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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 333-63643
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[CLASSIC CABLE LOGO]
CLASSIC CABLE, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 74-2750981
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515 CONGRESS AVENUE, SUITE 2626 78701
AUSTIN, TX (Zip Code)
(Address of principal executive offices)
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Registrant's telephone number, including area code: (512) 476-9095
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]
As of March 17, 2000, there were 1,000 shares of Common Stock outstanding.
The Registrant meets the conditions set forth in General Instructions
I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced
disclosure format.
DOCUMENTS INCORPORATED BY REFERENCE
None
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CLASSIC CABLE, INC.
1999 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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PART I
Item 1 Business.................................................... 3
Item 2 Properties.................................................. 16
Item 3 Legal Proceedings........................................... 16
Item 4 Submission of Matters to a Vote of Security Holders......... 16
PART II
Item 5 Market for the Registrant's Common Stock and Related
Stockholder Matters......................................... 17
Item 6 Selected Financial Data..................................... 17
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 17
Item 8 Financial Statements and Supplementary Data................. 21
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 21
PART III
Item 10 Directors and Executive Officers of the Company............. 21
Item 11 Executive Compensation...................................... 21
Item 12 Security Ownership of Certain Beneficial Owners and
Management.................................................. 21
Item 13 Certain Relationships and Related Transactions.............. 21
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 21
SIGNATURES............................................................ 27
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This Annual Report on Form 10-K is for the year ending December 31, 1999.
This Annual Report modifies and supersedes documents filed prior to this Annual
Report. The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you directly to those documents. Information incorporated by reference
is considered to be part of this Annual Report. In addition, information that we
file with the SEC in the future will automatically update and supersede
information contained in this Annual Report. In this Annual Report, "Classic,"
"we," "us" and "our" refer to Classic Cable, Inc. and its subsidiaries.
You should carefully review the information contained in this Annual
Report, but should particularly consider any risk factors that we set forth in
this Annual Report and in other reports or documents that we file from time to
time with the SEC. The statements, other than statements of historical fact,
included in this Annual Report on Form 10-K are forward-looking statements.
These statements include, but are not limited to:
- statements regarding our plans for future acquisitions;
- statements regarding integration of our cable systems and future acquired
systems;
- statements regarding our planned capital expenditures and system
upgrades; and
- statements regarding the offering of video and Internet access on our
systems.
Forward-looking statements generally can also be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate," "plan," "seek," or "believe." We believe
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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 integrating
past and future acquisitions;
- 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 or refinance our outstanding indebtedness;
- the timing, actual cost and allocation of our capital expenditures and
system upgrades;
- our potential need for additional capital;
- competition in the cable industry; and
- the advent of new technology.
You should not unduly rely on these forward-looking statements, which speak
only as of the date of this Annual Report on Form 10-K. 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 Annual Report on Form 10-K or to reflect the occurrence of
unanticipated events.
PART I
ITEM 1. BUSINESS
COMPANY OVERVIEW
We are a growth oriented cable operator focused on non-metropolitan markets
in the United States. In pursuing our business strategy, we have focused our
efforts, including acquisitions, on cable television systems in 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. In addition, there are
typically fewer competitive entertainment alternatives in these markets.
Through the acquisition and upgrade of clustered non-metropolitan 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.
As of December 31, 1999, our consolidated cable operations served
approximately 356,000 basic subscribers and passed approximately 609,000 homes
in the United States. In February 2000, we acquired Star Cable Associates, a
cable communications company serving approximately 57,000 subscribers, thus
increasing the number of subscribers we serve to approximately 413,000 and the
number of homes we pass to approximately 707,000.
We are a wholly owned subsidiary of Classic Communications. 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 website is
www.classic-cable.com. The information on our website is not a part of this
report.
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
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quality of our services. Our business strategy is to focus on serving growing
non-metropolitan communities in the United States.
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 have created clusters of
cable television systems around these markets and believe that clustering cable
systems provides significant operating and cost advantages.
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.
Increase the Revenue-Generating Bandwidth of Our Cable Plant
Through our capital improvement program, we plan to upgrade our cable plant
aggressively and systematically utilize 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.;
- The deployment of fiber optic cable; and
- The consolidation of headends.
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 a
direct-to-home solution. In larger systems, we provide enhanced digital video in
our upgraded and certain other systems using HITS. 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
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- multiple tiers of niche satellite basic programming.
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. 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 programming selection comparable to that currently offered by
HITS to the headend.
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.
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.
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.
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.
PROGRAMMING
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. 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.
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 establishing 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
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cable programming, inflationary increases and other factors. 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.
GENERAL DEVELOPMENTS
Star Acquisition
In February 2000, a wholly owned subsidiary purchased substantially all of
the assets of Star Cable Associates ("Star"), which operates cable television
systems in Texas, Louisiana and Ohio, for an aggregate purchase price of
approximately $110 million in cash and 555,555 shares of Classic Communications
Class A Voting Common Stock ("Class A Common Stock").
Private Debt Offering
In February 2000, we completed a private offering of $225 million of Senior
Subordinated Notes due 2010. The securities sold in the private offering will
not be and have not been registered under the Securities Act of 1933 and may not
be offered or sold in the United States without registration or an applicable
exemption from registration requirements. The proceeds of the offering were used
to fund a portion of the acquisition of Star, repay a portion of indebtedness
under our senior credit facility and repurchase approximately $33 million of our
9.375% Senior Subordinated Notes due 2008.
In connection with the offering, we entered into a second amendment to our
senior credit facility, which (1) allowed for the offering of the 10.5% senior
subordinated notes, (2) modified some of the covenants in the credit facility to
provide us with more flexibility (i.e., maximum total debt ratio, total interest
coverage ratio, maximum capital expenditures, limitations on investments,
permitted acquisitions, and lines of business), (3) restructured the term loan A
facility so that following a prepayment in full of the term loan A facility, and
subject to certain additional conditions, we have the ability to reborrow in one
or more advances under the term loan A facility until February 10, 2001 and (4)
increased the term loan A facility so that an additional $25 million may be made
available under that facility.
Initial Public Offering
In December 1999, Classic Communications completed an initial public
offering of 7,250,000 shares of its Class A Common Stock, raising approximately
$168.9 million. It used the proceeds from the offering to pay offering expenses
and to redeem all of its outstanding 13.25% senior discount notes due 2009.
Classic Communications contributed the remainder of the proceeds, approximately
$83.5 million, to us, which we used for general business purposes, including
financing part of the Star acquisition.
The Buford Acquisition
In July 1999, we 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 added approximately 170,000 basic
subscribers and, we believe, represented an excellent geographic and strategic
fit with our other cable systems. In addition, we believe that the Buford
acquisition provided other benefits, including an opportunity to reduce
programming costs, consolidate headends and enhance customer service. The Buford
acquisition was financed through a $350 million credit facility and the issuance
of $150 million of our senior subordinated notes due 2009.
The Brera Classic Equity Investment
In connection with the Buford acquisition, Classic Communications received
$100 million from Brera Classic, LLC, $3.3 million of which was paid to Brera
Classic pursuant to management and advisory fee agreements, and $750,000 of
which 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
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financed through the sale of Classic Communications common stock to Brera
Classic. The net proceeds were contributed to us.
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. 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.
We own or lease 670 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 146 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.
Our 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.
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
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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 a fixed
monthly fee 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.
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," and
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.
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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 have competing franchises in ten systems passing approximately
23,100 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
continental 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 traditional analog cable systems with respect to programming and digital
quality, as well as disadvantages that include high up-front costs and a lack of
local 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 suffers 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. Legislation
removing the existing legal obstacles to retransmitting local broadcast
programming to DBS subscribers was signed into law by President Clinton on
November 29, 1999. DBS providers are now making local broadcast programming
available in certain larger markets. If subsequent rural loan legislation is
enacted, local broadcast programming may become available to DBS subscribers in
smaller markets. In rural markets it may not be cost effective for DBS providers
to provide local programming unless subsidized by the federal government.
Cable television systems also compete with wireless program distribution
services such as multichannel multipoint distribution service, or MMDS, which
use low power microwave signals 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 Telecom 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,
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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. Wireless Internet access is now offered in some markets by
cellular, PCS and other mobile service providers, such as Nextel.
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 December 31, 1999, Classic had approximately 700 employees. None of our
employees is represented by a labor union. We consider our relations with our
employees to be good.
LEGISLATION AND REGULATION
The operation of cable television systems is extensively regulated by the
FCC, some state governments and most local governments. The 1996 Telecom Act
altered the regulatory structure governing the nation's telecommunications
providers. It removes barriers to competition in both the cable television
market and the local telephone market. Among other things, it reduces the scope
of cable rate regulation.
The 1996 Telecom Act required the FCC to implement numerous rulemakings,
the final outcome of which for some cannot yet be determined due to court
challenges. Moreover, Congress and the FCC have frequently revisited the subject
of cable television regulation and may do so again. Future legislative and
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regulatory changes could adversely affect our operations. This section briefly
summarizes certain of the key laws and regulations currently affecting the
growth and operation of our cable systems.
Cable Rate Regulation
The 1992 Cable Act imposed an extensive rate regulation regime on the cable
television industry, which limited the ability of cable companies to increase
subscriber fees. Under that regime, all cable systems were subjected to rate
regulation, unless they faced "effective competition" in their local franchise
area. Federal law now defines "effective competition" on a community-specific
basis as requiring satisfaction of conditions rarely satisfied in the current
marketplace.
Although the FCC establishes all cable rate rules, local government units
(commonly referred to as local franchising authorities or "LFAs") are primarily
responsible for administering the regulation of the lowest level of cable -- the
basic service tier ("BST"), which typically contains local broadcast stations
and public, educational and governmental, or PEG access channels. Before an LFA
begins BST rate regulation, it must certify to the FCC that it will follow
applicable federal rules, and many LFAs have voluntarily declined to exercise
this authority. LFAs also have primary responsibility for regulating cable
equipment rates. Under federal law, charges for various types of cable equipment
must be unbundled from each other and from monthly charges for programming
services, and priced no higher than the operator's actual cost, plus an 11.25%
rate of return.
The FCC historically administered rate regulation of any cable programming
service tiers ("CPST"), which typically contain satellite-delivered programming.
Under the 1996 Telecom Act, however, the FCC's authority to regulate CPST rates
sunset on March 31, 1999. The FCC has taken the position that it will still
adjudicate pending CPST complaints but will strictly limit its review, and
possible refund orders, to the time period predating the sunset date.
Cable Entry Into Telecommunications
The 1996 Telecom Act provides that no state or local laws or regulations
may prohibit or have the effect of prohibiting any entity from providing any
interstate or intrastate telecommunications service. States are authorized,
however, to impose "competitively neutral" requirements regarding universal
service, public safety and welfare, service quality, and consumer protection.
State and local governments also retain their authority to manage the public
rights-of-way. Although the 1996 Telecom Act clarifies that traditional cable
franchise fees may be based only on revenues related to the provision of cable
television services, it also provides that LFAs may require reasonable,
competitively neutral compensation for management of the public rights-of-way
when cable operators provide telecommunications service. In 1999, there were
several conflicting and inconclusive federal court decisions that addressed the
issues of lawful "management of the right-of-ways" and "competitively neutral
compensation," but some doubt remains. The 1996 Telecom Act prohibits LFAs from
requiring cable operators to provide telecommunications service or facilities as
a condition of a franchise grant, renewal or transfer, except that LFAs argue
they can seek "institutional networks" as part of such franchise negotiations.
The favorable pole attachment rates afforded cable operators under federal law
can be increased by utility companies owning the poles during a five year
phase-in period beginning in 2001 if the cable operator provides
telecommunications service, as well as cable service, over its plant. The FCC
has clarified that a cable operator's provision of Internet service does not
affect the favorable pole rates.
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 intended to facilitate the entry of new
telecommunications providers (including cable operators) is the interconnection
obligation imposed on all telecommunications carriers. This requires, for
example, that the incumbent local telephone company must allow new competing
telecommunications providers to connect to the local telephone distribution
system. In a January 1999 decision, the United States Supreme Court upheld the
FCC's authority to adopt interconnection pricing rules.
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Cable Systems Providing Internet Service
Although there is at present no significant federal regulation of cable
system delivery of Internet services and the FCC recently issued several reports
finding no immediate need to impose such regulation, this situation may change
as cable systems expand their broadband delivery of Internet services. In
particular, proposals have been advanced at the FCC and Congress that would
require cable operators to provide nondiscriminating access to unaffiliated
Internet service providers and online service providers. Additionally, some
local franchising authorities are considering the imposition of mandatory
Internet access requirements as part of cable franchise renewals or transfers. A
federal district court in Portland, Oregon recently upheld the legal ability of
local franchising authorities to impose such conditions, but an appeal was filed
with the Ninth Circuit Court of Appeals, oral argument has been held and the
parties are awaiting a decision. A number of other local authorities have
imposed or may impose mandatory Internet access requirements on cable operators,
some of which are on appeal. Numerous other franchise authorities are
considering imposing similar requirements, either during transfer or renewal
process or by promulgating regulations pursuant to their general franchise
authority. Finally, several states are considering legislation that would
require mandatory access for unaffiliated Internet service providers. Some large
cable systems have committed to provide such access in the future. These
developments could, if they become widespread, burden the capacity of cable
systems and complicate and delay plans for providing Internet service.
Telephone Company Entry Into Cable Television
The 1996 Telecom Act allows telephone companies to compete directly with
cable operators both inside and outside their telephone service areas. Because
of their resources, LECs could be formidable competitors to traditional cable
operators, and certain LECs have begun offering cable service. We currently have
telephone overbuilds in three systems passing approximately 3,300 homes.
Under the 1996 Telecom Act, an LEC or other entity providing video
programming to customers will be regulated as a traditional cable operator
(subject to local franchising and federal regulatory requirements), unless it
elects to provide its programming via an "open video system" ("OVS"). A January
1999 federal court of appeals decision held that OVS providers can be required
to obtain a local franchise. To be eligible for OVS status, the provider cannot
occupy more than one-third of the system's activated channels when demand for
channels exceeds supply. Nor can it discriminate among programmers or establish
unreasonable rates, terms or conditions for service.
Although LECs and cable operators can now expand their offerings across
traditional service boundaries, the general prohibitions remain on LEC buyouts
(i.e., any ownership interest exceeding 10 percent) of co-located cable systems,
cable operator buyouts of co-located LEC systems, and joint ventures among cable
operators and LECs in the same market. The 1996 Telecom Act provides a few
limited exceptions to this buyout prohibition, including certain rural areas.
Electric Utility Entry Into Telecommunications/Cable Television
The 1996 Telecom Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services, cable television services,
information services and other services or products subject to the jurisdiction
of the FCC notwithstanding the Public Utilities Holding Company Act. Electric
utilities must establish separate subsidiaries, known as "exempt
telecommunications companies" and must apply to the FCC for operating authority.
Again, because of their resources, electric utilities could be formidable
competitors to traditional cable systems.
Cable Television Ownership Restrictions
The FCC's rules preclude a cable system from devoting more than 40% of its
activated channel capacity to the carriage of affiliated national program
services and impose limits on the number of cable subscribers that a single
cable operator can serve. In general, pursuant to rules adopted October 8, 1999,
no cable operator can have an attributable interest in cable systems which serve
more than 30% of all nationwide subscribers to multichannel video programming
distributors, including cable and DBS subscribers. These new horizontal
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ownership rules raised the percentage of all cable subscribers that can be
served by a single cable operator to 36.7% of cable subscribers as of October
1999.
The 1996 Telecom Act eliminates statutory restrictions on broadcast/cable
cross-ownership (including broadcast network/cable restrictions), but leaves in
place existing FCC regulations prohibiting local cross-ownership between
television stations and cable systems. The 1996 Telecom Act leaves in place
existing restrictions on cable cross-ownership with SMATV and MMDS facilities,
but lifts those restrictions where the cable operator is subject to effective
competition. The FCC's regulations permit cable operators to own and operate
SMATV systems within their franchise area, provided that such operation is
consistent with local cable franchise requirements.
Must Carry/Retransmission Consent
The 1992 Cable Act contains broadcast signal carriage requirements that
allow local commercial television broadcast stations to elect once every three
years between requiring a cable system to carry the station ("must carry") or
negotiating for payments for granting permission to the cable operator to carry
the station ("retransmission consent"). Less popular stations typically elect
must carry, and more popular stations typically elect retransmission consent. In
addition, local non-commercial stations are given must carry rights, and
retransmission consent must be obtained to carry "distant" broadcast stations,
except for certain "superstations." Must carry requests can dilute the appeal of
a cable system's programming offerings, and retransmission consent demands may
require substantial payments or other concessions (e.g. a requirement that the
cable system also carry the local broadcaster's affiliated cable programming
service). Either option has a potentially adverse effect on our business. The
burden associated with must-carry obligations could dramatically increase if
television broadcast stations proceed with planned conversions to digital
transmissions and if the FCC determines in a pending rulemaking that cable
systems must carry all analog and digital signals transmitted by the television
stations.
Access Channels
LFAs can include franchise provisions requiring cable operators to set
aside certain channels for PEG access programming. Federal law also requires a
cable system with 36 or more channels to designate a portion of its activated
channel capacity (either 10% or 15%) for commercial leased access by
unaffiliated third parties. The FCC's rules regulate the terms, conditions and
maximum rates a cable operator may charge for use of this designated channel
capacity, but use of commercial leased access channels has been relatively
limited.
"Anti-Buy Through" Provisions
Federal law requires each cable system to permit customers to purchase
premium or pay-per-view video programming offered by the operator on a
per-channel or a per-program basis without the necessity of subscribing to any
tier of service (other than the basic service tier) unless the system's lack of
addressable converter boxes or other technological limitations does not permit
it to do so. The statutory exemption for cable systems that do not have the
technological capability to comply expires in October 2002, but the FCC may
extend that period.
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. In particular, satellite
video programmers affiliated with cable operators cannot favor cable operators
over competing multichannel video programming distributors (such as DBS and MMDS
distributors). This provision limits the ability of vertically integrated
satellite cable programmers to offer exclusive programming arrangements to cable
companies. Both Congress and the FCC have considered proposals that would expand
the program access rights of cable's competitors, including the possibility of
subjecting both
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terrestrially delivered video programming and video programmers who are not
affiliated with cable operators to all program access requirements.
Inside Wiring; Subscriber Access
The FCC's rules require an incumbent cable operator, upon expiration of a
multiple dwelling unit service contract, to sell, abandon, or remove "home run"
wiring that was installed by the cable operator in a multiple dwelling unit
building. These inside wiring rules are expected to assist building owners in
their attempts to replace existing cable operators with new programming
providers who are willing to pay the building owner a higher fee, where such a
fee is permissible. The FCC has also proposed abrogating all exclusive multiple
dwelling unit service agreements held by incumbent operators, but allowing such
contracts when held by new entrants. In another proceeding, the FCC has
preempted restrictions on the deployment of private antenna on rental property
within the exclusive use of a tenant, such as balconies and patios. This FCC
ruling may limit the extent to which multiple dwelling unit owners may enforce
certain aspects of multiple dwelling unit agreements which otherwise prohibit,
for example, placement of digital broadcast satellite receiver antennae in
multiple dwelling unit areas under the exclusive occupancy of a renter. These
developments may make it more difficult for us to provide service in multiple
dwelling unit complexes.
Other Regulations of the FCC
In addition to the FCC regulations noted above, there are other regulations
of the FCC covering such areas as:
- equal employment opportunity;
- subscriber privacy;
- programming practices, including, among other things:
(1) syndicated program exclusivity, which is a Federal Communications
Commission rule which requires a cable system to delete particular
programming offered by a distant broadcast signal carried on the system
which duplicates the programming for which a local broadcast station has
secured exclusive distribution rights;
(2) network program nonduplication;
(3) local sports blackouts;
(4) indecent programming;
(5) lottery programming;
(6) political programming;
(7) sponsorship identification;
(8) children's programming advertisements; and
(9) closed captioning;
- registration of cable systems and facilities licensing;
- maintenance of various records and public inspection files;
- aeronautical frequency usage;
- lockbox availability;
- antenna structure notification;
- tower marking and lighting;
- consumer protection and customer service standards;
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<PAGE> 15
- technical standards;
- consumer electronics equipment compatibility;
- emergency alert systems;
- pole attachments; and
- franchise transfers.
The FCC recently ruled that cable customers must be allowed to purchase
cable converters from third parties and established a multi-year phase-in during
which security functions, which would remain in the operator's exclusive
control, would be unbundled from basic converter functions, which could then be
satisfied by third party vendors.
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 television systems are subject to federal copyright licensing
covering carriage of television and radio broadcast signals. In exchange for
filing certain reports and contributing a percentage of their revenue to a
federal copyright royalty pool (such percentage varies depending on the size of
the system and the number of distant broadcast television signals carried),
cable operators can obtain blanket permission to retransmit copyrighted material
on broadcast signals. The possible modification or elimination of this
compulsory copyright license is subject to continuing review and could adversely
affect our ability to obtain desired broadcast programming. In addition, the
cable industry pays music licensing fees to Broadcast Music, Inc. and is
negotiating a similar arrangement with the American Society of Composers,
Authors and Publishers. Copyright clearances for nonbroadcast programming
services are arranged through private negotiations.
State and Local Regulation
Cable television systems generally are operated pursuant to nonexclusive
franchises granted by a municipality or other state or local government entity.
The 1996 Telecom Act clarified that the need for an entity providing cable
services to obtain a local franchise depends solely on whether the entity
crosses public rights of way. Federal law now prohibits franchise authorities
from granting exclusive franchises or from unreasonably refusing to award
additional franchises covering an existing cable system's service area. Cable
franchises generally are granted for fixed terms and in many cases are
terminable if the franchisee fails to comply with material provisions.
Non-compliance by the cable operator with franchise provisions may also result
in monetary penalties.
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 subject
cable television systems to the jurisdiction of centralized state governmental
agencies. 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 revenue, cannot dictate the
particular technology used by the system, and cannot specify video programming
other than identifying broad categories of programming.
Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees and funding for PEG channels 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
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onerous franchise requirements in connection with a request for consent.
Historically, franchises have been renewed for cable operators that have
provided satisfactory services and have complied with the terms of their
franchises.
Changes in Regulation
The regulation of cable television systems at the federal, state and local
levels is subject to the political process and has been in constant flux over
the past decade. Material changes in the law and regulatory requirements must be
anticipated and there can be no assurance that our business will not be affected
adversely by future legislation, new regulation or deregulation.
ITEM 2. PROPERTIES
At December 31, 1999, our cable systems were located in Texas, Arkansas,
Oklahoma, Louisiana, Missouri, Kansas, Colorado, Nebraska and New Mexico.
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.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which we are a party or
to which any of our respective properties are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Information for this item is omitted pursuant to SEC General Instruction I
to Form 10-K.
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PART II
ITEM 5.MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
ABSENCE OF A TRADING MARKET
Our common stock is not publicly traded. Therefore, there is no established
public trading market for the common stock, and none is expected to develop in
the foreseeable future.
HOLDER
All of our shares of common stock, $0.01 par value, are owned by Classic
Communications.
DIVIDENDS
None.
ITEM 6. SELECTED FINANCIAL DATA
Information for this item is omitted pursuant to SEC General Instruction I
to Form 10-K.
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information for this item is omitted pursuant to SEC General Instruction I
for Form 10-K, except as noted below.
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $111,410 $ 69,802
Operating expenses:
Programming................................................. 29,906 17,840
Plant and operating......................................... 12,744 8,437
General and administrative.................................. 17,126 11,295
Marketing and advertising................................... 1,929 850
Corporate overhead.......................................... 9,721 3,648
Depreciation and amortization............................... 51,484 30,531
-------- --------
Total operating expenses.......................... 122,910 72,601
-------- --------
Loss from operations........................................ (11,500) (2,799)
Interest expense............................................ (31,201) (20,688)
Write-off of abandoned telephone operations and accrual of
related costs............................................. -- (220)
Other Income................................................ 605 192
-------- --------
Loss before income taxes and extraordinary item............. (42,096) (23,515)
Income tax benefit.......................................... 10,128 2,339
-------- --------
Loss before extraordinary item.............................. (31,968) (21,176)
Extraordinary loss on extinguishment of debt, net of
taxes..................................................... (4,093) (5,524)
-------- --------
Net loss.................................................... $(36,061) $(26,700)
======== ========
</TABLE>
1999 VS. 1998
Revenues increased $41.6 million, or 60%, in 1999. Revenues increased due
to increased subscribers from acquisitions of approximately 28,000 subscribers
in July 1998 and 170,000 subscribers in July 1999 and basic rate increases. The
increase in subscribers was due to the acquisition of systems from Cable One in
July 1998 and the acquisition of Buford in July 1999. In addition, there was a
rate increase of approximately 7% affecting approximately two-thirds of our
customers in February 1999, resulting in an increase in basic revenues per
subscriber of 7% from $27.87 to $29.82 period to period. We have historically
increased rates in February in
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order to offset increases in operating costs such as programming which occur
primarily in January of each year.
Operating expenses increased $50.3 million, or 69%, in 1999. Programming
expenses increased $12.1 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. Plant and operating and general and administrative
expenses increased $10.1 million, or 51%, as a result of the additional costs
associated with the systems acquired in 1998 and 1999. Corporate overhead
increased $6.1 million primarily due to $6.6 million of acquisition related
compensation expenses incurred in connection with the Buford acquisition.
Depreciation and amortization expense in 1999 was $51.5 million, an increase of
$21.0 million over the same period in 1998. The increase represents the effect
of acquisitions and capital expenditures.
Interest expense increased $10.5 million, or 51%, in 1999. This increase is
primarily the result of the debt issued in conjunction with the July 1999 and
1998 acquisitions and subsequent refinancing of debt.
The income tax benefit increased $10.3 million in 1999. The pre-tax loss
increased in 1999 and the effective tax rate increased from 9.9% to 24.1% for
1999. The effective tax rates for 1999 and 1998 differ from the statutory rates
primarily due to an increase in the valuation allowance on deferred tax assets.
As a result of the above described fluctuations in our results of
operations and extraordinary losses recognized in connection with the July 1998
and 1999 refinancing of debt, the net loss of $36.1 million in 1999 increased by
$9.4 million, as compared to the net loss of $26.7 million in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations increased 24% or $3.4 million to $17.4 million,
driven by the acquisition of cable systems in 1998 and 1999. Cash used in
investing activities increased 469% or $268.2 million to $325.5 million, driven
primarily by the acquisition of Buford in July 1999, as well as by increased
levels of capital spending. Cash provided by financing activities increased 761%
or $345.8 million to $391.2 million due to the investment by Brera Classic,
Classic Communications' initial public equity offering, and additional debt
incurred in conjunction with the Buford acquisition. EBITDA increased 44% or
$12.3 million to $40.0 million due primarily to the acquisition of cable systems
in 1998 and 1999. EBITDA has been reduced by non-cash operating charges
consisting of compensation on stock awards of $1.9 million and $1.1 million as
well as by non-recurring fees paid to certain members of the management team in
connection with completed acquisitions and financing transactions of $5.5
million and $0.8 million for 1999 and 1998, respectively. Without the non-cash
operating charges and other fees, EBITDA would have been $47.4 million and $29.6
million for 1999 and 1998, respectively. 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 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. EBITDA as presented may not be
comparable to similarly titled measures presented by other companies.
In July 1999, we issued $150 million of 9.375% senior subordinated notes
concurrently with our entry into the 1999 credit facility totaling $450 million,
as amended. These transactions, along with $100 million in proceeds from a sale
of Classic Communications stock to Brera Classic, were utilized to purchase
Buford, repay our previous credit agreement and pay the fees and expenses of
these transactions.
In December 1999, Classic Communications completed an initial public
offering of 7,250,000 shares of its Class A Common Stock, raising approximately
$168.9 million. It used the proceeds from the offering to pay offering expenses
and to redeem all of its outstanding 13.25% senior discount notes due 2009.
Classic Communications contributed the remainder of the proceeds, approximately
$83.5 million, to us, which we used for general business purposes, including
financing part of the Star acquisition.
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In February 2000, one of our subsidiaries purchased substantially all of
the assets of Star Cable Associates, which operates cable television systems in
Texas, Louisiana and Ohio, for an aggregate purchase price of approximately $110
million in cash and 555,555 shares of Classic Communications Class A Common
Stock.
In February 2000, we completed a private offering of $225 million of Senior
Subordinated Notes due 2010. The securities sold in the private offering will
not be and have not been registered under the Securities Act of 1933 and may not
be offered or sold in the United States without registration or an applicable
exemption from registration requirements. We used the proceeds of the offering
to fund a portion of the acquisition of Star, repay a portion of indebtedness
under our senior credit facility and repurchase approximately $33 million of our
9.375% Senior Subordinated Notes due 2008.
In connection with the offering, we entered into a second amendment to our
senior credit facility, which (1) allowed for the offering of our 10.5% senior
subordinated notes, (2) modified some of the covenants in the credit facility to
provide us more flexibility (i.e., maximum total debt ratio, total interest
coverage ratio, maximum capital expenditures, limitations on investments,
permitted acquisitions, and lines of business), (3) restructured the term loan A
facility so that following a prepayment in full of the term loan A facility, and
subject to certain additional conditions, we have the ability to reborrow in one
or more advances under the term loan A facility until February 10, 2001 and (4)
increased the term loan A facility so that an additional $25 million may be made
available under that facility.
We have debt service requirements increasing from approximately $41 million
in 2000 to $53 million in 2001 and remaining consistent at that level through
2007. Our debt has significant maturities during the years 2008 to 2010.
Additionally, the Company has standby letters of credit totaling $3 million
maturing through August 2000.
Our capital improvement plan contemplates the investment of approximately
$200.0 million over the next four fiscal years as follows:
- $126.0 million to establish a technical standard of 550-750 MHz bandwidth
capacity in cable television systems serving approximately 72% of our
basic subscribers and for the consolidation of headends;
- $52.0 million for ongoing maintenance and replacement, installations and
extensions to the cable plant related to customer growth; and
- $22.0 million for the purchase of additional addressable converters and
headend equipment to support the deployment of digital services.
We have in place a credit facility which, as amended, currently allows for
$175 million of additional borrowing subject to certain limitations.
All of our debt is fully and unconditionally guaranteed by our wholly owned
direct and indirect subsidiaries on a joint and several basis. There are
presently no restrictions on the ability of these subsidiaries to make
distributions to us.
INTEREST RATE RISK MANAGEMENT
We are exposed to market risk including changes in interest rates. To
manage the volatility relating to these exposures, we enter into various
derivative transactions pursuant to our policies in areas such as counterparty
exposure and hedging practices. Positions are monitored using techniques
including market value and sensitivity analyses. We do not hold or issue any
derivative financial instruments for trading purposes and are not a party to
leveraged instruments. The credit risks associated with our derivative financial
instruments are controlled through the evaluation and monitoring of the
creditworthiness of the counterparties. Although we may be exposed to losses in
the event of nonperformance by the counterparties, we do not expect such losses,
if any, to be significant.
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INTEREST RATE RISK
The use of interest rate risk management instruments, such as interest rate
exchange agreements ("Swaps"), interest rate cap agreements ("Caps") and
interest rate collar agreements ("Collars"), is required under the terms of
certain of our outstanding debt agreements. Our policy is to manage interest
costs using a mix of fixed and variable rate debt. Using Swaps, we agree to
exchange, at specified intervals, the difference between fixed and variable
interest amounts calculated by reference to an agreed-upon notional principal
amount. Caps are used to lock in a maximum interest rate should variable rates
rise, but enable us to otherwise pay lower market rates. Collars limit our
exposure to and benefits from interest rate fluctuations on variable rate debt
to within a certain range of rates.
During the year ended December 31, 1999, we entered into Collars with an
aggregate notional amount of $75.0 million. No other instruments were
outstanding during the year.
The table set forth below summarizes the fair values and contract terms of
financial instruments subject to interest rate risk maintained by us as of
December 31, 1999 (dollars in millions):
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
----------------------------------------------- VALUE AT
2000 2001 2002 2003 2004 THEREAFTER TOTAL 12/31/1999
---- ----- ---- ---- ----- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt:
Fixed Rate................ $ 0.5 $ -- $ -- $ -- $ -- $188.8 $189.3 $185.2
Average Interest Rate..... 9.0% 0.0% 0.0% 0.0% 0.0% 9.5% 9.5%
Variable Rate............. $ -- $ 2.4 $ 7.5 $ 9.4 $13.2 $232.5 $265.0 $265.0
Average Interest Rate..... 0.0% 8.8% 8.8% 8.8% 8.8% 8.9% 8.9%
Interest Rate Instruments:
Collar.................... $75.0 $ 75.0 $ --
Average Cap Rate.......... 8.3% 8.3%
Average Floor Rate........ 5.5% 5.5%
</TABLE>
The notional amounts of interest rate instruments, as presented in the
table above are used to measure interest to be paid or received and do not
represent the amount of exposure to credit loss. The estimated fair value
approximates the proceeds (costs) to settle the outstanding contracts. Interest
rates on variable debt are estimated by us using the average implied forward
London Interbank Offer Rate ("LIBOR") rates for the year of maturity based on
the yield curve in effect at December 31, 1999, plus the borrowing margin in
effect for each credit facility at December 31, 1999. While Swaps, Caps and
Collars represent an integral part of our interest rate risk management program;
their incremental effect on interest expense for the years ended December 31,
1999 and 1998 was not significant.
INTANGIBLES
We have recorded net intangible assets of $345.9 million, 51.0% of total
assets. These assets arose during the acquisition of cable systems throughout
our history. These intangible assets are amortized over their estimated useful
lives. We review the valuation and amortization periods of these intangibles on
a periodic basis, taking into consideration any events or circumstances that
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 the intangible assets.
YEAR 2000 COMPLIANCE
During 1999, we planned, inventoried and evaluated systems, remediated,
replaced where and when necessary and tested such remediation and replacements.
As a result, we experienced no adverse year 2000 related issues on January 1,
2000. We recognize that there may be residual effects related to year 2000
issues. Our assessment of our year 2000 readiness will be ongoing as we continue
to develop our operating systems and rely on our vendors' or their vendors'
systems. We do not have any way to assess the costs related to remediation of
any residual year 2000 effect. We intend to use internal resources for such
remediation where possible. We may in the future identify a significant internal
or external year 2000 related residual issue which,
20
<PAGE> 21
if not remedied in a timely manner, could have a material adverse effect on our
business, financial condition and results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Supplemental Data on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Disclosed on Form 8-K/A, filed on November 5, 1999.
PART III
The information called for by Item 10, Directors and Executive Officers of
the Registrant, Item 11, Executive Compensation, Item 12, Security Ownership of
Certain Beneficial Owners and Management, and Item 13, Certain Relationships and
Related Transactions, is omitted pursuant to SEC General Instruction I of Form
10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
See Index to the Financial Statements at page F-1.
(2) Financial Statement Schedules
All financial statement schedules are omitted because they are not
applicable, not required or the required information is included in the
consolidated financial statements or notes thereto.
(3) Exhibits required to be filed by Item 601 of Regulation S-K:
<TABLE>
<C> <S>
2.1(1) -- Securities Purchase Agreement among Classic Cable, Inc.
and Buford Group, Inc. dated as of May 11, 1999.
2.2 -- Asset Purchase Agreement, dated as of October 14, 1999,
by and between Star Cable Associates and Universal Cable
Holdings, Inc., and Amendment No. 1 thereto, dated
February 16, 2000 (incorporated by reference to Exhibit 2
to Classic Cable, Inc.'s Form 8-K, filed on February 29,
2000).
4.1(2) -- Classic Cable, Inc. Certificate of Incorporation dated
April 29, 1995.
4.2(3) -- Classic Cable, Inc. Bylaws
4.3(4) -- Classic Cable Holding, Inc. Certificate of Incorporation
dated December 1, 1996.
4.4(5) -- Classic Cable Holding, Inc. Bylaws
4.5(6) -- Classic Telephone, Inc. Certificate of Incorporation
dated November 22, 1994.
4.6(7) -- Classic Telephone, Inc. Bylaws
4.7(8) -- Universal Cable Holdings, Inc. Certificate of
Incorporation dated October 17, 1985, as amended
4.8(9) -- Universal Cable Holdings, Inc. Bylaws
4.9(10) -- Universal Cable Communications, Inc. Certificate of
Incorporation dated June 7, 1983, as amended
4.10(11) -- Universal Cable Communications, Inc. Bylaws
</TABLE>
21
<PAGE> 22
<TABLE>
<C> <S>
4.11(12) -- Universal Cable of Beaver Oklahoma, Inc. Certificate of
Incorporation dated June 4, 1987, as amended
4.12(13) -- Universal Cable of Beaver Oklahoma, Inc. Bylaws
4.13(14) -- Universal Cable Midwest, Inc. Certificate of
Incorporation dated February 22, 1989, as amended
4.14(15) -- Universal Cable Midwest, Inc. Bylaws
4.15(16) -- WT Acquisition Corporation Articles of Incorporation
dated August 14, 1992, as amended
4.16(17) -- WT Acquisition Corporation Bylaws
4.17(18) -- W.K. Communications, Inc. Certificate of Incorporation
dated June 11, 1987, as amended
4.18(19) -- W.K. Communications, Inc. Bylaws
4.19(20) -- Television Enterprises, Inc. Certificate of Incorporation
dated August 12, 1965, as amended
4.20(21) -- Television Enterprises, Inc. Bylaws
4.21(22) -- Black Creek Communications, L.P. Certificate of Limited
Partnership dated May 19, 1998.
4.22(23) -- Black Creek Communications, L.P. Limited Partnership
Agreement
4.23(24) -- Black Creek Management, L.L.C. Articles of Organization
dated May 19, 1998.
4.24(25) -- Black Creek Management, L.L.C. Regulations
4.25(26) -- Friendship Cable of Texas, Inc. Articles of Incorporation
dated July 12, 1988, as amended
4.26(27) -- Friendship Cable of Texas, Inc. Bylaws
4.27(28) -- CallCom 24, Inc. Articles of Incorporation dated June 9,
1998, as amended
4.28(29) -- CallCom 24, Inc. Bylaws
4.29(30) -- Correctional Cable TV, Inc. Articles of Incorporation
dated October 9, 1992.
4.30(31) -- Correctional Cable TV, Inc. Bylaws
4.31(32) -- Friendship Cable of Arkansas, Inc. Articles of
Incorporation dated July 11, 1986, as amended
4.32(33) -- Friendship Cable of Arkansas, Inc. Bylaws
4.41(34) -- 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
4.42(35) -- 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
4.43(36) -- Indenture for $150,000,000 9.375% 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
4.44(37) -- Form of Global 9.375% Senior Subordinated Note due 2009.
4.45(38) -- 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, The Chase Manhattan
Bank, as Documentation Agent and Union Bank of
California, N.A., as Administrative Agent
</TABLE>
22
<PAGE> 23
<TABLE>
<C> <S>
4.46(39) -- Facilities Commitment Letter, dated June 24, 1999,
between Classic Cable, Inc. and Goldman Sachs Credit
Partners L.P.
4.47(40) -- 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.
4.48 -- Registration Rights Agreement dated as July 29, 1998, by
and between Classic Communications, Inc., and Merrill
Lynch, Pierce, Fenner & Smith Incorporated (incorporated
by reference to Exhibit 4.3A to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration
No. 333-63641)).
4.49 -- 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 (incorporated by reference to
Exhibit 4.3B to Classic Communications, Inc.'s
Registration Statement on Form S-4 (Registration No.
333-63641)).
4.50 -- 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) (incorporated by reference to
Exhibit 4.3C to Classic Communications, Inc.'s
Registration Statement on Form S-4 (Registration No.
333-63641)).
4.51 -- 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) (incorporated by reference to Exhibit
4.3D to Classic Communications, Inc.'s Registration
Statement on Form S-4 (Registration No. 333-63641)).
4.52 -- Amended and Restated Stockholders' Agreement, dated as of
December 13, 1999, by and among Classic Communications,
Inc., Brera Classic, LLC and the additional parties named
therein.
4.53 -- Amended and Restated Registration Rights Agreement, dated
as of December 13, 1999, by and among Classic
Communications, Inc., Brera Classic, LLC and the
additional parties named therein.
10.1** -- Employment Agreement dated as of July 29, 1999 by and
between Classic Cable, Inc. and Ronald W. Martin.
10.2** -- Employment Agreement dated as of July 29, 1999 by and
between Classic Cable, Inc. and Elizabeth Kay Manigold.
10.3(41) -- Employment Agreement, dated as of July 28, 1999, by and
between Classic Communications, Inc., Classic Cable, Inc.
and J. Merritt Belisle.
10.4(42) -- Employment Agreement, dated as of July 28, 1999, by and
between Classic Communications, Inc., Classic Cable, Inc.
and Steven E. Seach.
10.5 -- Amendment and Waiver No. 1 to the Amended and Restated
Credit Agreement dated November 15, 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.
10.6 -- Amended and Restated Credit Agreement dated January 31,
2000 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., Administrative Agent.
</TABLE>
23
<PAGE> 24
<TABLE>
<C> <S>
10.7(43) -- Management and Advisory Fee Agreement dated May 24, 1999.
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(44) -- Investment Agreement dated as of May 24, 1999 between
Brera Classic, LLC and Classic Communications, Inc.
12.1 -- Statement of Earnings to Fixed Charges
27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Incorporated by reference to Exhibit 10.8 to Classic Cable, Inc.'s
Registration Statement on Form S-4 (Registration No. 333-63643).
** Incorporated by reference to the identically numbered Exhibit to Classic
Communications, Inc.'s Registration Statement on Form S-1 (Registration No.
333-89295).
(1) Incorporated herein by reference to Exhibit 2.1 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(2) Incorporated herein by reference to Exhibit 3.1 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(3) Incorporated herein by reference to Exhibit 3.2 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(4) Incorporated herein by reference to Exhibit 3.3 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(5) Incorporated herein by reference to Exhibit 3.4 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(6) Incorporated herein by reference to Exhibit 3.7 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(7) Incorporated herein by reference to Exhibit 3.8 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(8) Incorporated herein by reference to Exhibit 3.9 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(9) Incorporated herein by reference to Exhibit 3.10 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(10) Incorporated herein by reference to Exhibit 3.11 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(11) Incorporated herein by reference to Exhibit 3.12 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(12) Incorporated herein by reference to Exhibit 3.13 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(13) Incorporated herein by reference to Exhibit 3.14 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(14) Incorporated herein by reference to Exhibit 3.15 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(15) Incorporated herein by reference to Exhibit 3.16 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(16) Incorporated herein by reference to Exhibit 3.17 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
24
<PAGE> 25
(17) Incorporated herein by reference to Exhibit 3.18 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(18) Incorporated herein by reference to Exhibit 3.19 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(19) Incorporated herein by reference to Exhibit 3.20 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(20) Incorporated herein by reference to Exhibit 3.21 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(21) Incorporated herein by reference to Exhibit 3.22 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(22) Incorporated herein by reference to Exhibit 3.23 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(23) Incorporated herein by reference to Exhibit 3.24 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(24) Incorporated herein by reference to Exhibit 3.25 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(25) Incorporated herein by reference to Exhibit 3.26 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(26) Incorporated herein by reference to Exhibit 3.29 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(27) Incorporated herein by reference to Exhibit 3.30 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(28) Incorporated herein by reference to Exhibit 3.33 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(29) Incorporated herein by reference to Exhibit 3.34 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(30) Incorporated herein by reference to Exhibit 3.35 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(31) Incorporated herein by reference to Exhibit 3.36 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(32) Incorporated herein by reference to Exhibit 3.37 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(33) Incorporated herein by reference to Exhibit 3.38 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(34) Incorporated herein by reference to Exhibit 4.4 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(35) Incorporated herein by reference to Exhibit 10.15 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(36) Incorporated herein by reference to Exhibit 10.16 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(37) Incorporated herein by reference to Exhibit 4.7 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643).
(38) Incorporated herein by reference to Exhibit 10.6 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(39) Incorporated herein by reference to Exhibit 10.7 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
25
<PAGE> 26
(40) Incorporated herein by reference to Exhibit 10.14 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643).
(41) Incorporated herein by reference to Exhibit 10.3 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(42) Incorporated herein by reference to Exhibit 10.4 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(43) Incorporated herein by reference to Exhibit 10.10 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(44) Incorporated herein by reference to Exhibit 10.9 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(b) Reports on Form 8-K
On October 25, 1999, we filed a Form 8-K announcing (1) the change in
accountants from Ernst & Young LLP to PricewaterhouseCoopers LLP, (2) the
signing of an asset purchase agreement whereby Universal Cable Holdings, Inc.
will acquire all of the cable assets of Star Cable Associates and (3) the filing
of Classic Communications' Registration Statement on Form S-1 on October 19,
1999. On October 26, 1999 and November 5, 1999, we filed Form 8-K/A amending the
Form 8-K filed on October 25, 1999.
26
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Classic Cable, Inc.
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach
President and Chief Financial
Officer
Date: March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer and March 30, 2000
- ----------------------------------------------------- Director (Principal
J. Merritt Belisle Executive
Officer)
/s/ STEVEN E. SEACH President and Chief Financial March 30, 2000
- ----------------------------------------------------- Officer and a Director
Steven E. Seach (Principal Financial Officer
and Principal Accounting
Officer)
</TABLE>
27
<PAGE> 28
CLASSIC CABLE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED ANNUAL FINANCIAL STATEMENTS
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets as of December 31, 1999 and
1998................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998, and 1997...................... F-4
Consolidated Statements of Stockholder's Equity for the
years ended December 31, 1999, 1998, and 1997.......... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998, and 1997...................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 29
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder
Classic Cable, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, changes in stockholder's equity
and cash flows present fairly, in all material respects, the financial position
of Classic Cable, Inc. and its subsidiaries at December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Austin, Texas
February 23, 2000
F-2
<PAGE> 30
CLASSIC CABLE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 85,855 $ 2,779
Accounts receivable, net.................................... 9,803 5,474
Prepaid expenses............................................ 1,131 424
Property, plant and equipment............................... 274,864 127,169
Less accumulated depreciation............................... (60,939) (39,977)
-------- --------
213,925 87,192
Deferred financing costs, net............................... 20,136 6,454
Advances to parent.......................................... 908 357
Intangible assets:
Customer relationships.................................... 156,567 95,180
Franchise marketing rights................................ 158,105 71,464
Noncompete agreements..................................... 25,425 8,425
Goodwill.................................................. 102,261 40,435
Other..................................................... -- 140
-------- --------
442,358 215,644
Less accumulated amortization............................. (96,428) (65,828)
-------- --------
345,930 149,816
-------- --------
Total assets...................................... $677,688 $252,496
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accounts payable.......................................... $ 3,254 $ 647
Subscriber deposits and unearned income................... 6,675 4,846
Other accrued expenses.................................... 15,606 7,174
Accrued interest.......................................... 10,676 5,883
Long-term debt, net....................................... 454,332 220,804
Deferred taxes, net....................................... 28,965 --
-------- --------
Total liabilities................................. 519,508 239,354
Stockholder's equity:
Common stock: $.01 par value per share; 1,000 shares
authorized, issued and outstanding..................... -- --
Additional paid-in capital.................................. 267,241 86,142
Accumulated deficit......................................... (109,061) (73,000)
-------- --------
Total stockholder's equity........................ 158,180 13,142
-------- --------
Total liabilities and stockholder's equity........ $677,688 $252,496
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 31
CLASSIC CABLE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues.................................................... $111,410 $ 69,802 $ 60,995
Operating expenses:
Programming............................................... 29,906 17,840 14,916
Plant and operating....................................... 12,744 8,437 7,622
General and administrative................................ 17,126 11,295 9,257
Marketing and advertising................................. 1,929 850 438
Corporate overhead........................................ 9,721 3,648 4,322
Depreciation and amortization............................. 51,484 30,531 27,832
-------- -------- --------
Total operating expenses.......................... 122,910 72,601 64,387
-------- -------- --------
Loss from operations........................................ (11,500) (2,799) (3,392)
Interest expense............................................ (31,201) (20,688) (20,759)
Gain on sale of cable system................................ -- -- 3,644
Write-off of abandoned telephone operations and accrual of
related costs............................................. -- (220) (500)
Other income................................................ 605 192 71
-------- -------- --------
Loss before income taxes and extraordinary item............. (42,096) (23,515) (20,936)
Income tax benefit.......................................... 10,128 2,339 7,149
-------- -------- --------
Loss before extraordinary item.............................. (31,968) (21,176) (13,787)
Extraordinary loss on extinguishment of debt, net of taxes
of $2,539 in 1999 and none in 1998........................ (4,093) (5,524) --
-------- -------- --------
Net loss.................................................... $(36,061) $(26,700) $(13,787)
======== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 32
CLASSIC CABLE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- ADDITIONAL TOTAL
SHARES PAID-IN ACCUMULATED STOCKHOLDER'S
ISSUED AMOUNT CAPITAL DEFICIT EQUITY
------ ------ --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996........... 1,000 $-- $ 61,381 $ (32,513) $ 28,868
Dividends on preferred stock......... -- -- (101) -- (101)
Capital contribution from parent..... -- -- 1,058 -- 1,058
Net loss............................. -- -- -- (13,787) (13,787)
----- --- -------- --------- --------
Balance at December 31, 1997........... 1,000 -- 62,338 (46,300) 16,038
Dividends on preferred stock......... -- -- (67) -- (67)
Capital contribution from parent..... -- -- 23,871 -- 23,871
Net loss............................. -- -- -- (26,700) (26,700)
----- --- -------- --------- --------
Balance at December 31, 1998........... 1,000 -- 86,142 (73,000) 13,142
Capital contribution from parent..... -- -- 181,099 -- 181,099
Net loss............................. -- -- -- (36,061) (36,061)
----- --- -------- --------- --------
Balance at December 31, 1999........... 1,000 $-- $267,241 $(109,061) $158,180
===== === ======== ========= ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 33
CLASSIC CABLE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1999 1998 1997
--------- --------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................... $ (36,061) $ (26,700) $(13,787)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Provision for doubtful accounts.......................... 1,585 971 1,248
Depreciation............................................. 20,884 12,041 10,285
Amortization of intangibles.............................. 30,600 18,352 17,547
Amortization of deferred financing costs................. 1,273 1,119 1,373
Discount accretion on bank debt.......................... 53 227 457
Gain on sales of cable systems........................... -- -- (3,644)
Non-cash compensation.................................... 1,920 1,108 1,058
Deferred tax benefit..................................... (10,128) (2,259) (7,404)
Extraordinary loss, net of taxes......................... 4,093 5,524 --
Changes in working capital, net of acquisition amounts:
Change in accounts receivable......................... (3,005) (1,841) (321)
Change in prepaid and other assets.................... (709) (84) 135
Change in other accruals and payables................. 2,072 1,099 413
Change in accrued interest............................ 4,793 4,439 532
--------- --------- --------
Net cash provided by (used in) operating activities........ 17,370 13,996 7,892
INVESTING ACTIVITIES
Acquisition of cable television systems, net of cash
acquired................................................. (292,601) (43,486) --
Purchases of property, plant and equipment................. (32,435) (13,759) (10,135)
Payments for other intangibles............................. (425) -- (323)
Net proceeds from sale of cable systems.................... -- -- 6,189
Net proceeds from litigation settlement.................... -- -- 2,928
--------- --------- --------
Net cash provided by (used in) investing activities........ (325,461) (57,245) (1,341)
FINANCING ACTIVITIES
Proceeds from long-term debt............................... 420,500 221,227 759
Repayments of long-term debt............................... (187,385) (190,292) (7,246)
Financing costs............................................ (20,267) (6,928) --
Redemption of preferred stock.............................. -- (1,267) --
Cash dividends paid on preferred stock..................... -- (92) (101)
Payment of premium on redeemed notes....................... (860) -- --
Capital contribution from parent........................... 179,179 22,764 --
--------- --------- --------
Net cash provided by (used in) financing activities........ 391,167 45,412 (6,588)
--------- --------- --------
Increase (decrease) in cash and cash equivalents........... 83,076 2,163 (37)
Cash and cash equivalents at beginning of year............. 2,779 616 653
--------- --------- --------
Cash and cash equivalents at end of year................... $ 85,855 $ 2,779 $ 616
========= ========= ========
Cash taxes paid............................................ $ 87 $ 166 $ 1
Cash interest paid......................................... $ 25,051 $ 15,039 $ 18,397
</TABLE>
See accompanying notes.
F-6
<PAGE> 34
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. ORGANIZATION
Classic Cable, Inc., through its subsidiaries (collectively, the
"Company"), acquires, develops and operates cable television systems throughout
the United States. The Company is a holding company with no assets or operations
other than its investments in its subsidiaries. The Company is a wholly owned
subsidiary of Classic Communications, Inc. ("CCI").
2. ACQUISITIONS AND DISPOSITIONS OF CABLE TELEVISION SYSTEMS
Acquisitions
In July 1999, the Company acquired Buford Group, Inc., for approximately
$300 million in cash. Buford Group, Inc. operates cable television systems in
four states. The acquisition was financed from a) a $95.7 million capital
contribution from CCI, b) proceeds of the Company's 1999 credit facility and c)
proceeds of the Company's $150 million private debt offering of 9.375% senior
subordinated notes.
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.
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 of 9.875% senior
subordinated notes.
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.
The following summarized unaudited pro forma financial information assumes
the above acquisitions 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 transactions been completed at the beginning of
the periods indicated, nor is it indicative of future operating results (in
thousands, except per share data):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Revenues.................................................... $156,311 $149,897
Loss before extraordinary item.............................. (59,893) (45,499)
Net loss.................................................... (63,986) (51,023)
</TABLE>
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.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned and majority-owned subsidiaries. Minority
interests are inconsequential. All significant intercompany accounts and
transactions have been eliminated in consolidation.
F-7
<PAGE> 35
CLASSIC CABLE, 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................... 3-12 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>
Customer relationships.................................. 5-15 years
Franchise marketing rights.............................. 5-10 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. The Buford acquisition increased intangible assets
$226.3 million.
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 ("FASB") 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 valuation and amortiza-
F-8
<PAGE> 36
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
tion periods of goodwill on a periodic basis, taking into consideration any
events or circumstances that 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's operations are included in consolidated income tax returns
filed by CCI. The consolidated amount of current and deferred income tax expense
is allocated to the Company by applying the principles of FASB Statement No.
109, Accounting for Income Taxes, to the Company as if it were a separate
taxpayer. As such, 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 that 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 $189.0 million and the fair value was $185.2 million at
December 31, 1999.
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. These counterparties expose the Company to credit loss in the
event of nonperformance. However, the Company does not anticipate nonperformance
by the other parties, and no material loss would be expected from their
nonperformance. The carrying amount of such instruments approximates fair value
at December 31, 1999.
F-9
<PAGE> 37
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Recent Accounting Pronouncements
In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by FASB Statement No. 137, which
the Company is required to adopt effective January 1, 2001. Because of the
Company's minimal use of derivatives, management does not anticipate that the
adoption of the Statement will have a significant effect on earnings or the
financial position of the Company.
Reclassifications
Certain reclassifications have been made in the 1998 financial statements
to conform to the 1999 presentation.
4. ACCOUNTS RECEIVABLE
Accounts receivable consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------
1999 1998
------ ------
<S> <C> <C>
Accounts receivable, trade.................................. $8,435 $5,211
Accounts receivable, other.................................. 1,783 588
Less allowance for doubtful accounts........................ (415) (325)
------ ------
Accounts receivables, net of allowance...................... $9,803 $5,474
====== ======
</TABLE>
The activity in the Company's allowance for doubtful accounts for the
periods ending December 31, 1999, 1998 and 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
FOR THE PERIOD ENDED OF PERIOD EXPENSES ACQUIRED DEDUCTIONS PERIOD
- -------------------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1999................. $325 $1,585 $412 $(1,907) $415
December 31, 1998................. 262 971 -- (908) 325
December 31, 1997................. 513 1,248 -- (1,499) 262
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1999 1998
-------- --------
<S> <C> <C>
Land........................................................ $ 2,390 $ 1,152
Buildings and improvements.................................. 7,738 3,262
Vehicles.................................................... 9,138 6,061
Cable television distribution systems....................... 236,612 106,373
Office furniture, tools and equipment....................... 12,930 3,858
Construction in progress.................................... 6,056 6,463
-------- --------
274,864 127,169
Less accumulated depreciation............................... (60,939) (39,977)
-------- --------
$213,925 $ 87,192
======== ========
</TABLE>
F-10
<PAGE> 38
CLASSIC CABLE, 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
-------------------
1999 1998
-------- --------
<S> <C> <C>
1999 credit facility
Term loan A............................................... $ 75,000 $ --
Term loan B............................................... 100,000 --
Term loan C............................................... 90,000 --
9.375% senior subordinated notes............................ 150,000 --
9.875% senior subordinated notes............................ 39,005 125,000
Unamortized discount...................................... (151) (563)
1998 credit facility
Term loans................................................ -- 75,000
Revolving loans........................................... -- 20,800
Other....................................................... 478 567
-------- --------
$454,332 $220,804
======== ========
</TABLE>
In July 1999, the Company issued $150 million of 9.375% senior subordinated
notes due 2009. Interest payments on these Notes begin in 2000. Concurrent with
the offering, the Company entered into the 1999 credit facility. The 1999 credit
facility, as amended in November 1999, consists of a $75 million revolving
credit facility, a $75 million term A loan, a $100 million term B loan, and a
$200 million term C loan. Principal payments on the facility commence in 2001
with final maturity in 2008. 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. At December
31, 1999, the weighted average interest rate of the credit facility was 8.91%.
Proceeds from the 1999 credit facility totaled $265 million and were, in part,
used to pay off the 1998 credit facility. This resulted in a pre-tax
extraordinary loss from the early extinguishment of debt of $2.3 million.
In connection with the 1999 credit facility, 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.
Pursuant to the change of control resulting from the July 1999 Brera
investment in CCI, and in accordance with the indentures of the respective note
agreements, the Company offered to redeem all of its outstanding 9.875%
subordinated notes and CCI all of its 13.25% senior discount notes. The Company
redeemed $86 million of the 9.875% senior subordinated notes at 101% of face
value plus accrued interest. This resulted in a pre-tax extraordinary loss from
the early extinguishment of debt of $4.3 million. The Company borrowed $90
million under its 1999 credit facility to repurchase the tendered 2008
subordinated notes and to pay associated fees and expenses incurred as a result
of the change of control offer. None of the 13.25% senior discount notes were
tendered for redemption.
In July 1998, CCI issued $114 million of 13.25% senior discount notes due
2009 and the Company issued $125 million of 9.875% senior subordinated notes due
2008. Net of the applicable discounts and the fair value of the CCI common stock
sold along with the senior discount notes, proceeds from these issues were $60
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 began in 1999. Concurrent with the offering, the Company
entered into the 1998 credit facility. The 1998 credit facility consisted of a
$50 million revolving credit facility and a $75 million term loan facility.
Proceeds from the 1998 credit facility totaled $95.8 million.
F-11
<PAGE> 39
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The proceeds of these transactions were, in part, used to pay off the 1995
credit facility. This resulted in an extraordinary loss from the early
extinguishment of debt of $5.5 million.
The 1995 credit facility consisted of a $20 million term A loan, a $65
million term B loan and line of credit notes not to exceed $130 million.
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 credit
facility 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 senior discount notes are unsecured and rank without preference with
all existing and future unsecured indebtedness of CCI, and senior to all future
subordinated indebtedness of CCI. The notes are also subordinate to all existing
and future liabilities of the Company and its subsidiaries. The senior
subordinated notes are unsecured and are subordinated to all existing and future
senior indebtedness of the Company. The notes rank without preference with all
existing and future senior subordinated indebtedness of the Company. Both the
senior discount notes and the senior subordinated notes may be redeemed
contingent on certain events and/or the passage of time at the redemption price,
which may include a premium. Restrictive covenants associated with these notes
limit the Company's ability to enter into certain transactions.
The 1999 credit facility is collateralized by essentially all the assets of
the Company. CCI has no operations of its own. Consequently, it will rely on
dividends and cash flow of the Company to meet its debt service obligations. The
terms of the credit facility restrict certain activities of the Company,
including the incurrence of additional indebtedness and the payment of certain
dividends. Accordingly, substantially all the assets and operations of the
Company are restricted as to transfer to CCI and may not be available for
dividends and/or debt service of CCI.
The Company is a holding company with no assets or operations other than
its investments in its subsidiaries. The Company's debt is fully and
unconditionally guaranteed by substantially all of the Company's wholly owned
direct and indirect subsidiaries on a joint and several basis. Other than
inconsequential subsidiaries, all of the Company's subsidiaries are wholly
owned. The Company is not presenting separate financial statements and other
disclosures concerning these subsidiaries as management has determined that such
information is not material to investors.
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. At December 31, 1999, an interest rate collar for a notional
amount of $75 million was outstanding. No such agreements were outstanding at
December 31, 1998. The impact of interest rate risk management activities on
income in 1999, 1998 and 1997, and the amount of deferred gains and losses from
interest rate risk management transactions at December 31, 1999 and 1998 were
not material. 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 using the interest method over the life of the agreement.
F-12
<PAGE> 40
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
2000..................................................... $ 478
2001..................................................... 2,350
2002..................................................... 7,525
2003..................................................... 9,400
2004..................................................... 13,150
Thereafter............................................... 421,580
--------
454,483
Less discount............................................ (151)
--------
$454,332
========
</TABLE>
In the first quarter of 2000, the Company redeemed certain debt and
restructured its credit facility. See Note 15 -- Subsequent Events.
7. PREFERRED STOCK
In July 1998, the Company redeemed the outstanding shares of a subsidiary's
preferred stock at a redemption price per share of $100 plus accrued and unpaid
dividends.
8. INCOME TAXES
Significant components of income tax benefit from continuing operations are
as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Current:
Federal............................................ $ -- $ (80) $ 255
State.............................................. -- -- --
-------- ------- -------
Total current.............................. -- (80) 255
Deferred:
Federal............................................ (8,409) (1,876) (6,573)
State.............................................. (1,719) (383) (831)
-------- ------- -------
Total deferred............................. (10,128) (2,259) (7,404)
-------- ------- -------
Income tax benefit......................... $(10,128) $(2,339) $(7,149)
======== ======= =======
</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
-------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Tax at U.S. statutory rate................................ (34.0)% (34.0)% (34.0)%
State taxes, net of federal benefit....................... (3.7) (3.9) (3.8)
Increase in valuation allowance........................... 9.2 25.1 --
Other nondeductible items................................. 4.4 2.9 3.7
----- ----- -----
(24.1)% (9.9)% (34.1)%
===== ===== =====
</TABLE>
F-13
<PAGE> 41
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
--------------------
1999 1998
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Book over tax basis of depreciable assets................. $ 15,850 $ 698
Book over tax basis of assets that are amortizable for
tax.................................................... 40,047 2,056
-------- --------
Total deferred tax liabilities.................... 55,897 2,754
Deferred tax assets:
Net operating loss carryforwards:
Restricted............................................. 28,552 4,880
Other.................................................. 10,716 12,839
Alternative minimum tax credit carryforwards.............. 5,858 166
Other....................................................... 1,353 543
-------- --------
Total deferred tax assets......................... 46,479 18,428
Less valuation allowance.................................... (19,547) (15,674)
-------- --------
Net deferred tax assets........................... 26,932 2,754
-------- --------
Net deferred tax liabilities...................... $ 28,965 $ --
======== ========
</TABLE>
At December 31, 1999, the Company had net operating loss carryforwards of
$102.5 million for federal income tax purposes, which begin to expire in 2002 if
not utilized. Approximately $74.6 million of the loss carryforwards is subject
to various limitations under the Internal Revenue Code (including limitations of
Section 382 of the Internal Revenue Code), which could result in expiration of
the loss carryforward before utilization.
During 1999, the Company recorded a net deferred tax liability of $41.6
million and a corresponding increase to goodwill related to the acquisition of
Buford Group, Inc.
Approximately $7.6 million of the total valuation allowance as of December
31, 1999 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.
9. 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 may match employee
contributions for an amount up to 6% of each employee's base salary. Costs of
the plan, including the Company's matching contributions, were $269,000,
$149,000 and $114,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
10. 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
F-14
<PAGE> 42
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
11. SETTLEMENT OF CLAIMS
In February 1998, CCI settled claims that arose in conjunction with divorce
proceedings of an officer of CCI. CCI purchased certain of its stock in which
the officer's wife held a community property interest and provided monetary
consideration for the release of the claims. The related expenses, including
legal, consultant and other fees of approximately $1,411,000 are included in
corporate overhead expenses in 1997.
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.
12. COMMITMENTS AND CONTINGENCIES
Obligations of Parent
The Company's parent, CCI, has certain obligations that would require
resources of the Company if CCI were to satisfy these obligations. At December
31, 1999, these obligations primarily consisted of the $114.0 million of 13.25%
Senior Discount Notes issued in July 1998. These notes were redeemed in January
2000. CCI used proceeds of its initial public offering of common stock to pay
off this debt.
Standby Letters of Credit
The Company had outstanding at December 31, 1999, $3 million in standby
letters of credit maturing through August 2000.
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, 1999, future minimum lease payments were $470,000 in 2000, $370,000
in 2001, $290,000 in 2002, $250,000 in 2003, $190,000 in 2004 and $480,000
thereafter. Rent expense was $2,230,000, $1,285,000 and $1,160,000 for the years
ended December 31, 1999, 1998 and 1997, 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, results of
operations or cash flows of the Company.
F-15
<PAGE> 43
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. RELATED PARTY TRANSACTIONS
In accordance with various provisions of executive management's employment
agreements, the Company made payments totaling approximately $5 million in
relation to the Buford acquisition and change of control that resulted from the
Brera equity investment. All payments to management were treated as a current
period cost in the third quarter of 1999.
In connection with the Buford acquisition, CCI paid a transaction fee of
$300,000 to The Austin Advisory, a financial consulting firm in which a former
member of executive management is a principal.
In July 1998, CCI paid all outstanding principal and accrued interest
balances on various subordinated debt agreements held by affiliates of CCI. The
debt bore interest at 7.5% and 15% and the amount paid was $397,000 and
$4,061,000, respectively.
14. QUARTERLY FINANCIAL SUMMARY
<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
1999
Revenues......................................... $19,576 $19,710 $ 33,105 $39,019
Operating loss................................... (893) (677) (7,021) (2,909)
Net loss before extraordinary item*.............. (6,186) (6,044) (17,511) (2,227)
Net loss*........................................ (6,186) (6,044) (24,143) 312
1998
Revenues......................................... 16,072 16,142 18,190 19,398
Operating loss................................... (547) (446) (720) (1,086)
Net loss before extraordinary item............... (4,725) (5,056) (5,131) (6,264)
Net loss......................................... (4,725) (5,056) (10,655) (6,264)
</TABLE>
- ---------------
* Includes a fourth quarter adjustment of $9.4 million related to the income
tax benefit in the third quarter due to a change in the estimate related to
the purchase accounting of the Buford acquisition.
15. SUBSEQUENT EVENTS
In February 2000, the Company acquired certain assets of Star Cable
Associates ("Star") serving communities in three states for approximately $110
million in cash and 555,555 shares of CCI Class A voting common stock. The
purchase was financed from proceeds of the Company's $225 million private debt
offering of 10.5% senior subordinated notes and available cash. In addition, the
Company utilized proceeds to pay down the 1999 credit facility by $100 million
and to redeem $33 million of its 9.875% senior subordinated notes. The 1999
credit facility was further amended to (a) allow for the Star acquisition, (b)
modify some of the covenants in the credit facility, (c) restructure the term
loan A to allow the Company to reborrow against it through February 2001,
subject to certain conditions, and (d) increase the term loan A facility $25
million. The extraordinary loss from these transactions was $8.5 million.
F-16
<PAGE> 44
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1(1) -- Securities Purchase Agreement among Classic Cable, Inc.
and Buford Group, Inc. dated as of May 11, 1999.
2.2 -- Asset Purchase Agreement, dated as of October 14, 1999,
by and between Star Cable Associates and Universal Cable
Holdings, Inc., and Amendment No. 1 thereto, dated
February 16, 2000 (incorporated by reference to Exhibit 2
to Classic Cable, Inc.'s Form 8-K, filed on February 29,
2000).
4.1(2) -- Classic Cable, Inc. Certificate of Incorporation dated
April 29, 1995.
4.2(3) -- Classic Cable, Inc. Bylaws
4.3(4) -- Classic Cable Holding, Inc. Certificate of Incorporation
dated December 1, 1996.
4.4(5) -- Classic Cable Holding, Inc. Bylaws
4.5(6) -- Classic Telephone, Inc. Certificate of Incorporation
dated November 22, 1994.
4.6(7) -- Classic Telephone, Inc. Bylaws
4.7(8) -- Universal Cable Holdings, Inc. Certificate of
Incorporation dated October 17, 1985, as amended
4.8(9) -- Universal Cable Holdings, Inc. Bylaws
4.9(10) -- Universal Cable Communications, Inc. Certificate of
Incorporation dated June 7, 1983, as amended
4.10(11) -- Universal Cable Communications, Inc. Bylaws
4.11(12) -- Universal Cable of Beaver Oklahoma, Inc. Certificate of
Incorporation dated June 4, 1987, as amended
4.12(13) -- Universal Cable of Beaver Oklahoma, Inc. Bylaws
4.13(14) -- Universal Cable Midwest, Inc. Certificate of
Incorporation dated February 22, 1989, as amended
4.14(15) -- Universal Cable Midwest, Inc. Bylaws
4.15(16) -- WT Acquisition Corporation Articles of Incorporation
dated August 14, 1992, as amended
4.16(17) -- WT Acquisition Corporation Bylaws
4.17(18) -- W.K. Communications, Inc. Certificate of Incorporation
dated June 11, 1987, as amended
4.18(19) -- W.K. Communications, Inc. Bylaws
4.19(20) -- Television Enterprises, Inc. Certificate of Incorporation
dated August 12, 1965, as amended
4.20(21) -- Television Enterprises, Inc. Bylaws
4.21(22) -- Black Creek Communications, L.P. Certificate of Limited
Partnership dated May 19, 1998.
4.22(23) -- Black Creek Communications, L.P. Limited Partnership
Agreement
4.23(24) -- Black Creek Management, L.L.C. Articles of Organization
dated May 19, 1998.
4.24(25) -- Black Creek Management, L.L.C. Regulations
4.25(26) -- Friendship Cable of Texas, Inc. Articles of Incorporation
dated July 12, 1988, as amended
4.26(27) -- Friendship Cable of Texas, Inc. Bylaws
4.27(28) -- CallCom 24, Inc. Articles of Incorporation dated June 9,
1998, as amended
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.28(29) -- CallCom 24, Inc. Bylaws
4.29(30) -- Correctional Cable TV, Inc. Articles of Incorporation
dated October 9, 1992.
4.30(31) -- Correctional Cable TV, Inc. Bylaws
4.31(32) -- Friendship Cable of Arkansas, Inc. Articles of
Incorporation dated July 11, 1986, as amended
4.32(33) -- Friendship Cable of Arkansas, Inc. Bylaws
4.41(34) -- 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
4.42(35) -- 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
4.43(36) -- Indenture for $150,000,000 9.375% 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
4.44(37) -- Form of Global 9.375% Senior Subordinated Note due 2009.
4.45(38) -- 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, The Chase Manhattan
Bank, as Documentation Agent and Union Bank of
California, N.A., as Administrative Agent
4.46(39) -- Facilities Commitment Letter, dated June 24, 1999,
between Classic Cable, Inc. and Goldman Sachs Credit
Partners L.P.
4.47(40) -- 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.
4.48 -- Registration Rights Agreement dated as July 29, 1998, by
and between Classic Communications, Inc., and Merrill
Lynch, Pierce, Fenner & Smith Incorporated (incorporated
by reference to Exhibit 4.3A to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration
No. 333-63641)).
4.49 -- 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 (incorporated by reference to
Exhibit 4.3B to Classic Communications, Inc.'s
Registration Statement on Form S-4 (Registration No.
333-63641)).
4.50 -- 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) (incorporated by reference to
Exhibit 4.3C to Classic Communications, Inc.'s
Registration Statement on Form S-4 (Registration No.
333-63641)).
4.51 -- 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) (incorporated by reference to Exhibit
4.3D to Classic Communications, Inc.'s Registration
Statement on Form S-4 (Registration No. 333-63641)).
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.52 -- Amended and Restated Stockholders' Agreement, dated as of
December 13, 1999, by and among Classic Communications,
Inc., Brera Classic, LLC and the additional parties named
therein.
4.53 -- Amended and Restated Registration Rights Agreement, dated
as of December 13, 1999, by and among Classic
Communications, Inc., Brera Classic, LLC and the
additional parties named therein.
10.1** -- Employment Agreement dated as of July 29, 1999 by and
between Classic Cable, Inc. and Ronald W. Martin.
10.2** -- Employment Agreement dated as of July 29, 1999 by and
between Classic Cable, Inc. and Elizabeth Kay Manigold.
10.3(41) -- Employment Agreement, dated as of July 28, 1999, by and
between Classic Communications, Inc., Classic Cable, Inc.
and J. Merritt Belisle.
10.4(42) -- Employment Agreement, dated as of July 28, 1999, by and
between Classic Communications, Inc., Classic Cable, Inc.
and Steven E. Seach.
10.5 -- Amendment and Waiver No. 1 to the Amended and Restated
Credit Agreement dated November 15, 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.
10.6 -- Amended and Restated Credit Agreement dated January 31,
2000 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., Administrative Agent.
10.7(43) -- Management and Advisory Fee Agreement dated May 24, 1999.
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(44) -- Investment Agreement dated as of May 24, 1999 between
Brera Classic, LLC and Classic Communications, Inc.
12.1 -- Statement of Earnings to Fixed Charges
27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Incorporated by reference to Exhibit 10.8 to Classic Cable, Inc.'s
Registration Statement on Form S-4 (Registration No. 333-63643).
** Incorporated by reference to the identically numbered Exhibit to Classic
Communications, Inc.'s Registration Statement on Form S-1 (Registration No.
333-89295).
(1) Incorporated herein by reference to Exhibit 2.1 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(2) Incorporated herein by reference to Exhibit 3.1 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(3) Incorporated herein by reference to Exhibit 3.2 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(4) Incorporated herein by reference to Exhibit 3.3 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
<PAGE> 47
(5) Incorporated herein by reference to Exhibit 3.4 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(6) Incorporated herein by reference to Exhibit 3.7 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(7) Incorporated herein by reference to Exhibit 3.8 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(8) Incorporated herein by reference to Exhibit 3.9 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(9) Incorporated herein by reference to Exhibit 3.10 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(10) Incorporated herein by reference to Exhibit 3.11 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(11) Incorporated herein by reference to Exhibit 3.12 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(12) Incorporated herein by reference to Exhibit 3.13 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(13) Incorporated herein by reference to Exhibit 3.14 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(14) Incorporated herein by reference to Exhibit 3.15 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(15) Incorporated herein by reference to Exhibit 3.16 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(16) Incorporated herein by reference to Exhibit 3.17 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(17) Incorporated herein by reference to Exhibit 3.18 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(18) Incorporated herein by reference to Exhibit 3.19 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(19) Incorporated herein by reference to Exhibit 3.20 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(20) Incorporated herein by reference to Exhibit 3.21 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(21) Incorporated herein by reference to Exhibit 3.22 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(22) Incorporated herein by reference to Exhibit 3.23 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(23) Incorporated herein by reference to Exhibit 3.24 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(24) Incorporated herein by reference to Exhibit 3.25 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(25) Incorporated herein by reference to Exhibit 3.26 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(26) Incorporated herein by reference to Exhibit 3.29 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(27) Incorporated herein by reference to Exhibit 3.30 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
<PAGE> 48
(28) Incorporated herein by reference to Exhibit 3.33 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(29) Incorporated herein by reference to Exhibit 3.34 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(30) Incorporated herein by reference to Exhibit 3.35 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(31) Incorporated herein by reference to Exhibit 3.36 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(32) Incorporated herein by reference to Exhibit 3.37 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(33) Incorporated herein by reference to Exhibit 3.38 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(34) Incorporated herein by reference to Exhibit 4.4 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(35) Incorporated herein by reference to Exhibit 10.15 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(36) Incorporated herein by reference to Exhibit 10.16 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(37) Incorporated herein by reference to Exhibit 4.7 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643).
(38) Incorporated herein by reference to Exhibit 10.6 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(39) Incorporated herein by reference to Exhibit 10.7 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(40) Incorporated herein by reference to Exhibit 10.14 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643).
(41) Incorporated herein by reference to Exhibit 10.3 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(42) Incorporated herein by reference to Exhibit 10.4 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(43) Incorporated herein by reference to Exhibit 10.10 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(44) Incorporated herein by reference to Exhibit 10.9 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
<PAGE> 1
EXHIBIT 4.52
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
dated as of December 13, 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. Election of Directors and Related Matters..................................................4
2.1 Board Voting......................................................................4
2.2 Chairmen..........................................................................6
2.3 Removal...........................................................................6
2.4 Vacancy...........................................................................6
2.5 Independence......................................................................6
2.6 Preferred Stock...................................................................6
2.7 Termination of Rights.............................................................6
2.8 Observer Rights...................................................................7
2.9 Term..............................................................................7
2.10 Star Cable Associates.............................................................7
2.11 Transaction Fees..................................................................7
3. Miscellaneous..............................................................................7
3.1 Confidentiality...................................................................7
3.2 Successors and Assigns............................................................8
3.3 Specific Performance..............................................................8
3.4 Entire Agreement; Amendment.......................................................9
3.5 Expenses and Attorneys' Fees......................................................9
3.6 Notices...........................................................................9
3.7 Severability.....................................................................10
3.8 Headings.........................................................................11
3.9 Counterparts.....................................................................11
3.10 Representations and Warranties...................................................11
3.11 Governing Law....................................................................11
3.12 Consent to Jurisdiction and Service of Process;
Appointment of Agent for Service of Process....................................11
3.13 Waiver of Jury Trial.............................................................12
</TABLE>
-i-
<PAGE> 3
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
THIS AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (this
"Agreement"), dated as of December 13, 1999, is by and among Classic
Communications, Inc., a Delaware corporation (the "Company"), Brera Classic,
LLC, a Delaware limited liability company (together with its Permitted
Transferees (as defined herein) "Brera"), J. Merritt Belisle (together with his
Permitted Transferees, "Belisle"), Steven E. Seach (together with his Permitted
Transferees, "Seach") and Bryan D. Noteboom (together with his Permitted
Transferees, "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"), UnionBanCal
Venture Corporation, a Delaware corporation ("Union Bancal"), The Chase
Manhattan Bank, N.A. ("Chase"), 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"), BA Capital
Company, L.P., successor in interest to NationsBanc Capital Corp., a Texas
Corporation ("BA Capital"), and the other signatories hereto (Austin, Austin
III-A, Austin III-B, Union Bancal, Chase, Growth Fund, BT Capital, BA Capital
and the other signatories hereto and their Permitted Transferees are
collectively referred to as the "Investors" and individually as an "Investor").
WHEREAS, the parties to this Agreement hold Common Stock of
the Company and warrants to purchase Common Stock;
WHEREAS, the parties to this Agreement are parties to the
Stockholders' Agreement, dated as of July 28, 1999 (the "Original Stockholders'
Agreement"); WHEREAS, the Company is in the process of conducting an Initial
Public Offering of its Class A Voting Common Stock; and
WHEREAS, the parties to this Agreement wish to amend and
restate in full the Original Stockholders' Agreement, effective as of the
closing of the Initial Public Offering, (the "Closing") in light of the
Company's status as a public
1
<PAGE> 4
company following the IPO and the requirements of the Nasdaq National
Market relating to independent directors.
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 "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.
1.2 "Agreement" has the meaning set forth in the preamble
hereto.
1.3 "Belisle" means J. Merritt Belisle.
1.4 "Board" means the Board of Directors of the Company.
1.5 "Brera" means, collectively, Brera Classic, LLC, a
Delaware limited liability company and its Permitted Transferees.
1.6 "Brera Director" has the meaning set forth in Section
2.1(a)(i).
1.7 "Bylaws" means the Bylaws of the Company, as amended or
restated from time to time.
2
<PAGE> 5
1.8 "Certificate of Incorporation" means the Company's Amended
and Restated Certificate of Incorporation, as amended or restated from time to
time.
1.9 "Class I Director" has the meaning set forth in Section
2.1(b)(i).
1.10 "Class II Director" has the meaning set forth in Section
2.1(b)(ii).
1.11 "Class III Director" has the meaning set forth in Section
2.1(b)(iii).
1.12 "Closing" has the meaning set forth in the recitals
hereto.
1.13 "Common Stock" means the Voting Common Stock and
Nonvoting Common Stock, par value $0.01 per share, of the Company.
1.14 "Company" means Classic Communications, Inc., a Delaware
corporation, and its successors and assigns.
1.15 "Current Investor Director" means Jeff Garvey for so long
as he serves as a director of the Company pursuant to Section 2.1 or his
replacement selected pursuant to Section 2.4.
1.16 "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 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.
1.17 "Fully Diluted Basis" means all outstanding shares of
Equity Securities plus all shares of Equity Securities issuable upon the
conversion of any other securities of the Company (including the exercise of any
warrants) in each case without regard to the voting rights attached to such
shares.
1.18 "GAAP" means United States generally accepted accounting
principles, consistently applied.
3
<PAGE> 6
1.19 "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 National Market.
1.20 "Investor Director" has the meaning set forth in Section
2.1(a)(ii).
1.21 "Investor Majority" means the holders of a majority of
Equity Securities held by the Investors.
1.22 "Management Stockholder" or "Management Stockholders" has
the meaning set forth in the preamble hereto.
1.23 "Permitted Transferee" or Permitted Transferees has the
meaning set forth in the Certificate of Incorporation.
1.24 "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.
1.25 "Seach" means Steven E. Seach.
1.26 "Securities Act" means the Securities Act of 1933, as
amended.
1.27 "Stockholder" or "Stockholders" means, collectively,
Brera, the Management Stockholders and the Investors.
2. Election of Directors and Related Matters.
2.1 Board Voting. Until such time as the Stockholders together
own less than 30% of the outstanding Common Stock on a Fully Diluted Basis (the
"Expiration Date"), the Company and 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, the attendance of meetings and the amendment of the
Certificate of Incorporation or the Bylaws, so as to:
4
<PAGE> 7
(a) cause the Board to consist of up to eleven (11) directors
composed of the following Persons:
(i) up to six (6) Persons designated by
Brera (the "Brera Directors");
(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 decides otherwise (the
"Investor Directors"); and
(iii) two (2) Independent Directors (as
defined pursuant to Rule 4200 of the Marketplace Rules of the National
Association of Securities Dealers, Inc. or any successor provision
thereto, the "Independent Directors"), which shall be designated by a
majority vote of the Board.
(b) cause the Board to be divided into three classes as
follows:
(i) one class (the "Class I Directors") to
consist of up to two (2) Brera Directors and one (1) 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 up to two (2) Brera Directors, one (1) Investor Director and
one (1) Independent Director 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 up to two (2) Brera Directors, one (1) Investor Director and
one (1) Independent Director, to serve until the third annual
5
<PAGE> 8
meeting of the Company following the Closing and thereafter for
additional terms of three years.
2.2 Chairmen. Brera will designate the chairman of the Board
and the chairman of each committee of the Board.
2.3 Removal. Unless required for the due exercise of their
fiduciary duties, the Stockholders will not take any action to remove any
director designated pursuant to this Section 2 without the prior written consent
of the Person who or which designated that director.
2.4 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 designated 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 a director designated by the Investors consistent with the
terms and provisions of this Section 2.
2.5 Independence. Nothing contained in this Agreement shall
have the effect of causing any Brera Director, Investor Director or Independent
Director to be deemed to be the deputy of or otherwise required to discharge his
or her duties on the Board under the direction of, or with special attention to
the interests of, the person designating such Person to serve on the Board.
2.6 Preferred Stock. Nothing in this Agreement is intended to
affect the right, if any, of holders of preferred stock of the Company, voting
as a class, to elect additional directors to the Board as contained in the
certificate of designations with respect to such preferred stock.
2.7 Termination of Rights. If at any time any of the Investors
or Brera shall cease to own at least 2% of the outstanding Common Stock on a
Fully Diluted Basis, then Brera or such Investor, as the case may be, shall no
longer be entitled to participate in the designation of any member of the Board,
but shall be required to comply with this Agreement for so long as it holds at
least 1% of the outstanding Common Stock on a Fully Diluted Basis; provided that
if at any time
6
<PAGE> 9
the Investors as a group shall cease to own at least 4% of the outstanding
Common Stock on a Fully Diluted Basis, then the Investors as a group shall no
longer be entitled to participate in the designation of any member of the Board.
2.8 Observer Rights. Each of Austin, Growth Fund, BT Capital
and BA Capital will have, so long as each remains party to this Agreement and
retains, together with its Affiliates, at least 2.5% 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.
2.9 Term. The term of this Agreement shall become effective
and commence upon the Closing and terminate upon the Expiration Date.
2.10 Star Cable Associates. The parties to this Agreement
hereby agree that, upon (a) the execution by Star Cable Associates ("Star") of a
consent and joinder agreement pursuant to which Star agrees to be bound by all
of the provisions of this Agreement, and (b) the completion of the acquisition
of substantially all the assets of Star by Universal Cable Holdings, Inc.
("Universal") pursuant to the Asset Purchase Agreement, dated as of October 14,
1999, by and between Universal and Star, then, at the Company's discretion, Star
shall be bound by and entitled to the benefits of this Agreement as though it
were an original party hereto as a "Stockholder," and all references to
"Stockholder" herein shall be deemed to include Star.
2.11 Transaction Fees. Brera agrees that, so long as the
Investors as a group own at least 2% of the outstanding Common Stock on a Fully
Diluted Basis, then any transaction fee payable by the Company to Brera that
exceeds 1% of the transaction value for any such transaction must be approved by
a majority of the directors excluding the Brera Directors and the directors of
the Company who are officers of the Company.
3. Miscellaneous.
3.1 Confidentiality. Each party to this Agreement agrees to
use the same degree of care to keep confidential any information from time to
time
7
<PAGE> 10
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 3.1 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 3.1 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 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 3.1.
3.2 Successors and Assigns. This Agreement shall not be
assignable by any Stockholder to any Person other than the Permitted
Transferees.
3.3 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.
8
<PAGE> 11
3.4 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 the Original Stockholders' Agreement. This Agreement
may be amended, and the performance of any provision hereof may be waived, only
by the written agreement of each Stockholder holding at least 5% of the Equity
Securities on a Fully Diluted Basis.
3.5 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.
3.6 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: Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive, Suite 2300
Chicago, IL 60606
Attention: Peter C. Krupp, Esq.
Fax: (312) 407-0411
9
<PAGE> 12
With a copy to: Winstead Sechrest & Minick P.C.
100 Congress Avenue, Suite 800
Austin, Texas 78701
Attention: Tim Young
Fax: (512) 370-2850
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.
3.7 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.
10
<PAGE> 13
3.8 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.
3.9 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.
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 REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (C) AGREES THAT IT WILL NOT
BRING ANY
11
<PAGE> 14
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 FURTHER WARRANTS
AND
12
<PAGE> 15
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.
13
<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this
Stockholders' Agreement as of the day and year first above written.
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 VENTURES, L.P.
By: AV PARTNERS, L.P.
By: /s/ Jeffery C. Garvey
------------------------------------------
Name: Jeffery C. Garvey
Title: General Partner
AUSTIN VENTURES III-A, L.P.
By: AV PARTNERS III, L.P.
By: /s/ Jeffery C. Garvey
------------------------------------------
Name: Jeffery C. Garvey
Title: General Partner
<PAGE> 17
AUSTIN VENTURES III-B, L.P.
By: AV PARTNERS III, L.P.
By: /s/ Jeffery C. Garvey
------------------------------------------
Name: Jeffery C. Garvey
Title: General Partner
BA CAPITAL COMPANY, L.P.
By: BA SBIC MANAGEMENT, LLC
Its General Partner
By: BA EQUITY MANAGEMENT, L.P.,
Its sole member
By: BA EQUITY MANAGEMENT, GP, LLC
Its General Partner
By: /s/ Robert H. Sheridan, III
------------------------------------------
Name: Robert H. Sheridan, III
Title: Managing Director
THE BOARD OF TRUSTEES OF THE
TEXAS GROWTH FUND, AS TRUSTEE FOR
THE TEXAS GROWTH FUND - 1991 TRUST
By: TGF Management Corp. as Executive
Director
By: /s/ James J. Kozlowski
------------------------------------------
Name: James J. Kozlowski
Title: President
<PAGE> 18
BT CAPITAL PARTNERS, INC.
By: /s/ Heide Silverstein
------------------------------------------
Name: Heide Silverstein
Title: Director
UNIONBANCAL VENTURE CORPORATION
By: /s/ Kevin Sampson
------------------------------------------
Name: Kevin Sampson
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Edmond DeForest
------------------------------------------
Name: Edmond DeForest
Title: Vice President
J. MERRITT BELISLE
By: /s/ J. Merritt Belisle
------------------------------------------
STEVEN E. SEACH
By: /s/ Steven E. Seach
------------------------------------------
BRYAN D. NOTEBOOM
By: /s/ Bryan D. Noteboom
------------------------------------------
<PAGE> 19
CIBC CAPITAL CORP.
By: /s/ Mark A. O'Connor
------------------------------------------
Name: Mark A. O'Connor
Title: Executive Director
SENIOR DEBT PORTFOLIO
By: Boston Management and Research as
Investment Advisor
By: /s/ Payson F. Swaffield
------------------------------------------
Name: Payson F. Swaffield
Title: Vice President
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/ Joseph Matteo
------------------------------------------
Name: Joseph Matteo
Title: Authorized Signatory
VAN KAMPEN PRIME RATE INCOME
TRUST
By: Van Kampen Investment Advisory Corp.
By: /s/ Darvin D. Pierce
------------------------------------------
Name: Darvin D. Pierce
Title: Vice President
<PAGE> 20
MARK LIVINGSTON
By: /s/ Mark Livingston
------------------------------------------
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEEN BANK B.A.
(Rabobank Nederland) New York Branch
By: /s/ Hans F. Breukhoven
------------------------------------------
Name: Hans F. Breukhoven
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Richard E. Anderson
------------------------------------------
Name: Richard E. Anderson
Title: Senior Vice President
UNION BANK
By: /s/ Peter C. Connoy
------------------------------------------
Name: Peter C. Connoy
Title: Vice President
<PAGE> 1
EXHIBIT 4.53
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
dated as of December 13, 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 ...................................................................... 2
1.1 Capitalized Terms .......................................................... 2
1.2 Defined Terms .............................................................. 2
1.3 General Interpretive Principles ............................................ 7
SECTION 2. REGISTRATION RIGHTS .............................................................. 7
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 ............................................................ 25
2.9 Rules 144 and 144A ......................................................... 30
2.10 Effectiveness .............................................................. 31
2.11 Star Cable Associates ...................................................... 31
SECTION 3. MISCELLANEOUS .................................................................... 31
3.1 Entire Agreement ........................................................... 31
3.2 Injunctive Relief .......................................................... 31
3.3 Attorneys' Fees ............................................................ 31
3.4 Notices .................................................................... 32
3.5 Successors, Assigns and Transferees ........................................ 33
3.6 Headings ................................................................... 34
3.7 Severability ............................................................... 34
3.8 Amendment; Waiver .......................................................... 34
3.9 Counterparts ............................................................... 35
3.10 Representations and Warranties ............................................. 35
3.11 Governing Law .............................................................. 35
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>
i
<PAGE> 3
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
"Agreement"), dated as of December 13, 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"), The Chase Manhattan Bank,
N.A. ("Chase"), 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 Capital Company, L.P., successor in
interest to NationsBanc Capital Corp., a Texas Corporation ("BA Capital") (BT
Capital, Union Bancal, Chase, Austin, Austin III-A, Austin III-B, Growth Fund
and BA Capital 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."
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 purchased, in the aggregate, from the Company, and the Company
has sold to Brera, 6,490,734 shares of voting common stock, par value $0.01 per
share (the "Voting Common Stock"), of the Company;
WHEREAS, the Company is in the process of conducting an
Initial Public Offering;
WHEREAS, as part of the Initial Public Offering, all of the
currently outstanding shares of Voting Common Stock will be converted to Class B
Voting Common Stock, par value $0.01 per share ("Class B Common Stock")
convertible into Class A Voting Common Stock, par value $0.01 per share ("Class
A Common Stock"), on a one-for-one basis;
1
<PAGE> 4
WHEREAS, the parties to this Agreement wish to provide for
certain registration rights relating to the shares of Class A Common Stock
issuable upon the conversion of shares of Class B Common Stock;
WHEREAS, the parties to this Agreement wish to amend certain
provisions of the Registration Rights Agreement, dated as of July 28, 1999 (the
"Previous Registration Rights Agreement"), among the parties hereto, relating to
the allocation of registrable securities; and
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.
2
<PAGE> 5
"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 Class A Common Stock
held by or issuable to Brera upon conversion of shares of Class B Common Stock,
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 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.
"Class A Common Stock" has the meaning set forth in the
preamble hereto.
"Class B Common Stock" has the meaning set forth in the
preamble hereto.
"Closing" means the closing of the Initial Public Offering of
the Company.
"Common Stock" means the Voting Common Stock and Nonvoting
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).
3
<PAGE> 6
"Current Investors" has the meaning set forth in the preamble
hereto.
"Current Investors Registrable Securities" means any Class A
Common Stock held by or issuable to the Current Investors upon conversion of
shares of Class B Common Stock, 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.
"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.
4
<PAGE> 7
"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).
"Loss" has the meaning set forth in Section 2.8(a).
"Management Registrable Securities" means any Class A Common
Stock held by or issuable to Belisle, Seach or Noteboom upon conversion of
shares of Class B Common Stock, and any securities that may be issued or
distributed or be issuable in respect of any Management 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 Management Registrable Securities
shall cease to be Management Registrable Securities to the extent a Registration
Statement with respect to the sale of such Management Registrable Securities has
been declared effective under the Securities Act and such Management 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 Management Registrable Securities shall be
determined based on the number of securities remaining unregistered.
"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.
5
<PAGE> 8
"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, the Current Investors Registrable Securities and the Management
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.
"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).
6
<PAGE> 9
"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
Closing, 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 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 Closing, 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
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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 "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 request-
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ing 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 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.
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(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 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
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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.
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
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<PAGE> 14
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 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
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<PAGE> 15
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 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 (ii) 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
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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 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,
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<PAGE> 17
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;
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;
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(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
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;
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(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
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
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taxation or general service of process in any such jurisdiction where
it is not then so subject;
(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
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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 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
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each inter-dealer quotation system on which any of the Company's
securities are then quoted;
(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
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(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.
(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
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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.
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
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<PAGE> 25
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 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
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<PAGE> 26
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 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,
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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 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.
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(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 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
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<PAGE> 29
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 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 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
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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
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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 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 Registrable 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.
2.10 Effectiveness. This Agreement shall not become effective until the
Closing. Prior to such time, the terms of the Previous Registration Rights
Agreement shall remain in full force and effect.
2.11 Star Cable Associates. The parties to this Agreement hereby agree
that, upon (a) the execution by Star Cable Associates ("Star") of a consent and
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joinder agreement pursuant to which Star agrees to be bound by all of the
provisions of this Agreement, and (b) the completion of the acquisition of
substantially all the assets of Star by Universal Cable Holdings, Inc.
("Universal") pursuant to the Asset Purchase Agreement, dated as of October 14,
1999, by and between Universal and Star, then Star shall be bound by and
entitled to the benefits of this Agreement as though it were an original party
hereto, and all references to "Current Investors" herein shall be deemed to
include Star.
SECTION 3. MISCELLANEOUS.
3.1 Entire Agreement. This Agreement shall, as of the Closing,
constitute the full and entire understanding and agreement between the parties
with regard to the subject matter hereof. This Agreement shall, as of the
Closing, supercede the Previous Registration Rights Agreement.
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:
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To the Company: Classic Communications, Inc.
515 Congress Avenue
Austin, TX 78701
Attention: J. Merritt Belisle
Fax: (512) 476-5204
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
With a copy to: Winstead Sechrest & Minick P.C.
100 Congress Avenue, Suite 800
Austin, TX 78701
Attention: Timothy E. Young
Fax: (512) 370-2850
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;
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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. (a) 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 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.
(b) 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
32
<PAGE> 35
invalid, illegal or unenforceable provision or portion of any provision had
never been contained therein.
3.8 Amendment; Waiver. (a) 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.
(b) 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, 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 perfor mance 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
33
<PAGE> 36
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 AGREE MENT, 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, GENER ALLY AND UNCONDITIONALLY, THE EXCLUSIVE
AND IRREVOCA BLE JURISDICTION AND VENUE OF THE AFORESAID COURTS AND WAIVES ANY
DEFENSE OF FORUM NON CONVENIENS, AND IRREVO CABLY 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
PRO VIDED 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.
34
<PAGE> 37
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 FURTHER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOW INGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOL LOWING 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 MODI FICATIONS TO THIS AGREEMENT OR TO ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEM PLATED 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 VENTURES, L.P.
By: AV PARTNERS, L.P.
By: /s/ Jeffery C. Garvey
---------------------------------
Name: Jeffery C. Garvey
Title: General Partner
AUSTIN VENTURES III-A, L.P.
By: AV PARTNERS III, L.P.
By: /s/ Jeffery C. Garvey
---------------------------------
Name: Jeffery C. Garvey
Title: General Partner
36
<PAGE> 39
AUSTIN VENTURES III-B, L.P.
By: AV PARTNERS III, L.P.
By: /s/ Jeffery C. Garvey
---------------------------------
Name: Jeffery C. Garvey
Title: General Partner
BA CAPITAL COMPANY, L.P.
By: BA SBIC MANAGEMENT, LLC
Its General Partner
By: BA EQUITY MANAGEMENT, L.P.,
Its sole member
By: BA EQUITY MANAGEMENT GP,
LLC
Its General Partner
By: /s/ Robert H. Sheridan, III
---------------------------------
Name: Robert H. Sheridan, III
Title: Managing Director
37
<PAGE> 40
THE BOARD OF TRUSTEES OF THE
TEXAS GROWTH FUND, AS TRUSTEE FOR
THE TEXAS GROWTH FUND - 1991 TRUST
By: TGF Management Corp. as
Executive Director
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
UNIONBANCAL VENTURE
CORPORATION
By: /s/ Craig Dougherty
---------------------------------
Name: Craig Dougherty
Title: President
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Edmond DeForest
---------------------------------
Name: Edmond DeForest
Title: Vice President
38
<PAGE> 41
J. MERRITT BELISLE
By: /s/ J. Merritt Belisle
---------------------------------
STEVEN E. SEACH
By: /s/ Steven E. Seach
---------------------------------
BRYAN D. NOTEBOOM
By: /s/ Bryan D. Noteboom
---------------------------------
39
<PAGE> 1
EXHIBIT 10.5
EXECUTION COPY
AMENDMENT AND WAIVER NO. 1
TO THE AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of November 15, 1999
AMENDMENT AND WAIVER NO. 1 TO THE AMENDED AND RESTATED CREDIT
AGREEMENT (this "Amendment") among Classic Cable, Inc., a Delaware corporation
(the "Borrower"), the banks, financial institutions and other institutional
lenders parties to the Credit Agreement referred to below (collectively, the
"Lenders") and Union Bank of California, N.A., as agent (the "Agent") for the
Lenders.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders, the Agent, Goldman Sachs Credit
Partners L.P., as Lead Arranger and Syndication Agent, and The Chase Manhattan
Bank, as Documentation Agent, have entered into an Amended and Restated Credit
Agreement dated as of July 28, 1999 (the "Credit Agreement"). Capitalized terms
not otherwise defined in this Amendment have the same meanings as specified in
the Credit Agreement.
(2) The Borrower has proposed to enter into an agreement with Star
Cable Associates Inc. ("Star Cable") to purchase all of the cable systems
currently owned by Star Cable for approximately $130,000,000 in cash and stock
(the "Star Acquisition"). The Borrower has requested that the Majority Lenders
waive Section 6.7(h)(i) of the Credit Agreement to the extent that the
consideration for the proposed acquisition exceeds the amount permitted by such
Section.
(3) The Borrower has further requested that the Majority Lenders agree
to extend the period of 90 days after the Closing Date for the delivery of a
pledged account letter as provided in Section 6(a) of the Security Agreement for
an additional 90 days.
(4) The Majority Lenders are, on the terms and conditions stated
below, willing to grant the request of the Borrower and to amend the limitation
on Capital Expenditures set forth in Section 6.1(f) of the Credit Agreement as
hereinafter set forth.
SECTION 1. Waivers. Effective as of the date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 3, the Majority
Lenders hereby agree (a) to consent to the proposed Star Acquisition and to
waive the limitation set forth in Sections 2.7(c)(i)(B) and 6.7(h)(i)(1) of the
Credit Agreement solely to the extent required to permit the Borrower to
consummate the Star Acquisition, (b) to waive the limitation set forth in clause
(iv) of the proviso to the definition of "Equity Offering" set forth in Section
1.1 of the Credit Agreement solely to permit the Borrower to apply the proceeds
of any issuance or sale of stock in the Borrower or capital contribution to the
Borrower made after the date hereof to the
<PAGE> 2
purchase price of the Star Acquisition without regard to the requirement that
such proceeds be applied to a Permitted Acquisition within 10 Business Days of
receipt and (c) to consent to extend the period set forth in Section 6(a) of the
Security Agreement for an additional 90 days.
SECTION 2. Amendment to the Credit Agreement. Effective as of the date
hereof and subject to the satisfaction of the conditions precedent set forth in
Section 3, the Majority Lenders hereby agree to amend the Credit Agreement as
follows:
(a) Section 2.21(a) is amended (i) by deleting the figure "$25,000,000" and
substituting therefor the figure "$10,000,000" and (ii) by restating clause (i)
of the proviso thereof in full to read "(i) in no event shall the Aggregate Term
C Commitment be more than (x) $100,000,000 at any time prior to the consummation
after November 15, 1999 of an Equity Offering the Net Proceeds of which exceed
$140,000,000 or (y) $200,000,000 at any time thereafter".
(b) Section 6.1(f) is amended in full to read as follows:
(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 $50,000,000
Fiscal Year Ending December 31, 2001 $70,000,000
Fiscal Year Ending December 31, 2002 $55,000,000
Each Fiscal Year thereafter $25,000,000
</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.
SECTION 3. Conditions of Effectiveness. (a) Section 1 and 2(a) of this
Amendment shall become effective as of the date first above written when, and
only when, (i) the Agent shall have received counterparts of this Amendment
executed by the Borrower and the Majority Lenders or, as to any of the Lenders,
advice satisfactory to the Agent that such Lender has executed this Amendment
and the consent attached hereto executed by each Guarantor and (ii) the Borrower
shall have paid all accrued fees and expenses of the Facility Agents (including
reasonable fees and expenses of counsel to the Lead Arranger), and (b) Section
2(b) of this Amendment shall become effective on and as of the date upon which
the Agent shall have received written notice from the Borrower of the
consummation of the Star Acquisition. This Amendment is subject to the
provisions of Section 9.1 of the Credit Agreement.
2
<PAGE> 3
SECTION 4. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
4.1 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, (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.
4.2 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 Star Acquisition in accordance with the terms of the acquisition agreement
related thereto 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 and each Subsidiary to execute, deliver and perform
this Amendment, the Consent and the Loan Documents to which it is a party and,
except for regulatory approvals and franchisee consents yet to be obtained (all
of which the Borrower anticipates will be obtainable in the ordinary course),
for the Borrower to consummate the Star Acquisition in accordance with the terms
of the acquisition agreement related thereto, and have been taken and/or
received.
4.3 Validity and Legal Effect. This Amendment and the Credit Agreement, as
modified hereby, constitutes, and the other Loan Documents, as amended hereby,
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).
4.4 No Violation of Laws or Agreements. The execution, delivery and
performance of this Amendment and the Loan Documents and the consummation of the
Star Acquisition in accordance with the terms of the acquisition agreement
related thereto (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 of
the Credit Agreement) upon or with respect to any property of the Borrower or
any Subsidiary, whether such property is now owned or hereafter acquired.
4.5 Litigation and Legal Proceedings. Except as disclosed on Schedule 3.10
to the Credit Agreement, 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 this
Amendment or any Loan Document or the transactions contemplated
3
<PAGE> 4
thereby, (ii) with respect to the Star Acquisition or the transactions
contemplated by the acquisition agreement related thereto 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.
SECTION 5. Reference to and Effect on the Loan Documents. (a) On and
after the effectiveness of this Amendment, each reference in the Credit
Agreement or the Security Agreement to "this Agreement", "hereunder", "hereof"
or words of like import referring to the Credit Agreement or the Security
Agreement, as the case may be, and each reference in the Notes and each of the
other Loan Documents to "the Credit Agreement", the "Security Agreement",
"thereunder", "thereof" or words of like import referring to the Credit
Agreement or the Security Agreement, as the case may be, shall mean and be a
reference to the Credit Agreement or the Security Agreement, as modified by this
Amendment.
(b) The Credit Agreement, the Security Agreement, the Notes and each
of the other Loan Documents, as specifically amended by this Amendment, are and
shall continue to be in full force and effect and are hereby in all respects
ratified and confirmed. Without limiting the generality of the foregoing, the
Collateral Documents and all of the Collateral described therein do and shall
continue to secure the payment of all Obligations of the Loan Parties under the
Loan Documents, in each case as amended by this Amendment.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Lender or the Agent under any of the Loan Documents, nor
constitute a waiver of any provision of any of the Loan Documents.
SECTION 6. Costs and Expenses. The Borrower agrees to pay on demand
all costs and expenses of the Agent in connection with the preparation,
execution, delivery and administration, modification and amendment of this
Amendment and the other instruments and documents to be delivered hereunder
(including, without limitation, the reasonable fees and expenses of counsel for
the Agent) in accordance with the terms of Section 9.5 of the Credit Agreement.
SECTION 7. Execution in Counterparts. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment.
4
<PAGE> 5
SECTION 8. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
CLASSIC CABLE, INC.
By /s/ Steven E. Seach
---------------------------------------
Title:
AGREED:
UNION BANK OF CALIFORNIA, N.A.,
as Agent and as Lender
By [/s/ An authorized signatory of Union Bank of California, N.A.]
----------------------------------------------------------------
Title: Assistant Vice President
GOLDMAN SACHS CAPITAL PARTNERS L.P.
By /s/ Stephen B. King
-------------------------------
Title:
THE CHASE MANHATTAN BANK
By [/s/ An authorized signatory of The Chase Manhattan Bank]
----------------------------------------------------------------
Title:
5
<PAGE> 6
AGREED:
PARIBAS
By /s/ Lynne Randall
----------------------------
Title: Managing Director
By /s/ Sean Faherty
----------------------------
Title: Vice President
6
<PAGE> 7
AGREED:
NITEXIS BANQUE BFCE
By /s/ Evan S. Kraus
---------------------------------
Title: Assistant Vice President
By /s/ Cynthia E. Sachs
---------------------------------
Title: Vice President Group Manager
7
<PAGE> 8
AGREED:
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By [/s/ An authorized signatory of Suntrust Bank, Central Florida, N.A.]
---------------------------------------------------------------------------
Title: Vice President
8
<PAGE> 9
AGREED:
PNC BANK, NATIONAL ASSOCIATION
By /s/ Jeffrey E. Hauser
-----------------------------------
Title: Vice President
9
<PAGE> 10
AGREED:
MERCANTILE BANK NATIONAL ASSOCIATION
By /s/ Teresa A. Lekich
------------------------------------
Title: Vice President
10
<PAGE> 11
AGREED:
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By /s/ Daniel E. A. Nichols
----------------------------------------
Title: Assistant Vice President
11
<PAGE> 12
AGREED:
U.S. BANK NATIONAL ASSOCIATION
By [/s/ An authorized signatory of U.S. Bank National Association]
----------------------------------------------------------------------
Title: Senior Vice President
12
<PAGE> 13
AGREED:
HELLER FINANCIAL, INC.
By /s/ Linda W. Wolf
----------------------------
Title: Senior Vice President
13
<PAGE> 14
AGREED:
MORGAN STANLEY/DEAN WITTER PRIME INCOME TRUST
By /s/ Sheila A. Finnerty
-----------------------------------
Title: Vice President
14
<PAGE> 15
AGREED:
FIRST UNION NATIONAL BANK
By [/s/ An authorized signatory of First Union National Bank]
-----------------------------------------------------------------
Title: Vice President
15
<PAGE> 16
AGREED:
HIGHLAND LEGACY LTD.
By HIGHLAND CAPITAL MANAGEMENT, L.P.,
as Collateral Manager
By /s/ Mark K. Okada
----------------------------
Title: Executive Vice President
16
<PAGE> 17
AGREED:
SEQUILS - ING (HBDGM), LTD.
By: ING Capital Advisors LLC,
Collateral Manager and
Authorized Signatory
By /s/ Michael J. Campbell
--------------------------------
Title: Senior Vice President &
Portfolio Manager
17
<PAGE> 18
AGREED:
KZH III LLC
By /s/ Peter Chin
----------------------------
Title: Authorized Agent
18
<PAGE> 19
AGREED:
KZH ING - 1 LLC
By /s/ Peter Chin
----------------------------
Title: Authorized Agent
19
<PAGE> 20
AGREED:
KZH INC-3 LLC
By /s/ Peter Chin
----------------------------
Title: Authorized Agent
20
<PAGE> 21
AGREED:
DEBT STRATEGIES FUND, INC. SENIOR HIGH INCOME PORTFOLIO, INC.
By /s/ Joseph P. Matteo By /s/ Joseph P. Matteo
-------------------------------- -------------------------------------
Title: Authorized Signatory Title: Authorized Signatory
DEBT STRATEGIES FUND II, INC. MERRILL LYNCH SENIOR FLOATING
RATE FUND II, INC.
By /s/ Joseph P. Matteo By /s/ Joseph P. Matteo
-------------------------------- ------------------------------------
Title: Authorized Signatory Title: Authorized Signatory
21
<PAGE> 22
AGREED:
ELC (Cayman) Ltd. 1999-II
By /s/ Arlene D. Nix
----------------------------
Title: Assistant Vice President
22
<PAGE> 23
AGREED:
STANFIELD CLO LTD.
By: Stanfield Capital Partners LLC,
as its Collateral Agent
By /s/ Gregory L. Smith
----------------------------
Title: Partner
23
<PAGE> 24
CONSENT
Dated as of November 15, 1999
The undersigned, each a Guarantor under the Amended and Restated Guarantee
dated as of July 29, 1999 (the "Guarantee") in favor of the Agent, for its
benefit and the benefit of the Lenders parties to the Credit Agreement referred
to in the foregoing Amendment and the Hedge Banks (as defined in the Guarantee),
hereby consent to such Amendment and hereby confirm and agree that (a)
notwithstanding the effectiveness of such Amendment, the Guarantee is, and shall
continue to be, in full force and effect and is hereby ratified and confirmed in
all respects, except that, on and after the effectiveness of such Amendment,
each reference in the Guarantee to the "Credit Agreement", the "Security
Agreement", "thereunder", "thereof" or words of like import shall mean and be a
reference to the Credit Agreement and the Security Agreement, each as modified
by such Amendment, and (b) the Collateral Documents to which each such Guarantor
is a party and all of the Collateral described therein do, and shall continue
to, secure the payment of all of the Secured Obligations (in each case, as
defined therein).
CLASSIC CABLE HOLDING, INC.
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
PONCA HOLDINGS, INC.
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
CLASSIC TELEPHONE, INC.
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
<PAGE> 25
UNIVERSAL CABLE HOLDINGS, INC.
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
UNIVERSAL CABLE COMMUNICATIONS INC.
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
UNIVERSAL CABLE OF BEAVER, OKLAHOMA, INC.
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
UNIVERSAL CABLE MIDWEST, INC.
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
WT ACQUISITION CORPORATION
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
2
<PAGE> 26
W.K. COMMUNICATIONS, INC.
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
TELEVISION ENTERPRISES, INC.
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
BLACK CREEK MANAGEMENT, L.L.C.
By: Classic Cable, Inc.,
its sole member
By /s/ Steven E. Seach
--------------------------------------------
Title: President and Chief Financial Officer
BLACK CREEK COMMUNICATIONS, L.P.
By: Black Creek Management, L.L.C.,
its General Partner
By: Classic Cable, Inc.,
its sole member
By /s/ Steven E. Seach
--------------------------------------------
Title: President and Chief Financial Officer
3
<PAGE> 27
CLASSIC NETWORK TRANSMISSION, L.L.C.
By /s/ Steven E. Seach
------------------------------------------------
Title: Manager
By /s/ Steven E. Seach
------------------------------------------------
Title: Manager
FRIENDSHIP CABLE OF ARKANSAS, INC.
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
FRIENDSHIP CABLE OF TEXAS, INC.
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
CORRECTIONAL CABLE TV, INC.
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
BUFORD TELEVISION INC. OF FORT SMITH
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
4
<PAGE> 28
BUFORD GROUP, INC.
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
BUFORD TELEVISION, INC.
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
CALLCOM 24, INC.
By /s/ Steven E. Seach
------------------------------------------------
Title: President and Chief Financial Officer
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<PAGE> 1
EXHIBIT 10.6
EXECUTION COPY
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$349,500,000
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 January 31, 2000
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<PAGE> 2
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of January 31, 2000
AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment") among Classic
Cable, Inc., a Delaware corporation (the "Borrower"), the banks, financial
institutions and other institutional lenders parties to the Existing Credit
Agreement referred to below (collectively, the "Lenders") and Union Bank of
California, N.A., as agent (the "Agent") for the Lenders.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders, the Agent, Goldman Sachs Credit Partners
L.P., as Lead Arranger and Syndication Agent, and The Chase Manhattan Bank, as
Documentation Agent, have entered into an Amended and Restated Credit Agreement
dated as of July 28, 1999, as amended by Amendment and Waiver No. 1 dated as of
November 15, 1999 (as so amended, the "Existing Credit Agreement"). Capitalized
terms not otherwise defined in this Amendment have the same meanings as
specified in the Existing Credit Agreement.
(2) The Borrower has proposed to issue a new series of senior
subordinated notes on substantially the same terms as the New Subordinated Notes
and has requested that the Majority Lenders agree to amend the Existing Credit
Agreement to permit such issuance.
(3) The Borrower has further requested that the Term A Lenders agree to
amend the Term A Facility so as to permit the Borrower, if and to the extent
that the Borrower in its sole discretion elects to prepay all of the Term A
Loans, to reborrow such amounts during a period not to exceed one calendar year
from the effective date of this Amendment.
(4) The Borrower has further requested that Majority Lenders agree to
amend certain of the financial covenants, waive Section 6.8 of the Existing
Credit Agreement to permit the Borrower to prepay the 9 7/8% Subordinated Notes
and to further amend the Credit Agreement and the Security Agreement as
hereinafter set forth.
(5) The Majority Lenders, and to the extent so indicated on the
signature pages hereof, the Term A Lenders, are, on the terms and conditions
stated below, willing to grant the requests of the Borrower and to amend the
Loan Documents as hereinafter set forth.
(6) The parties to this Amendment desire to amend the Existing Credit
Agreement as set forth herein and to restate the Existing Credit Agreement in
its entirety to read as set forth in the Existing Credit Agreement with the
following amendments.
NOW, THEREFORE, the parties hereto hereby agree that the Existing
Credit Agreement shall be amended and restated in its entirety to read as set
forth in the Existing Credit Agreement with the following amendments, and agree
as follows:
<PAGE> 3
SECTION 1. Phase I Amendments to the Existing Credit Agreement.
Effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 5(b), the Majority Lenders hereby
agree to amend the Existing Credit Agreement as follows:
(a) Section 1.1 is amended by adding the following defined terms in the
appropriate alphabetical order:
"Subordinated Notes (2000)": up to $225,000,000 Classic Cable, Inc.
Senior Subordinated Notes due 2010 to be issued pursuant to an indenture
substantially similar to the New Subordinated Indenture, as such notes may
be issued on or prior to March 31, 2000 and may be refinanced in accordance
with Section 6.2(h).
(b) The definition of "Subordinated Indebtedness" in Section 1.1 is amended
in full to read as follows:
"Subordinated Indebtedness": the 9 7/8% Subordinated Notes, the New
Subordinated Notes and the Subordinated Notes (2000).
(c) The definition of "Subordinated Indentures" in Section 1.1 is amended
by adding to the end thereof the following phrase:
and (c) that certain indenture entered into between the Borrower and the
indenture trustee named therein, with substantially the same terms as the
New Subordinated Indenture, related to the issuance of the Subordinated
Notes (2000), as it may be amended or otherwise modified, or replaced
pursuant to a refinancing of the Subordinated Notes (2000) permitted under
Section 6.2(h), from time to time in accordance with the terms hereof.
(d) Section 2.7(a) is amended (i) by deleting the date "December 31, 2001"
and substituting therefor the date "December 31, 2002", (ii) by deleting the
figure "75%" and substituting therefor the figure "50%" and (iii) by adding to
the end thereof the following proviso:
provided that such prepayments described in this clause (ii) shall not
include any such prepayments made with the proceeds of Subordinated
Indebtedness.
(e) Section 2.7(b)(i) is amended by deleting from the first sentence
thereof the figure "$2,000,000" and substituting therefor the phrase "$5,000,000
in any twelve month period".
(f) The last paragraph of Section 2.7(b)(i) is amended in full to read as
follows:
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, up
to a total of $75,000,000, in excess of $3,000,000 that are on deposit in
any
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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.
(g) Section 2.7(c)(i) is amended in full to read as follows:
(i) Upon any Equity Offering during any period in which the Maximum
Total Debt Ratio is greater than 5.00:1, the Borrower shall prepay the
Loans (and such prepayment shall be applied as set forth in Section 2.7(f))
in an amount equal to 50% of the Net Proceeds of such Equity Offering that
are not used (A) to repay, prepay or redeem (1) the 9 7/8% Subordinated
Notes, (2) after the 9 7/8% Subordinated Notes have been paid in full, up
to 35% in original principal amount of the New Subordinated Notes, and (3)
after the full permitted amount of New Subordinated Notes have been
redeemed under clause (2), up to 35% in original principal amount of the
Subordinated Notes (2000), or (B) to fund Permitted Acquisitions in
accordance with Section 6.7(h)(i), provided that the amount of such
prepayment shall be limited to the amount by which, after giving effect to
such application of Net Proceeds, the pro forma Maximum Debt Ratio is
5.00:1 or less.
(h) Section 6.1(a) is amended by deleting the table contained therein and
substituting therefor the following table:
<TABLE>
<CAPTION>
Period Ratio
- -------------------------------------------------- ------
<S> <C>
Closing Date to and including December 31, 2000 7.00:1
- -------------------------------------------------- ------
January 1, 2001 to and including December 31, 2001 6.90:1
- -------------------------------------------------- ------
January 1, 2002 to and including December 31, 2002 6.75:1
- -------------------------------------------------- ------
January 1, 2003 to and including December 31, 2003 6.50:1
- -------------------------------------------------- ------
January 1, 2004 to and including December 31, 2004 6.00:1
- -------------------------------------------------- ------
January 1, 2005 and thereafter 5.50:1
- -------------------------------------------------- ------
</TABLE>
(i) Section 6.1(b) is amended by deleting the table contained therein and
substituting therefor the following table:
<TABLE>
<CAPTION>
Period Ratio
- -------------------------------------------------- ------
<S> <C>
Closing Date to and including December 31, 2000 4.50:1
- -------------------------------------------------- ------
January 1, 2001 to and including December 31, 2001 4.25:1
- -------------------------------------------------- ------
January 1, 2002 to and including December 31, 2002 4.00:1
- -------------------------------------------------- ------
January 1, 2003 and thereafter 3.50:1
- -------------------------------------------------- ------
</TABLE>
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(j) Section 6.1(c) is amended by deleting the table contained therein and
substituting therefor the following table:
<TABLE>
<CAPTION>
Period Ratio
- -------------------------------------------------- ------
<S> <C>
Closing Date to and including June 30, 2000 1.35:1
- -------------------------------------------------- ------
July 1, 2000 to and including December 31, 2000 1.40:1
- -------------------------------------------------- ------
January 1, 2001 to and including December 31, 2001 1.45:1
- -------------------------------------------------- ------
January 1, 2002 to and including December 31, 2002 1.55:1
- -------------------------------------------------- ------
January 1, 2003 and thereafter 1.65:1
- -------------------------------------------------- ------
</TABLE>
(k) Section 6.1(f) is amended by deleting the figure "$50,000,000" set
opposite the period "Fiscal Year Ending December 31, 2000" and substituting
therefor the figure "$65,000,000".
(l) Section 6.7(g) is amended by deleting the figure "$5,000,000" and
substituting therefor the figure "10,000,000".
(m) Section 6.7(h)(i) is amended by adding a new clause (z) immediately
before the first proviso thereof to read "plus (z) up to $150,000,000 payable
solely in common stock of CCI".
(n) Section 6.13 is amended by deleting from the proviso the figure "75%"
and substituting therefor the figure "66 2/3%".
SECTION 2. Amendment to the Security Agreement. Effective as of the
date hereof and subject to the satisfaction of the conditions precedent set
forth in Section 5(a), the Majority Lenders hereby agree to amend the second
sentence of Recital E of the Security Agreement by deleting the phrase "with a
bank reasonably acceptable to the Agent in the state of Texas" and substituting
therefor the phrase "with the Agent".
SECTION 3. Phase II Amendments to the Existing Credit Agreement Related
to the Term A Facility. Effective as of the date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 5(c), and solely
if and to the extent that the Borrower elects in its sole discretion to prepay
in full the Term A Facility, the Term A Lenders so affirming their Term A
Commitments on the signature pages hereof hereby agree to amend the Existing
Credit Agreement as follows:
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(a) Section 1.1 is amended to add the following definitions in appropriate
alphabetical order:
"Amendment No. 2 Effective Date": February 10, 2000.
"Assuming Term A Lender": as specified in Section 2.22(d).
"Increasing Term A Lender": as specified in Section 2.22(b).
"Term A Commitment Date": as specified in Section 2.22(b).
"Term A Commitment Increase": as specified in Section 2.22(a).
"Term A Increase Date": as defined in Section 2.22(a).
"Term A Reset Date": the date, if any, upon which the Borrower elects
in its sole discretion to prepay in full the Term A Facility, which date,
if any, shall be notified to the Agent and the Lead Arranger.
(b) The definition of "Aggregate Term A Commitment" is amended in full to
read as follows:
"Aggregate Term A Commitment": the sum of the Term A Commitments of the
Term A Lenders.
(c) The definition of "Term A Commitment" is amended in full to read as
follows:
"Term A Commitment": (a) with respect to each Lender having a Term A
Commitment prior to the Term A Reset Date, 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 and (b) with respect to each Lender
that agrees to extend its commitment to make Term A Loans after the Term A
Reset Date, or each Assuming Term A Lender that participates in any Term A
Commitment Increase, the commitment of such Lender as determined in
accordance with Section 2.22 to make Term A Loans hereunder through its
Applicable Lending Office, in each case as the same may be adjusted
pursuant to the provisions hereof.
(d) Section 2.2(a) is amended in full to read as follows:
(a) Subject to the terms and conditions hereof, each Lender having a
Term A Commitment severally agrees to make term loans (each, a "Term A
Loan" and, collectively, the "Term A Loans") to the Borrower on a
multi-draw basis during the period from the Term A Reset Date to and
including the first anniversary of the Amendment No. 2 Effective Date in an
aggregate principal amount equal to the Term A Commitment of such Lender.
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(e) Section 2.2(d) is amended in full to read as follows:
(d) On each Term A Reduction Date, the Borrower shall repay the
principal of the Term A Notes in an aggregate amount determined by the
percentage, set forth below opposite such Term A Reduction Date, of the
aggregate amount of Term A Notes outstanding on December 31, 2001:
<TABLE>
<CAPTION>
Term A Reduction Date Principal Payment
- --------------------- -----------------
<S> <C>
December 31, 2001 2.500%
March 31, June 30, 1.875%
September 30 and December
31, 2002
March 31, June 30, 2.500%
September 30 and December
31, 2003
March 31, June 30, September 3.750%
30 and December 31, 2004
March 31, June 30, September 5.000%
30 and December 31, 2005
March 31, June 30, September 6.250%
30 and December 31, 2006
March 31 and July 31, 2007 10.00%
</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.
(f) Section 2.2 (e) is amended is full to read as follows:
(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 each proposed borrowing 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 each proposed borrowing date) requesting
that the Term A Lenders make the Term A Loans on the proposed borrowing
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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 proposed borrowing 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 pro rata share of the aggregate
borrowing amount (based on the Term A Commitment Percentage of such Term A
Lender's Term A Commitment) 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.
(g) Section 2.6 is amended by inserting in the second to last sentence
immediately after the phrase "Amounts prepaid" the phrase "pursuant to this
Section 2.6".
(h) Section 2.7(f)(iii) is amended by inserting in the first sentence
immediately after the phrase "Each prepayment of the Term A Loans" the phrase
"pursuant to this Section 2.7".
(i) Section 2.18 is amended in full to read as follows:
2.18 Unused Commitment Fees. The Borrower agrees to pay to the Agent
for the account of the Revolving Loan Lenders and the Term A Lenders an
unused commitment fee to be shared pro rata among the Revolving Loan
Lenders with respect to the Revolving Loan Commitments and pro rata among
the Term A Lenders with respect to the Term A Commitments, in each case,
for the period from and including the Term A Reset Date to but excluding
the Revolving Loan Commitment Expiration Date, based on the average daily
aggregate amount of the unused Aggregate Revolving Loan Commitment and
unused Aggregate Term A Commitment from time to time in effect and computed
at the rate of (i) during the period from the Term A Reset Date until the
earlier of (x) the date that the Term A Commitments are fully drawn
(without giving effect to any subsequent increase of the Term A Commitments
in accordance with Section 2.22) and (y) the first anniversary of the
Amendment No. 2 Effective Date, 0.750% per annum and (ii) thereafter, (A)
during any period in which the Maximum Total Debt Ratio is less than
5.50:1, 0.375% per annum and (B) 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 Term
A Reset Date.
(j) A new Section 2.22 is added to read as follows:
2.22. Term A Commitments. (a) After the Term A Reset Date, the Borrower
may, at any time but in any event not more than once in any three month
period prior to
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the first anniversary of the Amendment No. 2 Effective Date, by notice to
the Lead Arranger, request that the Aggregate Term A Commitment be
increased by an amount of $10,000,000 or an integral multiple of $5,000,000
in excess thereof (each a "Term A Commitment Increase") to be effective as
of a date (the "Term A Increase Date") as specified in the related notice
to the Lead Arranger; provided, however that (i) in no event shall the
Aggregate Term A Commitment be more than $100,000,000 and (ii) on the date
of any request by the Borrower for a Term 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 Term A
Commitment Increase, which notice shall include (i) the proposed amount of
such requested Term A Commitment Increase, (ii) the proposed Increase Date
and (iii) the date by which such banks or other entities wishing to
participate in the Term A Commitment Increase must commit to such increase
in the Term A Commitments (the "Term A Commitment Date"). The requested
Term A 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 Term A 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
Term A Commitment Increase; provided, however, that the Term A 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 Term A 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 Term A Commitment Increase in accordance with Section
2.22(c) (each such bank or other entity, an "Assuming Term A Lender") shall
become a Lender party to this Agreement as of such Term A Increase Date and
the Term A 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 Term A Lender") shall be so increased
by such amount as of such Term A Increase Date; provided, however, that the
Agent shall have received on or before such Term A 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
Term A Commitment Increase and the corresponding modifications to this
Agreement, (B) Term A Notes duly executed by the Borrower payable to
each Increasing Term A Lender and each Assuming Term A Lender in a
principal amount equal to such Lender's new or increased Term A
Commitment, (C) a consent executed by each Guarantor approving the Term
A 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;
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(ii) an assumption agreement from each Assuming Term A Lender, in
form and substance satisfactory to the Borrower and the Agent, duly
executed by such Assuming Lender, the Agent and the Borrower; and
(iii) confirmation from each Increasing Term A Lender of the amount
of its Term A Commitment in a writing satisfactory to the Borrower and
the Agent.
On each Term A Increase Date, upon fulfillment of the conditions set forth
in the immediately preceding sentence of this Section 2.22(d), the Agent
(x) shall notify the Lenders (including, without limitation, each Assuming
Term A Lender) and the Borrower, on or before 1:00 P.M., Los Angeles time,
by telecopier or telex, of the occurrence of the Term A Commitment Increase
to be effected on such Term A Increase Date, (y) shall record in the
Register the relevant information with respect to each Increasing Term A
Lender and each Assuming Term A Lender on such date and (z) shall notify
each Term A Increasing Lender and each Term A Assuming Lender of the
amounts, if any, that each such Lender shall be required to fund, and each
such Lender hereby agrees to so fund such amount for the ratable prepayment
of Term A Lenders, so as to result in each such Lender's Term A Commitment
to be utilized ratably based on each such Lender's Term A Commitment
Percentage.
(k) Section 5.9 is amended (i) by inserting after the phrase "the Term A
Loans" in clause (i) the phrase "made on the Closing Date", (ii) by adding to
the end of clause (iv) thereof the word "and" and (iii) by inserting immediately
after clause (iv) a new clause (v) to read as follows:
(v) the Term A Loans made after the Term A Reset Date shall be used (A)
for capital expenditures, working capital and general corporate purposes
and (B) to fund Permitted Acquisitions.
(l) Section 9.6(c) is amended by deleting therefrom the proviso and
substituting therefor the following:
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 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, the assigning Lender shall retain an aggregate principal
amount of Revolving 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 A Loans and in the case
of an assignment of less than all of a Lender's Term A Loans, the assigning
Lender shall retain an aggregate principal amount of Term A 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 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,
(iv) 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
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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 (v) each such assignment by a Lender of its
Revolving Loans, Revolving Note, Revolving Commitment or its participation
in Letters of Credit shall be in such manner so that the same portion of
its Revolving Loans, Revolving Note, Revolving Commitment and its
participation in Letters of Credit is assigned to the respective assignee.
SECTION 4. Waiver of the Credit Agreement. Effective as of the date
hereof and subject to the satisfaction of the conditions precedent set forth in
Section 5(b), the Majority Lenders hereby agree to waive the restrictions of
Section 6.8(b) of the Existing Credit Agreement, as amended and restated hereby,
solely to permit the Borrower to prepay the 9 7/8% Subordinated Notes.
SECTION 5. Conditions of Effectiveness. (a) Section 2 of this Amendment
shall become effective as of the date first above written when, and only when,
the Agent shall have received counterparts of this Amendment executed by the
Borrower and the Majority Lenders or, as to any of the Lenders, advice
satisfactory to the Agent that such Lender has executed this Amendment and the
consent attached hereto executed by each Guarantor,
(b) Sections 1 and 4 of this Amendment shall become effective as of the
date first above written, after the satisfaction of the condition set forth in
Section 5(a) above, when and only when (i) the Borrower shall have issued the
Subordinated Notes (2000) and (ii) the Borrower shall have paid (x) all accrued
fees and expenses of the Lead Arranger (including reasonable fees and expenses
of counsel to the Lead Arranger) and (y) an amendment fee equal to 0.125% of the
aggregate Commitments of the Lenders that consent to the effectiveness of this
Amendment.
(c) Section 3 of this Amendment shall become effective, after the
satisfaction of the conditions set forth the Sections 5(a) and (b) above, on and
as of the date upon which the Borrower, in its sole discretion, shall have
prepaid in full the Term A Loans outstanding on the date of this Amendment and
which the Agent shall have received the following:
(i) counterparts of this Amendment executed by Term A Lenders
indicating their consent to renew or extend at least $50,000,000 of the
Term A Commitments in effect on the date hereof,
(ii) (A) certified copies of resolutions of the Board of Directors of
the Borrower or the Executive Committee of such Board approving the Term A
Facility and the corresponding modifications to this Agreement, (B) Term A
Notes duly executed by the Borrower payable to each Term A Lender in a
principal amount equal to such Lender's Term A Commitment and (C) an
opinion of Winstead Sechrest & Minick P.C., counsel for the Borrower, in
form and substance satisfactory to the Lead Arranger,
(iii) written notice from the Borrower of the Term A Reset Date, and
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(iv) payment of a commitment fee equal to 0.375% of the aggregate Term
A Commitments of the Term A Lenders that agree to extend their Term A
Commitments.
This Amendment is subject to the provisions of Section 9.1 of the Existing
Credit Agreement.
SECTION 6. Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
6.1 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, (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.
6.2 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, to issue the Subordinated Notes (2000) in
accordance with the terms of the indenture related thereto and to consummate the
other transactions contemplated hereby 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 and each Subsidiary to execute, deliver and perform
this Amendment, the Consent and the Loan Documents to which it is a party and
for the Borrower to issue the Subordinated Notes (2000) in accordance with the
terms of the indenture related thereto and to consummate the other transactions
contemplated hereby, and have been taken and/or received.
6.3 Validity and Legal Effect. This Amendment and the Existing Credit
Agreement, as modified hereby, constitutes, and the other Loan Documents, as
amended hereby, 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).
6.4 No Violation of Laws or Agreements. The execution, delivery and
performance of this Amendment and the Loan Documents, the issuance of the
Subordinated Notes (2000) in accordance with the terms of the indenture related
thereto and the consummation of the other transactions contemplated hereby (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 of the Existing Credit
Agreement) upon or with respect to any property of the Borrower or any
Subsidiary, whether such property is now owned or hereafter acquired.
11
<PAGE> 13
6.5 Litigation and Legal Proceedings. Except as disclosed on Schedule 3.10
to the Existing Credit Agreement, 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 this
Amendment or any Loan Document or the transactions contemplated thereby, (ii)
with respect to the issuance of the Subordinated Notes (2000) or the other
transactions contemplated hereby 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.
SECTION 7. Reference to and Effect on the Loan Documents. (a) On and
after the effectiveness of this Amendment, each reference in the Existing Credit
Agreement or the Security Agreement to "this Agreement", "hereunder", "hereof"
or words of like import referring to the Existing Credit Agreement or the
Security Agreement, as the case may be, and each reference in the Notes and each
of the other Loan Documents to "the Credit Agreement", the "Security Agreement",
"thereunder", "thereof" or words of like import referring to the Existing Credit
Agreement or the Security Agreement, as the case may be, shall mean and be a
reference to the Existing Credit Agreement or the Security Agreement, as
modified by this Amendment.
(b) The Existing Credit Agreement, the Security Agreement, the Notes
and each of the other Loan Documents, as specifically amended by this Amendment,
are and shall continue to be in full force and effect and are hereby in all
respects ratified and confirmed. Without limiting the generality of the
foregoing, the Collateral Documents and all of the Collateral described therein
do and shall continue to secure the payment of all Obligations of the Loan
Parties under the Loan Documents, in each case as amended by this Amendment.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Lender or the Agent under any of the Loan Documents, nor
constitute a waiver of any provision of any of the Loan Documents.
SECTION 8. Costs and Expenses. The Borrower agrees to pay on demand all
costs and expenses of the Agent in connection with the preparation, execution,
delivery and administration, modification and amendment of this Amendment and
the other instruments and documents to be delivered hereunder (including,
without limitation, the reasonable fees and expenses of counsel for the Agent)
in accordance with the terms of Section 9.5 of the Existing Credit Agreement.
SECTION 9. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment.
12
<PAGE> 14
SECTION 10. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
CLASSIC CABLE, INC.
By /s/ Steven E. Seach
--------------------------------------
Title:
AGREED:
UNION BANK OF CALIFORNIA, N.A.,
as Agent and as Lender
By /s/ Seth Yakatan
--------------------------------
Title: Assistant Vice President
GOLDMAN SACHS CAPITAL PARTNERS L.P.
By /s/ Elizabeth Fischer
--------------------------------
Title: Authorized Signatory
THE CHASE MANHATTAN BANK
By /s/ Edmond DeForest
--------------------------------
Title: Vice President
13
<PAGE> 15
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Allstate Insurance Company
- ------------------------------------
(Type or Print Name of Institution)
By /s/ Jerry D. Zinkula
--------------------------------
By /s/ Charles D. Mires
--------------------------------
Title: Authorized Signatories
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
---------------------------------
Title:
<PAGE> 16
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Allstate Life Insurance Company
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Jerry D. Zinkula
--------------------------------
By /s/ Charles D. Mires
--------------------------------
Title: Authorized Signatories
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 17
AGREED (AS TO SECTIONS 1 AND 2 ARCHIMEDES FUNDING ILL, LTD.
OF THE FOREGOING AMENDMENT):
By: ING Capital Advisors LLC
as Collateral Manager
By: /s/ Michael D. Hatley
- ----------------------------------- --------------------------------
(Type or Print Name of Institution) Title: Managing Director
By
--------------------------------
Title:
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 18
AGREED (AS TO SECTIONS 1 AND 2 OF THE FOREGOING AMENDMENT):
AVALON CAPITAL LTD.
By: INVESCO Senior Secured Management,
Inc., as Portfolio Advisor
By: /s/ Kathleen A. Lenarcic
------------------------------
Name: Kathleen a. Lenarcic
Title: Authorized Signatory
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 19
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Black Diamond CLO 1998-1 Ltd.
- -----------------------------------
(Type or Print Name of Institution)
By [/s/ An authorized signatory of Black Diamond CLO 1998-1 Ltd.]
----------------------------------------------------------------
Title:
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 20
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Captiva II Finance Ltd.
- -----------------------------------
(Type or Print Name of Institution)
By [/s/ An authorized signatory of Captiva II Finance Ltd.]
--------------------------------------------------------
Title: Director
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 21
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
The Chase Manhattan Bank
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Edmond DeForest
--------------------------------
Title: Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
The Chase Manhattan Bank $8,750,000.00
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By /s/ Edmond DeForest
--------------------------------
Title: Vice President
<PAGE> 22
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
The CIT Group/Equipment Financing
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Daniel E. A. Nichols
--------------------------------
Title: Assistant Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
The CIT Group/Equipment Financing $5,500,000.00
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By /s/ Daniel E. A. Nichols
--------------------------------
Title: Assistant Vice President
<PAGE> 23
CypressTree Investment Management Company, Inc.
As: Attorney-in-Fact and on Behalf of First
Allmerica Financial Life Insurance Company as Portfolio
Manager
By: /s/ Catherine C. McDermott
---------------------------------------------------
Name: Catherine C. McDermott
Title: Principal
<PAGE> 24
CypressTree Senior Floating Rate Fund
By: CypressTree Investment Management Company, Inc.
as Portfolio Manager
By: /s/ Catherine C. McDermott
-------------------------------------
Name: Catherine C. McDermott
Title: Principal
<PAGE> 25
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Eaton Vance Institutional Senior Loan Fund
By: Eaton Vance Management
As Investment Advisor
- -------------------------------------------
(Type or Print Name of Institution)
By /s/ Payson F. Swaffield
----------------------------------------
Title: Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 26
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Eaton Vance Senior Income Trust
By: Eaton Vance Management
As Investment Advisor
- -------------------------------------------
(Type or Print Name of Institution)
By /s/ Payson F. Swaffield
----------------------------------------
Title: Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 27
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
ELC (Cayman) Ltd. 1999-II
- -----------------------------------
(Type or Print Name of Institution)
By [/s/ An authorized signatory of ELC (Cayman) Ltd. 1999-II]
----------------------------------------------------------
Title: Managing Director
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 28
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
First Dominion Capital
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Andrew H. Marshak
--------------------------------
Title: Managing Director
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 29
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
First Union National Bank
- -----------------------------------
(Type or Print Name of Institution)
By [/s/ An authorized signatory of First Union National Bank]
----------------------------------------------------------
Title: Senior Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
First Union National Bank $2,500,000
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By [/s/ An authorized signatory of First Union National Bank]
----------------------------------------------------------
Title: Senior Vice President
By
---------------------------------
Title:
<PAGE> 30
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Franklin Floating Rate Trust
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Chauncey Lufkin
--------------------------------
Title: Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 31
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Maria Chachere
- -----------------------------------
Fremont Investment & Loan
By /s/ Maria Chachere
--------------------------------
Title: Vice President
<PAGE> 32
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Heller Financial, Inc.
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Sheila C. Weimer
--------------------------------
Title: Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
Heller Financial, Inc. $4,500,000
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By /s/ Sheila C. Weimer
--------------------------------
Title: Vice President
<PAGE> 33
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Highland Legacy Limited
By: Highland Capital Management, L.P.
as Collateral Manager
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Mark K. Okada CFA
---------------------------------
Title: Executive Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 34
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
KZH ING-1 LLC
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Peter Chin
--------------------------------
Title: Authorized Agent
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 35
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
KZH ING-3 LLC
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Peter Chin
--------------------------------
Title: Authorized Agent
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 36
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
KZH III LLC
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Peter Chin
--------------------------------
Title: Authorized Agent
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 37
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Mercantile Bank National Association
- ------------------------------------
(Type or Print Name of Institution)
By /s/ Teresa A. Lekich
---------------------------------
Title: Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
Mercantile Bank National Association $7,500,000
- ------------------------------------ -----------------------------------
(Type or Print Name of Institution)
By /s/ Teresa A. Lekich
---------------------------------
Title: Vice President
<PAGE> 38
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
By: /s/ Joseph Matteo
-------------------------------
Authorized Signatory
DEBT STRATEGIES FUND, INC.
By: /s/ Joseph Matteo
-------------------------------
Authorized Signatory
DEBT STRATEGIES FUND II, INC.
By: /s/ Joseph Matteo
-------------------------------
Authorized Signatory
SENIOR HIGH INCOME PORTFOLIO, INC.
By: /s/ Joseph Matteo
-------------------------------
Authorized Signatory
<PAGE> 39
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
ML CLO XX PILGRIM AMERICA
(CAYMAN), LTD.
- -----------------------------------
(Type or Print Name of Institution)
By: Pilgrim Investments, Inc.
as its investment manager
By: /s/ Elizabeth O. MacLean
-------------------------------
Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 40
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
(Type or Print Name of Institution)
By /s/ Sheila A. Finnerty
--------------------------------
Title: Senior Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 41
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Natexis Banque Popularies
- -----------------------------------
(Type or Print Name of Institution)
(formerly known as Natexis Banque)
By /s/ Evan S. Kraus /s/ William C. Maier
-------------------------------- ------------------------------------
Title: Assistant Vice President Senior Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
Natexis Banque Popularies $5,500,000
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
(formerly known as Natexis Banque)
By /s/ Evan S. Kraus /s/ William C. Maier
-------------------------------- ------------------------------------
Title: Assistant Vice President Senior Vice President
<PAGE> 42
North American Senior Floating Rate Fund
By: CypressTree Investment Management
Company, Inc. as Portfolio Manager
By: /s/ Catherine C. McDermott
------------------------------------
Name: Catherine C. McDermott
Title: Principal
<PAGE> 43
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
OCTAGON INVESTMENT PARTNERS II, LLC
By: Octagon Credit Investors, LLC
as sub-investment manager
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Andrew D. Gordon
--------------------------------
Title: Portfolio Manager
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 44
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
OCTAGON INVESTMENT PARTNERS III, LTD.
By: Octagon Credit Investors, LLC
as sub-investment manager
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Andrew D. Gordon
--------------------------------
Title: Portfolio Manager
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 45
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Oxford Strategic Income Fund
By: Eaton Vance Management
as Investment Advisor
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Payson F. Swaffield
--------------------------------
Title: Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 46
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Paribas
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Lynne S. Randall By: /s/ Sean Faherty
-------------------------------- --------------------------------
Title: Managing Director Title: Vice President
-----------------------------
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
Paribas $7,500,000.00
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By /s/ Lynne S. Randall By: /s/ Sean Faherty
-------------------------------- --------------------------------
Title: Managing Director Title: Vice President
-----------------------------
<PAGE> 47
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
PILGRIM AMERICA HIGH INCOME INVESTMENTS, LTD.
(Type or Print Name of Institution)
By /s/ Elizabeth O. MacLean
--------------------------------
Title: Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 48
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
PNC BANK, NATIONAL ASSOCIATION
(Type or Print Name of Institution)
By /s/ Karen L. Kooman
--------------------------------
Title: Assistant Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
PNC Bank, National Association $8,750,000.00**
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By /s/ Karen L. Kooman
--------------------------------
Title: Assistant Vice President
** We are re-affirming our present commitment to the Term Loan A of $6,250,000
and increasing that commitment by $2,500,00.
<PAGE> 49
SANKATY HIGH YIELD PARTNERS II, L.P.
By: /s/ Diane J. Exter
-----------------------------------------------
Name: Diane J. Exter
---------------------------------------------
Title: Executive Vice President, Portfolio Manager
--------------------------------------------
Sankaty Advisors, Inc. as Collateral Manager for
GREAT POINT CLO 1999-1 LTD., as Term Lender
By: /s/ Diane J. Exter
-----------------------------------------------
Name: Diane J. Exter
---------------------------------------------
Title: Executive Vice President, Portfolio Manager
--------------------------------------------
<PAGE> 50
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Senior Debt Portfolio
By: Boston Management and Research
as Investment Advisor
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Payson F. Swaffield
--------------------------------
Title: Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 51
SEQUILS-ING I (HBDGM), LTD.
By: TCW Advisors, Inc. as its
Collateral Manager
By: /s/ Mark L. Gold
-------------------------------------
Name: Mark L. Gold
Title: Managing Director
By: /s/ Jonathan R. Insull
-------------------------------------
Name: Jonathan R. Insull
Title: Vice President
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 52
AGREED (AS TO SECTIONS 1 AND 2 SEQUILS-ING I (HBDGM), LTD.
OF THE FOREGOING AMENDMENT):
By: ING Capital Advisors LLC,
A Collateral Manager
By: /s/ Michael D. Hatley
-------------------------------------
- ----------------------------------- Name: Michael D. Hatley
(Type or Print Name of Institution) Title: Managing Director
By
--------------------------------
Title:
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 53
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
STANFIELD CLO LTD.
(Type or Print Name of Institution)
By /s/ Gregory L. Smith
--------------------------------
Title: Partner
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 54
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
Summit Bank
- -----------------------------------
(Type or Print Name of Institution)
By [/s/ An authorized signatory of Summit Bank]
--------------------------------------------
Title: Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
Summit Bank $9,500,000.00
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By [/s/ An authorized signatory of Summit Bank]
--------------------------------------------
Title: Vice President
<PAGE> 55
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
TRAVELERS CORPORATE LOAN FUND INC.
Travelers Asset Management
By: International Corporation
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Allen R. Cantrell
--------------------------------
Title: Investment Officer
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 56
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
The Travelers Insurance Company
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Allen R. Cantrell
--------------------------------
Title: Investment Officer
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
$
- ----------------------------------- -----------------------------------
(Type or Print Name of Institution)
By
--------------------------------
Title:
<PAGE> 57
AGREED (AS TO SECTIONS 1 AND 2
OF THE FOREGOING AMENDMENT):
UNION BANK OF CALIFORNIA, N.A.
(Type or Print Name of Institution)
By /s/ Seth Yakatan
--------------------------------
Title: Assistant Vice President
For Term A Lenders only:
AGREED (AS TO SECTION 3 AMOUNT OF TERM A COMMITMENT
OF THE FOREGOING AMENDMENT):
UNION BANK OF CALIFORNIA, N.A.
$13,750,000.00
- -----------------------------------
(Type or Print Name of Institution)
By /s/ Seth Yakatan
--------------------------------
Title: Assistant Vice President
<PAGE> 58
CONSENT
Dated as of January 31, 2000
The undersigned, each a Guarantor under the Amended and Restated
Guarantee dated as of July 29, 1999 (the "Guarantee") in favor of the Agent, for
its benefit and the benefit of the Lenders parties to the Credit Agreement
referred to in the foregoing Amendment and the Hedge Banks (as defined in the
Guarantee), hereby consent to such Amendment and hereby confirm and agree that
(a) notwithstanding the effectiveness of such Amendment, the Guarantee is, and
shall continue to be, in full force and effect and is hereby ratified and
confirmed in all respects, except that, on and after the effectiveness of such
Amendment, each reference in the Guarantee to the "Credit Agreement", the
"Security Agreement", "thereunder", "thereof" or words of like import shall mean
and be a reference to the Credit Agreement and the Security Agreement, each as
modified by such Amendment, and (b) the Collateral Documents to which each such
Guarantor is a party and all of the Collateral described therein do, and shall
continue to, secure the payment of all of the Secured Obligations (in each case,
as defined therein).
CLASSIC CABLE HOLDING, INC.
By /s/ Steven E. Seach
-----------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
CLASSIC TELEPHONE, INC.
By /s/ Steven E. Seach
-----------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
UNIVERSAL CABLE HOLDINGS, INC.
By /s/ Steven E. Seach
-----------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
<PAGE> 59
UNIVERSAL CABLE COMMUNICATIONS INC.
By /s/ Steven E. Seach
------------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
UNIVERSAL CABLE OF BEAVER, OKLAHOMA, INC.
By /s/ Steven E. Seach
------------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
UNIVERSAL CABLE MIDWEST, INC.
By /s/ Steven E. Seach
------------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
WT ACQUISITION CORPORATION
By /s/ Steven E. Seach
------------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
W.K. COMMUNICATIONS, INC.
By /s/ Steven E. Seach
------------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
<PAGE> 60
TELEVISION ENTERPRISES, INC.
By /s/ Steven E. Seach
------------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
BLACK CREEK MANAGEMENT, L.L.C.
By: Classic Cable, Inc.,
its sole member
By /s/ Steven E. Seach
------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
BLACK CREEK COMMUNICATIONS, L.P.
By: Black Creek Management, L.L.C.,
its General Partner
By: Classic Cable, Inc.,
its sole member
By /s/ Steven E. Seach
------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
CLASSIC NETWORK TRANSMISSION, L.L.C.
By /s/ Steven E. Seach
----------------------------------------
Name: Steven E. Seach
Title: Manager
<PAGE> 61
By /s/ Steven E. Seach
---------------------------------------------
Name: J. Merritt Belisle
Title: Manager
FRIENDSHIP CABLE OF ARKANSAS, INC.
By /s/ Steven E. Seach
---------------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
FRIENDSHIP CABLE OF TEXAS, INC.
By /s/ Steven E. Seach
---------------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
CORRECTIONAL CABLE TV, INC.
By /s/ Steven E. Seach
---------------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
CALLCOM 24, INC.
By /s/ Steven E. Seach
---------------------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the Year Ended December 31,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Loss before income tax benefit, minority
interest and extraordinary loss (42,096) (23,515) (20,936)
Fixed Charges:
Interest expense 31,201 20,688 20,759
Interest portion of rental expense 893 514 464
Dividends on unconsolidated subsidiary -- 67 101
-------- -------- --------
Earnings (10,002) (2,246) 388
======== ======== ========
Fixed charges:
Interest expense 31,201 20,688 20,759
Interest portion of rental expense 893 514 464
Dividends on unconsolidated subsidiary -- 67 101
-------- -------- --------
Total fixed charges 32,094 21,269 21,324
-------- -------- --------
Ratio of earnings to fixed charges n/a n/a n/a
Earnings inadequate to cover fixed charges:
Total fixed charges 32,094 21,269 21,324
Earnings (10,002) (2,246) 388
-------- -------- --------
Deficiency of earnings to fixed charges (42,096) (23,515) (20,936)
======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 85,855
<SECURITIES> 0
<RECEIVABLES> 10,218
<ALLOWANCES> 415
<INVENTORY> 0
<CURRENT-ASSETS> 96,789
<PP&E> 274,864
<DEPRECIATION> 60,939
<TOTAL-ASSETS> 677,688
<CURRENT-LIABILITIES> 519,508
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 677,688
<SALES> 0
<TOTAL-REVENUES> 111,410
<CGS> 0
<TOTAL-COSTS> 122,910
<OTHER-EXPENSES> (605)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,201
<INCOME-PRETAX> (42,096)
<INCOME-TAX> (10,128)
<INCOME-CONTINUING> (31,968)
<DISCONTINUED> 0
<EXTRAORDINARY> (4,093)
<CHANGES> 0
<NET-INCOME> (36,061)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
