employee shall have the obligation to permit the Employer to
redeem (a "Call"), all or part of the Employer's common stock owned by the
Employee and his "family members" (as defined in the Stockholders Agreement
dated as of July , 1999 among the Employer, the Employee and certain other
stockholders of the Employer), including all stock the Employee is entitled to
purchase under the stock options granted hereunder (collectively, the "Employee
Shares"), and (ii) for a period of 60 days from the date of such termination,
the Employee shall have the right to require the Employer to redeem, and the
Employer shall have the obligation to redeem, subject to the existence of
legally available funds therefore (a "Put"), all or part of the Employee Shares.
The purchase price of each share of the Employee Shares purchased pursuant to a
Put exercised hereunder shall be equal to its Fair Market Value on the date of
the Employee's termination. The purchase price of each share of the Employee
Shares purchased pursuant to a Call shall be equal to its Fair Market Value on
the date the Call is exercised. Notwithstanding the foregoing, any payment in
respect of a Put or a Call under this Section 13(a) shall be subject to any
covenant restrictions on such payment that might exist in the Employer's credit
agreements or indentures as from time to time in effect. If any Put or Call
pursuant to this Section 13(a) is prohibited by any covenant restrictions on
such payments under the Employer's credit agreements or indentures, the Employer
will use all reasonable efforts to obtain a waiver of such covenant
restrictions.
(b) Resignation; Permanent Disability. In the event that Employee's
employment with the Employer is terminated because he resigns or because of his
Permanent Disability, the Employer shall have the right for a period of 60 days
from the date of such termination to Call all of the Employee Shares owned by
Employee and members of his "family group". The purchase price the Employee
Shares purchased pursuant to a Call exercised pursuant to this Section 13(b)
shall be equal to its Fair Market Value on the date of Employee's termination.
(c) Termination for Good Cause. In the event that Employee's
employment with the Employer is terminated for "good cause," the Employer shall
have the right to Call all or part of the Employee Shares owned directly or
indirectly by Employee and members of his "family group" as of the date of his
termination. The purchase price for all such Employee Shares shall be equal to
the Fair Market Value of the Employee Shares acquired by the Employer.
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<PAGE> 11
(d) Notice and Delivery. The closing with respect to any Put or Call
of Employee Shares pursuant to this Section 13 shall occur within 30 days of the
delivery of a Put notice and 30 days within delivery of a Call notice. The
Employee and the Employer each agree to negotiate in good faith determine the
Fair Market Value of any Employee Shares to be purchased by the Employer
pursuant to this Section 13.
(e) Definitions.
(i) "Appraiser" means an independent investment bank of
national reputation.
(ii) "Appraised Value" means the value of Employee Shares
determined by one or more Appraisers. In the event that the Employer and
Employee cannot agree as to Fair Market Value for purposes of this Agreement
within 30 days of the event giving rise to the need to determine Fair Market
Value, the Employer and the Employee shall select an Appraiser to determine Fair
Market Value. If the Employer and the Employee cannot agree on any one Appraiser
within 10 days, the Employer and the Employee shall each select an Appraiser
within 5 days after such 10 day period and those two Appraisers will select a
third Appraiser within 5 days, the cost of which will be split on an equal basis
by the Employer and the Employee. The Appraisers will be directed to determine
Fair Market Value as soon as reasonably practicable, but in no event later than
30 days from the date of their selection. If more than one Appraiser is retained
to determine Fair Market Value, Appraised Value shall mean the average of the
values determined by the Appraisers.
(iii) "Fair Market Value" means (A) as to securities traded in
the organized securities markets, the Market Value; and (B) as to all securities
not traded in the securities markets and other property, the fair market value
of such securities of property as determined in good faith by the Board of
Directors of the Employer; provided, however, if Employee and the Employer
cannot agree upon the fair market value of the Employee Shares to be repurchased
such fair market value will be determined as set forth below. In the event that
Employee and the Employer are unable to agree upon the Fair Market Value of such
securities or other property, then the Fair Market Value of such securities or
property will be the Appraised Value.
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<PAGE> 12
(iv) "Market Value" as of a certain date means, per share of
common stock:
(1) the average of the last sale prices, regular way, on
the 20 consecutive business days immediately preceding such date or, if
there shall have been no sale on any such day, the average of the closing
bid and asked prices on such date, in each case as officially reported on
the principal national securities exchange on which such common stock is
at the time listed or admitted to trading, or
(2) if such common stock is not then listed or admitted to
trading on any national securities exchange, but is designated as a
national market system security by the NASD, the last trading price of the
common stock on such date, or if there shall have been no trading on such
date or if the common stock is not so designated, the average of the
reported closing bid and asked prices on such 20 days as shown by the NASD
automated quotation system.
14. Stock Options
(a) The Employee will be granted two stock options to purchase
common stock of Classic Communications, Inc. (the "Common Stock") upon
completion of the Closing. The stock options will have a ten (10) year term. The
first stock option will entitle Employee to purchase 279,874 shares of Common
Stock at an exercise price of $14.57 per share and will vest (i) on a monthly
basis over a three-year period (1/36 per month) (subject to accelerated vesting
pursuant to this Agreement) or (ii) immediately upon closing of a Liquidity
Event which involves a sale of all of the Common Stock of the Employee for cash
or a sale of all or substantially all of the assets of the Employer. The second
stock option will entitle Employee to purchase 279,874 shares of Common Stock at
the Liquidity Event Exercise Price (as defined below) and will vest (y) on a
monthly basis over a three-year period (1/36 per month) which begins on the date
of the closing of a Liquidity Event (as defined below) which involves an initial
public offering or a stock-for-stock merger or (z) immediately upon the closing
of a Liquidity Event which involves a sale of all of the Common Stock of the
Employee for cash or a sale of all or substantially all of the assets of the
Employer.
(b) For purposes of this Section 14, (i) the term "Liquidity Event"
means the sale of all of the outstanding Common Stock for cash, stock or
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<PAGE> 13
other securities by merger, tender offer, stock purchase or otherwise, the sale
of all or substantially all of the assets of the Employer, or an initial public
offering of the Employer's Common Stock; and (ii) the term "Liquidity Event
Exercise Price" shall mean (A) the gross sale price per share of Common Stock in
the initial public offering of the Employer's Common Stock and (B) in the event
the Liquidity Event involves a sale of the Employer's stock or assets, an amount
equal to $14.57 per share increased by 14% per annum from the Closing to the
date of the closing of such Liquidity Event.
(c) If the Employer 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 Employer, or (iii)
the merger of the Employer into or its consolidation with another corporation,
then the shares subject to the stock options as set forth in this Section 14
shall, at no additional cost, include the number and class of shares of stock or
other securities to which the Employee is entitled 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, and the exercise price shall be adjusted accordingly. If any such adjustment
shall result in a fractional-share interest being issuable, such fraction shall
be disregarded.
15. 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.
16. 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.
17. 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> 14
18. 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 1998 Agreement. Employee agrees that
he has no further rights under the 1998 Agreement or under any other employment
agreement or consulting agreement with Employer or any of its affiliates
provided that the Employee has been paid his accrued and unpaid transaction
compensation of $1,500,000 whether or not there has been any change of control
and additional compensation due upon a change of control in the amount of
$700,000 in connection with previous agreements. 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.
19. Construction and Interpretation.
(a) Notwithstanding the choice of law provisions in the Investment
Agreement and the other Transaction Agreements (as defined in the Investment
Agreement) 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.
20. 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
14
<PAGE> 15
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.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
With copies to: Winstead Sechrest & Minick P.C.
100 Congress Avenue
Suite 800
Austin, TX 78701
Attention: Timothy E. Young
And copies to: Brera Classic, LLC
712 Fifth Avenue
34th Floor
New York, NY 10019
Attention: Lisa A. Hook
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And copies to: Skadden, Arps, Slate, Meagher & Flom
(Illinois)
333 W. Wacker Drive
Suite 2300
Chicago, Illinois 60606
Attention: Peter C. Krupp
To the Employee: at the address dated in the preamble
hereto
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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
---------------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
CLASSIC CABLE, INC.
By: /s/ J. Merritt Belisle
---------------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
STEVEN E. SEACH
/s/ Steven E. Seach
--------------------------------------------
17
<PAGE> 1
EXECUTION COPY
================================================================
AMENDED AND RESTATED
CREDIT AGREEMENT
among
CLASSIC CABLE, INC.
as Borrower
THE LENDERS PARTIES HERETO,
GOLDMAN SACHS CREDIT PARTNERS L.P.
as Lead Arranger and Syndication Agent
and
THE CHASE MANHATTAN BANK
as Documentation Agent
and
UNION BANK OF CALIFORNIA, N.A.
as Administrative Agent
Dated as of July 28, 1999
===============================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. DEFINITIONS...........................................................................................1
1.1 Defined Terms...................................................................................1
1.2 Other Definitional Provisions..................................................................20
SECTION 2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT; COMMITMENT AMOUNTS..................................21
2.1 Revolving Loans and Letters of Credit; Revolving Loan Commitment Amounts.......................21
2.2 Term A Loans; Term A Commitment................................................................24
2.3 Term B Loans; Term B Commitment................................................................25
2.4 Term C Loans; Term C Commitment................................................................27
2.5 Issuance of Letters of Credit..................................................................29
2.6 Optional Prepayments...........................................................................31
2.7 Mandatory Prepayments..........................................................................31
2.8 Conversion and Continuation Options............................................................34
2.9 Minimum Amounts of Tranches....................................................................35
2.10 Interest Rates and Payment Dates...............................................................35
2.11 Computation of Interest and Fees...............................................................35
2.12 Inability to Determine Interest Rate...........................................................36
2.13 Pro Rata Treatment and Payments................................................................36
2.14 Illegality.....................................................................................37
2.15 Increased Costs................................................................................37
2.16 U.S. Taxes.....................................................................................38
2.17 Indemnity......................................................................................39
2.18 Unused Commitment Fees.........................................................................39
2.19 Mitigation of Costs............................................................................39
2.20 Registered Loans...............................................................................40
2.21. Term C Commitments................................................................................40
SECTION 3. REPRESENTATIONS AND WARRANTIES.......................................................................41
3.1 Organization and Good Standing.................................................................41
3.2 Power and Authority............................................................................41
3.3 Validity and Legal Effect......................................................................41
3.4 No Violation of Laws or Agreements.............................................................41
3.5 Title to Assets; Existing Encumbrances; Legal Names............................................42
3.6 Capital Structure; Equity Ownership; Subordinated Debt.........................................42
3.7 Subsidiaries and Affiliates....................................................................42
3.8 Material Contracts.............................................................................42
3.9 Taxes and Assessments..........................................................................43
3.10 Litigation and Legal Proceedings...............................................................43
3.11 Accuracy of Financial Information..............................................................43
3.12 Accuracy of Other Information..................................................................43
3.13 Compliance with Laws Generally.................................................................44
3.14 ERISA Compliance...............................................................................44
3.15 Environmental Compliance.......................................................................44
3.16 Federal Regulations............................................................................45
3.17 Fees and Commissions...........................................................................45
3.18 Representations and Warranties in Acquisition Agreement........................................45
</TABLE>
<PAGE> 3
ii
<TABLE>
<S> <C> <C>
3.19 Solvency.......................................................................................45
3.20 Franchises.....................................................................................45
3.21 The CATV Systems...............................................................................46
3.22 Rate Regulation................................................................................47
3.23 Investment Company Act; Public Utility Holding Company Act.....................................47
3.24 Nature of Business.............................................................................48
3.25 Ranking of Loans...............................................................................48
SECTION 4. CONDITIONS PRECEDENT.................................................................................48
4.1 Conditions to Closing Date.....................................................................48
4.2 Conditions to Each Loan or Letter of Credit....................................................51
SECTION 5. AFFIRMATIVE COVENANTS................................................................................51
5.1 Financial Statements...........................................................................51
5.2 Certificates; Other Information................................................................52
5.3 Payment of Obligations.........................................................................53
5.4 Conduct of Business and Maintenance of Existence...............................................53
5.5 Maintenance of Property........................................................................54
5.6 Insurance......................................................................................54
5.7 Inspection of Property; Books and Records; Discussions.........................................54
5.8 Environmental Laws.............................................................................54
5.9 Use of Proceeds................................................................................55
5.10 Compliance With Laws, Etc......................................................................55
5.11 Certain Obligations Respecting Subsidiaries; Prohibitions on Certain Agreements................55
5.12 Interest Rate Protection.......................................................................56
5.13 Year 2000......................................................................................56
5.14 Buford Television Partnership..................................................................56
SECTION 6. NEGATIVE COVENANTS...................................................................................56
6.1 Financial Condition Covenants..................................................................56
6.2 Limitation on Indebtedness.....................................................................58
6.3 Limitation on Liens............................................................................59
6.4 Limitation on Fundamental Changes..............................................................59
6.5 Limitation on Sale of Assets...................................................................60
6.6 Limitation on Dividends........................................................................60
6.7 Limitation on Investments, Loans and Advances..................................................61
6.8 Modifications of Certain Documents; Subordinated Indebtedness; Certain Changes.................62
6.9 Transactions with Affiliates...................................................................63
6.10 Fiscal Year....................................................................................63
6.11 Sale-Leaseback Transactions....................................................................63
6.12 Management Fees................................................................................63
6.13 Lines of Business..............................................................................63
SECTION 7. EVENTS OF DEFAULT....................................................................................64
SECTION 8. THE AGENT............................................................................................67
8.1 Appointment....................................................................................67
8.2 Delegation of Duties...........................................................................67
8.3 Exculpatory Provisions.........................................................................67
8.4 Reliance by the Agent..........................................................................68
</TABLE>
<PAGE> 4
iii
<TABLE>
<S> <C> <C>
8.5 Notice of Default..............................................................................68
8.6 Non-Reliance on the Agent and Other Lenders....................................................68
8.7 Indemnification................................................................................69
8.8 The Facility Agents in Their Individual Capacities.............................................69
8.9 Successor Agent................................................................................69
8.10 Collateral Documents...........................................................................69
SECTION 9. MISCELLANEOUS........................................................................................70
9.1 Amendments and Waivers.........................................................................70
9.2 Notices........................................................................................70
9.3 No Waiver; Cumulative Remedies.................................................................71
9.4 Survival of Representations and Warranties.....................................................71
9.5 Payment of Expenses and Taxes..................................................................71
9.6 Successors and Assigns; Participations; Purchasing Lenders.....................................72
9.7 Adjustments; Set-Off...........................................................................75
9.8 Counterparts...................................................................................75
9.9 Severability...................................................................................75
9.10 Integration....................................................................................75
9.11 GOVERNING LAW..................................................................................75
9.12 Acknowledgments................................................................................75
9.13 Headings.......................................................................................76
9.14 Copies of Certificates, Etc....................................................................76
9.15 Treatment of Certain Information; Confidentiality..............................................76
9.16 Consent to Jurisdiction........................................................................76
9.17 Interest Rates.................................................................................77
9.18 WAIVER OF JURY TRIAL...........................................................................78
</TABLE>
<PAGE> 5
iv
EXHIBITS
A-1 Form of Revolving Note
A-2 Form of Term A Note
A-3 Form of Term B Note
A-4 Form of Term C 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
1.1 Initial Stockholders
2.1 Commitments
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
4.1 Post-Closing Date FCC Consents
6.2 Indebtedness
6.3 Liens
6.7 Investments
<PAGE> 6
AMENDED AND RESTATED CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of July 28, 1999, 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) GOLDMAN SACHS CREDIT PARTNERS L.P., as Lead Arranger and
Syndication Agent, (4) THE CHASE MANHATTAN BANK, as Documentation Agent, and (5)
UNION BANK OF CALIFORNIA, N.A., as Administrative Agent for the Lenders
hereunder (in such capacity, the "Agent").
PRELIMINARY STATEMENTS:
1. The Borrower is a party to the Credit Agreement dated as of July 29,
1998 (the "Existing Credit Agreement") among the Borrower, as borrower, the
lenders referred to therein (the "Existing Lenders"), Goldman Sachs Capital
Partners L.P., as Co-Arranger and Syndication Agent, and Union Bank of
California, N.A., as Co-Arranger, Administrative Agent and Documentation Agent,
as agent for such lenders.
2. The Borrower, as buyer, and Buford Group, Inc. and certain other
Persons, as seller, have entered into that certain Securities Purchase Agreement
dated as of May 11, 1999 (as amended, modified or supplemented, the "Acquisition
Agreement"). Pursuant to the Acquisition Agreement the Borrower will purchase
all outstanding shares of capital stock (except for shares owned by Buford
Television Partnership) of Buford Television, Inc. ("BTI") and all partnership
interests of Buford Television Partnership (such acquisition, the "BTI
Acquisition") for a purchase price not more than $300,000,000 (as such price may
be adjusted pursuant to the Acquisition Agreement).
3. 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 $250,000,000 (subject to being increased to $350,000,000 in accordance
with the terms of Section 2.21 hereof), for the purposes of (i) refinancing
certain existing indebtedness of BTI, (ii) consummating the BTI 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 to amend and restate
the Existing Credit Agreement as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"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 Lead Arranger.
"Acquisition Agreement": as defined in the Preliminary Statements
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
<PAGE> 7
2
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, the Aggregate Term A Commitment, the Aggregate Term B Commitment and
the Aggregate Term C 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 A Commitment": the sum of the Term A Commitments set
forth on the signature pages hereto.
"Aggregate Term B Commitment": the sum of the Term B Commitments set
forth on the signature pages hereto.
"Aggregate Term C Commitment": the sum of the Term C Commitments of the
Term C Lenders.
"Agreement": this Credit Agreement, as amended, waived, supplemented or
otherwise modified from time to time.
"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
or Assumption Agreement 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 Margin": (a) with respect to Revolving Loans and Term A
Loans, for each LIBOR Loan and for each Base Rate Loan as set forth below:
<TABLE>
<CAPTION>
Maximum
Total Debt Ratio LIBOR Base Rate
- ---------------- ------ ---------
<S> <C> <C>
1(>=6.50:1) +2.500% +1.500%
2(<6.50:1->=6.00:1) +2.250% +1.250%
3(<6.00:1->=5.50:1) +2.000% +1.000%
4(<5.50:1->=5.00:1) +1.750% +0.750%
- -------------------------------------------------------------------------
</TABLE>
<PAGE> 8
3
<TABLE>
<S> <C> <C>
5(<5.00:1) +1.500% +0.500%
</TABLE>
and (b) with respect to Term B Loans and Term C Loans, for each LIBOR
Loan and for each Base Rate Loan as set forth below:
<TABLE>
<CAPTION>
Maximum
Total Debt Ratio LIBOR Base Rate
- ---------------- ------ ---------
<S> <C> <C>
1(>= 5.50:1) +2.750% +1.750%
2(< 5.50:1) +2.500% +1.500%
</TABLE>
"Approved Fund": with respect to any Lender that is a fund that invests
in commercial loans, any other fund or trust or entity that invests in
commercial loans and is advised or managed by the same investment advisor as
such Lender or by an Affiliate of such investment advisor.
"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, 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.
"Assuming Lender": as specified in Section 2.21(d).
"Assumption Agreement": as specified in Section 2.21(d)(ii).
"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
<PAGE> 9
4
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.
"Base Rate Loans": Loans the rate of interest applicable to which is
based upon the Base Rate.
"Basic Subscribers": as at any date, (a) the number of Subscribers who
subscribe to a CATV System at all rates of pricing for the different levels of
service 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.
"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.
"BTI": as defined in the Preliminary Statements hereto.
"BTI Acquisition": as defined in the Preliminary Statements 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.
"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 BTI
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.
"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 Account": as defined in the Recitals to the Security
Agreement.
"Cash Collateral Deposit": cash deposits made by the Borrower to the
Agent, to be held by the Agent as Collateral in the Cash Collateral Account
pursuant to the Security Agreement, for the reimbursement of drawings under
Letters of Credit.
"Cash Equivalent": any of the following: (a) readily marketable direct
obligations of the United States of America or any agency or instrumentality
thereof or obligations unconditionally guaranteed by the full faith and credit
of the United States of America, maturing within 365 days of purchase (in the
case of all such obligations other than direct
<PAGE> 10
5
obligations of the United States Treasury), (b) certificates of deposit of or
time deposits maturing within 365 days of purchase with any commercial bank that
is a Lender or (i) has deposits insured by the Federal Deposit Insurance
Corporation, (ii) is organized under the laws of the United States or any State
thereof and (iii) (A) issues (or the parent of which issues) commercial paper
rated as described in clause (c) below, or (B) has combined capital and surplus
or at least $500 million, (c) commercial paper issued by any corporation
organized under the laws of any State of the United States and rated at least
"Prime-1" (or the then equivalent grade) by Moody's Investors Service, Inc. or
"A-1" (or the then equivalent grade) by the Standard & Poor's Ratings Group, a
division of the McGraw-Hill Companies, Inc., in each case with a maturity of not
more than 180 days from the date of acquisition thereof, (d) repurchase
agreements entered into by the Borrower with a Lender or any commercial bank of
the type referred to in clause (b) above for direct obligations issued by or
fully guaranteed by the United States of America maturing within 365 days and,
except for repurchase agreements having a term of not more than seven days, in
which the Agent shall have a valid and perfected first priority security
interest (subject to no other Liens) provided that each such repurchase
agreement shall have a fair market value of at least 100% of the amount of the
repurchase obligations thereunder on the date of purchase thereof and (e)
investments, classified as current assets of the Borrower or any of its
Subsidiaries under GAAP, in money market investment programs registered under
the Investment Company Act of 1940, as amended, which are administered by
financial institutions that have the highest rating obtainable from either
Moody's Investors Service, Inc. or Standard & Poor's Rating Agency, and the
portfolios of which are limited solely to Investments of the character, quality
and maturity described in clauses (a), (b) and (c) of this definition.
"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.
"CCI: Classic Communications, Inc., a Delaware corporation.
"CCI Indenture": that certain Indenture dated as of July 29, 1998,
between CCI and Bank 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 issued pursuant to the CCI Indenture.
"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.
"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 and any
other Obligor, as the case may be, as security for all or part of the
Obligations.
"Collateral Account": as defined in the Recitals to the Security
Agreement.
<PAGE> 11
6
"Collateral Documents": the Security Agreement, all notices of security
interests in (and agreements executed in connection therewith) deposit accounts
requested by the Agent pursuant to the Security Agreement, the Pledge Agreement,
and all Form UCC-1 and Form UCC-3 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 and the other Obligors.
"Commitment Date": as specified in Section 2.21(b).
"Commitment Increase": as specified in Section 2.21(a).
"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, any
Term A Commitment, any Term B Commitment and any Term C 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 2.8, 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.
"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 2.7 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.
<PAGE> 12
7
"Drawing Lender": as defined in Section 2.5(c).
"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 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, (iv) any such issuance or sale of stock in the Borrower or capital
contribution to 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) or (v) any equity interest
issued pursuant to an employment contract or an equity incentive plan for
employees and involving cash consideration not in excess of $1,000,000 in any
single transaction or $3,000,000 in the aggregate for all transactions included
in this clause (v).
"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.
"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 2.7(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).
<PAGE> 13
8
"Existing Credit Agreement": as defined in the Preliminary Statements
hereto.
"Existing Lenders": as defined in the Preliminary Statements hereto.
"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 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
<PAGE> 14
9
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 Agent for the benefit
of the Lenders, in form and substance reasonably satisfactory to the Lead
Arranger and the Agent, as the same may be amended or modified from time to time
in accordance with the terms hereof.
"Guarantors": (i) each Subsidiary, (ii) CCI and (iii) Translator
Management, Inc., a Delaware corporation.
"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.
"Increase Date": as defined in Section 2.21(a).
"Increase Lender": as specified in Section 2.21(b).
"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 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, (f) all
payment 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, the persons and entities listed
on Schedule 1.1 hereto and any Affiliates thereof which become owners of capital
stock of CCI.
"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
<PAGE> 15
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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 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, the day on which the Term A Loans, Term B Loans, Term C
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 A Loans, the Term B Loans,
the Term C 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.
"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.
"Lead Arranger": as defined in the preamble hereto.
"Lenders": as defined in the preamble hereto and Section 8.8 hereof and
includes Assuming Lenders.
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"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.
"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 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, a Term A Loan, a Term B Loan or a Term C
Loan.
"Loan Documents": this Agreement, the Notes, any Letter of Credit
Requests that are executed by the Borrower, the 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 and UCC-3 Financing
Statements, as such agreements and documents may be amended, supplemented and
otherwise modified from time to time in accordance with the terms hereof.
<PAGE> 17
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"Majority Lenders": Lenders having at least 51% of the sum of (a) the
aggregate outstanding principal amounts of the Term A Loans or, if the Term A
Loans shall not have been made, the aggregate outstanding principal amount of
the Term A Commitments, plus (b) the aggregate outstanding principal amounts of
the Term B Loans or, if the Term B Loans shall not have been made, the aggregate
outstanding principal amount of the Term B Commitments plus (c) the aggregate
outstanding principal amounts of the Term C Loans or, if the Term C Loans shall
not have been made, the aggregate outstanding principal amount of the Term C
Commitments plus (d) 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 51% of the aggregate amount of the Revolving Commitments or, if the
Revolving Loan Commitments shall have terminated, Lenders holding at least 51%
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 2.7(b)(i)) 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 2.7(b)(i)) 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 from time to time (whether
as initial consideration or through payment or disposition of deferred
consideration or disposition of non-cash consideration) minus the sum of (i) 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), (ii) Indebtedness, other than the Loans, required to be paid as a
result of such Asset Disposition and (iii) 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); (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
<PAGE> 18
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Event; and (d) with respect to any Sale-Leaseback of Tower Assets, the net
amount equal to the aggregate amount received in cash in connection with such
Sale-Leaseback of Tower Assets minus the reasonable fees, commissions and other
out-of-pocket expenses incurred by the Borrower or any of its Subsidiaries in
connection with such Sale-Leaseback of Tower Assets (other than amounts payable
to Affiliates of the Person entering into such transaction).
"New Subordinated Notes": $100,000,000 Classic Cable, Inc. 93/8% Senior
Subordinated Notes due 2009 issued pursuant to the New Subordinated Indenture,
as such notes may be refinanced in accordance with Section 6.2(h).
"97/8% Subordinated Notes": $125,000,000 Classic Cable, Inc. 9 7/8%
Senior Subordinated Notes due 2008 issued pursuant to the 1998 Subordinated
Indenture, as such notes may be refinanced in accordance with Section 6.2(h).
"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 Lead Arranger and the Agent, 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, a Term A Note, a Term B Note or a Term C
Note, as the case may be, and "Notes" shall mean the Revolving Notes, Term A
Notes, the Term B Notes and/or the Term C 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 A Loans,
the Term B Loans, the Term C 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 other Facility
Agents 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 or in respect of overdrafts and related
liabilities owed to any Lender or any of its Affiliates or any treasury,
depositary and cash management services in connection with any automated
clearing house transfers of funds provided by a Lender or any of its Affiliates
for the Borrower or in respect of guarantees by the Borrower of any such
obligations or liabilities of any of its Subsidiaries for such services, 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 other Facility Agents 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 the Agent or 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
<PAGE> 19
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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) to the extent otherwise deducted in computing Operating Cash Flow, an amount
paid during the period ending on September 30, 1999 not to exceed $5,200,000
payable to officers of the Borrower as one-time transaction fees in connection
with the transactions relating to the BTI Acquisition plus (d) for each period
ending prior to June 30, 2000, $375,000 for each Fiscal Quarter to reflect
certain approximate compensation expense adjustments and merger related
expenses.
Notwithstanding the foregoing, with respect to any calculation of
Operating Cash Flow for any periods occurring prior to consummation of the BTI
Acquisition, such calculation shall be made (i) in compliance with Section
1.2(e) and (ii) for periods prior to July 1, 1999, such that the BTI 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.
"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 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 Lead Arranger and the Agent, 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.
"Prepayment Amount": as defined in Section 5.2(m).
"Prepayment Date": as defined in Section 5.2(m).
<PAGE> 20
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"Prepayment Notice": as defined in Section 5.2(m).
"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 (ii) by CCI,
to the extent encumbered by the Pledge Agreement.
"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., The Chase
Manhattan Bank 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 Agent as
"Reference Lenders" hereunder.
"Register": as defined in Section 9.6(d).
"Registered Loans": as defined in Section 2.20.
"Registered Notes": as defined in Section 2.20.
"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.
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"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).
"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": July 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 Note" and "Revolving Notes": as defined in Section 2.1(c).
"Sale-Leaseback of Tower Assets": the sale and leaseback, in one or
more transactions, of any of the towers owned by the Borrower or any of its
Subsidiaries as of the date hereof, used to facilitate the transmission of
telecommunication, voice data and video signals.
"Security Agreement": the Security Agreement in form and substance
reasonably satisfactory to the Lead Arranger and the Agent made by the Borrower
and the Subsidiary Guarantors in favor of the Agent, for the benefit of the
Lenders, in respect of the tangible and intangible personal property of the
Borrower and the Subsidiary Guarantors described therein, as the same may be
amended from time to time in accordance with the terms hereof.
<PAGE> 22
17
"Senior Debt": Total Debt other than Subordinated Indebtedness.
"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:
(a) 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;
(b) such Person is able to pay its debts as they become due;
and
(c) 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 97/8% Subordinated Notes and the New
Subordinated Notes.
"Subordinated Indentures": collectively, (a) 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 97/8% Subordinated Notes permitted
under Section 6.2(h), from time to time in accordance with the terms hereof (the
"1998 Subordinated Indenture") and (b) that certain Indenture dated as of July
28, 1999, between the Borrower and Chase Bank of Texas, N.A., as trustee, as it
may be amended or otherwise modified, or replaced pursuant to a refinancing of
the New Subordinated Notes permitted under Section 6.2(h), from time to time in
accordance with the terms hereof (the "New Subordinated Indenture").
"Subordinated Notes": the 97/8% Subordinated Notes and the New
Subordinated Notes.
"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 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.
<PAGE> 23
18
"Term A Commitment": with respect to each Lender having a Term A
Commitment, the commitment listed as its "Term A Commitment" in Schedule 2.1
hereto to make a Term A Loan hereunder through its Applicable Lending Office, as
the same may be adjusted pursuant to the provisions hereof.
"Term A Commitment Percentage": with respect to each Term A Lender, the
percentage equivalent of the ratio which such Term A Lender's Term A Commitment
bears to the Aggregate Term A Commitment.
"Term A Lenders": each Lender having a Term A Commitment and/or which
shall have Term A Loans outstanding.
"Term A Loan": as defined in Section 2.2(a).
"Term A Maturity Date": July 31, 2007 or such earlier date as the
Aggregate Term A Loan Commitment shall expire (whether by acceleration,
reduction to zero or otherwise).
"Term A Note" and "Term A Notes": as defined in Section 2.2(c).
"Term A Reduction Dates": the dates on which scheduled principal
payments of the Term A Loans are due, as set forth in the table in Section
2.2(d).
"Term B Commitment": with respect to each Lender having a Term B
Commitment, the commitment listed as its "Term B Commitment" in Schedule 2.1
hereto to make a Term B Loan hereunder through its Applicable Lending Office, as
the same may be adjusted pursuant to the provisions hereof.
"Term B Commitment Percentage": with respect to each Term B Lender, the
percentage equivalent of the ratio which such Term B Lender's Term B Commitment
bears to the Aggregate Term B Commitment.
"Term B Lenders": each Lender having a Term B Commitment and/or which
shall have Term B Loans outstanding.
"Term B Loan": as defined in Section 2.3(a).
"Term B Maturity Date": January 31, 2008 or such earlier date as the
Aggregate Term B Loan Commitment shall expire (whether by acceleration,
reduction to zero or otherwise).
"Term B Note" and "Term B Notes": as defined in Section 2.3(c).
"Term B Reduction Dates": the dates on which scheduled principal
payments of the Term B Loans are due, as set forth in the table in Section
2.3(d).
"Term C Commitment": with respect to each Lender or Assuming Lender
that participates in a Commitment Increase, the commitment of such Lender as
determined in accordance with Section 2.21 to make a Term C Loan hereunder
through its Applicable Lending Office, as the same may be adjusted pursuant to
the provisions hereof.
"Term C Commitment Percentage": with respect to each Term C Lender, the
percentage equivalent of the ratio which such Term C Lender's Term C Commitment
bears to the Aggregate Term C Commitment.
"Term C Lenders": each Lender having a Term C Commitment and/or which
shall have Term C Loans outstanding.
<PAGE> 24
19
"Term C Loan": as defined in Section 2.4(a).
"Term C Maturity Date": January 31, 2008 or such earlier date as the
Aggregate Term B Loan Commitment shall expire (whether by acceleration,
reduction to zero or otherwise).
"Term C Note" and "Term C Notes": as defined in Section 2.4(c).
"Term C Reduction Dates": the dates on which scheduled principal
payments of the Term C Loans are due, as set forth in the table in Section
2.4(d).
"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 (net of applicable
discounts taken in accordance with GAAP) 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 A Loan, any Term B Loan, Term C Loan or any
Revolving Loan, its nature as a Base Rate Loan or a LIBOR Loan.
"U.S. Person": as defined in Section 2.16.
"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 or more Wholly Owned Subsidiaries of such Person.
"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 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
<PAGE> 25
20
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 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 2.5 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
<PAGE> 26
21
Credit Amount of all Letters of Credit outstanding and (y) the aggregate amount
of unreimbursed drawings under all Letters of Credit shall not exceed
$10,000,000 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's account, prepay Revolving Loans and reborrow Revolving
Loans.
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 2.12 and 2.14, 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 2.8. 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 2.5(c), with
interest thereon as prescribed in Sections 2.10 and 2.11. 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 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 2.10 and 2.11 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
<PAGE> 27
22
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:
<TABLE>
<CAPTION>
Reduced Aggregate
Effective Date of Reduction Revolving Loan Commitment
- --------------------------- -------------------------
<S> <C>
December 31, 2001 $ 73,125,000
March 31, 2002 71,718,750
June 30, 2002 70,312,500
September 30, 2002 69,906,250
December 31, 2002 67,500,000
March 31, 2003 65,625,000
June 30, 2003 63,750,000
September 30, 2003 61,875,000
December 31, 2003 60,000,000
March 31, 2004 57,187,500
June 30, 2004 54,375,000
September 30, 2004 51,562,500
December 31, 2004 48,750,000
March 31, 2005 45,000,000
June 30, 2005 41,250,000
September 30, 2005 37,500,000
December 31, 2005 33,750,000
March 31, 2006 29,062,500
June 30, 2006 24,375,000
September 30, 2006 19,687,500
December 31, 2006 15,000,000
March 31, 2007 7,500,000
July 31, 2007 0
</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 without premium or penalty 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 2.7 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 2.7 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 2.18, 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 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
<PAGE> 28
23
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) make 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 2.17.
(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 A Loans; Term A Commitment. Subject to the terms and
conditions hereof, each Lender having a Term A Commitment severally agrees to
make a term loan (each, a "Term A Loan" and, collectively, the "Term A Loans")
to the Borrower on the Closing Date in a principal amount equal to the Term A
Commitment of such Lender.
(b) Subject to Sections 2.12 and 2.14, the Term A 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 2.8. Each Term A Lender may make or maintain its Term A
Loan to the Borrower by or through any Applicable Lending Office.
(c) The Term A Loan made by each Term A Lender to the Borrower shall be
evidenced by a promissory note of the Borrower, substantially in the form of
Exhibit A-2 (a "Term A Note"), with appropriate insertions therein as to payee,
date and principal amount, payable to the order of such Term A Lender and
representing the obligations of the Borrower to pay the aggregate unpaid
principal amount of the Term A Loan made by such Term A Lender to the Borrower
pursuant to Section 2.2(a), with interest thereon as prescribed in Sections 2.10
and 2.11. Each Term A Lender is hereby authorized (but not required) to record
the date and amount of each payment or prepayment of principal of its Term A
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
A Lender, and any such recordation shall constitute prima facie evidence of the
accuracy of the information so recorded. The failure of any Term A Lender to
make any such recordation or notation in the books and records of the Term A
Lender (or any error in such recordation or notation) shall not affect the
obligations of the Borrower hereunder or under the Term A Notes. Each Term A
Note shall (i) be dated the Closing Date, (ii) provide for the payment of
interest in accordance with Sections 2.10 and 2.11 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 A Reduction Date, the Borrower shall repay the
principal of the Term A Notes in an aggregate amount equal to the amount set
forth below opposite such Term A Reduction Date:
<PAGE> 29
24
<TABLE>
<CAPTION>
Term A Reduction Date Principal Payment
--------------------- -----------------
<S> <C>
December 31, 2001 $ 1,875,000
March 31, June 30, September 30 1,406,250
and December 31, 2002
March 31, June 30, September 30 1,875,000
and December 31, 2003
March 31, June 30, September 30 2,812,500
and December 31, 2004
March 31, June 30, September 30 3,750,000
and December 31, 2005
March 31, June 30, September 30 4,687,500
and December 31, 2006
March 31 and July 31, 2007 7,500,000
</TABLE>
; provided that the final installment paid shall be in an amount equal to all
amounts owed by the Borrower on the Term A Notes.
All outstanding Term A Loans shall be due and payable, to the extent not
previously paid in accordance with the terms hereof, on the Term A Maturity
Date. The aggregate amount payable to any Term A Lender on any Term A Reduction
Date shall be determined in accordance with the provisions of Section 2.13.
(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 or, if all or any part of the Term A Loans are
requested to be made as LIBOR Loans, three Eurodollar Business Days prior to the
Closing Date) requesting that the Term A Lenders make the Term A Loans on the
Closing Date and specifying (i) the aggregate amount of Term A Loans requested
to be made, (ii) whether the Term A Loans are to be LIBOR Loans, Base Rate Loans
or a combination thereof and (iii) if the Term A Loans are to be entirely or
partly LIBOR Loans, the respective amounts of each such Type of Term A Loan and
the respective lengths of the initial Interest Periods therefor. Upon receipt of
such Borrowing Notice the Agent shall promptly notify each Term A 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 A Lender shall make available to the Agent at its office
specified in Section 9.2 the amount of such Term A Lender's Term A Loan
Commitment (or such lesser amount specified in Section 2.2(a)) in immediately
available funds. The Agent may, in the absence of notification from any Term A
Lender that such Term A 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 A Loans.
(f) Neither the Agent nor any Term A Lender shall be responsible for
the obligations or Term A Commitment of any other Term A Lender hereunder, nor
will the failure of any Term A Lender to comply with the terms of this Agreement
relieve any other Term A Lender or the Borrower of their obligations under this
Agreement and the Term A Notes. Nothing herein shall be deemed to relieve any
Term A Lender from its obligation to fulfill its Commitment hereunder or to
prejudice any rights which the Borrower may have against any Term A Lender as a
result of any default by such Term A Lender hereunder.
<PAGE> 30
25
2.3 Term B Loans; Term B Commitment. (a) Subject to the terms and
conditions hereof, each Lender having a Term B Commitment severally agrees to
make a term loan (each, a "Term B Loan" and, collectively, the "Term B Loans")
to the Borrower on the Closing Date in a principal amount equal to the amount of
the Term B Commitment of such Lender.
(b) Subject to Sections 2.12 and 2.14, the Term B 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 2.3(e) or 2.8. Each Term B Lender may make or maintain its Term B
Loan to the Borrower by or through any Applicable Lending Office.
(c) The Term B Loan made by each Term B Lender to the Borrower shall be
evidenced by a promissory note of the Borrower, substantially in the form of
Exhibit A-3 (a "Term B Note"), with appropriate insertions therein as to payee,
date and principal amount, payable to the order of such Term B Lender and
representing the obligations of the Borrower to pay the aggregate unpaid
principal amount of the Term B Loan made by such Term B Lender to the Borrower
pursuant to Section 2.3(a), with interest thereon as prescribed in Sections 2.10
and 2.11. Each Term B Lender is hereby authorized (but not required) to record
the date and amount of each payment or prepayment of principal of its Term B
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
B Lender, and any such recordation shall constitute prima facie evidence of the
accuracy of the information so recorded. The failure of any Term B Lender to
make any such recordation or notation in the books and records of the Term B
Lender (or any error in such recordation or notation) shall not affect the
obligations of the Borrower hereunder or under the Term B Notes. Each Term B
Note shall (i) be dated the Closing Date, (ii) provide for the payment of
interest in accordance with Sections 2.10 and 2.11 and (iii) be stated to be
payable in installments of principal in accordance with, and subject to the
provisions of, Section 2.3(d).
(d) On each Term B Reduction Date, the Borrower shall repay the
principal of the Term B Notes in an aggregate amount equal to the amount set
forth below opposite such Term B Reduction Date:
<TABLE>
<CAPTION>
Term B Reduction Date Principal Payment
--------------------- -----------------
<S> <C>
December 31, 2001 $ 250,000
March 31, June 30, September 30 and
December 31, 2002 250,000
March 31, June 30, September 30 and
December 31, 2003 250,000
March 31, June 30, September 30 and
December 31, 2004 250,000
March 31, June 30, September 30 and
December 31, 2005 250,000
March 31, June 30, September 30 and
December 31, 2006 250,000
March 31, June 30, September 30 and
December 31, 2007 250,000
</TABLE>
<PAGE> 31
26
<TABLE>
<CAPTION>
Term B Reduction Date Principal Payment
--------------------- -----------------
<S> <C>
January 31, 2008 93,750,000
</TABLE>
; provided that the final installment paid shall be in an amount equal to all
amounts owed by the Borrower on the Term B Notes.
All outstanding Term B Loans shall be due and payable, to the extent not
previously paid in accordance with the terms hereof, on the Term B Maturity
Date. The aggregate amount payable to any Term B Lender on any Term B Reduction
Date shall be determined in accordance with the provisions of Section 2.13.
(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 or, if all or any part of the Term B Loans are requested to
be made as LIBOR Loans, three Eurodollar Business Days prior to the Closing
Date) requesting that the Term B Lenders make the Term B Loans on the Closing
Date and specifying (i) the aggregate amount of Term B Loans requested to be
made, (ii) whether the Term B Loans are to be LIBOR Loans, Base Rate Loans or a
combination thereof and (iii) if the Term B Loans are to be entirely or partly
LIBOR Loans, the respective amounts of each such Type of Term B Loan and the
respective lengths of the initial Interest Periods therefor. Upon receipt of
such Borrowing Notice the Agent shall promptly notify each Term B 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 B Lender shall make available to the Agent at its office
specified in Section 9.2 the amount of such Term B Lender's Term B Commitment in
immediately available funds. The Agent may, in the absence of notification from
any Term B Lender that such Term B 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 B Loans.
(f) Neither the Agent nor any Term B Lender shall be responsible for
the obligations or Term B Commitment of any other Term B Lender hereunder, nor
will the failure of any Term B Lender to comply with the terms of this Agreement
relieve any other Term B Lender or the Borrower of their obligations under this
Agreement and the Term B Notes. Nothing herein shall be deemed to relieve any
Term B Lender from its obligation to fulfill its Commitment hereunder or to
prejudice any rights which the Borrower may have against any Term B Lender as a
result of any default by such Term B Lender hereunder.
2.4 Term C Loans; Term C Commitment. (a) Subject to the terms and
conditions hereof, each Lender that, as a result of a Commitment Increase made
in accordance with Section 2.21, has a Term C Commitment on any Increase Date
severally agrees to make a term loan (each an "Term C Loan" and, collectively,
the "Term C Loans") to the Borrower in accordance with Section 2.4(c) in a
principal amount not to exceed the unused amount of the Term C Commitment of
such Lender on such date.
(b) Subject to Sections 2.12 and 2.14, the Term C 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 2.4(e) or 2.8. Each Term C Lender may make or maintain its Term C
Loan to the Borrower by or through any Applicable Lending Office.
(c) The Term C Loan made by each Term C Lender to the Borrower shall be
evidenced by a promissory note of the Borrower, substantially in the form of
Exhibit A-4 (a "Term C Note"), with appropriate insertions therein as to payee,
date and principal amount, payable to the order of such Term C Lender and
representing the obligations of the Borrower to pay the aggregate unpaid
principal amount of the Term C Loan made by such Term C Lender to the Borrower
pursuant to Section 2.4(a), with interest thereon as prescribed in Sections 2.10
and 2.11. Each Term C
<PAGE> 32
27
Lender is hereby authorized (but not required) to record the date and amount of
each payment or prepayment of principal of its Term C 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 C Lender, and any
such recordation shall constitute prima facie evidence of the accuracy of the
information so recorded. The failure of any Term C Lender to make any such
recordation or notation in the books and records of the Term C Lender (or any
error in such recordation or notation) shall not affect the obligations of the
Borrower hereunder or under the Term C Notes. Each Term C Note shall (i) be
dated the applicable Increase Date, (ii) provide for the payment of interest in
accordance with Sections 2.10 and 2.11 and (iii) be stated to be payable in
installments of principal in accordance with, and subject to the provisions of,
Section 2.4(d).
(d) On each Term C Reduction Date, the Borrower shall repay the
principal of the Term C Notes in an aggregate amount determined as the
percentage, set forth below opposite such Term C Reduction Date, of the maximum
aggregate amount of Incremental Term C Notes outstanding at any time on or
before such Term C Reduction Date:
<TABLE>
<CAPTION>
Term C Reduction Date Principal Payment
--------------------- -----------------
<S> <C>
December 31, 2001 0.25%
March 31, June 30, September 30 and
December 31, 2002 0.25%
March 31, June 30, September 30 and
December 31, 2003 0.25%
March 31, June 30, September 30 and
December 31, 2004 0.25%
March 31, June 30, September 30 and
December 31, 2005 0.25%
March 31, June 30, September 30 and
December 31, 2006 0.25%
March 31, June 30, September 30 and
December 31, 2007 0.25%
January 31, 2008 93.75%
</TABLE>
; provided that the final installment paid shall be in an amount equal to all
amounts owed by the Borrower on the Term C Notes.
All outstanding Term C Loans shall be due and payable, to the extent not
previously paid in accordance with the terms hereof, on the Term C Maturity
Date. The aggregate amount payable to any Term C Lender on any Term C Reduction
Date shall be determined in accordance with the provisions of Section 2.13.
(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 applicable Increase Date or, if all or any part of the Term C Loans
are requested to be made as LIBOR
<PAGE> 33
28
Loans, three Eurodollar Business Days prior to the applicable Increase Date)
requesting that the Term C Lenders make the Term C Loans on applicable Increase
Date and specifying (i) the aggregate amount of Term C Loans requested to be
made, (ii) whether the Term C Loans are to be LIBOR Loans, Base Rate Loans or a
combination thereof and (iii) if the Term C Loans are to be entirely or partly
LIBOR Loans, the respective amounts of each such Type of Term C Loan and the
respective lengths of the initial Interest Periods therefor. Upon receipt of
such Borrowing Notice the Agent shall promptly notify each Term C 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 applicable
Increase Date, each Term C Lender that has any Term C Commitment on such date
shall make available to the Agent at its office specified in Section 9.2 the
amount of such Term C Lender's Term C Commitment on such date, in immediately
available funds. The Agent may, in the absence of notification from any Term C
Lender that such Term C 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 C Loans.
(f) Neither the Agent nor any Term C Lender shall be responsible for
the obligations or Term C Commitment of any other Term C Lender hereunder, nor
will the failure of any Term C Lender to comply with the terms of this Agreement
relieve any other Term C Lender or the Borrower of their obligations under this
Agreement and the Term C Notes. Nothing herein shall be deemed to relieve any
Term C Lender from its obligation to fulfill its Commitment hereunder or to
prejudice any rights which the Borrower may have against any Term C Lender as a
result of any default by such Term C Lender hereunder.
2.5 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. Letters of credit outstanding under the Existing Credit Agreement shall be
deemed to be Letters of Credit issued in accordance with and pursuant to this
Section 2.5.
(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 any such Loan by the Drawing Lender resulting from a drawing
<PAGE> 34
29
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
2.5(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
(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
<PAGE> 35
30
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, 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 2.5 is
intended to limit the other obligations of the Borrower, any Lender, or the
Agent under this Agreement.
2.6 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 A Loans, Term B Loans,
Term C 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
2.17. Partial prepayments of Term A Loans, Term B Loans or Term C Loans shall be
applied to the installments of principal thereof in inverse order of maturity.
Amounts prepaid on account of the Term A Loans, the Term B Loans or Term C 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.
2.7 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 December 31, 2001), the Borrower shall prepay the Loans (and such
prepayment shall be applied as set forth in Section 2.7(f)) in an aggregate
amount equal to the excess of (i) 75% of Excess Cash Flow for such fiscal year
over (ii) the aggregate amount of prepayments of Term A Loans, Term B Loans or
Term C Loans made during such fiscal year pursuant to Section 2.6.
<PAGE> 36
31
(b) Sale of Assets; Sale-Leaseback of Tower Assets. (i) 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)(i)) shall exceed $2,000,000, the
Borrower shall prepay the Loans (and such prepayment shall be applied as set
forth in Section 2.7(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)(i)).
Notwithstanding the foregoing, the Borrower shall not be required to
make a prepayment pursuant to this paragraph (b)(i) 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
(A) such Net Proceeds are held by the Agent in the Cash
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),
(B) 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 Cash 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 prepayment of Loans (and
such prepayment shall be applied as set forth in Section 2.7(f)) and
(C) 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
2.7(f)).
Nothing in this paragraph (b)(i) shall be deemed to obligate the Agent
to release any of such proceeds from the Cash 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 the Borrower and its Subsidiaries have cash
on hand in excess of $3,000,000 including amounts on deposit in the Cash
Collateral Account pursuant to Section 2.7(b)(i)(A) or in any other Collateral
Account in accordance with the Security Agreement, calculations of the Maximum
Total Debt Ratio and the Maximum Senior Debt Ratio with respect to such period
shall subtract from Total Debt any such amounts in excess of $3,000,000 that are
on deposit in any Collateral Account (it being understood that no such
subtraction shall be made following any reinvestment thereof as contemplated by
Section 2.7(b)(i)). The Borrower hereby agrees that if amounts on deposit in any
Collateral Account are used in the determination of compliance with the Maximum
Total Debt Ratio or the Maximum Senior Debt Ratio, the Borrower will request
that a daily collection report be delivered to the Agent, and amounts on deposit
in any Collateral Account will be used in such determination of compliance only
to the extent reported in such daily report.
<PAGE> 37
32
(ii) Upon any Sale-Leaseback of Tower Assets made during any
period in which the Maximum Total Debt Ratio (measured on a pro forma basis as
at the most recently ended fiscal quarter of the Borrower) is greater than
6.75:1.00; the Borrower shall prepay the Loans (and such prepayment shall be
applied as set forth in Section 2.06(f)) in an aggregate amount equal to 100% of
the Net Proceeds thereof.
(iii) Upon any Sale-Leaseback of Tower Assets made during any
period in which the Maximum Total Debt Ratio (measured on a pro forma basis as
at the most recently ended fiscal quarter of the Borrower) is 6.75:1.00 or less,
the Borrower shall prepay the Loans (and such prepayment shall be applied as set
forth in Section 2.7(f)) in an aggregate amount equal to 50% of the Net Proceeds
thereof.
(c) Equity or Debt Offering. (i) Upon any Equity Offering, the Borrower
shall prepay the Loans (and such prepayment shall be applied as set forth in
Section 2.7(f)) to the extent that the Net Proceeds thereof are not used (A) to
repay, prepay or redeem (1) the CCI Notes, (2) after the CCI Notes have been
paid in full, up to 35% in original principal amount of the 9 7/8% Subordinated
Notes and (3) after the full permitted amount of 9 7/8% Subordinated Notes have
been redeemed under clause (2), up to 35% in original principal amount of the
New Subordinated Notes, or (B) to fund Permitted Acquisitions in accordance with
Section 6.7(h)(i).
(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 2.7(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 2.7(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, provided that no such prepayment
shall be required to the extent the aggregate amount of such proceeds or
compensation is less than $250,000.
(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 2.7 shall be applied to the outstanding amounts of Term A Loans, Term B
Loans, Term C Loans and Revolving Loans on a pro rata basis determined on the
basis of the amount of Term A Loans, Term B Loans, Term C Loans and Revolving
Loans 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 2.17.
(ii) Each prepayment of the Revolving Loans and each Cash
Collateral Deposit under this Section 2.7 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
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33
prepayment would have been under this Section 2.7 if Revolving Loans had been
outstanding against which to apply such prepayment.
(iii) Each prepayment of the Term A Loans shall be applied to
scheduled installments of principal of the Term A Loans in inverse order of
maturity. Such prepaid Term A Loans may not be reborrowed.
(iv) Each prepayment of the Term B Loans shall be applied to
scheduled installments of principal of the Term B Loans in inverse order of
maturity. Such prepaid Term B Loans may not be reborrowed.
(v) Each prepayment of the Term C Loans shall be applied to
scheduled installments of principal of the Term C Loans in inverse order of
maturity. Such prepaid Term C Loans may not be reborrowed.
(vi) With respect to any mandatory prepayment of the Term B
Loans or Term C Loans, any Term B Lender and any Term C Lender, at its option
and to the extent that any Term A Loans are then outstanding, may elect not to
accept such prepayment (such Lender being a "Declining Lender"), in which event
the provisions of the next two sentences shall apply. Any Term B Lender or Term
C Lender may elect not to accept its ratable share of the prepayment referred to
in any Prepayment Notice by giving written notice to the Agent not later than
11:00 A.M., Los Angeles time, on the Business Day immediately preceding the
scheduled Prepayment Date. On the Prepayment Date, an amount equal to that
portion of the Prepayment Amount available to prepay Term B Lenders or Term C
Lenders (less any amounts that would otherwise be payable to Declining Lenders)
shall be applied to prepay Term B Loans owing to Term B Lenders other than
Declining Lenders or Term C Loans owing to Term C Lenders other than Declining
Lenders and any amounts that would otherwise have been applied to prepay Term B
Loans or Term C Loans owing to Declining Lenders shall instead be applied
ratably to prepay the remaining Term A Loans as provided in this Section
2.07(f); provided further that on prepayment in full of Term A Loans, Term B
Loans and Term C Loans owing to Term A Lenders, Term B Lenders and Term C
Lenders other than Declining Lenders, the remainder of any Prepayment Amount
shall be applied ratably to prepay Term B Loans and Term C Loans owing to
Declining Lenders.
2.8 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 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
2.9 shall not have been contravened, (ii) no Term A 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 A Loans, (iii) no Term B 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 B Loans, (iv) no Term C
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 C Loans, (v)
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 (vi) 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 2.9 would be contravened,
(ii) in the case of any Term A Loans, after the date that is one month prior to
the due date of the final installment of principal of the Term A Loans, (iii) in
the case of any Term B Loans, after the date that is one month prior
<PAGE> 39
34
to the due date of the final installment of principal of the Term B Loans, (iv)
in the case of any Term C Loans, after the date that is one month prior to the
due date of the final installment of principal of the Term C Loans, (v) in the
case of any Revolving Loans, after the date that is one month prior to the
Revolving Loan Commitment Expiration Date or (vi) 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.
2.9 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 2.5(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 15 Tranches.
2.10 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 the Applicable Margin.
(b) Each Base Rate Loan shall bear interest at a rate per annum equal
to the Base Rate plus the Applicable 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 Event of Default until such Event of 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 2.5(e) and the commitment fee
referred to in Section 2.18, 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 Applicable Margin
shall be deemed to be at the highest pricing, 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 result 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.
2.11 Computation of Interest and Fees. (a) Interest on Base Rate Loans
(other than Base Rate Loans based on the Federal 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
<PAGE> 40
35
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 Agent) 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 Administrative Agent hereunder and (ii) Union Bank of
California, N.A. and The Chase Manhattan Bank shall be the only Reference
Lenders 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.
2.12 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 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.
2.13 Pro Rata Treatment and Payments. Subject to Section 2.7(f)(v),
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
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36
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.
2.14 Illegality. Notwithstanding any other provision herein, if any
change after the Closing Date in any Requirement 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 2.17. To the extent that a Lender's
LIBOR Loans have been converted to Base Rate Loans pursuant to this Section
2.14, 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.
2.15 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 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.
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(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.
2.16 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. 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 2.16(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
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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 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).
2.17 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.
2.18 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.
2.19 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 2.12, 2.14, 2.15, or 2.16, such Lender shall take such
action.
2.20 Registered Loans. 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
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39
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.
2.21. Term C Commitments. (a) The Borrower may, at any time but in any
event not more than once in any three month period prior to the Term C Maturity
Date, by notice to the Lead Arranger, request that the Aggregate Term C
Commitment be increased (or established) by an amount of $25,000,000 or an
integral multiple of $5,000,000 in excess thereof (each a "Commitment Increase")
to be effective as of a date that is at least 90 days prior to the Term C
Maturity Date (the "Increase Date") as specified in the related notice to the
Lead Arranger; provided, however that (i) in no event shall the Aggregate Term C
Commitment be more than $100,000,000 and (ii) on the date of any request by the
Borrower for a Commitment Increase and on the related Increase Date, the
conditions set forth in Section 4.2 shall be satisfied.
(b) The Lead Arranger shall promptly notify such banks and
other entities as it shall identify of a request by the Borrower for a
Commitment Increase, which notice shall include (i) the proposed amount of such
requested Commitment Increase, (ii) the proposed Increase Date and (iii) the
date by which such banks or other entities wishing to participate in the
Commitment Increase must commit to such increase in the Term C Commitments (the
"Commitment Date"). The requested Commitment Increase shall be allocated among
the banks and other entities willing to participate therein in such amounts as
are agreed between the Borrower and the Lead Arranger.
(c) Promptly following each Commitment Date, the Lead Arranger
shall notify the Borrower and the Agent as to the amount, if any, by which the
banks and other entities are willing to participate in the requested Commitment
Increase; provided, however, that the Term C Commitment of each such bank or
other entity shall be in an amount of $2,000,000 or an integral multiple
thereof.
(d) On each Increase Date, each bank or other entity that is
not prior to such date a Lender hereunder and accepts an offer to participate in
a requested Commitment Increase in accordance with Section 2.21(c) (each such
bank or other entity, an "Assuming Lender") shall become a Lender party to this
Agreement as of such Increase Date and the Term C Commitment of each bank or
other entity that prior to such date is a Lender and accepts an offer to
participate in such requested Commitment Increase (an "Increasing Lender") shall
be so increased (or established) by such amount as of such Increase Date;
provided, however, that the Agent shall have received on or before such Increase
Date the following, each dated such date:
(i) (A) certified copies of resolutions of the Board of
Directors of the Borrower or the Executive Committee of such Board
approving the Commitment Increase and the corresponding modifications
to this Agreement, (B) Term C Notes duly executed by the Borrower
payable to each Increasing Lender and each Assuming Lender in a
principal amount equal to such Lender's new or increased Term C
Commitment, (C) a consent executed by each Guarantor approving the
Commitment Increase and the corresponding modifications to this
Agreement and (D) an opinion of counsel for the Borrower (which may be
in-house counsel), in form and substance satisfactory to the Lead
Arranger;
(ii) an assumption agreement from each Assuming Lender, if
any, in form and substance satisfactory to the Borrower and the Agent
(each an "Assumption Agreement"), duly executed by such Assuming
Lender, the Agent and the Borrower; and
<PAGE> 45
40
(iii) confirmation from each Increasing Lender of the amount
of its Term C Commitment in a writing satisfactory to the Borrower and
the Agent.
On each Increase Date, upon fulfillment of the conditions set forth in the
immediately preceding sentence of this Section 2.21(d), the Agent shall notify
the Lenders (including, without limitation, each Assuming Lender) and the
Borrower, on or before 1:00 P.M., Los Angeles time, by telecopier or telex, of
the occurrence of the Commitment Increase to be effected on such Increase Date
and shall record in the Register the relevant information with respect to each
Increasing Lender and each Assuming Lender on such date.
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 and to consummate
the BTI Acquisition in accordance with the terms of the Acquisition Agreement
and (ii) 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 the Borrower
to consummate the BTI 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 BTI 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 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
<PAGE> 46
41
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 New Subordinated Notes. The New 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" or "Senior Debt" included in such
provisions. The New 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 as of the Closing Date (i) each Subsidiary of the Borrower,
(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 as of the Closing Date 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 Lead Arranger 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 $1,000,000 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
<PAGE> 47
42
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.
(b) The Borrower has net operating losses (within the meaning of
Section 172 of the Code) as of the Closing Date 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 BTI 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
the Borrower and its Subsidiaries for the fiscal year ended December 31, 1998,
(ii) the unaudited consolidated financial statements for the Borrower and its
Subsidiaries for the fiscal quarter ended March 31, 1999 and (iii) the unaudited
pro forma consolidated balance sheet for the Borrower and its Subsidiaries, as
at March 31, 1999 (prepared under the assumption that the BTI Acquisition
occurred on March 31, 1999) and unaudited pro forma consolidated statements of
operations for the fiscal year ended on December 31, 1998 and the 3-month period
ended on March 31, 1999 (prepared under the assumption that the BTI Acquisition
and each acquisition made by the Borrower or its Subsidiaries or BTI in calendar
year 1998 occurred on January 1, 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, 1998 there has been no event or condition
resulting in a Material Adverse Effect.
3.12 Accuracy of Other Information. All information (other than
financial projections) 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 projections given to the Agent, the
other Facility Agents, 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.
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(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) in excess of $1,000,000 in the
aggregate of the Borrower, any Subsidiary or any ERISA Affiliate thereof 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
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44
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 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 2.18 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 BTI 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 BTI 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 by the Borrower
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 BTI 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 New 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 BTI Acquisition). The Borrower and each Subsidiary possesses or has the
right to use, or will possess or have the right to use (after giving effect to
the BTI 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 BTI 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.
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3.21 The CATV Systems. (a) The Borrower and each Subsidiary, and the
CATV Systems owned by them (and, after giving effect to the BTI 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 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 BTI 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 BTI
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) BTI 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 BTI 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) BTI have each reviewed and evaluated in detail the FCC rules
currently in effect (the "Rate Regulation Rules") implementing the rate
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46
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) BTI of
all applicable worksheets contemplated by the Rate Regulation Rules for each
CATV System owned by the Borrower (or, after giving effect to the BTI
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.
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:
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(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 A
Notes, the Term B Notes, the Revolving Notes, the Guarantees, 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
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 Borrower shall have paid all accrued fees and
expenses of the Facility Agents (including reasonable legal fees and expenses of
counsel to the Lead Arranger).
(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 Lead Arranger and the Agent;
(ii) executed legal opinions of local counsel to the Borrower
and the Guarantors in the States of Kansas, Missouri, Oklahoma,
Arkansas and Louisiana in form and substance satisfactory to the Lead
Arranger and the Agent;
(iii) the executed legal opinion of Cole, Raywid & Braverman,
regulatory counsel to the Borrower and the Guarantors, in form and
substance satisfactory to the Lead Arranger and the Agent; and
(iv) such other legal opinions as the Lead Arranger and the
Agent 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 Indentures 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 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.
<PAGE> 53
48
(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, together with an undated stock power for each of such certificates,
duly executed in blank by an authorized officer of the relevant corporate
pledgor 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. The Agent shall have received a certificate of a
senior financial officer of the Borrower indicating that the New Subordinated
Notes have been issued and gross cash proceeds have been received therefor in
the amount of $150,000,000.
(l) Equity Investment. The Agent shall have received a certificate of a
senior financial officer of the Borrower and CCI indicating that the Borrower
has, on terms set forth in the investment agreement dated as of May 24, 1999,
received an equity investment in an amount not less than $100,000,000 (net of up
to $3,000,000 in fees plus out-of-pocket expenses) from CCI as a result of an
equity contribution to CCI made by Brera Classic LLC.
(m) Existing Indebtedness. The Lead Arranger and the Agent shall have
received evidence satisfactory to them of (i) the repayment of all Indebtedness
of the Borrower owing to the Existing Lenders under the Existing Credit
Agreement (other than in respect of any Letters of Credit outstanding under the
Existing Credit Agreement), (ii) full repayment of all existing Indebtedness of
BTI and the termination of all guarantees and collateral pledges thereunder and
(iii) release of all Liens on the assets of BTI (except any permitted by Section
6.3), or in each case evidence that arrangements for such release satisfactory
to the Lead Arranger and the Agent shall have been made.
(n) 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.
(o) 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 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.
(p) 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.
(q) Basic Subscribers; Cash Flow. After giving effect to the BTI
Acquisition (i) the aggregate number of Basic Subscribers of the Borrower and
its Subsidiaries shall be at least equal to 345,000 and (ii) the aggregate
Annualized Operating Cash Flow as at May 31, 1999 (calculated, for purposes of
this Section 4.1(d), as though the
<PAGE> 54
49
three-month period ending May 31, 1999 was the most recently ended fiscal
quarter referred to in clause (i) of the definition of "Annualized Operating
Cash Flow") shall be at least equal to $65,000,000, and the Agent shall have
received a certificate of a Responsible Officer of the Borrower to such effect.
(r) Acquisition. The BTI 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
Lead Arranger and the Agent.
(s) Acquisition Price. The aggregate consideration paid in connection
with the BTI Acquisition shall not exceed $300,000,000, subject to working
capital adjustments at closing calculated pursuant to the Acquisition Agreement,
and the Agent shall have received a certificate of a Responsible Officer of the
Borrower to such effect.
(t) Necessary Governmental Authorizations and Consents; Expiration of
Waiting Periods, Etc. The Borrower shall have 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 BTI 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 (i) 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 and (ii) the FCC consents described on Schedule 4.1
hereto, which the Borrower does not anticipate any material difficulty in
obtaining in the ordinary course. 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.
(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 BTI 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
4:50:1).
(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 the date of issuance of such Letter of Credit, as applicable, that:
<PAGE> 55
50
(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.
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 the Borrower and its
Subsidiaries for such period and for the period from the beginning of the
respective fiscal year to the end of such period, and the related consolidated
balance sheets of the Borrower and its Subsidiaries as at the end of such
period, setting forth in each case in comparative form the corresponding
consolidated figures 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 the Borrower, which certificate shall state that said
consolidated financial statements fairly present the consolidated financial
condition and results of operations of 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 and the Borrower and its Subsidiaries (including, separately
stated, consolidated statements of income, retained earnings and cash flows of
CCI and the Borrower) for such fiscal year and the related consolidated balance
sheet of CCI and its Subsidiaries (including, separately stated, a consolidated
balance sheet of CCI and the Borrower) as at the end of such fiscal year,
setting forth in comparative form the corresponding consolidated figures 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:
<PAGE> 56
51
(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 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 all holders of equity interests therein;
(h) (i) 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, (ii) 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, (iii) 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 of $500,000 and (iv)
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
<PAGE> 57
52
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;
(m) as soon as possible and in any event no later than 10:00 A.M., Los
Angeles time, at least three Business Days before any prepayment of Term B Loans
or Term C Loans is to be made by the Borrower pursuant to Section 2.7 (the
"Prepayment Date"), written notice of the principal amount of such prepayment
(the "Prepayment Amount") and the applicable Prepayment Date (each such notice
(a "Prepayment Notice") shall be by telecopier or otherwise as provided in
Section 8.02); and
(n) 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 conducted by the Borrower and its
Subsidiaries as of the Closing Date, (ii) except as permitted by Section 6.4(c)
or (d), 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.
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53
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.
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 A Loans and the Term B Loans shall be used in
full on the Closing Date (A) to refinance existing indebtedness of BTI
and (B) to pay a portion of the purchase price with regard to the BTI
Acquisition and expenses associated therewith;
(ii) the Revolving Loans shall be used (A) to refinance
existing indebtedness of BTI, (B) to pay a portion of the purchase
price with regard to the BTI Acquisition and expenses associated
therewith, (C) for capital expenditures, working capital and general
corporate purposes and (D) to fund Permitted Acquisitions; provided
that Revolving Loans in an aggregate principal amount not to exceed
$25,000,000 may be used to redeem the 97/8% Subordinated Notes put by
the holders thereof as a result of a change of control arising from the
capital investment made by Brera Classic LLC in CCI.
(iii) any Letters of Credit shall be used for general
corporate purposes; and
(iv) the Term C Loans shall be used (A) for capital
expenditures, working capital and general corporate purposes, (B) to
fund Permitted Acquisitions and (C) to redeem the 97/8% Subordinated
Notes put by
<PAGE> 59
54
the holders thereof as a result of a change of control arising from the
capital investment made by Brera Classic LLC in CCI.
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, and (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.
(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) 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 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.
(c) Except for the documents executed in connection with the
Subordinated Indentures, 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, Inc., a Delaware corporation, or
one or more of its Subsidiaries.
<PAGE> 60
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5.12 Interest Rate Protection. The Borrower will, within 90 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 to be either (i) subject to a fixed interest rate pursuant to the
Subordinated Indentures 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 Lead Arranger and the Agent, in each case for a period of at
least two years measured from the Closing Date.
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.
5.14 Buford Television Partnership. The Borrower will use its best
efforts to cause the Buford Television Partnership to be liquidated as promptly
as practical after the Closing Date and to cause the shares of BTI held by the
Buford Television Partnership to be delivered in pledge to the Agent under the
terms of the Security Agreement, provided that such liquidation shall not be
required if doing so would result in adverse tax consequences to such
partnership or its partners.
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, 2000 7:00:1
July 1, 2000 to and including December 31, 2000 6.90:1
January 1, 2001 to and including December 31, 2001 6:75:1
January 1, 2002 to and including December 31, 2002 6:50:1
January 1, 2003 to and including December 31, 2003 6:00:1
January 1, 2004 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 June 30, 2000 4:50:1
July 1, 2000 to and including June 30, 2001 4:00:1
</TABLE>
<PAGE> 61
56
<TABLE>
<S> <C>
July 1, 2001 to and including December 31, 2002 3:75:1
January 1, 2003 and thereafter 3:25:1
</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, 2000 1:45:1
January 1, 2001 to and including December 31, 2001 1:55:1
January 1, 2002 to and including December 31, 2002 1:65:1
January 1, 2003 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
ending September 30, 2003, 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>
<CAPTION>
Period Ratio
------ ------
<S> <C>
Closing Date to and including December 31, 2000 1:15:1
January 1, 2001 to and including December 31, 2002 1:25:1
January 1, 2003 and thereafter 1:35:1
</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:
<TABLE>
<CAPTION>
Period Maximum Amount
- ------ --------------
<S> <C>
Closing Date to December 31, 1999 $ 25,000,000
Fiscal Year Ending December 31, 2000 $ 45,000,000
Fiscal Year Ending December 31, 2001 $ 45,000,000
Fiscal Year Ending December 31, 2002 $ 35,000,000
Each Fiscal Year thereafter $ 20,000,000
</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;
<PAGE> 62
57
(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, provided that such
Interest Rate Agreement is not entered into for speculative purposes but is
entered into, with respect to floating rate Indebtedness, to hedge against
fluctuations in interest rates;
(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 $2,500,000 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;
(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 $5,000,000 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
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
<PAGE> 63
58
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, assessments and governmental charges 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; and
(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).
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 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) the Borrower may consummate the BTI Acquisition;
(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
<PAGE> 64
59
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 $3,000,000 and (ii) CATV Systems, so long
as the aggregate fair market value of any CATV Systems disposed of under this
clause (ii) during any twelve-month period shall not exceed $5,000,000; provided
that in each case, (A) the Borrower makes the mandatory payment, if any,
required pursuant to Section 2.7(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) except for an Asset Disposition involving the exchange
of CATV Systems, 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 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 (i) 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 (ii) 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 may make Restricted Payments to the Borrower or to any other Wholly
Owned Subsidiary of the Borrower, (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 and (iii) the
Borrower may make Restricted Payments to CCI to pay administrative expenses and
taxes in an amount not to exceed $1,000,000 in any fiscal year; provided that in
each case (A) no Default has occurred and is continuing or would result from the
making of such Restricted Payment and (B) 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 Cash Equivalents;
(c) investments outstanding on the date hereof and identified in
Schedule 6.7;
(d) operating demand deposit accounts with banks established and
maintained in the ordinary course of business;
(e) investments by the Borrower and its Subsidiaries in the Borrower
and its Subsidiaries;
(f) Interest Rate Agreements;
<PAGE> 65
60
(g) investments not referred to in any other clause of this Section 6.7
up to but not exceeding $5,000,000 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
shall not exceed the sum of (x) $30,000,000 plus (y) an amount equal to
50% of the amount of Net Proceeds of any Equity Offering not used to
repay or prepay certain debt in accordance with Section 2.7(c)(i);
provided that, in the case of any Permitted Acquisitions in excess of
an aggregate of $30,000,000, the Total Debt Ratio of the Borrower
immediately after giving effect to such Permitted Acquisition shall not
be greater than the Total Debt Ratio of the Borrower immediately before
giving effect to such Permitted Acquisition; provided, further, that
not more than $10,000,000 aggregate purchase price of such Permitted
Acquisitions shall consist of Other Communications Businesses;
(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 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);
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61
(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) 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 substantially 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 Agent with
respect to such perfection and with respect to regulatory compliance of
the assets or entity to be acquired); and
(viii) 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 in any manner that would have a
Material Adverse Effect, (ii) the Tax Sharing Agreement or (iii) any agreement,
instrument or other document relating to the Subordinated Indebtedness
(including but not limited to the Subordinated Indentures) in any manner that
would have a Material Adverse Effect, 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 applicable Subordinated Indenture (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
applicable Subordinated Indenture, any other Default shall have occurred and be
continuing) and provided, further, that the Borrower may effect a refinancing of
Subordinated Indebtedness with new subordinated indebtedness of the Borrower so
long as (i) such refinancing is permitted under Section 6.2(h) and (ii) at the
time of such refinancing and after giving effect thereto no Default shall have
occurred and be continuing and provided, further, that the Borrower may redeem,
in part, the Subordinated Indebtedness with the proceeds of Equity Offerings in
the priority and to the extent set forth in Section 2.7 (c)(i) so long as both
immediately prior and after giving effect to any such redemption (i) the Maximum
Senior Debt Ratio is less than 3.5:1 and (ii) no Default shall have occurred and
be continuing.
(c) The Borrower shall not designate any Indebtedness as "Designated
Senior Indebtedness" (as defined in the applicable Subordinated Indenture) for
purposes of the Subordinated Indentures 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 giving at least 30 days
prior written notice to the Agent.
6.9 Transactions with Affiliates. Except as otherwise permitted under
Sections 6.6 or 6.12, 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
<PAGE> 67
62
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.
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 unless (a) before and after giving effect thereto no Default shall have
occurred and be continuing; and (b) the net cash proceeds of that sale and
leaseback transaction are at least equal to the fair market value, as determined
in good faith by the board of directors and set forth in an officer's
certificate delivered to the Agent, of the property that is the subject of that
sale and leaseback transaction.
6.12 Management Fees. The Borrower shall not, and shall not permit any
of its Subsidiaries to, incur any management fees for services rendered other
than management fees payable to Brera Classic LLC or any of its Affiliates in an
amount not to exceed $500,000 in any Fiscal Year.
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
so long as the Maximum Total Debt Ratio is greater than 6.00:1.0, at least 85%
and so long as the Maximum Total Debt Ratio is 6.00:1.0 or less, at least 75% 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.
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
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63
(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 $5,000,000 or
more, or in the payment when due of any amount under any 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 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 $5,000,000 or more, or involving in the aggregate a
liability (regardless of insurance coverage) of $10,000,000 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
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(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;
(ii) prior to a Qualified Public Offering, Brera Classic LLC
and its Affiliates (collectively, the "Brera Holders") shall cease to
own, 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 51% of the votes that may be cast
in an election of directors of CCI; provided, however, that if the
aggregate holdings of the Brera Holders represent less than 51% of such
votes solely as a result of the dilution of existing shareholders
generally through the issuance by CCI of additional equity in
connection with a corporate transaction effected after the Closing Date
and not involving the sale or other disposition of CCI capital stock by
the Brera Holders, then no default shall exist under this clause (ii)
so long as the aggregate holdings of the Brera Holders continue to
represent not less than 35% of such votes;
(iii) 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
(iv) 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 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
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(m) The Liens created by the 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
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) The Borrower or any Subsidiary shall fail to comply with the
subordination provisions of the Subordinated Indentures; or
(o) Except for a Subsidiary sold with the consent of the Majority
Lenders, 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 the Lead Arranger and the Syndication
Agent and Documentation Agent to act as its agent under and in accordance with
the terms of this Agreement. The obligations of the Lead Arranger 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 the Lead 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
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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, or the perfection or priority of any lien or security interest created or
purported to be created under or in connection with, 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 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.
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 such Facility Agent to any Lender. Each Lender
represents to each Facility Agent that it has, independently
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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 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, act as
trustee under indentures of, accept investment banking engagements from and
generally engage in any kind of business with the Borrower, any Subsidiary, the
other Obligors and any Person who may do business with or own securities of the
Borrower or any such Subsidiary or Obligor, all as though the Facility Agents
were not the Facility Agents hereunder and under the other Loan Documents and
without any duty to account therefor to the Lenders. 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
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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 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 the Guarantees may be 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 pursuant
to a public or private sale, the Agent or any Lender may be the purchaser of any
or all of such 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 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 2.6 or 2.7, 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, 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), 2.3(f),
2.4(f) or 2.13; 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 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 4.2 with respect to the making
of any Term C Loan, without the written consent of the Term C Lenders that are
to make such Term C Loan; or (iv) amend, modify or waive any provision of
Section 8 without the written consent of the Agent, Syndication Agent,
Documentation Agent or the Lead 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.
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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
or Assumption Agreement 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, 2.5, 2.6 or 2.8 shall not be effective
until received.
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 Lead Arranger and the Agent 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 the Lead Arranger, (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,
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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 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 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.
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 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
<PAGE> 76
71
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 thereof as provided in Section 9.7. The Borrower also agrees that each
Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17
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 Approved Funds or to any Lender, any Affiliate or Approved Fund
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 related to the Revolving Loans and the Term A
Loans under this Agreement, the Notes and the other Loan Documents and in the
case of an assignment of less than all of a Lender's Revolving Loans and Term A
Loans, the assigning Lender shall retain an aggregate principal amount of
Revolving Loans and Term A Loans of not less than $2,000,000, (ii) any such sale
must result in the Purchasing Lender having at least $2,000,000 in aggregate
amount of obligations related to the Term B Loans and in the case of an
assignment of less than all of a Lender's Term B Loans, the assigning Lender
shall retain an aggregate principal amount of Term B Loans of not less than
$2,000,000, (iii) any such sale must result in the Purchasing Lender having at
least $2,000,000 in aggregate amount of obligations related to the Term C Loans
and in the case of an assignment of less than all of a Lender's Term C Loans,
the assigning Lender shall retain an aggregate principal amount of Term C Loans
of not less than $2,000,000 and (iv) each such assignment by a Lender of its
Term A Loans, Term A Note, 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 Term A Loans, Term A Note, 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
Lender 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 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
<PAGE> 77
72
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 and each Assumption Agreement 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 of a registration and processing fee of $2,000 (except in the
case of a Lender assigning to its Affiliate or Approved Funds or to another
Lender and assignments made to or by Goldman Sachs Credit Partners L.P., in
which case the processing fee shall be $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, 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 provided that such Transferee or prospective Transferee agrees
to be bound by the terms of Section 9.15(b) hereof.
(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.
<PAGE> 78
73
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 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, 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.
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 LAW OF THE STATE OF
NEW YORK.
9.12 Acknowledgments. The Borrower hereby acknowledges that:
<PAGE> 79
74
(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 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 nonexclusive general
jurisdiction of the courts of the States of California and New York, the courts
of the United States of America for the Central District of California and the
Southern District of New York 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, New York 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.
<PAGE> 80
75
9.17 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 9.17, "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 2.7(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 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 Chapter 1D of the Texas Credit Title, as amended, are deemed
applicable to the determination of the Maximum Lawful Rate with respect to any
of the Loans, the weekly rate ceiling computed from time to time pursuant to
Article 1D.003 of such Chapter 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 this Section 9.17, 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.
<PAGE> 81
76
9.18 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.
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/ Steven E. Seach
------------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
AGENT
UNION BANK OF CALIFORNIA, N.A.,
as Agent
By: /s/ Peter C. Connoy
------------------------------------------
Name: Peter C. Connoy
Title: Vice President
LENDERS
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as a Lender
By: /s/ Doug Henderson
------------------------------------------
Name: Doug Henderson
Title: Managing Director
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
By: /s/ Peter C. Connoy
------------------------------------------
Name: Peter C. Connoy
Title: Vice President
<PAGE> 82
77
THE CHASE MANHATTAN BANK, as a Lender
By: /s/ Edmond DeForest
------------------------------------------
Name: Edmond DeForest
Title: Vice President
PARIBAS, as a Lender
By: /s/ Lynn S. Randall William B. Schink
------------------------------------------
Name: Lynn S. Randall William B. Schink
Title: Directors
MERCANTILE BANK NATIONAL ASSOCIATION,
as a Lender
By: /s/ Gregory D. Knudsen
------------------------------------------
Name: Gregory D. Knudsen
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION,
as a Lender
By: /s/ Steven J. McGehrin
------------------------------------------
Name: Steven J. McGehrin
Title: Vice President
SUNTRUST BANK, CENTRAL FLORIDA, N.A.,
as a Lender
By: /s/ Laura G. Harrison
------------------------------------------
Name: Laura G. Harrison
Title: Vice President
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as a Lender
By: /s/ J. E. Palmer
------------------------------------------
Name: J. E. Palmer
Title: Assistant Vice President
<PAGE> 83
78
HELLER FINANCIAL, INC., as a Lender
By: /s/ Sheila C. Weiner
------------------------------------------
Name: Sheila C. Weiner
Title: Vice President
NATEXIS BANQUE BFCE, as a Lender
By: /s/ Cynthia E. Sachs Frank H. Madden, Jr.
------------------------------------------
Name: Cynthia E. Sach Frank H. Madden, Jr.
Title: Vice Presidents and Group Managers
SUMMIT BANK, as a Lender
By: /s/ Michael P. Thomson
------------------------------------------
Name: Michael P. Thomson
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION,
as a Lender
By: /s/ Andy McDonald
------------------------------------------
Name: Andy McDonald
Title: Senior Vice President
<PAGE> 84
79
SCHEDULE 2.1
PART A
COMMITMENTS
<TABLE>
<CAPTION>
Revolving Loan Term A Term B
Lender Commitment Commitment Commitment
------ ---------- ---------- ----------
<S> <C> <C> <C>
Goldman Sachs Credit Partners L.P. $ $ $
Union Bank of California, N.A. $ $ $
The Chase Manhattan Bank $ $ $
Banque Paribas $ $ $
</TABLE>
<PAGE> 1
[GOLDMAN SACHS CREDIT PARTNERS L.P. LETTERHEAD]
PERSONAL AND CONFIDENTIAL
June 24, 1999
Classic Cable, Inc.
515 Congress Avenue, Suite 2626
Austin, Texas 78701
Attention: Steven E. Seach
Classic Cable, Inc.
Ladies and Gentlemen:
Reference is hereby made to the commitment letter dated the date hereof
(together with Annex A and Annex B attached thereto, the "Facilities Commitment
Letter") from Goldman Sachs Capital Partners L.P. ("GSCP") to Classic Cable,
Inc. (the "Company"). This letter confirms the arrangements under which GSCP is
exclusively authorized by the Company to act as sole Lead Arranger and sole
Syndication Agent, and GSCP commits to provide all of the requested $100
million under a short term single-draw facility (the "Backstop Facility") to be
used by the Company for the sole purpose of redeeming the 9 7/8% Senior
Subordinated Notes due August 1, 2008 of the Company put by the existing
bondholders as a result of the change of control provisions in the indenture
related to such Senior Subordinated Notes triggered by the acquisition of
Buford Television, Inc. ("BTI").
GSCP is pleased to confirm its commitment to act as sole Lead Arranger to
provide the Company with structuring advice in connection with the Backstop
Facility and as sole Syndication Agent to provide the Company with syndication
advice in connection with the Backstop Facility and to provide the Company, for
the period beginning the date of the closing of the Facilities described in the
Facilities Commitment Letter and ending on the earlier of (x) the 45th day
thereafter and (y) the date upon which the redemption payment is required to be
made, $100 million for the Backstop Facility, in each case on the terms and
subject to the conditions contained in this Commitment Letter. Our
<PAGE> 2
2
fees for such services are set forth in a separate fee letter (the "Backstop
Fee Letter") entered into by the Company and GSCP on the date hereof.
GSCP's commitment is subject, in its discretion, to the condition that the
Facilities described in the Facilities Commitment Letter are closed in
accordance with the terms set forth in the Facilities Commitment Letter,
including, without limitation (i) there shall not have been, since the date of
the most recent audited financial statements furnished by the Company to GSCP,
any material change in the capital stock or long-term debt of the Company and
its subsidiaries or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the business, financial
position or results of operations of the Company and its subsidiaries taken as
a whole, and (ii) there shall not have been any material disruption or adverse
change in the financial or capital markets generally, or in the market for loan
syndications in particular. GSCP's commitment is also subject, in its
discretion, to the satisfactory negotiation, execution and delivery of
appropriate loan documents relating to the Facilities described in the
Facilities Commitment Letter, including, without limitation, a credit
agreement, guaranties, security agreements, pledge agreements, real property
mortgages, opinions of counsel and other related definitive documents
(collectively, the "Loan Documents") to be based upon and substantially
consistent with the terms set forth in the Facilities Commitment Letter and
this Commitment Letter.
The Backstop Facility shall be deemed, until the expiration of GSCP's
commitment therefor, to be a usage of the Incremental Facility described in
Annex B to the Facilities Commitment Letter. The interest rates (subject to the
next succeeding paragraph) and the amortization of the Backstop Facility, if
drawn, shall be identical to those applicable to the Term Loan B Facility, and
shall be deemed to be available under the terms and conditions that are
applicable to the Term Loan B Facility. Upon the expiration of GSCP's
commitment for the Backstop Facility, the Incremental Facility described in the
Facilities Commitment Letter shall be deemed uncommitted and unused to the
extent that the Backstop Facility was undrawn. The Backstop Facility, if drawn,
shall be governed by the Loan Documents described in the Facilities Commitment
Letter.
GSCP intends and reserves the sole right, after consultation with the Company,
to syndicate the Backstop Facility to the Lenders (as defined in Annex B
included in the Facilities Commitment Letter) and the commitment of GSCP
hereunder shall be reduced as and when corresponding commitments are received
from the Lenders. GSCP shall select the Lenders with the Company's consent, not
to be unreasonably withheld. GSCP will lead the syndication, including
determining the timing of all offers to potential Lenders, any title of agent
or similar designations awarded to any Lender and the acceptance of
commitments, the amounts offered and the compensation provided to each Lender
from the amounts to be paid to GSCP pursuant to the terms of this Commitment
Letter and the Backstop Fee Letter. GSCP will determine the final commitment
allocations and will notify the Company of such determinations. To ensure an
orderly and effective syndication of the Backstop Facility, you agree that,
until the termination of the syndication as determined by GSCP, you will not,
and will not permit any of your affiliates to, syndicate or issue, attempt to
syndicate or issue, announce or authorize the announcement of the syndication
or issuance of, or engage in discussions concerning
<PAGE> 3
3
the syndication or issuance of, any debt facility or debt security of Company
or any of its subsidiaries (other than the Facilities and the Subordinated Debt
described in the Facilities Commitment Letter and other indebtedness
contemplated hereby and thereby), including any renewals or refinancings of any
existing debt facility or debt security, without the prior written consent of
GSCP. You also agree that only GSCP shall be entitled, but not obligated, after
consultation with you, to change the terms, conditions, pricing and/or
structure of the Backstop Facility if GSCP determines in its sole discretion
that such changes are advisable to insure the successful syndication of the
Backstop Facility; provided that the total amount of the Backstop Facility
remains unchanged.
The Company agrees to reasonably cooperate with GSCP in connection with (i) the
preparation of an information package regarding the business, operations and
prospects of the Company, including, without limitation, the delivery of all
information relating to the transactions contemplated hereunder prepared by or
on behalf of the Company deemed reasonably necessary by GSCP to complete the
syndication of the Backstop Facility and (ii) the presentation of such
information package in bank meetings and other communications with prospective
Lenders in connection with the syndication of the Backstop Facility. The
Company acknowledges that GSCP will be using and relying upon the information
contained in such information package and presentation without independent
verification thereof. In addition, the Company represents and covenants that
all information provided directly or indirectly by the Company to GSCP or the
Lenders in connection with the transactions contemplated hereunder other than
the Projections (as defined below) does not and will not, as of the date
furnished, contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained therein not misleading
and that all financial projections (the "Projections") concerning the Company
and BTI and their respective subsidiaries that have been or are hereafter made
available to GSCP or the Lenders by the Company or any of its representatives
(or on its or their behalf) have been or will be prepared in good faith based
upon reasonable assumptions, it being understood that no assurances are being
given that the results forecasted in the Projections will be achieved.
In connection with arrangements such as this, it is our firm policy to receive
indemnification. The Company agrees to the provisions with respect to our
indemnity and other matters set forth in Annex A which is incorporated by
reference into this Commitment Letter.
Please note that this Commitment Letter, the Backstop Fee Letter and any
written or oral advice provided by GSCP in connection with this arrangement is
exclusively for the information of the Board of Directors and senior management
of the Company and may not be disclosed to any third party or circulated or
referred to publicly without our prior written consent (which consent, with
respect to the Commitment Letter only, shall not be unreasonably withheld),
except, after providing written notice to GSCP, pursuant to a subpoena or order
issued by a court of competent jurisdiction or by a judicial, administrative or
legislative body or committee. In addition, we hereby consent to your
disclosure of (a) such advice to your officers, directors, agents and advisors
who are directly involved in the consideration of the Backstop Facility to the
extent such persons are obligated to hold such advice in confidence, and (b)
upon your acceptance of this Commitment Letter, this Commitment
<PAGE> 4
4
Letter or the information contained therein to BTI and its attorneys and
advisors to the extent you notify such persons of their obligations to keep
such material confidential. Further, following your acceptance of this
Commitment Letter (i) you may make public disclosure of the existence and
amount of GSCP's commitments hereunder and of GSCP's identity as sole lead
arranger and syndication agent, (ii) you may file a copy of this Commitment
Letter in any public record in which it is required by law to be filed, (iii)
you may make such other public disclosures of the terms and conditions hereof
as you are required by law, in the opinion of your counsel, to make and (iv)
you may disclose Annex B hereto as you deem reasonably necessary in connection
with the transactions contemplated hereby (but not in any discussions with
other senior lenders that are not Lenders (as defined in Annex B)).
As you know, GSCP may from time to time effect transactions, for its own
account or the account of customers, and hold positions in loans or options on
loans of the Company and other companies that may be the subject of this
arrangement. In addition, Goldman, Sachs & Co. is a full service securities
firm and as such may from time to time effect transactions, for its own account
or the account of customers, and hold positions in securities or options on
securities of the Company and other companies that may be the subject of this
arrangement. In addition, GSCP may employ the services of its affiliates in
providing certain services hereunder and may exchange with such affiliates
information concerning the Company and other companies that may be the subject
of this arrangement, and such affiliates shall be entitled to the benefits
afforded to GSCP hereunder.
GSCP's commitment hereunder shall terminate on August 15, 1999 unless the
closing of the Facilities described in the Facilities Commitment Letter shall
have been consummated. This Commitment Letter and the Backstop Fee Letter may
be executed in counterparts which, taken together, shall constitute an
original. Delivery of an executed counterpart of this Commitment Letter or the
Backstop Fee Letter by telecopier shall be effective as delivery of a manually
executed counterpart thereof.
Please confirm that the foregoing is in accordance with your understanding by
signing and returning to GSCP the enclosed copy of this Commitment Letter,
together, if not previously executed and delivered, with the Backstop Fee
Letter, on or before the close of business on June 24, 1999, whereupon this
Commitment Letter and the Backstop Fee Letter shall become binding agreements
between us. If the Commitment Letter and the Backstop Fee Letter are not signed
and returned as described in the preceding sentence by such date, this offer
will terminate on such date. We look forward to working with you on this
assignment.
<PAGE> 5
5
Very truly yours,
GOLDMAN SACHS CREDIT PARTNERS L.P.
By: /s/ JOSEF H. NORFLUS
-----------------------------------
Authorized Signatory
ACCEPTED as of the date above:
CLASSIC CABLE, INC.
By: /s/ STEVEN E. SEACH
--------------------------
Name: Steven E. Seach
Title: President and Chief Financial
Officer
<PAGE> 6
Annex A
In the event that GSCP becomes involved in any capacity in any action,
proceeding or investigation brought by or against any person, including
stockholders of the Company, in connection with or as a result of either this
arrangement or any matter referred to in this Commitment Letter or the Fee
Letter (together, the "Letters"), the Company will reimburse GSCP for its
reasonable legal and other reasonable expenses (including the cost of any
investigation and preparation) incurred in connection therewith. The Company
also will indemnify and hold GSCP harmless against any and all losses, claims,
damages or liabilities to any such person in connection with or as a result of
either this arrangement or any matter referred to in the Letters and without
regard to the exclusive or contributory negligence of GSCP, except to the
extent that any such loss, claim, damage or liability results from the gross
negligence, willful misconduct or bad faith of GSCP in performing the services
that are the subject of the Letters. If for any reason the foregoing
indemnification is unavailable to GSCP or insufficient to hold it harmless,
then the Company shall contribute to the amount paid or payable by GSCP as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative economic interests of the Company, and its
stockholders on the one hand and GSCP on the other hand in the matters
contemplated by the Letters as well as the relative fault of the Company and
GSCP with respect to such loss, claim, damage or liability and any other
relevant equitable considerations. The reimbursement, indemnity and
contribution obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any affiliate of GSCP and the partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of GSCP and any such affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, GSCP, any such affiliate and any such person. The Company also agrees
that neither GSCP nor any of such affiliates, partners, directors, agents,
employees or controlling persons shall have any liability based on its or their
exclusive contributory negligence or otherwise to the Company, any person
asserting claims on behalf of or in right of the Company or any other person in
connection with or as a result of either this arrangement or any matter
referred to in the Letters except to the extent that any losses, claims,
damages, liabilities or expenses incurred by the Company result from the gross
negligence, willful misconduct or bad faith of GSCP in performing the services
that are the subject of the Letters; provided, however, that in no event shall
such Indemnified Party or such other parties have any liability for any
indirect, consequential or punitive damages. Any right to trial by jury with
respect to any action or proceeding arising in connection with or as a result
of either this arrangement or any matter referred to in the Letters is hereby
waived by the parties hereto. The Company agrees that, to the extent permitted
by law, any suit or proceeding arising in respect to this agreement or our
engagement will be tried exclusively in the U.S. District Court for the
Southern District of New York or, if that court does not have subject matter
jurisdiction, in any state court located in the City of New York and the
Company agrees to submit to the jurisdiction of, and to venue in, such courts.
The provisions of this Annex A shall survive any termination or completion of
the arrangement provided by the Letters, and this Commitment Letter shall be
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of laws.
<PAGE> 1
STOCKHOLDERS' AGREEMENT
dated as of July 28, 1999
among
CLASSIC COMMUNICATIONS, INC.,
BRERA CLASSIC, LLC,
and
the additional parties named herein.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Definitions.....................................................................................2
2. Restrictions On Transfer........................................................................9
2.1 General Restrictions.......................................................................9
2.2 Permitted Transfers........................................................................9
2.3 Put Rights................................................................................12
3. Other Transfers................................................................................13
3.1 Sale of the Company; Take-Along Rights....................................................13
3.2 Initial Public Offering...................................................................14
3.3 Involuntary Transfers.....................................................................14
4. Preemptive Purchase Rights.....................................................................15
4.1 Preemptive Rights.........................................................................15
4.2 Notice of Sale............................................................................16
5. Election of Directors and Related Matters......................................................16
5.1 Board Voting..............................................................................16
5.2 Chairmen..................................................................................17
5.3 Removal...................................................................................17
5.4 Vacancy...................................................................................18
5.5 Observer Rights...........................................................................18
5.6 Transaction Fees..........................................................................18
6. Miscellaneous..................................................................................18
6.1 Stock Certificate Legend..................................................................18
6.2 Financial Information.....................................................................20
6.3 Confidentiality...........................................................................22
6.4 Additional Stockholders...................................................................23
6.5 Successors and Assigns....................................................................23
6.6 Specific Performance......................................................................23
6.7 Entire Agreement; Amendment...............................................................23
6.8 Expenses and Attorneys' Fees..............................................................24
6.9 Term......................................................................................24
6.10 Notices..................................................................................24
6.11 Severability.............................................................................25
6.12 Headings.................................................................................25
6.13 Counterparts.............................................................................25
6.14 Representations and Warranties...........................................................26
6.15 Governing Law............................................................................26
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
6.16 Consent to Jurisdiction and Service of Process;
Appointment of Agent for Service of Process...........................................26
6.17 Waiver of Jury Trial.....................................................................27
</TABLE>
-ii-
<PAGE> 4
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (this "Agreement"), dated as of
July __, 1999, is by and among Classic Communications, Inc., a Delaware
corporation (the "Company"), Brera Classic, LLC, a Delaware limited liability
company ("Brera"), J. Merritt Belisle ("Belisle"), Steven E. Seach ("Seach") and
Bryan D. Noteboom ("Noteboom") (Belisle, Seach and Noteboom are collectively
known as "Management Stockholders" and individually as a "Management
Stockholder"), 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 III-A, and Austin III-B are collectively referred to as "Austin
Ventures"), Texas Growth Fund, a trust fund created by the Constitution of the
State of Texas ("Growth Fund"), and BA SBIC Management, L.L.C., successor in
interest to NationsBanc Capital Corp., a Texas Corporation ("BA SBIC"), (Austin,
Austin III-A, Austin III-B, Union Bancal, Growth Fund, BT Capital, and BA SBIC
are collectively referred to as the "Investors" and individually as an
"Investor") and other Persons who become parties to this Agreement pursuant to
Section 2.2. The parties (other than the Company) and any Person who hereafter
acquires shares of Equity Securities (as defined herein) pursuant to the
provisions of, and subject to the restrictions and rights set forth in, this
Agreement, shall sometimes hereinafter be referred to individually as a
"Stockholder" and collectively as the "Stockholders." Capitalized terms not
otherwise defined herein will have the meanings given them in that certain
Investment Agreement, dated as of May 24, 1999 (the "Investment Agreement), by
and between Brera and the Company.
RECITALS
A. Pursuant to the terms of the Investment Agreement and
simultaneously with the execution of this Agreement, Brera is purchasing from
the Company shares of Common Stock.
B. The execution and delivery of this Agreement by the
parties are conditions to the purchase of the Common Stock by Brera pursuant to
the Investment Agreement.
1
<PAGE> 5
C. Prior to the closing of the transactions contemplated by
the Investment Agreement (the "Closing"), the Stockholders (excluding Brera)
constitute the record and beneficial owners of the capital stock and rights to
acquire capital stock of the Company as of the date hereof, as set forth on
Schedule A attached hereto;
D. On the date hereof, the Stockholders and the Company have
entered into a Registration Rights Agreement with respect to the Common Stock
(the "Registration Rights Agreement").
E. This Agreement supercedes each of the following: (i) that
certain Amended Registration Rights Agreement, dated as of October 31, 1995,
among the Company and certain stockholders, and (ii) that certain Amended
Shareholders Agreement, dated as of October 31, 1995, among the Company and
certain stockholders.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and for other good and valuable consideration, the receipt of
and sufficiency of which is hereby acknowledged, the parties hereto hereby agree
that:
AGREEMENT
1. Definitions
When used in this Agreement, the following terms shall have
the meanings specified:
1.1 "Additional Party Signature Page" means a signature page
substantially in the form attached hereto as Exhibit A.
1.2 "Additional Securities" has the meaning set forth in
Section 2.2(b)(ii).
1.3 "Affiliate" as applied to any Person, means any other
Person directly or indirectly controlling, controlled by or under common control
with that Person. The term "control" (including, with correlative meanings, the
terms "controlling," "controlled by" and "under common control with"), as
applied to any Person, means the possession, directly or indirectly, of power to
direct the management and policies of that Person, whether through voting power,
by contract or otherwise.
2
<PAGE> 6
1.4 "Agreement" has the meaning set forth in the preamble
hereto.
1.5 "Appraised Value" means the value determined in accordance
with the following procedures. During the Negotiation Period, the Company and
the Stockholder agree to negotiate in good faith to reach agreement upon the
Appraised Value of the Equity Securities or other securities or property at
issue, as of the date of the Valuation Event, which will be the fair market
value of such securities or property, without premium for control or discount
for minority interests, illiquidity, or restrictions on transfer. In the event
that the Company and the Stockholder are unable to agree upon the Appraised
Value of the Equity Securities or such other securities or other property by the
end of the Negotiation Period, then the Appraised Value of the Equity Securities
or such other securities or property will be determined for purposes of this
Agreement by a recognized appraisal or investment banking firm mutually
agreeable to the Stockholder and the Company (the "Appraiser"). If the
Stockholder and the Company cannot agree on an Appraiser within fifteen (15)
days after the end of the Negotiation Period, the Company, on the one hand, and
the Stockholder, on the other hand, will each select an appraiser within
twenty-one (21) days after the end of the Negotiation Period and those two
appraisers will select within twenty-five (25) days after the end of the
Negotiation Period an independent Appraiser to determine the fair market value
of such securities or property, without premium for control or discount for
minority interests, illiquidity, or restrictions on transfer. Such independent
Appraiser will be directed to determine fair market value of such securities or
property as soon as practicable, but in no event later than thirty (30) days
from the date of its selection. The determination by an Appraiser of the fair
market value will be conclusive and binding on the Company and the Stockholder.
Appraised Value of each share of Common Stock at a time when (i) the Company is
not a reporting company under the Exchange Act and (ii) the Common Stock is not
traded in the organized securities markets, will, in all cases, be calculated by
determining the Appraised Value of the entire Company taken as a whole and
dividing that value by the sum of (x) the number of shares of Common Stock then
outstanding plus (y) the number of shares of Common Stock underlying the Common
Stock Equivalents, without premium for control or discount for minority
interests, illiquidity, or restrictions on transfer. In the event the Appraised
Value of the Equity Securities or such other securities or property for any
purpose exceeds the Fair Market Value of such securities or property determined
by the Board of Directors of the Company by an amount in excess of ten percent
(10%) of such Fair Market Value, the costs of the Appraiser will be borne by the
Company; otherwise, the costs of the Appraiser will be borne on a Pro Rata Basis
by the Stockholders demanding the Appraisal. In no event will the Appraised
Value of the Equity Securities be more or less than the per share consideration
received or receivable with respect to the Equity
3
<PAGE> 7
Securities or other securities or property of the same class as the Equity
Securities, as the case may be, in connection with a pending transaction
involving a sale, merger, recapitalization, reorganization, consolidation, or
share exchange, dissolution of the Company, sale or transfer of all or a
majority of its assets or revenue or income generating capacity, or similar
transaction. The Appraiser will give due consideration to the prevailing market
prices for the Equity Securities or any other security or property, but the
prevailing market prices for the Equity Securities or any other security or
property will not be dispositive of the Appraised Value thereof.
1.6 "Appraiser" has the meaning set forth in the definition of
Appraised Value.
1.7 "Approved Sale" has the meaning set forth in Section
3.1(a).
1.8 "Authorization Date" has the meaning set forth in Section
2.2(b).
1.9 "beneficial ownership" and "beneficially own" have the
meanings set forth in the Investment Agreement.
1.10 "Belisle" means J. Merritt Belisle.
1.11 "Board" means the Board of Directors of the Company.
1.12 "Brera" means Brera Classic, LLC, a Delaware limited
liability company.
1.13 "Brera Director" has the meaning set forth in Section
5.1(a)(i).
1.14 "Bylaws" means the Bylaws of the Company, as amended or
restated from time to time.
1.15 "Certificate of Incorporation" means the Company's
Amended and Restated Certificate of Incorporation, as amended or restated from
time to time.
1.16 "Class I Director" has the meaning set forth in Section
5.1(b)(i).
1.17 "Class II Director" has the meaning set forth in Section
5.1(b)(ii).
4
<PAGE> 8
1.18 "Class III Director" has the meaning set forth in Section
5.1(b)(iii).
1.19 "Closing" has the meaning set forth in the recitals
hereto.
1.20 "Come-Along Notice" has the meaning set forth in Section
2.2(b)(ii).
1.21 "Come-Along Rights" has the meaning set forth in Section
2.2(b)(ii).
1.22 "Come-Along Securities" has the meaning set forth in
Section 2.2(b)(ii).
1.23 "Common Stock" means the Voting Common Stock and
non-voting Common Stock, par value $0.01 per share, of the Company.
1.24 "Common Stock Equivalent" means any option, warrant,
right, or similar security or right exercisable into, exchangeable for, or
convertible to Common Stock.
1.25 "Company" means Classic Communications, Inc., a Delaware
corporation, and its successors and assigns.
1.26 "Current Investor Director" means _________________ for
so long as he serves as a director of the Company pursuant to Section 5.1 or his
replacement selected pursuant to Section 5.4.
1.27 "Electing Stockholder" has the meaning set forth in
Section 2.2(b)(ii).
1.28 "Election Period" has the meaning set forth in Section
2.2(b).
1.29 "Equity Security Equivalent" means any option, warrant,
right, or similar security or right exercisable into, exchangeable for, or
convertible to Equity Securities, including, without limitation, Common Stock
Equivalents.
1.30 "Equity Securities" means any class of capital stock of
the Company and all securities convertible into or rights to purchase capital
stock of the Company, if any, including any warrants and options and any and all
other equity
5
<PAGE> 9
securities of the Company or securities convertible into or exchangeable for
such securities or issued as a distribution with respect to or in exchange for
such securities.
1.31 "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
1.32 "Fair Market Value" means:
(a) as to securities regularly traded in the
organized securities markets, the Market Value; and
(b) As to all securities (including the Equity
Securities) not regularly traded in the securities markets and other property,
the fair market value of such securities or property as determined in good faith
by the Board at the time of the transaction (a "Valuation Event") requiring a
determination of Fair Market Value under this Agreement. If a Stockholder and
the Company cannot agree upon the Fair Market Value of the Equity Securities or
other securities or property to be purchased, such Fair Market Value will be
determined as set forth below. For a period of 30 days after the date of a
Valuation Event (the "Negotiation Period"), the Stockholder and the Company
agree to negotiate in good faith to reach agreement upon the Fair Market Value
of the Equity Securities or such other securities or property, as of the date of
the Valuation Event. In the event that the parties are unable to agree upon the
Fair Market Value of the Equity Securities or such other securities or other
property by the end of the Negotiation Period, then the Fair Market Value of the
Equity Securities or such other securities or property will be the Appraised
Value. Notwithstanding any other provisions of this Agreement, the time for any
closing of any transaction as to which Appraised Value is relevant or to which
the foregoing Negotiation Period applies will be extended until the thirtieth
(30th) day following determination of Fair Market Value under this Agreement.
1.33 "Fully Diluted Basis" means all outstanding shares of
Equity Securities plus all shares of Equity Securities issuable upon any the
conversion of any other securities of the Company (including the exercise of any
warrants).
1.34 "GAAP" means United States generally accepted accounting
principles, consistently applied.
1.35 "Individual Stockholder" means each natural Person owning
Equity Securities on the date hereof and such other officers and employees of
the Company that may acquire Equity Securities and become parties to this
Agreement.
6
<PAGE> 10
1.36 "Initial Public Offering" means a registered offering of
Common Stock that results in net proceeds to the Company of at least $100
million and listing of the Common Stock on a national securities exchange or
Nasdaq.
1.37 "Investment Agreement" has the meaning set forth in the
preamble hereto.
1.38 "Investor Director" has the meaning set forth in Section
5.1(a)(ii).
1.39 "Investor Majority" has the meaning set forth in Section
5.3.
1.40 "Management Stockholder" or "Management Stockholders" has
the meaning set forth in the preamble hereto.
1.41 "Market Value" as of a certain date means, per share of
common stock:
(a) the average of the last sale prices, regular
way, on the 20 consecutive business days immediately preceding such date or, if
there shall have been no sale on any such day, the average of the closing bid
and asked prices on such date, in each case as officially reported on the
principal national securities exchange on which such common stock is at the time
listed or admitted to trading, or
(b) if such common stock is not then listed or
admitted to trading on any national securities exchange, but is designated as a
national market system security by the NASD, the average of the reported closing
bid and asked prices on such 20 days as shown by the NASD automated quotation
system.
1.42 "NASD" means The National Association of Securities
Dealers, Inc.
1.43 "Nasdaq" means The Nasdaq Stock Market's National Market.
1.44 "Negotiation Period" has the meaning set forth in the
definition of Fair Market Value.
1.45 "Offered Securities" has the meaning set forth in Section
2.2(b).
1.46 "Offered Shares" has the meaning set forth in Section
3.3.
7
<PAGE> 11
1.47 "Other Stockholders" has the meaning set forth in Section
2.2(b).
1.48 "Person" means any natural person, corporation, firm,
joint venture, limited liability company, partnership, trust, unincorporated
organization, government or any department or agency of government or any other
entity.
1.49 "Pro Rata Basis" among any specified group of
Stockholders means the proportion of (x) the number of shares of Equity
Securities then owned by, and issuable to (assuming exercise of all Equity
Security Equivalents) an individual Stockholder of such group, to (y) the number
of shares of Equity Securities then owned by, and issuable to (assuming exercise
of all Equity Security Equivalents) all the Stockholders of such group.
1.50 "Representatives" has the meaning set forth in the
Investment Agreement.
1.51 "Sale Notice" has the meaning set forth in Section
2.2(b).
1.52 "Seach" means Steven E. Seach.
1.53 "SEC" means the Securities and Exchange Commission.
1.54 "Securities Act" means the Securities Act of 1933, as
amended.
1.55 "Stock Incentive Plan" has the meaning set forth in
Section 6.4.
1.56 "Stockholder" or "Stockholders" has the meaning set forth
in the preamble hereto.
1.57 "Subsidiary" has the meaning set forth in the Investment
Agreement.
1.58 "Transfer" has the meaning set forth in Section 2.1.
1.59 "Transfer Notice" has the meaning set forth in Section
2.2(a).
1.60 "Transferring Stockholder" has the meaning set forth in
Section 2.2(b).
8
<PAGE> 12
1.61 "Valuation Event" has the meaning set forth in the
definition of Fair Market Value.
2. Restrictions On Transfer
2.1 General Restrictions. Except to the extent otherwise
specifically provided herein and in accordance with the terms and provisions of
this Agreement, no Stockholder will sell, assign, pledge, hypothecate, make
gifts of or in any manner whatsoever dispose of or encumber (any such transfer
or disposition being hereinafter referred to as a "Transfer") any shares of
Equity Securities now owned or hereafter acquired by such Stockholder. Any
purported Transfer in violation of this Agreement shall be null and void and of
no force and effect. No Stockholder may Transfer Equity Securities to any Person
that is a competitor of the Company, unless such Transfer is in connection with
an Approved Sale pursuant to Section 3.1.
2.2 Permitted Transfers. Notwithstanding Section 2.1 of this
Agreement:
(a) Stockholder Transfers. The restrictions
contained in Section 2.1 will not apply with respect to a Transfer of shares of
Equity Securities (i) pursuant to applicable laws of descent and distribution,
(ii) to a wholly-owned Affiliate of an Investor which is not a portfolio company
which engages in any business that competes with any business of the Company at
the time of transfer or (iii) among the Individual Stockholder's family group;
provided that the restrictions contained in Section 2.1 will continue to be
applicable to the Equity Securities after any such Transfer, and the transferees
of such Equity Securities must agree in writing to be bound by the provisions of
this Agreement prior to any such transfer. The Individual Stockholder's "family
group" means the Individual Stockholder's spouse and direct lineal descendants
(whether natural or adopted) and any trust solely for the benefit of the
Individual Stockholder and/or the Individual Stockholder's spouse and/or direct
lineal descendants. At least 30 days prior to making any transfer of Equity
Securities pursuant to this Section 2.2(a), the Individual Stockholder will
deliver a written notice (the "Transfer Notice") to the Company. The Transfer
Notice will disclose in reasonable detail the identity of the prospective
transferee(s) and the terms and conditions of the proposed transfer.
(b) Right of First Offer; Come-Along Rights. Subject
to Section 2.2(c) below, each Stockholder may Transfer any Equity Securities
pursuant to the provisions of this Section 2.2(b). Prior to making any Transfer
pursuant to this
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Section 2.2(b), a Stockholder (the "Transferring Stockholder") shall deliver
written notice (the "Sale Notice") to the Company and the other Stockholders
(the "Other Stockholders"). The Sale Notice shall disclose in reasonable detail
the amount of Equity Securities proposed to be Transferred (the "Offered
Securities") and the terms and conditions of the proposed Transfer. A
Stockholder shall not consummate any Transfer until twenty (20) days after the
Sale Notice has been delivered to the Company and each Other Stockholder (the
"Election Period"), unless the parties to the Transfer have been finally
determined pursuant to this Section 2.2(b) prior to the expiration of the
Election Period. The date of the first to occur of such events is referred to
herein as the "Authorization Date."
(i) Right of First Offer. The Company may elect to
purchase all, but not less than all, of the Offered Securities which are the
subject of the Sale Notice delivered by any Stockholder upon the same terms and
conditions as described in the Sale Notice by delivering a written notice of
such election to such Transferring Stockholder within twenty (20) days after the
Sale Notice has been delivered to the Company. If the Company has not elected to
purchase all of the Offered Securities which are the subject of such Sale
Notice, the Other Stockholders may, in the aggregate, elect to purchase all, but
not less than all, of the Offered Securities which are the subject of such Sale
Notice delivered by any Stockholder upon the same terms and conditions as
described in the Sale Notice by delivering a written notice of such election to
the Transferring Stockholder within twenty (20) days after the Sale Notice has
been delivered to the Other Stockholders. If more than one Other Stockholder
elects to purchase the Offered Securities, the Offered Securities shall be
allocated among the Other Stockholders so electing on a Pro Rata Basis. If
neither the Company nor the Other Stockholders elect to purchase all of the
Offered Securities specified in the Sale Notice, the Transferring Stockholder
will have (y) ninety (90) days after the Authorization Date to draft, execute
and deliver definitive documentation to Transfer such Offered Securities,
subject to the provisions of Section 2.2(b)(ii) below, on terms and conditions
no more favorable to the transferee than those proposed in the Sale Notice and
(z) if such documentation is so drafted, executed and delivered, sixty (60) days
thereafter to consummate the Transfer. Any such Offered Securities not so
Transferred by the Transferring Stockholder during such 150 day period will
again be subject to the provisions of this Section 2.2(b) upon subsequent
Transfer. If the Company or any Other Stockholder has elected to purchase
Offered Securities hereunder, the Transfer of such Offered Securities shall be
consummated as soon as practical after the delivery of the election notice(s) to
the Transferring Stockholder, but in any event within thirty (30) days after the
expiration of the Election Period. The Company or the Other Stockholders shall
pay for such Offered Securities by delivery of a check or wire transfer of funds
in the aggregate
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amount of the purchase price for such Offered Securities. The purchasers of
Offered Securities under this Section 2.2(b)(i) shall be entitled to receive
customary representations and warranties from the Transferring Stockholder
regarding the ownership and title of such Offered Securities. The right of first
offer granted pursuant to this Section 2.2(b)(i) and the requirements of this
Section 2.2(b)(i) shall terminate upon the date of the closing of an Initial
Public Offering, and the Stockholders will have no rights of first offer in
connection with the sale of Equity Securities in such public offering.
(ii) Come-Along Rights. Any Other Stockholder shall
be entitled to participate in any proposed Transfer (other than a Transfer to
the Company) by any Transferring Stockholder pursuant to Section 2.2(b) (a
"Come-Along Right"). Each of the Other Stockholders shall be entitled, within
twenty (20) days of the delivery of the Sale Notice to the Other Stockholders,
to give written notice (the "Come-Along Notice") to the Transferring Stockholder
that such Other Stockholder desires to participate in such proposed Transfer
upon the price, terms and conditions set forth in the Sale Notice or as
otherwise agreed to by such Transferring Stockholder, which Come-Along Notice
shall specify the number of shares of Equity Securities such Other Stockholder
desires to include in such proposed Transfer. If one or more Other Stockholders
elects to exercise its Come-Along Rights by timely delivering a Come-Along
Notice (each, an "Electing Stockholder"), each Electing Stockholder shall be
entitled, subject to the remainder of this Section 2.2(b)(ii), to include in
such proposed Transfer the number of shares of Equity Securities (as to each
Electing Stockholder, the "Come-Along Securities" and, as to all Electing
Stockholders collectively, the "Additional Securities") equal to the lesser of
(A) the maximum amount specified by such Electing Stockholder in its Come-Along
Notice to the Transferring Stockholder and (B) the amount determined by
multiplying the number of shares of Equity Securities owned by such Electing
Stockholder by a fraction, the numerator of which is the number of shares of
Offered Securities, and the denominator of which is the number of shares of
Equity Securities owned by the Transferring Stockholder (assuming exercise of
all convertible securities, options and warrants held by the Transferring
Stockholder. If none of the Other Stockholders gives the Transferring
Stockholder a timely Come-Along Notice with respect to the Transfer proposed in
the Sale Notice, then the Transferring Stockholder will have (y) ninety (90)
days after the Authorization Date to draft, execute and deliver definitive
documentation to Transfer such Offered Securities on terms and conditions no
more favorable to the transferee than those proposed in the Sale Notice and (z)
if such documentation is so drafted, executed and delivered, sixty (60) days
thereafter to consummate the Transfer. Any such Offered Securities not so
Transferred by the Transferring Stockholder during such 150 day period will
again be
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subject to the provisions of this Section 2.2 upon subsequent Transfer. If such
Transferring Stockholder receives a timely Come-Along Notice, then such
Transferring Stockholder shall use all reasonable efforts to obtain the
agreement of the prospective transferee to purchase all, and not less than all,
of the Offered Securities and the Additional Securities, on the terms set forth
above. If the prospective purchaser declines to purchase all of the Offered
Securities and the Additional Securities, each of the Transferring Stockholder
and each Electing Stockholder shall be entitled to Transfer the number of Equity
Securities determined by multiplying (x) the number of shares of Equity
Securities the prospective purchaser is willing to purchase by (y) a fraction,
the numerator of which is (A) in the case of the Transferring Stockholder, the
number of shares of Offered Securities and (B) in the case of an Electing
Stockholder, the number of shares of Come-Along Securities of such Electing
Stockholder, and the denominator of which is the sum of the number of shares of
Offered Securities plus the number of shares of Additional Securities. Each
Electing Stockholder shall be severally obligated to join (on a basis not to
exceed such Electing Stockholder's pro rata share of the proceeds from such sale
as provided hereunder) in any indemnification or other obligations to which a
Transferring Stockholder agrees in connection with such sale (other than any
such obligations that relate specifically to a particular Electing Stockholder,
such as indemnification with respect to representations and warranties given by
an Electing Stockholder regarding such Electing Stockholder's title to and
ownership of Equity Securities, as to which obligations each such Electing
Stockholder shall be solely liable). The Come-Along Right granted pursuant to
this Section 2.2(b)(ii) and the requirements of this Section 2.2(b)(ii) shall
terminate upon the date of the closing of an Initial Public Offering, and the
Stockholders will have no Come-Along Rights in connection with the sale of
Equity Securities in such public offering.
(c) Notwithstanding anything to the contrary
contained in this Agreement, the Management Stockholders shall not transfer any
Equity Securities, other than (i) pursuant to Section 2.2(a) above, (ii) as an
Electing Stockholder pursuant to Section 2.2(b)(ii) above or (iii) pursuant to
Section 3.1 below, until the earlier of (x) three (3) years after the Closing or
(y) six (6) months after an Initial Public Offering.
2.3 Put Rights. Each Stockholder holding warrants to purchase
Common Stock hereby agrees, effective as of the Closing, to forever waive any
right to "put" any Equity Securities or Equity Security Equivalents to the
Company.
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3. Other Transfers
3.1 Sale of the Company; Take-Along Rights.
(a) Notwithstanding Section 2.1 of this Agreement,
if, prior to the closing of an Initial Public Offering, the Board approves the
sale of all or part of the Company to an independent third party (whether by
merger, consolidation, sale of all or substantially all of its assets or sale of
all of the outstanding Equity Securities) (an "Approved Sale"), the Board shall
notify the Stockholders in writing of that election. Upon request by the Board,
each Stockholder will consent to and raise no objections to the Approved Sale,
waive any appraisal or dissenters rights in respect of such Approved Sale, and
take all other actions reasonably necessary or desirable to cause the
consummation of such Approved Sale on the terms proposed by the Board,
including, without limitation, (i) if the Approved Sale is structured as a sale
of stock, each Stockholder will sell all of its Equity Securities and rights to
acquire Equity Securities on the terms and conditions approved by the Board,
(ii) if the Approved Sale is structured as a merger or consolidation, each
Stockholder will vote in favor thereof and will not exercise any dissenters'
rights of appraisal it may have under any applicable law, and (iii) if the
Approved Sale is structured as a sale of all or substantially all of the assets
of the Company, each Stockholder will vote in favor thereof and, if applicable,
will vote in favor of the subsequent dissolution and liquidation of the Company.
Each Stockholder shall be severally obligated to join (on a basis not to exceed
such Stockholder's pro rata share of the proceeds from such Approved Sale) in
any indemnification or other obligations to which the Board agrees in connection
with such Approved Sale (other than any such obligations that relate
specifically to a particular Stockholder, such as indemnification with respect
to representations and warranties given by a Stockholder regarding such
Stockholder's title to and ownership of Equity Securities, as to which
obligations each such Stockholder shall be solely liable).
(b) The obligations of the Stockholders with respect
to an Approved Sale are subject to the satisfaction of the following conditions:
(i) upon the consummation of the Approved Sale, all of the holders of a
particular class or series of Equity Securities shall receive the same form and
amount of consideration per share, or if any Stockholders of a particular type,
class or series of Equity Securities are given an option as to the form and
amount of consideration to be received, all Stockholders of such type, class or
series will be given the same option, and (ii) all Stockholders of then
currently exercisable Equity Security Equivalents will be given an opportunity
to either (A) exercise such rights prior to the consummation of the Approved
Sale and participate in such sale as Stockholders of such Equity Securities or
(B) upon the consummation of the Approved Sale, receive in exchange for such
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<PAGE> 17
rights consideration equal to the amount determined by multiplying (1) the same
amount of consideration per share received by the Stockholders of such type and
class of Equity Securities in connection with the Approved Sale less the
exercise price per share or amount of rights to acquire such Equity Securities
by (2) the number of shares represented by such rights.
(c) If the Company enters into any negotiation or
transaction for which Rule 506 of the Securities Act (or any similar rule then
in effect) may be available with respect to such negotiation or transaction
(including a merger, consolidation or other reorganization), each Stockholder
that is not an "accredited investor" (within the meaning of Rule 501(a) of the
Securities Act) will, at the request of the Board, appoint a purchaser
representative (as such term is defined in Rule 501 of the Securities Act)
approved by the Board, and the Company will pay the fees of such purchaser
representative. If any such Stockholder declines to appoint the purchaser
representative approved by the Board, such Stockholder will appoint another
purchaser representative, and such Stockholder will be responsible for the fees
of the purchaser representative so appointed.
(d) Each Stockholder will bear its pro rata share of
the reasonable costs of any sale of Equity Securities pursuant to an Approved
Sale (but only if such Approved Sale is actually consummated) to the extent such
costs are incurred for the benefit of all Stockholders and are not otherwise
paid by the Company or the acquiring party. Costs incurred by or on behalf of a
Stockholder for its sole benefit will not be considered costs of the transaction
hereunder.
3.2 Initial Public Offering. Each Stockholder, at the
Company's expense, will take all actions in connection with the consummation of
an Initial Public Offering as are reasonably requested by the Company or Brera;
provided that no Stockholder will be required to take any action that would
impair its economic interest or rights as stockholder in the Company.
3.3 Involuntary Transfers. Notwithstanding Section 2.1 of this
Agreement:
(a) In the event that any Equity Securities owned by
any Stockholder shall be subject to sale or other transfer by reason of (i)
bankruptcy or insolvency proceedings, whether voluntary or involuntary, or (ii)
distraint, levy, execution or other involuntary transfer, then such Stockholder
shall give the Company written notice thereof promptly upon the occurrence of
such event (and the Company shall promptly send a copy of such notice to each
Stockholder) stating the terms of
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such proposed transfer, the identity of the proposed transferee, the price or
other consideration, if readily determinable, for which the shares of Equity
Securities are proposed to be transferred and the number of shares of Equity
Securities to be transferred (the "Offered Shares"). After its receipt of any
such notice or, failing such receipt, after the Company otherwise obtains actual
knowledge of such a proposed transfer, the Company will have the right to
purchase some or all of the Offered Shares (provided that any Offered Shares not
purchased by the Company may be purchased by the Stockholders pursuant to this
Section 3.3) at the price and on the terms applicable to such proposed transfer,
which right shall be exercised by written notice given by the Company to such
proposed transferor within 90 days following the Company's receipt of such
notice or, failing such receipt, the Company's obtaining actual knowledge of
such proposed transfer.
(b) The closing of the purchase and sale of the
Offered Shares shall be held at the principal office of the Company on a date to
be established by the Company in its notice of election to purchase the Offered
Shares, which in no event shall be less than 10 days nor more than 30 days from
the date of such notice.
(c) If the Company does not elect to purchase all of
the Offered Shares, it shall thereupon give notice of the terms of the proposed
transfer to each of the Stockholders, each of which shall then have, for a
period of 15 days after the receipt of such notice, the right to purchase on a
Pro Rata Basis all of the Offered Shares not purchased by the Company, with a
right of over allotment to purchase Offered Shares not purchased by any other
Stockholders (on a Pro Rata Basis or such other basis as the participating
Stockholders may agree upon) by giving written notice to the Company and the
proposed transferor within such 15-day period. The purchase of Offered Shares by
Stockholders shall be subject to the same procedures and terms as those relating
to the purchase by the Company. In the event that the foregoing rights are not
fully exercised with respect to all of the Offered Shares, the proposed
involuntary transfer referred to in Section 3.3(a) shall be permitted to occur.
If the nature of the event giving rise to such involuntary transfer is such that
no readily determinable consideration is to be paid for the Offered Shares, the
price per share of Equity Securities to be paid by the Company or the
Stockholders, as the case may be, shall be the Fair Market Value on the date of
such transfer.
4. Preemptive Purchase Rights
4.1 Preemptive Rights. Beginning immediately after the
Closing, the Company will not issue or sell any Equity Securities without first
complying with this Section 4 (other than Equity Securities issued pursuant to
(a) an Initial Public
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Offering, (b) warrants and options outstanding on the date hereof or (c) any
employee stock incentive plan for an amount of shares of Common Stock not to
exceed 20% of the outstanding shares of Common Stock as of date hereof less the
shares subject to options granted to Belisle and Seach pursuant to their
employment agreements with the Company and Classic Cable, Inc., dated the date
hereof (the "Employment Agreements") approved by the Board, provided that new
options granted to Belisle or Seach, other than pursuant to their Employment
Agreements, will not be exempt from this Section 4). The Company hereby grants
to each Stockholder the preemptive right to purchase, on a Pro Rata Basis, all
or any part of any Equity Securities that the Company may, from time to time,
propose to issue or sell (other than Equity Securities issued pursuant to an
Initial Public Offering or pursuant to warrants and options outstanding on the
date hereof and Equity Securities issued pursuant to any employee stock
incentive plan approved by the Board). Any purchase made by a Stockholder
pursuant to this Section 4.1 shall occur on the same terms and conditions
offered to the proposed transferee(s) of the Equity Securities. The preemptive
right granted pursuant to this Section 4.1 and the requirements of Section 4.2
shall terminate upon the date of the closing of an Initial Public Offering.
4.2 Notice of Sale. As soon as practicable after the Company
determines to issue or sell any Equity Securities, the Company shall notify each
Stockholder of such proposed issuance or sale. The notice shall specify, to the
extent practicable, the purchase price for, and the terms and conditions of, the
sale of such Equity Securities. Each Stockholder shall have fifteen (15) days
from the date it receives such notice to purchase, on a Pro Rata Basis, all or a
portion of its respective amount of the Equity Securities proposed to be issued
by the Company. Thereafter, the Company shall have 150 days to sell such Equity
Securities not elected to be purchased by the Stockholders at the same or higher
price and upon terms substantially similar to those specified in the Company's
notice. In the event the Company has not sold such Equity Securities within the
150 day period, the Company will not thereafter issue or sell any Equity
Securities without first offering such Equity Securities in the manner provided
in this Section 4.
5. Election of Directors and Related Matters.
5.1 Board Voting. Until such time as the Management
Stockholders, Brera and the Investors together own less than 30% of the
outstanding Common Stock on a Fully Diluted Basis, each Stockholder agrees to
take any and all action necessary, including, without limitation, the voting of
all of its Common Stock, the execution of written consents, the calling of
special meetings, the removal of directors, the filling of vacancies in
directorships on the Board, the waiving of notice,
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the attendance of meetings and the amendment of the Certificate of Incorporation
or the Bylaws, so as to:
(a) cause the Board to consist of up to seven (7)
directors composed of the following Persons:
(i) four (4) Persons designated by
Brera (the "Brera Directors"); and
(ii) the chief executive officer of
the Company, initially Belisle for so long as he is employed by the Company, and
two other individuals selected by the Investor Majority, provided that Seach
shall hold one board seat, for so long as he is employed by the Company, and the
Current Investor Director shall hold the other board seat until the Investor
Majority determines otherwise (the "Investor Directors").
(b) cause the Board to be divided into three classes
as follows:
(i) one class (the "Class I
Directors") to consist of one Brera Director and one Investor Director
(initially, the Current Investor Director) to serve until the first annual
meeting of the Company following the Closing and thereafter for additional terms
of three years;
(ii) one class (the "Class II
Directors") to consist of one Brera Director and one Investor Director
(initially, Seach), to serve until the second annual meeting of the Company
following the Closing and thereafter for additional terms of three years; and
(iii) one class (the "Class III
Directors") to consist of two Brera Directors and one Investor Director
(initially, Belisle), to serve until the third annual meeting of the Company
following the Closing and thereafter for additional terms of three years.
5.2 Chairmen. Brera will designate the chairman of the Board
and the chairman of each committee of the Board.
5.3 Removal. The removal from the Board (with or without
cause) of any Brera Director or Investor Director shall be in the sole
discretion and at the written direction of Brera or the holders of a majority of
Equity Securities held by the Investors (the "Investor Majority"), respectively,
but only upon such written
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direction and under no other circumstances; provided, that neither Belisle or
Seach may be removed from the Board without Brera's consent.
5.4 Vacancy. If any Brera Director or Investor Director (other
than the chief executive officer) ceases to serve as a member of the Board
during such representative's term of office, the resulting vacancy on the Board
shall be filled only by Brera or the Investor Majority, as the case may be, but
only upon such written direction and under no other circumstances. If Belisle or
Seach is terminated or otherwise ceases to be the chief executive officer or
chief financial officer, respectively, of the Company (whether by death,
disability or otherwise), then such person shall be deemed to have resigned from
the Board and (a) in the case of Belisle, he will be replaced by the new chief
executive officer of the Company and (b) in the case of Seach, he will be
replaced by the Investors consistent with the terms and provisions of this
Section 5.
5.5 Observer Rights. Each of Austin, Growth Fund, BT Capital
and BA SBIC will have, so long as each remains party to this Agreement and
retains, together with its Affiliates, at least 4.0% of the Common Stock, the
rights to (a) receive notices of Board meetings along with the directors and (b)
send one representative to observe Board meetings, provided that the
representative will not have any right to vote at, participate in or disrupt the
meeting, and provided further that by sending a representative to a meeting, the
Stockholder agrees to be bound by all confidentiality and fiduciary duties that
apply to directors at such meetings. The Company will pay the reasonable
out-of-pocket expenses incurred in sending such an observer.
5.6 Transaction Fees. Brera agrees that any transaction fee
payable by the Company to Brera that exceeds 1% of the transaction value for any
such transaction must be approved by the Current Investor Director.
6. Miscellaneous.
6.1 Stock Certificate Legend. A copy of this Agreement shall
be filed with the Secretary of the Company and kept with the records of the
Company. Each certificate representing shares of Equity Securities owned by any
Stockholder shall bear the following legends:
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First Legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED,
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS."
Second Legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS OF AND PROVISIONS OF A STOCKHOLDERS' AGREEMENT DATED AS OF MAY
23, 1999, AND A REGISTRATION RIGHTS AGREEMENT, DATED AS OF MAY 23,
1999, (AS SUCH AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED, AMENDED, OR
RESTATED FROM TIME TO TIME, THE "AGREEMENTS") AND MAY NOT BE OFFERED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
(COLLECTIVELY, "TRANSFERRED") UNLESS AND UNTIL SUCH TRANSFER COMPLIES
WITH THE AGREEMENTS, COPIES OF WHICH ARE ON FILE AT THE OFFICES OF THE
COMPANY.
All Stockholders shall be bound by the requirements of such legends to the
extent that such legends are applicable. Upon request of any Stockholder, the
Company shall
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remove the First Legend from the certificate or issue to such Stockholder a
replacement certificate without the First Legend required by this Section 6.1
if, with such request, the Company shall have received an opinion of counsel to
such Stockholder reasonably acceptable to the Company to the effect that such
legend is no longer necessary under the Securities Act. Upon the closing of the
Initial Public Offering, all certificates representing shares of Common Stock
shall be replaced, at the expense of the Company, with certificates not bearing
the Second Legend required by this Section 6.1, and in connection with shares to
be sold pursuant to a registered public offering, the certificates representing
such shares shall be replaced, at the expense of the Company, with certificates
not bearing either of the legends required by this Section 6.1.
6.2 Financial Information . The Company hereby agrees to
provide the following to each Stockholder for so long as such Person owns shares
of Equity Securities:
(a) as soon as practicable after the end of each
fiscal year of the Company, and in any event within 120 days thereafter,
beginning with the fiscal year ending December 31, 1999, consolidated and
consolidating balance sheets of the Company and its subsidiaries, as at the end
of such year, and consolidated and consolidating statements of income and cash
flow of the Company and its subsidiaries, for such fiscal year, prepared in
accordance with GAAP and setting forth in each case in comparative form the
figures for the previous fiscal year together with a comparison of such
statements to the Budget (as defined below) for the most recently added fiscal
year, all in reasonable detail and, in the case of the consolidated statements,
audited and certified by a nationally recognized independent public accounting
firm selected by the Board;
(b) as soon as practicable after the end of each
fiscal quarter of the Company, and in any event within 45 days thereafter,
beginning with the fiscal quarter ending June 30, 1999, consolidated and
consolidating balance sheets of the Company and its subsidiaries, as at the end
of such quarter, and consolidated and consolidating statements of income and
cash flow of the Company and its subsidiaries, for such fiscal quarter, prepared
in accordance with GAAP and setting forth in each case in comparative form the
figures for the corresponding period of the previous fiscal year, together with
a comparison of such statements to the Budget (as defined below), subject to
changes resulting from normal year-end audit adjustments, all in reasonable
detail and certified by an appropriate officer of the Company;
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(c) for as long as such Person holds at least 20% of
the Common Stock on a Fully Diluted Basis and the Company has not completed an
Initial Public Offering, the following information:
(i) as soon as practicable after the
end of each calendar month, and in any event within 30 days thereafter,
beginning with June 30, 1999, consolidated and consolidating balance sheets of
the Company and its subsidiaries, as at the end of such month, and consolidated
and consolidating statements of income and cash flow of the Company and its
subsidiaries for such month and for the current fiscal year to date, prepared
substantially in accordance with GAAP and setting forth in comparative form the
figures for the corresponding periods of the previous fiscal year, together with
a comparison of such statements to the Budget (as defined below), subject to
changes resulting from normal year-end audit adjustments, all in reasonable
detail and certified by an appropriate officer of the Company;
(ii) as soon as practicable after
the end of each calendar month, and in any event within 30 days thereafter,
beginning with June 30, 1999, a statement signed by the chief executive and
chief financial officers of the Company, setting forth in reasonable detail, as
to each cable television system owned or acquired by the Company ant its
subsidiaries from time to time, (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 its
subsidiaries on a consolidated basis, together with the corresponding figures
for the Company's and its subsidiaries' budgets on a consolidated basis provided
by the Company pursuant to subparagraph (iii) below;
(iii) prior to the commencement of
each fiscal year, an annual business plan, including a budget and financial
projections (including consolidated and consolidating balance sheets of the
Company and its subsidiaries and consolidated and consolidating statements of
income and cash flow of the Company and its subsidiaries), for each month during
such fiscal year, all in reasonable detail together with underlying assumptions
and approved by a majority of the entire Board (the "Budget");
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(iv) promptly upon receipt thereof,
copies of all other reports, if any, submitted to the Company by independent
public accountants in connection with any annual or interim audit of the books
of the Company and its subsidiaries made by such accountants;
(v) a copy of each financial
statement, report or registration statement that the Company or any of its
subsidiaries files with the SEC or any stock exchange;
(vi) promptly upon the Company's
learning thereof, notice of the institution or resolution of any suit or
administrative proceeding that could be reasonably expected to have a material
adverse impact on the condition (financial or otherwise), properties, assets,
operations, results of operations, business or rights of the Company or any of
its subsidiaries; and
(vii) promptly upon the Company's
learning thereof, notice of any event that has had, or could reasonably be
expected to have, a material adverse impact on the condition (financial or
otherwise), properties, assets, operations, results of operations, business or
rights of the Company or any of its subsidiaries, including, without limitation,
the threat of any material litigation or investigation with respect to the
Company or any of its subsidiaries or any material disputes with customers.
6.3 Confidentiality. Each party to this Agreement agrees to
use the same degree of care to keep confidential any information from time to
time supplied to it by or on behalf of the Company which the Company or the
Person acting on its behalf designates in writing at the time of its delivery to
be treated as confidential or actually known by the receiver to be confidential
information as such party uses to keep confidential its own information of a
similar character; provided, however, that the foregoing provisions of this
Section 6.3 shall not apply:
(a) to any information which is or becomes public
knowledge other than by reason of any breach by such party of this Section 6.3
or is or becomes available to such party on a nonconfidential basis from a
source that such party reasonably believes may disclose such information without
violating a confidentiality obligation to the Company;
(b) to the extent a party is required to disclose
the information in question pursuant to any law, statute, rule or regulation or
any order of any court
22
<PAGE> 26
or judicial process or pursuant to any direction, request or requirement of any
self-regulating organization or any governmental, fiscal, monetary or other
authority;
(c) to the extent that a party is reasonably
required to disclose the information in question for the protection or
enforcement of any of such party's rights or interests against the Company
(provided that each party hereby agrees that it will use reasonable efforts
promptly to notify the Company of any request for information to which this
clause (c) applies); or
(d) to the prospective transferee in connection with
any contemplated Transfer of any of the shares of Common Stock by such party,
provided such transferee agrees to maintain confidentiality of such information
consistent with the provisions of this Section 6.3.
6.4 Additional Stockholders. Each party hereto (a)
acknowledges that the Company may issue additional shares of Common Stock
pursuant to a stock incentive plan to be approved by the Board for the benefit
of officers and key employees of the Company and its subsidiaries (the "Stock
Incentive Plan") and (b) agrees that any such officer or key employee who is
granted any award under such plan shall, upon execution and delivery of an
Additional Party Signature Page to the Company, be bound by and entitled to the
benefits of this Agreement as though he or she were an original party hereto.
The Company agrees to include as a requirement to participation in the Stock
Incentive Plan that no awards shall be made under such plan to any Person who
does not become a party to this Agreement.
6.5 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns, regardless of whether or not any such successors,
assigns or holders have delivered an undertaking or assumption with respect to
this Agreement. In addition, whether or not any express assignment has been
made, the provisions of this Agreement that are for the benefit of or bind
holders of Equity Securities are also for the benefit of or bind any subsequent
holder of Equity Securities; provided, however, that no third-party transferee
shall derive any rights under this Agreement unless and until such third-party
transferee has executed and delivered to the Company an Additional Party
Signature Page. Any party to, or Person who is subject to, this Agreement that
ceases to own shares of Equity Securities or any interest therein shall cease to
be a party to, or Person who is subject to, this Agreement and thereafter shall
have no rights or obligations hereunder.
23
<PAGE> 27
6.6 Specific Performance. Without limiting the rights of each
party to this Agreement to pursue all other legal and equitable rights available
to such party for any other party's failure to perform its obligations under
this Agreement, the parties hereto acknowledge and agree that the remedy at law
for any failure to perform their obligations hereunder would be inadequate and
that each of them, respectively, shall be entitled to specific performance,
injunctive relief or other equitable remedies in the event of any such failure.
6.7 Entire Agreement; Amendment. This Agreement constitutes
the full and entire understanding and agreement between the parties with regard
to the subject matter hereof. Without limiting the generality of the foregoing,
this Agreement supercedes each of the following: (i) that certain Amended
Registration Rights Agreement, dated as of October 31, 1995, among the Company
and certain stockholders, and (ii) that certain Amended Shareholders Agreement,
dated as of October 31, 1995, among the Company and certain stockholders. This
Agreement may be amended, and the performance of any provision hereof may be
waived, only by the written agreement of each of the parties hereto or their
respective successors and assigns for so long as each such successor and assign,
as the case may be, owns at least 5% of the Equity Securities on a Fully Diluted
Basis.
6.8 Expenses and Attorneys' Fees. Except as specifically
provided in this Agreement, the Company shall pay all reasonable fees and
expenses incurred by the Stockholders, including the reasonable fees of their
respective counsel, in connection with the preparation, issuance, maintenance,
reissuance and amendment of this Agreement and the consummation of the
transactions contemplated by this Agreement and the protection or enforcement of
the Stockholders' rights under this Agreement.
6.9 Term. This Agreement, other than Sections 5 and 6, shall
terminate on the date of the closing of an Initial Public Offering pursuant to a
registration statement that was declared effective by the SEC.
6.10 Notices. Any notice provided for in this Agreement must
be in writing and must be either (a) personally delivered, (b) sent by a
recognized overnight courier service, to the recipient at the address below
indicated or (c) by facsimile which is confirmed in writing by sending a copy of
such facsimile to the recipient thereof pursuant to clause (a) or (b) above:
24
<PAGE> 28
To the Company: Classic Communications, Inc.
515 Congress Avenue
Austin, TX 78701
Attention: J. Merritt Belisle
Fax: (512) 476-5204
With a copy to: Winstead Sechrest & Minick P.C.
100 Congress Avenue, Suite 800
Austin, TX 78701
Attention: Timothy E. Young, Esq.
Fax: (512) 370-2850
With a copy to: Cary Ferchill, Esq.
500 Capital of Texas Highway North
Building 6, Suite 225
Austin, Texas 78746
Fax: (512) 327-7272
To Brera: Brera Classic, LLC
c/o Brera Capital Partners, LLC
712 Fifth Avenue
34th Floor
New York, NY 10019
Attention: Lisa Hook
Fax: (212) 835-1399
With a copy to: Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive, Suite 2300
Chicago, IL 60606
Attention: Peter C. Krupp, Esq.
Fax: (312) 407-0411
To Stockholders: at the addresses listed on the signature pages attached hereto.
or such other address or to the attention of such other Person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given (x) on the date
such notice is personally delivered, (y) one (1) day after the date such notice
is delivered to the overnight courier service if sent by overnight courier or
(z) with respect to facsimiles,
25
<PAGE> 29
on the earlier of one (1) day after the date such facsimile is delivered to the
overnight courier for confirmation or confirmation by telephone to the number
designated herein; provided that in each case notices received after 4:00 p.m.
(local time of the recipient) shall be deemed to have been duly given on the
next business day.
6.11 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.
6.12 Headings. The headings and captions contained herein are
for convenience only and shall not control or affect the meaning or construction
of any provision hereof.
6.13 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original and which
together shall constitute one and the same instrument.
6.14 Representations and Warranties. (a) Each party to this
Agreement represents and warrants to each other party to this Agreement that (i)
all action on the part of such party necessary for the authorization, execution,
delivery and performance of this Agreement has been taken and (ii) this
Agreement is a legal, valid and binding obligation of such party, enforceable
against such party in accordance with its terms.
(b) Brera represents that other than the Transaction
Agreements and the Stockholder Voting Agreement, dated as of May 24,1999,
between Brera and each stockholder named therein, as of the date hereof, there
are no other agreements between Brera and (i) either Belisle or Seach, (ii) the
Company or (iii) with respect to any sale of Brera's interests in the Company,
any third party.
6.15 Governing Law. All questions concerning the validity,
meaning and effect of this Agreement shall be determined in accordance with the
laws of the State of New York applicable to contracts made and to be performed
within the State, without regard to the principles of conflicts of laws except
to the extent necessary to permit this Agreement to be governed by New York law
as set forth above.
26
<PAGE> 30
6.16 Consent to Jurisdiction and Service of Process;
Appointment of Agent for Service of Process. EACH PARTY TO THIS AGREEMENT HEREBY
CONSENTS TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND ANY NEW YORK STATE COURT LOCATED IN THE
BOROUGH OF MANHATTAN AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREBY, OR ANY BUSINESS OR OTHER DISPUTES BETWEEN THE PARTIES (WHETHER SUCH
ACTIONS OR PROCEEDINGS ARE BASED IN STATUTE, TORT, CONTRACT OR OTHERWISE), SHALL
BE LITIGATED IN SUCH COURTS. EACH PARTY (A) CONSENTS TO SUBMIT ITSELF TO THE
PERSONAL JURISDICTION OF SUCH COURTS FOR SUCH ACTIONS OR PROCEEDINGS, (B) AGREES
THAT IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION
OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (C) AGREES THAT IT WILL NOT
BRING ANY SUCH ACTION OR PROCEEDING IN ANY COURT OTHER THAN SUCH COURTS. EACH
PARTY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE EXCLUSIVE AND IRREVOCABLE JURISDICTION AND VENUE OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREE TO BE BOUND BY ANY NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION
WITH SUCH ACTIONS OR PROCEEDINGS. A COPY OF ANY SERVICE OF PROCESS SERVED UPON
THE PARTIES SHALL BE MAILED BY REGISTERED MAIL TO THE RESPECTIVE PARTY EXCEPT
THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY
SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY A
PARTY REFUSES TO ACCEPT SERVICE, EACH PARTY AGREES THAT SERVICE UPON THE
APPROPRIATE PARTY BY REGISTERED MAIL SHALL CONSTITUTE SUFFICIENT SERVICE.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
6.17 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS
BETWEEN
27
<PAGE> 31
THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT
IS BEING ESTABLISHED. EACH PARTY ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON
SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ANY OF THE OTHER
PARTIES. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
EACH PARTY ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO
A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING
INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR
RELATED FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED HEREBY. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
ACCORDINGLY, EACH PARTY ACKNOWLEDGES THAT IT HAS WAIVED ITS RIGHT TO SUE OR BE
SUED IN TEXAS AND TO A JURY TRIAL. EACH PARTY HAS DISCUSSED THIS AGREEMENT WITH
ITS COUNSEL AND AGREES TO BE BOUND BY ITS TERMS.
28
<PAGE> 32
IN WITNESS WHEREOF, the parties have executed this
Stockholders' Agreement as of the day and year first above written.
CLASSIC COMMUNICATIONS, INC.
By:
---------------------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
BRERA CLASSIC, LLC
By:
---------------------------------------------
Name: Lisa A. Hook
Title: Authorized Signatory
<PAGE> 33
AUSTIN VENTURES, L.P.
By: AV PARTNERS, L.P.
By:
---------------------------------------------
Name: Jeffery C. Garvey
Title: General Partner
AUSTIN VENTURES III-A, L.P.
By: AV PARTNERS III, L.P.
By:
---------------------------------------------
Name: Jeffery C. Garvey
Title: General Partner
AUSTIN VENTURES III-B, L.P.
By: AV PARTNERS III, L.P.
By:
---------------------------------------------
Name: Jeffery C. Garvey
Title: General Partner
BA SBIC MANAGEMENT, L.L.C.,
By: BA Equity Management, L.P.,
Its Sole Member
By: BA Equity Management G.P.
Its General Partner
By:
---------------------------------------------
Name: Robert H. Sheridan, III
Title: Member
<PAGE> 34
BOARD OF TRUSTEES OF TEXAS
GROWTH FUND - 1991 TRUST, AS
TRUSTEE
By: TGF Management Corp.
By:
---------------------------------------------
Name: James J. Kozlowski
Title: President
BT CAPITAL PARTNERS, INC.
By:
---------------------------------------------
Name: Robert J. Marakovits
Title: President
UNION BANCAL VENTURE CORPORATION
By:
---------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, N.A.
By:
---------------------------------------------
Name:
Title:
J. MERRITT BELISLE
By:
---------------------------------------------
<PAGE> 35
STEVEN E. SEACH
By:
---------------------------------------------
BRYAN D. NOTEBOOM
By:
---------------------------------------------
<PAGE> 36
SCHEDULE A
<PAGE> 37
EXHIBIT A
ADDITIONAL PARTY SIGNATURE PAGE
The undersigned hereby executes the Stockholders' Agreement,
dated as of May 23, 1999, by and among Classic Communications, Inc., a Delaware
corporation, Brera Classic, LLC, a Delaware limited liability company, and the
other signatories listed in the signature pages attached thereto, authorizes
this signature page to be attached to a counterpart of such agreement, and
agrees to be bound by such agreement as if the undersigned had executed such
agreement on the date of its original execution.
-----------------------------------------
Name
-----------------------------------------
Address
-----------------------------------------
Signature
CLASSIC COMMUNICATIONS, INC.
(on behalf of itself and
the Stockholders)
By:
--------------------------------------
Title:
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
dated as of July 28, 1999
among
CLASSIC COMMUNICATIONS, INC.,
BRERA CLASSIC, LLC,
and
the additional parties named herein.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
SECTION 1. DEFINITIONS
1.1 Capitalized Terms......................................................................2
1.2 Defined Terms..........................................................................2
1.3 General Interpretive Principles........................................................6
SECTION 2. REGISTRATION RIGHTS
2.1 Demand Registrations...................................................................7
2.2 Piggyback Registrations...............................................................12
2.3 Lock-Up Period for the Company and Others.............................................14
2.4 Registration Procedures...............................................................15
2.5 Underwritten Offerings................................................................23
2.6 No Inconsistent Agreements; Additional Rights.........................................24
2.7 Registration Expenses.................................................................24
2.8 Indemnification.......................................................................26
2.9 Rules 144 and 144A....................................................................30
SECTION 3. MISCELLANEOUS
3.1 Entire Agreement......................................................................31
3.2 Injunctive Relief.....................................................................31
3.3 Attorneys' Fees.......................................................................31
3.4 Notices...............................................................................31
3.5 Successors, Assigns and Transferees...................................................33
3.6 Headings..............................................................................33
3.7 Severability..........................................................................33
3.8 Amendment; Waiver.....................................................................34
3.9 Counterparts..........................................................................34
3.10 Representations and Warranties........................................................34
3.11 Governing Law.........................................................................34
3.12 Consent to Jurisdiction and Service of Process; Appointment
of Agent for Service of Process.......................................................35
3.13 Waiver of Jury Trial..................................................................36
</TABLE>
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
July __, 1999, is by and among Classic Communications, Inc., a Delaware
corporation (the "Company"), Brera Classic, LLC, a Delaware limited liability
company ("Brera"), J. Merritt Belisle ("Belisle"), Steven E. Seach ("Seach") and
Bryan D. Noteboom ("Noteboom") (Belisle, Seach, and Noteboom are collectively
referred to as the "Management Stockholders" and individually as a "Management
Stockholder"), 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"), Texas
Growth Fund, a trust fund created by the Constitution of the State of Texas
("Growth Fund"), and BA SBIC Management, L.L.C., successor in interest to
NationsBanc Capital Corp., a Texas Corporation ("BA SBIC"), (BT Capital, Union
Bancal, Austin, Austin III-A, Austin III-B, Growth Fund and BA SBIC are
collectively referred to as the "Current Investors" and individually as a
"Current Investor"). The parties (other than the Company) and any Person who
hereafter acquires shares of Equity Securities (as defined herein) pursuant to
the provisions of, and subject to the restrictions and rights set forth in, this
Agreement, shall sometimes hereinafter be referred to individually as a
"Stockholder" and collectively as the "Stockholders."
A. WHEREAS, the Company and Brera have entered into an
Investment Agreement, dated as of May 24, 1999 (the "Investment Agreement"),
pursuant to which Brera has agreed to purchase, in the aggregate, from the
Company, and the Company has agreed to issue and sell to Brera, 6,490,734 shares
of voting common stock, par value $0.01 per share (the "Voting Common Stock"),
of the Company;
B. WHEREAS, as an inducement to Brera entering into the
Investment Agreement, Brera has required that the Company agree, and the Company
has agreed, to provide the registration rights set forth in this Agreement;
C. WHEREAS, this Agreement supercedes that certain Amended
Registration Rights Agreement, dated as of October 31, 1995, among the Company
and certain stockholders.
1
<PAGE> 4
D. WHEREAS, this Agreement shall not become effective until
completion of the Closing.
NOW, THEREFORE, in consideration of the foregoing and the
mutual premises, covenants and agreements of the parties hereto, and for other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
1.1 Capitalized Terms. Capitalized terms used but not defined
herein shall have the respective meanings given to them in the Investment
Agreement.
1.2 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"Adverse Disclosure" means public disclosure of material
non-public information, which disclosure in the Board's good faith judgment
after consultation with counsel to the Company (i) would be required to be made
in any registration statement filed with the SEC by the Company so that such
registration statement would not be materially misleading; (ii) would not be
required to be made at such time but for the filing of such registration
statement; and (iii) the Company has a bona fide business purpose for not
disclosing publicly.
"Affiliate", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by or under common control with
that Person. The term "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as applied to
any Person, means the possession, directly or indirectly, of power to direct the
management and policies of that Person, whether through voting power, by
contract or otherwise.
"Agreement" has the meaning set forth in the preamble hereto.
"Brera" has the meaning set forth in the preamble hereto.
"Brera Registrable Securities" means any Common Stock held by
or issuable to Brera, and any securities that may be issued or distributed or be
issuable in respect of any Brera Registrable Securities by way of stock
dividend, stock split or other distribution, merger, consolidation, exchange
offer, recapitalization or reclassification or similar transaction; provided,
however, that any such Brera Registrable
2
<PAGE> 5
Securities shall cease to be Brera Registrable Securities to the extent a
Registration Statement with respect to the sale of such Brera Registrable
Securities has been declared effective under the Securities Act and such Brera
Registrable Securities have been disposed of in accordance with the plan of
distribution set forth in such Registration Statement. Unless otherwise provided
herein, a percentage (or a majority) of the Brera Registrable Securities shall
be determined based on the number of securities remaining unregistered.
"Board" means the board of directors of the Company.
"Business Day" has the meaning set forth in the Investment
Agreement.
"Closing" has the meaning set forth in the Investment
Agreement.
"Closing Date" has the meaning set forth in the Investment
Agreement.
"Common Stock" means the Voting Common Stock and non-voting
Common Stock, par value $0.01 per share, of the Company.
"Company" has the meaning set forth in the preamble and
includes the Company's successors by merger, acquisition, reorganization or
otherwise.
"Company Public Sale" has the meaning set forth in
Section 2.2(a).
"Current Investors" has the meaning set forth in the preamble
hereto.
"Current Investors Registrable Securities" means any Common
Stock held by or issuable to the Current Investors, and any securities that may
be issued or distributed or be issuable in respect of any Current Investors
Registrable Securities by way of stock dividend, stock split or other
distribution, merger, consolidation, exchange offer, recapitalization or
reclassification or similar transaction; provided, however, that any such
Current Investors Registrable Securities shall cease to be Current Investors
Registrable Securities to the extent a Registration Statement with respect to
the sale of such Current Investors Registrable Securities has been declared
effective under the Securities Act and such Current Investors Registrable
Securities have been disposed of in accordance with the plan of distribution set
forth in such Registration Statement. Unless otherwise provided herein, a
percentage (or a majority) of the Current Investors Registrable Securities shall
be determined based on the number of securities remaining unregistered.
3
<PAGE> 6
"Demand Notice" has the meaning set forth in Section 2.1(f).
"Demand Period" has the meaning set forth in Section 2.1(e).
"Demand Registration" has the meaning set forth in
Section 2.1(a)(iii).
"Demand Registration Statement" has the meaning set forth in
Section 2.1(a).
"Equity Securities" has the meaning set forth in the
Investment Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any successor thereto, and any rules and regulations promulgated
thereunder, all as the same shall be in effect from time to time.
A "holder" or "holders" means, unless the context otherwise
requires, any holder or holders of Registrable Securities (whether or not
acquired pursuant to the Investment Agreement) who is a party hereto or who
otherwise agrees in writing to be bound by the provisions of this Agreement.
"Indemnified Company Parties" has the meaning set forth in
Section 2.8(b).
"Indemnified Holder Parties" has the meaning set forth in
Section 2.8(a).
"Initial Public Offering" means a registered offering of
Common Stock that results in net proceeds to the Company of at least $100
million and listing of the Common Stock on a national securities exchange or the
Nasdaq Stock Market's National Market.
"Investment Agreement" has the meaning set forth in the
recitals.
"Long-Form Registration" has the meaning set forth in Section
2.1(a)(i).
"Long-Form Demand Registration" has the meaning set forth in
Section 2.1(a)(iii).
4
<PAGE> 7
"Loss" has the meaning set forth in Section 2.8(a).
"NASD" means the National Association of Securities
Dealers, Inc.
"Person" means any individual, firm, limited liability company
or partnership, joint venture, corporation, joint stock company, trust or
unincorporated organization, incorporated or unincorporated association,
government (or any department, agency or political subdivision thereof) or other
entity of any kind, and shall include any successor (by merger or otherwise) of
such entity.
"Piggyback Registration" has the meaning set forth in
Section 2.2(a).
"Prospectus" means the prospectus included in any Registration
Statement as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by the Registration Statement and all other amendments and supplements
to the prospectus, including post-effective amendments and all other material
incorporated by reference in such prospectus.
"Registrable Securities" means the Brera Registrable
Securities and the Current Investors Registrable Securities. For purposes of
this Agreement, a "class" of Registrable Securities means the Brera Registrable
Securities or the Current Investors Registrable Securities, as applicable.
"Registration" means a registration of the Company's
securities for sale to the public under a Registration Statement.
"Registration Expenses" has the meaning set forth in
Section 2.7(a).
"Registration Statement" means any registration statement of
the Company filed with, or to be filed with, the SEC under the rules and
regulations promulgated under the Securities Act, including the Prospectus,
amendments and supplements to such registration statement, including
post-effective amendments, and all exhibits and all material incorporated by
reference in such registration statement.
"Requesting Class" has the meaning set forth in
Section 2.1(i).
"SEC" means the Securities and Exchange Commission.
5
<PAGE> 8
"Securities Act" means the Securities Act of 1933, as amended,
and any successor thereto, and any rules and regulations promulgated thereunder,
all as the same shall be in effect from time to time.
"Short-Form Registration" has the meaning set forth in Section
2.1(a)(i).
"Short-Form Demand Registration" has the meaning set forth in
Section 2.1(a)(iii).
"Underwritten Offering" means a Registration in which
securities of the Company are sold to an underwriter on a firm commitment basis
for reoffering to the public.
"Voting Common Stock" means the voting Common Stock, par value
$.01 per share, of the Company
1.3 General Interpretive Principles. Whenever used in this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires, any noun or pronoun shall be deemed to include the plural as
well as the singular and to cover all genders. The name assigned this Agreement
and the section captions used herein are for convenience of reference only and
shall not be construed to affect the meaning, construction or effect hereof.
Unless otherwise specified, the terms "hereof," "herein" and similar terms refer
to this Agreement as a whole (including the exhibits, schedules and disclosure
statements hereto), and references herein to Sections refer to Sections of this
Agreement.
SECTION 2. REGISTRATION RIGHTS.
2.1 Demand Registrations.
(a) Demand by Holders. (i) At any time after the
earlier of (x) the Company's Initial Public Offering and (y) the date which is
three years after the Closing Date, but in no event within one hundred eighty
(180) days of the effective date of a Registration Statement, the holder or
holders of twenty (20%) or more of the Brera Registrable Securities at any time
may request Registration under the Securities Act of all or part of their Brera
Registrable Securities on Form S-1 or any similar long-form registration
("Long-Form Registration") or, if available, on Form S- 3 or any similar
short-form registration ("Short-Form Registration") by delivering a written
notice to the Company to that effect; provided, however, that the aggregate
6
<PAGE> 9
offering value of the Brera Registrable Securities requested to be registered in
any such Registration must be reasonably expected to equal at least $10,000,000.
(ii) At any time after the earlier of (x) the
Company's Initial Public Offering and (y) the date which is three years
after the Closing Date, but in no event within one hundred eighty (180)
days of the effective date of a Registration Statement, Current
Investors holding a majority of the Current Investors' Registrable
Securities at any time may request Registration under the Securities
Act of all or part of their Current Investors Registrable Securities on
any Long-Form Registration or, if available, any Short-Form
Registration by delivering a written notice to the Company to that
effect; provided, however, that the aggregate offering value of the
Current Investors Registrable Securities requested to be registered in
any such Registration must be reasonably expected to equal at least
$10,000,000.
(iii) Any Long-Form Registration and Short-Form
Registration requested pursuant to this Section 2.1(a), other than a
Registration in which the Company sells any of its securities in a
primary offering, are referred to herein, respectively, as a "Long-Form
Demand Registration" and a "Short-Form Demand Registration." All
Long-Form Demand Registrations and Short-Form Demand Registrations
shall collectively be referred to herein as "Demand Registrations."
Notwithstanding the foregoing, the Company will have the right to
register and sell any of its securities in a Registration requested
pursuant to this Section 2.1 (a) and all Registrations requested
pursuant to this Section 2.1(a) in which the Company sells any of its
securities in a primary offering, other than pursuant to an
over-allotment option granted to underwriters in connection with such
offering, shall not be deemed to be Demand Registrations and shall be
considered Piggyback Registrations and will be governed by Section 2.2.
Each request for a Demand Registration shall specify the kind and aggregate
amount of the class of Registrable Securities to be registered and the intended
methods of disposition thereof. Upon such request for a Demand Registration, the
Company shall file a Registration Statement relating to such Demand Registration
(the "Demand Registration Statement"), and shall use its best efforts promptly
to cause to become effective the Registration of such class of Registrable
Securities (and all other Registrable Securities which the Company has been
requested to register by any other holder pursuant to Section 2.1(f) hereof)
under (i) the Securities Act, and (ii) the
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"Blue Sky" laws of such jurisdictions as any holder of Registrable Securities
being registered under such Registration or any underwriter, if any, reasonably
requests.
(b) Long-Form Demand Registrations. A maximum of
four (4) Long-Form Demand Registrations may be requested by the holders of the
Brera Registrable Securities pursuant to subparagraph (i) of Section 2.1(a), and
a maximum of three (3) Long-Form Demand Registration may be requested by the
holders of the Current Investors Registrable Securities pursuant to subparagraph
(ii) of Section 2.1(a). A Registration will not count as a Long-Form Demand
Registration until it has become effective and unless the holders of Registrable
Securities initially requesting such Registration are able to register and sell
at least seventy-five percent (75%) of the Registrable Securities requested to
be included in such registration.
(c) Short-Form Demand Registrations. In addition to
the Long-Form Demand Registrations that may be requested pursuant to Section
2.1(b), the holders of Brera Registrable Securities and the Current Investors
Registrable Securities will each, as a class, be entitled to request, pursuant
and subject to the terms of Section 2.1(a), four (4) Short-Form Demand
Registrations. Once the Company has become subject to the reporting requirements
of the Securities Exchange Act, the Corporation will use its best efforts to
make Short-Form Demand Registrations available for the sale of Registrable
Securities.
(d) Demand Withdrawal. In the event that a Demand
Registration is requested under Section 2.1(a), and the holders of the class of
Registrable Securities later determine not to sell their Registrable Securities
in connection with the registration requested, then prompt notice shall be given
by such holders to the Company that the registration requested is no longer
required and that the request is thereby withdrawn. Upon receipt of such notice,
the Company shall cease all efforts to secure registration and shall take all
action necessary and reasonably practicable to prevent the commencement of
effectiveness for any registration statement that it is preparing or has
prepared in connection with the withdrawn request. Such registration shall be
deemed a Demand Registration for purposes of Sections 2.1(b) and (c) above,
unless the withdrawing holders shall have paid or reimbursed the Company for all
of the reasonable out-of-pocket fees and expenses incurred by the Company in
connection with the registration of such withdrawn Registrable Securities.
(e) Effective Registration. The Company shall be
deemed to have effected a Demand Registration if the Demand Registration
Statement is declared effective by the SEC and remains effective for not fewer
than 180 days (or such shorter period as will terminate when all Registrable
Securities covered by such
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Demand Registration Statement have been sold or withdrawn), or, if such
Registration Statement relates to an Underwritten Offering, such longer period
as in the opinion of counsel for the underwriter or underwriters a Prospectus is
required by law to be delivered in connection with sales of Registrable
Securities by an underwriter or dealer (in either case, such period being the
"Demand Period"). No Demand Registration shall be deemed to have been effected
if (i) during the Demand Period, such Registration is interfered with by any
stop order, injunction or other order or requirement of the SEC or other
governmental agency or court or (ii) the conditions to closing specified in the
underwriting agreement, if any, entered into in connection with such
Registration are not satisfied.
(f) Demand Notice. Promptly upon receipt of any
request for a Demand Registration pursuant to Section 2.1(a) (but in no event
more than five (5) Business Days thereafter), the Company shall serve written
notice (a "Demand Notice") of any such Registration request to all other holders
of Registrable Securities, and the Company shall include in such Registration
all such Registrable Securities of any holder with respect to which the Company
has received written requests for inclusion therein within 30 days after the
Demand Notice has been given to it. All requests made pursuant to this Section
2.1(f) shall specify the kind and aggregate amount of Registrable Securities to
be registered and the intended method of distribution of such securities.
(g) Delay in Filing; Suspension of Registration. If
the continued effectiveness of the Demand Registration Statement at any time
would require the Company to make an Adverse Disclosure, the Company may, upon
giving prompt written notice of such action to the holders, suspend use of the
Demand Registration Statement (a "Demand Suspension"); provided, however, that
the Company shall not be permitted to exercise a Demand Suspension (i) more than
three times during any twenty-four (24) month period, (ii) for a period
exceeding forty (40) days on any one occasion, or (iii) for an aggregate period
exceeding one hundred twenty (120) days in any twelve (12) month period with
respect to more than one Demand Suspension. In the case of a Demand Suspension,
the holders agree to suspend use of the Prospectus related to the Demand
Registration in connection with any such sale or purchase or offer to sell or
purchase of Registrable Securities upon receipt of the notice referred to above.
The Company shall immediately notify the holders upon the termination of any
Demand Suspension, amend or supplement the Prospectus, if necessary, so it does
not contain any untrue statement or omission therein and furnish to the holders
such numbers of copies of the Prospectus as so amended or supplemented as the
holders may reasonably request. The Company agrees, if necessary, to supplement
or make amendments to the Demand Registration Statement, if required by the
registration
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<PAGE> 12
form used by the Company for the Demand Registration or by the instructions
applicable to such registration form or by the Securities Act or the rules or
regulations promulgated thereunder or as may reasonably be requested by the
Holders of a majority of the Registrable Securities to be included in such
Registration.
(h) Underwritten Offering. If not less than a
majority of the holders of any class of Registrable Securities requesting a
Demand Registration so elect, the offering of Registrable Securities pursuant to
such Demand Registration shall be in the form of an Underwritten Offering. If
any offering pursuant to a Demand Registration involves an Underwritten
Offering, the holders of a majority of the Registrable Securities included in
such Demand Registration shall, after consulting with the Company, have the
right to select the managing underwriter or underwriters to administer the
offering.
(i) Priority of Securities Registered Pursuant to
Demand Registrations. If the managing underwriter or underwriters of a Demand
Registration (or, in the case of a Demand Registration not being underwritten,
holders of a majority of the class of Registrable Securities requesting the
Demand Registration (the "Requesting Class")), advise the Company in writing
that, in its or their opinion, the number of securities requested to be included
in such Demand Registration (including securities of the Company for its own
account or for the account of other Persons which are not holders of Registrable
Securities) exceeds the number which can be sold in such offering without being
likely to have a significant adverse effect on the price, timing or distribution
of the securities offered or the market for the Company's Common Stock, the
Company will include in such Registration, Registrable Securities sought to be
registered therein and only such lesser number of other securities as shall, in
the opinion of the managing underwriter or underwriters (or, in the case of a
Demand Registration not being underwritten, holders of a majority of the
Requesting Class) not be likely to have such an effect, allocated as follows:
(i) first, pro rata among all holders of Registrable Securities that have
requested pursuant to this Section 2.1 to be included in such Registration,
based on the fully diluted ownership of such holders (provided that any
Registrable Securities allocated to any such holder pursuant to this clause (i)
that exceed such holder's request will be reallocated among the remaining
requesting holders of Registrable Securities in like manner) and (ii) second,
and only if all of the Registrable Securities referenced in clause (i) have been
included, any other securities eligible for inclusion in such Registration.
Notwithstanding the foregoing, if such Demand Registration involves the Initial
Public Offering or the first Registration thereafter in which the Current
Investors are entitled to request that their Registrable Securities be included
in such Registration, the Registrable Securities to be included in such
Registration shall be
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allocated as follows: two-thirds (2/3) of the number of shares available for
Registration under this Section 2.1(i) (the "Available Shares") shall be
allocated pro rata among the Current Investors which have requested pursuant to
Section 2.2(a) to be included in such Registration based on their fully diluted
ownership, and one-third (1/3) of the Available Shares shall be allocated to
Brera, Belisle and Seach as group (collectively, the "Brera Group") on a pro
rata basis; provided, further, however, that if either the Brera Group or the
Current Investors (as a group) desire to Register less than the number of shares
allocated to it or them in accordance with this Section 2.1(i), then the
remaining Available Shares which the Brera Group or the Current Investors (as a
group) do not desire to register shall be re-allocated to the Current Investors
(as a group) or the Brera Group, as applicable.
2.2 Piggyback Registrations.
(a) Participation. If the Company at any time
proposes to file a Registration Statement under the Securities Act with respect
to any offering of its Equity Securities for its own account or for the account
of any holders (other than (i) a Registration under Section 2.1 hereof, (ii) a
Registration on Form S-4 or S-8 or any successor form to such Forms, (iii) a
Registration of securities solely relating to an offering and sale to employees
or directors of the Company pursuant to any employee stock plan or other
employee benefit plan arrangement, or (iv) a Registration of securities issued
solely in an acquisition or business combination) (a "Company Public Sale"),
then, as soon as practicable (but in no event less than thirty (30) days prior
to the proposed date of filing such Registration Statement), the Company shall
give written notice of such proposed filing to all holders of Registrable
Securities and (unless all such Registrable Securities are then registered
pursuant to Section 2.1) such notice shall offer the holders of such Registrable
Securities the opportunity to register such number of Registrable Securities as
each such holder may request in writing (a "Piggyback Registration"). Subject to
Section 2.2(b), the Company shall include in such Registration Statement all
Registrable Securities requested within fifteen (15) Business Days after the
receipt by the holder of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder) to be included
in the Registration for such offering pursuant to a Piggyback Registration;
provided, however, that if at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
Registration Statement filed in connection with such Registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i) in
the case of a determination not to register, shall be relieved of its obligation
to register any Registrable Securities in connection with such Registration (but
not from its obligation to pay the Registration Expenses in
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<PAGE> 14
connection therewith), without prejudice, however, to the rights of any holders
of Registrable Securities entitled to request that such Registration be effected
as a Demand Registration under Section 2.1, and (ii) in the case of a
determination to delay registering and in the absence of a request for a Demand
Registration, shall be permitted to delay registering any Registrable
Securities, for the same period as the delay in registering such other
securities. If the offering pursuant to such Registration Statement is to be
underwritten, then each holder making a request for a Piggyback Registration
pursuant to this Section 2.2(a) must participate in such Underwritten Offering.
If the offering pursuant to such Registration Statement is to be on any other
basis, then each holder making a request for a Piggyback Registration pursuant
to this Section 2.2(a) must participate in such offering on such basis. Each
holder of Registrable Securities shall be permitted to withdraw all or part of
such holder's Registrable Securities from a Piggyback Registration at any time
prior to the effective date thereof. No registration effected under this Section
2.2 shall relieve the Company of its obligation to effect any registration upon
request under Section 2.1, nor shall any such registration hereunder be deemed
to have been effected pursuant to Section 2.1. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this Section 2.2.
(b) Priority of Piggyback Registration. If the
managing underwriter or underwriters of any proposed Underwritten Offering in a
Piggyback Registration inform the Company and the holders of such Registrable
Securities in writing that the total amount or kind of securities which such
holders and any other Persons intend to include in such offering exceeds the
number which can be sold in such offering so as to have a significant adverse
effect on the price, timing or distribution of the securities offered in such
offering or the market for the Company's Common Stock, then the securities to be
included in such Registration shall be (i) first, 100% of the securities that
the Company proposes to sell, (ii) second, and only if all the securities
referenced in clause (i) have been included, the number of Registrable
Securities that, in the opinion of such underwriter or underwriters, can be sold
without having such adverse effect, allocated as follows: (A) in the Initial
Public Offering and the Company's first secondary offering in which Piggyback
Registration rights are available, two-thirds (2/3) of the number of shares
available for Registration under this clause (ii) (the "Available Shares") shall
be allocated pro rata among the Current Investors which have requested pursuant
to Section 2.2(a) to be included in such Registration based on their fully
diluted ownership, and one-third (1/3) of the Available Shares shall be
allocated to the Brera Group; provided, further, however, that if either the
Brera Group or the Current Investors (as a group) desire to Register less than
the number of shares allocated to it or them in accordance with this clause
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<PAGE> 15
(ii), then the remaining Available Shares which the Brera Group or the Current
Investors (as a group) do not desire to register shall be re-allocated to the
Current Investors (as a group) or the Brera Group, as applicable; or (B) in any
other offering, pro rata among the holders of all Registrable Securities that
have requested pursuant to Section 2.2(a) to be included in such Registration,
based on the fully diluted ownership of such holders (provided that any
Registrable Securities allocated to any such holder pursuant to this clause (B)
that exceed such holder's request will be reallocated among the remaining
requesting holders of Registrable Securities in like manner) and (iii) third,
and only if all of the Registrable Securities referenced in clauses (i) and (ii)
have been included, any other securities eligible for inclusion in such
Registration.
(c) No Effect on Demand Registrations. No
Registration of Registrable Securities effected pursuant to a request under this
Section 2.2 shall be deemed to have been effected pursuant to Section 2.1 hereof
or shall relieve the Company of its obligations under Section 2.1 hereof.
2.3 Lock-Up Period for the Company and Others. In the case of
an Underwritten Offering, the Company agrees, if requested by the holders of a
majority of any class of Registrable Securities or the managing underwriters in
such Underwritten Offering, not to effect any public sale or distribution of any
securities the same as or similar to those being registered, or any securities
convertible into or exchangeable or exercisable for such securities, during the
period beginning 7 days before, and ending 180 days (or such lesser period as
may be permitted by such holders or such underwriter) after, the effective date
of the Registration Statement filed in connection with such registration (or, in
the case of an underwriting under a shelf registration, the date of the closing
under the underwriting agreement), to the extent timely notified in writing by a
holder of Registrable Securities covered by such Registration Statement or the
managing underwriters (except, in each case, as part of such Underwritten
Offering, if permitted, or pursuant to registrations on Forms S-4 or S-8 or any
successor form to such Forms or otherwise as part of any registration of
securities for offering and sale to management of the Company pursuant to any
employee stock plan or other employee benefit plan arrangement or Registration
of securities issued solely in an acquisition or business combination). The
Company agrees to use all reasonable efforts to obtain from each Current
Investor and each holder of restricted securities of the Company the same as or
similar to those being registered by the Company, or any restricted securities
convertible into or exchangeable or exercisable for any of its securities, an
agreement not to effect any public sale or distribution of such securities
during any such period referred to in this paragraph, except as part of any such
Registration if permitted. Without limiting the foregoing (but subject to
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<PAGE> 16
Section 2.6), if after the date hereof the Company grants any Person any rights
to demand or participate in, a Registration, the Company agrees that the
agreement with respect thereto shall include such Person's agreement as
contemplated by the previous sentence. In addition to the foregoing, each holder
of Registrable Securities hereby agrees not to effect any public sale or
distribution of equity securities of the Company, including any public sale
pursuant to Rule 144 under the Securities Act, or any securities convertible
into or exchangeable or exercisable for such securities, during the seven days
prior to and the 180-day period beginning on the effective date of the Company's
Initial Public Offering, unless the underwriters managing the Initial Public
Offering otherwise agree. During such period, the Company may impose stop
transfer instructions with respect to Registrable Securities to prohibit
transfers in violation of the previous sentence.
2.4 Registration Procedures.
(a) Actions by Company. In connection with the
Company's registration obligations under Sections 2.1 and 2.2 hereof, the
Company will use its best efforts to effect such registration to permit the sale
of such Registrable Securities in accordance with the intended method or methods
of distribution thereof as expeditiously as possible, and pursuant thereto the
Company will, as expeditiously as possible:
(i) before filing a Registration Statement or
Prospectus, or any amendments or supplements thereto and in connection
therewith, (x) furnish to the underwriters, if any, and to the holders
of the Registrable Securities covered by such Registration Statement,
copies of all documents prepared to be filed, which documents will be
subject to the review of such underwriters and such holders and their
respective counsel and (y) except in the case of a registration under
Section 2.2, not file any Registration Statement or Prospectus or
amendments or supplements thereto to which the holders of a majority of
Registrable Securities covered by such Registration Statement or the
underwriters, if any, shall reasonably object;
(ii) prepare and, in the case of a Demand
Registration, no later than 45 days after a request for a Demand
Registration, file with the SEC a Registration Statement relating to
the Registrable Securities including all exhibits and financial
statements required by the SEC to be filed therewith, and use its best
efforts to cause such Registration Statement to become effective under
the Securities Act;
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provided, however, that such period shall be 90 days if a request for
a Demand Registration is made in the first 45 days of any year, and
the Company cannot file such Demand Registration without audited
financial statements for the prior calendar year under the rules of
the SEC;
(iii) prepare and file with the SEC such
amendments and post-effective amendments to such Registration Statement
and supplements to the Prospectus as may be (x) reasonably requested by
the holders of a majority of the participating Registrable Securities,
(y) reasonably requested by any participating holder (to the extent
such request relates to information relating to such holder), or (z)
necessary to keep such Registration effective for the Demand Period
(in the case of a Demand Registration);
(iv) notify the selling holders of Registrable
Securities and the managing underwriter or underwriters, if any, and
(if requested) confirm such advice in writing, as soon as reasonably
practicable after notice thereof is received by the Company (a) when
the Registration Statement or any amendment thereto has been filed or
becomes effective, when the Prospectus or any amendment or supplement
to the Prospectus has been filed, and, to furnish such selling holders
and managing underwriter or underwriters, if any, with copies thereof,
(b) of any written comments by the SEC or any request by the SEC or
any other federal or state governmental authority for amendments or
supplements to the Registration Statement or the Prospectus or for
additional information, (c) of the issuance by the SEC of any stop
order suspending the effectiveness of the Registration Statement or
any order preventing or suspending the use of any preliminary or final
Prospectus or the initiation or threatening of any proceedings for
such purposes, (d) if, at any time, the representations and warranties
of the Company contemplated by paragraph (xiv) below cease to be true
and correct in all material respects and (e) of any notification with
respect to the suspension of the qualification of the Registrable
Securities for offering or sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose;
(v) promptly notify each selling holder of
Registrable Securities and the managing underwriter or underwriters, if
any, when the Company becomes aware of the happening of any event as a
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<PAGE> 18
result of which the Registration Statement or the Prospectus included
in such Registration Statement (as then in effect) contains any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein (in the case of the Prospectus
and any preliminary Prospectus, in light of the circumstances under
which they were made) not misleading or, if for any other reason it
shall be necessary during such time period to amend or supplement the
Registration Statement or the Prospectus in order to comply with the
Securities Act and, in either case as promptly as reasonably
practicable thereafter, prepare and file with the SEC, and furnish
without charge to the selling holders and the managing underwriter or
underwriters, if any, an amendment or supplement to such Registration
Statement or Prospectus which will correct such statement or omission
or effect such compliance;
(vi) make every reasonable effort to prevent or
obtain the withdrawal of any stop order or other order suspending the
use of any preliminary or final Prospectus or suspending any
qualification of the Registrable Securities at the earliest possible
moment;
(vii) if reasonably requested by the managing
underwriter or underwriters or a holder of Registrable Securities being
sold in connection with an Underwritten Offering, promptly incorporate
in a Prospectus supplement or post-effective amendment such information
as the managing underwriter or underwriters and the holders of a
majority of the Registrable Securities being sold agree should be
included therein relating to the plan of distribution with respect to
such Registrable Securities, including, without limitation, information
with respect to the number of Registrable Securities being sold to, and
the purchase price being paid therefor by, such underwriter or
underwriters and with respect to any other terms of the underwritten
(or best efforts underwritten) offering of the Registrable Securities
to be sold in such offering; and make all required filings of
such Prospectus supplement or post-effective amendment as soon as
reasonably practicable after being notified of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;
(viii) furnish to each selling holder of
Registrable Securities and each managing underwriter, if any, without
charge, as many conformed copies as such holder or managing
underwriter may
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reasonably request of the Registration Statement and any amendment or
post-effective amendment thereto, including financial statements and
schedules, all documents incorporated therein by reference and all
exhibits (including those incorporated by reference);
(ix) deliver to each selling holder of Registrable
Securities and each managing underwriter, if any, without charge, as
many copies of the Prospectus (including each preliminary prospectus)
and any amendment or supplement thereto as such holder or managing
underwriter may reasonably request (it being understood that the
Company consents to the use of the Prospectus or any amendment or
supplement thereto by each of the selling holders of Registrable
Securities and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by the
Prospectus or any amendment or supplement thereto) and such other
documents as such selling holder or managing underwriter may reasonably
request in order to facilitate the disposition of the Registrable
Securities by such holder or underwriter;
(x) on or prior to the date on which the
Registration Statement is declared effective, use its best efforts to
register or qualify, and cooperate with the selling holders of
Registrable Securities, the managing underwriter, underwriters or
agent, if any, and their respective counsel, in connection with the
registration or qualification of such Registrable Securities for offer
and sale under the securities or "Blue Sky" laws of each state and
other jurisdiction of the United States as any such selling holder,
underwriter or agent, if any, or their respective counsel, reasonably
request in writing and do any and all other acts or things reasonably
necessary or advisable to keep such registration or qualification in
effect for so long as such Registration Statement remains in effect
and so as to permit the continuance of sales and dealings in such
jurisdictions for as long as may be necessary to complete the
distribution of the Registrable Securities covered by the Registration
Statement; provided that the Company will not be required to qualify
generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to taxation or
general service of process in any such jurisdiction where it is not
then so subject;
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(xi) cooperate with the selling holders of
Registrable Securities and the managing underwriter, underwriters or
agent, if any, 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 and registered in such names as the
managing underwriters may request at least two (2) Business Days prior
to any sale of Registrable Securities to the underwriters;
(xii) use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement
to be registered with or approved by such other governmental agencies
or authorities as may be necessary to enable the seller or sellers
thereof or the underwriter or underwriters, if any, to consummate the
disposition of such Registrable Securities;
(xiii) not later than the effective date of the
applicable Registration Statement, provide a CUSIP number for all
Registrable Securities and provide the applicable transfer agent with
printed certificates for the Registrable Securities which are in a form
eligible for deposit with The Depository Trust Company or such other
form as is reasonably requested by the selling holders;
(xiv) make such representations and warranties to
the holders of Registrable Securities being registered, and the
underwriters or agents, if any, in form, substance and scope as are
customarily made by issuers in secondary underwritten public offerings;
(xv) enter into such customary agreements
(including underwriting and indemnification agreements) and take all
such other actions as the holders of at least a majority of any class
of Registrable Securities being sold or the managing underwriter or
agent, if any, reasonably request in order to expedite or facilitate
the registration and disposition of such Registrable Securities;
(xvi) obtain for delivery to the holders of
Registrable Securities being registered and to the underwriter,
underwriters or agent, if any, an opinion or opinions from counsel for
the Company dated the effective date of the Registration Statement and,
in the event of an Underwritten Offering, brought down to the date of
execution of
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the underwriting agreement (if different from such effective date)
and to the closing under the underwriting agreement, in customary form,
scope and substance, which counsel and opinions shall be reasonably
satisfactory to such holders, underwriters or agents and their
respective counsel;
(xvii) obtain for delivery to the Company and the
underwriter, underwriters or agent, if any, with copies to the holders
of Registrable Securities (unless precluded by applicable accounting
rules), a "comfort" letter from the Company's independent certified
public accountants in customary form and covering such matters of the
type customarily covered by "comfort" letters and such other matters as
the managing underwriter or underwriters reasonably request, dated the
date of execution of the underwriting agreement and brought down to the
closing under the underwriting agreement;
(xviii) notify each seller of Registrable
Securities and each underwriter or agent, if any, participating in the
disposition of such Registrable Securities and their respective
counsel of, and cooperate with such sellers and such underwriters or
agents, if any, in connection with any filings required to be made
with the NASD;
(xix) use its best efforts to comply with all
applicable rules and regulations of the SEC and make generally
available to its security holders, as soon as reasonably practicable
(but not more than fifteen months) after the effective date of the
Registration Statement, an earnings statement satisfying the provisions
of Section 11(a) of the Securities Act and the rules and regulations
promulgated thereunder;
(xx) provide and cause to be maintained a transfer
agent and registrar for all Registrable Securities covered by such
Registration Statement from and after a date not later than the
effective date of such Registration Statement;
(xxi) cause all Registrable Securities covered by
the Registration Statement to be listed on each securities exchange on
which any of the Company's securities are then listed or quoted and on
each inter-dealer quotation system on which any of the Company's
securities are then quoted;
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(xxii) make available upon reasonable notice at
reasonable times and for reasonable periods for inspection by a
representative appointed by a majority of the sellers of such
Registrable Securities covered by such Registration Statement, by any
underwriter participating in any disposition to be effected pursuant to
such Registration Statement and by any attorney, accountant or other
agent retained by such sellers or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and
properties of the Company, and cause all of the Company's officers,
directors and employees and the independent public accountants who have
certified its financial statements to make themselves available to
discuss the business of the Company and to supply all information
reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such Registration Statement as
shall be necessary to enable them to exercise their due diligence
responsibility (subject to each party referred to in this clause (xxii)
entering into customary confidentiality agreements in a form reasonably
acceptable to the Company);
(xxiii) make available senior management personnel
of the Company to participate in, and cause them to cooperate with the
holders or the managing underwriter in any Underwritten Offering in
connection with "road show" and other customary marketing activities,
including "one-on-one" meetings with prospective purchasers of the
Registrable Securities to be sold in the Underwritten Offering and
otherwise to facilitate, cooperate with, and participate in each
proposed offering contemplated herein and customary selling efforts
related thereto, in each case to the same extent as if the Company were
engaged in a primary registered offering of its Common Stock;
(xxiv) promptly, after the issuance of an
earnings release or upon the request of a holder, prepare a current
report on Form 8-K with respect to such earnings release or a matter
of disclosure as requested by such holder and file such Form 8-K with
the SEC; and
(xxv) take such other actions as sellers of such
Registrable Securities holding 51% of the shares to be sold shall
reasonably request in order to expedite or facilitate the disposition
of such Registrable Securities.
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(b) Holders' Information. The Company may require
each seller of Registrable Securities as to which any Registration is being
effected to furnish to the Company such information regarding the distribution
of such securities and such other information relating to such holder and its
ownership of Registrable Securities as the Company may from time to time
reasonably request in writing. Each holder of Registrable Securities agrees to
furnish such information to the Company and to cooperate with the Company as
necessary to enable the Company to comply with the provisions of this Agreement.
If any such registration statement refers to any holder of Registrable
Securities by name or otherwise as the holder of any securities of the Company,
then such holder shall have the right to require (i) the insertion therein of
language, in form and substance satisfactory to such holder, to the effect that
the holding by such holder of such securities is not to be construed as a
recommendation by such holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such holder.
(c) Discontinuation of Disposition. Each holder of
Registrable Securities agrees by acquisition of such Registrable Securities
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 2.4(a)(v) hereof, such holder will forthwith
discontinue disposition of Registrable Securities pursuant to such Registration
Statement until such holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 2.4(a)(v) hereof, or until it is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus, and, if so directed by the Company,
such holder will deliver to the Company (at the Company's expense) all copies,
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. In the event the Company shall give any such notice, the Demand
Period during which such Registration Statement is required to be maintained
effective shall be extended by the number of days during the period from and
including the date of the giving of such notice to and including the date when
each seller of Registrable Securities covered by such Registration Statement
either receives the copies of the supplemented or amended Prospectus
contemplated by Section 2.4(a)(v) hereof or is advised in writing by the Company
that the use of the Prospectus may be resumed.
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2.5 Underwritten Offerings.
(a) Demand Registrations. If requested by the
underwriters for any Underwritten Offering requested by holders of Registrable
Securities pursuant to a Registration under Section 2.1, the Company shall enter
into an underwriting agreement with such underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to the Company,
holders of a majority of the Registrable Securities to be included in such
underwriting, and the underwriters, and to contain such representations and
warranties by the Company and such other terms as are generally prevailing in
agreements of that type, including, without limitation, indemnities no less
favorable to the recipient thereof than those provided in Section 2.8. The
holders of the Registrable Securities proposed to be distributed by such
underwriters will cooperate with the Company in the negotiation of the
underwriting agreement and will give consideration to the reasonable suggestions
of the Company regarding the form thereof. Such holders of Registrable
Securities to be distributed by such underwriters shall be parties to such
underwriting agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable Securities
shall not be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder's Registrable Securities, such
holder's intended method of distribution and any other representations required
by law.
(b) Piggyback Registrations. If the Company proposes
to register any of its securities under the Securities Act as contemplated by
Section 2.2 and such securities are to be distributed in an Underwritten
Offering through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities pursuant to Section 2.2 and subject to the
provisions of Section 2.2(b), use its best efforts to arrange for such
underwriters to include on the same terms and conditions that apply to the other
sellers in such Registration all the Registrable Securities to be offered and
sold by such holder among the securities of the Company to be distributed by
such underwriters in such Registration. The holders of Registrable Securities to
be distributed by such underwriters shall be parties to the underwriting
agreement between the Company and such underwriters and any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the
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<PAGE> 25
benefit of such holders of Registrable Securities and any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement shall be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable Securities
shall not be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution or any other representations required
by law.
(c) Participation in Underwritten Registrations. No
Person may participate in any Underwritten Offering hereunder unless such Person
(i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled to approve such
arrangements and (ii) completes and executes all questionnaires, indemnities,
underwriting agreements and other documents (other than powers of attorney)
required under the terms of such underwriting arrangements.
2.6 No Inconsistent Agreements; Additional Rights. The
Company will not hereafter enter into, and except as disclosed on Schedule 3.3
to the Investment Agreement and the Existing Registration Rights Agreements (as
defined in the Investment Agreement), is not currently a party to, any agreement
with respect to its securities which is inconsistent with the rights granted to
the holders of Registrable Securities by this Agreement or otherwise conflicts
with the provisions hereof.
2.7 Registration Expenses.
(a) Expenses Paid by Company. All expenses incident
to the Company's performance of or compliance with this Agreement will be paid
by the Company (and, in the case of the filing of a Registration Statement,
regardless of whether such Registration Statement becomes effective), including
without limitation (i) all registration and filing fees, and any other fees and
expenses associated with filings required to be made with the SEC or the NASD
(including, if applicable, the fees and expenses of any "qualified independent
underwriter" and its counsel as may be required by the rules and regulations of
the NASD), (ii) all fees and expenses of compliance with state securities or
"Blue Sky" laws (including fees and disbursements of counsel in connection with
"Blue Sky" qualifications of the Registrable Securities and determination of
their eligibility for investment under the laws of such jurisdictions as the
managing underwriters or holders of a majority of the Registrable Securities
being sold may designate), (iii) all printing, duplicating, word processing,
messenger, telephone, facsimile and mailing and delivery expenses (including
expenses
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<PAGE> 26
of printing certificates for the Registrable Securities in a form eligible for
deposit with The Depository Trust Company and of printing prospectuses), (iv)
all printing, mailing and delivery expenses incurred in the preparation and
delivery of a Registration Statement or Prospectus, (v) all fees and
disbursements of counsel for the Company and of all independent certified public
accountants of the Company (including the expenses of cold comfort letters
required by or incident to such performance), (vi) Securities Act liability
insurance or similar insurance if the Company so desires or the underwriters so
require in accordance with then-customary underwriting practice, (vii) all fees
and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange or quotation of the Registrable Securities
on any inter-dealer quotation system, (viii) all applicable rating agency fees
with respect to the Preferred Stock, (ix) all reasonable fees and disbursements
of one law firm or other counsel selected by the holders of a majority of the
Registrable Securities being registered, (x) all reasonable fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (except as set forth in Section 2.7(b) below), (xi) all fees and
expenses of accountants to the holders of Registrable Securities being sold,
(xii) all fees and expenses of any special experts retained by the Company in
connection with any Demand Registration or Piggyback Registration and (xiii)
fees and expenses of other Persons retained by the Company without limitation
(all such expenses being herein called "Registration Expenses"). The Company
will, in any event, pay its internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any audit and the fees and expenses of any
Person, including special experts, retained by the Company.
(b) Expenses Not Paid by Company. The Company shall
not be required to pay any fees and disbursements of underwriters not
customarily paid by the issuers or sellers of securities, including underwriting
discounts and commissions and transfer taxes, if any, attributable to the sale
of Registrable Securities and the fees and expenses of counsel to the
underwriters other than as provided in paragraph (a) above.
2.8 Indemnification.
(a) Indemnification by Company. The Company will, and
hereby agrees to, indemnify and hold harmless, to the full extent permitted by
law, each holder of Registrable Securities, its Affiliates and their respective
officers, directors, shareholders, employees, advisors, agents, each other
Person who participates as an underwriter, selling broker, dealer manager, or
similar securities industry professional in the offering or sale of Registrable
Securities, and each Person who
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<PAGE> 27
controls (within the meaning of the Securities Act or the Exchange Act) any of
the foregoing Persons (collectively, the "Indemnified Holder Parties") from and
against any and all losses, claims, damages, liabilities (or actions or
proceedings in respect thereof, whether or not such Indemnified Holder Party is
a party thereto) and expenses, joint or several (including reasonable costs of
investigation and legal expenses) (each, a "Loss" and collectively "Losses")
arising out of or based upon (i) any untrue or alleged untrue statement of a
material fact contained in any Registration Statement under which such
Registrable Securities were registered under the Securities Act (including any
final, preliminary or summary Prospectus contained therein or any amendment
thereof or supplement thereto or any documents incorporated by reference
therein), or (ii) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
(in the case of a Prospectus or preliminary Prospectus, in light of the
circumstances under which they were made) not misleading; provided, however,
that the Company shall not be liable to any particular Indemnified Holder Party
in any such case to the extent that any such Loss arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in any such Registration Statement in reliance upon and in conformity with
written information furnished to the Company by such Indemnified Holder Party
through an instrument duly executed by such Indemnified Holder Party,
specifically stating that it is for use in the preparation of such Registration
Statement; and provided, further, that the Company will not be liable to any
particular Indemnified Holder Party in any case to the extent that any such Loss
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in any final, preliminary or summary
Prospectus if such untrue statement or alleged untrue statement or omission or
alleged omission is completely corrected in an amendment or supplement to such
Prospectus and the relevant Indemnified Holder Party (having previously been
furnished by or on behalf of the Company with a sufficient number of copies of
the same on a timely basis), fails to deliver such Prospectus as so amended
or supplement prior to or concurrently with the sales of the Registrable
Securities to the Person asserting such loss, claim, damage, liability or
expense. This indemnity shall be in addition to any liability the Company may
otherwise have. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of such holder or any Indemnified
Holder Party and shall survive the transfer of such securities by such holder.
(b) Indemnification by the Selling Holder of
Registrable Securities. In the event of Registration of any Registrable
Securities of the Company under the Securities Act pursuant to Sections 2.1 or
2.2 hereof, each selling holder of Registrable Securities agrees (severally and
not jointly) to indemnify and hold
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harmless, to the full extent permitted by law, the Company, its directors and
officers and each Person who controls (within the meaning of the Securities Act
and the Exchange Act) the Company (collectively, the "Indemnified Company
Parties") from and against any Losses resulting from any untrue statement of a
material fact or any omission of a material fact required to be stated in the
Registration Statement under which such Registrable Securities were registered
under the Securities Act (including any final, preliminary or summary Prospectus
contained therein or any amendment thereof or supplement thereto or any
documents incorporated by reference therein), or necessary to make the
statements therein (in the case of a Prospectus or preliminary Prospectus, in
light of the circumstances under which they were made) not misleading, to the
extent, but only to the extent, that such untrue statement or omission is
contained in any written information furnished to the Company through an
instrument duly executed by such holder, specifically stating that it is for
inclusion in such Registration Statement and has not been corrected in a
subsequent writing prior to or concurrently with the sale of the Registrable
Securities. In no event shall the liability of any selling holder of Registrable
Securities hereunder be greater in amount than the dollar amount of the proceeds
received by such holder under the sale of the Registrable Securities giving rise
to such indemnification obligation. The Company shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to the same
extent as provided above (with appropriate modification) with respect to
information so furnished in writing by such Persons specifically for inclusion
in any Prospectus or Registration Statement.
(c) Conduct of Indemnification Proceedings. Any
Person entitled to indemnification hereunder will (i) give prompt written notice
to the indemnifying party of any claim with respect to which it seeks
indemnification (provided, that any delay or failure to so notify the
indemnifying party shall relieve the indemnifying party of its obligations
hereunder only to the extent, if at all, that it is actually and materially
prejudiced by reason of such delay or failure) and (ii) permit such indemnifying
party to assume the defense of such claim with counsel reasonably satisfactory
to the Indemnified Holder Party or the Indemnified Company Party, as the case
may be; provided, however, that any Person entitled to indemnification hereunder
shall have the right to select and employ separate counsel and to participate in
the defense of such claim, but the fees and expenses of such counsel shall be at
the expense of such Person unless (i) the indemnifying party has agreed in
writing to pay such fees or expenses, (ii) the indemnifying party shall have
failed to assume the defense of such claim within a reasonable time after
receipt of notice of such claim from the Person entitled to indemnification
hereunder and employ counsel reasonably satisfactory to such Person, (iii) the
Indemnified Holder Party or the Indemnified
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Company Party, as the case may be, has reasonably concluded (based on advice of
counsel) that there may be legal defenses available to it or other Indemnified
Holder Parties or Indemnified Company parties, as the case may be, that are
different from or in addition to those available to the indemnifying party, or
(iv) in the reasonable judgment of any such Person, based upon advice of its
counsel, a conflict of interest may exist between such Person and the
indemnifying party with respect to such claims (in which case, if the Person
notifies the indemnifying party in writing that such Person elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such claim on behalf of
such Person). If such defense is not assumed by the indemnifying party, the
indemnifying party will not be subject to any liability for any settlement made
without its consent, but such consent may not be unreasonably withheld; provided
that an indemnifying party shall not be required to consent to any settlement
involving the imposition of equitable remedies or involving the imposition of
any material obligations on such indemnifying party other than financial
obligations for which such indemnified party will be indemnified hereunder. If
the indemnifying party assumes the defense, the indemnifying party shall have
the right to settle such action without the consent of the Indemnified Holder
Party or the Indemnified Company Party, as the case may be; provided, however,
that the indemnifying party shall be required to obtain such consent (which
consent shall not be unreasonably withheld) if the settlement includes any
admission of wrongdoing on the part of the Indemnified Holder Party or the
Indemnified Company Party, as the case may be, or any decree or restriction on
the Indemnified Holder Party or the Indemnified Company Party, as the case may
be, or its officers or directors. No indemnifying party shall consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Holder Party or Indemnified Company Party, as the case may be, of an
unconditional release from all liability in respect to such claim or litigation
or which would impose any material obligations on such Indemnified Holder Party
or Indemnified
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Company Party, as the case may be. It is understood that the indemnifying party
or parties shall not, in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time from all such Indemnified Holder Party or Parties
or Indemnified Company Party or Parties, as the case may be, unless (x) the
employment of more than one counsel has been authorized in writing by the
Indemnified Holder Party or Parties or the Indemnified Company Party or Parties,
as the case may be, (y) an Indemnified Holder Party or Indemnified Company
Party, as the case may be, has reasonably concluded (based on advice of counsel)
that there may be legal defenses available to it that are different from or in
addition to those available to the other Indemnified Holder Parties or
Indemnified Company Parties, as the case may be, or (z) a conflict or potential
conflict exists or may exist (based on advice of counsel to an Indemnified
Holder Party or an Indemnified Company Party, as the case may be) between such
Indemnified Holder Party or such Indemnified Company Party, as the case may be,
and the other Indemnified Holder Parties or Indemnified Company Parties, as the
case may be, in each of which cases the indemnifying party shall be obligated to
pay the reasonable fees and expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the
indemnification provided for in paragraphs (a) and (b) of this Section 2.8 is
unavailable to an Indemnified Holder Party or an Indemnified Company Party, as
the case may be, or insufficient to hold it harmless as contemplated by
paragraphs (a) and (b) of this Section 2.8, then the indemnifying party shall
contribute to the amount paid or payable by the Indemnified Holder Party or the
Indemnified Company Party, as the case may be, as a result of such Loss in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the Indemnified Holder Party or the Indemnified
Company Party, as the case may be, on the other. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or the
Indemnified Holder Party or the Indemnified Company Party, as the case may be,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
Notwithstanding anything in this Section 2.8(d) to the contrary, no indemnifying
party (other than the Company) shall be required pursuant to this Section 2.8(d)
to contribute any amount in excess of the amount by which the net proceeds
received by such indemnifying party from the sale of Registrable Securities in
the offering to which the Losses of the Indemnified Holder Parties or the
Indemnified Company Parties, as the case may be, relate exceeds the amount of
any damages which such indemnifying party has otherwise
been required to pay by reason of such untrue statement or omission. The parties
hereto agree that it would not be just and equitable if contribution pursuant to
this Section 2.8(d) 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 the immediately preceding paragraph. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. If indemnification is available
under this Section 2.8, the indemnifying parties shall indemnify each
Indemnified Holder Party or Indemnified Company Party, as the case may be, to
the full extent provided in Sections 2.8(a) and 2.8(b) hereof without regard to
the relative fault of said indemnifying
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<PAGE> 31
parties or Indemnified Holder Party or Indemnified Company Party, as the case
may be.
(e) Other Indemnification. Indemnification and
contribution similar to that specified in the preceding subdivisions of this
Section 2.8 (with appropriate modifications) shall be given by the Company and
each seller of Regis trable Securities with respect to any required registration
or other qualification of securities under any Federal or state law or
regulation of any governmental authority, other than the Securities Act.
(f) Indemnification Payments. The indemnification
required by this Section 2.8 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, promptly as and when
bills are received or Losses are incurred.
2.9 Rules 144 and 144A. The Company covenants that it will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if
the Company is not required to file such reports, it will, upon the request of
any holder of Registrable Securities, make publicly available other information
so long as necessary to permit sales pursuant to Rules 144, 144A or Regulation S
under the Securities Act), and it will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rules 144, 144A or Regulation S under the Securities Act, as
such Rules may be amended from time to time, or (ii) any similar rule or
regulation 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 and, if not, the
specifics thereof.
SECTION 3. MISCELLANEOUS.
3.1 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof. This Agreement supercedes that certain Amended
Registration Rights Agreement, dated as of October 31, 1995, among the Company
and certain stockholders.
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<PAGE> 32
3.2 Injunctive Relief. It is hereby agreed and acknowledged
that it will be impossible to measure in money the damages that would be
suffered if the parties fail to comply with any of the obligations herein
imposed on them and that in the event of any such failure, an aggrieved Person
will be irreparably damaged and will not have an adequate remedy at law. Any
such Person shall, therefore, be entitled (in addition to any other remedy to
which it may be entitled in law or in equity) to injunctive relief, including,
without limitation, specific performance, to enforce such obligations, and if
any action should be brought in equity to enforce any of the provisions of this
Agreement, none of the parties hereto shall raise the defense that there is an
adequate remedy at law.
3.3 Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement or where any provision hereof is validly
asserted as a defense, the successful party shall, to the extent permitted by
applicable law, be entitled to recover reasonable attorneys' fees in addition to
any other available remedy.
3.4 Notices. Any notice provided for in this Agreement must
be in writing and must be either (a) personally delivered, (b) sent by a
recognized overnight courier service, to the recipient at the address below
indicated or (c) by facsimile which is confirmed in writing by sending a copy of
such facsimile to the recipient thereof pursuant to clause (a) or (b) above:
To the Company: Classic Communications, Inc.
515 Congress Avenue
Austin, TX 78701
Attention: J. Merritt Belisle
Fax: (512) 476-5204
With a copy to: Winstead Sechrest & Minick P.C.
100 Congress Avenue, Suite 800
Austin, TX 78701
Attention: Timothy E. Young, Esq.
Fax: (512) 370-2850
With a copy to: Cary Ferchill, Esq.
500 Capital of Texas Highway North
Building 6, Suite 225
Austin, Texas 78746
Fax: (512) 327-7272
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To Brera: Brera Classic, LLC
c/o Brera Capital Partners, LLC
712 Fifth Avenue
34th Floor
New York, NY 10019
Attention: Lisa Hook
Fax: (212) 835-1399
With a copy to: Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive, Suite 2300
Chicago, IL 60606
Attention: Peter C. Krupp, Esq.
Fax: (312) 407-0411
To Stockholders: at the addresses listed on the signature pages
attached hereto.
or such other address or to the attention of such other Person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given (x) on the date
such notice is personally delivered, (y) one (1) day after the date such notice
is delivered to the overnight courier service if sent by overnight courier or
(z) with respect to facsimiles, on the earlier of one (1) day after the date
such facsimile is delivered to the overnight courier for confirmation or
confirmation by telephone to the number designated herein; provided that in each
case notices received after 4:00 p.m. (local time of the recipient) shall be
deemed to have been duly given on the next business day.
3.5 Successors, Assigns and Transferees. The registration
rights of any holder under this Agreement with respect to any Registrable
Securities may be transferred and assigned, provided that other than a transfer
or assignment to Brera or an Affiliate of Brera, no such assignment shall be
binding upon or obligate the Company to any such assignee unless and until (i)
the Company shall have received notice of such assignment as herein provided,
which notice shall (A) reference this Agreement and (B) set forth the name and
address of any assignee for the purpose of any notices hereunder or (ii) such
assignee can establish its beneficial or record ownership of any Registrable
Securities and shall have provided the Company with the information called for
by clause (i)(B) of this Section 3.5(a), (iii) such assignee acquires at least
twenty percent (20%) of the Registrable Securities held by a holder; provided
that such Registrable Securities represent at least five percent (5%) of the
Company's outstanding Common Stock; provided, further, that any assignment of
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<PAGE> 34
registration rights to a limited or general partner of any holder will be
without restriction as to minimum share holdings, and (iv) such assignee is not
a competitor of the Company. Any transfer or assignment made other than as
provided in the first sentence of this Section 3.5 shall be null and void.
(a) This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, and their respective
successors and permitted assigns. Whether or not any express assignment shall
have been made, the provisions of this Agreement which are for the benefit of
the parties hereto other than the Company shall also be for the benefit of and
enforceable by any subsequent holder of Registrable Securities, subject to the
provisions contained herein.
3.6 Headings. The section and paragraph headings contained
in this Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
3.7 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law but if any provision or portion
of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained therein.
3.8 Amendment; Waiver. This Agreement may not be amended
or modified and waivers and consents to departures from the provisions hereof
may not be given, except by an instrument or instruments in writing making
specific reference to this Agreement and signed by the Company, the holders of a
majority of Registrable Securities of each class then outstanding and, so long
as it is a holder, Brera. Each holder of any Registrable Securities at the time
or thereafter outstanding shall be bound by any amendment, modification, waiver
or consent authorized by this Section 3.8(a), whether or not such Registrable
Securities shall have been marked accordingly.
(a) The waiver by any party hereto of a breach
of any provision of this Agreement shall not operate or be construed as a
further or continuing waiver of such breach or as a waiver of any other or
subsequent breach. Except as otherwise expressly provided herein, no failure on
the part of any party to exercise,
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<PAGE> 35
and no delay in exercising, any right, power or remedy hereunder, or otherwise
available in respect hereof at law or in equity, shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise of
any other right, power or remedy.
3.9 Counterparts. This Agreement may be executed in any
number of separate 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 together shall constitute one and the same agreement.
3.10 Representations and Warranties. Each party to this
Agreement represents and warrants to each other party to this Agreement that (i)
all action on the part of such party necessary for the authorization, execution,
delivery and performance of this Agreement has been taken and (ii) this
Agreement is a legal, valid and binding obligation of such party, enforceable
against such party in accordance with its terms.
3.11 Governing Law. All questions concerning the validity,
meaning and effect of this Agreement shall be determined in accordance with the
laws of the State of New York applicable to contracts made and to be performed
within the State, without regard to the principles of conflicts of laws except
to the extent necessary to permit this Agreement to be governed by New York law
as set forth above.
3.12 Consent to Jurisdiction and Service of Process;
Appointment of Agent for Service of Process. EACH PARTY TO THIS AGREEMENT HEREBY
CONSENTS TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND ANY NEW YORK STATE COURT LOCATED IN THE
BOROUGH OF MANHATTAN AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREBY, OR ANY BUSINESS OR OTHER DISPUTES BETWEEN THE PARTIES (WHETHER SUCH
ACTIONS OR PROCEEDINGS ARE BASED IN STATUTE, TORT, CONTRACT OR OTHERWISE), SHALL
BE LITIGATED IN SUCH COURTS. EACH PARTY (A) CONSENTS TO SUBMIT ITSELF TO THE
PERSONAL JURISDICTION OF SUCH COURTS FOR SUCH ACTIONS OR PROCEEDINGS, (B) AGREES
THAT IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION
OR OTHER
33
<PAGE> 36
REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (C) AGREES THAT IT WILL NOT BRING ANY
SUCH ACTION OR PROCEEDING IN ANY COURT OTHER THAN SUCH COURTS. EACH PARTY
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE EXCLUSIVE AND IRREVOCABLE JURISDICTION AND VENUE OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREE TO BE BOUND BY ANY NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION
WITH SUCH ACTIONS OR PROCEEDINGS. A COPY OF ANY SERVICE OF PROCESS SERVED UPON
THE PARTIES SHALL BE MAILED BY REGISTERED MAIL TO THE RESPECTIVE PARTY EXCEPT
THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY
SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY A
PARTY REFUSES TO ACCEPT SERVICE, EACH PARTY AGREES THAT SERVICE UPON THE
APPROPRIATE PARTY BY REGISTERED MAIL SHALL CONSTITUTE SUFFICIENT SERVICE.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
3.13 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE
RELATIONSHIP THAT IS BEING ESTABLISHED. EACH PARTY ALSO WAIVES ANY BOND OR
SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED
OF ANY OF THE OTHER PARTIES. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. EACH PARTY ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED
ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO
RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
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<PAGE> 37
FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
TRANSACTION CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
ACCORDINGLY, EACH PARTY ACKNOWLEDGES THAT IT HAS WAIVED ITS RIGHT TO SUE OR BE
SUED IN TEXAS AND TO A JURY TRIAL. EACH PARTY HAS DISCUSSED THIS AGREEMENT WITH
ITS COUNSEL AND AGREES TO BE BOUND BY ITS TERMS.
35
<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be duly executed as of the date first written above.
CLASSIC COMMUNICATIONS, INC.
By: /s/ J. Merritt Belisle
------------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
BRERA CLASSIC, LLC
By: /s/ Lisa A. Hook
------------------------------------
Name: Lisa A. Hook
Title: Authorized Signatory
AUSTIN VENTURE, L.P.
By: AV PARTNERS, L.P.
By: /s/ Jeffery C. Garvey
------------------------------------
Name: Jeffery C. Garvey
Title: General Partner
AUSTIN VENTURE III-A, L.P.
By: AV PARTNERS III, L.P.
By: /s/ Jeffery C. Garvey
------------------------------------
Name: Jeffery C. Garvey
Title: General Partner
AUSTIN VENTURE III-B, L.P.
By: AV PARTNERS III, L.P.
By: /s/ Jeffery C. Garvey
------------------------------------
Name: Jeffery C. Garvey
Title: General Partner
36
<PAGE> 39
BA SBIC MANAGEMENT, L.L.C.,
By: BA Equity Management, L.P.,
Its Sole Member
By: BA Equity Management G.P.
Its General Partner
By: /s/ Robert H. Sheridan, III
---------------------------------------
Name: Robert H. Sheridan, III, Member
TEXAS GROWTH FUND
By: /s/ James J. Kozlowski
---------------------------------------
Name: James J. Kozlowski
Title: President
BT CAPITAL PARTNERS, INC.
By: /s/ Robert J. Marakovits
---------------------------------------
Name: Robert J. Marakovits
Title: President
UNION BANCAL VENTURE
CORPORATION
By: /s/ Peter C. Conroy
---------------------------------------
Name: Peter C. Conroy
Title: Vice President
J. MERRITT BELISLE
/s/ J. Merritt Belisle
---------------------------------------
STEVEN E. SEACH
/s/ Steven E. Seach
---------------------------------------
BRYAN D. NOTEBOOM
/s/ Bryan D. Noteboom
---------------------------------------
<PAGE> 1
EXECUTION COPY
CLASSIC CABLE, INC.
9 3/8% SENIOR SUBORDINATED NOTES DUE 2009
----------
PURCHASE AGREEMENT
July 21, 1999
Goldman, Sachs & Co.,
Donaldson, Lufkin & Jenrette Securities Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
As representatives of the several Purchasers
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Classic Cable, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Purchasers named in Schedule I hereto (the "Purchasers") an aggregate of $150.0
million principal amount of the 9 3/8% Senior Subordinated Notes due 2009 (the
"Securities") of the Company. The Securities will be unconditionally guaranteed
as to the payment of principal, premium, if any, and interest (the "Guarantees")
by each of the entities named in Schedule II hereto (each a "Guarantor" and,
collectively, the "Guarantors").
The Notes are being issued and sold in connection with a Securities
Purchase Agreement (the "Securities Purchase Agreement") dated as of May 11,
1999, as amended, by and among the Company and Buford Group, Inc., a Delaware
corporation ("Buford") and the sellers named therein. The Securities Purchase
Agreement provides that, subject to certain conditions as described therein, the
Company will, directly or indirectly, acquire all of the outstanding capital
stock of Buford (the "Acquisition") for a purchase price of approximately $300.0
million in cash (the "Securities Purchase Consideration").
<PAGE> 2
The proceeds to the Company from the sale to the Purchasers of the
Notes (the "Proceeds") will be used to partially fund the Securities Purchase
Consideration. In addition to the Proceeds, the Company will generate funding
for the Acquisition through (i) borrowings under a credit facility (the "New
Credit Facility") with the financial institutions which are party thereto (the
"Lenders") and Goldman Sachs Credit Partners L.P., as agent for the Lenders, to
be entered into concurrently with the closing of the Acquisition and (ii) an
equity contribution from Brera Classic, L.L.C. ("Brera") to Classic
Communications, Inc., a Delaware corporation and the Company's direct parent
("CCI"), which will then be contributed, after deducting fees, to the Company by
CCI.
1. Each of the Company and the Guarantors, jointly and severally,
represents and warrants to, and agrees with, each of the Purchasers that:
(a) A preliminary offering circular, dated July 7,1999 (the
"Preliminary Offering Circular") and an offering circular, dated July
21, 1999 (the "Offering Circular"), in each case including the
international supplement thereto, have been prepared in connection with
the offering of the Securities. Any reference to the Preliminary
Offering Circular or the Offering Circular shall be deemed to refer to
and include any Additional Issuer Information (as defined in Section
5(f)) furnished by the Company prior to the completion of the
distribution of the Securities. The Preliminary Offering Circular or
the Offering Circular and any amendments or supplements thereto did not
and will not, as of their respective dates, contain an untrue statement
of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by a Purchaser through Goldman,
Sachs & Co. expressly for use therein;
(b) Neither the Company nor any of its subsidiaries has, and
after giving effect to the Acquisition pursuant to the terms of the
Securities Purchase Agreement will have, sustained since the date of
the latest audited financial statements included in the Offering
Circular any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Offering Circular; and, since the respective dates as of which
information is given in the Offering Circular, there has not been, and
after giving effect to the Acquisition pursuant to the terms of the
Securities Purchase Agreement will not be, any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or
any material adverse change in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole,
otherwise than as set forth or contemplated in the Offering Circular;
(c) The Company and its subsidiaries have, and after giving
effect to the Acquisition pursuant to the terms of the Securities
Purchase Agreement will have, good and marketable title in fee simple
to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Offering
Circular or such as do not, in the aggregate, materially affect the
value of such property and do not, in the aggregate, materially
interfere with the
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<PAGE> 3
use made and proposed to be made of such property by the Company and
its subsidiaries; and any real property and buildings held under lease
by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its subsidiaries;
(d) The Company has been, and after giving effect to the
Acquisition pursuant to the terms of the Securities Purchase Agreement
will be, duly incorporated and is validly existing as a corporation in
good standing under the laws of Delaware, with power and authority
(corporate and other) to own its properties and conduct its business as
described in the Offering Circular, and has been, and after giving
effect to the Acquisition pursuant to the terms of the Securities
Purchase Agreement will be, duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is
subject to no material liability or disability by reason of the failure
to be so qualified in any such jurisdiction; and each subsidiary of the
Company has been, and after giving effect to the Acquisition pursuant
to the terms of the Securities Purchase Agreement will be, duly
organized and is validly existing in good standing under the laws of
its jurisdiction of organization;
(e) The Company has an authorized capitalization as set forth in
the Offering Circular, and all of the issued shares of capital stock of
the Company have been, and after giving effect to the Acquisition
pursuant to the terms of the Securities Purchase Agreement will be,
duly and validly authorized and issued and are and will be fully paid
and non-assessable; and all of the issued shares of capital stock of
each subsidiary of the Company have been, and after giving effect to
the Acquisition pursuant to the terms of the Securities Purchase
Agreement will be, duly and validly authorized and issued, are and will
be fully paid and non-assessable and (except for directors' qualifying
shares and except as otherwise set forth in the Offering Circular) are
and will be owned directly or indirectly by the Company, free and clear
of all liens, encumbrances, equities or claims;
(f) The Securities have been duly authorized by the Company and,
when issued and delivered pursuant to this Agreement, will have been
duly executed, authenticated, issued and delivered and will constitute
valid and legally binding obligations of the Company entitled to the
benefits provided by the Indenture to be dated as of July 28, 1999 (the
"Indenture") between the Company and Chase Bank of Texas, National
Association, as Trustee (the "Trustee"), under which they are to be
issued, which will be substantially in the form previously delivered to
you; the Indenture has been duly authorized and, when executed and
delivered by the Company and the Trustee, the Indenture will constitute
a valid and legally binding instrument of the Company, enforceable
against the Company in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights and
to general equity principles; and the Securities and the Indenture will
conform in all material respects to the descriptions thereof in the
Offering Circular and will be in substantially the form previously
delivered to you;
3
<PAGE> 4
(g) The Guarantees have been duly authorized and, upon the due
authorization, issuance and delivery of the related Securities and the
due endorsement of the Guarantees thereon, will have been duly
executed, authenticated, issued and delivered and will constitute valid
and legally binding obligations of such Guarantor entitled to the
benefits provided by the Indenture under which they are to be issued,
and the Guarantees will conform in all material respects to the
description thereof in the Offering Circular and will be in
substantially the form previously delivered to you;
(h) The exchange and registration rights agreement, to be dated
as of July 28, 1999 (the "Registration Rights Agreement"), between the
Company, the Guarantors and the Purchasers has been duly authorized by
the Company and each of the Guarantors and, when executed and delivered
by the Company and each Guarantor, the Registration Rights Agreement
will constitute a valid and legally binding instrument of the Company
and each Guarantor, enforceable in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general equity principles. Pursuant to the Registration
Rights Agreement, the Company and the Guarantors will agree to file
with the Commission, under the circumstances set forth therein, (i) a
registration statement under the United States Securities Act of 1933,
as amended (the "Act"), relating to another series of debt securities
of the Company with terms substantially identical to the Securities
(the "Exchange Securities") to be offered in exchange for the
Securities (the "Exchange Offer"), (ii) to the extent required by the
Registration Rights Agreement, a shelf registration statement pursuant
to Rule 415 of the Act relating to the resale by certain holders of the
Securities and (iii) to the extent required by the Registration Rights
Agreement, a market making registration statement, and in each case, to
use its reasonable best efforts to cause such registration statements
to be declared effective. The Exchange Securities have been duly
authorized for issuance by the Company, and when issued and
authenticated in accordance with the terms of the Indenture will be the
valid and legally binding obligations of the Company, entitled to the
benefits provided by the Indenture, enforceable against the Company in
accordance with their terms. The Guarantees with respect to the
Exchange Securities have been duly authorized for issuance by each
Guarantor, and when issued in accordance with the terms of the
Indenture will be the valid and legally binding obligations of such
Guarantor, entitled to the benefits provided by the Indenture,
enforceable in accordance with their terms. The Registration Rights
Agreement, the Exchange Securities and the Guarantees with respect to
the Exchange Securities will conform, in all material respects, to the
descriptions thereof in the Offering Circular and will be in
substantially the form previously delivered to you;
(i) The New Credit Facility has been duly authorized by the
Company and, when executed and delivered by the Company and the
subsidiaries of the Company that are obligors thereunder, the New
Credit Facility will constitute a valid and legally binding instrument
of the Company, enforceable against the Company in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles; and the
New Credit Facility will conform in all material respects to the
descriptions thereof in the Offering Circular;
4
<PAGE> 5
(j) The Securities Purchase Agreement has been duly authorized,
executed and delivered by the Company, constitutes a valid and legally
binding instrument of the Company, enforceable against the Company in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and the Securities Purchase Agreement conforms to the
descriptions thereof in the Offering Circular;
(k) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale
of the Securities) will violate or result in a violation of Section 7
of the Exchange Act, or any regulation promulgated thereunder,
including, without limitation, Regulations T, U, and X of the Board of
Governors of the Federal Reserve System;
(l) Prior to the date hereof, none of the Company, the
Guarantors nor any of their respective affiliates have taken any action
which is designed to or which has constituted or which might have been
expected to cause or result in stabilization or manipulation of the
price of any security of the Company or any Guarantor in connection
with the offering of the Securities and the Guarantees;
(m) The issue and sale of the Securities and the Guarantees and
the compliance by the Company and the Guarantors with all of the
provisions of the Securities, the Guarantees, the Indenture, the
Registration Rights Agreement and this Agreement and the consummation
of the transactions herein and therein contemplated will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which
the Company or any of its subsidiaries is, or after giving effect to
the Acquisition pursuant to the terms of the Securities Purchase
Agreement will be, a party or by which the Company or any of its
subsidiaries is, or after giving effect to the Acquisition pursuant to
the terms of the Securities Purchase Agreement will be, bound or to
which any of the property or assets of the Company or any of its
subsidiaries is, or after giving effect to the Acquisition pursuant to
the terms of the Securities Purchase Agreement will be, subject (except
such as will not individually or in the aggregate have a Material
Adverse Effect), nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
Company or any Guarantor or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties (other than immaterial FCC and local franchise
authority requirements); and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the
Securities and the Guarantees or the consummation by the Company and
the Guarantors of the transactions contemplated by this Agreement, the
Registration Rights Agreement or the Indenture, except for the filing
of a registration statement by the Company with the Commission pursuant
to the Act pursuant to Section 5(k) hereof and qualification of the
Indenture under the Trust Indenture Act of 1939 (the "TIA") and such
consents, approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Securities by the Purchasers;
5
<PAGE> 6
(n) Neither the Company nor any of its subsidiaries is, and
after giving effect to the Acquisition pursuant to the terms of the
Securities Purchase Agreement neither the Company nor any of its
subsidiaries will be, in violation of its Certificate of Incorporation
or By-laws or in default in the performance or observance of any
obligation, covenant or condition contained in any indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be
bound, except for such default that would not have a Material Adverse
Effect;
(o) The statements set forth in the Offering Circular under the
caption "Description of Notes", insofar as they purport to constitute a
summary of the terms of the Securities and under the captions
"Legislation and Regulation", "Certain Relationships and Related
Transactions", "Description of Other Indebtedness", "Certain United
States Federal Income Tax Considerations" and "Underwriting", insofar
as they purport to describe the provisions of the laws and documents
referred to therein, are accurate and complete in all material
respects;
(p) Other than as set forth in the Offering Circular, there are
no legal or governmental proceedings pending to which the Company or
any of its subsidiaries is, and after giving effect to the Acquisition
pursuant to the terms of the Securities Purchase Agreement will be, a
party or to which any property of the Company or any of its
subsidiaries is, and after giving effect to the Acquisition pursuant to
the terms of the Securities Purchase Agreement will be, the subject
which, if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected to individually or in the
aggregate have a material adverse effect on the general affairs,
management, the current or future financial position, business,
stockholders' equity or results of operations of the Company and its
subsidiaries (a "Material Adverse Effect"); and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others;
(q) When the Securities and the Guarantees are issued and
delivered pursuant to this Agreement, neither the Securities nor the
Guarantees will be of the same class (within the meaning of Rule 144A
under the Act) as securities of the Company or the Guarantors which are
listed on a national securities exchange registered under Section 6 of
the Exchange Act or quoted in a U.S. automated inter-dealer quotation
system;
(r) Each of the Company and the Guarantors is not, and after
giving effect to the offering and sale of the Securities and after
giving effect to the Acquisition pursuant to the terms of the
Securities Purchase Agreement, will not be an "investment company", as
such term is defined in the United States Investment Company Act of
1940, as amended (the "Investment Company Act");
(s) None of the Company, the Guarantors or any person acting on
its or their behalf (other than the Purchasers and their affiliates as
to whom the Company and the Guarantors make no representation) has
offered or sold the Securities by means of any general solicitation or
general advertising within the meaning of Rule 502(c) under the Act or,
with respect to Securities and Guarantees sold outside the United
States to non-U.S. persons (as defined in Rule 902 under the Act), by
means of any directed selling efforts within the meaning of Rule 902
under the Act and the Company, the Guarantors, any affiliate of the
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<PAGE> 7
Company or the Guarantors and any person acting on its or their behalf
(other than the Purchasers and their affiliates as to whom the Company
and the Guarantors make no representation) has complied with and will
implement the "offering restriction" within the meaning of such Rule
902;
(t) Within the preceding six months none of the Company, the
Guarantors or any other person acting on behalf of the Company or any
Guarantor (other than the Purchasers and their affiliates as to whom
the Company and the Guarantors make no representation) has offered or
sold to any person any Securities or Guarantees, or any securities of
the same or a similar class as the Securities or Guarantees, other than
Securities and Guarantees offered or sold to the Purchasers hereunder.
The Company and the Guarantors will take reasonable precautions
designed to insure that any offer or sale, direct or indirect, in the
United States or to any U.S. person (as defined in Rule 902 under the
Act) of any Securities, any Guarantee or any substantially similar
security issued by the Company or any Guarantor, within six months
subsequent to the date on which the distribution of the Securities and
the Guarantees has been completed (as notified to the Company by
Goldman, Sachs & Co.), is made under restrictions and other
circumstances reasonably designed not to affect the status of the offer
and sale of the Securities and the Guarantees in the United States and
to U.S. persons contemplated by this Agreement as transactions exempt
from the registration provisions of the Act;
(u) Ernst & Young, LLP who have certified certain financial
statements of the Company and its subsidiaries, and KPMG LLP, who have
certified certain financial statements of Buford and its subsidiaries,
are each independent public accountants as required by the Act and the
rules and regulations of the Commission thereunder;
(v) The Company has reviewed its operations and that of its
subsidiaries and any third parties with which the Company or any of its
subsidiaries has a material relationship to evaluate the extent to
which the business or operations of the Company or any of its
subsidiaries will be affected by the Year 2000 Problem. As a result of
such review, the Company has no reason to believe, and does not
believe, that the Year 2000 Problem will have a Material Adverse
Effect. The "Year 2000 Problem" as used herein means any significant
risk that computer hardware or software used in the receipt,
transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods occurring
prior to January 1, 2000;
(w) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, and after giving effect to the Acquisition
pursuant to the terms of the Securities Purchase Agreement will own or
possess, or be able to acquire on reasonable terms, adequate patents,
patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service
marks, trade names or other intellectual property (collectively,
"Intellectual Property") necessary to carry on the business now
operated by them, or operated by them after giving effect to the
Acquisition, except as would not result in a Material Adverse Effect,
and neither the Company nor any of its subsidiaries
7
<PAGE> 8
has received, and after giving effect to the Acquisition pursuant to
the terms of the Securities Purchase Agreement will have received, any
notice or is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or
of any facts or circumstances which would render any Intellectual
Property invalid or inadequate to protect the interest of the Company
or any of its subsidiaries therein, and which infringement or conflict
(if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, singly or in the aggregate, would result in a
Material Adverse Effect;
(x) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of (collectively,
"authorizations"), any court or governmental authority or agency
(including the Federal Communications Commission (the "FCC")) is
necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or
sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement or the Securities Purchase
Agreement (other than filings which have been made and authorizations
which have been obtained in the case of the Securities Purchase
Agreement and other than immaterial FCC and local franchise authority
requirements); except for the filing of a registration statement by the
Company with the Commission pursuant to the Act pursuant to Section
5(k) hereof and qualification of the Indenture under the TIA and such
consents, approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Securities by the Purchasers;
(y) The Company and its subsidiaries possess, and after giving
effect to the Acquisition pursuant to the terms of the Securities
Purchase Agreement will possess, such permits, franchises, licenses
(including licenses of the FCC), approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them, except
where the failure to possess such Governmental Licenses would not have
a Material Adverse Effect; the Company and its subsidiaries are, and
after giving effect to the Acquisition pursuant to the terms of the
Securities Purchase Agreement will be, in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure
to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full
force and effect would not have a Material Adverse Effect; and neither
the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect;
(z) The Company and its subsidiaries have filed, and after
giving effect to the Acquisition pursuant to the terms of the
Securities Purchase Agreement will have filed, all federal, state,
local and foreign tax returns that are required to be filed or have
duly requested extensions thereof and have paid all material taxes
required to be paid by any of them and any related assessments, fines
or penalties, except for any such tax, assessment, fine or penalty that
is being contested in good faith and by appropriate proceedings; and
adequate charges, accruals and reserves have been provided for in the
financial statements, together with the related schedules and notes,
included in the Offering Circular in respect of
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all material federal, state, local and foreign taxes for all periods as
to which the tax liability of the Company or any of its subsidiaries
has not been fully determined or remains open to examination by
applicable taxing authorities;
(aa) Except as described in the Offering Circular and except as
such matters as would not, singly or in the aggregate, result in a
Material Adverse Effect, (i) neither the Company nor any of its
subsidiaries is, and after giving effect to the Acquisition pursuant to
the terms of the Securities Purchase Agreement will be, in violation of
any federal, state, local or foreign statute, law, rule, regulation,
ordinance, code, policy or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials (collectively, "Environmental
Laws"), (ii) the Company and its subsidiaries have, and after giving
effect to the Acquisition pursuant to the terms of the Securities
Purchase Agreement will have, all permits, authorizations and approvals
required under any applicable Environmental Laws and are each, and
after giving effect to the Acquisition pursuant to the terms of the
Securities Purchase Agreement will each be, in compliance with their
requirements, (iii) there are, and after giving effect to the
Acquisition pursuant to the terms of the Securities Purchase Agreement
there will be, no pending or to the Company's knowledge threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Laws against
the Company or any of its subsidiaries and (iv) there are, and after
giving effect to the Acquisition pursuant to the terms of the
Securities Purchase Agreement there will be, no events or circumstances
that might reasonably be expected to form the basis of an order for
clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency against or affecting the
Company or any of its subsidiaries relating to Hazardous Materials or
Environmental Laws;
(bb) The Company and its subsidiaries carry or are entitled to
the benefits of, and after giving effect to the Acquisition pursuant to
the terms of the Securities Purchase Agreement will carry or be
entitled to the benefits of, insurance, with financially sound and
reputable insurers, in such amounts and covering such risks as is
generally maintained by companies of established repute engaged in the
same or similar business, and all such insurance is in full force and
effect in all material respects;
(cc) The Company is, and after giving effect to the Acquisition
pursuant to the terms of the Securities Purchase Agreement will be,
Solvent. As used herein, the term "Solvent" means, with respect to the
Company on a particular date, that on such date (i) the fair market
value of the assets of the Company is greater than the total amount of
liabilities (including contingent liabilities) of the Company, (ii) the
present fair salable value of the assets of the Company is greater than
the amount that will be required to pay the probable liabilities of the
Company on its debts as they become absolute and matured, (iii) the
Company is able to
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<PAGE> 10
realize upon its assets and pay its debts and other liabilities,
including contingent obligations, as they mature, and (iv) the Company
does not have unreasonably small capital; and
(dd) The Company is not in default under any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument constituting Senior Debt (as defined in the Indenture) or
under the Securities Purchase Agreement, except for defaults of the
Company or any of its subsidiaries that would not have a Material
Adverse Effect.
2. Subject to the terms and conditions herein set forth, the Company
and the Guarantors agree to issue and sell to each of the Purchasers, and each
of the Purchasers agrees, severally and not jointly, to purchase from the
Company and the Guarantors, at a purchase price of 97.25% of the principal
amount thereof, plus accrued interest, if any, from July 28, 1999 to the Time of
Delivery hereunder, the principal amount of Securities (including the Guarantees
thereof) set forth opposite the name of such Purchaser in Schedule I hereto.
3. Upon the authorization by you of the release of the Securities and
the Guarantees, the several Purchasers propose to offer the Securities for sale
upon the terms and conditions set forth in this Agreement and the Offering
Circular, and each Purchaser hereby represents and warrants to, and agrees with
the Company and the Guarantors that:
(a) It will offer and sell the Securities only to: (i) persons who it
reasonably believes are "qualified institutional buyers" ("QIBs") within the
meaning of Rule 144A under the Act in transactions meeting the requirements of
Rule 144A or (ii) upon the terms and conditions set forth in Annex I to this
Agreement;
(b) It is an Institutional Accredited Investor; and
(c) It will not offer or sell the Securities and Guarantees by any form
of general solicitation or general advertising, including but not limited to the
methods described in Rule 502(c) under the Act.
4. (a) The Securities to be purchased by each Purchaser hereunder will
be represented by one or more definitive global Securities in book-entry form,
which will be deposited by or on behalf of the Company with The Depository Trust
Company ("DTC") or its designated custodian. The Company and the Guarantors will
deliver the Securities and the Guarantees to Goldman, Sachs & Co., for the
account of each Purchaser, against payment by or on behalf of such Purchaser of
the purchase price therefor by wire transfer of Federal (same day) funds to an
account designated by the Company, by causing DTC to credit the Securities to
the account of Goldman, Sachs & Co. at DTC. The Company and the Guarantors will
cause the certificates representing the Securities to be made available to
Goldman, Sachs & Co. for checking at least twenty-four hours prior to the Time
of Delivery (as defined below) at the office of DTC or its designated custodian
(the "Designated Office"). The time and date of such delivery and payment shall
be 9:30 a.m., New York City time, on July 28, 1999 or such other time and date
as Goldman, Sachs & Co. and the Company may agree upon in writing. Such time and
date are herein called the "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional
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documents requested by the Purchasers pursuant to Section 7(i) hereof, will be
delivered at such time and date at the offices of Winstead Sechrest & Minick
P.C., 5400 Renaissance Tower, 1201 Elm Street, Dallas, Texas 75270-2199 (the
"Closing Location"), and the Securities and Guarantees will be delivered at the
Designated Office, all at the Time of Delivery. A meeting will be held at the
Closing Location at 3:00 p.m., New York City time, on the New York Business Day
next preceding the Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are generally
authorized or obligated by law or executive order to close.
5. Each of the Company and the Guarantors, jointly and severally,
agrees with each of the Purchasers:
(a) To prepare the Offering Circular in a form approved by you; to make
no amendment or any supplement to the Offering Circular which shall be
disapproved by you promptly after reasonable notice thereof; and to furnish you
with copies thereof;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Securities, provided that in connection therewith neither the Company nor
any Guarantor shall be required to qualify as a foreign corporation or subject
itself to taxation in respect of doing business or to file a general consent to
service of process in any jurisdiction;
(c) To furnish the Purchasers with five copies of the Offering Circular
and each amendment or supplement thereto signed by an authorized officer of the
Company with the independent accountants' report(s) in the Offering Circular,
and any amendment or supplement containing amendments to the financial
statements covered by such report(s), signed by the accountants, and additional
copies thereof in such quantities as you may from time to time reasonably
request, and if, at any time prior to the expiration of nine months after the
date of the Offering Circular, any event shall have occurred as a result of
which the Offering Circular as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made when such Offering Circular is delivered, not misleading,
or, if for any other reason it shall be necessary or desirable during such same
period to amend or supplement the Offering Circular, to notify you and upon your
request to prepare and furnish without charge to each Purchaser and to any
dealer in securities as many copies as you may from time to time reasonably
request of an amended Offering Circular or a supplement to the Offering Circular
which will correct such statement or omission or effect such compliance;
(d) During the period beginning from the date hereof and continuing
until the date six months after the Time of Delivery, not to offer, sell,
contract to sell or otherwise dispose of, except as provided hereunder any
securities of the Company or any Guarantor that are substantially similar to the
Securities or the Guarantees; except to the extent required by existing
registration rights agreements;
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(e) Not to be or become, at any time prior to the expiration of three
years after the Time of Delivery, an open-end investment company, unit
investment trust, closed-end investment company or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act;
(f) At any time when the Company is not subject to Section 13 or 15(d)
of the Exchange Act, for the benefit of holders from time to time of Securities,
to furnish at its expense, upon request, to holders of Securities and
prospective purchasers of securities information (the "Additional Issuer
Information") satisfying the requirements of subsection (d)(4)(i) of Rule 144A
under the Act;
(g) If requested by you, to use its best efforts to cause such
Securities to be eligible for the PORTAL trading system of the National
Association of Securities Dealers, Inc.;
(h) To furnish to the holders of the Securities as soon as practicable
after the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of the Company and
its consolidated subsidiaries certified by independent public accountants) and,
as soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the date of the
Offering Circular), to make available to holders of the Securities consolidated
summary financial information of the Company and its subsidiaries for such
quarter in reasonable detail;
(i) During a period of five years from the date of the Offering
Circular, to furnish to you copies of all reports or other communications
(financial or other) furnished to holders of Securities of the Company or any of
the Guarantors, and to deliver to you (i) as soon as they are available, copies
of any reports and financial statements furnished to or filed with the
Commission or any securities exchange on which the Securities or any class of
securities of the Company or the Guarantors is listed; and (ii) such additional
information concerning the business and financial condition of the Company or
the Guarantors as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission);
(j) During a period of two years after the Time of Delivery, the
Company will not, and will not permit any of its "affiliates" (as defined in
Rule 144 under the Act) to, resell any of the Securities which constitute
"restricted securities" under Rule 144 that have been reacquired by them;
(k) The Company and the Guarantors shall file and use its best efforts
to cause to be declared or become effective under the Act, on or prior to 210.
days after the Time of Delivery, a registration statement on Form S-4 providing
for the registration of the Exchange Securities and the Guarantees thereon, and
the exchange of the Securities for the Exchange Securities, all in a manner
which will permit persons who acquire the Exchange Securities to resell the
Exchange Securities pursuant to Section 4(1) of the Act; and
(l) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the Offering
Circular under the caption "Use of Proceeds".
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6. Each of the Company and the Guarantors, jointly and severally,
covenants and agrees with the several Purchasers that the Company and the
Guarantors will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's and the Guarantors' counsel and
accountants in connection with the issue of the Securities and all other
expenses in connection with the preparation, printing and filing of the
Preliminary Offering Circular and the Offering Circular and any amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Purchasers and dealers; (ii) the cost of printing or producing any Agreement
among Purchasers, this Agreement, the Indenture, the Registration Rights
Agreement, the Blue Sky and Legal Investment Memoranda, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Securities and Guarantees;
(iii) all expenses in connection with the qualification of the Securities and
the Exchange Securities for offering and sale under state securities laws as
provided in Section 5(b) hereof, including the fees and disbursements of counsel
for the Purchasers in connection with such qualification and in connection with
the Blue Sky and legal investment surveys; (iv) any fees charged by securities
rating services for rating the Securities and the Exchange Securities; (v) the
cost of preparing the Securities, the Exchange Securities and the Guarantees
with respect thereto; (vi) the fees and expenses of the Trustee and any agent of
the Trustee and the fees and disbursements of counsel for the Trustee in
connection with the Indenture, the Securities and the Exchange Securities; (vii)
any cost incurred in connection with the designation of the Securities for
trading in PORTAL; and (viii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except as
provided in this Section, and Sections 8 and 11 hereof, the Purchasers will pay
all of their own costs and expenses, including the fees of their counsel,
transfer taxes on resale of any of the Securities by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Purchasers hereunder shall be subject, in
their discretion, to the condition that all representations and warranties and
other statements of the Company and the Guarantors herein are, at and as of the
Time of Delivery, true and correct, the condition that the Company and the
Guarantors shall have performed all of its obligations hereunder theretofore to
be performed, and the following additional conditions:
(a) Latham & Watkins, counsel for the Purchasers, shall have furnished
to you such opinion or opinions, dated the Time of Delivery, with respect to the
matters covered in paragraphs (i), (vii), (viii), (ix), (x), (xi), (xii), (xx)
and (xxi) of subsection (b) below as well as such other related matters as you
may reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(b) Winstead Sechrest & Minick P.C., counsel for the Company, shall
have furnished to you their written opinion, dated the Time of Delivery, in form
and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Delaware,
with corporate power and authority to own its properties and conduct
its business as described in the Offering Circular;
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(ii) The Company has an authorized capitalization as set forth
in the Offering Circular, and all of the issued shares of capital stock
of the Company have been duly and validly authorized and issued and are
fully paid and non-assessable;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction (such
counsel being entitled to rely in respect of the opinion in this clause
upon opinions of local counsel and in respect of matters of fact upon
certificates of officers of the Company, provided that such counsel
shall state that they believe that both you and they are justified in
relying upon such opinions and certificates);
(iv) Each subsidiary of the Company has been duly organized and
is validly existing as a corporation, limited liability company or
limited partnership, in good standing under the laws of its
jurisdiction of organization; and all of the issued shares of capital
stock of each such subsidiary have been duly and validly authorized and
issued, are fully paid and non-assessable, and (except for directors'
qualifying shares and except as otherwise set forth in the Offering
Circular) are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims (such counsel
being entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact upon
certificates of officers of the Company or its subsidiaries, provided
that such counsel shall state that they believe that both you and they
are justified in relying upon such opinions and certificates);
(v) To the best of such counsel's knowledge and other than as
set forth in the Offering Circular, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is
a party or of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the current or future
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; and, to the best of
such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company and each of the Guarantors;
(vii) The Securities have been duly authorized, executed,
authenticated, issued and delivered and constitute valid and legally
binding obligations of the Company entitled to the benefits provided by
the Indenture; and the Securities and the Indenture conform to the
descriptions thereof in the Offering Circular; The Securities have been
duly authorized by the Company; the temporary global Security has been
duly executed, authenticated, issued and delivered and constitutes a
valid and legally binding obligation of the Company entitled to the
benefits provided by the Indenture; the Securities in definitive form,
when executed, authenticated, issued and delivered in exchange for the
temporary global Security in accordance with the terms of the
Indenture, will have been duly executed, authenticated,
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issued and delivered and will constitute valid and legally binding
obligations of the Company entitled to the benefits provided by the
Indenture; and the temporary global Security and the Indenture conform,
and the Securities will conform, to the descriptions thereof in the
Offering Circular;
(viii) The Guarantees have been duly authorized, executed,
issued and delivered and constitute valid and legally binding
obligations of the Guarantors entitled to the benefits provided by the
Indenture; and the Guarantees conform in all material respects to the
descriptions thereof in the Offering Circular;
(ix) The Exchange Securities have been duly authorized;
(x) The Guarantees with respect to the Exchange Securities have
been duly authorized;
(xi) The Indenture has been duly authorized, executed and
delivered by the parties thereto and constitutes a valid and legally
binding instrument, enforceable in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general equity principles;
(xii) The Registration Rights Agreement has been duly
authorized, executed and delivered by the parties thereto and
constitutes a valid and legally binding instrument, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(xiii) The New Credit Facility has been duly authorized,
executed and delivered by the parties thereto and constitutes a valid
and legally binding instrument, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles;
(xiv) The Securities Purchase Agreement has been duly
authorized, executed and delivered by the parties thereto and
constitutes a valid and legally binding instrument, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(xv) The issue and sale of the Securities and the Guarantees and
the compliance by the Company and the Guarantors with all of the
provisions of the Securities, the Indenture, the Registration Rights
Agreement and this Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan agreement
or other material agreement or instrument known to such counsel to
which the Company or any of its subsidiaries is a party or by which the
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Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject, nor will such actions result in any violation of the
provisions of the Certificate of Incorporation or By-laws, or
Certificate of Limited Liability Company or Limited Liability Company
Agreement, or Certificate of Limited Partnership or Limited Partnership
Agreement, of the Company or any Guarantor or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties;
(xvi) No consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or
body is required for the issue and sale of the Securities and the
Guarantees or the consummation by the Company and the Guarantors of the
transactions contemplated by this Agreement, the Registration Rights
Agreement or the Indenture, except such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase
and distribution of the Securities by the Purchasers;
(xvii) The statements set forth in the Offering Circular under
the caption "Description of Notes", insofar as they purport to
constitute a summary of the terms of the Securities and under the
captions "Certain Relationships and Related Transactions", "Description
of Other Indebtedness", "Certain United States Federal Income Tax
Considerations" and "Underwriting", insofar as they purport to describe
the provisions of the laws and documents referred to therein, are
accurate and complete in all material respects;
(xviii) No registration of the Securities under the Act, and no
qualification of an indenture under the United States Trust Indenture
Act of 1939 with respect thereto, is required for the offer, sale and
initial resale of the Securities by the Purchasers in the manner
contemplated by this Agreement;
(xix) Such counsel have no reason to believe that the Offering
Circular and any further amendments or supplements thereto made by the
Company prior to the Time of Delivery (other than the financial
statements therein, as to which such counsel need express no opinion)
contained as of its date or contains as of the Time of Delivery an
untrue statement of a material fact or omitted or omits, as the case
may be, to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(xx) Each of the Company and the Guarantors is not an
"investment company", as such term is defined in the Investment Company
Act; and
(xxi) Except as set forth in the Offering Circular, each of the
Company and its subsidiaries has all of the licenses, permits,
franchises and authorizations required by each state in which it
operates, or the political subdivisions thereof, for the provision of
cable television services (as such counsel understands service to be
provided which may be based on a certificate of an officer of the
Company, provided that such counsel shall state that they believe that
both the Purchasers and such counsel are justified in relying on such
certificate), where the failure to obtain or hold such license, permit,
franchise or authorization would have a Material Adverse Effect.
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(c) Cole Raywid & Braverman, regulatory counsel for the Company, shall
have furnished to you their written opinion, dated the Time of Delivery, in form
and substance satisfactory to you, to the effect that:
(i) The statements set forth in the Offering Circular under the
caption "Legislation and Regulation," insofar as they purport to
describe the provisions of the laws and documents referred to therein,
are accurate and complete in all material respects;
(ii) The Company and its subsidiaries operate cable television
systems which serve the communities listed on Attachment 1 hereto. Each
such community has been registered with the FCC;
(iii) The Company and its subsidiaries hold the FCC licenses set
forth on Attachment 1 hereto, each of which is in full force and
effect, and each of the Company and its subsidiaries have fulfilled and
performed all material obligations with respect thereto. To the best of
our knowledge, these are the only FCC licenses which are presently
necessary to the business of the Company and its subsidiaries as now
conducted, except for those licenses that are not material to the
Company. To the best of our knowledge, no condition exists or event has
occurred which permits or which after lapse of time or the giving of
notice or both would permit the suspension, revocation, impairment,
forfeiture, nonrenewal or termination of any FCC license set forth on
Attachment 1. To the best of our knowledge, neither the Company nor any
of its subsidiaries has received written notice of any violation or
institution of any cease and desist proceeding with respect thereto;
(iv) Except with respect to general rulemakings and similar
matters relating generally to the cable television industry, there is
no action, suit or proceeding pending at the FCC, or, to the best of
our knowledge after due investigation with respect thereto, any inquiry
or investigation by the FCC pending or proceeding threatened by the FCC
against or affecting the Company or any of its subsidiaries which might
have Material Adverse Effect upon the Company and its subsidiaries or
the operation of the cable systems of the Company and its subsidiaries;
and
(v) The execution, delivery and performance by the Company of
the Purchase Agreement, the Registration Rights Agreement, the
Indenture, the Notes and the New Senior Credit Agreement and the
consummation of the Acquisition do not require the approval of the FCC
and will not result in any violation of the Communications Act of 1934,
as amended, or any rule or regulation of the FCC; provided however,
that prior FCC approval is required for the transfer of control of FCC
licenses, and prior FCC approval or filing may be required to foreclose
upon certain of the collateral pledged under the New Senior Credit
Agreement, and provided further, that the secured parties under the New
Senior Credit Agreement comply with the Communications Act and the
rules and regulations of the FCC, including, but not limited to,
ownership restrictions with respect to the ownership of the pledged
collateral.
(d) On the date of the Offering Circular prior to the execution of this
Agreement and also at the Time of Delivery, Ernst & Young, LLP shall have
furnished to you a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, to the effect set forth in
Annex II hereto;
17
<PAGE> 18
(e) On the date of the Offering Circular prior to the execution of this
Agreement and also at the Time of Delivery, KPMG LLP shall have furnished to you
a letter or letters, dated the respective dates of delivery thereof, in form and
substance satisfactory to you, to the effect set forth in Annex II hereto;
(f) On the date of the Offering Circular prior to the execution of this
Agreement and also at the Time of Delivery, Gainer Donnelly & Desroches shall
have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you;
(g) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Offering Circular any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Offering Circular, and (ii) since the
respective dates as of which information is given in the Offering Circular there
shall not have been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Offering
Circular, the effect of which, in any such case described in Clause (i) or (ii),
is in the judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Securities on the terms and in the manner contemplated in this Agreement
and in the Offering Circular;
(h) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's and any Guarantors' debt securities by any
"nationally recognized statistical rating organization", as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
and any Guarantors' debt securities;
(i) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange; (ii) a general moratorium on
commercial banking activities declared by either Federal or New York State
authorities; or (iii) the outbreak or escalation of hostilities involving the
United States or the declaration by the United States of a national emergency or
war, if the effect of any such event specified in this Clause (iii) in the
judgment of the Representatives makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Securities on the terms and in
the manner contemplated in the Offering Circular; or (iv) the occurrence of any
material adverse change in the existing, financial, political or economic
conditions in the United States or elsewhere which, in the judgment of the
Representatives, would materially and adversely affect the financial markets or
the markets for the Securities and other debt securities;
(j) The Securities have been designated for trading on PORTAL;
(k) The Company shall have furnished or caused to be furnished to you
at the Time of Delivery certificates of officers of the Company and the
Guarantors satisfactory to you as to the accuracy of the representations and
warranties of the Company and the Guarantors herein at and as
18
<PAGE> 19
of such Time of Delivery, as to the performance by the Company of all of its
obligations hereunder to be performed at or prior to such Time of Delivery, as
to the matters set forth in subsections (g) and (h) of this Section and as to
such other matters as you may reasonably request;
(l) The Company shall have entered into the New Credit Facility (the
form and substance of which shall be acceptable to the Purchasers) and the
Purchasers shall have received copies of counterparts, conformed as executed
thereof and of all other documents and agreements entered into in connection
therewith;
(m) The Company shall have entered into the Securities Purchase
Agreement (the form and substance of which shall be acceptable to the
Purchasers) and the Purchasers shall have received counterparts, conformed as
executed thereof and of all other documents and agreements entered into in
connection therewith. The Securities Purchase Agreement shall be in full force
and effect, all conditions thereto shall have been satisfied, and no condition
shall have been waived without the express consent of Goldman, Sachs & Co.,
which consent shall not be unreasonably withheld; and
(n) CCI shall have received an equity contribution from Brera Classic,
L.L.C. and shall have contributed such funds to the Company as set forth in the
Offering Circular.
8. (a) The Company and each Guarantor will, jointly and severally,
indemnify and hold harmless each Purchaser against any losses, claims, damages
or liabilities, joint or several, to which such Purchaser may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Circular or the Offering Circular, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein not misleading, and will reimburse each Purchaser for any legal or other
expenses reasonably incurred by such Purchaser in connection with investigating
or defending any such action or claim as such expenses are incurred; provided,
however, that neither the Company nor any Guarantor shall be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Offering Circular or the Offering
Circular or any such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by any Purchaser through
Goldman, Sachs & Co. expressly for use therein.
(b) Each Purchaser will indemnify and hold harmless the Company and the
Guarantors against any losses, claims, damages or liabilities to which the
Company and any Guarantor may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Offering Circular or
the Offering Circular, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact or necessary to make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary Offering
Circular or the Offering Circular or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Purchaser through Goldman, Sachs & Co. expressly for use
therein; and will reimburse the Company and the Guarantors for any legal or
other
19
<PAGE> 20
expenses reasonably incurred by the Company and the Guarantors in connection
with investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to,
or an admission of, fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Guarantors on the one hand and
the Purchasers on the other from the offering of the Securities. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Guarantors on the one hand and the Purchasers on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Guarantors on the one hand and the Purchasers on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company and the
Guarantors bear to the total underwriting discounts and commissions received by
the Purchasers, in each case as set forth in the Offering Circular. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
and the Guarantors on the one hand or
20
<PAGE> 21
the Purchasers on the other and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company, the Guarantors and the Purchasers agree that it would not be just
and equitable if contribution pursuant to this subsection (d) were determined by
pro rata allocation (even if the Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (d),
no Purchaser shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to investors were offered to investors exceeds the amount of any
damages which such Purchaser has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. The
Purchasers' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) The obligations of the Company and the Guarantors under this
Section 8 shall be in addition to any liability which the Company and the
Guarantors may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Purchaser within the
meaning of the Act; and the obligations of the Purchasers under this Section 8
shall be in addition to any liability which the respective Purchasers may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company or any Guarantor and to each person, if any,
who controls the Company or any Guarantor within the meaning of the Act.
9. (a) If any Purchaser shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Securities on
the terms contained herein. If within thirty-six hours after such default by any
Purchaser you do not arrange for the purchase of such Securities, then the
Company shall be entitled to a further period of thirty-six hours within which
to procure another party or other parties satisfactory to you to purchase such
Securities on such terms. In the event that, within the respective prescribed
periods, you notify the Company that you have so arranged for the purchase of
such Securities, or the Company notifies you that it has so arranged for the
purchase of such Securities, you or the Company shall have the right to postpone
the Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Offering Circular,
or in any other documents or arrangements, and the Company agrees to prepare
promptly any amendments to the Offering Circular which in your opinion may
thereby be made necessary. The term "Purchaser" as used in this Agreement shall
include any person substituted under this Section with like effect as if such
person had originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of such
Securities which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Securities, then the Company shall have
the right to require each non-defaulting Purchaser to purchase the principal
amount of Securities which such Purchaser agreed to purchase hereunder and, in
addition, to require each non-defaulting
21
<PAGE> 22
Purchaser to purchase its pro rata share (based on the principal amount of
Securities which such Purchaser agreed to purchase hereunder) of the Securities
of such defaulting Purchaser or Purchasers for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Purchaser from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of Securities
which remains unpurchased exceeds one-eleventh of the aggregate principal amount
of all the Securities, or if the Company shall not exercise the right described
in subsection (b) above to require non-defaulting Purchasers to purchase
Securities of a defaulting Purchaser or Purchasers, then this Agreement shall
thereupon terminate, without liability on the part of any non-defaulting
Purchaser or the Company and the Guarantors, except for the expenses to be borne
by the Company, the Guarantors and the Purchasers as provided in Section 6
hereof and the indemnity and contribution agreements in Section 8 hereof; but
nothing herein shall relieve a defaulting Purchaser from liability for its
default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Guarantors and the several Purchasers,
as set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Purchaser or any controlling person of any Purchaser, or the
Company, the Guarantors or any officer or director or controlling person of the
Company or a Guarantor, and shall survive delivery of and payment for the
Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Purchaser except as
provided in Sections 6 and 8 hereof; but, if for any other reason, the
Securities (including the Guarantees with respect thereto) are not delivered by
or on behalf of the Company and the Guarantors as provided herein, the Company
and the Guarantors will reimburse the Purchasers through you for all
out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Purchasers in making
preparations for the purchase, sale and delivery of the Securities, but the
Company shall then be under no further liability to any Purchaser except as
provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Purchasers, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Purchaser made or given
by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchasers shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 21st Floor, New York, New York 10005, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the Offering
Circular, Attention: Secretary, with a copy to Brera, 712 Fifth Avenue, 34th
Floor, New York, NY 10019; provided, however, that any notice to a Purchaser
pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or
facsimile transmission to such Purchaser at its address set forth in its
Purchasers' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied
22
<PAGE> 23
to the Company by you upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Purchasers, the Company, the Guarantors and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
and the Guarantors and each person who controls the Company, a Guarantor or any
Purchaser, and their respective heirs, executors, administrators, successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. No purchaser of any of the Securities from any Purchaser
shall be deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one and
the same instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company and each of the Representatives plus one
for each counsel counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Purchasers, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Purchasers and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Purchasers is pursuant to the authority set forth in a form of Agreement among
Purchasers, the form of which shall be submitted to the Company for examination
upon request, but without warranty on your part as to the authority of the
signers thereof.
23
<PAGE> 24
Very truly yours,
CLASSIC CABLE, INC.
By:
--------------------------------------------
Name:
Title:
CLASSIC CABLE HOLDING, INC.
By:
--------------------------------------------
Name:
Title:
PONCA HOLDINGS, INC.
By:
--------------------------------------------
Name:
Title:
CLASSIC TELEPHONE, INC.
By:
--------------------------------------------
Name:
Title:
UNIVERSAL CABLE HOLDINGS, INC.
By:
--------------------------------------------
Name:
Title:
UNIVERSAL CABLE COMMUNICATIONS INC.
By:
--------------------------------------------
Name:
Title:
<PAGE> 25
UNIVERSAL CABLE OF BEAVER, OKLAHOMA, INC.
By:
--------------------------------------------
Name:
Title:
UNIVERSAL CABLE MIDWEST, INC.
By:
--------------------------------------------
Name:
Title:
WT ACQUISITION CORPORATION
By:
--------------------------------------------
Name:
Title:
W.K. COMMUNICATIONS, INC.
By:
--------------------------------------------
Name:
Title:
TELEVISION ENTERPRISES, INC.
By:
--------------------------------------------
Name:
Title:
BLACK CREEK MANAGEMENT, L.L.C.
By:
--------------------------------------------
Name:
Title:
BLACK CREEK COMMUNICATIONS, L.P.
By:
--------------------------------------------
Name:
Title:
<PAGE> 26
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
BY:
------------------------------------------------------
(GOLDMAN, SACHS & CO)
On behalf of each of the Purchasers
<PAGE> 27
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
SECURITIES
TO BE
PURCHASER PURCHASED
--------- ---------
<S> <C>
Goldman, Sachs & Co......................................................................... $ 90,000,000
Donaldson, Lufkin & Jenrette Securities Corporation......................................... 30,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................................................. 30,000,000
-------------
Total..................................................................... $ 150,000,000
=============
</TABLE>
<PAGE> 28
SCHEDULE II
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 Management, L.L.C.
Black Creek Communications, L.P.
Buford Group, Inc. (as of the Time of Delivery)
Friendship Cable of Texas, Inc. (as of the Time of Delivery)
Buford Television, Inc. (as of the Time of Delivery)
CallCom 24, Inc. (as of the Time of Delivery)
Correctional Cable TV, Inc. (as of the Time of Delivery)
Friendship Cable of Arkansas, Inc. (as of the Time of Delivery)
Buford Television Inc. of Fort Smith (as of the Time of Delivery)
<PAGE> 29
ANNEX I
(1) The Securities have not been and will not be registered under the
Act and may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except in accordance with Regulation S under
the Act or pursuant to an exemption from the registration requirements of the
Act. Each Purchaser represents that it has offered and sold the Securities, and
will offer and sell the Securities (i) as part of its distribution at any time
and (ii) otherwise until 40 days after the later of the commencement of the
offering and the Time of Delivery, only in accordance with Rule 903 of
Regulation S or Rule 144A under the Act. Accordingly, each Purchaser agrees that
neither it, its affiliates nor any persons acting on its or their behalf has
engaged or will engage in any directed selling efforts with respect to the
Securities, and it and they have complied and will comply with the offering
restrictions requirement of Regulation S. Each Purchaser agrees that, at or
prior to confirmation of sale of Securities (other than a sale pursuant to Rule
144A), it will have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases Securities from it
during the restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time
or (ii) otherwise until 40 days after the later of the commencement of
the offering and the closing date, except in either case in accordance
with Regulation S (or Rule 144A if available) under the Act. Terms used
above have the meaning given to them by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation S.
Each Purchaser further agrees that it has not entered and will not
enter into any contractual arrangement with respect to the distribution or
delivery of the Securities, except with its affiliates or with the prior written
consent of the Company.
(2) Notwithstanding the foregoing, Securities in registered form may be
offered, sold and delivered by the Purchasers in the United States and to U.S.
persons pursuant to Section 3 of this Agreement without delivery of the written
statement required by paragraph (1) above.
(3) Each Purchaser further represents and agrees that (a) it has not
offered or sold and will not offer or sell any Securities to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (b) it
has complied, and will comply, with all applicable provisions of the Financial
Services Act of 1986 of Great Britain with respect to anything done by it in
relation to the Securities in, from or otherwise involving the United Kingdom,
and (c) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issuance of
the Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
of Great Britain or is a person to whom the document may otherwise lawfully be
issued or passed on.
A-1
<PAGE> 30
(4) Each Purchaser agrees that it will not offer, sell or deliver any
of the Securities in any jurisdiction outside the United States except under
circumstances that will result in compliance with the applicable laws thereof,
and that it will take at its own expense whatever action is required to permit
its purchase and resale of the Securities in such jurisdictions. Each Purchaser
understands that no action has been taken to permit a public offering in any
jurisdiction outside the United States where action would be required for such
purpose. Each Purchaser agrees not to cause any advertisement of the Securities
to be published in any newspaper or periodical or posted in any public place and
not to issue any circular relating to the Securities, except in any such case
with Goldman, Sachs & Co.'s express written consent and then only at its own
risk and expense.
A-2
<PAGE> 31
ANNEX II
Pursuant to Section 7(c) and 7(d) of the Purchase Agreement, the
accountants shall furnish letters to the Purchasers to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Securities Exchange Act of 1934 (the "Exchange Act") and the applicable
published rules and regulations thereunder;
(ii) In our opinion, the consolidated financial statements and
financial statement schedules audited by us and included in the
Offering Circular comply as to form in all material respects with the
applicable requirements of the Exchange Act and the related published
rules and regulations;
(iii) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Offering
Circular agrees with the corresponding amounts (after restatements
where applicable) in the audited consolidated financial statements for
such five fiscal years;
(iv) On the basis of limited procedures not constituting an
audit in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included in
the Offering Circular, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Offering Circular are not in
conformity with generally accepted accounting principles
applied on the basis substantially consistent with the basis
for the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Offering Circular;
(B) any other unaudited income statement data and balance
sheet items included in the Offering Circular do not agree
with the corresponding items in the unaudited consolidated
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited consolidated
financial statements included in the Offering Circular;
(C) the unaudited financial statements which were not
included in the Offering Circular but from which were derived
any unaudited condensed financial statements referred to in
Clause (A) and any unaudited income statement data and balance
sheet
AII-1
<PAGE> 32
items included in the Offering Circular and referred to in
Clause (B) were not determined on a basis substantially
consistent with the basis for the audited consolidated
financial statements included in the Offering Circular;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Offering Circular do not
comply as to form in all material respects with the applicable
accounting requirements or the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days prior
to the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital
stock upon exercise of options and stock appreciation rights,
upon earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest financial statements included in the
Offering Circular or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any
decreases in consolidated net current assets or stockholders'
equity or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in
each case as compared with amounts shown in the latest balance
sheet included in the Offering Circular except in each case
for changes, increases or decreases which the Offering
Circular discloses have occurred or may occur or which are
described in such letter; or
(F) for the period from the date of the latest financial
statements included in the Offering Circular to the specified
date referred to in Clause (E) there were any decreases in
consolidated net revenues or operating profit or the total or
per share amounts of consolidated net income or other items
specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as
compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representatives, except in each case for decreases or
increases which the Offering Circular discloses have occurred
or may occur or which are described in such letter.
(v) In addition to the examination referred to in their
report(s) included in the Offering Circular and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraphs (iii) and (iv) above, they have carried out certain
specified procedures, not constituting an audit in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives,
which are derived from the general accounting records of the Company
and its subsidiaries, which appear in the Offering Circular, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and
have found them to be in agreement.
AII-2
<PAGE> 1
EXECUTION COPY
CLASSIC CABLE, INC.
9 3/8% SENIOR SUBORDINATED NOTES DUE 2009
UNCONDITIONALLY GUARANTEED AS TO THE
PAYMENT OF PRINCIPAL, PREMIUM,
IF ANY, AND INTEREST BY
EACH ENTITY LISTED ON SCHEDULE I HERETO
-------------
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
July 28,1999
Goldman, Sachs & Co.
Merrill Lynch & Co.
Donaldson, Lufkin & Jenrette
As representatives of the several Purchasers
named in Schedule I to the Purchase Agreement
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Classic Cable, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to the Purchasers (as defined herein) upon the terms set forth
in the Purchase Agreement (as defined herein) its 9 3/8% Senior Subordinated
Notes due 2009 (the "Securities"), which are unconditionally guaranteed by the
Guarantors named on Schedule I hereto. As an inducement to the Purchasers to
enter into the Purchase Agreement and in satisfaction of a condition to the
obligations of the Purchasers thereunder, the Company and the Guarantors agree
with the Purchasers for the benefit of holders (as defined herein) from time to
time of the Registrable Securities (as defined herein) as follows:
1. Certain Definitions. For purposes of this Exchange and Registration
Rights Agreement, the following terms shall have the following respective
meanings:
"Base Interest" shall mean the interest that would otherwise accrue on
the Securities under the terms thereof and the Indenture, without giving
effect to the provisions of this Exchange and Registration Rights
Agreement.
The term "broker-dealer" shall mean any broker or dealer registered
with the Commission under the Exchange Act.
<PAGE> 2
"Closing Date" shall mean the date on which the Securities are
initially issued.
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
Exchange Act or the Securities Act, whichever is the relevant statute for
the particular purpose.
"Conduct Rules" has the meaning assigned thereto in Section 3(d)(xix).
"Effective Time," in the case of (i) an Exchange Registration, shall
mean the time and date as of which the Commission declares the Exchange
Registration Statement effective or as of which the Exchange Registration
Statement otherwise becomes effective and (ii) a Shelf Registration, shall
mean the time and date as of which the Commission declares the Shelf
Registration Statement effective or as of which the Shelf Registration
Statement otherwise becomes effective.
"Electing Holder" shall mean any holder of Registrable Securities that
has returned a completed and signed Notice and Questionnaire to the Company
in accordance with Section 3(d)(ii) or 3(d)(iii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
"Exchange Offer" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Registration" shall have the meaning assigned thereto in
Section 3(c) hereof.
"Exchange Registration Statement" shall have the meaning assigned
thereto in Section 2(a) hereof.
"Exchange Securities" shall have the meaning assigned thereto in
Section 2(a) hereof.
"Guarantors" shall have the meaning assigned thereto in the Indenture.
The term "holder" shall mean each of the Purchasers and other persons
who acquire Registrable Securities from time to time (including any
successors or assigns), in each case for so long as such person owns any
Registrable Securities.
"Indenture" shall mean the Indenture, dated as of July 28, 1999,
between the Company, the Guarantors and Chase Bank of Texas, National
Association, as Trustee, as the same shall be amended from time to time.
"Notice and Questionnaire" means a Notice of Registration Statement
and Selling Securityholder Questionnaire substantially in the form of
Exhibit A hereto.
The term "person" shall mean a corporation, association, partnership,
organization, business, individual, government or political subdivision
thereof or governmental agency.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of
July 21, 1999, between the Purchasers, the Guarantors and the Company
relating to the Securities.
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<PAGE> 3
"Purchasers" shall mean the Purchasers named in Schedule I to the
Purchase Agreement.
"Registrable Securities" shall mean the Securities; provided, however,
that a Security shall cease to be a Registrable Security when (i) in the
circumstances contemplated by Section 2(a) hereof, the Security has been
exchanged for an Exchange Security in an Exchange Offer as contemplated in
Section 2(a) hereof (provided that any Exchange Security that, pursuant to
the last two sentences of Section 2(a), is included in a prospectus for use
in connection with resales by broker-dealers shall be deemed to be a
Registrable Security with respect to Sections 5, 6 and 9 until resale of
such Registrable Security has been effected within the 180-day period
referred to in Section 2(a)); (ii) in the circumstances contemplated by
Section 2(b) hereof, a Shelf Registration Statement registering such
Security under the Securities Act has been declared or becomes effective
and such Security has been sold or otherwise transferred by the holder
thereof pursuant to and in a manner contemplated by such effective Shelf
Registration Statement; (iii) such Security is sold pursuant to Rule 144
under circumstances in which any legend borne by such Security relating to
restrictions on transferability thereof, under the Securities Act or
otherwise, is removed by the Company or pursuant to the Indenture; (iv)
such Security is eligible to be sold pursuant to paragraph (k) of Rule 144;
or (v) such Security shall cease to be outstanding.
"Registration Default" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
"Resale Period" shall have the meaning assigned thereto in Section
2(a) hereof.
"Restricted Holder" shall mean (i) a holder that is an affiliate of
the Company within the meaning of Rule 405, (ii) a holder who acquires
Exchange Securities outside the ordinary course of such holder's business,
(iii) a holder who has arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of distributing Exchange
Securities and (iv) a holder that is a broker-dealer, but only with respect
to Exchange Securities received by such broker-dealer pursuant to an
Exchange Offer in exchange for Registrable Securities acquired by the
broker-dealer directly from the Company.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such
rule promulgated under the Securities Act (or any successor provision), as
the same shall be amended from time to time.
"Securities" shall mean, collectively, the 9 3/8% Senior Subordinated
Notes due 2009 of the Company to be issued and sold to the Purchasers, and
securities issued in exchange therefor or in lieu thereof pursuant to the
Indenture. Each Security is entitled to the benefit of the guarantee
provided for in the Indenture (the "Guarantee") and, unless the context
otherwise requires, any reference herein to a "Security," an "Exchange
Security" or a "Registrable Security" shall include a reference to the
related Guarantee.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
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<PAGE> 4
"Shelf Registration" shall have the meaning assigned thereto in
Section 2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned thereto
in Section 2(b) hereof.
"Special Interest" shall have the meaning assigned thereto in Section
2(c) hereof.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or
any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a
"Section" or "clause" refers to a Section or clause, as the case may be, of this
Exchange and Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Exchange and
Registration Rights Agreement as a whole and not to any particular Section or
other subdivision.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees to
file under the Securities Act, as soon as practicable, but no later than 45 days
after the Closing Date, a registration statement relating to an offer to
exchange (such registration statement, the "Exchange Registration Statement,"
and such offer, the "Exchange Offer") any and all of the Securities for a like
aggregate principal amount of debt securities issued by the Company and
guaranteed by the Guarantors, which debt securities and guarantees are
substantially identical to the Securities and the related Guarantees,
respectively (and are entitled to the benefits of a trust indenture which is
substantially identical to the Indenture or is the Indenture and which has been
qualified under the Trust Indenture Act), except that they have been registered
pursuant to an effective registration statement under the Securities Act and do
not contain provisions for the additional interest contemplated in Section 2(c)
below (such new debt securities hereinafter called "Exchange Securities"). The
Company agrees to use its best efforts to cause the Exchange Registration
Statement to become effective under the Securities Act as soon as practicable,
but no later than 210 days after the Closing Date. The Exchange Offer will be
registered under the Securities Act on the appropriate form and will comply with
all applicable tender offer rules and regulations under the Exchange Act. The
Company further agrees to use its best efforts to commence and complete the
Exchange Offer promptly, but no later than 45 days after such Exchange
Registration Statement has become effective, hold the Exchange Offer open for at
least 30 days and exchange Exchange Securities for all Registrable Securities
that have been properly tendered and not validly withdrawn on or prior to the
expiration of the Exchange Offer. The Exchange Offer will be deemed to have been
"completed" only if the debt securities and related guarantees received by
holders other than Restricted Holders in the Exchange Offer for Registrable
Securities are, upon receipt, transferable by each such holder without
restriction under the Securities Act and the Exchange Act (except for the
requirement to deliver a prospectus included in the Exchange Registration
Statement applicable to resales by any broker-dealer pursuant to an Exchange
Offer in exchange for Registrable Securities other than those acquired by the
broker-dealer directly from the Company) and without material restrictions under
the blue sky or securities laws of a substantial majority of the States of the
United States of America. The Exchange Offer shall be
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<PAGE> 5
deemed to have been completed upon the earlier to occur of (i) the Company
having exchanged the Exchange Securities for all outstanding Registrable
Securities pursuant to the Exchange Offer and (ii) the Company having exchanged,
pursuant to the Exchange Offer, Exchange Securities for all Registrable
Securities that have been properly tendered and not withdrawn before the
expiration of the Exchange Offer, which shall be on a date that is at least 30
days following the commencement of the Exchange Offer. The Company agrees (x) to
include in the Exchange Registration Statement a prospectus for use in any
resales by any holder of Exchange Securities that is a broker-dealer and (y) to
keep such Exchange Registration Statement effective for a period (the "Resale
Period") beginning when Exchange Securities are first issued in the Exchange
Offer and ending upon the earlier of the expiration of the 180th day after the
Exchange Offer has been completed or such time as such broker-dealers no longer
own any Registrable Securities. With respect to such Exchange Registration
Statement, such holders shall have the benefit of the rights of indemnification
and contribution set forth in Sections 6(a), (c), (d) and (e) hereof.
(b) If (i) on or prior to the time the Exchange Offer is completed
existing Commission interpretations are changed such that the debt securities or
the related guarantees received by holders other than Restricted Holders in the
Exchange Offer for Registrable Securities are not or would not be, upon receipt,
transferable by each such holder without restriction under the Securities Act,
(ii) the Exchange Offer has not been completed within 255 days following the
Closing Date or (iii) the Exchange Offer is not available to any holder of the
Securities, the Company shall, in lieu of (or, in the case of clause (iii), in
addition to) conducting the Exchange Offer contemplated by Section 2(a), file
under the Securities Act as soon as practicable, but no later than the later of
45 days after the time such obligation to file arises, a "shelf" registration
statement providing for the registration of, and the sale on a continuous or
delayed basis by the holders of, all of the Registrable Securities, pursuant to
Rule 415 or any similar rule that may be adopted by the Commission (such filing,
the "Shelf Registration" and such registration statement, the "Shelf
Registration Statement"). The Company agrees to use its best efforts (x) to
cause the Shelf Registration Statement to become or be declared effective no
later than 120 days after such Shelf Registration Statement is filed and to keep
such Shelf Registration Statement continuously effective for a period ending on
the earlier of the second anniversary of the Effective Time or such time as
there are no longer any Registrable Securities outstanding, provided, however,
that no holder shall be entitled to be named as a selling securityholder in the
Shelf Registration Statement or to use the prospectus forming a part thereof for
resales of Registrable Securities unless such holder is an Electing Holder, and
(y) after the Effective Time of the Shelf Registration Statement, promptly upon
the request of any holder of Registrable Securities that is not then an Electing
Holder, to take any action reasonably necessary to enable such holder to use the
prospectus forming a part thereof for resales of Registrable Securities,
including, without limitation, any action necessary to identify such holder as a
selling securityholder in the Shelf Registration Statement, provided, however,
that nothing in this Clause (y) shall relieve any such holder of the obligation
to return a completed and signed Notice and Questionnaire to the Company in
accordance with Section 3(d)(iii) hereof. The Company further agrees to
supplement or make amendments to the Shelf Registration Statement, as and when
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration Statement or
by the Securities Act or rules and regulations thereunder for shelf
registration, and the Company agrees to furnish to each
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<PAGE> 6
Electing Holder copies of any such supplement or amendment prior to its being
used or promptly following its filing with the Commission.
Notwithstanding the foregoing, the Company may postpone, for a
period not to exceed 30 days, supplementing or amending the Shelf Registration
Statement if (i) the Company is in possession of material non-public information
related to a proposed financing, recapitalization, acquisition, business
combination or other material transaction and the Board of Directors of the
Company determines (in good faith in a written resolution) that disclosure of
such information would have a material adverse effect on the business or
operations of the Company or any of its subsidiaries and disclosure of such
information is not otherwise required by law and (ii) the Company delivers
notice (which shall include a copy of the resolution of the Board of Directors
with respect to such determination) to the Electing Holders and any placement
agent or underwriting as contemplated by Section 3(d)(viii)(F) to the effect
that Electing Holders may not make offers or sales under the Shelf Registration
Statement; provided, however, that the Company may deliver only two such notices
within any twelve-month period. Promptly upon the earlier of (x) public
disclosure of such material non-public information, (y) the date on which such
non-public information is no linger material and (z) 30 days after the notice is
given by the Company pursuant to clause (ii) above, the Company shall supplement
or amend the Shelf Registration Statement as required by the immediately
preceding sentence and give notice to the Electing Holders that offers and sales
under the Shelf Registration Statement may be resumed.
(c) In the event that (i) the Company has not filed the Exchange
Registration Statement or Shelf Registration Statement on or before the date on
which such registration statement is required to be filed pursuant to Section
2(a) or 2(b) hereof, respectively, or (ii) such Exchange Registration Statement
or Shelf Registration Statement has not become effective or been declared
effective by the Commission on or before the date on which such registration
statement is required to become or be declared effective pursuant to Section
2(a) or 2(b), respectively, or (iii) the Exchange Offer has not been completed
within 45 days after the initial effective date of the Exchange Registration
Statement relating to the Exchange Offer (if the Exchange Offer is then required
to be made) or (iv) any Exchange Registration Statement or Shelf Registration
Statement required by Section 2(a) or 2(b) hereof is filed and declared
effective but shall thereafter either be withdrawn by the Company or shall
become subject to an effective stop order issued pursuant to Section 8(d) of the
Securities Act suspending the effectiveness of such registration statement
(except as specifically permitted herein) without being succeeded immediately by
an additional registration statement filed and declared effective (each such
event referred to in clauses (i) through (iv), a "Registration Default" and each
period during which a Registration Default has occurred and is continuing, a
"Registration Default Period"), then, as liquidated damages for such
Registration Default, subject to the provisions of Section 9(b), special
interest ("Special Interest"), in addition to the Base Interest, shall accrue in
an amount equal to $0.05 per week per $1,000 principal amount of Securities held
by such holder, which amount shall increase after the first 90-day period
following the occurrence of the first Registration Default and at the beginning
of each subsequent 90-day period during such Registration Default by an
additional $0.05 per week per $1,000 principal amount of Securities with respect
to each subsequent week during which any Registration Default exists up to a
maximum amount of $0.50 per week per $1,000 principal amount of Securities, for
the period from an including the date of occurrence of the first Registration
Default until such time as no Registration Default is in effect (after which
such
6
<PAGE> 7
Special Interest shall cease to be payable and the interest rate shall return to
the Base Interest). In the event that any Special Interest becomes payable, the
Company shall promptly notify the Trustee of such event, including any
subsequent increase in the amount of Special Interest, and the beginning and
ending dates therefor. All accrued Special Interest will be paid by the Company
on each February 1 and August 1 to the holder of Securities by wire transfer of
immediately available funds or by federal funds check, and to holders of
certificated Securities by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified; provided that the Company will in no event be required to pay Special
Interest for more than one Registration Default at a time. Notwithstanding
anything to the contrary set forth herein, (1) upon filing of the Exchange
Registration Statement and/or the Shelf Registration Statement, in the case of
(i) above, (2) upon the effectiveness of the Exchange Registration Statement
and/or the Shelf Registration Statement, in the case of (ii) above, (3) upon
completion of the Exchange Offer, in the case of (iii) above, or (4) upon the
filing of a post-effective amendment or an additional registration statement
that causes the Exchange Registration Statement and/or the Shelf Registration
Statement to again be declared effective or made usable, in the case of (iv)
above, the Special Interest payable as a result of such clause (i), (ii), (iii)
or (iv), as applicable, shall cease accruing and the interest rate shall return
to the Base Interest.
(d) The Company shall take, and shall cause the Guarantors to take, all
actions reasonably necessary or advisable to be taken by it to ensure that the
transactions contemplated herein are effected as so contemplated, including all
actions reasonably necessary or desirable to register the Guarantee under the
registration statement contemplated in Section 2(a) or 2(b) hereof, as
applicable.
(e) Any reference herein to a registration statement as of any time
shall be deemed to include any document incorporated, or deemed to be
incorporated, therein by reference as of such time and any reference herein to
any post-effective amendment to a registration statement as of any time shall be
deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time.
3. Registration Procedures.
If the Company files a registration statement pursuant to Section
2(a) or Section 2(b) hereof, the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, whichever may be first, the Company shall qualify the Indenture
under the Trust Indenture Act of 1939.
(b) In the event that such qualification would require the appointment
of a new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Company's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) hereof (the
"Exchange Registration"), if applicable, the Company shall, as soon as
practicable (or as otherwise specified):
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<PAGE> 8
(i) prepare and file with the Commission, as soon as practicable
but no later than 45 days after the Closing Date, an Exchange
Registration Statement on any form which may be utilized by the
Company and which shall permit the Exchange Offer and resales of
Exchange Securities by broker-dealers during the Resale Period to be
effected as contemplated by Section 2(a), and use its best efforts to
cause such Exchange Registration Statement to become effective as soon
as practicable thereafter, but no later than 210 days after the
Closing Date;
(ii) as soon as practicable prepare and file with the Commission
such amendments and supplements to such Exchange Registration
Statement and the prospectus included therein as may be necessary to
effect and maintain the effectiveness of such Exchange Registration
Statement for the periods and purposes contemplated in Section 2(a)
hereof and as may be required by the applicable rules and regulations
of the Commission and the instructions applicable to the form of such
Exchange Registration Statement, and promptly provide each
broker-dealer holding Exchange Securities with such number of copies
of the prospectus included therein (as then amended or supplemented),
in conformity in all material respects with the requirements of the
Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder, as such broker-dealer
reasonably may request prior to the expiration of the Resale Period,
for use in connection with resales of Exchange Securities;
(iii) promptly notify each broker-dealer that has requested or
received copies of the prospectus included in such Exchange
Registration Statement, and confirm such advice in writing, (A) when
such Exchange Registration Statement or the prospectus included
therein or any prospectus amendment or supplement or post-effective
amendment has been filed, and, with respect to such Exchange
Registration Statement or any post-effective amendment, when the same
has become effective, (B) if requested by such broker-dealer, of any
comments by the Commission and by the blue sky or securities
commissioner or regulator of any state with respect thereto or any
request by the Commission for amendments or supplements to such
Exchange Registration Statement or prospectus or for additional
information, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of such Exchange Registration Statement
or the initiation or threatening of any proceedings for that purpose,
(D) if at any time the representations and warranties of the Company
contemplated by Section 5 cease to be true and correct in all material
respects, (E) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Exchange
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (F) at any time
during the Resale Period when a prospectus is required to be delivered
under the Securities Act, that such Exchange Registration Statement,
prospectus, prospectus amendment or supplement or post-effective
amendment does not conform in all material respects to the applicable
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder or contains an
untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
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<PAGE> 9
(iv) in the event that the Company would be required, pursuant to
Section 3(e)(iii)(F) above, to notify any broker-dealers holding
Exchange Securities, reasonably promptly prepare and furnish to each
such holder a reasonable number of copies of a prospectus supplemented
or amended so that, as thereafter delivered to purchasers of such
Exchange Securities during the Resale Period, such prospectus shall
conform in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and shall not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(v) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such Exchange Registration Statement
or any post-effective amendment thereto at the earliest practicable
date;
(vi) use its best efforts to (A) register or qualify the Exchange
Securities under the securities laws or blue sky laws of such
jurisdictions as are contemplated by Section 2(a) no later than the
commencement of the Exchange Offer, (B) keep such registrations or
qualifications in effect and comply with such laws so as to permit the
continuance of offers, sales and dealings therein in such
jurisdictions until the expiration of the Resale Period and (C) take
any and all other actions as may be reasonably necessary or advisable
to enable each broker-dealer holding Exchange Securities to consummate
the disposition thereof in such jurisdictions; provided, however, that
neither the Company nor the Guarantors shall be required for any such
purpose to (1) qualify as a foreign corporation in any jurisdiction
wherein it would not otherwise be required to qualify but for the
requirements of this Section 3(c)(vi), (2) consent to general service
of process or taxation in any such jurisdiction or (3) make any
changes to its certificate of incorporation or by-laws or any
agreement between it and its stockholders;
(vii) use its best efforts to obtain the consent or approval of
each governmental agency or authority, whether federal, state or
local, which may be required to effect the Exchange Registration, the
Exchange Offer and the offering and sale of Exchange Securities by
broker-dealers during the Resale Period;
(viii) provide a CUSIP number for all Exchange Securities, not
later than the applicable Effective Time of the Exchange Registration
Statement;
(ix) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as
soon as practicable but no later than eighteen months after the
effective date of such Exchange Registration Statement, an earning
statement of the Company and its subsidiaries complying with Section
11(a) of the Securities Act (including, at the option of the Company,
Rule 158 thereunder).
(d) In connection with the Company's obligations with respect to the
Shelf Registration, if applicable, the Company shall, as soon as practicable (or
as otherwise specified):
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<PAGE> 10
(i) prepare and file with the Commission, as soon as practicable
but in any case within the time periods specified in Section 2(b)
hereof, a Shelf Registration Statement on any form which may be
utilized by the Company and which shall register all of the
Registrable Securities for resale by the holders thereof in accordance
with such method or methods of disposition as may be specified by such
of the holders as, from time to time, may be Electing Holders and use
its best efforts to cause such Shelf Registration Statement to become
effective as soon as practicable after such filing but in any case
within the time periods specified in Section 2(b) hereof;
(ii) not less than 30 calendar days prior to the Effective Time
of the Shelf Registration Statement, mail the Notice and Questionnaire
to the holders of Registrable Securities; no holder shall be entitled
to be named as a selling securityholder in the Shelf Registration
Statement as of the Effective Time, and no holder shall be entitled to
use the prospectus forming a part thereof for resales of Registrable
Securities at any time, unless such holder has returned a completed
and signed Notice and Questionnaire to the Company by the deadline for
response set forth therein; provided, however, holders of Registrable
Securities shall have at least 28 calendar days from the date on which
the Notice and Questionnaire is first mailed to such holders to return
a completed and signed Notice and Questionnaire to the Company;
(iii) after the Effective Time of the Shelf Registration
Statement, upon the request of any holder of Registrable Securities
that is not then an Electing Holder, promptly send a Notice and
Questionnaire to such holder; provided that the Company shall not be
required to take any action to name such holder as a selling
securityholder in the Shelf Registration Statement or to enable such
holder to use the prospectus forming a part thereof for resales of
Registrable Securities until such holder has returned a completed and
signed Notice and Questionnaire to the Company;
(iv) as soon as practicable prepare and file with the Commission
such amendments and supplements to such Shelf Registration Statement
and the prospectus included therein as may be necessary to effect and
maintain the effectiveness of such Shelf Registration Statement for
the period specified in Section 2(b) hereof and as may be required by
the applicable rules and regulations of the Commission and the
instructions applicable to the form of such Shelf Registration
Statement, and furnish to the Electing Holders copies of any such
supplement or amendment simultaneously with or prior to its being used
or filed with the Commission;
(v) comply with the provisions of the Securities Act with respect
to the disposition of all of the Registrable Securities covered by
such Shelf Registration Statement in accordance with the intended
methods of disposition by the Electing Holders provided for in such
Shelf Registration Statement;
(vi) provide (A) the Electing Holders, (B) the underwriters
(which term, for purposes of this Exchange and Registration Rights
Agreement, shall include a person deemed to be an underwriter within
the meaning of Section 2(a)(11) of the Securities Act), if any,
thereof, (C) any sales or placement agent therefor, (D) counsel for
any such underwriter or agent and (E) not more than one counsel for
all the Electing Holders the opportunity to participate in the
preparation of such Shelf Registration Statement, each
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prospectus included therein or filed with the Commission and each
amendment or supplement thereto;
(vii) for a reasonable period prior to the filing of such Shelf
Registration Statement, and throughout the period specified in Section
2(b) hereof, make available at reasonable times at the Company's
principal place of business or such other reasonable place for
inspection by the persons referred to in Section 3(d)(vi) who shall
certify to the Company that they have a current intention to sell the
Registrable Securities pursuant to the Shelf Registration, such
financial and other information and books and records of the Company,
and cause the officers, employees, counsel and independent certified
public accountants of the Company to respond to such inquiries, as
shall be reasonably necessary, in the judgment of the respective
counsel referred to in such Section 3(d)(vi), to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act;
provided, however, that each such party shall be required to maintain
in confidence and not to disclose to any other person any information
or records reasonably designated by the Company as being confidential,
until such time as (A) such information becomes a matter of public
record (whether by virtue of its inclusion in such Shelf Registration
Statement or otherwise but not because of disclosure by such person or
its representatives), or (B) such person shall be required so to
disclose such information pursuant to a subpoena or order of any court
or other governmental agency or body having jurisdiction over the
matter (subject to the requirements of such order, and only after such
person shall have given the Company prompt prior written notice of
such requirement), or (C) such information is required to be set forth
in such Shelf Registration Statement or the prospectus included
therein or in an amendment to such Shelf Registration Statement or an
amendment or supplement to such prospectus so that such Shelf
Registration Statement, prospectus, amendment or supplement, as the
case may be, complies with applicable requirements of the federal
securities laws and the rules and regulations of the Commission and
does not contain an untrue statement of a material fact or omit to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances then existing;
(viii) promptly notify each of the Electing Holders, any sales or
placement agent therefor and any underwriter thereof (which
notification may be made through any managing underwriter that is a
representative of such underwriter for such purpose) and confirm such
advice in writing, (A) when such Shelf Registration Statement or the
prospectus included therein or any prospectus amendment or supplement
or post-effective amendment has been filed, and, with respect to such
Shelf Registration Statement or any post-effective amendment, when the
same has become effective, (B) if requested, of any comments by the
Commission and by the blue sky or securities commissioner or regulator
of any state with respect thereto or any request by the Commission for
amendments or supplements to such Shelf Registration Statement or
prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of such
Shelf Registration Statement or the initiation or threatening of any
proceedings for that purpose, (D) if at any time the representations
and warranties of the Company contemplated by Section 3(d)(xvii) or
Section 5 cease to be true and correct in all material respects, (E)
of the receipt by the Company of any notification with respect to the
suspension of the qualification of the
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Registrable Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose, or (F) if at any
time when a prospectus is required to be delivered under the
Securities Act, that such Shelf Registration Statement, prospectus,
prospectus amendment or supplement or post-effective amendment does
not conform in all material respects to the applicable requirements of
the Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder or contains an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(ix) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such Shelf Registration Statement or
any post-effective amendment thereto at the earliest practicable date;
(x) if requested by any managing underwriter or underwriters, any
placement or sales agent or any Electing Holder, promptly incorporate
in a prospectus supplement or post-effective amendment such
information as is required by the applicable rules and regulations of
the Commission and as such managing underwriter or underwriters, such
agent or such Electing Holder reasonably specifies should be included
therein relating to the terms of the sale of such Registrable
Securities, including information with respect to the principal amount
of Registrable Securities being sold by such Electing Holder or agent
or to any underwriters, the name and description of such Electing
Holder, agent or underwriter, the offering price of such Registrable
Securities and any discount, commission or other compensation payable
in respect thereof, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the offering of
the Registrable Securities to be sold by such Electing Holder or agent
or to such underwriters, as applicable; and make all required filings
of such prospectus supplement or post-effective amendment promptly
after notification of the matters to be incorporated in such
prospectus supplement or post-effective amendment;
(xi) furnish to each Electing Holder, each placement or sales
agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 3(d)(vi) an executed copy
(or, in the case of an Electing Holder, a conformed copy) of such
Shelf Registration Statement, each such amendment and supplement
thereto (in each case including all exhibits thereto (in the case of
an Electing Holder of Registrable Securities, upon request) and
documents incorporated by reference therein) and such number of copies
of such Shelf Registration Statement (excluding exhibits thereto and
documents incorporated by reference therein unless specifically so
requested by such Electing Holder, agent or underwriter, as the case
may be) and of the prospectus included in such Shelf Registration
Statement (including each preliminary prospectus and any summary
prospectus), in conformity in all material respects with the
applicable requirements of the Securities Act and the Trust Indenture
Act and the rules and regulations of the Commission thereunder, and
such other documents, as such Electing Holder, agent, if any, and
underwriter, if any, may reasonably request in order to facilitate the
offering and disposition of the Registrable Securities owned by such
Electing Holder, or offered or sold by such agent or underwritten by
such underwriter, as applicable, and to permit such Electing Holder,
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<PAGE> 13
agent and underwriter to satisfy the prospectus delivery requirements
of the Securities Act; and the Company hereby consents to the use of
such prospectus (including such preliminary and summary prospectus)
and any amendment or supplement thereto by each such Electing Holder
and by any such agent and underwriter, in each case in the form most
recently provided to such person by the Company, in connection with
the offering and sale of the Registrable Securities covered by the
prospectus (including such preliminary and summary prospectus) or any
supplement or amendment thereto;
(xii) use its best efforts to (A) register or qualify the
Registrable Securities to be included in such Shelf Registration
Statement under such securities laws or blue sky laws of such
jurisdictions as any Electing Holder and each placement or sales
agent, if any, therefor and each underwriter, if any, thereof shall
reasonably request, (B) keep such registrations or qualifications in
effect and comply with such laws so as to permit the continuance of
offers, sales and dealings therein in such jurisdictions during the
period the Shelf Registration is required to remain effective under
Section 2(b) above and for so long as may be necessary to enable any
such Electing Holder, agent or underwriter to complete its
distribution (so long as such distribution is commenced during the
period the Shelf Registration is required to remain effective under
Section 2(b) above) of Securities pursuant to such Shelf Registration
Statement and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each such Electing Holder, agent, if
any, and underwriter, if any, to consummate the disposition in such
jurisdictions of such Registrable Securities; provided, however, that
neither the Company nor the Guarantors shall be required for any such
purpose to (1) qualify as a foreign corporation in any jurisdiction
wherein it would not otherwise be required to qualify but for the
requirements of this Section 3(d)(xii), (2) consent to general service
of process or taxation in any such jurisdiction or (3) make any
changes to its certificate of incorporation or by-laws or any
agreement between it and its stockholders;
(xiii) use its best efforts to obtain the consent or approval of
each governmental agency or authority, whether federal, state or
local, which may be required to effect the Shelf Registration or the
offering or sale in connection therewith or to enable the selling
holder or holders to offer, or to consummate the disposition of, their
Registrable Securities;
(xiv) Unless any Registrable Securities shall be in book-entry
only form, cooperate with the Electing Holders and the managing
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be
sold, which certificates, if so required by any securities exchange
upon which any Registrable Securities are listed, shall be printed,
penned, lithographed or engraved, or produced by any combination of
such methods, on steel engraved borders, and which certificates shall
not bear any restrictive legends; and, in the case of an underwritten
offering, enable such Registrable Securities to be in such
denominations and registered in such names as the managing
underwriters may request at least two business days prior to any sale
of the Registrable Securities;
(xv) provide a CUSIP number for all Registrable Securities, not
later than the applicable Effective Time;
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<PAGE> 14
(xvi) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including customary provisions
relating to indemnification and contribution, and take such other
actions in connection therewith as any Electing Holders aggregating at
least 30% in aggregate principal amount of the Registrable Securities
at the time outstanding shall request in order to expedite or
facilitate the disposition of such Registrable Securities;
(xvii) whether or not an agreement of the type referred to in
Section 3(d)(xvi) hereof is entered into and whether or not any
portion of the offering contemplated by the Shelf Registration is an
underwritten offering or is made through a placement or sales agent or
any other entity, (A) make such representations and warranties to the
Electing Holders and the placement or sales agent, if any, therefor
and the underwriters, if any, thereof in form, substance and scope as
are customarily made in connection with an offering of debt securities
pursuant to any appropriate agreement or to a registration statement
filed on the form applicable to the Shelf Registration; (B) obtain an
opinion of counsel to the Company in customary form and covering such
matters, of the type customarily covered by such an opinion, as the
managing underwriters, if any, or as any Electing Holders of at least
30% in aggregate principal amount of the Registrable Securities at the
time outstanding may reasonably request, addressed to such Electing
Holder or Electing Holders and the placement or sales agent, if any,
therefor and the underwriters, if any, thereof and dated the effective
date of such Shelf Registration Statement (and if such Shelf
Registration Statement contemplates an underwritten offering of a part
or all of the Registrable Securities, dated the date of the closing
under the underwriting agreement relating thereto) (it being agreed
that the matters to be covered by such opinion shall include the due
organization and good standing of the Company and its subsidiaries in
their respective states of organization; the qualification of the
Company and its subsidiaries to transact business as foreign entities
in states where they transact business; the due authorization,
execution and delivery of the relevant agreement of the type referred
to in Section 3(d)(xvi) hereof; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of
the Registrable Securities; the absence of material legal or
governmental proceedings involving the Company not otherwise disclosed
in the Shelf Registration Statement; the absence of governmental
approvals required to be obtained in connection with the Shelf
Registration, the offering and sale of the Registrable Securities,
this Exchange and Registration Rights Agreement or any agreement of
the type referred to in Section 3(d)(xvi) hereof, except such
approvals as may be required under state securities or blue sky laws;
the material compliance as to form of such Shelf Registration
Statement and any documents incorporated by reference therein and of
the Indenture with the requirements of the Securities Act and the
Trust Indenture Act and the rules and regulations of the Commission
thereunder, respectively; and, as of the date of the opinion and of
the Shelf Registration Statement or most recent post-effective
amendment thereto, as the case may be, the absence from such Shelf
Registration Statement and the prospectus included therein, as then
amended or supplemented, and from the documents incorporated by
reference therein (in each case other than the financial statements
and other financial information contained therein) of an untrue
statement of a material fact or the omission to state therein a
material fact necessary to make the statements therein not misleading
(in the
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<PAGE> 15
case of the prospectus and such documents, in the light of the
circumstances then existing at the time that such documents were filed
with the Commission under the Exchange Act)); (C) obtain a "cold
comfort" letter or letters from the independent certified public
accountants of the Company addressed to the selling Electing Holders,
the placement or sales agent, if any, therefor or the underwriters, if
any, thereof, dated (i) the effective date of such Shelf Registration
Statement and (ii) the effective date of any prospectus supplement to
the prospectus included in such Shelf Registration Statement or
post-effective amendment to such Shelf Registration Statement which
includes unaudited or audited financial statements as of a date or for
a period subsequent to that of the latest such statements included in
such prospectus (and, if such Shelf Registration Statement
contemplates an underwritten offering pursuant to any prospectus
supplement to the prospectus included in such Shelf Registration
Statement or post-effective amendment to such Shelf Registration
Statement which includes unaudited or audited financial statements as
of a date or for a period subsequent to that of the latest such
statements included in such prospectus, dated the date of the closing
under the underwriting agreement relating thereto), such letter or
letters to be in customary form and covering such matters of the type
customarily covered by letters of such type; (D) deliver such
documents and certificates, including officers' certificates, as may
be reasonably requested by any Electing Holders of at least 30% in
aggregate principal amount of the Registrable Securities at the time
outstanding or the placement or sales agent, if any, therefor and the
managing underwriters, if any, thereof to evidence the accuracy of the
representations and warranties made pursuant to clause (A) above or
those contained in Section 5(a) hereof and the compliance with or
satisfaction of any agreements or conditions contained in the
underwriting agreement or other agreement entered into by the Company
or the Guarantors; and (E) undertake such obligations relating to
expense reimbursement, indemnification and contribution as are
provided in Section 6 hereof;
(xviii) notify in writing each holder of Registrable Securities
affected thereby of any proposal by the Company to amend or waive any
provision of this Exchange and Registration Rights Agreement pursuant
to Section 9(h) hereof and of any amendment or waiver effected
pursuant thereto, each of which notices shall contain the text of the
amendment or waiver proposed or effected, as the case may be;
(xix) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or
participate as a member of an underwriting syndicate or selling group
or "assist in the distribution" (within the meaning of the Conduct
Rules (the "Conduct Rules") of the National Association of Securities
Dealers, Inc. ("NASD") or any successor thereto, as amended from time
to time) thereof, whether as a holder of such Registrable Securities
or as an underwriter, a placement or sales agent or a broker or dealer
in respect thereof, or otherwise, assist such broker-dealer in
complying with the requirements of such Conduct Rules, including by
(A) if such Conduct Rules shall so require, engaging a "qualified
independent underwriter" (as defined in such Conduct Rules) to
participate in the preparation of the Shelf Registration Statement
relating to such Registrable Securities, to exercise usual standards
of due diligence in respect thereto and, if any portion of the
offering contemplated by such Shelf Registration Statement is an
underwritten offering or is made through a placement or sales agent,
to recommend the yield of such Registrable
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<PAGE> 16
Securities, (B) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters
provided in Section 6 hereof (or to such other customary extent as may
be requested by such underwriter), and (C) providing such information
to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Conduct Rules;
and
(xx) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as
soon as practicable but in any event not later than eighteen months
after the effective date of such Shelf Registration Statement, an
earning statement of the Company and its subsidiaries complying with
Section 11(a) of the Securities Act (including, at the option of the
Company, Rule 158 thereunder).
(e) In the event that the Company would be required, pursuant to
Section 3(d)(viii)(F) above, to notify the Electing Holders, the placement or
sales agent, if any, therefor and the managing underwriters, if any, thereof,
the Company shall reasonably promptly prepare and furnish to each of the
Electing Holders, to each placement or sales agent, if any, and to each such
underwriter, if any, a reasonable number of copies of a prospectus supplemented
or amended so that, as thereafter delivered to purchasers of Registrable
Securities, such prospectus shall conform in all material respects to the
applicable requirements of the Securities Act and the Trust Indenture Act and
the rules and regulations of the Commission thereunder and shall not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing. Each Electing Holder agrees that upon
receipt of any notice from the Company pursuant to Section 3(d)(viii)(F) hereof,
such Electing Holder shall forthwith discontinue the disposition of Registrable
Securities pursuant to the Shelf Registration Statement applicable to such
Registrable Securities until such Electing Holder shall have received copies of
such amended or supplemented prospectus, and if so directed by the Company, such
Electing Holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Electing Holder's
possession of the prospectus covering such Registrable Securities at the time of
receipt of such notice.
(f) In the event of a Shelf Registration, in addition to the
information required to be provided by each Electing Holder in its Notice and
Questionnaire, the Company may require such Electing Holder to furnish to the
Company such additional information regarding such Electing Holder and such
Electing Holder's intended method of distribution of Registrable Securities as
may be required or necessary in order to comply with the Securities Act. Each
such Electing Holder agrees to notify the Company as promptly as practicable of
any inaccuracy or change in information previously furnished by such Electing
Holder to the Company or of the occurrence of any event in either case as a
result of which any prospectus relating to such Shelf Registration contains or
would contain an untrue statement of a material fact regarding such Electing
Holder or such Electing Holder's intended method of disposition of such
Registrable Securities or omits to state any material fact regarding such
Electing Holder or such Electing Holder's intended method of disposition of such
Registrable Securities required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
and promptly to furnish to the Company any additional information required to
correct and update any previously furnished information or required so
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<PAGE> 17
that such prospectus shall not contain, with respect to such Electing Holder or
the disposition of such Registrable Securities, 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 in light of the
circumstances then existing.
(g) Until the expiration of two years after the Closing Date, the
Company will not, and will not permit any of its "affiliates" (as defined in
Rule 144) to, resell any of the Securities that have been reacquired by any of
them except pursuant to an effective registration statement under the Securities
Act.
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid
promptly all expenses incident to the Company's performance of or compliance
with this Exchange and Registration Rights Agreement, including (a) all
Commission and any NASD registration, filing and review fees and expenses
including reasonable fees and disbursements of counsel for the placement or
sales agent or underwriters in connection with such registration, filing and
review, (b) all fees and expenses in connection with the qualification of the
Registrable Securities for offering and sale under the State securities and blue
sky laws referred to in Section 3(d)(xii) hereof and determination of their
eligibility for investment under the laws of such jurisdictions as any managing
underwriters or the Electing Holders may designate, including any reasonable
fees and disbursements of one counsel for the Electing Holders or underwriters
in connection with such qualification and determination, (c) all expenses
relating to the preparation, printing, production, distribution and reproduction
of each registration statement required to be filed hereunder, each prospectus
included therein or prepared for distribution pursuant hereto, each amendment or
supplement to the foregoing, the expenses of preparing the Securities for
delivery and the expenses of printing or producing any underwriting agreements,
agreements among underwriters, selling agreements and blue sky or legal
investment memoranda and all other documents in connection with the offering,
sale or delivery of Securities to be disposed of (including certificates
representing the Securities), (d) messenger, telephone and delivery expenses
relating to the offering, sale or delivery of Securities and the preparation of
documents referred in clause (c) above, (e) fees and expenses of the Trustee
under the Indenture, any agent of the Trustee and any counsel for the Trustee
and of any collateral agent or custodian, (f) internal expenses of the Company
(including all salaries and expenses of the Company's officers and employees
performing legal or accounting duties), (g) fees, disbursements and expenses of
counsel and independent certified public accountants of the Company (including
the expenses of any opinions or "cold comfort" letters required by or incident
to such performance and compliance), (h) fees, disbursements and expenses of any
"qualified independent underwriter" engaged pursuant to Section 3(d)(xix)
hereof, (i) reasonable fees, disbursements and expenses of one counsel for the
Electing Holders retained in connection with a Shelf Registration, as selected
by the Electing Holders of at least a majority in aggregate principal amount of
the Registrable Securities held by Electing Holders (which counsel shall be
reasonably satisfactory to the Company), (j) any fees charged by securities
rating services for rating the Securities, and (k) fees, expenses and
disbursements of any other persons, including special experts, retained by the
Company in connection with such registration (collectively, the "Registration
Expenses"). To the extent that any Registration Expenses are incurred, assumed
or paid by any holder of Registrable Securities or any placement or sales agent
therefor or underwriter thereof, the Company shall reimburse such
17
<PAGE> 18
person for the full amount of the Registration Expenses so incurred, assumed or
paid promptly after receipt of a request therefor. Notwithstanding the
foregoing, the holders of the Registrable Securities being registered shall pay
all agency fees and commissions and underwriting discounts and commissions
attributable to the sale of such Registrable Securities and the fees and
disbursements of any counsel or other advisors or experts retained by such
holders (severally or jointly), other than the counsel and experts specifically
referred to above.
5. Representations and Warranties.
The Company and the Guarantors represent and warrant to, and
agree with, each Purchaser and each of the holders from time to time of
Registrable Securities that:
(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(d) or Section 3(c) hereof and any
further amendments or supplements to any such registration statement or
prospectus, when it becomes effective or is filed with the Commission, as the
case may be, and, in the case of an underwritten offering of Registrable
Securities, at the time of the closing under the underwriting agreement relating
thereto, will conform in all material respects to the requirements of the
Securities Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, and with respect to any prospectus, in the light
of the circumstances then existing, not misleading; and at all times subsequent
to the applicable Effective Time when a prospectus would be required to be
delivered under the Securities Act, other than (A) from (i) such time as a
notice has been given to holders of Registrable Securities pursuant to Section
3(d)(viii)(F) or Section 3(c)(iii)(F) hereof until (ii) such time as the Company
furnishes an amended or supplemented prospectus pursuant to Section 3(e) or
Section 3(c)(iv) hereof or (B) during any suspension of offering and sale
pursuant to the second paragraph of Section 2(b) hereof, each such registration
statement, and each prospectus (including any summary prospectus) contained
therein or furnished pursuant to Section 3(d) or Section 3(c) hereof, as then
amended or supplemented, will conform in all material respects to the
requirements of the Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing; provided, however, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing to the
Company by a holder of Registrable Securities expressly for use therein.
(b) Any documents incorporated by reference in any prospectus referred
to in Section 5(a) hereof, when they become or became effective or are or were
filed with the Commission, as the case may be, will conform or conformed in all
material respects to the requirements of the Securities Act or the Exchange Act,
as applicable, and none of such documents will contain or contained an untrue
statement of a material fact or will omit or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, and
with respect to any prospectus, in the light of the circumstances then existing,
not misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in conformity
with information
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<PAGE> 19
furnished in writing to the Company by a holder of Registrable Securities
expressly for use therein.
(c) The compliance by the Company with all of the provisions of this
Exchange and Registration Rights Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any subsidiary of the Company is a party or by which the
Company or any subsidiary of the Company is bound or to which any of the
property or assets of the Company or any subsidiary of the Company is subject,
other than any such conflict, breach or violation as would not have a material
adverse effect on the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries taken as a whole, nor will such action result in any violation of
the provisions of the certificate of incorporation, as amended, or the by-laws
of the Company or the Guarantors or any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over the Company
or any subsidiary of the Company or any of their properties; and no consent,
approval, authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the consummation by
the Company and the Guarantors of the transactions contemplated by this Exchange
and Registration Rights Agreement, except in connection with the registration
under the Securities Act of the Registrable Securities, qualification of the
Indenture under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under State
securities or blue sky laws in connection with the offering and distribution of
the Securities.
(d) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Company.
6. Indemnification.
(a) Indemnification by the Company and the Guarantors. The Company and
the Guarantors, jointly and severally, will indemnify and hold harmless each of
the holders of Registrable Securities included in an Exchange Registration
Statement, each of the Electing Holders of Registrable Securities included in a
Shelf Registration Statement and each person who participates as a placement or
sales agent or as an underwriter in any offering or sale of such Registrable
Securities against any losses, claims, damages or liabilities, joint or several,
to which such holder, agent or underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Exchange Registration Statement or Shelf Registration Statement, as the case may
be, under which such Registrable Securities were registered under the Securities
Act, or any preliminary, final or summary prospectus contained therein or
furnished by the Company to any such holder, Electing Holder, agent or
underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, and
with respect to any prospectus, in the light of the circumstances under which
they were made, not misleading, and will reimburse such holder, such Electing
Holder, such agent and such underwriter for any legal or other expenses
reasonably incurred by them in
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connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that neither the Company nor the
Guarantors shall be liable to any such person in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, or preliminary, final or summary
prospectus, or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by such person
expressly for use therein.
(b) Indemnification by the Holders and any Agents and Underwriters.
The Company may require, as a condition to including any Registrable Securities
in any Shelf Registration Statement filed pursuant to Section 2(b) hereof and to
entering into any underwriting agreement with respect thereto, that the Company
shall have received an undertaking reasonably satisfactory to it from the
Electing Holder of such Registrable Securities and from each underwriter named
in any such underwriting agreement, severally and not jointly, to (i) indemnify
and hold harmless the Company, the Guarantors, and all other holders of
Registrable Securities, against any losses, claims, damages or liabilities to
which the Company, the Guarantors or such other holders of Registrable
Securities may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in such registration statement, or any preliminary,
final or summary prospectus contained therein or furnished by the Company to any
such Electing Holder, agent or underwriter, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Electing Holder or underwriter
expressly for use therein, and (ii) reimburse the Company and the Guarantors for
any legal or other expenses reasonably incurred by the Company and the
Guarantors in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that no such Electing
Holder shall be required to undertake liability to any person under this Section
6(b) for any amounts in excess of the dollar amount of the proceeds to be
received by such Electing Holder from the sale of such Electing Holder's
Registrable Securities pursuant to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of written notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party otherwise than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, such indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the
20
<PAGE> 21
indemnifying party to such indemnified party of its election so to assume the
defense thereof, such indemnifying party shall not be liable to such indemnified
party for any legal expenses of other counsel or any other expenses, in each
case subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) Contribution. If for any reason the indemnification provisions
contemplated by Section 6(a) or Section 6(b) hereof are unavailable to or
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the indemnifying party and the indemnified
party in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or by such indemnified party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contributions pursuant to this
Section 6(d) were determined by pro rata allocation (even if the holders or any
agents or underwriters or all of them were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 6(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages, or
liabilities (or actions in respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 6(d), no holder shall
be required to contribute any amount in excess of the amount by which the dollar
amount of the proceeds received by such holder from the sale of any Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) exceeds the amount of any damages which such holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission, and no underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The holders' and any underwriters' obligations in this
21
<PAGE> 22
Section 6(d) to contribute shall be several in proportion to the principal
amount of Registrable Securities registered or underwritten, as the case may be,
by them and not joint.
(e) The obligations of the Company and the Guarantors under this
Section 6 shall be in addition to any liability which the Company or the
Guarantors may otherwise have and shall extend, upon the same terms and
conditions, to each officer, director and partner of each holder, agent and
underwriter and each person, if any, who controls any holder, agent or
underwriter within the meaning of the Securities Act; and the obligations of the
holders and any agents or underwriters contemplated by this Section 6 shall be
in addition to any liability which the respective holder, agent or underwriter
may otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company or the Guarantors, including any person who,
with his consent, is named in any registration statement as about to become a
director of the Company or the Guarantors, and to each person, if any, who
controls the Company or the Guarantors within the meaning of the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities
covered by the Shelf Registration are to be sold pursuant to an underwritten
offering, the managing underwriter or underwriters thereof shall be designated
by Electing Holders holding at least a majority in aggregate principal amount of
the Registrable Securities to be included in such offering, provided that such
designated managing underwriter or underwriters is or are reasonably acceptable
to the Company.
(b) Participation by Holders. Each holder of Registrable Securities
hereby agrees with each other such holder that no such holder may participate in
any underwritten offering hereunder unless such holder (i) 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 (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
8. Rule 144.
The Company covenants to the holders of Registrable Securities
that to the extent it shall be required to do so under the Exchange Act, the
Company shall timely file the reports required to be filed by it under the
Exchange Act or the Securities Act (including the reports under Section 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted
by the Commission under the Securities Act) and the rules and regulations
adopted by the Commission thereunder, and shall take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitations of the
exemption provided by Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar or successor rule or regulation
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities in connection with that holder's sale pursuant to Rule
144, the Company shall deliver to such holder a written statement as to whether
it has complied with such requirements.
22
<PAGE> 23
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants,
covenants and agrees that it has not granted, and shall not grant, registration
rights with respect to Registrable Securities or any other securities which
would be inconsistent with the terms contained in this Exchange and Registration
Rights Agreement.
(b) Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if the Company fails to perform any of its
obligations hereunder and that the Purchasers and the holders from time to time
of the Registrable Securities may be irreparably harmed by any such failure, and
accordingly agree that the Purchasers and such holders, in addition to any other
remedy to which they may be entitled at law or in equity, shall be entitled to
compel specific performance of the obligations of the Company under this
Exchange and Registration Rights Agreement in accordance with the terms and
conditions of this Exchange and Registration Rights Agreement, in any court of
the United States or any State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: If to the Company, to it
at 515 Congress Avenue, Suite 2626, Austin TX 78701, and if to a holder, to the
address of such holder set forth in the security register or other records of
the Company, or to such other address as the Company or any such holder may have
furnished to the other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this Exchange
and Registration Rights Agreement shall be binding upon, shall inure to the
benefit of and shall be enforceable by the parties hereto and the holders from
time to time of the Registrable Securities and the respective successors and
assigns of the parties hereto and such holders. In the event that any transferee
of any holder of Registrable Securities shall acquire Registrable Securities, in
any manner, whether by gift, bequest, purchase, operation of law or otherwise,
such transferee shall, without any further writing or action of any kind, be
deemed a beneficiary hereof for all purposes and such Registrable Securities
shall be held subject to all of the terms of this Exchange and Registration
Rights Agreement, and by taking and holding such Registrable Securities such
transferee shall be entitled to receive the benefits of, and be conclusively
deemed to have agreed to be bound by all of the applicable terms and provisions
of this Exchange and Registration Rights Agreement. If the Company shall so
request, any such successor, assign or transferee shall agree in writing to
acquire and hold the Registrable Securities subject to all of the applicable
terms hereof.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Exchange and Registration
Rights Agreement or made pursuant hereto shall remain in full force and effect
regardless of any investigation (or statement as to the results thereof) made by
or on behalf of any holder of Registrable Securities, any director, officer or
partner of such holder, any agent or underwriter or any director, officer or
partner thereof, or any controlling person of any of the foregoing, and shall
23
<PAGE> 24
survive delivery of and payment for the Registrable Securities pursuant to the
Purchase Agreement and the transfer and registration of Registrable Securities
by such holder and the consummation of an Exchange Offer.
(f) GOVERNING LAW. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Exchange and Registration Rights Agreement are inserted for
convenience only, do not constitute a part of this Exchange and Registration
Rights Agreement and shall not affect in any way the meaning or interpretation
of this Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and Registration
Rights Agreement and the other writings referred to herein (including the
Indenture and the form of Securities) or delivered pursuant hereto which form a
part hereof contain the entire understanding of the parties with respect to its
subject matter. This Exchange and Registration Rights Agreement supersedes all
prior agreements and understandings between the parties with respect to its
subject matter. This Exchange and Registration Rights Agreement may be amended
and the observance of any term of this Exchange and Registration Rights
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) only by a written instrument duly executed by
the Company and the holders of at least a majority in aggregate principal amount
of the Registrable Securities at the time outstanding. Each holder of any
Registrable Securities at the time or thereafter outstanding shall be bound by
any amendment or waiver effected pursuant to this Section 9(h), whether or not
any notice, writing or marking indicating such amendment or waiver appears on
such Registrable Securities or is delivered to such holder.
(i) Inspection. For so long as this Exchange and Registration Rights
Agreement shall be in effect, this Exchange and Registration Rights Agreement
and, upon three days' notice, a complete list of the names and addresses of all
the holders of Registrable Securities shall be made available for inspection and
copying on any business day by any holder of Registrable Securities for proper
purposes only (which shall include any purpose related to the rights of the
holders of Registrable Securities under the Securities, the Indenture and this
Exchange and Registration Rights Agreement) at the office of the Trustee under
the Indenture.
(j) Counterparts. This Exchange and Registration Rights Agreement may
be executed by the parties in counterparts, each of which shall be deemed to be
an original, but all such respective counterparts shall together constitute one
and the same instrument.
24
<PAGE> 25
If the foregoing is in accordance with your understanding, please
sign and return to us one for the Company, the Guarantors and each of the
Representatives plus one for each counsel, counterparts hereof, and upon the
acceptance hereof by you, on behalf of each of the Purchasers, this letter and
such acceptance hereof shall constitute a binding agreement between each of the
Purchasers, the Guarantors and the Company. It is understood that your
acceptance of this letter on behalf of each of the Purchasers is pursuant to the
authority set forth in a form of Agreement among Purchasers, the form of which
shall be submitted to the Company for examination upon request, but without
warranty on your part as to the authority of the signers thereof.
25
<PAGE> 26
Very truly yours,
CLASSIC CABLE, INC.
By:
------------------------------------
Name:
Title:
CLASSIC CABLE HOLDING, INC.
By:
------------------------------------
Name:
Title:
PONCA HOLDINGS, INC.
By:
------------------------------------
Name:
Title:
CLASSIC TELEPHONE, INC.
By:
------------------------------------
Name:
Title:
UNIVERSAL CABLE HOLDINGS, INC.
By:
------------------------------------
Name:
Title:
UNIVERSAL CABLE COMMUNICATIONS INC.
By:
------------------------------------
Name:
Title:
<PAGE> 27
UNIVERSAL CABLE OF BEAVER, OKLAHOMA, INC.
By:
------------------------------------
Name:
Title:
UNIVERSAL CABLE MIDWEST, INC.
By:
------------------------------------
Name:
Title:
WT ACQUISITION CORPORATION
By:
------------------------------------
Name:
Title:
W.K. COMMUNICATIONS, INC.
By:
------------------------------------
Name:
Title:
TELEVISION ENTERPRISES, INC.
By:
------------------------------------
Name:
Title:
BLACK CREEK MANAGEMENT, L.L.C.
By:
------------------------------------
Name:
Title:
BLACK CREEK COMMUNICATIONS, L.P.
By:
------------------------------------
Name:
Title:
<PAGE> 28
BUFORD GROUP, INC.
By:
------------------------------------
Name:
Title:
FRIENDSHIP CABLE OF TEXAS, INC.
By:
------------------------------------
Name:
Title:
BUFORD TELEVISION, INC.
By:
------------------------------------
Name:
Title:
CALLCOM24, INC.
By:
------------------------------------
Name:
Title:
CORRECTIONAL CABLE TV, INC.
By:
------------------------------------
Name:
Title:
FRIENDSHIP CABLE OF ARKANSAS, INC.
By:
------------------------------------
Name:
Title:
BUFORD TELEVISION INC. OF FORT SMITH
By:
------------------------------------
Name:
Title:
27
<PAGE> 29
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
---------------------------------
(Goldman, Sachs & Co.)
<PAGE> 30
SCHEDULE I
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 Management, L.L.C.
Black Creek Communications, L.P.
Buford Group, Inc.
Friendship Cable of Texas, Inc.
Buford Television, Inc.
CallCom 24, Inc.
Correctional Cable TV, Inc.
Friendship Cable of Arkansas, Inc.
Buford Television Inc. of Fort Smith
<PAGE> 31
EXHIBIT A
CLASSIC CABLE, INC.
INSTRUCTION TO DTC PARTICIPANTS
(Date of Mailing)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: _______ [INSERT DATE] *
The Depository Trust Company ("DTC") has identified you as a DTC Participant
through which beneficial interests in the Classic Cable, Inc. (the "Company")
9 3/8% Senior Subordinated Notes due 2009 of the Company (the "Securities") are
held.
The Company is in the process of registering the Securities under the Securities
Act of 1933 for resale by the beneficial owners thereof. In order to have their
Securities included in the registration statement, beneficial owners must
complete and return the enclosed Notice of Registration Statement and Selling
Securityholder Questionnaire.
It is important that beneficial owners of the Securities receive a copy of the
enclosed materials as soon as possible as their rights to have the Securities
included in the registration statement depend upon their returning the Notice
and Questionnaire by _____________ [Insert Deadline For Response]. Please
forward a copy of the enclosed documents to each beneficial owner that holds
interests in the Securities through you. If you require more copies of the
enclosed materials or have any questions pertaining to this matter, please
contact Classic Cable, Inc., 515 Congress Avenue, Suite 2626, Austin TX 78701,
(512) 476-9095.
- ---------------
*Not less than 28 calendar days from date of mailing.
A-1
<PAGE> 32
Classic Cable, Inc.
Notice of Registration Statement
and
Selling Securityholder Questionnaire
(Date)
Reference is hereby made to the Exchange and Registration Rights Agreement (the
"Exchange and Registration Rights Agreement") between Classic Cable, Inc. (the
"Company") and the Purchasers named therein. Pursuant to the Exchange and
Registration Rights Agreement, the Company has filed with the United States
Securities and Exchange Commission (the "Commission") a registration statement
on Form ___ (the "Shelf Registration Statement") for the registration and resale
under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"),
of the Company's 9 3/8% Senior Subordinated Notes due 2009 (the "Securities"). A
copy of the Exchange and Registration Rights Agreement is attached hereto. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Exchange and Registration Rights Agreement.
Each beneficial owner of Registrable Securities (as defined below) is entitled
to have the Registrable Securities beneficially owned by it included in the
Shelf Registration Statement. In order to have Registrable Securities included
in the Shelf Registration Statement, this Notice of Registration Statement and
Selling Securityholder Questionnaire ("Notice and Questionnaire") must be
completed, executed and delivered to the Company's counsel at the address set
forth herein for receipt ON OR BEFORE _______________ [Insert Deadline For
Response]. Beneficial owners of Registrable Securities who do not complete,
execute and return this Notice and Questionnaire by such date (i) will not be
named as selling securityholders in the Shelf Registration Statement and (ii)
may not use the Prospectus forming a part thereof for resales of Registrable
Securities.
Certain legal consequences arise from being named as a selling securityholder in
the Shelf Registration Statement and related Prospectus. Accordingly, holders
and beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Shelf Registration Statement and
related Prospectus.
The term "Registrable Securities" is defined in the Exchange and Registration
Rights Agreement.
A-2
<PAGE> 33
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable Securities
hereby elects to include in the Shelf Registration Statement the Registrable
Securities beneficially owned by it and listed below in Item (3). The
undersigned, by signing and returning this Notice and Questionnaire, agrees to
be bound with respect to such Registrable Securities by the terms and conditions
of this Notice and Questionnaire and the Exchange and Registration Rights
Agreement, including, without limitation, Section 6 of the Exchange and
Registration Rights Agreement, as if the undersigned Selling Securityholder were
an original party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf Registration
Statement, the Selling Securityholder will be required to deliver to the Company
and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and
as Exhibit B to the Exchange and Registration Rights Agreement.
The Selling Securityholder hereby provides the following information to the
Company and represents and warrants to the Company that such information is
accurate and complete:
A-3
<PAGE> 34
QUESTIONNAIRE
(1) (a) Full Legal Name of Selling Securityholder:
----------------------------------------------------------------------
(b) Full Legal Name of Registered Holder (if not the same as in (a) above)
of Registrable Securities Listed in Item (3) below:
----------------------------------------------------------------------
(c) Full Legal Name of DTC Participant (if applicable and if not the
same as (b) above) Through Which Registrable Securities Listed in
Item (3) below are Held:
----------------------------------------------------------------------
(2) Address for Notices to Selling Securityholder:
---------------------------
---------------------------
---------------------------
Telephone:
---------------------------
Fax:
---------------------------
Contact Person:
---------------------------
(3) Beneficial Ownership of Securities:
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Securities.
(a) Principal amount of Registrable Securities beneficially owned:
--------
CUSIP No(s). of such Registrable Securities:
--------------------------
(b) Principal amount of Securities other than Registrable Securities
beneficially owned:
----------------------------------------------------------------------
CUSIP No(s). of such other Securities:
(c) Principal amount of Registrable Securities which the undersigned
wishes to be included in the Shelf Registration Statement:
------------
CUSIP No(s). of such Registrable Securities to be included in the
Shelf Registration Statement:
-----------------------------------------
(4) Beneficial Ownership of Other Securities of the Company:
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any
other securities of the Company, other than the Securities listed
above in Item (3).
State any exceptions here:
A-4
<PAGE> 35
(5) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any
of its affiliates, officers, directors or principal equity holders (5%
or more) has held any position or office or has had any other material
relationship with the Company (or its predecessors or affiliates)
during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Registrable Securities listed above in Item
(3) only as follows (if at all): Such Registrable Securities may be
sold from time to time directly by the undersigned Selling
Securityholder or, alternatively, through underwriters, broker-dealers
or agents. Such Registrable Securities may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time
of sale, at varying prices determined at the time of sale, or at
negotiated prices. Such sales may be effected in transactions (which
may involve crosses or block transactions) (i) on any national
securities exchange or quotation service on which the Registered
Securities may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such
exchanges or services or in the over-the-counter market, or (iv)
through the writing of options. In connection with sales of the
Registrable Securities or otherwise, the Selling Securityholder may
enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the Registrable Securities in the course of
hedging the positions they assume. The Selling Securityholder may also
sell Registrable Securities short and deliver Registrable Securities
to close out such short positions, or loan or pledge Registrable
Securities to broker-dealers that in turn may sell such securities.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it understands
its obligation to comply, and agrees that it will comply, with the provisions of
the Exchange Act and the rules and regulations thereunder, particularly
Regulation M.
In the event that the Selling Securityholder transfers all or any portion of the
Registrable Securities listed in Item (3) above after the date on which such
information is provided to the Company, the Selling Securityholder agrees to
notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Exchange and
Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the disclosure of the
information contained herein in its answers to Items (1) through (6) above and
the inclusion of such information in the Shelf Registration Statement and
related Prospectus. The Selling Securityholder understands that such information
will be relied upon by the Company in connection with the preparation of the
Shelf Registration Statement and related Prospectus.
A-5
<PAGE> 36
In accordance with the Selling Securityholder's obligation under Section 3(d) of
the Exchange and Registration Rights Agreement to provide such information as
may be required by law for inclusion in the Shelf Registration Statement, the
Selling Securityholder agrees to promptly notify the Company of any inaccuracies
or changes in the information provided herein which may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Exchange and Registration
Rights Agreement shall be made in writing, by hand-delivery, first-class mail,
or air courier guaranteeing overnight delivery as follows:
(i) To the Company:
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Attention: Corporate Secretary
(ii) With a copy to:
Winstead Sechrest & Minick P.C.
100 Congress Avenue
Suite 800
Austin, Texas 78701
Attention: Timothy E. Young
Once this Notice and Questionnaire is executed by the Selling Securityholder and
received by the Company's counsel, the terms of this Notice and Questionnaire,
and the representations and warranties contained herein, shall be binding on,
shall inure to the benefit of and shall be enforceable by the respective
successors, heirs, personal representatives, and assigns of the Company and the
Selling Securityholder (with respect to the Registrable Securities beneficially
owned by such Selling Securityholder and listed in Item (3) above). This
Agreement shall be governed in all respects by the laws of the State of New
York.
A-6
<PAGE> 37
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.
Dated:
---------------------
-------------------------------------------------------
Selling Securityholder
(Print/type full legal name of beneficial owner of
Registrable Securities)
By:
----------------------------------------------------
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE __________, 1999 TO THE COMPANY'S COUNSEL AT:
Winstead Sechrest & Minick P.C.
100 Congress Avenue
Suite 800
Austin, TX 78701
Attention: Timothy E. Young
A-7
<PAGE> 38
EXHIBIT B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
Chase Bank of Texas, National Association
Classic Cable, Inc.
c/o Chase Bank of Texas, National Association
600 Travis
Houston, Texas 77002
Attention: Trust Officer
Re: Classic Cable, Inc. (the "Company")
9 3/8% Senior Subordinate Notes due 2009
Dear Sirs:
Please be advised that ___ has transferred $ aggregate principal amount of the
above-referenced Notes pursuant to an effective Registration Statement on Form
(File No. 333- ) filed by the Company.
We hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial owner of the Notes is named as a "Selling Holder" in the Prospectus
dated ________, 1999 or in supplements thereto, and that the aggregate principal
amount of the Notes transferred are the Notes listed in such Prospectus opposite
such owner's name.
Dated:
Very truly yours,
---------------------------------
(Name)
By: ---------------------------------
(Authorized Signature)
B-1
<PAGE> 1
EXECUTION COPY
- --------------------------------------------------------------------------------
Classic Cable, Inc.
SERIES A AND SERIES B
9 3/8% SENIOR SUBORDINATED NOTES DUE 2009
-----------------
INDENTURE
Dated as of July 28, 1999
-----------------
Chase Bank of Texas, National Association
Trustee
-----------------
- -------------------------------------------------------------------------------
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310(a)(1)............................................ 7.10
(a)(2)............................................ 7.10
(a)(3)............................................ N.A.
(a)(4)............................................ N.A.
(a)(5)............................................ 7.10
(b)............................................... 7.10
(c)............................................... N.A.
311(a)............................................... 7.11
(b)............................................... 7.11
(c)............................................... N.A.
312(a)............................................... 2.05
(b)............................................... 11.03
(c)............................................... 11.03
313(a)............................................... 7.06
(b)(1)............................................ 10.03
(b)(2)............................................ 7.07
(c)............................................... 7.06;11.02
(d)............................................... 7.06
314(a)............................................... 4.03;11.02
(b)............................................... 10.02
(c)(1)............................................ 11.04
(c)(2)............................................ 11.04
(c)(3)............................................ N.A.
(d)............................................... N.A.
(e)............................................... 11.05
(f)............................................... N.A.
315(a)............................................... 7.01
(b)............................................... 7.05,11.02
(c)............................................... 7.01
(d)............................................... 7.01
(e)............................................... 6.11
316(a) (last sentence)............................... 2.09
(a)(1)(A)......................................... 6.05
(a)(1)(B)......................................... 6.04
(a)(2)............................................ N.A.
(b)............................................... 6.07
(c)............................................... 2.12
317(a)(1)............................................ 6.08
(a)(2)............................................ 6.09
(b)............................................... 2.04
318(a)............................................... 11.01
(b)............................................... N.A.
(c)............................................... 11.01
</TABLE>
N.A. means not applicable.
* This Cross-Reference Table is not part of the Indenture.
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TABLE OF CONTENTS
<TABLE>
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Page
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ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.................................................1
Section 1.02. Other Definitions..........................................22
Section 1.03. Incorporation by Reference of Trust Indenture Act..........22
Section 1.04. Rules of Construction......................................23
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating............................................23
Section 2.02. Execution and Authentication...............................24
Section 2.03. Registrar and Paying Agent.................................25
Section 2.04. Paying Agent to Hold Money in Trust........................25
Section 2.05. Holder Lists...............................................25
Section 2.06. Transfer and Exchange......................................25
Section 2.07. Replacement Notes..........................................37
Section 2.08. Outstanding Notes..........................................37
Section 2.09. Treasury Notes.............................................38
Section 2.10. Temporary Notes............................................38
Section 2.11. Cancellation...............................................38
Section 2.12. Defaulted Interest.........................................38
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.........................................38
Section 3.02. Selection of Notes to Be Redeemed..........................39
Section 3.03. Notice of Redemption.......................................39
Section 3.04. Effect of Notice of Redemption.............................40
Section 3.05. Deposit of Redemption Price................................40
Section 3.06. Notes Redeemed in Part.....................................40
Section 3.07. Optional Redemption........................................40
Section 3.08. Mandatory Redemption.......................................41
Section 3.09. Offer to Purchase by Application of Excess Proceeds........41
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes...........................................43
Section 4.02. Maintenance of Office or Agency............................43
Section 4.03. Reports....................................................44
Section 4.04. Compliance Certificate.....................................44
Section 4.05. Taxes......................................................45
Section 4.06. Stay, Extension and Usury Laws.............................45
Section 4.07. Restricted Payments........................................45
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries.............................................47
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred
Stock....................................................49
</TABLE>
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<TABLE>
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Section 4.10. Asset Sales................................................51
Section 4.11. Transactions with Affiliates...............................52
Section 4.12. Liens......................................................53
Section 4.13. Corporate Existence........................................54
Section 4.14. Offer to Repurchase Upon Change of Control.................54
Section 4.15. No Senior Subordinated Debt................................55
Section 4.16. Limitation on Sale and Leaseback Transactions..............55
Section 4.17. Limitation on Issuances and Sales of Equity Interests in
Wholly Owned Subsidiaries..................................56
Section 4.18. Designation of Restricted and Unrestricted Subsidiaries....56
Section 4.19. Additional Note Guarantees.................................56
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets...................57
Section 5.02. Successor Corporation Substituted..........................57
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default..........................................58
Section 6.02. Acceleration...............................................59
Section 6.03. Other Remedies.............................................60
Section 6.04. Waiver of Past Defaults....................................60
Section 6.05. Control by Majority........................................60
Section 6.06. Limitation on Suits........................................61
Section 6.07. Rights of Holders of Notes to Receive Payment..............61
Section 6.08. Collection Suit by Trustee.................................61
Section 6.09. Trustee May File Proofs of Claim...........................61
Section 6.10. Priorities.................................................62
Section 6.11. Undertaking for Costs......................................62
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee..........................................63
Section 7.02. Rights of Trustee..........................................64
Section 7.03. Individual Rights of Trustee...............................65
Section 7.04. Trustee's Disclaimer.......................................65
Section 7.05. Notice of Defaults.........................................65
Section 7.06. Reports by Trustee to Holders of the Notes.................65
Section 7.07. Compensation and Indemnity.................................65
Section 7.08. Replacement of Trustee.....................................66
Section 7.09. Successor Trustee by Merger, etc...........................67
Section 7.10. Eligibility; Disqualification..............................67
Section 7.11. Preferential Collection of Claims Against Company..........67
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...68
Section 8.02. Legal Defeasance and Discharge.............................68
Section 8.03. Covenant Defeasance........................................68
</TABLE>
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<TABLE>
<S> <C> <C>
Section 8.04. Conditions to Legal or Covenant Defeasance.................69
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions.....................70
Section 8.06. Repayment to Company.......................................70
Section 8.07. Reinstatement..............................................71
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes........................71
Section 9.02. With Consent of Holders of Notes...........................72
Section 9.03. Compliance with Trust Indenture Act........................73
Section 9.04. Revocation and Effect of Consents..........................73
Section 9.05. Notation on or Exchange of Notes...........................73
Section 9.06. Trustee to Sign Amendments, etc............................74
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate...................................74
Section 10.02. Liquidation; Dissolution; Bankruptcy.......................74
Section 10.03. Default on Designated Senior Debt..........................75
Section 10.04. Acceleration of Securities.................................75
Section 10.05. When Distribution Must Be Paid Over........................75
Section 10.06. Notice by Company..........................................76
Section 10.07. Subrogation................................................76
Section 10.08. Relative Rights............................................76
Section 10.09. Subordination May Not Be Impaired by Company...............77
Section 10.10. Distribution or Notice to Representative...................77
Section 10.11. Rights of Trustee and Paying Agent.........................77
Section 10.12. Authorization to Effect Subordination......................77
Section 10.13. Amendments.................................................78
ARTICLE 11
NOTE GUARANTEES
Section 11.01. Guarantee..................................................78
Section 11.02. Subordination of Note Guarantee............................79
Section 11.03. Limitation on Guarantor Liability..........................79
Section 11.04. Execution and Delivery of Note Guarantee...................78
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms.........80
Section 11.06. Releases Following Sale of Assets..........................80
ARTICLE 12
SATISFACTION AND DISCHARGE
Section 12.01. Satisfaction and Discharge.................................81
Section 12.02. Application of Trust Money.................................82
ARTICLE 13
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls...............................82
Section 13.02. Notices....................................................82
</TABLE>
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<TABLE>
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Section 13.03. Communication by Holders of Notes with Other Holders of
Notes......................................................84
Section 13.04. Certificate and Opinion as to Conditions Precedent.........84
Section 13.05. Statements Required in Certificate or Opinion..............84
Section 13.06. Rules by Trustee and Agents................................85
Section 13.07. No Personal Liability of Directors, Officers, Employees
and Stockholders...........................................85
Section 13.08. Governing Law..............................................85
Section 13.09. No Adverse Interpretation of Other Agreements..............85
Section 13.10. Successors.................................................85
Section 13.11. Severability...............................................85
Section 13.12. Counterpart Originals......................................85
Section 13.13. Table of Contents, Headings, etc...........................86
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A1 FORM OF NOTE
Exhibit A2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE FROM EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL
ACCREDITED INVESTOR
Exhibit E FORM OF NOTE GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
</TABLE>
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INDENTURE dated as of July 28, 1999 between Classic Cable, Inc., a
Delaware corporation (the "Company" or "Classic"), the Guarantors listed on
Schedule 1 hereto and Chase Bank of Texas, National Association, as trustee (the
"Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 9 3/8% Series
A Senior Subordinated Notes due 2009 (the "Series A Notes") and the 9 3/8%
Series B Senior Subordinated Notes due 2009 (the "Series B Notes" and, together
with the Series A Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note substantially in the form of
Exhibit A1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other Person
is merged with or into or became a Subsidiary of such specified Person,
whether or not such Indebtedness is incurred in connection with, or in
contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Additional Notes" means up to $100.0 million aggregate principal
amount of Notes (other than the Initial Notes) issued under this Indenture in
accordance with Sections 2.02 and 4.09 hereof, as part of the same series as
the Initial Notes.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of more than 5% of
the Voting Stock of a Person shall be deemed to be control. For purposes of
this definition, the terms "controlling," "controlled by" and "under common
control with" shall have correlative meanings.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Premium" means, with respect to any Note on any redemption
date, the greater of:
(1) 1.0% of the principal amount of the Note; or
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(2) the excess of:
(a) the present value at such redemption date of (i) the
redemption price of the Note at August 1, 2004 (such
redemption price being set forth in the table in Section 3.07
hereof) plus (ii) all required interest payments due on the
Note through August 1, 2004 (excluding accrued but unpaid
interest), computed using a discount rate equal to the
Treasury Rate as of such redemption date plus 50 basis points;
over
(b) the principal amount of the Note, if greater.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer
or exchange.
"Asset Acquisition" means (a) an Investment by Classic 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
Classic or any Restricted Subsidiary, or (b) any acquisition by Classic or any
Restricted Subsidiary of the assets of any Person that constitute substantially
all of an operating unit, a division or line of business of such Person or that
is otherwise outside of the ordinary course of business.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than in the ordinary course of business consistent with
past practices; provided that the sale, conveyance or other disposition
of all or substantially all of the assets of Classic and its
Subsidiaries taken as a whole will be governed by the provisions of
Section 4.14 hereof and/or the provisions of Section 5.01 hereof and not
by the provisions of Section 4.10 hereof; and
(2) the issuance or sale of Equity Interests in any of Classic's Restricted
Subsidiaries or the sale of Equity Interests in any of its Subsidiaries.
Notwithstanding the preceding, the following items shall not be
deemed to be Asset Sales:
(1) any single transaction or series of related transactions that involves
assets having a fair market value of less than $1.0 million or results
in net proceeds to Classic and its Restricted Subsidiaries of less than
$1.0 million;
(2) transfers of assets between or among Classic and its Wholly Owned
Restricted Subsidiaries,
(3) an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary
to Classic or to another Wholly Owned Restricted Subsidiary;
(4) the sale or lease of equipment, inventory, accounts receivable or other
assets in the ordinary course of business;
(5) the sale or other disposition of cash or Cash Equivalents;
(6) a Restricted Payment or Permitted Investment that is permitted by
Section 4.07 hereof; and
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(7) the sale of property or equipment that has become worn out, damaged or
otherwise unsuitable for use in the business of Classic or any of its
Restricted Subsidiaries.
"Asset Swap" means an exchange of assets by Classic or a Restricted
Subsidiary of Classic for:
(1) one or more Permitted Businesses;
(2) a controlling equity interest in any Person whose assets consist
primarily of one or more Permitted Businesses;
(3) cash; and/or
(4) long-term assets that are used in a Permitted Business.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value of the obligation of the
lessee for net rental payments during the remaining term of the lease included
in such sale and leaseback transaction including any period for which such
lease has been extended or may, at the option of the lessor, be extended. Such
present value shall be calculated using a discount rate equal to the rate of
interest implicit in such transaction, determined in accordance with GAAP.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular "person" (as that term is used in
Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have
beneficial ownership of all securities that such "person" has the right to
acquire by conversion or exercise of other securities, whether such right is
currently exercisable or is exercisable only upon the occurrence of a
subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned"
shall have a corresponding meaning.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Broker-Dealer" has the meaning set forth in the Registration Rights
Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital
lease that would at that time be required to be capitalized on a balance sheet
in accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
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(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership
or membership interests (whether general or limited); and
(4) any other interest, other than any straight debt obligation, or
participation that confers on a Person the right to receive a share of
the profits and losses of, or distributions of assets of, the issuing
Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged
in support thereof) having maturities of not more than six months from
the date of acquisition;
(3) 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 either (x) a party
to the Credit Agreement or (y) a member of the Federal Reserve Bank
having capital and surplus in excess of $500.0 million and a Thompson
Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper having a P-1 rating from Moody's Investors Service,
Inc. or an A-1 rating from Standard & Poor's Rating Services and in each
case maturing within six months after the date of acquisition; and
(6) money market funds having assets in excess of $100.0 million, at least
95% of the assets of which constitute Cash Equivalents of the kinds
described in clauses (1) through (5) of this definition.
"CCI" means Classic Communications, Inc., a Delaware corporation, and
the direct parent of Classic.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the properties or
assets of CCI, Classic and its Restricted Subsidiaries, taken as a whole
to any "person" (as that term is used in Section 13(d)(3) of the
Exchange Act), other than Classic or any of its Restricted Subsidiaries;
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(2) the adoption of a plan relating to the liquidation or dissolution of
Classic;
(3) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as
defined above), other than the Principals and their Related Parties or a
Permitted Group, becomes the Beneficial Owner, directly or indirectly,
of more than 35% of the Voting Stock of CCI, measured by voting power
rather than number of shares;
(4) the first day on which a majority of the members of the Board of
Directors of CCI or Classic are not Continuing Directors;
(5) CCI or Classic consolidates with, or merges with or into, any Person, or
any Person consolidates with, or merges with or into, CCI or Classic, in
any such event pursuant to a transaction in which any of the outstanding
Voting Stock of CCI or Classic or such other Person is converted into or
exchanged for cash, securities or other property, other than any such
transaction where the Voting Stock of CCI or Classic outstanding
immediately prior to such transaction is converted into or exchanged for
Voting Stock (other than Disqualified Stock) of the surviving or
transferee Person constituting a majority of the outstanding shares of
such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance); or
(6) the first day on which the CCI ceases to own 100% of the outstanding
Equity Interests of Classic.
"Company" or "Classic" means Classic Cable, Inc., a Delaware
corporation, and any and all successors thereto.
"Consolidated Cash Flow" means, with respect to any specified Person
for any period, the Consolidated Net Income of such Person for such period
plus:
(1) an amount equal to any extraordinary loss plus any net loss realized by
such Person or any of its Restricted Subsidiaries in connection with an
Asset Sale, to the extent such losses were deducted in computing such
Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and its
Subsidiaries for such period, to the extent that such provision for
taxes was deducted in computing such Consolidated Net Income; plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net of the effect of all
payments made or received pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated
Net Income; plus
(4) depreciation, amortization (including amortization of goodwill and other
intangibles) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for
cash expenses in any future period) of such Person and its Restricted
Subsidiaries
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for such period to the extent that such depreciation, amortization and
other non-cash expenses were deducted in computing such Consolidated Net
Income; plus
(5) all transaction fees paid or accrued on or prior to the date of this
Indenture, to officers of Classic, in connection with transactions
consummated prior to or on the date of this Indenture; plus
(6) all fees paid to officers of Classic after the date of this Indenture in
connection with acquisitions or dispositions, provided that not more
than an aggregate of $1.0 million of such fees may be included pursuant
to this clause (6) in any twelve-month period; minus
(7) non-cash items increasing such Consolidated Net Income (including the
partial or entire reversal of reserves taken in prior periods) for such
period, other than the accrual of revenue in the ordinary course of
business,
in each case, on a consolidated basis and determined in accordance with GAAP.
"Consolidated Indebtedness" means, with respect to any Person as of
any date of determination, the sum, without duplication, of (i) the total
amount of Indebtedness of such Person and its Restricted Subsidiaries, plus
(ii) the aggregate liquidation value of all Disqualified Stock of such Person
and all preferred stock of Restricted Subsidiaries of such Person, less (iii)
Hedging Obligations that would be a liability on the balance sheet, in each
case, determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (i) the consolidated interest
expense of such Person and its Restricted Subsidiaries for such period, whether
paid or accrued (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, all calculated after taking into
account the effect of all Hedging Obligations, and (ii) the consolidated
interest expense of such Person and its Subsidiaries that was capitalized
during such period, and (iii) any interest expense on Indebtedness of another
Person that is guaranteed by such Person or one of its Subsidiaries or secured
by a Lien on assets of such Person or one of its Subsidiaries (whether or not
such Guarantee or Lien is called upon) and (iv) the product of (a) all dividend
payments on any series of preferred stock of such Person or any of its
Subsidiaries, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any specified Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person or a Wholly Owned
Restricted Subsidiary thereof;
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(2) the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall
be excluded;
(4) the cumulative effect of a change in accounting principles shall be
excluded; and
(5) the Net Income (but not loss) of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the specified Person or one of
its Subsidiaries.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of Classic or CCI, as the case may be, who:
(1) was a member of such Board of Directors on the date of this Indenture;
or
(2) was nominated for election or elected to such Board of Directors with
the approval of a majority of the Continuing Directors who were members
of such Board at the time of such nomination or election; or
(3) is a representative of or was approved by Brera Classic, L.L.C., or one
of its Affiliates.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Agreement" means that certain Credit Agreement, dated as of
July 28, 1999, by and among Classic and Goldman Sachs Credit Partners L.P., The
Chase Manhattan Bank and Union Bank of California, providing for $175.0 million
in term loan facilities, up to $75.0 million of revolving credit borrowings,
and an additional $100.0 million uncommitted incremental facility on a term
loan basis, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and, in each case,
as amended, modified, renewed, refunded, replaced or refinanced from time to
time.
"Credit Facilities" means, one or more debt facilities (including,
without limitation, the Credit Agreement) or commercial paper facilities, in
each case with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow
from such lenders against such receivables) or letters of credit, in each case,
as amended, restated, modified, renewed, refunded, replaced or refinanced in
whole or in part from time to time.
"Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
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"Debt to Cash Flow Ratio" means, as of any date of determination (the
"Determination Date"), the ratio of (a) the Consolidated Indebtedness of
Classic as of such Determination Date to (b) four times the Consolidated Cash
Flow of Classic for the latest three months for which financial information is
available preceding such Determination Date (the "Measurement Period"),
determined on a pro forma basis after giving effect to all acquisitions or
dispositions of assets made by Classic and its Subsidiaries from the beginning
of such three-month period through and including such Determination Date
(including any related financing transactions) as if such acquisitions and
dispositions had occurred at the beginning of such three-month period. For
purposes of calculating Consolidated 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 Consolidated 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
Consolidated Cash Flow) will be deemed not to have been a Restricted Subsidiary
at any time during such Measurement Period; and (iii) if Classic 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.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof,
substantially in the form of Exhibit A1 hereto except that such Note shall not
bear the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Senior Debt" means:
(1) any Indebtedness outstanding under the Credit Agreement; and
(2) any other Senior Debt permitted under this Indenture the principal
amount of which is $50.0 million or more and that has been designated by
Classic as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof),
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<PAGE> 15
or upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the option
of the holder thereof, in whole or in part, on or prior to the earlier of the
date on which the Notes mature and the date on which no Notes remain
outstanding. Notwithstanding the preceding sentence, any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require Classic to repurchase such Capital Stock upon the occurrence of
a change of control or an asset sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that Classic may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with Section 4.07 hereof.
"Domestic Subsidiary" means any Restricted Subsidiary that was formed
under the laws of the United States or any state thereof or the District of
Columbia or that guarantees or otherwise provides direct credit support for any
Indebtedness of Classic.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant
to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of Classic and its
Subsidiaries, including refinancings thereof, (other than Indebtedness under
the Credit Agreement) in existence on the date of this Indenture, until such
amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, substantially in the
form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
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<PAGE> 16
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness, measured as the lesser of the
aggregate outstanding amount of the Indebtedness so guaranteed and the face
amount of the guarantee.
"Guarantors" means each of:
(1) Classic's Domestic Subsidiaries on the date of this Indenture; and
(2) any other subsidiary that executes a Note Guarantee in accordance with
the provisions of this Indenture;
and their respective successors and assigns.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and interest
rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person against
fluctuations in interest rates.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note substantially in the form of
Exhibit A1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of and registered in the name of the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold to Institutional Accredited
Investors.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations of such Person and all
Attributable Debt in respect of sale and leaseback transactions entered
into by such Person;
(5) in respect of the balance deferred and unpaid of the purchase price of
any property, except any such balance that constitutes an accrued
expense or trade payable; or
(6) representing any Hedging Obligations,
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<PAGE> 17
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount; and
(2) the outstanding principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Notes" means the first $150.0 aggregate principal amount of
Notes issued under this Indenture on the date hereof.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all direct or
indirect investments by such Person in other Persons (including Affiliates) in
the forms of loans (including Guarantees or other extensions of credit),
advances or capital contributions (excluding commission, travel, moving and
similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP and include the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary. If Classic or any Restricted Subsidiary of Classic sells or
otherwise disposes of any Equity Interests of any direct or indirect Restricted
Subsidiary of Classic such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of Classic, Classic shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, hypothecation, assignment for security or
encumbrance of any kind in respect of such asset, whether or not
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<PAGE> 18
filed, recorded or otherwise perfected under applicable law, including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Management and Advisory Fee Agreement" means the agreement by and
between CCI and Brera Classic, L.L.C., dated as of May 24, 1999.
"Net Income" means, with respect to any specified Person, the net
income (loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for taxes
on such gain (but not loss), realized in connection with: (a) any Asset
Sale; or (b) the disposition of any securities by such Person or any of
its Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by Classic
or any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of:
(1) 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;
(2) 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;
(3) 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
(4) 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 Classic
or any Restricted Subsidiary after such Asset Sale.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither Classic nor any of its Restricted Subsidiaries (a)
provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender;
(2) no default with respect to which (including any rights that the holders
thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or
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<PAGE> 19
both any holder of any other Indebtedness (other than the Notes) of
Classic or any of its Restricted Subsidiaries to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated
or payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of Classic or any of its
Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Guarantee" means the Guarantee by each Guarantor of the
Company's payment obligations under this Indenture and on the Notes, executed
pursuant to the provisions of this Indenture.
"Notes" has the meaning assigned to it in the preamble to this
Indenture. The Initial Notes and the Additional Notes shall be treated as a
single class for all purposes under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Other Permitted Liens" means:
(1) 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;
(2) 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;
(3) 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
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<PAGE> 20
property subject thereto or interfere with the ordinary conduct of the
business of Classic or its Subsidiaries;
(4) Liens related to Capital 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 Classic or any Restricted
Subsidiary or a Permitted Business, provided that any such Lien
encumbers only the asset or assets so financed, purchased, constructed
or improved;
(5) Liens resulting from the pledge by Classic of Equity Interests in a
Restricted Subsidiary in connection with a Credit Facility or in an
Unrestricted Subsidiary in any circumstance, where recourse to Classic
is limited to the value of the Equity Interests so pledged;
(6) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security;
(7) 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);
(8) leases or subleases granted to third Persons not interfering with the
ordinary course of business of Classic;
(9) deposits made in the ordinary course of business to secure liability to
insurance carriers;
(10) 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;
(11) Liens on the assets of Classic to secure Hedging Obligations with
respect to Indebtedness permitted by the Indenture to be incurred;
(12) attachment or judgment Liens not giving rise to a Default or an Event of
Default; and
(13) any interest or title of a lessor under any capital lease or operating
lease.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Business" means a cable television, media and
communications, telecommunications, internet service provider or data
transmission business, and businesses ancillary, complementary or reasonably
related to those businesses.
"Permitted Group" means any group of investors that is deemed to be a
"person" (as that term is used in Section 13(d)(3) of the Exchange Act) by
virtue of the Stockholders' Agreement, as the same may be amended, modified or
supplemented from time to time, provided that no single Person (other than the
Principals and their Related Parties) Beneficially Owns (together with its
Affiliates) more of the Voting
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<PAGE> 21
Stock of Classic that is Beneficially Owned by such group of investors than is
then collectively Beneficially Owned by the Principals and their Related Parties
in the aggregate.
"Permitted Investments" means:
(1) any Investment in Classic or in a Restricted Subsidiary of Classic that
is a Guarantor;
(2) any Investment in Cash Equivalents;
(3) any Investment by Classic or any Subsidiary of Classic in a Person, if
as a result of or concurrently with such Investment:
(a) such Person becomes a Restricted Subsidiary of Classic and a
Guarantor; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets
to, or is liquidated into, Classic or a Restricted Subsidiary
of Classic that is a Guarantor; provided that such Person's
primary business is a Permitted Business;
(4) any Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with
Section 4.10 hereof;
(5) any Investment in prepaid expenses, negotiable instruments held for
collection and lease, utility and workers' compensation, performance and
other similar deposits;
(6) the extension of credit to vendors, suppliers and customers in the
ordinary course of business;
(7) any Investment 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 Classic
or any Restricted Subsidiary to make any additional cash or non-cash
payments or provide additional services in connection therewith;
(8) any Investment consisting of a Guarantee permitted under clause (1) of
the second paragraph of Section 4.09 hereof;
(9) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of Classic;
(10) any Investment made with the net cash proceeds received by Classic from
the sale of Equity Interests of Classic (other than (i) sales of
Disqualified Stock, (ii) Equity Interests sold to any of Classic's
Subsidiaries and (iii) Equity Interests sold in the Private Equity
Sale); provided that the amount of any such net cash proceeds that are
utilized for such Investment will be excluded from clause 3(b) of
Section 4.07 hereof;
(11) Hedging Obligations; and
(12) other Investments, in addition to those in clauses (1) through (11) of
this definition, in any Person, other than CCI or an Affiliate of CCI
that is not also a Subsidiary of Classic, having an aggregate
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<PAGE> 22
fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (12)
since the date of this Indenture, not to exceed $10.0 million at any one
time outstanding.
"Permitted Junior Securities" means:
(1) Equity Interests in Classic or any Guarantor; or
(2) debt securities that are subordinated to all Senior Debt and any debt
securities issued in exchange for Senior Debt to substantially the same
extent as, or to a greater extent than, the Notes and the Note
Guarantees are subordinated to Senior Debt under this Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of Classic
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of Classic or any of its Subsidiaries (other than intercompany
Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount
(or accreted value, if applicable) of the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus all accrued
interest thereon and the amount of all expenses and premiums incurred in
connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable to the Holders of Notes as
those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by Classic or by the Subsidiary who
is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Permitted Tower Sale and Leaseback" means the sale and leaseback by
Classic or any of its Restricted Subsidiaries, in one or more transactions, for
aggregate consideration of up to $50.0 million, of any communications towers
used to facilitate the transmission of telecommunication, voice, data and video
signals.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
limited liability company or government or other entity.
"Principals" means Brera Classic, L.L.C., so long as that entity is an
Affiliate of Brera Capital Partners Limited Partnership, Austin Ventures, L.P.,
BT Capital Partners, Inc., The Texas Growth Fund, BA SBIC Management, L.L.C.,
J. Merritt Belisle and Steven E. Seach.
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<PAGE> 23
"Private Equity Sale" means the sale for $100.0 million in cash of
common stock of CCI, to be consummated concurrently with this offering, the
proceeds of which will be contributed by CCI to Classic.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Public Equity Offering" means an underwritten public offering by
Classic or its direct parent for cash (in an amount not less than $25.0
million) of its common stock pursuant to the Securities Act registration
statement (not including Forms S-4 or S-8).
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registration Rights Agreement" means the Exchange and Registration
Rights Agreement, dated as of July 28, 1999, by and among the Company and the
other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time and, with respect to any
Additional Notes, one or more registration rights agreements between the
Company and the other parties thereto, as such agreement(s) may be amended,
modified or supplemented from time to time, relating to rights given by the
Company to the purchasers of Additional Notes to register such Additional Notes
under the Securities Act.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Party" means:
(1) any controlling stockholder, 80% (or more) owned Subsidiary, or
immediate family member (in the case of an individual) of any Principal;
or
(2) any trust, corporation, partnership or other entity, whose
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of such entity consist of
any one or more Principals and/or such other Persons referred to in the
immediately preceding clause (1).
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Debt.
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<PAGE> 24
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means:
(1) all Indebtedness of Classic or any Guarantor outstanding under Credit
Facilities and all Hedging Obligations with respect thereto;
(2) any other Indebtedness of Classic or any Guarantor permitted to be
incurred under the terms of this Indenture (which Indebtedness includes
interest, whether or not allowable, accruing after the filing of a
petition initiating any proceeding under any state, federal or foreign
bankruptcy law), unless the instrument under which such Indebtedness is
incurred expressly provides that it is on a parity with or subordinated
in right of payment to the Notes or any Note Guarantee; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior
Debt will not include:
(1) any liability for federal, state, local or other taxes owed or owing by
Classic;
(2) any Indebtedness of Classic to any of its Subsidiaries or other
Affiliates;
(3) any trade payables; or
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<PAGE> 25
(4) the portion of any Indebtedness that is incurred in violation of this
Indenture.
"Senior Guarantees" means the Guarantees by the Guarantors of
Obligations under the Credit Agreement.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"Special Interest" means all special interest then owing pursuant to
Section 2 of the Registration Rights Agreement.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Stockholders' Agreement" means the agreement by and between Brera
Classic, L.L.C., CCI, BT Capital Partners, Inc., Austin Ventures, L.P., BA SBIC
Management, L.L.C., as the successor in interest to NationsBanc Capital Corp.,
J. Merritt Belisle, Steven E. Seach and certain other stockholders of CCI,
dated as of the date of the consummation of the Private Equity Sale.
"Strategic Equity Investment" means an investment in CCI or Classic 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 $1.0 billion
or, if not a public company, had total revenues of more than $1.0 billion
during its previous fiscal year.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more than
50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned
or controlled, directly or indirectly, by such Person or one or more of
the other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
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"Treasury Rate" means, as of any redemption date, the yield to
maturity as of such redemption date of United States Treasury securities with a
constant maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the redemption date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data))
most nearly equal to the period from the redemption date to August 1, 2004;
provided, however, that if the period from the redemption date to August 1,
2004 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 above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note substantially
in the form of Exhibit A1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of Classic (or any
successor to any of them) that is designated by the Board of Directors as an
Unrestricted Subsidiary pursuant to a resolution of the Board of Directors, but
only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding
with Classic or any Restricted Subsidiary of Classic unless the terms of
any such agreement, contract, arrangement or understanding are no less
favorable to Classic or such Restricted Subsidiary than those that might
be obtained at the time from Persons who are not Affiliates of Classic;
(3) is a Person with respect to which neither Classic nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of Classic or any of its Restricted
Subsidiaries; and
(5) has at least one director on its Board of Directors that is not a
director or executive officer of Classic or any of its Restricted
Subsidiaries and has at least one executive officer that is not a
director or executive officer of Classic or any of its Restricted
Subsidiaries.
Any designation of a Subsidiary of Classic as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the resolution of the Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the preceding conditions and was permitted by Section 4.07 hereof.
If, at any time, any Unrestricted Subsidiary would fail to meet the preceding
requirements as an Unrestricted Subsidiary, it shall thereafter
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<PAGE> 27
cease to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of Classic as of such date and, if such Indebtedness is not permitted
to be incurred as of such date under Section 4.09 hereof, Classic shall be in
default of such covenant. The Board of Directors of Classic may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of Classic of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (1) such
Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma
basis as if such designation had occurred at the beginning of the three-month
reference period; and (2) no Default or Event of Default would be in existence
following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board
of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any specified Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person or by such Person and one or more Wholly
Owned Restricted Subsidiaries of such Person.
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Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Affiliate Transaction".................................. 4.11
"Asset Sale"............................................. 4.10
"Asset Sale Offer"....................................... 3.09
"Authentication Order"................................... 2.02
"Bankruptcy Law"......................................... 4.01
"Change of Control Offer"................................ 4.14
"Change of Control Payment".............................. 4.14
"Change of Control Payment Date"......................... 4.14
"Covenant Defeasance".................................... 8.03
"Event of Default"....................................... 6.01
"Excess Proceeds"........................................ 4.10
"incur".................................................. 4.09
"Legal Defeasance"....................................... 8.02
"Offer Amount"........................................... 3.09
"Offer Period"........................................... 3.09
"Paying Agent"........................................... 2.03
"Permitted Debt"......................................... 4.09
"Purchase Date".......................................... 3.09
"Registrar".............................................. 2.03
"Restricted Payments".................................... 4.07
"Unit Legend"............................................ 2.06
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Note Guarantees means the Company and
the Guarantors, respectively, and any successor obligor upon the Notes and the
Note Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the
TIA have the meanings so assigned to them.
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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 GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural
include the singular;
(e) provisions apply to successive events and transactions; and
(f) references to sections of or rules under the Securities Act and
the Exchange Act shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions
of this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes. Notes issued in global form shall be substantially
in the form of Exhibits A1 or A2 attached hereto (including the Global Note
Legend thereon and the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Notes issued in definitive form shall be substantially in
the form of Exhibit A1 attached hereto (but without the Global Note Legend
thereon and without the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Each Global Note shall represent such of the outstanding
Notes as shall be specified therein and each shall provide that it shall
represent the aggregate principal amount of outstanding Notes from time to time
endorsed thereon and that the aggregate principal amount of outstanding Notes
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Note to reflect the amount of any increase or decrease in the aggregate
principal amount of outstanding Notes represented thereby shall be made by the
Trustee or the Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof as required by Section 2.06 hereof.
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<PAGE> 30
(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S
Temporary Global Note, which shall be deposited on behalf of the purchasers of
the Notes represented thereby with the Trustee, at its New York office, as
custodian for the Depositary, and registered in the name of the Depositary or
the nominee of the Depositary for the accounts of designated agents holding on
behalf of Euroclear or Cedel Bank, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The Restricted Period
shall be terminated upon the receipt by the Trustee of (i) a written
certificate from the Depositary, together with copies of certificates from
Euroclear and Cedel Bank certifying that they have received certification of
non-United States beneficial ownership of 100% of the aggregate principal
amount of the Regulation S Temporary Global Note (except to the extent of any
beneficial owners thereof who acquired an interest therein during the
Restricted Period pursuant to another exemption from registration under the
Securities Act and who will take delivery of a beneficial ownership interest in
a 144A Global Note or an IAI Global Note bearing a Private Placement Legend,
all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers'
Certificate from the Company. Following the termination of the Restricted
Period, beneficial interests in the Regulation S Temporary Global Note shall be
exchanged for beneficial interests in Regulation S Permanent Global Notes
pursuant to the Applicable Procedures. Simultaneously with the authentication
of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation
S Temporary Global Note. The aggregate principal amount of the Regulation S
Temporary Global Note and the Regulation S Permanent Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee, as the case may be, in connection
with transfers of interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel
Bank" and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes and
may be in facsimile form.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
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<PAGE> 31
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Registrar" includes any co-registrar and
the term "Paying Agent" includes any additional paying agent. The Company may
change any Paying Agent or Registrar without notice to any Holder. The Company
shall notify the Trustee in writing of the name and address of any Agent not a
party to this Indenture. If the Company fails to appoint or maintain another
entity as Registrar or Paying Agent, the Trustee shall act as such. The Company
or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Special Interest, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the benefit of the Holders all money held by it as Paying Agent.
Upon any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA Section 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged
by the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary
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<PAGE> 32
that it is unwilling or unable to continue to act as Depositary or that it is
no longer a clearing agency registered under the Exchange Act and, in either
case, a successor Depositary is not appointed by the Company within 120 days
after the date of such notice from the Depositary or (ii) the Company in its
sole discretion determines that the Global Notes (in whole but not in part)
should be exchanged for Definitive Notes and delivers a written notice to such
effect to the Trustee; provided that in no event shall the Regulation S
Temporary Global Note be exchanged by the Company for Definitive Notes prior to
(x) the expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under
the Securities Act. Upon the occurrence of either of the preceding events in
(i) or (ii) above, Definitive Notes shall be issued in such names as the
Depositary shall instruct the Trustee. Global Notes also may be exchanged or
replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof.
Every Note authenticated and delivered in exchange for, or in lieu of, a Global
Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or
2.10 hereof, shall be authenticated and delivered in the form of, and shall be,
a Global Note. A Global Note may not be exchanged for another Note other than
as provided in this Section 2.06(a), however, beneficial interests in a Global
Note may be transferred and exchanged as provided in Section 2.06(b), (c) or
(f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Temporary Regulation S Global Note may not be
made to a U.S. Person or for the account or benefit of a U.S. Person
(other than an Initial Purchaser). Beneficial interests in any
Unrestricted Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note. No written orders or instructions shall be required to be delivered
to the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from
a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to
cause to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to
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<PAGE> 33
effect the transfer or exchange referred to in (1) above; provided that in
no event shall Definitive Notes be issued upon the transfer or exchange of
beneficial interests in the Regulation S Temporary Global Note prior to
(x) the expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903 under the
Securities Act. Upon consummation of an Exchange Offer by the Company in
accordance with Section 2.06(f) hereof, the requirements of this Section
2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the
Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted
Global Notes. Upon satisfaction of all of the requirements for transfer or
exchange of beneficial interests in Global Notes contained in this
Indenture and the Notes or otherwise applicable under the Securities Act,
the Trustee shall adjust the principal amount of the relevant Global
Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of
a beneficial interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of
a beneficial interest in the Regulation S Temporary Global Note or
the Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of
a beneficial interest in the IAI Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications and certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
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<PAGE> 34
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a) thereof;
or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note,
a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to
the aggregate principal amount of beneficial interests transferred
pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the
form of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a
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<PAGE> 35
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to
an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other than
those listed in subparagraphs (B) through (D) above, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable;
(F) if such beneficial interest is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)(i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Beneficial Interests in Regulation S Temporary Global Note to
Definitive Notes. Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar
of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act, except in the case of a transfer pursuant to an exemption
from the registration requirements of the Securities Act other than Rule
903 or Rule 904.
(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest to a
Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
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(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the case of
an exchange, or the transferee, in the case of a transfer, certifies
in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (1)(b)
thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a Definitive Note that does not bear the Private Placement
Legend, a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest in
an Unrestricted Global Note proposes to exchange such beneficial interest
for a Definitive Note or to transfer such beneficial interest to a Person
who takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes to
the Persons in whose names such Notes are so registered. Any Definitive
Note issued in exchange for a beneficial interest pursuant to this Section
2.06(c)(iii) shall not bear the Private Placement Legend.
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(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a Restricted
Global Note or to transfer such Restricted Definitive Notes to a Person
who takes delivery thereof in the form of a beneficial interest in a
Restricted Global Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the form
of Exhibit C hereto, including the certifications in item (2)(b)
thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144 under
the Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in reliance on
an exemption from the registration requirements of the Securities
Act other than those listed in subparagraphs (B) through (D) above,
a certificate to the effect set forth in Exhibit B hereto, including
the certifications, certificates and Opinion of Counsel required by
item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to the Company or any of its Subsidiaries, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement under
the Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, in the case of clause (C) above, the
Regulation S Global Note, and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an
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Unrestricted Global Note or transfer such Restricted Definitive Note to
a Person who takes delivery thereof in the form of a beneficial interest
in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or
(3) a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes
to exchange such Notes for a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item
(1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes
to transfer such Notes to a Person who shall take delivery thereof
in the form of a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes
and increase or cause to be increased the aggregate principal amount of
the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note at any time. Upon receipt of a request for such an exchange or
transfer, the Trustee shall cancel the applicable Unrestricted Definitive
Note and increase or cause to be increased the aggregate principal amount
of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D)
or (iii) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an Authentication
Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global
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Notes in an aggregate principal amount equal to the principal amount of
Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of
transfer or exchange, the requesting Holder shall present or surrender to the
Registrar the Definitive Notes duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by its attorney, duly authorized in writing. In addition, the
requesting Holder shall provide any additional certifications, documents and
information, as applicable, required pursuant to the following provisions of
this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes.
Any Restricted Definitive Note may be transferred to and registered in the
name of Persons who take delivery thereof in the form of a Restricted
Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A
under the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or
Rule 904, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (2)
thereof; and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act,
then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes.
Any Restricted Definitive Note may be exchanged by the Holder thereof for
an Unrestricted Definitive Note or transferred to a Person or Persons who
take delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or
(3) a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
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(1) if the Holder of such Restricted Definitive
Notes proposes to exchange such Notes for an Unrestricted
Definitive Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (1)(d)
thereof; or
(2) if the Holder of such Restricted Definitive
Notes proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request to register such a transfer,
the Registrar shall register the Unrestricted Definitive Notes pursuant to
the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons
that certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the
Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the
Company, and accepted for exchange in the Exchange Offer and (ii) Definitive
Notes in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Notes accepted for exchange in the Exchange Offer.
Concurrently with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of Definitive
Notes so accepted Definitive Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below,
each Global Note and each Definitive Note (and all Notes issued in
exchange therefor or substitution thereof) shall bear the legend
in substantially the following form:
"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHO THE
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SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(iii),
(c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section
2.06 (and all Notes issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF CLASSIC CABLE, INC."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an
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endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such reduction; and if
the beneficial interest is being exchanged for or transferred to a Person who
will take delivery thereof in the form of a beneficial interest in another
Global Note, such other Global Note shall be increased accordingly and an
endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.14 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer
of or exchange any Note selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global
Notes or Definitive Notes surrendered upon such registration of transfer
or exchange.
(v) The Company shall not be required (A) to issue, to register
the transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business
on the day of selection, (B) to register the transfer of or to exchange
any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part or (C) to register
the transfer of or to exchange a Note between a record date and the next
succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer
of any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
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Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note. If,
after the delivery of such replacement Note, a bona fide purchaser of the
original Note in lieu of which such replacement Note was issued presents for
payment or registration such original Note, the Trustee shall be entitled to
recover such replacement Note 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 Company, the Trustee, any Agent
and any authenticating agent in connection therewith.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company, shall be
considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so owned
shall be so disregarded.
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Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company upon its written request. The Company may not issue new Notes to
replace Notes that it has paid or that have been delivered to the Trustee for
cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee
in writing of the amount of defaulted interest proposed to be paid on each Note
and the date of the proposed payment. The Company shall fix or cause to be
fixed each such special record date and payment date, provided that no such
special record date shall be less than 10 days prior to the related payment
date for such defaulted interest. At least 15 days before the special record
date, the Company (or, upon the written request of the Company, the Trustee in
the name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant
to which the redemption shall occur, (ii) the redemption date, (iii) the
principal amount of Notes to be redeemed and (iv) the redemption price.
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Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed or, if the Notes are not so listed, on a pro rata basis,
by lot or in accordance with any other method the Trustee considers fair and
appropriate. In the event of partial redemption by lot, the particular Notes to
be redeemed shall be selected, unless otherwise provided herein, not less than
30 nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption
date upon surrender of such Note, a new Note or Notes in principal amount equal
to the unredeemed portion shall be issued upon cancellation of the original
Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
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<PAGE> 46
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that
the Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as
provided in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess
of the amounts necessary to pay the redemption price of, and accrued interest
on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Notwithstanding the provisions of clause (b) of this Section 3.07,
at any time prior to August 1, 2002, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes ever
issued under this Indenture at a redemption price equal to 109.375% of the
principal amount of the Notes redeemed plus accrued and unpaid interest and
Special Interest, if any, to the redemption date, with the net cash proceeds of
one or more Public Equity Offerings by the Company or the net cash proceeds of
a Strategic Equity Investment in the Company or a capital contribution to the
Company's common equity made with the net cash proceeds of a concurrent Public
Equity Offering by, or Strategic Equity Investment in, the Company's direct
parent; provided that (1) at least 65% of the Notes ever issued under this
Indenture remain outstanding immediately after each such redemption (excluding
Notes held by the Company and its Subsidiaries) and (2) the redemption occurs
within 60 days of the date of the closing of such Public Equity Offering or
Strategic Equity Investment.
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<PAGE> 47
(b) At any time, the Company may also redeem all or a part of the
Notes upon the occurrence of a Change of Control, upon not less than 30 nor
more than 60 days' prior notice (but in no event may any such redemption occur
more than 90 days after the occurrence of such Change of Control) mailed by
first-class mail to each Holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium as
of, and accrued and unpaid interest and Special Interest, if any, to the date
of redemption.
(c) Except as set forth in clause (a) or clause (b) of this Section
3.07, the Company shall not have the option to redeem the Notes pursuant to
this Section 3.07 prior to August 1, 2004. Thereafter, the Company shall have
the option to redeem the Notes, in whole or in part, upon no less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as percentages
of principal amount) set forth below plus accrued and unpaid interest and
Special Interest, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on August 1 of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004.................................................. 104.688%
2005.................................................. 103.125%
2006.................................................. 101.562%
2007 and thereafter................................... 100.000%
</TABLE>
(d) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an offer to all Holders to purchase Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
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<PAGE> 48
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may elect to have Notes purchased in integral multiples of
$1,000 only;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Company, a depositary, if
appointed by the Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09. The Company, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes
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<PAGE> 49
tendered by such Holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Note, and the Trustee, upon written request
from the Company shall authenticate and mail or deliver such new Note to such
Holder, in a principal amount equal to any unpurchased portion of the Note
surrendered. Any Note not so accepted shall be promptly mailed or delivered by
the Company to the Holder thereof. The Company shall publicly announce the
results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in
the Notes. Principal, premium, if any, and interest shall be considered paid on
the date due if the Paying Agent, if other than the Company or a Subsidiary
thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by
the Company in immediately available funds and designated for and sufficient to
pay all principal, premium, if any, and interest then due. The Company shall
pay all Special Interest, if any, in the same manner on the dates and in the
amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest
and Special Interest (without regard to any applicable grace period) at the
same rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may
be served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
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<PAGE> 50
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, the Company shall furnish to the Holders
of Notes, within 15 days of the time periods specified in the SEC's rules and
regulations (i) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the
Company were required to file such forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with
respect to the annual information only, a report on the annual financial
statements by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the SEC on Form 8-K if
the Company were required to file such reports. In addition, following
consummation of the Exchange Offer, whether or not required by the rules and
regulations of the SEC, the Company shall file a copy of all such information
and reports with the SEC for public availability within the time periods
specified in the SEC's rules and regulations (unless the SEC will not accept
such a filing, in which case the Company will make such information available
to securities analysts and prospective investors upon request). The Company
shall at all times comply with TIA ss. 314(a).
(b) For so long as any Notes remain outstanding, unless the Company is
filing periodic reports pursuant to the Exchange Act, the Company and the
Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company and each Guarantor (to the extent that such Guarantor
is so required under the TIA) shall deliver to the Trustee, within 90 days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in
the performance or observance of any of the terms, provisions and conditions of
this Indenture (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge and what action the Company is taking or proposes to take with
respect thereto) and that to the best of his or her knowledge no event has
occurred and remains in existence by reason of which payments on account of the
principal of or interest, if any, on the Notes is prohibited or if such event
has occurred, a description of the event and what action the Company is taking
or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by
a written statement of the Company's independent public accountants (who shall
be a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred,
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<PAGE> 51
specifying the nature and period of existence thereof, it being understood that
such accountants shall not be liable directly or indirectly to any Person for
any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate
proceedings or where the failure to effect such payment is not adverse in any
material respect to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of the Guarantors covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and the
Company and each of the Guarantors (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been
enacted.
Section 4.07. Restricted Payments.
Classic will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution on
account of Classic's or any of its Restricted Subsidiaries' Equity
Interests (including, without limitation, any payment in connection with
any merger or consolidation involving Classic or any of its Restricted
Subsidiaries) or to the direct or indirect holders of Classic's or any
of its Restricted Subsidiaries' Equity Interests in their capacity as
such (other than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of Classic or to Classic or a Restricted
Subsidiary of Classic);
(2) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation
involving Classic) any Equity Interests of Classic or any direct or
indirect parent of Classic;
(3) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes or the Note Guarantees, except a payment of
interest or principal at the Stated Maturity thereof; or
(4) make any Restricted Investment (all such payments and other actions set
forth in clauses (1) through (4) above being collectively referred to as
"Restricted Payments"),
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<PAGE> 52
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing or would
occur as a consequence thereof; and
(2) Classic would, at the time of such Restricted Payment and after giving
pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable three-month period, have been permitted
to incur at least $1.00 of additional Indebtedness (other than Permitted
Debt) pursuant to the Debt to Cash Flow Ratio test set forth in the
first paragraph of Section 4.09 hereof; and
(3) such Restricted Payment, together with the aggregate amount of all other
Restricted Payments declared or made after the date of this Indenture
(excluding Restricted Payments permitted by clauses (2), (3) and (4) of
the next succeeding paragraph) shall not exceed, at the date of
determination, the sum, without duplication, of:
(a) an amount equal to Classic's Consolidated Cash Flow from the
date hereof to the end of Classic's most recently ended
three-month period for which internal financial statements are
available, taken as a single accounting period, less the
product of 1.4 times Classic's Consolidated Interest Expense
from the date of this Indenture to the end of Classic's most
recently ended three-month period for which internal financial
statements are available, taken as a single accounting period;
plus
(b) an amount equal to the net cash proceeds received by Classic
from the sale of Equity Interests after the date of this
Indenture (other than (i) sales of Disqualified Stock, (ii)
Equity Interests sold to any of Classic's Subsidiaries, (iii)
Equity Interests sold in the Private Equity Sale and (iv)
Equity Interests that are applied to make a Permitted
Investment pursuant to clause (10) of the definition of
Permitted Investments) or from the issue or sale of
convertible or exchangeable Disqualified Stock or convertible
or exchangeable debt securities of Classic that have been
converted into or exchanged for such Equity Interests (other
than Equity Interests (or Disqualified Stock or debt
securities) sold to a Subsidiary of Classic); plus
(c) to the extent that any Restricted Investment that was made
after the date of this Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of: (i) the cash
return of capital with respect to such Restricted Investment
(less the cost of disposition, if any); and (ii) the initial
amount of such Restricted Investment.
The preceding provisions will not prohibit:
(1) so long as no Default has occurred and is continuing or would be caused
thereby, the payment of any dividend or distribution within 60 days
after the date of declaration thereof, if at the date of declaration
such payment would have complied with the provisions of this Indenture;
(2) the redemption, repurchase, retirement, defeasance or other acquisition
of any subordinated Indebtedness of Classic or any Guarantor or of any
Equity Interests of Classic in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a
Subsidiary of Classic or an employee stock ownership plan or to a trust
established by Classic or any Subsidiary of Classic for the benefit of
its employees) of, Equity Interests of Classic (other than Disqualified
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<PAGE> 53
Stock); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition will be excluded from clause (3)(b) of the preceding
paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of Classic or any Guarantor with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of Classic to the
holders of its Equity Interests on a pro rata basis; and
(5) so long as no Default has occurred and is continuing or would be caused
thereby, the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of Classic or any Restricted
Subsidiary of Classic held by any member of Classic's (or any of its
Restricted Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement in effect as of the
date of this Indenture; provided that the aggregate price paid for all
such repurchased, redeemed, acquired or retired Equity Interests shall
not exceed $250,000 in any twelve-month period.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued to or by Classic or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be
valued by this covenant will be determined by Classic's Board of Directors
whose resolution with respect thereto shall be delivered to the Trustee. The
Board of Directors' determination must be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if the fair market value exceeds $5.0 million. Not later than the date
of making any Restricted Payment, Classic will deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this Section
4.07 were computed, together with a copy of any fairness opinion or appraisal
required by this Indenture.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
Classic shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Equity Interests to
Classic or any of its Restricted Subsidiaries, or pay any indebtedness
owed to Classic or any of its Restricted Subsidiaries;
(2) make loans or advances or guarantee any such loans or advances to
Classic or any of its Restricted Subsidiaries; or
(3) transfer any of its properties or assets to Classic or any of its
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
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<PAGE> 54
(1) encumbrances and restrictions as in effect on the date of this Indenture
pursuant to Existing Indebtedness or Credit Facilities, and any
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are no more
restrictive, taken as a whole, with respect to such dividend and other
payment restrictions than those contained in such Existing Indebtedness
or Credit Facilities, as in effect on the date of this Indenture;
(2) this Indenture , the Notes and the Note Guarantees;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by Classic or any of its Restricted Subsidiaries as in effect
at the time of such acquisition (except to the extent such Indebtedness
or Capital Stock was incurred in connection with or in contemplation of
such acquisition), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the
Person, or the property or assets of the Person, so acquired, provided
that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of this Indenture to be incurred;
(5) customary non-assignment provisions in contracts of Classic or any of
its Restricted Subsidiaries;
(6) purchase money obligations for property acquired in the ordinary course
of business that impose restrictions on the property so acquired of the
nature described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Subsidiary pending its
sale or other disposition;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness that limit the right of the debtor to
dispose of the assets subject to such Lien;
(10) provisions with respect to the disposition or distribution of assets or
property in joint venture agreements, assets sale agreements, stock sale
agreements and other similar agreements entered into in the ordinary
course of business;
(11) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business;
(12) restrictions that are not materially more restrictive than customary
provisions in comparable financings if the management of Classic
determines that such restrictions will not materially impair Classic's
ability to make payments as required under the Notes; and
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<PAGE> 55
(13) restrictions contained in Indebtedness under Credit Facilities permitted
to be incurred under Section 4.09, provided that the restrictions are
not more restrictive than the terms contained in the existing Credit
Facilities as of the date hereof.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
Classic shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt), and Classic
shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that
Classic may incur Indebtedness (including Acquired Debt) or issue Disqualified
Stock, and the Guarantors may incur Indebtedness or issue preferred stock, if
Classic's Debt to Cash Flow Ratio at the time of incurrence of such Indebtedness
or the issuance of such Disqualified Stock or preferred stock, after giving pro
forma effect to such incurrence or issuance as of such date and to the use of
proceeds therefrom as if the same had occurred at the beginning of the most
recently ended three-month period of Classic for which internal financial
statements are available, would have been no greater than 7.0 to 1.
The first paragraph of this Section 4.09 shall not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the incurrence by Classic and any Guarantor of additional Indebtedness
and letters of credit under Credit Facilities in an aggregate principal
amount at any one time outstanding under this clause (1) (with letters
of credit being deemed to have a principal amount equal to the maximum
potential liability of Classic and its Restricted Subsidiaries
thereunder) not to exceed $350.0 million;
(2) the incurrence by Classic and its Restricted Subsidiaries of the
Existing Indebtedness;
(3) the incurrence by Classic and the Guarantors of Indebtedness represented
by the Notes and the related Note Guarantees to be issued on the date
hereof and the Exchange Notes and the related Note Guarantees to be
issued pursuant to the Registration Rights Agreement;
(4) the incurrence by Classic or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage
financings or 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 Classic or such Restricted
Subsidiary, in an aggregate principal amount, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (4), not to exceed $15.0
million at any time outstanding;
(5) the incurrence by Classic or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other
than intercompany Indebtedness) that was permitted by this Indenture to
be incurred under the first paragraph of this Section 4.09 or clauses
(2), (3), (4) or (5) of this paragraph;
(6) the incurrence by Classic or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among Classic and any of its
Restricted Subsidiaries; provided, however, that:
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(a) if Classic or any Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly subordinated
to the prior payment in full in cash of all Obligations with
respect to the Notes, in the case of Classic, or the Note
Guarantee, in the case of a Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person
other than Classic or a Restricted Subsidiary thereof and (ii)
any sale or other transfer of any such Indebtedness to a
Person that is not either Classic or a Restricted Subsidiary
of Classic, will be deemed, in each case, to constitute an
incurrence of such Indebtedness by Classic or such Restricted
Subsidiary, as the case may be, that was not permitted by this
clause (6);
(7) the incurrence by Classic or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding;
(8) the guarantee by Classic or any of the Guarantors of Indebtedness of
Classic or a Subsidiary of Classic that was permitted to be incurred by
another provision of this Section 4.09;
(9) the accrual of interest, the accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of
dividends on Disqualified Stock in the form of additional shares of the
same class of Disqualified Stock shall not be deemed to be an incurrence
of Indebtedness or an issuance of Disqualified Stock for purposes of
this Section 4.09;
(10) the incurrence of Indebtedness of a Restricted Subsidiary that was
outstanding on or prior to the date on which such Restricted Subsidiary
was acquired by Classic (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 Classic); provided, however,
that on the date of such acquisition and after giving effect to that
acquisition, the Debt to Cash Flow Ratio would have been less than or
equal to the Debt to Cash Flow Ratio immediately prior to that
acquisition;
(11) the incurrence by Classic or any of the Guarantors of Indebtedness in
addition to any Indebtedness described in clauses (1) through (10) and
(12) of this Section 4.09 in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (11), not to exceed $25.0
million; and
(12) the incurrence by Classic's Unrestricted Subsidiaries of Non-Recourse
Debt, provided, however, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, that event will be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of Classic that was not permitted by this clause (12).
For purposes of determining compliance with this Section 4.09, in the
event that an item of proposed Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (1) through (12) above,
or is entitled to be incurred pursuant to the first paragraph of this Section
4.09, Classic shall be permitted to classify such item of Indebtedness on the
date of its incurrence or later
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reclassify all or a portion of such item of Indebtedness in any manner that
complies with this Section 4.09 and the items will be treated as having been
incurred pursuant only to the first paragraph or clause (1) through (12) of
this Section 4.09. Indebtedness under Credit Facilities outstanding on the date
on which Notes are first issued and authenticated under this Indenture shall be
deemed to have been incurred on such date in reliance on the exception provided
by clause (1) of the definition of Permitted Debt.
Section 4.10. Asset Sales.
Classic shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) Classic (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(2) such fair market value is determined by Classic's Board of Directors and
evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee; and
(3) at least 75% of the consideration received in such Asset Sale by Classic
or such Restricted Subsidiary is in the form of cash or Cash
Equivalents. For purposes of this provision, each of the following shall
be deemed to be cash:
(a) any Indebtedness or other liabilities, as shown on Classic's
or such Restricted Subsidiary's most recent balance sheet, of
Classic or any Restricted Subsidiary (other than contingent
liabilities and Indebtedness that is by its terms subordinated
to the Notes or any Note Guarantee) that are assumed by the
transferee of any such assets pursuant to an agreement that
releases Classic or such Restricted Subsidiary from further
liability; and
(b) any securities, notes or other obligations received by Classic
or any such Restricted Subsidiary from such transferee that
are converted within 60 days of the applicable Asset Sale by
Classic or such Restricted Subsidiary into cash or Cash
Equivalents, to the extent of the cash received in that
conversion.
Notwithstanding the foregoing, Classic and its Restricted Subsidiaries
may consummate Asset Swaps; provided that, immediately after giving effect to
such Asset Swap, Classic would be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt to Cash Flow Ratio test set forth
in the first paragraph of Section 4.09 hereof.
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, including any cash received in an Asset Swap, Classic or any of its
Restricted Subsidiaries may apply those Net Proceeds at its option:
(1) to prepay, repay, redeem or purchase Senior Debt and, if the Senior Debt
repaid is revolving credit Indebtedness, to correspondingly reduce
commitments with respect thereto;
(2) to acquire all or substantially all of the assets of a Permitted
Business;
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(3) to acquire Voting Stock of a Permitted Business from a Person that is
not a Subsidiary of Classic; provided, that (a) after giving effect
thereto, Classic and its Restricted Subsidiaries collectively own a
majority of such Voting Stock and (b) such acquisition is otherwise made
in accordance with this Indenture, including, without limitation,
Section 4.07 hereof;
(4) to make a capital expenditure; or
(5) to acquire other long-term assets that are used or useful in a Permitted
Business;
provided that in the event Classic would be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt to Cash Flow Ratio test set forth
in the first paragraph of Section 4.09 hereof at the time it consummates a
Permitted Tower Sale and Leaseback, then the 365-day period referred to above
shall be extended for an additional 365 days as to the Net Proceeds from the
Permitted Tower Sale and Leaseback only.
Pending the final application of any Net Proceeds, Classic may
temporarily reduce revolving credit borrowings or otherwise invest the Net
Proceeds in any manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph shall constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $15.0 million, Classic will make an
offer (an "Asset Sale Offer") to all Holders of Notes and all holders of other
Indebtedness that is pari passu with the Notes containing provisions similar to
those set forth in this Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets to purchase the maximum principal amount of
Notes and such other pari passu Indebtedness that may be purchased out of the
Excess Proceeds. The offer price in any Asset Sale Offer shall be equal to 100%
of principal amount plus accrued and unpaid interest and Special Interest, if
any, to the date of purchase, and shall be payable in cash. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, Classic may use such
Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If
the aggregate principal amount of Notes and such other pari passu Indebtedness
tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
Trustee will select the Notes and such other pari passu Indebtedness to be
purchased on a pro rata basis based on the principal amount of Notes and such
other pari passu Indebtedness tendered. Upon completion of each Asset Sale
Offer, the amount of Excess Proceeds shall be reset at zero.
Section 4.11. Transactions with Affiliates.
Classic shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any payment to, or sell, lease,
transfer, exchange or otherwise dispose of any of its properties or assets to,
or purchase any property or assets from, or enter into or make or amend any
transaction or series of transactions, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate, officer or
director or Classic (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
Classic or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by Classic or such Restricted
Subsidiary with an unrelated Person; and
(2) Classic delivers to the Trustee:
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(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (1) of this Section
4.11 and that such Affiliate Transaction has been approved by
a majority of the disinterested members of the Board of
Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment
banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions
and, therefore, will not be subject to the provisions of the prior paragraph:
(1) employment agreements entered into by Classic or any of its Subsidiaries
on or prior to the date of this Indenture and any employment agreement
entered into by Classic or any of its Restricted Subsidiaries in the
ordinary course of business and consistent with the past practice of
Classic or such Restricted Subsidiary;
(2) transactions between or among Classic and/or its Restricted
Subsidiaries;
(3) transactions with a Person that is an Affiliate of Classic solely
because Classic owns an Equity Interest in such Person;
(4) payment of reasonable fees to directors who are not employees of Classic
or any of its Restricted Subsidiaries, and customary indemnification and
insurance arrangements in favor of any director;
(5) sales or issuances of Equity Interests (other than Disqualified Stock)
to Affiliates of Classic;
(6) Restricted Payments that are permitted by the provisions of Section 4.07
of this Indenture;
(7) loans or advances, not to exceed $2.0 million in the aggregate at any
time outstanding, to employees in the ordinary course of business in
accordance with past practice; and
(8) management fees, deal fees or transaction fees paid to employees,
directors and their respective affiliates, in accordance with the
provisions of the Management and Advisory Fee Agreement or the
Stockholders' Agreement, as applicable, as the same are in effect on the
date hereof.
Section 4.12. Liens.
Classic shall not, and shall not permit any Restricted Subsidiary to,
incur any Indebtedness secured by a Lien against or on any of its property or
assets now owned or hereafter acquired by the Company or any Restricted
Subsidiary unless contemporaneously therewith effective provision is made to
secure the Notes equally and ratably with such secured Indebtedness. This
restriction does not, however, apply to Indebtedness secured by (1) Liens
securing Senior Debt or Indebtedness of a Restricted Subsidiary of Classic, (2)
Liens, if any, in effect on the date hereof; (3) Liens in favor of governmental
bodies to secure progress or advance payments; (4) 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
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not incurred in anticipation of such acquisition; (5) Liens securing the Notes;
(6) other Liens, in addition to those described in clauses (1) through (5), (7)
or (8) of this paragraph, securing Indebtedness of Classic in an amount not to
exceed $10.0 million at any time outstanding; (7) Other Permitted Liens; and (8)
any extension, renewal or replacement of any Lien referred to in the foregoing
clauses (1) through (7), inclusive.
Section 4.13. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
Section 4.14. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall make
an offer (a "Change of Control Offer") to each Holder to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes
at a purchase price equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Special Interest thereon, if any, to the
date of purchase (the "Change of Control Payment"). Within 30 days following
any Change of Control, the Company shall mail a notice to each Holder stating:
(1) that the Change of Control Offer is being made pursuant to this Section
4.14 and that all Notes tendered will be accepted for payment; (2) the purchase
price and the purchase date, which shall be no later than 30 Business 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 the
Company defaults in the payment of the Change of Control Payment, all Notes
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Payment Date; (5) that Holders
electing to have any Notes purchased pursuant to a Change of Control Offer will
be required to surrender the Notes, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date; (6) that Holders
will be entitled to withdraw their election if the Paying Agent receives, not
later than the close of business on the second 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 Notes
delivered for purchase, and a statement that such Holder is withdrawing his
election to have the Notes purchased; and (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, which unpurchased portion
must be equal to $1,000 in principal amount or an integral multiple thereof.
The Company shall comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of Notes
in connection with a Change of Control.
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(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Company shall
execute and issue and the Trustee shall promptly authenticate and mail (or
cause to be transferred by book entry) to each Holder a new Note equal in
principal amount to any unpurchased portion of the Notes surrendered by such
Holder, if any; provided, that each such new Note shall be in a principal
amount of $1,000 or an integral multiple thereof.
Prior to complying with any of the provisions of this Section 4.14,
but in any event within 90 days following a Change of Control, the Company will
either repay all outstanding Senior Debt or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Debt to permit the
repurchase of Notes required by this Section 4.14. The Company shall publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.14, the
Company shall not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in this
Section 4.14 hereof and all other provisions of this Indenture applicable to a
Change of Control Offer made by the Company and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
Section 4.15. No Senior Subordinated Debt.
Notwithstanding the provisions of Section 4.09 hereof, Classic shall
not incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to any Senior
Debt of Classic and senior in any respect in right of payment to the Notes. No
Guarantor shall incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment
to the Senior Debt of such Guarantor and senior in any respect in right of
payment to such Guarantor's Note Guarantee.
Section 4.16. Limitation on Sale and Leaseback Transactions.
Classic shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction, unless:
(1) Classic or that Restricted Subsidiary, as applicable, could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction under the Debt to Cash
Flow Ratio test in the first paragraph of Section 4.09 hereof and (b)
created a Lien on such property securing Attributable Debt without
equally and ratably securing the Notes pursuant to Section 4.12 hereof;
(2) the net cash proceeds of that sale and leaseback transaction are at
least equal to the fair market value, as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered
to the Trustee, of the property that is the subject of that sale and
leaseback transaction; and
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(3) the transfer of assets in that sale and leaseback transaction is
permitted by, and Classic or that Restricted Subsidiary applies the
proceeds of such transaction in compliance with, Section 4.10 hereof.
Section 4.17. Limitation on Issuances and Sales of Equity Interests in
Wholly Owned Subsidiaries.
Classic shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, transfer, convey, sell, lease or
otherwise dispose of any Equity Interests in any Wholly Owned Restricted
Subsidiary of Classic to any Person (other than Classic or a Wholly Owned
Restricted Subsidiary of Classic), unless:
(1) such transfer, conveyance, sale, lease or other disposition is of all
the Equity Interests in such Wholly Owned Restricted Subsidiary; and
(2) the cash Net Proceeds from such transfer, conveyance, sale, lease or
other disposition are applied in accordance with Section 4.10 hereof.
In addition, Classic shall not permit any Wholly Owned Restricted
Subsidiary of Classic to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to Classic or a Wholly Owned Restricted
Subsidiary of Classic.
Section 4.18. Designation of Restricted and Unrestricted Subsidiaries.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate
fair market value of all outstanding Investments owned by Classic and its
Restricted Subsidiaries in the Subsidiary so designated shall be deemed to be an
Investment made as of the time of such designation and will either reduce the
amount available for Restricted Payments under the first paragraph of Section
4.07 hereof or reduce the amount available for future Investments under one or
more clauses of the definition of Permitted Investments, as Classic shall
determine. That designation shall only be permitted if such Investment would be
permitted at that time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary. The Board of Directors may redesignate
any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation
would not cause a Default.
Section 4.19. Additional Note Guarantees.
If Classic or any of its Subsidiaries acquires or creates another
Domestic Subsidiary after the date of this Indenture, then that newly acquired
or created Domestic Subsidiary must become a Guarantor and execute a Note
Guarantee in the form of a Supplemental Indenture and deliver an Opinion of
Counsel to the Trustee within 10 Business Days of the date on which it was
acquired or created, unless such Domestic Subsidiary has properly been
designated as an Unrestricted Subsidiary in accordance with this Indenture, for
so long as such Domestic Subsidiary continues to constitute an Unrestricted
Subsidiary. The form of such Note Guarantee is attached as Exhibit E hereto.
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ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
Classic shall not, directly or indirectly: (1) consolidate or merge
with or into another Person (whether or not Classic is the surviving
corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of Classic and its Restricted
Subsidiaries taken as a whole, in one or more related transactions, to another
Person; unless:
(1) either: (a) Classic is the surviving corporation; or (b) the Person
formed by or surviving any such consolidation or merger (if other than
Classic) or to which such sale, assignment, transfer, conveyance or
other disposition shall have been made is a corporation, limited
liability company or limited partnership organized or existing under the
laws of the United States, any state thereof or the District of
Columbia;
(2) the Person formed by or surviving any such consolidation or merger (if
other than Classic) or the Person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes
all the obligations of Classic under the Notes, this Indenture and the
Registration Rights Agreement pursuant to agreements reasonably
satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) Classic or the Person formed by or surviving any such consolidation or
merger (if other than Classic), or to which such sale, assignment,
transfer, conveyance or other disposition shall have been made will, on
the date of such transaction after giving pro forma effect thereto and
any related financing transactions as if the same had occurred at the
beginning of the applicable three-month period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Debt to Cash Flow
Ratio test set forth in the first paragraph of Section 4.09 hereof.
In addition, Classic shall not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This Section 5.01 shall not apply to a sale,
assignment, transfer, conveyance or other disposition of assets between or among
Classic and any of the Guarantors.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
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ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Special Interest with respect to, the Notes whether or not prohibited by Article
10 hereof and such default continues for a period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes whether or not prohibited by Article 10 hereof;
(c) the Company or any of its Subsidiaries fails to comply with the
provisions applicable to them of Section 5.01 hereof;
(d) the Company or any of its Subsidiaries fails to comply with the
provisions applicable to them of Section 4.03, 4.07, 4.08, 4.09, 4.11, 4.14,
4.16, 4.17, 4.18 or 4.19 (in each case other than a failure to purchase Notes)
for 30 days after notice to the Company;
(e) the Company or any of its Subsidiaries fails to observe or perform
any other agreements applicable to them in this Indenture or the Notes for 60
days after notice to the Company;
(f) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of
its Restricted Subsidiaries), whether such Indebtedness or guarantee now
exists, or is created after the date of this Indenture, if that default (a) is
caused by a failure to pay principal of such Indebtedness at final maturity or
(b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, if the total principal amount of such Indebtedness
unpaid or accelerated exceeds $5.0 million;
(g) any judgment or decree for the payment of money in excess of $5.0
million is rendered against the Company or any Restricted Subsidiary of the
Company 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 notice;
(h) the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary
pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a custodian of it or for all
or substantially all of its property,
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(iv) makes a general assignment for the benefit of its creditors,
or
(v) generally is not paying its debts as they become due; or
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary in an involuntary case;
(ii) appoints a custodian of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary or for all or substantially all of the
property of the Company or any of its Significant Subsidiaries or any
group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days;
or
(j) except as permitted by this Indenture, any Note Guarantee is held
in any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under such
Guarantor's Note Guarantee.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (h) or (i) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.
Upon any such declaration, the Notes shall become due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (h) or
(i) of Section 6.01 hereof occurs with respect to the Company, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary, all outstanding Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if (a) the Company has deposited with the
Trustee a sum sufficient to pay (1) 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, (2) all overdue interest on
all Notes then outstanding, (3) 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 (including Special Interest) at the rate
borne by the Notes and (4) 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.
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Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
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 Notes outstanding by written notice to
Classic and the Trustee, may rescind and annul such declaration and its
consequences if (a) Classic has paid or deposited with the Trustee a sum
sufficient to pay (1) 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, (2) all overdue interest on all Notes
then outstanding, (3) 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 (including Special Interest) at the rate borne
by the Notes and (4) 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 this
Indenture. No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except (1) a continuing Default or Event of Default in
the payment of the principal of, premium and Special Interest, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration) or
(2) in respect of a covenant or provision which under this Indenture cannot be
modified or amended without the consent of the Holder of each Note affected by
such modification or amendment. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
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Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Special
Interest, if any, and interest on the Note, on or after the respective due
dates expressed in the Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount of
principal of, premium and Special Interest, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent
lawful, interest and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Holders of the Notes allowed in any judicial proceedings relative to
the Company (or any other obligor upon the Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder
to make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to
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the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the Trustee
and the costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Special Interest, if any, and interest,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal, premium and Special
Interest, if any and interest, respectively; and
Third: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
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ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture,
and use the same degree of care and skill in its exercise, as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
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Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
security or indemnity reasonably satisfactory to it against the costs, expenses
and liabilities that might be incurred by it in compliance with such request or
direction.
(g) 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.
(h) In the event the Trustee receives inconsistent or conflicting
requests and indemnity from two or more groups of holders of Notes, each
representing less than a majority in aggregate principal amount of the Notes
outstanding, pursuant to the provisions of this Indenture, the Trustee, in its
sole discretion, may determine what action, if any, shall be taken.
(i) 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 the right to
indemnification shall survive the Trustee's resignation or removal, the
discharge of this Indenture and final payment of the Notes.
(j) 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.
(k) Except for information provided by the Trustee concerning the
Trustee, the Trustee shall have no responsibility for any information in any
offering circular or other disclosure material distributed with respect to the
Notes, and the Trustee shall have no responsibility for compliance with any
state or federal securities laws in connection with the Notes.
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Section 7.03. Individual Rights of Trustee.
The Trustee in its or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or any Affiliate of
the Company with the same rights it would have if it were not Trustee. However,
in the event that the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes
or any other document in connection with the sale of the Notes or pursuant to
this Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Trustee, the Trustee shall mail to
Holders of Notes a notice of the Default or Event of Default within 90 days
after it occurs. Except in the case of a Default or Event of Default in payment
of principal of, premium, if any, or interest on any Note, the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers
in good faith determines that withholding the notice is in the interests of the
Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA ss. 313(a) (but if no event described in
TIA ss. 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
ss. 313(b)(2). The Trustee shall also transmit by mail all reports as required
by TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA ss. 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred
or made by it in
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addition to the compensation for its services. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of a majority
in principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
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(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder who has been a
Holder for at least six months, fails to comply with Section 7.10, such Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation,
bank or banking association organized and doing business under the laws of the
United States of America or of any state thereof that is authorized under such
laws to exercise corporate trustee powers, that is subject to supervision or
examination by federal or state authorities and that has a combined capital and
surplus of at least $100 million as set forth in its most recent published
annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
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ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at its option and at any time, elect to have either
Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance
with the conditions set forth below in this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and the Guarantors shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
deemed to have been discharged from their obligations with respect to all
outstanding Notes and Note Guarantees on the date the conditions set forth
below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Notes, which shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.05
hereof and the other Sections of this Indenture referred to in (a) and (b)
below, and the Company and the Guarantors shall be deemed to have satisfied all
their other obligations under such Notes, the Notes Guarantees and this
Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.04 hereof, and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Notes when such payments are due, (b) the Company's
obligations with respect to such Notes under Article 2 and Section 4.02 hereof,
(c) the rights, powers, trusts, duties and immunities of the Trustee hereunder
and the Company's and the Guarantors' obligations in connection therewith and
(d) this Article 8. Subject to compliance with this Article 8, the Company may
exercise its option under this Section 8.02 notwithstanding the prior exercise
of its option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and the Guarantors shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
released from their obligations under the covenants contained in Sections 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.14, 4.15, 4.16, 4.17, 4.18 and 4.19 hereof and
clause (4) of Section 5.01 hereof with respect to the outstanding Notes and the
Note Guarantees on and after the date the conditions set forth in Section 8.04
are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes and such Note Guarantees shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to
the outstanding Notes and Note Guarantees, the Company may omit to comply with
and shall have no liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference
in any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder of
this Indenture and such Notes and Note
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Guarantees shall be unaffected thereby. In addition, upon the Company's
exercise under Section 8.01 hereof of the option applicable to this Section
8.03 hereof, subject to the satisfaction of the conditions set forth in Section
8.04 hereof, Sections 6.01(c) through 6.01(f) hereof shall not constitute
Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes and Note Guarantees:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium and Special Interest, if
any, and interest on the outstanding Notes on the stated date for payment
thereof or on the applicable redemption date, as the case may be;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of the
proceeds of which will be used to defease the Notes pursuant to this Article 8
concurrently with such incurrence) or insofar as Sections 6.01(h) or 6.01(i)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement
or instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
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(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent
required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust. The Holder of such Note shall thereafter look only
to the Company for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the Company
as trustee thereof, shall thereupon cease; provided, however, that the Trustee
or such Paying Agent, before being required to make any such repayment, may at
the expense of the Company cause to be published once, in the New York Times
and The Wall Street Journal (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less
than 30 days from the date of such notification or publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
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Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02
or 8.03 hereof, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; provided, however, that, if the
Company makes any payment of principal of, premium, if any, or interest on any
Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the Note
Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including
the related definitions) in a manner that does not materially adversely affect
any Holder;
(c) to provide for the assumption of the Company's or a Guarantor's
obligations to the Holders of the Notes by a successor to the Company pursuant
to Article 5 or Article 10 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance with
the limitations set forth in this Indenture as of the date hereof; or
(g) to allow any Guarantor to execute a supplemental indenture and/or a
Note Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company and
the Guarantors in the execution of any amended or supplemental Indenture
authorized or permitted by the
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terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Section 3.09, 4.10
and 4.14 hereof), the Note Guarantees and the Notes with the consent of the
Holders of at least a majority in principal amount of the Notes (including
Additional Notes, if any) then outstanding voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any
existing Default or Event of Default (other than a Default or Event of Default
in the payment of the principal of, premium, if any, or interest on the Notes,
except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture, the Note
Guarantees or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including
Additional Notes, if any) voting as a single class (including consents obtained
in connection with a tender offer or exchange offer for, or purchase of, the
Notes).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Company in the execution
of such amended or supplemental Indenture unless such amended or supplemental
Indenture directly affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise, in which case the Trustee may in its discretion,
but shall not be obligated to, enter into such amended or supplemental
Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes (including Additional
Notes, if any) then outstanding voting as a single class may waive compliance
in a particular instance by the Company with any provision of this Indenture or
the Notes. However, without the consent of each Holder affected, an amendment
or waiver under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the Notes
except as provided above with respect to Sections 3.09, 4.10 and 4.14 hereof;
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(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of
or premium or Special Interest, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority
in aggregate principal amount of the then outstanding Notes (including
Additional Notes, if any) and a waiver of the payment default that resulted
from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of, or interest or premium or Special Interest, if any, on the
Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Sections 3.09, 4.10 and 4.14 hereof);
(h) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions; or
(i) release any Guarantor from any of its obligations under its Note
Guarantee or this Indenture, except in accordance with the terms of this
Indenture.
In addition, without the consent of at least 75% in aggregate
principal amount of the Notes then outstanding no waiver or amendment to this
Indenture may make any change in the provisions of Article 10 hereof that
adversely affects the rights of any Holder of Notes.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment
becomes effective. An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
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Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 11.04 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Notes is subordinated in right of payment, to
the extent and in the manner provided in this Article 10, to the prior payment
in full of all Senior Debt (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for
the benefit of the holders of Senior Debt.
Section 10.02. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities:
(i) holders of Senior Debt shall be entitled to receive payment in
full of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before Holders of the Notes shall
be entitled to receive any payment with respect to the Notes (except that
Holders may receive (A) Permitted Junior Securities and (B) payments and
other distributions made from any defeasance trust created pursuant to
Section 8.01 hereof); and
(ii) until all Obligations with respect to Senior Debt (as
provided in clause (i) above) are paid in full, any distribution to which
Holders would be entitled but for this Article 10 shall be made to holders
of Senior Debt (except that Holders of Notes may receive (A) Permitted
Junior Securities and (B) payments and other distributions made from any
defeasance trust created pursuant to Section 8.01 hereof), as their
interests may appear.
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Section 10.03. Default on Designated Senior Debt.
(a) The Company may not make any payment or distribution to the
Trustee or any Holder in respect of Obligations with respect to the Notes and
may not acquire from the Trustee or any Holder any Notes for cash or property
(other than (A) Permitted Junior Securities and (B) payments and other
distributions made from any defeasance trust created pursuant to Section 8.01
hereof) until all principal and other Obligations with respect to the Senior
Debt have been paid in full if:
(i) a default in the payment of any principal or other Obligations
with respect to Designated Senior Debt occurs and is continuing beyond any
applicable grace period in the agreement, indenture or other document
governing such Designated Senior Debt; or
(ii) a default, other than a payment default, on Designated Senior
Debt occurs and is continuing that then permits holders of the Designated
Senior Debt to accelerate its maturity and the Trustee receives a notice
of the default (a "Payment Blockage Notice") from a Person who may give it
pursuant to Section 10.11 hereof. If the Trustee receives any such Payment
Blockage Notice, no subsequent Payment Blockage Notice shall be effective
for purposes of this Section unless and until (A) at least 360 days shall
have elapsed since the delivery of the immediately prior Payment Blockage
Notice and (B) all scheduled payments of principal, premium and Special
Interest, if any, and interest on the Notes that have come due have been
paid in full in cash. No nonpayment default that existed or was continuing
on the date of delivery of any Payment Blockage Notice to the Trustee
shall be, or be made, the basis for a subsequent Payment Blockage Notice
unless such default shall have been waived for a period of not less than
90 days.
(b) The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(i) the date upon which the default is cured or waived, or
(ii) in the case of a default referred to in clause (ii) of
Section 10.03(a) hereof, 179 days pass after notice is received, unless
the maturity of such Designated Senior Debt has been accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
Section 10.04. Acceleration of Securities.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Debt of the acceleration.
Section 10.05. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes (except in Permitted Junior Securities or
from the trust described under Section 8.01 hereof) at a time when the payment
is prohibited by Section 10.03 hereof and the Trustee or such Holder, as
applicable, has actual knowledge that such payment is prohibited by Section
10.03 hereof, such payment shall be held by the Trustee or such Holder, in trust
for the benefit of, and shall be paid forthwith over and delivered,
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upon written request, to, the holders of Senior Debt as their interests may
appear or their Representative under the indenture or other agreement (if any)
pursuant to which Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Senior Debt remaining unpaid to the extent necessary to pay such
Obligations in full in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically
set forth in this Article 10, and no implied covenants or obligations with
respect to the holders of Senior Debt shall be read into this Indenture against
the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall
be entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
Section 10.06. Notice by Company.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article 10, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article 10.
Section 10.07. Subrogation.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders of Notes shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders of Notes have been applied to
the payment of Senior Debt. A distribution made under this Article 10 to
holders of Senior Debt that otherwise would have been made to Holders of Notes
is not, as between the Company and Holders, a payment by the Company on the
Notes.
Section 10.08. Relative Rights.
This Article 10 defines the relative rights of Holders of Notes and
holders of Senior Debt. Nothing in this Indenture shall:
(i) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(ii) affect the relative rights of Holders of Notes and creditors
of the Company other than their rights in relation to holders of Senior
Debt; or
(iii) prevent the Trustee or any Holder of Notes from exercising
its available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Debt to receive distributions and
payments otherwise payable to Holders of Notes.
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If the Company fails because of this Article 10 to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
Section 10.09. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
Section 10.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
10.
Section 10.11. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07
hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may
do the same with like rights.
Section 10.12. Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Representatives are hereby authorized to file an appropriate
claim for and on behalf of the Holders of the Notes.
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Section 10.13. Amendments.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Debt.
ARTICLE 11
NOTE GUARANTEES
Section 11.01. Guarantee.
Subject to this Article 11, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated
and delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that: (a) the principal
of and interest on the Notes will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that same
will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise. Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Guarantors shall be jointly
and severally obligated to pay the same immediately. Each Guarantor agrees that
this is a guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of
the Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute
a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands
whatsoever and covenant that this Note Guarantee shall not be discharged except
by complete performance of the obligations contained in the Notes and this
Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Note Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6
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hereof, such obligations (whether or not due and payable) shall forthwith
become due and payable by the Guarantors for the purpose of this Note Guarantee.
The Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Guarantee.
Section 11.02. Subordination of Note Guarantee.
The Obligations of each Guarantor under its Note Guarantee pursuant to
this Article 11 shall be junior and subordinated to the Senior Guarantee of
such Guarantor on the same basis as the Notes are junior and subordinated to
Senior Debt of the Company. For the purposes of the foregoing sentence, the
Trustee and the Holders shall have the right to receive and/or retain payments
by any of the Guarantors only at such times as they may receive and/or retain
payments in respect of the Notes pursuant to this Indenture, including Article
10 hereof.
Section 11.03. Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Note Guarantee
of such Guarantor not constitute a fraudulent transfer or conveyance for
purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar federal or state law to the extent
applicable to any Note Guarantee. To effectuate the foregoing intention, the
Trustee, the Holders and the Guarantors hereby irrevocably agree that the
obligations of such Guarantor will, after giving effect to such maximum amount
and all other contingent and fixed liabilities of such Guarantor that are
relevant under such laws, and after giving effect to any collections from,
rights to receive contribution from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under
this Article 11, result in the obligations of such Guarantor under its Note
Guarantee not constituting a fraudulent transfer or conveyance.
Section 11.04. Execution and Delivery of Note Guarantee.
To evidence its Note Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Note Guarantee substantially in
the form included in Exhibit E shall be endorsed by an Officer of such
Guarantor on each Note authenticated and delivered by the Trustee and that this
Indenture shall be executed on behalf of such Guarantor by its President or one
of its Vice Presidents.
Each Guarantor hereby agrees that its Note Guarantee set forth in
Section 11.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Note Guarantee.
If an Officer whose signature is on this Indenture or on the Note
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Note Guarantee set
forth in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.24 hereof,
the Company shall cause such Subsidiaries to execute
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supplemental indentures to this Indenture and Note Guarantees in accordance
with Section 4.24 hereof and this Article 11, to the extent applicable.
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms.
Except as otherwise provided in Section 11.06, no Guarantor may sell
or otherwise dispose of all or substantially all of its assets to, or
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another Person other than Classic or another Guarantor
unless:
(a) either (1) the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such consolidation or
merger assumes all the obligations of that Guarantor under the Indenture, its
Note Guarantee and the Registration Rights Agreement pursuant to a supplemental
indenture satisfactory to the Trustee or (2) the Net Proceeds of such sale or
other disposition are applied in accordance with Section 4.10 hereof; and
(b) immediately after giving effect to such transaction, no Default or
Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the Note
Guarantee endorsed upon the Notes and the due and punctual performance of all
of the covenants and conditions of this Indenture to be performed by the
Guarantor, such successor Person shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein as a Guarantor.
Such successor Person thereupon may cause to be signed any or all of the Note
Guarantees to be endorsed upon all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee. All the Note Guarantees so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Note Guarantees theretofore
and thereafter issued in accordance with the terms of this Indenture as though
all of such Note Guarantees had been issued at the date of the execution
hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
Section 11.06. Releases Following Sale of Assets.
In the event of a sale or other disposition of all or substantially
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all the Capital Stock of any
Guarantor, in each case to a Person that is not (either before or after giving
effect to such transactions) a Subsidiary of the Company, then such Guarantor
(in the event of a sale or other disposition, by way of merger, consolidation
or otherwise, of all of the Capital Stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be released and
relieved of any obligations under its Note Guarantee; provided that the Net
Proceeds of such sale or other disposition are applied in accordance with the
applicable provisions of this Indenture, including without limitation Section
4.10 hereof. In addition, the Note Guarantee of a Guarantor shall be released
if the Company properly designates any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary in accordance with the applicable
provisions of this Indenture. Upon delivery by the Company to the Trustee of an
Officers' Certificate and an Opinion of Counsel to the
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<PAGE> 87
effect that such sale or other disposition was made by the Company in
accordance with the provisions of this Indenture, including without limitation
Section 4.10 hereof, the Trustee shall execute any documents reasonably
required in order to evidence the release of any Guarantor from its obligations
under its Note Guarantee.
Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this
Indenture as provided in this Article 11.
ARTICLE 12
SATISFACTION AND DISCHARGE
Section 12.01. Satisfaction and Discharge.
This Indenture will be discharged and will cease to be of further
effect as to all Notes issued hereunder, when:
(1) either:
(a) all Notes that have been authenticated (except lost, stolen or
destroyed Notes that have been replaced or paid and Notes for
whose payment money has theretofore been deposited in trust
and thereafter repaid to the Company) have been delivered to
the Trustee for cancellation; or
(b) all Notes that have not been delivered to the Trustee for
cancellation have become due and payable by reason of the
making of a notice of redemption or otherwise or will become
due and payable within one year and the Company or any
Guarantor has irrevocably deposited or caused to be deposited
with the Trustee as trust funds in trust solely for the
benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such
amounts as will be sufficient without consideration of any
reinvestment of interest, to pay and discharge the entire
indebtedness on the Notes not delivered to the Trustee for
cancellation for principal, premium and Special Interest, if
any, and accrued interest to the date of maturity or
redemption;
(2) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit or shall occur as a result of such deposit and
such deposit will not result in a breach or violation of, or constitute
a default under, any other instrument to which the Company or any
Guarantor is a party or by which the Company or any Guarantor is bound;
(3) the Company or any Guarantor has paid or caused to be paid all sums
payable by it under this Indenture; and
(4) the Company has delivered irrevocable instructions to the Trustee under
this Indenture to apply the deposited money toward the payment of the
Notes at maturity or the redemption date, as the case may be.
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<PAGE> 88
In addition, the Company must deliver an Officers' Certificate and an Opinion of
Counsel to the Trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied.
Notwithstanding the satisfaction and discharge of this Indenture, if
money shall have been deposited with the Trustee pursuant to subclause (b) of
clause (1) of this Section, the provisions of Section 12.02 and Section 8.06
shall survive.
Section 12.02. Application of Trust Money.
Subject to the provisions of Section 8.06, all money deposited with
the Trustee pursuant to Section 12.01 shall be held in trust and applied by it,
in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest for whose
payment such money has been deposited with the Trustee; but such money need not
be segregated from other funds except to the extent required by law.
If the Trustee or Paying Agent is unable to apply any money or
Government Securities in accordance with Section 11.01 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
Company's and any Guarantor's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 12.01; provided that if the Company has made any payment of principal
of, premium, if any, or interest on any Notes because of the reinstatement of
its obligations, the Company shall be subrogated to the rights of the Holders
of such Notes to receive such payment from the money or Government Securities
held by the Trustee or Paying Agent.
ARTICLE 13
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA ss.318(c), the imposed duties shall control.
Section 13.02. Notices.
Any notice or communication by the Company, any Guarantor or the
Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address:
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<PAGE> 89
If to the Company and/or any Guarantor:
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Telecopier No.: (512) 476-9095
Attention: Corporate Secretary
With a copy to:
Winstead Sechrest & Minick P.C.
100 Congress Avenue
Suite 800
Austin, Texas 78701
Telecopier No.: (512) 370-2850
Attention: Timothy E. Young
If to the Trustee:
For payment, registration, transfer and exchange of the Notes:
Chase Bank of Texas, National Association
One Main Place
1201 Main Street, 18th Floor
Dallas, Texas 75202
Telecopier No.: (214) 672-5932
Telephone No: (214) 672-5125 or (800) 275-2048
For all other communications relating to the Notes:
Chase Bank of Texas, National Association
600 Travis
Houston, Texas 77002
Telecopier No.: (713) 216-5476
Attention: Corporate Trust
The Company, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery. Notwithstanding
the foregoing, notices to the Trustee shall be effective only upon receipt.
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<PAGE> 90
Any notice or communication to a Holder shall be mailed by first class
mail,certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 13.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else 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 Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
Section 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 (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions
of TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
satisfied; and
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<PAGE> 91
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 13.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 13.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator
or stockholder of the Company or any Guarantor, as such, shall have any
liability for any obligations of the Company or such Guarantor under the Notes,
the Note Guarantees, this Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes.
Section 13.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 13.10. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors. All agreements of each Guarantor in this Indenture shall bind
its successors, except as otherwise provided in Section 11.06.
Section 13.11. Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 13.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
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<PAGE> 92
Section 13.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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<PAGE> 93
SIGNATURES
Dated as of July 28, 1999
CLASSIC CABLE, INC.
By:
-------------------------------
Name:
Title:
CLASSIC COMMUNICATIONS, INC.
By:
-------------------------------
Name:
Title:
CLASSIC CABLE, INC.
By:
-------------------------------
Name:
Title:
CLASSIC CABLE HOLDING, INC.
By:
-------------------------------
Name:
Title:
PONCA HOLDINGS, INC.
By:
-------------------------------
Name:
Title:
CLASSIC TELEPHONE, INC.
By:
-------------------------------
Name:
Title:
Indenture Signature Page
<PAGE> 94
UNIVERSAL CABLE HOLDINGS, INC.
By:
-------------------------------
Name:
Title:
UNIVERSAL CABLE COMMUNICATIONS INC.
By:
-------------------------------
Name:
Title:
UNIVERSAL CABLE OF BEAVER, OKLAHOMA, INC.
By:
-------------------------------
Name:
Title:
UNIVERSAL CABLE MIDWEST, INC.
By:
-------------------------------
Name:
Title:
WT ACQUISITION CORPORATION
By:
-------------------------------
Name:
Title:
W.K. COMMUNICATIONS, INC.
By:
-------------------------------
Name:
Title:
Indenture Signature Page
<PAGE> 95
TELEVISION ENTERPRISES, INC.
By:
-------------------------------
Name:
Title:
BLACK CREEK MANAGEMENT, L.L.C.
By:
-------------------------------
Name:
Title:
BLACK CREEK COMMUNICATIONS, L.P.
By:
-------------------------------
Name:
Title:
BUFORD GROUP, INC.
By:
-------------------------------
Name:
Title:
FRIENDSHIP CABLE OF TEXAS, INC.
By:
-------------------------------
Name:
Title:
BUFORD TELEVISION, INC.
By:
-------------------------------
Name:
Title:
Indenture Signature Page
<PAGE> 96
CALLCOM 24, INC.
By:
-------------------------------
Name:
Title:
CORRECTIONAL CABLE TV, INC.
By:
-------------------------------
Name:
Title:
FRIENDSHIP CABLE OF ARKANSAS, INC.
By:
-------------------------------
Name:
Title:
BUFORD TELEVISION INC. OF FORT SMITH
By:
-------------------------------
Name:
Title:
Indenture Signature Page
<PAGE> 97
Dated as of July 28, 1999
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Trustee
By:
-------------------------------
Name:
Title:
Indenture Signature Page
<PAGE> 98
EXHIBIT A1
[Face of Note]
- -------------------------------------------------------------------------------
CUSIP/CINS: 18272NAD4
9 3/8% [Series A][Series B] Senior Subordinated Notes due 2009
No. R-1 $
------------
CLASSIC CABLE, INC.
promises to pay to Cede & Co. or registered assigns,
the principal sum of
----------------------------------------------------------
Dollars on August 1, 2009.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
CLASSIC CABLE, INC.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
(SEAL)
This is one of the Notes referred to
in the within-mentioned Indenture:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Trustee
By: Date of Authentication: July 28, 1999
--------------------------------
Authorized Signatory
- -------------------------------------------------------------------------------
A1-1
<PAGE> 99
[Back of Note]
9 3/8% [Series A] [Series B] Senior Subordinated Notes due 2009
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Classic Cable, Inc., a Delaware corporation
(the"Company"), promises to pay interest on the principal amount of this Note
at 9 3/8% per annum from July 28, 1999 until maturity and shall pay the Special
Interest payable pursuant to Section 2(d) of the Registration Rights Agreement
referred to below. The Company will pay interest and Special Interest
semi-annually in arrears on February 1 and August 1 of each year, or if any
such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be February 1,
2000. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the
rate then in effect; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest
and Special Interest (without regard to any applicable grace periods) from time
to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Special Interest to the Persons who are
registered Holders of Notes at the close of business on the January 15 or July
15 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium and Special Interest, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Special Interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest, premium and Special
Interest on, all Global Notes and all other Notes the Holders of which shall
have provided wire transfer instructions to the Company or the Paying Agent.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT AND REGISTRAR. Initially, Chase Bank of Texas,
National Association, the Trustee under the Indenture, will act as Paying Agent
and Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Subsidiaries may act in any
such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of July 28, 1999 ("Indenture") between the Company and the Trustee. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended
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<PAGE> 100
(15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms,
and Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and
be controlling. The Notes are obligations of the Company limited to $250.0
million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Notwithstanding the provisions of clause (b) of this Paragraph 5,
at any time prior to August 1, 2002, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes ever
issued under this Indenture at a redemption price equal to 109.375% of the
principal amount thereof plus accrued and unpaid interest and Special Interest,
if any, to the redemption date, with the net cash proceeds of one or more
Public Equity Offerings by the Company or the net cash proceeds of a Strategic
Equity Investment in the Company or a capital contribution to the Company's
common equity made with the net cash proceeds of a concurrent Public Equity
Offering by, or Strategic Equity Investment in, the Company's direct parent;
provided that (1) at least 65% of the Notes ever issued under this Indenture
remain outstanding immediately after each such redemption (excluding Notes held
by the Company and its Subsidiaries) and (2) the redemption occurs within 60
days of the date of the closing of such Public Equity Offering or Strategic
Equity Investment.
(b) At any time, the Company may also redeem all or a part of the
Notes upon the occurrence of a Change of Control, upon not less than 30 nor
more than 60 days' prior notice (but in no event may any such redemption occur
more than 90 days after the occurrence of such Change of Control) mailed by
first-class mail to each Holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium as
of, and accrued and unpaid interest and Special Interest, if any, to the date
of redemption.
(c) Except as set forth in clause (a) of this Paragraph 5, the Company
shall not have the option to redeem the Notes pursuant to this Paragraph 5
prior to August 1, 2004. Thereafter, the Company shall have the option to
redeem the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Special Interest, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on August 1 of the
years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004...................................................... 104.688%
2005...................................................... 103.125%
2006...................................................... 101.562%
2007 and thereafter....................................... 100.000%
</TABLE>
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part
(equal to $1,000 or an integral multiple thereof)
A1-3
<PAGE> 101
of each Holder's Notes at a purchase price equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Special Interest
thereon, if any, to the date of purchase (the "Change of Control Payment").
Within 30 days following any Change of Control, the Company shall mail a notice
to each Holder setting forth the procedures governing the Change of Control
Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, within
five days of each date on which the aggregate amount of Excess Proceeds exceeds
$15.0 million, the Company shall commence an offer to all Holders of Notes (as
"Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the
maximum principal amount of Notes (including any Additional Notes) that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Special Interest thereon, if any, to the date fixed for the closing of such
offer, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes (including any Additional Notes)
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company (or such Subsidiary) may use such deficiency for general corporate
purposes. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Holders of Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
9. SUBORDINATION. Payment of principal, interest and premium and
Special Interest, if any, on the Notes is subordinated to the prior payment of
Senior Debt on the terms provided in the Indenture.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a
record date and the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Note Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Notes and Additional Notes, if any, voting as a single
class, and any existing default or compliance with any provision of the
Indenture, the Note Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes and
Additional Notes, if any, voting as a single class. Without the consent of
A1-4
<PAGE> 102
any Holder of a Note, the Indenture, the Note Guarantees or the Notes may be
amended or supplemented to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's or Guarantor's
obligations to Holders of the Notes in case of a merger or consolidation, to
make any change that would provide any additional rights or benefits to the
Holders of the Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder, to comply with the requirements of the SEC in
order to effect or maintain the qualification of the Indenture under the Trust
Indenture Act, to provide for the Issuance of Additional Notes in accordance
with the limitations set forth in the Indenture, or to allow any Guarantor to
execute a supplemental indenture to the Indenture and/or a Note Guarantee with
respect to the Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest or Special Interest on the Notes
whether or not prohibited by Article 10 of the Indenture; (ii) default in
payment when due of principal of or premium, if any, on the Notes when the same
becomes due and payable at maturity, upon redemption (including in connection
with an offer to purchase) or otherwise whether or not prohibited by Article 10
of the Indenture, (iii) failure by the Company or any of its Subsidiaries to
comply with the provisions applicable to them of Section 5.01 of the Indenture;
(iv) failure by the Company or any of its Subsidiaries for 30 days after notice
to the Company by the Trustee or the Holders of at least 25% in principal
amount of the Notes (including Additional Notes, if any) then outstanding
voting as a single class to comply with the provisions applicable to them of
Sections 4.03, 4.07, 4.08, 4.09, 4.11, 4.14, 4.16, 4.17, 4.18 or 4.19 of the
Indenture; (v) failure by the Company or any of its Subsidiaries for 60 days
after notice to the Company by the Trustee or the Holders of at least 25% in
principal amount of the Notes (including Additional Notes, if any) then
outstanding voting as a single class to comply with certain other agreements in
the Indenture or the Notes; (vi) default under certain other agreements
relating to Indebtedness of the Company which default results in the
acceleration of such Indebtedness prior to its express maturity; (vii) certain
final judgments for the payment of money that remain undischarged for a period
of 60 days; (viii) certain events of bankruptcy or insolvency with respect to
the Company or any of its Significant Subsidiaries; and (ix) except as
permitted by the Indenture, any Note Guarantee shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be
in full force and effect or any Guarantor or any Person acting on its behalf
shall deny or disaffirm its obligations under such Guarantor's Note Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount of the then outstanding Notes may declare all
the Notes to be due and payable. Notwithstanding the foregoing, in the case of
an Event of Default arising from certain events of bankruptcy or insolvency,
all outstanding Notes will become due and payable without further action or
notice. Holders may not enforce the Indenture or the Notes except as provided
in the Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the Notes. The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
A1-5
<PAGE> 103
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with right of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Exchange and
Registration Rights Agreement dated as of July 28, 1999, between the Company
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Attention: Corporate Secretary
A1-6
<PAGE> 104
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
---------------------------------
(Insert assignee's legal name)
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date
--------------------------------------
Your Signature:
---------------------------------
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee*:
------------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A1-7
<PAGE> 105
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box
below:
[ ] Section 4.10 [ ]Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased:
$
----------------
Date:
---------------------------------
Your Signature:
---------------------------------
(Sign exactly as your name appears
on the face of this Note)
Tax Identification No.:
-------------------------
Signature Guarantee*:
------------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A1-8
<PAGE> 106
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Principal Amount Signature of
Amount of decrease in Amount of increase in of this Global Note authorized officer of
Principal Amount Principal Amount following such decrease Trustee or Note
Date of Exchange this Global Note of this Global Note (or increase) Custodian
---------------- ---------------- ------------------- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
* This schedule should be included only if the Note is issued in global form.
A1-9
<PAGE> 107
EXHIBIT A2
[Face of Regulation S Temporary Global Note]
- -------------------------------------------------------------------------------
CUSIP/CINS: U17965AB7
9 3/8% [Series A] [Series B] Senior Subordinated Notes due 2009
No. S-1 $
-----------
CLASSIC CABLE, INC.
promises to pay to Cede & Co. or registered assigns,
the principal sum of
----------------------------------------------------------
Dollars on , 2009.
--------------
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
CLASSIC CABLE, INC.
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
(SEAL)
This is one of the Notes referred to
in the within-mentioned Indenture:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Trustee
By: Date of Authentication: July 28, 1999
-------------------------------
Authorized Signatory
- -------------------------------------------------------------------------------
A2-1
<PAGE> 108
[Back of Regulation S Temporary Global Note]
9 3/8% [Series A] [Series B] Senior Subordinated Notes due 2009
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE NOTE
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE
HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN OF RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT
A2-2
<PAGE> 109
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE NOTE EVIDENCED HEREBY OF
THE RESALE RESTRICTIONS SET FORTH IN (1) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Classic Cable, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 9
3/8% per annum from July 28, 1999 until maturity and shall pay the Special
Interest payable pursuant to Section 2(d) of the Registration Rights Agreement
referred to below. The Company will pay interest and Special Interest
semi-annually in arrears on February 1 and August 1 of each year, or if any
such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be February 1,
2000. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the
rate then in effect; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest
and Special Interest (without regard to any applicable grace periods) from time
to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Special Interest to the Persons who are
registered Holders of Notes at the close of business on the January 15 or July
15 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium and Special Interest, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Special Interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest, premium and Special
Interest on, all Global Notes and all other Notes the Holders of which shall
have provided wire transfer instructions to the Company or the Paying Agent.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT AND REGISTRAR. Initially, Chase Bank of Texas,
National Association, the Trustee under the Indenture, will act as Paying Agent
and Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Subsidiaries may act in any
such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of July 28, 1999 ("Indenture") between the Company and the Trustee. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts
A2-3
<PAGE> 110
with the express provisions of the Indenture, the provisions of the Indenture
shall govern and be controlling. The Notes are obligations of the Company
limited to $250.0 million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Notwithstanding the provisions of clause (b) of this Paragraph 5,
at any time prior to August 1, 2002, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes ever
issued under this Indenture at a redemption price equal to 109.375% of the
principal amount thereof plus accrued and unpaid interest and Special Interest,
if any, to the redemption date, with the net cash proceeds of one or more
Public Equity Offerings by the Company or the net cash proceeds of a Strategic
Equity Investment in the Company or a capital contribution to the Company's
common equity made with the net cash proceeds of a concurrent Public Equity
Offering by, or Strategic Equity Investment in, the Company's direct parent;
provided that (1) at least 65% of the Notes ever issued under this Indenture
remain outstanding immediately after each such redemption (excluding Notes held
by the Company and its Subsidiaries) and (2) the redemption occurs within 60
days of the date of the closing of such Public Equity Offering or Strategic
Equity Investment.
(b) At any time, the Company may also redeem all or a part of the
Notes upon the occurrence of a Change of Control, upon not less than 30 nor
more than 60 days' prior notice (but in no event may any such redemption occur
more than 90 days after the occurrence of such Change of Control) mailed by
first-class mail to each Holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium as
of, and accrued and unpaid interest and Special Interest, if any, to the date
of redemption.
(c) Except as set forth in clause (a) of this Paragraph 5, the Company
shall not have the option to redeem the Notes pursuant to this Paragraph 5
prior to August 1, 2004. Thereafter, the Company shall have the option to
redeem the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Special Interest, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on August 1 of the
years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004.................................................... 104.688%
2005.................................................... 103.125%
2006.................................................... 101.562%
2007 and thereafter..................................... 100.000%
</TABLE>
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a
purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Special Interest thereon, if any, to the date
of purchase (the "Change of
A2-4
<PAGE> 111
Control Payment"). Within 30 days following any Change of Control, the Company
shall mail a notice to each Holder setting forth the procedures governing the
Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, within
five days of each date on which the aggregate amount of Excess Proceeds exceeds
$15.0 million, the Company shall commence an offer to all Holders of Notes (as
"Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the
maximum principal amount of Notes (including any Additional Notes) that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Special Interest thereon, if any, to the date fixed for the closing of such
offer, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes (including any Additional Notes)
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company (or such Subsidiary) may use such deficiency for general corporate
purposes. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Holders of Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
9. SUBORDINATION. Payment of principal, interest and premium and
Special Interest, if any, on the Notes is subordinated to the prior payment of
Senior Debt on the terms provided in the Indenture.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a
record date and the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Note Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Notes and Additional Notes, if any, voting as a single
class, and any existing default or compliance with any provision of the
Indenture, the Note Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes and
Additional Notes, if any, voting as a single class. Without the consent of any
Holder of a Note, the Indenture, the Note Guarantees or the Notes may be
amended or supplemented to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of
A2-5
<PAGE> 112
certificated Notes, to provide for the assumption of the Company's or
Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act, to provide for the Issuance of
Additional Notes in accordance with the limitations set forth in the Indenture,
or to allow any Guarantor to execute a supplemental indenture to the Indenture
and/or a Note Guarantee with respect to the Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest or Special Interest on the Notes
whether or not prohibited by Article 10 of the Indenture; (ii) default in
payment when due of principal of or premium, if any, on the Notes when the same
becomes due and payable at maturity, upon redemption (including in connection
with an offer to purchase) or otherwise whether or not prohibited by Article 10
of the Indenture, (iii) failure by the Company or any of its Subsidiaries to
comply with the provisions applicable to them of Section 5.01 of the Indenture;
(iv) failure by the Company or any of its Subsidiaries for 30 days after notice
to the Company by the Trustee or the Holders of at least 25% in principal
amount of the Notes (including Additional Notes, if any) then outstanding
voting as a single class to comply with the provisions applicable to them of
Sections 4.03, 4.07, 4.08, 4.09, 4.11, 4.14, 4.16, 4.17, 4.18 or 4.19 of the
Indenture; (v) failure by the Company or any of its Subsidiaries for 60 days
after notice to the Company by the Trustee or the Holders of at least 25% in
principal amount of the Notes (including Additional Notes, if any) then
outstanding voting as a single class to comply with certain other agreements in
the Indenture or the Notes; (vi) default under certain other agreements
relating to Indebtedness of the Company which default results in the
acceleration of such Indebtedness prior to its express maturity; (vii) certain
final judgments for the payment of money that remain undischarged for a period
of 60 days; (viii) certain events of bankruptcy or insolvency with respect to
the Company or any of its Significant Subsidiaries; and (ix) except as
permitted by the Indenture, any Note Guarantee shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be
in full force and effect or any Guarantor or any Person acting on its behalf
shall deny or disaffirm its obligations under such Guarantor's Note Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount of the then outstanding Notes may declare all
the Notes to be due and payable. Notwithstanding the foregoing, in the case of
an Event of Default arising from certain events of bankruptcy or insolvency,
all outstanding Notes will become due and payable without further action or
notice. Holders may not enforce the Indenture or the Notes except as provided
in the Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the Notes. The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
A2-6
<PAGE> 113
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with right of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Exchange and
Registration Rights Agreement dated as of July 28, 1999, between the Company
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Attention: Corporate Secretary
A2-7
<PAGE> 114
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
---------------------------------
(Insert assignee's legal name)
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date
--------------------------------------
Your Signature:
---------------------------------
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee*:
------------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A2-8
<PAGE> 115
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box
below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased:
$
----------------
Date:
---------------------------------
Your Signature:
---------------------------------
(Sign exactly as your name appears
on the face of this Note)
Tax Identification No.:
-------------------------
Signature Guarantee*:
------------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A2-9
<PAGE> 116
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount of
this Signature of
Amount of decrease in Amount of increase in Global Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
--------------- ---------------- ---------------- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
A2-10
<PAGE> 117
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Chase Bank of Texas, National Association
600 Travis
Houston, Texas 77002
Re: 9 3/8% Senior Subordinated Notes due 2009
Reference is hereby made to the Indenture, dated as of July 28, 1999
(the "Indenture"), between Classic Cable, Inc., as issuer (the "Company"), the
Guarantors on the signature pages thereto, and Chase Bank of Texas, National
Association, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
___________________, (the "Transferor") owns and proposes to transfer
the Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to ___________________________ (the "Transferee"), as further specified in
Annex A hereto. In connection with the Transfer, the Transferor hereby
certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE 144A GLOBAL NOTE Or a DEFINITIVE NOTE PURSUANT TO RULE 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE TEMPORAry REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE
OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act
and, accordingly, the Transferor hereby further certifies that (i) the Transfer
is not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person
B-1
<PAGE> 118
EXHIBIT B
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the Securities Act, (iii) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act and (iv) if the
proposed transfer is being made prior to the expiration of the Restricted
Period, the transfer is not being made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation
of the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on Transfer enumerated in the Private Placement Legend printed on
the Regulation S Global Note, the Temporary Regulation S Global Note and/or the
Definitive Note and in the Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A
BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY
PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act and
any applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements
of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the
Transferor hereby further certifies that it has not engaged in any general
solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive
Notes and the requirements of the exemption claimed, which certification
is supported by (1) a certificate executed by the Transferee in the form
of Exhibit D to the Indenture and (2) an Opinion of Counsel provided by
the Transferor or the Transferee (a copy of which the Transferor has
attached to this certification), to the effect that such Transfer is in
compliance with the Securities Act. Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the IAI
Global Note and/or the Definitive Notes and in the Indenture and the
Securities Act.
B-2
<PAGE> 119
EXHIBIT B
4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST
IN AN UNRESTRICTED GLObal NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any state
of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order
to maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will no longer be
subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATIon S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky
securities laws of any state of the United States and (ii) the
restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPtion. (i) The
Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule
144, Rule 903 or Rule 904 and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of
any State of the United States and (ii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will not
be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes or Restricted
Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
--------------------------------
[Insert Name of Transferor]
By:
---------------------------
Name:
Title:
Dated:
-------------------
B-3
<PAGE> 120
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ), or
-----------
(ii) [ ] Regulation S Global Note (CUSIP ), or
--------
(iii) [ ] IAI Global Note (CUSIP ); or
-----------
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ), or
------------
(ii) [ ] Regulation S Global Note (CUSIP ), or
---------
(iii) [ ] IAI Global Note (CUSIP ); or
-------------
(iv) [ ] Unrestricted Global Note (CUSIP ); or
--------
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE> 121
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Chase Bank of Texas, National Association
600 Travis
Houston, Texas 77002
Re: 9 3/8% Senior Subordinated Notes due 2009
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of July 28, 1999
(the "Indenture"), between Classic Cable, Inc., as issuer (the "Company"), the
Guarantors on the signature pages thereto, and Chase Bank of Texas, National
Association, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
__________________________, (the "Owner") owns and proposes to
exchange the Note[s] or interest in such Note[s] specified herein, in the
principal amount of $____________ in such Note[s] or interests (the
"Exchange"). In connection with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE to BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE to UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
C-1
<PAGE> 122
EXHIBIT C
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST In an UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in
an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest is
being acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Unrestricted Definitive Note is being acquired for the
Owner's own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to Restricted Definitive
Notes and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Unrestricted Definitive Note is being acquired in compliance with
any applicable blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE to RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL
INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the
Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE]
[ ] 144A Global Note, [ ] Regulation S Global Note, [ ] [ ] IAI Global Note
with an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer and
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Notes and pursuant to and in
accordance with the Securities Act, and in compliance with any applicable blue
sky securities laws of any state of the United States. Upon consummation of the
proposed Exchange in accordance with the terms of the Indenture, the beneficial
interest issued will be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the relevant Restricted Global Note and
in the Indenture and the Securities Act.
C-2
<PAGE> 123
EXHIBIT C
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
--------------------------------
[Insert Name of Transferor]
By:
---------------------------
Name:
Title:
Dated:
-------------------
C-3
<PAGE> 124
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Chase Bank of Texas, National Association
600 Travis
Houston, Texas 77002
Re: 9 3/8% Senior Subordinated Notes due 2009
Reference is hereby made to the Indenture, dated as of July 28, 1999
(the "Indenture"), between Classic Cable, Inc., as issuer (the "Company"), the
Guarantors on the signature pages thereto, and Chase Bank of Texas, National
Association, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest
therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which
we are acting as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and
to the Company a signed letter substantially in the form of this letter and an
Opinion of Counsel in form reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act, (D) outside the
United States in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or
(F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing the Definitive Note or
beneficial interest in a Global Note from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising
such purchaser that resales thereof are restricted as stated herein.
D-1
<PAGE> 125
EXHIBIT D
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and
the Company may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the Notes purchased
by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein purchased
by us for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
--------------------------------
[Insert Name of Transferor]
By:
---------------------------
Name:
Title:
Dated:
-------------------
D-2
<PAGE> 126
EXHIBIT E
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of July 28, 1999 (the "Indenture") among
Classic Cable, Inc., the Guarantors listed on Schedule I thereto and Chase Bank
of Texas, National Association, as trustee (the "Trustee"), (a) the due and
punctual payment of the principal of, premium, if any, and interest on the
Notes (as defined in the Indenture), whether at maturity, by acceleration,
redemption or otherwise, the due and punctual payment of interest on overdue
principal and premium, and, to the extent permitted by law, interest, and the
due and punctual performance of all other obligations of the Company to the
Holders or the Trustee all in accordance with the terms of the Indenture and
(b) in case of any extension of time of payment or renewal of any Notes or any
of such other obligations, that the same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, whether
at stated maturity, by acceleration or otherwise. The obligations of the
Guarantors to the Holders of Notes and to the Trustee pursuant to the Note
Guarantee and the Indenture are expressly set forth in Article 11 of the
Indenture and reference is hereby made to the Indenture for the precise terms
of the Note Guarantee. Each Holder of a Note, by accepting the same, (a) agrees
to and shall be bound by such provisions, (b) authorizes and directs the
Trustee, on behalf of such Holder, to take such action as may be necessary or
appropriate to effectuate the subordination as provided in the Indenture and
(c) appoints the Trustee attorney-in-fact of such Holder for such purpose;
provided, however, that the Indebtedness evidenced by this Note Guarantee shall
cease to be so subordinated and subject in right of payment upon any defeasance
of this Note in accordance with the provisions of the Indenture.
CLASSIC COMMUNICATIONS, INC.
By:
-------------------------------
Name:
Title:
CLASSIC CABLE, INC.
By:
-------------------------------
Name:
Title:
CLASSIC CABLE HOLDING, INC.
By:
-------------------------------
Name:
Title:
E-1
<PAGE> 127
EXHIBIT E
PONCA HOLDINGS, INC.
By:
-------------------------------
Name:
Title:
CLASSIC TELEPHONE, INC.
By:
-------------------------------
Name:
Title:
UNIVERSAL CABLE HOLDINGS, INC.
By:
-------------------------------
Name:
Title:
UNIVERSAL CABLE COMMUNICATIONS INC.
By:
-------------------------------
Name:
Title:
UNIVERSAL CABLE OF BEAVER, OKLAHOMA, INC.
By:
-------------------------------
Name:
Title:
UNIVERSAL CABLE MIDWEST, INC.
By:
-------------------------------
Name:
Title:
E-2
<PAGE> 128
EXHIBIT E
WT ACQUISITION CORPORATION
By:
-------------------------------
Name:
Title:
W.K. COMMUNICATIONS, INC.
By:
-------------------------------
Name:
Title:
TELEVISION ENTERPRISES, INC.
By:
-------------------------------
Name:
Title:
BLACK CREEK MANAGEMENT, L.L.C.
By:
-------------------------------
Name:
Title:
BLACK CREEK COMMUNICATIONS, L.P.
By:
-------------------------------
Name:
Title:
BUFORD GROUP, INC.
By:
-------------------------------
Name:
Title:
E-3
<PAGE> 129
EXHIBIT E
FRIENDSHIP CABLE OF TEXAS, INC.
By:
-------------------------------
Name:
Title:
BUFORD TELEVISION, INC.
By:
-------------------------------
Name:
Title:
CALLCOM 24, INC.
By:
-------------------------------
Name:
Title:
CORRECTIONAL CABLE TV, INC.
By:
-------------------------------
Name:
Title:
FRIENDSHIP CABLE OF ARKANSAS, INC.
By:
-------------------------------
Name:
Title:
BUFORD TELEVISION INC. OF FORT SMITH
By:
-------------------------------
Name:
Title:
E-4
<PAGE> 130
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guaranteeing Subsidiary"), a
subsidiary of Classic Cable, Inc. (or its permitted successor), a Delaware
corporation (the "Company"), the Company, the other Guarantors (as defined in
the Indenture referred to herein) and Chase Bank of Texas, National
Association, as trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of July 28, 1999 providing for
the issuance of an aggregate principal amount of up to $250.0 million of 9 3/8%
Senior Subordinated Notes due 2009 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Note Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees
as follows:
(a) Along with all Guarantors named in the Indenture, to jointly
and severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and
assigns, the Notes or the obligations of the Company hereunder or
thereunder, that:
(i) the principal of and interest on the Notes will be
promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful, and all
other obligations of the Company to the Holders or the Trustee
hereunder or thereunder will be promptly paid in full or performed,
all in accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal
of any Notes or any of such other obligations, that same will be
promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise. Failing payment when due of any amount so
guaranteed or any performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay the same
immediately.
F-1
<PAGE> 131
EXHIBIT F
(b) The obligations hereunder shall be unconditional, irrespective
of the validity, regularity or enforceability of the Notes or the
Indenture, the absence of any action to enforce the same, any waiver or
consent by any Holder of the Notes with respect to any provisions hereof
or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.
(c) The following is hereby waived: diligence presentment, demand
of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against
the Company, protest, notice and all demands whatsoever.
(d) This Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and the Indenture,
and the Guaranteeing Subsidiary accepts all obligations of a Guarantor
under the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors, or any Custodian,
Trustee, liquidator or other similar official acting in relation to either
the Company or the Guarantors, any amount paid by either to the Trustee or
such Holder, this Note Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right
of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed
hereby.
(g) As between the Guarantors, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article 6 of the
Indenture for the purposes of this Note Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in
respect of the obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in Article 6
of the Indenture, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantors for the purpose of this
Note Guarantee.
(h) The Guarantors shall have the right to seek contribution from
any non-paying Guarantor so long as the exercise of such right does not
impair the rights of the Holders under the Guarantee.
(i) Pursuant to Section 11.03 of the Indenture, after giving
effect to any maximum amount and any other contingent and fixed
liabilities that are relevant under any applicable Bankruptcy or
fraudulent conveyance laws, and after giving effect to any collections
from, rights to receive contribution from or payments made by or on behalf
of any other Guarantor in respect of the obligations of such other
Guarantor under Article 11 of the Indenture, this new Note Guarantee shall
be limited to the maximum amount permissible such that the obligations of
such Guarantor under this Note Guarantee will not constitute a fraudulent
transfer or conveyance.
3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that
the Note Guarantees shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Note Guarantee.
F-2
<PAGE> 132
EXHIBIT F
4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) The Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person)
another corporation, Person or entity whether or not affiliated with such
Guarantor unless:
(i) subject to Sections 11.05 and 11.06 of the Indenture, the
Person formed by or surviving any such consolidation or merger (if
other than a Guarantor or the Company) unconditionally assumes all
the obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Note Guarantee on
the terms set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in form
to the Trustee, of the Note Guarantee endorsed upon the Notes and the due
and punctual performance of all of the covenants and conditions of the
Indenture to be performed by the Guarantor, such successor corporation
shall succeed to and be substituted for the Guarantor with the same effect
as if it had been named herein as a Guarantor. Such successor corporation
thereupon may cause to be signed any or all of the Note Guarantees to be
endorsed upon all of the Notes issuable hereunder which theretofore shall
not have been signed by the Company and delivered to the Trustee. All the
Note Guarantees so issued shall in all respects have the same legal rank
and benefit under the Indenture as the Note Guarantees theretofore and
thereafter issued in accordance with the terms of the Indenture as though
all of such Note Guarantees had been issued at the date of the execution
hereof.
(c) Except as set forth in Articles 4 and 5 and Section 11.06 of
the Indenture, and notwithstanding clauses (a) and (b) above, nothing
contained in the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company or another
Guarantor, or shall prevent any sale or conveyance of the property of a
Guarantor as an entirety or substantially as an entirety to the Company or
another Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or otherwise, or
a sale or other disposition of all to the capital stock of any Guarantor,
in each case to a Person that is not (either before or after giving effect
to such transaction) a Subsidiary of the Company, then such Guarantor (in
the event of a sale or other disposition, by way of merger, consolidation
or otherwise, of all of the capital stock of such Guarantor) or the
corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor)
will be released and relieved of any obligations under its Note Guarantee;
provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of the Indenture,
including without limitation Section 4.10 of the Indenture. Upon delivery
by the Company to the Trustee of an Officers' Certificate and an Opinion
of Counsel to the effect that such sale or other disposition was made by
the Company in accordance with the provisions of the Indenture, including
without limitation Section 4.10 of the Indenture, the Trustee shall
execute any documents reasonably required in order to evidence the release
of any Guarantor from its obligations under its Note Guarantee.
F-3
<PAGE> 133
EXHIBIT F
(b) Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor under
the Indenture as provided in Article 11 of the Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the SEC that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. COUNTERPARTS The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
F-4
<PAGE> 134
EXHIBIT F
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: ,
------------- ----
[GUARANTEEING SUBSIDIARY]
By:
-------------------------------
Name:
Title:
CLASSIC CABLE, INC.
By:
-------------------------------
Name:
Title:
CLASSIC COMMUNICATIONS, INC.
By:
-------------------------------
Name:
Title:
CLASSIC CABLE, INC.
By:
-------------------------------
Name:
Title:
CLASSIC CABLE HOLDING, INC.
By:
-------------------------------
Name:
Title:
PONCA HOLDINGS, INC.
By:
-------------------------------
Name:
Title:
F-5
<PAGE> 135
EXHIBIT F
CLASSIC TELEPHONE, INC.
By:
-------------------------------
Name:
Title:
UNIVERSAL CABLE HOLDINGS, INC.
By:
-------------------------------
Name:
Title:
UNIVERSAL CABLE COMMUNICATIONS INC.
By:
-------------------------------
Name:
Title:
UNIVERSAL CABLE OF BEAVER,
OKLAHOMA, INC.
By:
-------------------------------
Name:
Title:
UNIVERSAL CABLE MIDWEST, INC.
By:
-------------------------------
Name:
Title:
WT ACQUISITION CORPORATION
By:
-------------------------------
Name:
Title:
F-6
<PAGE> 136
EXHIBIT F
W.K. COMMUNICATIONS, INC.
By:
-------------------------------
Name:
Title:
TELEVISION ENTERPRISES, INC.
By:
-------------------------------
Name:
Title:
BLACK CREEK MANAGEMENT, L.L.C.
By:
-------------------------------
Name:
Title:
BLACK CREEK COMMUNICATIONS, L.P.
By:
-------------------------------
Name:
Title:
BUFORD GROUP, INC.
By:
-------------------------------
Name:
Title:
FRIENDSHIP CABLE OF TEXAS, INC.
By:
-------------------------------
Name:
Title:
F-7
<PAGE> 137
EXHIBIT F
BUFORD TELEVISION, INC.
By:
-------------------------------
Name:
Title:
CALLCOM 24, INC.
By:
-------------------------------
Name:
Title:
CORRECTIONAL CABLE TV, INC.
By:
-------------------------------
Name:
Title:
FRIENDSHIP CABLE OF ARKANSAS, INC.
By:
-------------------------------
Name:
Title:
BUFORD TELEVISION INC. OF FORT SMITH
By:
-------------------------------
Name:
Title:
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Trustee
By:
-------------------------------
Authorized Signatory
F-8
<PAGE> 138
SCHEDULE 1
SCHEDULE OF GUARANTORS
The following schedule lists each Guarantor under the Indenture as of
the Issue Date:
Classic Communications, Inc.
Classic Cable, Inc.
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 Management, L.L.C.
Black Creek Communications, L.P.
Buford Group, Inc.
Friendship Cable of Texas, Inc.
Buford Television, Inc.
Callcom 24, Inc.
Correctional Cable TV, Inc.
Friendship Cable of Arkansas, Inc.
Buford Television Inc. of Fort Smith
<PAGE> 1
- -------------------------------------------------------------------------------
CUSIP/CINS: 18272NAD4
9 3/8% Series A Senior Subordinated Notes due 2009
No. R-1 $149,935,000
CLASSIC CABLE, INC.
promises to pay to Cede & Co. or registered assigns,
the principal sum of One Hundred Forty Nine Million Nine Hundred Thirty Five
Thousand Dollars
on August 1, 2009.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
CLASSIC CABLE, INC.
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
(SEAL)
This is one of the Notes referred to
in the within-mentioned Indenture:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Trustee
By: Date of Authentication: July 28, 1999
--------------------------------
Authorized Signatory
- -------------------------------------------------------------------------------
<PAGE> 2
9 3/8% Series A Senior Subordinated Notes due 2009
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE
MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL
NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF CLASSIC CABLE, INC.
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES.
Capitalized terms used herein shall have the meanings
assigned to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Classic Cable, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 9
3/8% per annum from July 28, 1999 until maturity and shall pay the Special
Interest payable pursuant to Section 2(d) of the Registration Rights Agreement
referred to below. The Company will pay interest and Special Interest
semi-annually in arrears on February 1 and August 1 of each year, or if any
such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be February 1,
2000. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the
rate then in effect; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest
and Special Interest (without regard to any applicable grace periods) from time
to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Notes (except defaulted interest) and Special Interest to the Persons who are
registered Holders of Notes at the close of
2
<PAGE> 3
business on the January 15 or July 15 next preceding the Interest Payment Date,
even if such Notes are canceled after such record date and on or before such
Interest Payment Date, except as provided in Section 2.12 of the Indenture with
respect to defaulted interest. The Notes will be payable as to principal,
premium and Special Interest, if any, and interest at the office or agency of
the Company maintained for such purpose within or without the City and State of
New York, or, at the option of the Company, payment of interest and Special
Interest may be made by check mailed to the Holders at their addresses set
forth in the register of Holders, and provided that payment by wire transfer of
immediately available funds will be required with respect to principal of and
interest, premium and Special Interest on, all Global Notes and all other Notes
the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Chase Bank of
Texas, National Association, the Trustee under the Indenture, will act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company or any of its Subsidiaries
may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture
dated as of July 28, 1999 ("Indenture") between the Company and the Trustee.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement
of such terms. To the extent any provision of this Note conflicts with the
express provisions of the Indenture, the provisions of the Indenture shall
govern and be controlling. The Notes are obligations of the Company limited to
$250.0 million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Notwithstanding the provisions of clause (b) of this
Paragraph 5, at any time prior to August 1, 2002, the Company may on any one or
more occasions redeem up to 35% of the aggregate principal amount of Notes ever
issued under this Indenture at a redemption price equal to 109.375% of the
principal amount of the Notes redeemed plus accrued and unpaid interest and
Special Interest, if any, to the redemption date, with the net cash proceeds of
one or more Public Equity Offerings by the Company or the net cash proceeds of
a Strategic Equity Investment in the Company or a capital contribution to the
Company's common equity made with the net cash proceeds of a concurrent Public
Equity Offering by, or Strategic Equity Investment in, the Company's direct
parent; provided that (1) at least 65% of the Notes ever issued under this
Indenture remain outstanding immediately after each such redemption (excluding
Notes held by the Company and its Subsidiaries) and (2) the redemption occurs
within 60 days of the date of the closing of such Public Equity Offering or
Strategic Equity Investment.
(b) At any time, the Company may also redeem all or a part of
the Notes upon the occurrence of a Change of Control, upon not less than 30 nor
more than 60 days' prior notice (but in no event may any such redemption occur
more than 90 days after the occurrence of such Change of Control) mailed by
first-class mail to each Holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium as
of, and accrued and unpaid interest and Special Interest, if any, to the date
of redemption.
(c) Except as set forth in clause (a) or clause (b) of this
Paragraph 5, the Company shall not have the option to redeem the Notes pursuant
to this Paragraph 5 prior to August 1, 2004. Thereafter, the Company shall have
the option to redeem the Notes, in whole or in part, upon no less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as percentages
of principal amount) set forth below plus accrued and unpaid interest and
Special Interest, if any, thereon to the applicable
3
<PAGE> 4
redemption date, if redeemed during the twelve-month period beginning on August
1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004.................................................................... 104.688%
2005.................................................................... 103.125%
2006.................................................................... 101.562%
2007 and thereafter..................................................... 100.000%
</TABLE>
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not
be required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of each Holder's
Notes at a purchase price equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Special Interest thereon, if any,
to the date of purchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Company shall mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales,
within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $15.0 million, the Company shall commence an offer to all Holders of
Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to
purchase the maximum principal amount of Notes (including any Additional Notes)
that may be purchased out of the Excess Proceeds at an offer price in cash in
an amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Special Interest thereon, if any, to the date fixed for the
closing of such offer, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes (including any
Additional Notes) tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company (or such Subsidiary) may use such deficiency for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Holders of
Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Company prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
9. SUBORDINATION. Payment of principal, interest and premium and
Special Interest, if any, on the Notes is subordinated to the prior payment of
Senior Debt on the terms provided in the Indenture.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may
4
<PAGE> 5
be registered and Notes may be exchanged as provided in the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company need not exchange or register the transfer of any Note or portion
of a Note selected for redemption, except for the unredeemed portion of any
Note being redeemed in part. Also, the Company need not exchange or register
the transfer of any Notes for a period of 15 days before a selection of Notes
to be redeemed or during the period between a record date and the corresponding
Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note
may be treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Note Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Notes and Additional Notes, if any,
voting as a single class, and any existing default or compliance with any
provision of the Indenture, the Note Guarantees or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes and Additional Notes, if any, voting as a single class.
Without the consent of any Holder of a Note, the Indenture, the Note Guarantees
or the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place
of certificated Notes, to provide for the assumption of the Company's or
Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act, to provide for the Issuance of
Additional Notes in accordance with the limitations set forth in the Indenture,
or to allow any Guarantor to execute a supplemental indenture to the Indenture
and/or a Note Guarantee with respect to the Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 days in the payment when due of interest or Special Interest on
the Notes whether or not prohibited by Article 10 of the Indenture; (ii)
default in payment when due of principal of or premium, if any, on the Notes
when the same becomes due and payable at maturity, upon redemption (including
in connection with an offer to purchase) or otherwise whether or not prohibited
by Article 10 of the Indenture, (iii) failure by the Company or any of its
Subsidiaries to comply with the provisions applicable to them of Section 5.01
of the Indenture; (iv) failure by the Company or any of its Subsidiaries for 30
days after notice to the Company to comply with the provisions applicable to
them of Sections 4.03, 4.07, 4.08, 4.09, 4.11, 4.14, 4.16, 4.17, 4.18 or 4.19
(in each case other than a failure to purchase Notes) of the Indenture; (v)
failure by the Company or any of its Subsidiaries for 60 days after notice to
the Company to comply with agreements applicable to them in the Indenture or
the Notes; (vi) default under certain other agreements relating to Indebtedness
of the Company which default results in the acceleration of such Indebtedness
prior to its express maturity; (vii) certain final judgments for the payment of
money that remain undischarged for a period of 60 days; (viii) certain events
of bankruptcy or insolvency with respect to the Company or any of its
Significant Subsidiaries; and (ix) except as permitted by the Indenture, any
Note Guarantee shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
Guarantor or any Person acting on its behalf shall deny or disaffirm its
obligations under such Guarantor's Note Guarantee. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, all
outstanding Notes will become due and payable without further action or notice.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of
5
<PAGE> 6
the then outstanding Notes may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing Default or Event
of Default and its consequences under the Indenture except a continuing Default
or Event of Default in the payment of interest on, or the principal of, the
Notes. The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer,
employee, incorporator or stockholder, of the Company, as such, shall not have
any liability for any obligations of the Company under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
16. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Exchange and
Registration Rights Agreement dated as of July 28, 1999, between the Company
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
20. NOTE GUARANTEES. For value received, each Guarantor
(which term includes any successor Person under the Indenture) has, jointly and
severally, unconditionally guaranteed, to the extent set forth in the Indenture
and subject to the provisions in the Indenture dated as of July 28, 1999 (the
"Indenture") among Classic Cable, Inc., the Guarantors listed on Schedule 1
thereto and Chase Bank of Texas, National Association, as trustee (the
"Trustee"), (a) the due and punctual payment of the principal of, premium, if
any, and interest on the Notes (as defined in the Indenture), whether at
maturity, by acceleration, redemption or otherwise, the due and punctual
payment of interest on overdue principal and premium, and, to the extent
permitted by law, interest, and the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee all in accordance with
the terms of the Indenture and (b) in case of any extension of time of payment
or renewal of any Notes or any of such other
6
<PAGE> 7
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The obligations of the Guarantors to
the Holders of Notes and to the Trustee pursuant to the Note Guarantee and the
Indenture are expressly set forth in Article 11 of the Indenture and reference
is hereby made to the Indenture for the precise terms of the Note Guarantee.
Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes and directs the Trustee, on behalf of such
Holder, to take such action as may be necessary or appropriate to effectuate
the subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
Indebtedness evidenced by this Note Guarantee shall cease to be so subordinated
and subject in right of payment upon any defeasance of this Note in accordance
with the provisions of the Indenture.
7
<PAGE> 8
CLASSIC COMMUNICATIONS, INC.
By:
---------------------------------------
Name:
Title:
CLASSIC CABLE, INC.
By:
---------------------------------------
Name:
Title:
CLASSIC CABLE HOLDING, INC.
By:
---------------------------------------
Name:
Title:
PONCA HOLDINGS, INC.
By:
---------------------------------------
Name:
Title:
CLASSIC TELEPHONE, INC.
By:
---------------------------------------
Name:
Title:
UNIVERSAL CABLE HOLDINGS, INC.
By:
---------------------------------------
Name:
Title:
UNIVERSAL CABLE COMMUNICATIONS INC.
By:
---------------------------------------
Name:
Title:
<PAGE> 9
UNIVERSAL CABLE OF BEAVER, OKLAHOMA, INC.
By:
---------------------------------------
Name:
Title:
UNIVERSAL CABLE MIDWEST, INC.
By:
---------------------------------------
Name:
Title:
WT ACQUISITION CORPORATION
By:
---------------------------------------
Name:
Title:
W.K. COMMUNICATIONS, INC.
By:
---------------------------------------
Name:
Title:
TELEVISION ENTERPRISES, INC.
By:
---------------------------------------
Name:
Title:
BLACK CREEK MANAGEMENT, L.L.C.
By:
---------------------------------------
Name:
Title:
<PAGE> 10
BLACK CREEK COMMUNICATIONS, L.P.
By:
---------------------------------------
Name:
Title:
BUFORD GROUP, INC.
By:
---------------------------------------
Name:
Title:
FRIENDSHIP CABLE OF TEXAS, INC.
By:
---------------------------------------
Name:
Title:
BUFORD TELEVISION, INC.
By:
---------------------------------------
Name:
Title:
CALLCOM 24, INC.
By:
---------------------------------------
Name:
Title:
CORRECTIONAL CABLE TV, INC.
By:
---------------------------------------
Name:
Title:
FRIENDSHIP CABLE OF ARKANSAS, INC.
By:
---------------------------------------
Name:
Title:
<PAGE> 11
BUFORD TELEVISION INC. OF FORT SMITH
By:
---------------------------------------
Name:
Title:
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Attention: Corporate Secretary
<PAGE> 12
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
-----------------------------------
(Insert assignee's legal name)
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
-----------------------------
Your Signature:
------------------------
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee*:
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
<PAGE> 13
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box
below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased:
$
-------------------
Date:
------------------------
Your Signature:
-------------------------
(Sign exactly as your name appears
on the face of this Note)
Tax Identification No.:
----------------
Signature Guarantee*:
--------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
<PAGE> 14
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a
part of another Global Note or Definitive Note for an interest in this Global
Note, have been made:
<TABLE>
<CAPTION>
Principal Amount Signature of
Amount of decrease in Amount of increase in of this Global Note authorized officer of
Principal Amount Principal Amount following such decrease Trustee or Note
Date of Exchange this Global Note of this Global Note (or increase) Custodian
---------------- ---------------- ------------------- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 15
- -------------------------------------------------------------------------------
CUSIP/CINS: U17965AB7
9 3/8% Series A Senior Subordinated Notes due 2009
No. S-1 $65,000
CLASSIC CABLE, INC.
promises to pay to Cede & Co. or registered assigns,
the principal sum of Sixty Five Thousand Dollars
on August 1, 2009.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
CLASSIC CABLE, INC.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
(SEAL)
This is one of the Notes referred to
in the within-mentioned Indenture:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Trustee
By: Date of Authentication: July 28, 1999
----------------------------------
Authorized Signatory
- --------------------------------------------------------------------------------
<PAGE> 16
9 3/8% Series A Senior Subordinated Notes due 2009
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE
MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL
NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF CLASSIC CABLE, INC.
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES.
Capitalized terms used herein shall have the meanings
assigned to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Classic Cable, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 9
3/8% per annum from July 28, 1999 until maturity and shall pay the Special
Interest payable pursuant to Section 2(d) of the Registration Rights Agreement
referred to below. The Company will pay interest and Special Interest
semi-annually in arrears on February 1 and August 1 of each year, or if any
such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be February 1,
2000. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the
rate then in effect; it shall pay
2
<PAGE> 17
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Special Interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Notes (except defaulted interest) and Special Interest to the Persons who are
registered Holders of Notes at the close of business on the January 15 or July
15 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium and Special Interest, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Special Interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest, premium and Special
Interest on, all Global Notes and all other Notes the Holders of which shall
have provided wire transfer instructions to the Company or the Paying Agent.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT AND REGISTRAR. Initially, Chase Bank of
Texas, National Association, the Trustee under the Indenture, will act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company or any of its Subsidiaries
may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture
dated as of July 28, 1999 ("Indenture") between the Company and the Trustee.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement
of such terms. To the extent any provision of this Note conflicts with the
express provisions of the Indenture, the provisions of the Indenture shall
govern and be controlling. The Notes are obligations of the Company limited to
$250.0 million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Notwithstanding the provisions of clause (b) of this
Paragraph 5, at any time prior to August 1, 2002, the Company may on any one or
more occasions redeem up to 35% of the aggregate principal amount of Notes ever
issued under this Indenture at a redemption price equal to 109.375% of the
principal amount of the Notes redeemed plus accrued and unpaid interest and
Special Interest, if any, to the redemption date, with the net cash proceeds of
one or more Public Equity Offerings by the Company or the net cash proceeds of
a Strategic Equity Investment in the Company or a capital contribution to the
Company's common equity made with the net cash proceeds of a concurrent Public
Equity Offering by, or Strategic Equity Investment in, the Company's direct
parent; provided that (1) at least 65% of the Notes ever issued under this
Indenture remain outstanding immediately after each such redemption (excluding
Notes held by the Company and its Subsidiaries) and (2) the redemption occurs
within 60 days of the date of the closing of such Public Equity Offering or
Strategic Equity Investment.
(b) At any time, the Company may also redeem all or a part of
the Notes upon the occurrence of a Change of Control, upon not less than 30 nor
more than 60 days' prior notice (but in no event may any such redemption occur
more than 90 days after the occurrence of such Change of Control) mailed by
first-class mail to each Holder's registered address, at a redemption price
equal to 100% of the
3
<PAGE> 18
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest and Special Interest, if any, to the date of redemption.
(c) Except as set forth in clause (a) or clause (b) of this
Paragraph 5, the Company shall not have the option to redeem the Notes pursuant
to this Paragraph 5 prior to August 1, 2004. Thereafter, the Company shall have
the option to redeem the Notes, in whole or in part, upon no less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as percentages
of principal amount) set forth below plus accrued and unpaid interest and
Special Interest, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on August 1 of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004.................................................................... 104.688%
2005.................................................................... 103.125%
2006.................................................................... 101.562%
2007 and thereafter..................................................... 100.000%
</TABLE>
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not
be required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of each Holder's
Notes at a purchase price equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Special Interest thereon, if any,
to the date of purchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Company shall mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales,
within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $15.0 million, the Company shall commence an offer to all Holders of
Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to
purchase the maximum principal amount of Notes (including any Additional Notes)
that may be purchased out of the Excess Proceeds at an offer price in cash in
an amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Special Interest thereon, if any, to the date fixed for the
closing of such offer, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes (including any
Additional Notes) tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company (or such Subsidiary) may use such deficiency for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Holders of
Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Company prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in
4
<PAGE> 19
whole multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
9. SUBORDINATION. Payment of principal, interest and premium
and Special Interest, if any, on the Notes is subordinated to the prior payment
of Senior Debt on the terms provided in the Indenture.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during
the period between a record date and the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note
may be treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Note Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Notes and Additional Notes, if any,
voting as a single class, and any existing default or compliance with any
provision of the Indenture, the Note Guarantees or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes and Additional Notes, if any, voting as a single class.
Without the consent of any Holder of a Note, the Indenture, the Note Guarantees
or the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place
of certificated Notes, to provide for the assumption of the Company's or
Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act, to provide for the Issuance of
Additional Notes in accordance with the limitations set forth in the Indenture,
or to allow any Guarantor to execute a supplemental indenture to the Indenture
and/or a Note Guarantee with respect to the Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 days in the payment when due of interest or Special Interest on
the Notes whether or not prohibited by Article 10 of the Indenture; (ii)
default in payment when due of principal of or premium, if any, on the Notes
when the same becomes due and payable at maturity, upon redemption (including
in connection with an offer to purchase) or otherwise whether or not prohibited
by Article 10 of the Indenture, (iii) failure by the Company or any of its
Subsidiaries to comply with the provisions applicable to them of Section 5.01
of the Indenture; (iv) failure by the Company or any of its Subsidiaries for 30
days after notice to the Company to comply with the provisions applicable to
them of Sections 4.03, 4.07, 4.08, 4.09, 4.11, 4.14, 4.16, 4.17, 4.18 or 4.19
(in each case other than a failure to purchase Notes) of the Indenture; (v)
failure by the Company or any of its Subsidiaries for 60 days after notice to
the Company to comply with agreements applicable to them in the Indenture or
the Notes; (vi) default under certain other agreements relating to Indebtedness
of the Company which default results in the acceleration of such Indebtedness
prior to its express maturity; (vii) certain final judgments for the payment of
money that remain
5
<PAGE> 20
undischarged for a period of 60 days; (viii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries;
and (ix) except as permitted by the Indenture, any Note Guarantee shall be held
in any judicial proceeding to be unenforceable or invalid or shall cease for
any reason to be in full force and effect or any Guarantor or any Person acting
on its behalf shall deny or disaffirm its obligations under such Guarantor's
Note Guarantee. If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding
Notes may declare all the Notes to be due and payable. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, all outstanding Notes will become due and payable
without further action or notice. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all
of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes. The
Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer,
employee, incorporator or stockholder, of the Company, as such, shall not have
any liability for any obligations of the Company under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
16. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Exchange and
Registration Rights Agreement dated as of July 28, 1999, between the Company
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
6
<PAGE> 21
20. NOTE GUARANTEES. For value received, each Guarantor
(which term includes any successor Person under the Indenture) has, jointly and
severally, unconditionally guaranteed, to the extent set forth in the Indenture
and subject to the provisions in the Indenture dated as of July 28, 1999 (the
"Indenture") among Classic Cable, Inc., the Guarantors listed on Schedule 1
thereto and Chase Bank of Texas, National Association, as trustee (the
"Trustee"), (a) the due and punctual payment of the principal of, premium, if
any, and interest on the Notes (as defined in the Indenture), whether at
maturity, by acceleration, redemption or otherwise, the due and punctual
payment of interest on overdue principal and premium, and, to the extent
permitted by law, interest, and the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee all in accordance with
the terms of the Indenture and (b) in case of any extension of time of payment
or renewal of any Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of the Guarantors to the Holders of Notes and to the Trustee
pursuant to the Note Guarantee and the Indenture are expressly set forth in
Article 11 of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Note Guarantee. Each Holder of a Note, by accepting
the same, (a) agrees to and shall be bound by such provisions, (b) authorizes
and directs the Trustee, on behalf of such Holder, to take such action as may
be necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such
purpose; provided, however, that the Indebtedness evidenced by this Note
Guarantee shall cease to be so subordinated and subject in right of payment
upon any defeasance of this Note in accordance with the provisions of the
Indenture.
7
<PAGE> 22
CLASSIC COMMUNICATIONS, INC.
By:
----------------------------------------
Name:
Title:
CLASSIC CABLE, INC.
By:
----------------------------------------
Name:
Title:
CLASSIC CABLE HOLDING, INC.
By:
----------------------------------------
Name:
Title:
PONCA HOLDINGS, INC.
By:
----------------------------------------
Name:
Title:
CLASSIC TELEPHONE, INC.
By:
----------------------------------------
Name:
Title:
UNIVERSAL CABLE HOLDINGS, INC.
By:
----------------------------------------
Name:
Title:
UNIVERSAL CABLE COMMUNICATIONS INC.
By:
----------------------------------------
Name:
Title:
<PAGE> 23
UNIVERSAL CABLE OF BEAVER, OKLAHOMA, INC.
By:
----------------------------------------
Name:
Title:
UNIVERSAL CABLE MIDWEST, INC.
By:
----------------------------------------
Name:
Title:
WT ACQUISITION CORPORATION
By:
----------------------------------------
Name:
Title:
W.K. COMMUNICATIONS, INC.
By:
----------------------------------------
Name:
Title:
TELEVISION ENTERPRISES, INC.
By:
----------------------------------------
Name:
Title:
BLACK CREEK MANAGEMENT, L.L.C.
By:
----------------------------------------
Name:
Title:
<PAGE> 24
BLACK CREEK COMMUNICATIONS, L.P.
By:
----------------------------------------
Name:
Title:
BUFORD GROUP, INC.
By:
----------------------------------------
Name:
Title:
FRIENDSHIP CABLE OF TEXAS, INC.
By:
----------------------------------------
Name:
Title:
BUFORD TELEVISION, INC.
By:
----------------------------------------
Name:
Title:
CALLCOM 24, INC.
By:
----------------------------------------
Name:
Title:
CORRECTIONAL CABLE TV, INC.
By:
----------------------------------------
Name:
Title:
FRIENDSHIP CABLE OF ARKANSAS, INC.
By:
----------------------------------------
Name:
Title:
<PAGE> 25
BUFORD TELEVISION INC. OF FORT SMITH
By:
----------------------------------------
Name:
Title:
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Attention: Corporate Secretary
<PAGE> 26
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
----------------------------------
(Insert assignee's legal name)
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
------------------
Your Signature:
------------------------
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee*:
-----------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
<PAGE> 27
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box
below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased:
$
-------------------
Date:
---------------
Your Signature:
------------------------
(Sign exactly as your name appears
on the face of this Note)
Tax Identification No.:
----------------
Signature Guarantee*:
----------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
<PAGE> 28
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S
Temporary Global Note for an interest in another Global Note, or of other
Restricted Global Notes for an interest in this Regulation S Temporary Global
Note, have been made:
<TABLE>
<CAPTION>
Principal Amount of this Signature of
Amount of decrease in Amount of increase in Global Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
---------------- ---------------- ---------------- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Historical
----------------------------------------------------------------------
For the Six Months
For the Year Ended December 31, Ended June 30,
---------------------------------------------- ---------------------
1994 1995 1996 1997 1998 1998 1999
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Loss before income tax benefit, minority
interest and extraordinary loss (3,596) (12,860) (19,968) (21,476) (27,269) (11,426) (16,547)
Fixed Charges:
Interest expense 4,975 14,199 20,633 21,299 24,442 10,497 14,992
Interest portion of rental expense 113 264 428 464 514 232 314
Dividends on unconsolidated subsidiary -- -- 101 101 67 50 --
------ ------- ------- ------- ------- ------- -------
Earnings 1,492 1,603 1,194 388 (2,246) (647) (1,241)
====== ======= ======= ======= ======= ======= =======
Fixed charges:
Interest expense 4,975 14,199 20,633 21,299 24,442 10,497 14,992
Interest portion of rental expense 113 264 428 464 514 232 314
Dividends on unconsolidated subsidiary -- -- 101 101 67 50 --
------ ------- ------- ------- ------- ------- -------
Total fixed charges 5,088 14,463 21,162 21,864 25,023 10,779 15,306
------ ------- ------- ------- ------- ------- -------
Ratio of earnings to fixed charges n/a n/a n/a n/a n/a n/a n/a
Earnings inadequate to cover fixed charges:
Total fixed charges 5,088 14,463 21,162 21,864 25,023 10,779 15,306
Earnings 1,492 1,603 1,194 388 (2,246) (647) (1,241)
------ ------- ------- ------- ------- ------- -------
Deficiency of earnings to fixed charges (3,596) (12,860) (19,968) (21,476) (27,269) (11,426) (16,547)
====== ======= ======= ======= ======= ======= =======
<CAPTION>
Pro Forma
-------------------------
For the For the
Year Ended Six Months Ended
December 31, June 30,
1998 1999
------- -------
<S> <C> <C>
Loss before income tax benefit, minority
interest and extraordinary loss (66,288) (28,776)
Fixed Charges:
Interest expense 51,743 25,947
Interest portion of rental expense 1,085 542
Dividends on unconsolidated subsidiary -- --
------- -------
Earnings (13,460) (2,287)
======= =======
Fixed charges:
Interest expense 51,743 25,947
Interest portion of rental expense 1,085 542
Dividends on unconsolidated subsidiary -- --
------- -------
Total fixed charges 52,828 26,489
------- -------
Ratio of earnings to fixed charges n/a n/a
Earnings inadequate to cover fixed charges:
Total fixed charges 52,828 26,489
Earnings (13,460) (2,287)
------- -------
Deficiency of earnings to fixed charges (66,288) (28,776)
======= =======
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 30, 1999, in Amendment No. 8 to the Registration
Statement (Form S-4 No. 333-63641) and the related Prospectus of Classic
Communications, Inc.
/s/ ERNST & YOUNG LLP
Austin, Texas
August 10, 1999
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Buford Group, Inc.:
We consent to the use of our report included herein and to the reference to our
firm under the headings "Experts" and "Selected Historical Consolidated
Financial Data - Buford Group, Inc." in the prospectus.
/s/ KPMG LLP
Dallas, Texas
August 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0001069602
<NAME>CLASSIC COMMUNICATIONS, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1997 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 JUN-30-1999
<CASH> 616 2,779 638
<SECURITIES> 0 0 0
<RECEIVABLES> 5,281 5,799 5,462
<ALLOWANCES> 762 325 326
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 5,742 8,677 7,115
<PP&E> 96,850 127,169 135,177
<DEPRECIATION> 28,211 39,977 47,486
<TOTAL-ASSETS> 220,162 254,604 243,576
<CURRENT-LIABILITIES> 11,735 17,482 16,888
<BONDS> 0 0 0
0 0 0
26,705 0 0
<COMMON> 28 32 32
<OTHER-SE> (13,214) (46,820) 0
<TOTAL-LIABILITY-AND-EQUITY> 220,162 254,604 243,576
<SALES> 0 0 0
<TOTAL-REVENUES> 60,995 69,802 39,286
<CGS> 0 0 0
<TOTAL-COSTS> 64,387 72,601 40,856
<OTHER-EXPENSES> (3,215) 28 (15)
<LOSS-PROVISION> 1,248 971 0
<INTEREST-EXPENSE> 21,299 24,442 14,992
<INCOME-PRETAX> (21,476) (27,269) (16,547)
<INCOME-TAX> (7,347) (1,930) 0
<INCOME-CONTINUING> (14,129) (25,339) (16,547)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 (5,524) 0
<CHANGES> 0 0 0
<NET-INCOME> (14,129) (30,863) (16,547)
<EPS-BASIC> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
