<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/XX/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended DECEMBER 31, 1994
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 1-10321
ACKERLEY COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 91-1043807
------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 Fifth Avenue, Suite 3770
Seattle, Washington 98104
------------------------------ --------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (206) 624-2888
Securities registered pursuant to Section 12(b) of the Act: COMMON STOCK
Securities registered pursuant to Section 12(g) of the Act: NONE
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 amendment to this
Form 10-K. / /
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
--- ---
Aggregate market value of voting Common Stock held by nonaffiliates of
Registrant as of March 17, 1995: $36,670,938.
Number of shares of common stock, $.01 par value, outstanding as of March 17,
1995: 9,598,433 Common Stock and 5,865,861 Class B Common Stock.
Documents incorporated by reference and parts of Form 10-K into which
incorporated: Registrant's Definitive Proxy Statement for May 1, 1995 Annual
Meeting--Part III
<PAGE>
PART I
ITEM 1 - BUSINESS
GENERAL
Ackerley Communications, Inc. (the "Company"), founded in 1975, is a
diversified communications company that, through its operating subsidiaries,
engages in three principal businesses: (i) out-of-home media, including outdoor
and airport advertising; (ii) television and radio broadcasting; and (iii) other
businesses consisting principally of professional basketball, through ownership
of the Seattle SuperSonics (the "SuperSonics"), a franchise of the National
Basketball Association ("NBA").
The Company's businesses generally are leaders in their respective
markets, positions that the Company believes to be sustainable by virtue of the
substantial governmental regulation of outdoor advertising and broadcasting and
the exclusive franchising practices in airport advertising and professional
basketball. The Company believes that the diversity of its operations minimizes
its reliance on any particular geographic region, advertising medium or
customer.
STRATEGY. Since 1993, the Company's strategy has been to build its more
mature and stable out-of-home media business and to control costs in each
business segment. Additionally, the Company instituted plans to expand and
enhance its broadcasting business, to create additional interest in the
SuperSonics and to pursue additional revenue producing opportunities through the
development of a new arena in Seattle. The Company's continuing strategy
includes:
* Improving the profitability of its outdoor advertising business by
increasing revenue while controlling operating costs. Prior to
1993, the Company had increased net revenue and improved operating
performance in its existing markets by constructing and, in some
cases, acquiring, additional displays, thereby achieving
comprehensive coverage and economies of scale in those markets.
Since 1993, however, the Company has focused its management and
sales efforts on optimizing the mix of rate and usage of its current
display inventory in each of its markets. In order to increase
sales, the Company expanded its sales force and instituted a
commission-based sales compensation plan.
* Renegotiating its airport advertising franchise agreements when they
expire to improve their economic terms. Alternatively, the Company
has and will continue to reduce overhead and operating expenses by
dropping those airports in which the Company is not able to achieve
acceptable operating margins. To the extent that an expiring
franchise agreement does not meet the Company's selection criteria
for new franchise agreements, generally based on projected Operating
Cash Flow, the Company will not renew the agreement.
* Increasing the ratings of its television stations in its existing
markets by concentrating on local market programming, particularly
news programming. The Company's approach to managing these stations
has been to focus on developing a strong local news presence
1
<PAGE>
and tailoring its non-network programming to specific audiences.
The Company believes that local news audiences are highly desirable
to local and national advertisers.
* Reviewing television broadcast station acquisitions in DMA markets
ranking from 50 to 150. The Company's television business
historically has grown through opportunistic acquisitions. The
Company intends to analyze acquisitions of stations in situations
where the Company believes its management approach can be
successfully employed. Specifically, the Company will seek to
acquire, on financially attractive terms, stations that currently
generate positive cash flow but which offer opportunities for
revenue and cash flow enhancement.
* Creating additional interest in the SuperSonics through the
development of a new arena in Seattle and pursuing other
revenue-generating opportunities related to the new arena.
Construction of the new arena is underway and should be completed in
time for the 1995-96 NBA season. In-arena advertising and
additional seating in the new arena will provide opportunities for
greater revenue generation, while the luxury boxes and concessions
will provide sources of revenue not previously available to the
Company. The Company has acquired an indoor soccer franchise that
will begin playing in the summer of 1995.
* Implementing cross-marketing and other potential synergies made
possible by the ownership of the SuperSonics and the conversion in
1992 of KJR(AM) in Seattle, the team's Company-owned flagship radio
station, to an all sports format. The ability to sell advertising
spots in conjunction with other marketing programs involving the
SuperSonics permits the Company to obtain premium pricing.
* Continuing the integration of KUBE(FM), operating in Seattle in
conjunction with KJR(AM) and KJR-FM. The Company acquired KUBE(FM)
in 1994 through its investment in the New Century Seattle Partner,
L.P. This gives the Company three signals in the same area, thereby
enhancing revenue opportunities while realizing cost savings
associated with eliminating the duplication of functions. See
"Business-Broadcasting-Radio-Operations" below.
2
<PAGE>
OUT-OF-HOME MEDIA
The Company's out-of-home media business segment involves the sale of
advertising space on outdoor displays and on display units located in airport
terminal facilities. National advertisers generally categorize outdoor and
airport advertising as out-of-home media because, unlike radio and television
broadcasting, newspapers and magazines, the primary focus of outdoor and airport
advertising is to disseminate the advertiser's message outside the home
environment.
OUTDOOR ADVERTISING
INDUSTRY OVERVIEW. During the nineteenth century, companies began to
lease out space on wooden boards for advertising messages, or "bills." Today,
outdoor advertising extends nationwide, providing advertisers with a low-cost
means of reaching large audiences. It is currently used by large national
advertisers as part of multi-media advertising campaigns and increasingly by
local merchants as a means of contacting their target markets.
The Company believes that outdoor advertising is one of the most
cost-effective forms of advertising. Poster space generally is sold in packages
called "showings," which comprise a given number of displays in a market area.
Posters provide advertisers with access either to a specified percentage of the
general population or to a specific target audience. Displays making up a
showing are placed in well-traveled areas and are distributed so as to reach a
wide audience in a particular market. An outdoor advertising company
establishes and publishes rate cards periodically, typically once a year, which
set monthly rates for painted bulletins, poster panels and junior posters for
each market it covers. Rates are based in part on surveys made by independent
traffic audits to determine a given display's exposure to the public. Actual
rates charged to customers are subject to negotiation. Advertising contracts
relating to painted bulletins, poster panels and junior posters generally have
terms of one year or less.
In addition to its cost-effectiveness, certain other features of outdoor
advertising make it particularly advantageous for certain types of advertisers.
Because the advertising message can be placed so that it reaches potential
customers close to the point of sale, restaurants, motels, service stations and
similar businesses find outdoor advertising particularly attractive. In
addition, the constant repetition resulting from people's traveling the same
route on a daily basis makes outdoor advertising especially suitable for
companies such as banks, insurance companies, soft drink manufacturers and radio
and television stations that sell their products by promoting a particular
image.
While outdoor advertising remains a stable and predictable source of
revenue, the Company believes that the number and diversity of advertisers using
the medium has increased. Emphasis has been shifting over the past few years
from national to local and regional sales and to customers who have not
traditionally used outdoor advertising. Advertisers shifting a significant
portion of their advertising dollars into outdoor advertising include city and
state governments (lottery advertising), health care services, specialty
retailers, food products companies and telephone equipment and service
companies.
3
<PAGE>
OPERATIONS. The Company's outdoor advertising business involves the
sale of space on advertising display faces and includes, in many cases, the
design of advertisements and the construction of outdoor structures that carry
these displays. The Company operates its outdoor advertising business primarily
in the greater metropolitan areas of Seattle and Tacoma, Washington; Portland,
Oregon; Boston and Worcester, Massachusetts; and Miami, Fort Lauderdale and West
Palm Beach, Florida. The Company, which has a total of approximately 9,446
advertising displays nationwide, is the dominant operator of outdoor advertising
in each of its markets. The Company believes that its strong market position,
the geographical diversity of its operations and its emphasis on local
advertisers lend stability to its revenue base, reduce its reliance on any
single local economy or advertiser and mitigate the effects of fluctuations in
national advertising expenditures. The Company also believes that its outdoor
advertising operation will continue to be a substantial source of revenue and
anticipates that any future growth in this business will result primarily
through diversification of its customer base and increased demand brought about
by creative marketing.
The principal outdoor advertising display used by the Company is the
billboard, of which there are three standardized types:
* PAINTED BULLETINS, which generally are 14 feet high and 48
feet wide, consist of panels that are hand painted at the Company's
facilities in accordance with design specifications supplied by the
advertiser or, less frequently, panels covered with a single sheet of
vinyl on which an image has been printed by computer. The panels are then
transported to the site of the billboard and mounted to the face of the
display. To attract more attention, panels may extend beyond the linear
edges of the display face and may include three-dimensional
embellishments. Painted bulletins are usually located near major highways
for maximum impact and space is usually sold to advertisers for periods of
four to twelve months.
* POSTER PANELS, which generally are 12 feet high by 25 feet
wide, are the most common type of billboard. Lithographed or
silk-screened paper sheets that are supplied by the advertiser are
prepasted and packaged in airtight bags by the Company and applied, like
wallpaper, to the face of the display. Poster panels are usually located
on major traffic arteries, and space is usually sold to advertisers for
periods of one to twelve months.
* JUNIOR POSTERS are usually 6 feet high by 12 feet wide. The
displays are prepared and mounted in the same manner as poster panels.
Most junior posters, because of their smaller size, generally are
concentrated on city streets and are targeted to pedestrian traffic.
Space on junior posters usually is sold to advertisers for periods of one
to twelve months.
4
<PAGE>
At December 31, 1994, the Company owned 1,384 painted bulletins, 6,541
poster panels and 1,521 junior posters distributed among markets served as
follows:
<TABLE>
<CAPTION>
DMA PAINTED POSTER JUNIOR
MARKET RANK(1) BULLETINS PANELS POSTERS
------ ------- --------- ------ -------
<S> <C> <C> <C> <C>
NORTHWEST:
Seattle/Tacoma. . . . . 12 213 1,673 373
Portland. . . . . . . . 25 134 1,242 --
BOSTON:
Boston/Worcester. . . . 6 302 2,042 96
FLORIDA:
Miami/Fort Lauderdale . 16 505 1,192 1,052
West Palm Beach . . . . 45 230 392 --
_______________
<FN>
(1) Source: Stations Volume of the Television & Cable Fact Book, No. 63,
1995 Edition. Designated Market Area ("DMA") rank is a common measure
of market size based on population used by the media industry.
</TABLE>
The Company owns all of its outdoor displays, which generally are located
on leased property. The typical lease provides for a term ranging from five to
15 years and for a reduction in or termination of rental payments in the event
the view of the advertising structure becomes obstructed during the lease term.
Usually, a property owner may terminate the lease in the event the site
undergoes development. In the event of such lease termination, the Company
seeks to relocate the structure at an alternate site, subject to zoning
requirements, in order to maintain its inventory of advertising displays in the
particular geographic region.
SALES AND MARKETING. The Company sells advertising space on the
Company's outdoor displays directly to advertisers, especially in the case of
local and regional sales. The Company also sells advertising space to
advertising agencies and specialized media buying services acting on behalf of
national advertisers. These agencies charge the Company a commission for their
services. In recent years, the Company has focused increasingly on selling to
local and regional advertisers.
A broad cross-section of advertisers utilize the Company's outdoor
advertising services, including tobacco, food and beverage, financial service,
automotive and entertainment companies. As a result of the Company's efforts to
diversify its advertiser base and to reduce the percentage of its net revenue
attributable to the advertising of tobacco products, the Company's largest
outdoor advertising customer accounted for less than 2.5% of the Company's gross
revenue in 1994.
5
<PAGE>
COMPETITION. The Company's outdoor advertising business competes
directly with others engaged in the same business and indirectly with other
types of advertising media, including television, radio, magazines, newspapers,
business publications and direct mail marketing. Substantial competition exists
among the various advertising media on a cost-per-rating-point basis and on the
ability to reach effectively a particular demographic section of the market. As
a general matter, competition is confined to a defined geographic market. While
there are a few companies in the outdoor advertising business that are
substantially larger than the Company, the Company is the largest owner and
operator of outdoor advertising displays in the geographic markets in which it
operates. The Company believes that it provides higher graphic quality, more
timely installation and better sign maintenance than other outdoor advertisers
in its markets.
REGULATION. The location of outdoor advertising structures is regulated
through zoning regulations adopted by state and local governments. Typically,
the Company's outdoor advertising structures are located in commercial and
industrial zones. In some jurisdictions there is a limitation on the number of
outdoor advertising structures that can be located within the city limits.
Local zoning ordinances either restrict or prohibit outdoor advertising
structures in specific areas in the various markets in which the Company
operates. In addition, the 1965 Federal Highway Beautification Act (the "FHBA")
requires states to adopt programs of effective regulation of outdoor advertising
along federal highways in order to qualify for their full share of federal
highway aid. However, the FHBA provides for the payment of compensation to the
owner of a lawfully erected outdoor advertising structure that is removed by
operation of the statute. In the event that a governmental entity seeks to
compel the removal of one of the Company's outdoor advertising structures, the
Company follows a policy of actively resisting unless adequate compensation is
paid. The Company has initiated several lawsuits of this character and has
prevailed in each such action. In addition, the Company has negotiated
resolutions to other disputes without recourse to litigation.
AIRPORT ADVERTISING
INDUSTRY OVERVIEW. Practically all airport complexes across the United
States grant franchises for the use of displays, signs and other units to
provide advertising services. Airport advertising is particularly attractive to
advertisers targeting an affluent audience with travel-related needs. The
airport advertising business is dominated by less than five competitors, with
the Company the largest by a significant margin based on revenues.
The airport advertising business requires a prospective franchisee to
obtain from the appropriate airport authority a franchise agreement authorizing
the franchisee to install, maintain and sell advertising space on advertising
display units in the airport's terminal facilities. Many airport authorities
have established advertising guidelines for, and some airport authorities
reserve the right to approve, the location and content of advertising materials.
Airport franchise agreements are individually negotiated with the
appropriate authority charged with the management of the airport facility,
usually a county, city or other governmental authority. In some instances, the
franchisee enters into agreements with individual airlines maintaining separate
terminal facilities under terms similar to those negotiated with the relevant
airport authority. The
6
<PAGE>
franchise agreements have an average initial term of three to five years and
require the payment of a concession fee to the airport authority based on a
negotiated percentage of gross revenue derived from advertising in the airport
facility. The amount generally is based on the size of the facility, the number
of display units that can be located in the facility and the size and
demographic characteristics of travelers using the facility. Many franchise
agreements also require guaranteed minimum annual payments to be made in the
event the fees otherwise payable to the airport authority are less than such
minimum amount. Typically, at the conclusion of the initial franchise term, the
franchise is either extended indefinitely, on an at-will basis, or subjected to
a competitive bidding process.
OPERATIONS. The Company is the largest owner and operator of airport
advertising displays in the United States. It owns, maintains and sells
advertising space on approximately 4,838 advertising display units in over 110
airport terminals throughout the United States, including principal airports
serving the greater metropolitan areas of Boston, New York, Washington, D.C.,
Miami, Houston, Dallas/Fort Worth and Seattle.
Airport advertising display units generally consist of freestanding
displays (primarily 4 x 4 feet in size, with some 8 x 8 feet and some 10 x 20
feet), interior-lighted units (3 x 5 feet) and multiple display hotel and motel
reservation boards with direct telephone lines to the advertised facilities.
With the permission of the governing authority, the Company may install other
types of display units at an airport. The Company sells advertising space on
airport advertising display units for periods ranging from one month to one
year.
SALES AND MARKETING. National and local advertisers purchase airport
advertising from the Company at rates based on passenger traffic surveyed at the
relevant airport. The Company sells advertising space on the Company's airport
advertising display units directly to the advertisers and also sells to
advertising agencies and specialized media buying services acting on behalf of
national advertisers. A broad cross-section of advertisers utilize the
Company's airport advertising services, including hotels, motels and automobile
rental companies, media and telecommunication companies and financial services
companies. The Company's largest airport advertising customer accounted for
less than 1% of the Company's gross revenue in 1994.
COMPETITION. The award of an advertising franchise at each airport
terminal facility generally is the result of a competitive process. Franchises
are awarded based on the amount of any guaranteed minimum payment offered and
the percentage of gross revenue to be paid to the airport authority, the
franchisee's ability to meet specialized needs set forth in the governing
agency's specifications and the franchisee's reputation and experience. The
Company believes that its position as industry leader, its history in the
business, its reputation for quality service and reliability and the size and
expertise of its sales force generally provides it with a competitive advantage.
BROADCASTING
The Company's broadcasting business segment involves the sale of air time
to a broad range of national and local advertisers. The Company operates in six
geographically diverse markets that offer a large and affluent population base
attractive to many advertisers.
7
<PAGE>
TELEVISION
INDUSTRY OVERVIEW. Television station revenue is derived primarily from
local, regional and national advertising and, to a lesser extent, from network
compensation from studio rental and commercial production activities.
Advertising rates are based upon a program's popularity among the viewers an
advertiser wishes to attract, the number of advertisers competing for the
available time, the size and demographic makeup of the market served by the
station and the availability of alternative advertising media in the market
area. The size of a television station's audience is determined by independent
rating service surveys.
Affiliation with one of the major networks has a significant impact on the
composition of the station's revenue, expenses and operations. A typical
affiliate receives the majority of its programming each day from the network.
This programming, together with cash payments, is provided to the affiliate by
the network in exchange for a substantial majority of the advertising time
during network programs. The network sells this advertising time and retains
the revenue so generated.
8
<PAGE>
OPERATIONS. The following table sets forth certain information with
respect to the Company's television stations and the markets in which they
operate:
<TABLE>
<CAPTION>
NO. OF
COMMERCIAL
STATIONS
CALL DATE NETWORK DMA RANKED IN
MARKET LETTERS ACQUIRED AFFILIATION RANK(1) MARKET(2) FREQUENCY(3)
- ------ ------- -------- ----------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Syracuse, New York . . . . . . . . . . . . . . . WIXT May 1982 ABC 67 3 VHF VHF
2 UHF(4)
Colorado Springs/Pueblo, Colorado. . . . . . . . KKTV January CBS 97 3 VHF VHF
1983 1 UHF(5)
Bakersfield, California. . . . . . . . . . . . . KGET October NBC 129 4 UHF(6) UHF
1983
Vancouver, British Columbia and portions KVOS June 1985 (7) (7) (7) VHF
of Seattle, Washington (station located
in Bellingham, Washington) . . . . . . . . . .
Salinas/Monterey, California . . . . . . . . . . KCBA June 1986 FOX 115 1 VHF UHF
3 UHF(8)
_______________
<FN>
(1) Source: Television & Cable Factbook, No. 63, 1995 Edition.
(2) Source: Television & Cable Factbook, No. 63, 1995 Edition. Does not
include public broadcasting stations, satellite stations or translators
which rebroadcast signals from distant stations.
(3) Very high frequency ("VHF") stations transmit on channels 2 through 13;
ultra high frequency ("UHF") stations transmit on channels 14 through 69.
Technical factors, such as station power, antenna location and height and
topography of the area, determine the geographic market served by a
television station. In general, a UHF station requires greater power or
antenna height to cover the same area as a VHF station.
(4) Two additional UHF channels have been allocated in the Syracuse market;
however, there has been no construction activity to date with respect to
these channels.
(5) Two additional UHF channels have been allocated in the Colorado
Springs/Pueblo market; however, there has been no construction activity to
date with respect to these channels.
(6) Two additional UHF channels have been allocated in the Bakersfield market;
however, there has been no construction activity to date with respect to
these channels.
(7) KVOS(TV), located in Bellingham, Washington, is a non-affiliated,
independent station that serves primarily the Vancouver, British Columbia
market (located in size between the markets of Sacramento, California and
Orlando, Florida, which have DMA rankings of 21 and 22, respectively) and
a portion of the Seattle, Washington market (DMA rank 12) and Whatcom
County, Washington (equivalent in size to St. Joseph, Missouri, with a DMA
rank of 190). The station's primary competition consists of 4 Canadian VHF
stations.
(8) One additional UHF channel has been allocated in the Salinas/Monterey
market; however, there has been no construction activity to date with
respect to this channel.
</TABLE>
The Company's major-network affiliated television stations operate under
standard two-year contracts which are automatically renewed for successive
two-year terms unless the Company or the network exercises its right to cancel.
Although federal regulations prohibit network contracts with terms of more than
two years, successive terms are permitted. Under the terms of a network
contract, the networks offer the Company's network-affiliated stations a variety
of programs. The Company's network-affiliated stations have a right of first
refusal to broadcast network programs before those programs can be offered to
any other television station in the same market.
The Company generally seeks to maximize the amount of commercial time it
has available to sell to advertisers to attract broader and better defined
audiences within its markets by emphasizing non-network programming during
certain significant time periods. Such programming includes locally produced
news, as well as syndicated and first-run talk programs, children's programming
and movies acquired from independent sources.
9
<PAGE>
In the case of KVOS(TV), which is located in Bellingham, Washington and
serves primarily the market of Vancouver, British Columbia, the percentage of
network programming preempted by alternate programming is substantial. This
preemption is due primarily to Canadian regulations that require Canadian cable
television operators to delete the signals of United States-based stations
broadcasting network programs in regularly scheduled time slots and replace them
with the signals of the Canadian-based network affiliates broadcasting at the
same time. By substituting this alternate programming, KVOS(TV) is able to
maximize the amount of time it is on the air in the Vancouver market.
SALES AND MARKETING. The principal sources of television broadcasting
revenue for the Company are the sale of time to advertisers in the form of
local, regional and national spot or schedule advertising and, to a much lesser
extent, network compensation. Spot or schedule advertising consists of short
announcements and sponsored programs either on behalf of advertisers in the
immediate area served by the station (local) or on behalf of national and
regional advertisers (national).
During 1994, local spot or schedule advertising, which is sold by the
Company's personnel at each station, accounted for approximately 42% of the
total revenue generated by the Company's television stations. National spot or
schedule advertising, which is sold primarily through national sales
representative firms on a commission-only basis, accounted for approximately 56%
of the total revenue generated by the Company's television stations in 1994.
Network compensation revenue is based upon network hourly rates payable to
a station by a network and is tied to the number of network programs broadcast.
Network hourly rates are fixed by the terms of the contract between the network
and the station and are subject to change by the network, although the station
has the right to terminate the contract if the change involves a decrease in
rates. In the aggregate, network compensation revenue does not represent a
significant portion of the total net revenue generated by the Company's
stations.
COMPETITION. The Company's television stations compete for revenue with
other television stations in their respective markets, as well as with other
advertising media, such as newspapers, radio, magazines, outdoor advertising,
transit advertising, yellow page directories, direct mail and local cable
systems. Factors material to maintaining an individual station's competitive
position in the television broadcast industry include the station's management
experience, authorized power, assigned frequency, network affiliation, audience
identification and local program acceptance, together with the strength of the
local competition.
The Company's television stations compete for both audience and
advertising with stations within their markets, as well as with cable television
and other news and entertainment media serving the same markets. Cable
television systems, which operate generally on a subscriber-payment basis,
compete by carrying television signals from outside the broadcast market and by
distributing programming originated exclusively for cable systems. Cable
operators historically have not sought to compete with broadcast stations for a
share of the local news audience. To the extent they elect to do so, increased
competition from cable operators for local news audiences could have an adverse
effect on the Company's advertising revenue. The Company also may face future
competition from high-powered direct broadcast satellite services which could
transmit programming directly to homes equipped with special receiving antennas
10
<PAGE>
or to cable television systems for transmission to their subscribers. In
addition, the Company's television stations compete for audience with other
forms of home entertainment, such as home videotape and disc players. Moreover,
the television industry is continually faced with technological change and
innovation, the possible rise in popularity of competing entertainment and
communications media, changes in labor conditions and in government regulations.
RADIO
INDUSTRY OVERVIEW. Radio stations in the United States operate either
on the amplitude modulation ("AM") band, comprising 107 different frequencies
located between 540 and 1600 kilohertz ("KHz") in the low frequency band of the
electromagnetic spectrum, or the frequency modulation ("FM") band, comprising
approximately 100 different frequencies located between 88 and 108 megahertz
("MHz") in the very high frequency band of the electromagnetic spectrum. FM
radio stations have captured a high percentage of the listening audience, in
part because of the perception that stereo broadcasting, which was once only
available on FM radio stations, provides enhanced sound quality.
Radio station revenue is derived substantially from local, regional and
national advertising and, to a lesser extent, from network compensation. The
majority of the Company's radio broadcasting revenue is derived from local
advertising generated by a station's local sales staff. National sales are made
on a station's behalf by a national independent sales representative. The
representative obtains advertising from national advertising agencies and
receives a commission based on a percentage of gross advertising revenue
generated. The principal costs incurred in the operation of radio stations are
salaries, programming, promotion and advertising, sports broadcasting rights
fees, rental of premises for studios and transmitting equipment and music
license royalty fees.
11
<PAGE>
OPERATIONS. The following table sets forth certain information with
respect to the Company's radio stations:
<TABLE>
<CAPTION>
RADIO STATION
RADIO NO. OF FORMAT AND
STATION COMMERCIAL PRIMARY
CALL DATE POWER ARBITRON STATIONS IN DEMOGRAPHIC
MARKET LETTERS ACQUIRED (WATTS) RANK(1) MARKET(1) TARGET
----------- --------- ---------- --------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Seattle/Tacoma, KJR(AM) May 1984 5,000 13 18 AM Sports Talk;
Washington Men 25-54
KJR-FM October 1987 100,000 13 17 FM ARRO-70'S;
Adults 25-54
KUBE(FM) July 1994 100,000 13 17 FM Rhythmic Top
40; Adults
18-34
<FN>
(1) Source: Radio Business Report, 1995, Vol. 3.
</TABLE>
The Company purchased KJR(AM), located in Seattle, Washington, in May
1984. KJR(AM) acquired the broadcast rights to SuperSonics games from the
Company in the 1987-1988 season, and now serves as the SuperSonics' flagship
radio station. In October 1987, the Company acquired KJR-FM (formerly called
KLTX(FM)), also located in Seattle.
On February 4, 1994, the Company entered into an agreement with Century
Management, Inc. which resulted in the formation of New Century Seattle
Partners, L.P. (the "Partnership") for the purpose of operating the assets of
KJR(AM), KJR-FM and KUBE(FM). This venture was approved by the Federal
Communications Commission ("FCC") and closed on July 14, 1994. Under the terms
of the Amended and Restated Limited Partnership Agreement dated July 14, 1994,
the Partnership purchased certain assets of KUBE(FM) from affiliated companies
of Cook Inlet, Inc., an Alaska-based native American corporation, and KJR Radio,
Inc. contributed certain assets of KJR(AM) and KJR-FM to the Partnership.
Century Management, Inc. is the general partner of the Partnership and KJR
Radio, Inc. is a limited partner holding approximately 97% of the equity
interests in the Partnership after payment of certain preferred distributions to
the other limited partners over the next three to four year period. The other
limited partners include ASDP/New Century, Inc., a Massachusetts corporation,
and Union Venture Corporation, a California corporation.
On March 9, 1994, the Company sold radio station WAXY(FM) in Fort
Lauderdale, Florida, to Clear Channel Radio, Inc. for approximately $14.0
million in cash, of which $13.0 million is for the assets of the radio station
and $1.0 million is for a prepaid outdoor advertising contract. The net book
value of WAXY(FM) at the time of the sale was approximately $10.5 million.
During 1992, the Company completed the sale of two other radio stations.
In March 1992, the Company sold all the assets of station WBOS(FM) in Boston,
Massachusetts to GCI Boston, Inc. In October 1992, the Company sold
substantially all of the broadcasting assets of stations KFXX(AM) and
12
<PAGE>
KGON(FM) in Portland, Oregon to Apogee Communications Inc. of California. The
Portland tower facilities, however, were retained by the Company.
SALES AND MARKETING. The principal source of radio broadcasting revenue
for the Company is the sale of air time to local advertisers. Advertising rates
charged by each of the Company's radio stations are based primarily on the
station's ability to attract audiences in the target demographic groups and the
number of stations competing in the market area. The size of a radio station's
audience is measured by independent rating service surveys.
During 1994, local spot or schedule advertising, which is sold by the
Company's personnel at each station, accounted for approximately 77% of the
revenue generated by the Company's radio stations. National spot or schedule
advertising, which is sold primarily through national sales representative firms
on a commission-only basis, accounted for approximately 19% of the Company's
radio broadcasting revenue in 1994. The remaining revenue consisted of tower
rentals and production fees.
COMPETITION. Radio stations compete with other broadcasting stations in
their respective market areas, as well as with other advertising media such as
newspapers, television, cable television, magazines, outdoor advertising,
transit advertising and mail marketing. Competition within the radio
broadcasting industry occurs primarily in individual market areas, and a station
in one market generally does not compete with stations in other market areas.
In addition to management experience, factors material to competitive position
include the station's rank in its market, transmitter power, assigned frequency,
audience characteristics, local program acceptance and the number and
characteristics of the stations in the market area. A competing station or a
station changing its format could enter into direct competition with, and
precipitate a decline in the ratings of, any one of the Company's stations. In
addition, because a radio station's success in the ratings may depend to a large
extent upon the presence of radio personalities who are able to develop large
followings among listeners in a particular radio market, the arrival of a radio
personality at a competing station or the loss of such person at one of the
Company's radio stations could adversely affect that station's ratings.
Congress and the FCC have under consideration, and may in the future
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that may have an adverse competitive impact on the Company's radio
broadcast properties. See "-- Broadcasting Regulation" below.
BROADCASTING REGULATION
The television and radio industries are subject to extensive federal
regulation under the Communications Act of 1934, as amended (the "Communications
Act"), which, among other things, requires approval by the FCC of transfers,
assignments and renewals of broadcastinglicenses, limits the number of
broadcasting properties the Company may acquire and restricts alien ownership of
capital stock of licensees. The FCC's multiple ownership rules limit certain
ownership of media interests in the same market, such as stations of the same
type (radio or television) serving the same geographic market, a radio station
and a television station serving the same geographic market, a cable system and
a television station serving the same geographic market and a radio station and
a daily newspaper serving
13
<PAGE>
the same geographic market. However, since 1992, the rules have permitted an
entity to own up to three radio stations, no more than two of which are AM or FM
stations, in markets with fewer than 15 stations, so long as the owned stations
represent less than 50% of the stations in the market. In radio markets with 15
or more commercial radio stations, an entity may own up to two AM and two FM
commercial stations, so long as the combined audience share of those stations
does not exceed 25%. The rules also restrict the total number of broadcasting
stations which the Company may own nationwide generally to 18 AM and 18 FM radio
stations and 12 television stations (so long as the television stations do not
reach more than 25% of television households nationwide). The Company currently
is in compliance with the FCC's rules governing the number of stations which may
be owned. These limitations on ownership may affect the Company's ability to
acquire additional stations in the future.
The success of the Company's broadcasting segment depends upon its
continuing to hold broadcast licenses from the FCC. Radio station licenses are
issued for terms of seven years and television station licenses are issued for
terms of five years. The Company's television stations KCBA, KVOS and WIXT have
licenses that expire (subject to renewal) on December 1, 1998, February 1, 1999
and June 1, 1999, respectively. Television stations KGET and KKTV each has a
license renewal application currently pending at the FCC. No competing
applications have been filed, although petitions to deny the license renewal
applications of KKTV and KGET have been filed by various parties. The Company's
radio stations, KJR(AM), KJR-FM and KUBE(FM), have licenses that expire (subject
to renewal) on February 1, 1998. While in the vast majority of cases licenses
are renewed by the FCC, there can be no assurance that the Company's
broadcasting licenses will be renewed, especially if competing applications to
obtain the licenses are filed. With respect to KKTV and KGET, the Company
believes that none of the petitions will result in a denial of the license
renewal application of either of these stations.
In determining whether to grant or renew a broadcast license, the FCC
considers a number of factors pertaining to the licensee, including compliance
with the Communications Act's limitations on alien ownership, compliance with
various rules limiting common ownership of broadcast, cable and newspaper
properties and the "character" of the licensee and those persons holding
attributable interests therein.
The Communications Act requires broadcasters to serve the "public
interest." Since the late 1970s, the FCC gradually has relaxed or eliminated
many of the more formalized procedures it developed to promote the broadcast of
certain types of programming responsive to the needs of a station's community of
license. However, licensees continue to be required to present programming that
is responsive to community problems, needs and interests and to maintain certain
records demonstrating such responsiveness. Complaints from listeners or viewers
concerning a station's programming often will be considered by the FCC when it
evaluates renewal applications of a licensee, although such complaints may be
filed at any time. Stations also must follow various rules promulgated under
the Communications Act that regulate, among other things, political advertising,
sponsorship identifications, the advertisement of contests and lotteries and
technical operations, including limits on radio frequency radiation. In
addition, licensees must develop and implement affirmative action programs
designed to promote equal employment opportunities and must submit reports to
the FCC with respect to these matters on an annual basis and in connection with
a renewal application.
14
<PAGE>
In March 1993, the FCC issued new rules establishing must-carry rights and
retransmission consent rights for television stations, as required by the Cable
Television Consumer Protection and Competition Act of 1992 (the "Cable Act").
By June 17, 1993, each local television station had to elect either (i) to
require its local cable television operator to carry its signal (the "must-carry
option"), or (ii) to grant its consent to the local cable operator (the
"retransmission consent option"). If a broadcaster chooses the must-carry
option, the cable operator generally is required to carry such broadcaster's
signal. However, the must-carry rights are not absolute, and their exercise
depends on variables such as the number of activated channels on, and the
location and size of, the cable system and the amount of duplicative programming
on a broadcast station. If a broadcaster chooses the retransmission consent
option, it may prohibit cable systems from carrying its signal or permit
carriage under a negotiated compensation arrangement. The Company's four
network-affiliated stations have chosen the retransmission consent option within
their respective markets. By September 6, 1993, all cable systems were required
to notify their subscribers which TV stations they would be carrying when the
new cable TV rules went into full effect on October 6, 1993. Of the Company's
four network-affiliated television stations, three (KKTV, KCBA and KGET) have
granted retransmission consents to their local cable systems, while the other
(WIXT) has agreed to extend for one year the deadline to complete its
negotiations with its local cable systems. While the Company believes that the
remaining negotiation will be concluded successfully and that even if it is not
successful the Company's operation would suffer no material adverse effect,
there can be no assurance that this will be the case.
FCC rules are subject to change and these changes may have an adverse
competitive impact on the Company. For example, the FCC has adopted rule
changes which may result in the expansion of the AM radio band, addition of more
AM and FM stations, or increased power for existing AM and FM stations, by
reducing the mileage spacing between existing stations and allowing the
utilization of certain other engineering techniques (e.g., directional antennas
and terrain shielding). Investigations by Congressional committees, the FCC and
other governmental agencies into certain practices and conditions in the
broadcasting industry (including broadcasting license renewal laws and policies,
spectrum and/or license fees, copyright law revisions, advertising practices,
cable television and trafficking rules) have resulted in various proposal or
inquiries now pending or which may be considered in the future by such bodies.
Congress and the FCC have under consideration, and may in the future
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could, directly or indirectly, affect the operation, ownership
and profitability of the Company's broadcast properties. Such matters include,
for example, an increase in the number of television stations one entity may
own; changes to the license renewal process; proposal to impose spectrum use or
other governmentally imposed fees upon licensees; the FCC's equal employment
opportunity rules and other matters relating to minority and female involvement
in the broadcasting industry; proposals to change rules relating to political
broadcasting; technical and frequency allocation matters, including those
relative to the implementation of digital audio broadcasting on both a satellite
and terrestrial basis; proposals to permit expanded use of FM translator
stations; proposals to restrict or prohibit the advertising of beer, wine and
other alcoholic beverages on radio; changes to broadcast technical requirements;
proposals to allow telephone companies to deliver audio and video programming to
the home through existing phone lines; and proposals to auction the right to use
the radio broadcast spectrum to the highest bidders. Additional
15
<PAGE>
FCC proposals which may have an adverse effect on the Company include
the expansion of operating hours of daytime-only stations. The Company cannot
predict whether any such proposed changes will be adopted nor can it judge in
advance what impact, if any, any such proposed changes might have on its
business. In addition, the Company cannot predict what other changes might be
considered in the future, nor can it judge in advance what impact, if any, such
other changes might have on its business.
The FCC has proposed the adoption of rules for implementing advanced
(including high-definition) television service ("ATV") in the United States.
Implementation of ATV will improve the technical quality of television. Under
certain circumstances, however, conversion to ATV operations may reduce a
station's geographical coverage area. Implementation of ATV will impose
additional costs on television stations providing the new service, due to
increased equipment and operating costs. At the same time, there is a potential
for increased revenues derived through the use of high-definition television.
While the Company believes the FCC will authorize ATV in the United States, the
Company cannot predict when such authorization might be given or the effect such
authorization might have on the Company's business.
KVOS, which derives much of its revenue from the Vancouver, British
Columbia market, is regulated by certain aspects of Canadian law. In
particular, although under Canadian tax laws advertising expenses are ordinarily
deductible as business expenses, a Canadian firm may not deduct the cost of
advertising on a United States-based television station which is directed into a
Canadian market. In order to compensate for this disparity, KVOS sells
advertising time in Canada at a discount from its standard rate. KVOS also is
subject to certain restrictions on its broadcast of network programming. See
"Broadcasting - Television - Operations" above.
OTHER BUSINESSES
The Company's third business segment consists principally of its
basketball operations. This segment, however, also incorporates the operations
of the Company's real estate holdings and the expenses of the Company's
corporate office.
THE SEATTLE SUPERSONICS
The SuperSonics franchise is one of 27 members of the NBA. Teams in the
NBA play a regular season schedule of 82 games from November through April and
play several preseason exhibition games. Based on their regular season records,
16 teams qualify for post-season play, which culminates in the NBA championship.
The SuperSonics have qualified for post-season play in each of the last three
years.
INDUSTRY OVERVIEW. NBA members share equally in the association's
profits and have joint and several liability for its obligations. NBA affairs
are supervised by a Board of Governors made up of a representative selected by
each of the members. Through its elected Commissioner, the Board of Governors
arbitrates disputes between members, assures that the conduct of members,
players and officials is in accordance with the NBA Constitution and Bylaws,
reviews and authorizes player transactions between members and imposes sanctions
(including fines and suspensions) on members,
16
<PAGE>
players and officials who are found to have breached NBA rules. The sale of any
NBA franchise is subject to the approval of a majority of the association's
owners.
OPERATIONS. Since 1983 the Company has owned and operated the
SuperSonics, the NBA franchise for Seattle, Washington. The franchise has been
operated in Seattle since it was granted by the NBA in 1966. The franchise,
which is subject to the Constitution and Bylaws of the NBA, operates for an
indefinite term of years so long as the Company maintains its membership in good
standing.
Currently, the SuperSonics maintain a full roster of 12 active players.
The minimum roster under NBA rules is 11 players. The SuperSonics acquire new
players primarily through the college draft, by signing veteran free agents
uncommitted to another NBA franchise or by trading players with another
franchise. NBA rules limit the aggregate annual salaries payable by each team
to its players.
SALES AND MARKETING. A major source of revenue for the SuperSonics is
ticket sales for home games, as 100% of the revenue from these sales are
retained by the home team. Average paid attendance per game increased from
13,098 for the 1991-92 regular season to 13,172 for the 1992-93 regular season
and increased to 13,250 for the 1993-94 regular season. Average paid attendance
for the 1994-95 through February 28, 1995 regular season increased to 13,585.
The increases in average paid attendance were attributable mainly to the
SuperSonics' improved win/loss record in each year. In addition, the increase
in the 1994-95 season partly resulted from the team playing its home games at
the Tacoma Dome which has a greater seating capacity than the Coliseum. The
SuperSonics do not receive revenue from ticket sales for "away" games.
In November 1993, the NBA granted franchises to the Canadian cities of
Toronto and Vancouver, for $125 million each, to begin play in the 1995-96
season. The SuperSonics will receive its proportionate share of the franchisee
fees received from these additional franchises. The SuperSonics share equally
with the other NBA teams in revenue resulting from NBA agreements with
television networks for the broadcast of league games and other NBA activities.
The proportion of revenue resulting from the sale of broadcast rights,
particularly television broadcast rights, has increased significantly in recent
years and is expected to become a more significant portion of total NBA revenue,
primarily because of the growth of cable television. In the spring of 1993, the
NBA entered into a new contract with NBC providing for the television broadcast
of certain league games through the 1997-98 season. This contract provides for
a minimum payment to the NBA of $750 million over the four-year term of the
contract.
Other sources of revenue for the Company derived from its ownership of the
SuperSonics include broadcast licensing, team advertising sponsorships and
in-arena advertising. All of the SuperSonics' games are broadcast exclusively
over KJR (AM), the Company-owned radio station in Seattle. Broadcasting rights
to the SuperSonics' games are licensed to local cable systems and, outside the
Seattle/Tacoma market, additional radio stations not affiliated with the
Company.
Broadcast revenue related to the SuperSonics, including the current
contracts with NBC and Turner Network Television, is included in the Company's
broadcasting segment.
17
<PAGE>
COMPETITION. Although the SuperSonics are the only professional
basketball team in the Seattle area, they compete with other sports teams and
other leisure activities for the attention of the local public.
EMPLOYEES
As of December 31, 1994, the Company employed approximately 378 persons in
its out-of-home media segment, 544 persons in its broadcasting segment and 97
persons in its other businesses segment. A sales force of approximately 63
employees based in New York, St. Louis and the Washington, D.C. area and in
other regional offices, which is responsible for selling advertising space on
the Company's outdoor advertising structures and airport displays, is included
in this tabulation.
Approximately 268 of the Company's employees are represented by various
unions under 15 collective bargaining agreements. The Company believes that its
employee relations are good. Collective bargaining agreements covering
approximately 19% of the Company's employees are terminable during 1995. The
Company believes that these collective bargaining agreements will be
renegotiated or automatically extended and that any renegotiation will not
materially adversely affect its operations.
FINANCIAL INFORMATION REGARDING BUSINESS SEGMENTS
Financial information concerning each of the business segments in which
the Company is engaged is set forth in Note 11 to the Notes to Consolidated
Financial Statements.
RESTRICTIONS ON OPERATIONS
The Company's Credit Agreement dated February 17, 1995 (the "1995 Credit
Agreement"), with certain of its bank lenders, the Indenture dated October 7,
1993 (the "Indenture") respecting its 10/ /% Senior Secured Notes Due 2003
("Senior Notes"), and its Note Agreements dated December 20, 1988 and Note
Agreements dated December 1, 1989, with certain insurance company lenders as
amended (collectively the "Subordinated Note Agreements") contain restrictions
on the Company's operations. The 1995 Credit Agreement, Indenture and
Subordinated Note Agreements include restrictions on aggregate indebtedness,
acquisitions of securities or assets of operating businesses, stock issuances,
the creation of liens, loans and advances, investments, capital expenditures,
guarantees, dividends on or purchases of its capital stock, changes in lines of
business, and transactions with affiliates. The 1995 Credit Agreement and
Indenture also restrict the Company's ability to prepay other debt. The 1995
Credit Agreement and Subordinated Note Agreements generally prohibit the Company
from engaging in a merger or certain sales of assets without the consent of the
respective lenders. Additionally, acquisitions of additional business
operations would generally require consents or waivers from certain of the
Company's lenders with respect to several of the above restrictions.
The Company has pledged the stock of all its subsidiaries to secure its
obligations under the 1995 Credit Agreement and Indenture. In the event of a
monetary default under the 1995 Credit Agreement or Senior Notes, the pledgee
under the Pledge Agreement, on behalf of the bank lenders and Senior
18
<PAGE>
Noteholders, could force a sale of all or a portion of the stock of the
subsidiaries to satisfy the Company's obligations.
Additional information concerning the 1995 Credit Agreement, Senior Notes
and Subordinated Note Agreements is set forth in Note 5 to the Notes to
Consolidated Financial Statements.
ITEM 2 - PROPERTIES
The principal executive offices of the Company are located at 800 Fifth
Avenue, Suite 3770, Seattle, Washington 98104. These offices, which consist of
approximately 9,000 square feet, are leased by the Company pursuant to a lease
that expires in 1996 and is subject to renewal options.
The following table sets forth certain information regarding the Company's
operating facilities as of December 31, 1994:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
SQUARE FOOTAGE SQUARE FOOTAGE
LOCATION NATURE OF FACILITY OWNED LEASED
- -------- ------------------ ----------- ------------
<S> <C> <C> <C>
OUT-OF-HOME MEDIA:
Seattle, Washington (Outdoor) Plant 35,889 -0-
Boston, Massachusetts (Outdoor) Plant 31,882 4,900
Miami, Florida (Outdoor) Plant 242,980 --
Airport Advertising Offices -- 7,389
BROADCASTING:
Syracuse, New York (WIXT) Station Operations 25,000 --
Colorado Springs, Colorado (KKTV) Station Operations 30,000 753
Bakersfield, California (KGET) Station Operations 16,740 --
Bellingham, Washington (KVOS) Station Operations 13,130 4,752
Salinas, California (KCBA) Station Operations 30,000 3,000
Seattle, Washington
(KJR(AM), KJR-FM, KUBE(FM)) Station Operations -- 14,007
Portland, Oregon Antenna Facility 3,500
OTHER BUSINESSES:
Seattle, Washington (SuperSonics) Offices 30,000 16,624
Practice Facility
Seattle, Washington; New York, New York Offices -- 28,260
(Corporate)
</TABLE>
The Company believes that its facilities are adequate for its present
business and that additional space is generally available for expansion without
significant delay. In 1994, the Company paid aggregate annual rentals on office
space of approximately $1.3 million.
The Company entered into a fifteen-year lease with the City of Seattle
which will provide for the construction by the City of a new multi-purpose arena
at the current site of the Seattle Coliseum for occupancy and use by the
SuperSonics by the 1995-96 basketball season. This lease replaced the former
lease for the Seattle Coliseum which was scheduled to expire at the end of the
1994-95 season. Since
19
<PAGE>
the Seattle Coliseum site is under construction during the 1994-95 basketball
season, the Tacoma Dome was secured as the site for SuperSonics home games.
At December 31, 1994, the Company owned 280 vehicles and leased 54
vehicles of various types for use in its operations. The Company owns a variety
of broadcast-related equipment, including broadcast towers, transmitters,
generators, microwave systems and audio and video equipment used in its
broadcasting business. The Company also owns an airplane which is used for
travel between the various facilities and leases an airplane for use by the
Supersonics under a private carrier agreement.
The Company believes that all of its buildings and equipment are
adequately insured in accordance with industry practice.
ITEM 3 - LEGAL PROCEEDINGS
The Company becomes involved from time to time in various claims and
lawsuits incidental to the ordinary course of its operations, including such
matters as contract and lease disputes and complaints alleging employment
discrimination. In addition, the Company participates in various governmental
and administrative proceedings relating to, among other things, condemnation of
outdoor advertising structures without payment of just compensation, disputes
regarding airport franchises and matters affecting the operation of broadcasting
facilities. The Company believes that the outcome of any such pending claims or
proceedings, individually or in the aggregate, will not have a material adverse
effect upon its business or financial condition.
The NBA regularly becomes involved in litigation with present or former
players, league employees, persons with interests in franchises and others. The
Company is unaware of any pending or threatened litigation which would have a
material adverse effect upon the business or financial condition of the NBA or
any of its members, including the SuperSonics.
ITEM 4 - SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders in the fourth
quarter of 1994.
20
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company currently are as follows:
Barry A. Ackerley 60 Chairman of the Board and Chief Executive Officer
William N. Ackerley 34 President and Chief Operating Officer
Denis M. Curley 47 Executive Vice President and Chief Financial
Officer, Treasurer and Secretary
Keith W. Ritzmann 43 Vice President and Controller
Mr. Barry Ackerley, one of the founders of the Company, assumed the
responsibilities of President and Chief Operating Officer of the Company
following the resignation of Donald E. Carter effective March 1991 and until the
appointment of William N. Ackerley as Senior Vice President and Chief Operating
Officer effective April 1992. He has been the chief executive officer and a
director of the Company and its predecessor and subsidiary companies since 1975
and is the Chairman of the Board.
Mr. William Ackerley was elected President in August 1993. He has served
as Chief Operating Officer of the Company since 1991 during which time he also
served as General Manager of Ackerley Communications of the Northwest, Inc.
(from March through July 1993) and as General Manager of KJR Radio, Inc. (from
September through November 1991). He has been with the Company since 1986 and
has served in the following capacities: from March 1986 to October 1988, as Vice
President of the SuperSonics, in front office administration; from October 1988
to September 1989, as Vice President of the Company, working on special
projects; from September 1989 to April 1991, as Project Manager with the
Company's subsidiary, The New Seattle Arena, Inc., responsible for the
development of a proposed sports arena.
Mr. Curley, who joined the Company in December 1984, was named in March 1,
1995 to the position of Executive Vice President and Chief Financial Officer
after having served as Senior Vice President and Chief Financial Officer of the
Company since January 1990. He has been Vice President of Finance, serving as
Chief Financial Officer of the Company, since May 1988, and Treasurer and
Assistant Secretary of the Company since November 1985.
Mr. Ritzmann, who joined the Company in November 1980, was named in
January 1990 to the position of Vice President. He has been the Controller of
the Company since 1986.
Barry A. Ackerley and William N. Ackerley are father and son. Gail A.
Ackerley, one of the three director nominees for election at the 1995 annual
shareholder's meeting, is Barry Ackerley's wife and William Ackerley's mother.
There are no other family relationships among any of the directors or executive
officers. All officers serve at the pleasure of the Board of Directors.
21
<PAGE>
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
As of March 17, 1995, the Company had 15,464,294 shares of outstanding
common stock, 9,562,433 shares of which are voting common stock ("Common Stock")
and 5,901,861 of which are Class B voting common stock ("Class B Common Stock").
As of the same date, there were 593 and 30 shareholders of record of Common
Stock and Class B Common Stock, respectively. American Stock Transfer & Trust
Company is the stock transfer agent for all common stock.
It has been the policy of the Company's Board of Directors to retain any
cash flow of the Company for working capital, expansion, and reduction of
long-term debt. The Company paid its first ever cash dividend of $.03 per share
on March 17, 1995 to shareholders of record on March 1, 1995. It is the present
intention of the Company's Board of Directors to pay a similar dividend next
year; however, such payment and any other future payment of dividends will
depend upon, among other things, the Company's earnings and financial condition,
capital requirements and general economic conditions. In this respect, payment
of dividends is restricted by the terms of the 1995 Credit Agreement and
Subordinated Note Agreements and the Indenture. Additionally, the Delaware
general corporation law would restrict the payment of dividends under certain
circumstances.
The Company's Common Stock is listed and traded on AMEX under the symbol
AK. The table below sets forth the high and low sales prices according to AMEX
or bids, as applicable, for each full quarterly period within the two most
recent fiscal years. These quotations reflect inter-dealer prices, without
retail markup, markdown or commission and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
1993 High Low 1994 High Low
- ---- ---- --- ---- ---- ---
<S> <C> <C> <C> <C> <C>
First Quarter $4 1/2 $2 1/2 First Quarter 8 3/8 5 3/8
Second Quarter $5 $3 9/16 Second Quarter 8 1/4 5 7/8
Third Quarter $4 3/4 $4 Third Quarter 6 5/8 5 5/8
Fourth Quarter $6 1/2 $4 3/16 Fourth Quarter 7 5 5/8
</TABLE>
As of March 17, 1995, the high and low sales price of the Common Stock
were at $8 1/2 and $8 1/2, respectively.
No market has existed for the Class B Common Stock since its initial
issuance in June 1987. Moreover, there are significant restrictions, set forth
in the Company's Third Restated Certificate of Incorporation, on the ability of
a stockholder to transfer shares of Class B Common Stock. As a consequence,
there does not exist an established trading market for the Class B Common Stock.
22
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA
The following selected consolidated financial data with respect to the
Company for the years ended December 31, 1990 through 1994 have been derived
from the audited consolidated financial statements of the Company. The
information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the "Consolidated Financial Statements" and Notes thereto included elsewhere in
this report.
<TABLE>
<CAPTION>
YEAR END DECEMBER 31,
--------------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In thousands except per share data)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue $211,728 $192,958 $187,295 $182,193 $183,103
Less agency commissions and discounts
(25,626) (22,346) (22,769) (22,838) (24,028)
--------- --------- --------- --------- ---------
Net revenue 186,102 170,617 164,526 159,355 159,075
Expenses and other income
Operating expenses 143,469 132,774 125,441 128,153 125,884
Disposition of assets (2,506) 759 (2,147) 22,243 ---
Depreciation and Amortization 10,883 12,018 13,915 21,014 24,164
Interest expense 25,909 22,431 23,809 27,595 24,745
Other (Income) expense (657) (458) 13 (512) (1,200)
--------- --------- --------- --------- ---------
Total expenses and other income 177,098 167,524 161,031 198,493 173,593
--------- --------- --------- --------- ---------
Income (loss) before income taxes
and extraordinary item 9,004 3,093 3,495 (39,138) (14,518)
Income taxes 73 133 1,188 --- ---
--------- --------- --------- --------- ---------
Income (loss) before extraordinay item 8,931 2,960 2,307 (39,138) (14,518)
Extraordinary item - loss on debt
extinguishment in 1994 and 1993;
utilization of tax loss carry (2,099) (625) 1,188 --- ---
forward in 1992 --------- --------- --------- --------- ---------
Net income (loss) applicable to
common shares $ 6,832 $ 2,335 $ 3,495 $(39,138) $(14,518)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Per common share:
Income (loss) before
extraordinary item $ .57 $ .19 $ .15 $ (2.54) $ (.94)
Extraordinary item (.13) (.04) .08 --- ---
--------- --------- --------- --------- ---------
Net income (loss) $ .44 $ .15 $ .23 $ (2.54) $ (.94)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Common shares used in per
share computation 15,742 15,602 15,450 15,419 15,393
CONSOLIDATED BALANCE SHEET
DATA (AT END OF PERIOD):
Working capital $ 16,783 $ 7,970 $(17,375) $ (6,657) $ 448
Total assets 170,783 160,493 166,756 186,694 214,325
Total long-term debt 227,107 215,114 198,700 219,969 239,076
Total debt 234,884 231,676 242,679 264,715 250,911
Stockholder's deficiency (95,958) (102,852) (105,228) (108,723) (69,585)
</TABLE>
23
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company reported net income of $6.8 million, $2.3 million and $3.5 million
in 1994, 1993 and 1992, respectively, after reporting net losses for the
previous 11 years. Historically, the Company had sought to expand its
businesses through acquisitions. This acquisition strategy has led the Company
to incur substantial depreciation and amortization expense and interest expense
on long-term debt. Financial results for the past three years reflect the
decreased acquisition activity of the early 1990's combined with the increased
profitability of the Company's existing operations.
On October 7, 1993, the Company completed a refinancing of its senior
indebtedness (the "1993 Refinancing") to obtain more favorable repayment terms
respecting its senior indebtedness and to provide the Company with liquidity
both in the near term and the long term. In connection with the 1993
Refinancing, the Company sold 10 3/4% Series A Senior Secured Notes due 2003
(the "Series A Senior Notes") for approximately $116.5 million in net proceeds
and entered into a credit agreement with a new group of bank lenders (the "1993
Credit Agreement") providing for up to $71.875 million in borrowings and up to
$4.75 million in standby letters of credit. The net proceeds from the sale of
the Series A Senior Notes and proceeds from the initial borrowing under the 1993
Credit Agreement were used to repay all outstanding indebtedness of
approximately $136.0 million under the previous credit agreement with certain
bank lenders (the "1991 Credit Agreement") and to repurchase approximately $45.0
million in principal of outstanding senior subordinated notes held by certain
insurance company lenders (the "Subordinated Notes").
On January 5, 1994, the Company completed the exchange of Series A Senior
Notes for 10 3/4% Senior Secured Notes due 2003 (the "Senior Notes") pursuant to
an effective registration statement filed with the SEC, as required by the terms
of a Registration Agreement with holders of the Series A Senior Notes. The
financial terms of the Senior Notes are essentially identical to those of the
Series A Senior Notes. The Company received no proceeds from such exchange.
On February 17, 1995, the Company completed another refinancing of its senior
indebtedness (the "1995 Refinancing") to obtain more favorable interest rate
margins and repayment terms respecting its senior bank indebtedness. In
connection with the 1995 Refinancing, the Company entered into a credit
agreement with a new group of bank lenders (the "1995 Credit Agreement")
providing for up to $65 million in borrowings including up to $7.5 million
dollars in standby letters of credit. The net proceeds from the initial
borrowing under the 1995 Credit Agreements were used to repay all outstanding
indebtedness of approximately $51.3 million under the 1993 Credit Agreement.
During the past three years, the Company maintained growth in net revenue,
completed the sale of three of its radio stations, completed the acquisition of
radio station KUBE(FM) in Seattle Washington and continued the cost containment
program initiated in 1991. One by-product of the cost containment effort that
has remained an important part of the Company's operating strategy is increased
scrutiny of expenses. Rather than concentrating solely on maximizing revenues,
the Company focuses on
24
<PAGE>
maximizing the Operating Cash Flow of each of its business
segments. Proposed expenses are evaluated in light of the enhancements to
revenue anticipated to flow from such expenditures.
As with many media companies that have grown through acquisitions, the
Company's acquisitions and dispositions of television and radio stations have
resulted in significant non-cash and non-recurring charges to income. For this
reason, in addition to net income (loss), management believes that Operating
Cash Flow (defined as net revenue less operating expenses plus other income
before amortization, depreciation, interest expense and disposition of assets)
is an appropriate measure of the Company's financial performance. This measure
excludes expenses consisting of depreciation, amortization, interest and
disposition of assets because these expenses are not considered by the Company
to be costs of ongoing operations. The Company uses Operating Cash Flow to pay
interest and principal on its long-term debt as well as to finance capital
expenditures. Operating Cash Flow, however, is not to be considered as an
alternative to net income (loss) as an indicator of the Company's operating
performance or to cash flows as a measure of the Company's liquidity.
The regional markets the Company serves, from time to time, experience varying
degrees of recessionary influences. Management cannot presently determine the
potential negative impact of such recessionary influences on the Company's
operations and its financial condition.
The Company implemented a reorganization of its operations by consolidating
its operating subsidiaries at the end of 1994 in order to simplify
administration procedures and reduce administrative costs.
25
<PAGE>
RESULTS OF OPERATIONS
The following tables set forth certain historical financial and operating data
of the Company for the three-year period ended December 31, 1994, including
separate net revenue, operating expense and other income and Operating Cash Flow
information by segment:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1994 1993 1992
--------------- --------------- ----------------
AS % AS % AS %
OF NET OF NET OF NET
AMOUNT REVENUE AMOUNT REVENUE AMOUNT REVENUE
------ ------- ------ ------- ------ -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Net revenue. . . . . . . . . . . . . $186,102 100.0% $170,617 100.0% $164,526 100.9%
Operating expenses and other
(Income) expense:
Operating expenses . . . . . . . . 143,469 77.1 132,774 77.8 125,441 76.2
Other (income) expense, net. . . . (657) (0.4) (458) (0.3) 13 (0.0)
-------- -------- --------
Total operating expenses and
other income . . . . . . . . . . 142,812 76.7 132,316 77.5 125,454 76.2
-------- -------- --------
Operating Cash Flow. . . . . . . . . 43,290 23.3 38,301 22.5 39,072 23.7
Other expenses:
Depreciation and amortization. . . 10,883 5.8 12,018 7.0 13,915 8.5
Interest expense . . . . . . . . . 25,909 13.9 22,431 13.2 23,809 14.5
-------- -------- --------
Total other expenses . . . . . . 36,792 19.7 34,449 20.2 37,724 22.9
Income (loss) before disposition of
assets, income taxes, and
extraordinary item . . . . . . . . 6,498 3.5 3,852 2.3 1,348 0.8
Disposition of assets. . . . . . . . (2,506) 1.3 759 0.4 (2,147) (1.3)
Income tax expense . . . . . . . . . 73 - 133 0.1 1,188 0.7
-------- -------- --------
Income (loss) before
extraordinary item . . . . . . . . 8,931 4.8 2,960 1.7 2,307 1.4
Extraordinary item . . . . . . . . . (2,099) (1.1) (625) (0.3) 1,188 0.7
-------- -------- --------
Net income (loss). . . . . . . . . . $ 6,832 3.7 $ 2,335 1.4 $ 3,495 2.1
-------- -------- --------
-------- -------- --------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
NET REVENUE:
Out-of-home media ...................... $ 85,436 $ 74,876 $ 78,652
Broadcasting............................ 81,559 75,521 70,190
Other................................... 19,107 20,220 15,684
-------- -------- --------
Total net revenue..................... $186,102 $170,617 $164,526
-------- -------- --------
-------- -------- --------
OPERATING EXPENSES AND OTHER INCOME:
Out-of-home media....................... $ 58,408 $ 55,335 $ 54,570
Broadcasting............................ 44,330 39,523 40,488
Other................................... 40,074 37,458 30,396
-------- -------- --------
Total operating expenses and other income $142,812 $132,316 $125,454
-------- -------- --------
-------- -------- --------
OPERATING CASH FLOW:
Out-of-home media....................... $ 27,028 $ 19,541 $ 24,082
Broadcasting............................ 37,229 35,998 29,702
Other................................... (20,967) (17,23) (14,712)
-------- -------- --------
Total Operating Cash Flow............. $ 43,290 $ 38,301 $ 39,072
-------- -------- --------
-------- -------- --------
CHANGE IN NET REVENUE FROM PRIOR PERIODS:
Out-of-home media....................... 14.1% (4.8)% 0.4%
Broadcasting............................ 8.0 7.6 2.0
Other................................... (5.5) 28.9 24.4
Change in total net revenue........... 9.1 3.7 3.2
OPERATING DATA AS A PERCENTAGE OF NET REVENUE:
Operating expenses and other income:
Out-of-home media....................... 68.4% 73.9% 69.4%
Broadcasting............................ 54.4 52.3 57.7
Other................................... 209.7 185.3 193.8
Total operating expenses and other income 76.7 77.6 76.3
Operating Cash Flow:
Out-of-home media....................... 31.6% 26.1 30.6%
Broadcasting............................ 45.6 47.7 42.3
Other................................... (109.7) (85.3) (90.4)
Total Operating Cash Flow............. 23.3 22.4 23.7
</TABLE>
27
<PAGE>
1994 COMPARED WITH 1993
NET REVENUE. Net revenue for 1994 increased by $15.5 million, or 9.1%, to
$186.1 million from $170.6 million in 1993. Net revenue in the Company's
out-of-home media segment increased by $10.6 million, or 14.1%, in 1994 from
1993. This increase was due to increased sales volume reflecting a
strengthening market for national advertising. The Company's broadcasting
segment showed an increase in net revenue of $6.0 million, or 8.0%, for 1994
mainly due to increased rates and sales volumes. Net revenue for the Company's
other businesses segment decreased $1.1 million, or 5.5%, in 1994 as compared
with the same period in the previous year, mainly because the SuperSonics played
only 5 NBA playoff games in 1994 as compared to 17 games in 1993.
OPERATING EXPENSES AND OTHER INCOME. Operating expenses and other income
increased $10.5 million, or 7.9%, to $142.8 million from $132.3 million in 1993.
However, operating expenses and other income as a percentage of net revenue
decreased to 76.7% for 1994 from 77.6% for 1993. In 1994, the Company's
out-of-home media operating expenses and other income increased $3.1 million, or
5.6%, from the previous year's level due to expenses related to increased
business activity. Operating expenses and other income in the Company's
broadcasting segment increased by $4.8 million, or 12.2%, to $44.3 million in
1994 from $39.5 million in 1993, mainly because of the addition of the
operations of KUBE(FM). The other businesses segment's operating expenses and
other income increased $2.6 million, or 7.0%, to $40.1 million in 1994 from
$37.5 million in 1993 principally because of increases in SuperSonic player
compensation.
OPERATING CASH FLOW. Because the increase in revenues exceeded the increase
in operating expenses and other income for the same period, Operating Cash Flow
increased by $5.0 million or 13.0% in 1994 from 1993. The increase in Operating
Cash Flow in the out-of-home media and broadcasting segments more than offset
the decrease in the other businesses segment's Operating Cash Flow. As a
result, Operating Cash Flow as a percentage of net revenue increased to 23.3% in
1994 from 22.4% in 1993.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
decreased by $1.1 million, or 9.4%, to $10.9 million in 1994 as compared to
$12.0 million in 1993. The majority of this decrease resulted from a reduction
in expenses associated with assets in the Company's broadcasting segment which
have been fully amortized or depreciated. Depreciation and amortization
expenses were further reduced by the sale of radio station WAXY(FM) in March
1994.
INTEREST EXPENSE. Interest expense for 1994 increased by $3.5 million, or
15.5%, to $25.9 million from $22.4 million in 1993. This increase was due
mainly to a combination of higher average interest rates and slightly higher
average debt levels during 1994 compared to 1993, and the amortization of
financing costs associated with the 1993 Refinancing. At current interest rate
levels, management expects that the Company's interest expense for 1995 will
decrease as a result of the 1995 Refinancing.
DISPOSITION OF ASSETS. In 1994 the Company experienced a gain on the
disposition of assets of $2.5 million compared to a loss on the disposition of
assets of $0.8 million in 1993. The gain in 1994 was related to the sale of
WAXY(FM) in March. In 1993 the Company experienced a loss on the disposition of
assets of $0.8 million related to the sale of a long-term note receivable in
June and the divestiture of its interest in the Washington Flyer Magazine in
December.
28
<PAGE>
INCOME TAX EXPENSE. In 1994 the Company had $0.1 million in income tax
expense under the alternative minimum tax rules. Management anticipates that
the Company will continue to incur income tax expenses under the alternative
minimum tax until operating loss carryforwards are substantially reduced.
EXTRAORDINARY ITEM. As a result of the 1995 Refinancing, the Company wrote
off deferred costs of $2.1 million related to the 1993 Credit Agreement in 1994.
NET INCOME. Net income for 1994 was $6.8 million, an increase of $4.5
million from that in 1993. This increase was mainly due to the effect of
increased business activity from the Company's out-of-home media operations in
which the growth in net revenue far surpassed the increase in operating
expenses, as described above. Net income as a percentage of net revenue
increased to 3.8% in 1994 from 1.4% in 1993.
1993 COMPARED WITH 1992
In order to conform to the 1994 presentation, the net revenue amounts for the
Company's broadcasting and other businesses segments have been reclassified as
stated below.
NET REVENUE. Net revenue for 1993 increased by $6.1 million, or 3.7%, to
$170.6 million from $164.5 million in 1992. Net revenue in the Company's
out-of-home media segment decreased by $3.8 million, or 4.8%, in 1993 from 1992.
This decrease was due to reduced sales volume reflecting a continued weakened
market for national advertising and the effect of Hurricane Andrew on the
Company's South Florida operations in the first and second quarters. The
Company's broadcasting segment showed an increase in net revenue of $5.3
million, or 7.6%, for 1993, even though revenue was lost as the result of the
sale of radio stations KGON/KFXX in October 1992. Net revenue from continuing
broadcasting operations (after adjusting for the sale of these broadcasting
operations) increased $7.7 million, or 11.5%, mainly due to increased rates and
sales volumes in such continuing broadcasting operations. Net revenue for the
Company's other businesses segment increased $4.5 million, or 28.9%, in 1993 as
compared with the same period in the previous year, mainly because the
SuperSonics played 17 NBA playoff games in 1993 as compared to nine games in
1992.
OPERATING EXPENSES AND OTHER INCOME. Operating expenses and other income
increased $6.9 million, or 5.5%, to $132.3 million from $125.4 million in 1992,
principally because of increases in the SuperSonics' operating costs incurred in
the 1993 NBA playoffs. Operating expenses and other income as a percentage of
net revenue increased to 77.6% for 1993 from 76.3% for 1992. In 1993, the
Company's out-of-home media operating expenses and other income increased less
than 1% from the previous year's level. Operating expenses and other income in
the Company's broadcasting segment decreased by $1.0 million or 2.5% to $39.5
million in 1993 from $40.5 million in 1992, mainly because of the exclusion of
some operating expenses for the radio stations KGON/KFXX which were sold in
October 1992. Operating expenses and other income for 1993 with respect to
continuing broadcasting operations (after adjusting for the sale of these
broadcasting operations) increased $1.2 million, or 3.1%, to $39.5 million in
1993 from $38.3 million in 1992. The other businesses segment's operating
expenses and other income increased $7.1 million, or 23.4%, to $37.5 million in
1993 from $30.4 million in 1992
29
<PAGE>
principally because of increases in the SuperSonics' operating costs incurred
through three rounds of the 1993 NBA playoffs.
OPERATING CASH FLOW. Because the increase in operating expenses and other
income exceeded the increase in revenues for the same period, Operating Cash
Flow decreased by $0.8 million or 2.0% in 1993 from 1992. The decrease in
Operating Cash Flow in the out-of-home media segment more than offset the
increase in the other businesses segments' Operating Cash Flow. As a result,
Operating Cash Flow as a percentage of net revenue decreased to 22.4% in 1993
from 23.7% in 1992.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
decreased by $1.9 million, or 13.7%, to $12.0 million in 1993 as compared to
$13.9 million in 1992. The majority of this decrease resulted from a reduction
in expenses associated with assets in the Company's broadcasting segment which
have been fully amortized or depreciated. Depreciation and amortization
expenses were further reduced by the sale of radio stations KGON/KFXX.
INTEREST EXPENSE. Interest expense for 1993 decreased by $1.4 million, or
5.9%, to $22.4 million from $23.8 million in 1992. This decrease was due mainly
to a combination of lower average interest rates and lower average debt levels
during the first nine months of 1993 as compared to the same period in 1992,
slightly offset by an increase in the last three months of 1993 due to increased
borrowing.
DISPOSITION OF ASSETS. In 1993 the Company experienced a loss on the
disposition of assets of $0.8 million compared with a gain on the disposition of
assets of $2.1 million in 1992. The loss in 1993 was related to the sale of a
long-term note receivable in June and the divestiture of its interest in the
Washington Flyer Magazine in December. In 1992 the Company realized a gain of
$1.1 million related to the sale of KGON/KFXX in Portland, Oregon, of $0.7
million related to the sale of property previously purchased for the proposed
Arena project and $0.3 million related to the sale of WBOS(FM) in Boston,
Massachusetts.
INCOME TAX EXPENSE. In 1993 the Company had $0.1 million in income tax
expense under the alternative minimum tax compared with no income tax expense in
1992 due to the utilization of operating loss carryforwards in that year.
EXTRAORDINARY ITEM. As a result of the 1993 Refinancing, the Company wrote
off deferred costs of $0.6 million related to the 1991 Credit Agreement and
certain Subordinated Note Agreements.
NET INCOME. Net income for 1993 was $2.3 million, a decrease of $1.2 million
from that in 1992. This decrease was mainly due to the Company's loss
recognition related to the disposition of assets in 1993 of $0.8 million
compared with a gain on the disposition of assets of $2.1 million in 1992. In
addition, the Company also experienced reduced Operating Cash Flow of $0.8
million, combined with the charges of $0.6 million related to the 1993
Refinancing and income tax expense of $0.1 million, as described above. Net
income as a percentage of net revenue decreased to 1.4% in 1993 from 2.1% in
1992.
LIQUIDITY AND CAPITAL RESOURCES
30
<PAGE>
On February 17, 1995, the Company completed the 1995 Refinancing to obtain
more favorable interest rate margins and repayment terms respecting its senior
bank indebtedness. In connection with the 1995 Refinancing, the Company entered
into the 1995 Credit Agreement providing for up to $65 million in borrowings
including up to $7.5 million dollars in standby letters of credit. The net
proceeds from the initial borrowing under the 1995 Credit Agreements were used
to repay all outstanding indebtedness of approximately $51.3 million under the
1993 Credit Agreement. The financial statements reflect the maturities of the
Company's long-term debt as if the 1995 Refinancing had occurred on December 31,
1994.
Under the 1995 Credit Agreement, the Company presently has approximately
$7.1 million available for borrowing under the revolving credit facility. The
1995 Credit Agreement and Subordinated Note Agreements require the consent of
the banks and other lenders prior to any material expansion of the Company's
operations.
Borrowings under the 1995 Credit Agreement bear annual interest based on
either the prime rate or LIBOR, at the Company's discretion, plus a margin
determined by the Company's total leverage ratio, as defined in the agreement.
The letter of credit facility bears interest at a rate determined by the
Company's leverage ratio. These borrowings and the Senior Notes are subject to
the Company's compliance with certain financial covenants and are secured by a
pledge of stock of the Company's subsidiaries.
The Company's working capital increased to $16.8 million at December 31, 1994
from $8.0 million at December 31, 1993. This increase was attributable mainly
to the 1995 Refinancing which reduced the current portion of long-term debt by
$9.0 million. In addition, net cash from operating activities was used to
finance capital expenditures in the amount of $8.8 million in 1994.
The Company's working capital increased to $8.0 million at December 31, 1993
from a deficiency of $17.4 million at December 31, 1992. This increase was
attributable mainly to the 1993 Refinancing which reduced the current portion of
long-term debt by $25.0 million. The Company also sold a long-term note
receivable for $4.5 million, the proceeds of which were used to reduce the
current portion of long-term debt. In addition, net cash from operating
activities was used to repay $6.5 million of long-term debt and to finance
capital expenditures in the amount of $3.5 million in 1993.
For the periods presented, the Company has financed its working capital needs
from cash provided by operating activities and the restructuring of its senior
debt. Capital expenditures for new property and equipment have been financed
with both cash provided by operating activities and long-term debt. Cash
provided by operating activities for 1994 decreased to $11.7 million from $15.1
million in 1993 mainly because of an increase in interest expense attributable
to higher average rates and an increase in average debt levels.
At December 31, 1994, the Company's capital resources consisted of $2.3
million in cash and cash equivalents and $10.0 million available under the 1995
Credit Agreement.
31
<PAGE>
The Company has recorded other assets of $3.7 million representing amounts due
from certain state agencies. Such amounts are being contested by the state
agencies. However, the Company is actively pursuing full collection of the
amounts it is owed, and believes it will ultimately be successful in these
efforts.
The Company expended $3.9 million, $3.5 million and $8.8 million for capital
additions in 1992, 1993 and 1994, respectively. The large portion of the 1994
increase was due to the construction of a practice facility for the SuperSonics.
The Company anticipates that 1995 capital expenditures consisting primarily of
construction and maintenance of billboard structures, broadcasting equipment,
and other routine capital additions will be between $4.0 million and $4.5
million. The Company is also constructing $12.5 million of leasehold
improvements in the new home of the SuperSonics, Key Arena. The construction is
expected to be completed for the start of the 1995-96 regular season.
On March 9, 1994, the Company sold radio station WAXY(FM), in Fort Lauderdale,
Florida, to Clear Channel Radio, Inc. for approximately $14.0 million in cash,
of which $13.0 million is for the assets of the radio station and $1.0 million
is for a prepaid outdoor advertising contract. At the date of sale, the net
book value of WAXY(FM) was approximately $10.5 million. The funds received from
the sale were used to reduce long-term debt.
In accordance with an agreement between the Company and Century Management,
Inc. New Century Seattle Partners, L.P. (the "Partnership") was formed for the
purpose of operating the assets of KJR(AM), KJR-FM and KUBE(FM). On July 14,
1994, the Partnership purchased certain assets of KUBE(FM) from affiliated
companies of Cook Inlet, Inc., an Alaska-based native American corporation. See
"Item 1 - Business - Broadcasting - Radio." In order to effect the purchase,
the Partnership incurred approximately $18.1 million of debt. In addition,
certain preferred distributions to other limited partners are reflected in the
Company's long-term deb. See "Notes to Consolidated Financial Statements - Note
3."
QUARTERLY VARIATIONS
The Company's results of operations may vary from quarter to quarter due in
part to the timing of acquisitions and to seasonal variations in the operations
of the broadcasting segment. In particular, the Company's net revenue and
Operating Cash Flow historically have been affected positively during the NBA
basketball season (the first, second and fourth quarters) and by increased
advertising activity in the second and fourth quarters.
TAXES
At December 31, 1994, the Company had a net operating loss carryforward for
federal income tax purposes of approximately $93.8 million and an investment tax
credit carryforward of approximately $1.4 million. These carryforwards expire
during the years 1996 to 2007.
32
<PAGE>
INFLATION
The effects of inflation on the Company's costs generally have been offset by
increases in advertising rates charged in the out-of-home media and broadcasting
segments and by increases in ticket prices for the SuperSonics.
RECENT ACCOUNTING PRONOUNCEMENTS
There are no pending changes in accounting standards that are expected to have
a material impact on the Company's financial position or results of operations.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information called for by this item is included in Item 14, pages F-1 through
F-20.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information concerning directors and certain executive officers of the
Company see the section entitled "Election of Directors" in the Company's
definitive Proxy Statement dated March 27, 1995 ("Proxy Statement") which is
incorporated herein by reference and "Executive Officers of the Registrant"
under Item 4 of this report.
ITEM 11 - EXECUTIVE COMPENSATION
For information concerning executive compensation see the section entitled
"Election of Directors" in the Proxy Statement, which information is
incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
As of March 17, 1995, Barry A. Ackerley was the only person to the Company's
knowledge owning beneficially more than 5% of the outstanding shares of Common
Stock and Class B Common Stock. For information concerning Mr. Ackerley's
security ownership and the ownership of management see
33
<PAGE>
the section entitled "Election of Directors" in the Proxy Statement, which
information is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
For information concerning certain relationships and related transactions,
see the Section entitled "Election of Directors" in the Proxy Statement, which
information is incorporated herein by reference, except for the Sections
entitled "Board Report on Executive Compensation" and "Shareholder Return
Performance Presentation".
34
<PAGE>
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a)(1) and (2) The following documents are being filed as part of this Report:
INDEX TO FINANCIAL STATEMENTS
Page
Number
------
Report of Ernst & Young LLP, independent auditors...................... F-1
Consolidated balance sheets as of December 31, 1994
and 1993............................................................. F-2
Consolidated statements of operations for the
years ended December 31, 1994, 1993 and 1992......................... F-3
Consolidated statements of stockholders' deficiency
for the years ended December 31, 1994, 1993 and 1992................. F-4
Consolidated statements of cash flows for the years
ended December 31, 1994, 1993 and 1992............................... F-5
Notes to consolidated financial statements............................. F-6
Summary of quarterly financial data (unaudited)........................ F-20
Schedules are omitted for the reason that they are not required or are not
applicable, or the required information is shown in the consolidated financial
statements or notes thereto.
35
<PAGE>
(3) EXHIBITS:
Exhibit
No. Exhibit
- ------- -------
3.1 Third Restated Certificate of Incorporation
3.2 Amendment dated May 11, 1994 to Third Restated Certificate of
Incorporation
3.3 Amended and Restated Bylaws(1)
4.1 Indenture dated October 1, 1993 between the Company and First Bank
National Association, relating to the 10 3/4% Series A Senior Secured
Notes and the 10 3/4% Senior Secured Notes Due 2003(2)
4.2 Form of Specimen 10 3/4% Senior Secured Note Due 2003((2))
10.1 Credit Agreement dated as of February 17, 1995, by and among First
Union National Bank of North Carolina, Natwest Bank, N.A.,
Seattle-First National Bank, Union Bank and Long-Term Credit Bank of
Japan, Ltd.
10.2 Composite Conformed Copies of Note Agreement between the Company and
certain insurance companies, dated as of December 1, 1988(1)
10.3 Composite Conformed Copies of Note Agreement between the Company and
certain insurance companies, dated as of December 1, 1989(3)
10.4 Amendment No. 1 dated October 18, 1991 to Note Agreements dated
December 1, 1988 and December 1, 1989(4)
10.5 Agreements of Waiver and Amendment dated as of September 30, 1990,
relating to the Note Agreements(5)
10.6 Implementation and Waiver Agreement dated October 18, 1991(4)
10.7 Interest Rate Conversion Agreement dated June 20, 1989 between the
Company and The Bank of California, N.A.(3)
10.8 ISDA Master Agreement dated as of June 23, 1994 between National
Westminster Bank USA and Ackerley Communications, Inc.
10.10 The Company's Employee Stock Option Plan, as amended and restated as
of June 8, 1988(6)
10.11 Amendment to the Company's Employee Stock Option Plan dated December
17, 1993(7)
10.12 Amendment to the Company's Employee Stock Option Plan dated February
16, 1994(7)
10.13 Form of Incentive Stock Option Agreement (without escrow)(6)
36
<PAGE>
10.14 Form of Non-Incentive Stock Option Plan, as amended and restated as of
June 8, 1988(6)
10.15 Agreement between King County and Ackerley Communications, Inc. dated
April 17, 1992, and addendum dated April 22, 1992, for the sale of
12.5 acre parcel of land(8)
10.16 Asset Purchase Agreement dated as of July 27, 1992, between Ackerley
Communications, Inc. and KSGO/KGON, Inc., and APOGEE Communications,
Inc.(9)
10.17 Purchase Agreement dated October 1, 1993 between the Company and The
First Boston Corporation(2)
10.18 Registration Agreement dated October 1, 1993 between the Company and
The First Boston Corporation(2)
10.19 Pledge Agreement dated as of October 1, 1993 between the Company and
First Trust of California, National Association(2)
10.20 Asset Purchase Agreement dated December 17, 1993 by and between
GRADH-105, Inc., Ackerley Radio of Florida, Inc., Clear Channel Radio,
Inc. and Clear Channel Radio Licenses, Inc.(7)
10.21 Amended and Restated Limited Partnership Agreement of New Century
Seattle Partners, L.P. dated July 14, 1994(10)
10.22 Premises Use and Occupancy Agreement between The City of Seattle and
SSI Sports, Inc. dated March 2, 1994
21.1 Subsidiaries of the Company
23.1 Consent of Ernst & Young LLP
24.1 Power of Attorney of Michel C. Thielen dated March 20, 1995
____________
(1) Incorporated by reference to Exhibits 3.3 and 10.12, respectively, to the
Company's 1988 Annual Report on Form 10-K, File No. 0-16676
(2) Incorporated by reference to Exhibits 4.1, 4.2, 10.19, 10.20 and 10.21 of
the Company's Registration Agreement on Form S-1, File No. 33-70936
(3) Incorporated by reference to Exhibits 10.13 and 10.16, respectively, to the
Company's 1989 Annual Report on Form 10-K, File No. 1-10321
(4) Incorporated by reference to Exhibits 10.9 and 10.10, respectively, to
the Company's 1991 Annual Report on Form 10-K, File No. 1-10321
(5) Incorporated by reference to Exhibit 10.20 to the Company's 1990 Annual
Report on Form 10-K, File No. 1-10321
37
<PAGE>
(6) Incorporated by reference to Exhibits 4.2, 4.3 and 4.4, respectively, to
the Company's Registration Statement on Form S-8, File No. 33-22545
(7) Incorporated by reference to Exhibits 10.11, 10.12 and 10.23, respectively,
to the Company's 1993 Annual Report on Form 10-K, File No. 1-10321
(8) Incorporated by reference to Exhibit 10.21 to the Company's 1992 Annual
Report on Form 10-K, File No. 1-10321
(9) Incorporated by reference to Exhibit 6(a) to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1992, File No. 1-10321
(10) Incorporated by reference to Exhibit 10 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1994, File No. 1-10321
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter ending
December 31, 1994
(c) Exhibits required by Item 601 of Regulation S-K are being filed herewith.
See Item 14(a)(3)
(d) Financial statements required by Regulation S-X are being filed herewith.
See Item 14(a) (1) and (2)
38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 23rd day of
March, 1995.
ACKERLEY COMMUNICATIONS, INC.
By: /S/ BARRY A. ACKERLEY
-----------------------------------------
Barry A. Ackerley, Chairman of the Board
and Chief Executive Officer
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 Company
and in the capacities and on the dates indicated, on the 23rd day of March,
1995.
A Majority of the Board of Directors: Principal Executive Officer:
/S/ BARRY A. ACKERLEY /S/ BARRY A. ACKERLEY
- --------------------------- ----------------------------------------
Barry A. Ackerley, Chairman Barry A. Ackerley, Chairman of the Board
of the Board and Chief Executive Officer
Principal Financial Officer:
/S/ DENIS M. CURLEY
----------------------------------------
Denis M. Curley, Executive Vice President
and Chief Financial Officer, Treasurer
MICHEL C. THIELEN* and Secretary
- ------------------
Michel C. Thielen, Director
Principal Accounting Officer:
*By: /S/ BARRY A. ACKERLEY /S/ KEITH W. RITZMANN
----------------------- ----------------------------------------
Barry A. Ackerley Keith W. Ritzmann, Vice President
Attorney-in-Fact and Controller
39
<PAGE>
ACKERLEY COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
------------
ASSETS (Note 7)
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,288 $ 6,732
Accounts receivable, net of allowance for doubtful
accounts of $1,160 in 1994 and $941 in 1993 (Note 4) 42,553 37,237
Current portion of broadcast rights 4,266 4,605
Prepaid and other current assets 7,310 7,625
--------- --------
Total current assets 56,417 56,199
Property and equipment, net (Note 5) 64,489 61,616
Intangibles (Note 6) 36,716 31,769
Other assets 13,161 10,907
--------- --------
$170,783 $160,491
--------- --------
--------- --------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 5,788 $ 7,463
Accrued interest 4,799 3,979
Other accrued liabilities 7,575 8,721
Deferred revenue 13,695 11,504
Current portion of long-term debt (Note 7) 7,777 16,562
--------- --------
Total current liabilities 39,634 48,229
Long-term debt (Note 7) 227,107 215,114
--------- --------
Total liabilities 266,741 263,343
Commitments and contingencies (Note 11)
Stockholders' deficiency: (Note 10)
Common stock, par value $.01 per share-authorized
50,000,000 shares, issued 10,937,379 at December 31,
1994, and 10,901,379 shares at December 31, 1993,
and outstanding 9,562,433 shares at December 31, 1994,
and 9,526,433 at December 31, 1993 109 109
Class B common stock, par value $.01 per share-
authorized 6,972,230 shares, issued and
outstanding 5,901,861 shares at December 31, 1994,
and 5,904,111 at December 31, 1993 59 59
Capital in excess of par value 3,007 2,945
Deficit (89,044) (95,876)
Less common stock in treasury, at cost (10,089) (10,089)
--------- --------
Total stockholders' deficiency (95,958) (102,852)
--------- --------
$170,783 $160,491
--------- --------
--------- --------
</TABLE>
See accompanying notes. F-2
<PAGE>
ACKERLEY COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
----------
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------
1994 1993 1992
---- ---- ----
(In thousands, except
per share amounts)
<S> <C> <C> <C>
Revenue $ 211,728 $ 192,958 $ 187,295
Less agency commissions and discounts 25,626 22,341 22,769
---------- ---------- ----------
Net revenue 186,102 170,617 164,526
Expenses and other income:
Operating expenses 143,469 132,774 125,441
Disposition of assets (2,506) 759 (2,147)
Amortization 3,794 4,415 5,229
Depreciation 7,089 7,603 8,686
Interest expense 25,909 22,431 23,809
Other (income) expense (657) (458) 13
---------- ---------- ----------
Total expenses and other income 177,098 167,524 161,031
Income before income taxes
and extraordinary items 9,004 3,093 3,495
Income taxes (Note 8) 73 133 1,188
---------- ---------- ----------
Income before extraordinary items 8,931 2,960 2,307
Extraordinary items: loss on debt
extinguishment in 1994 and 1993; utilization
of tax loss carryforward in 1992 (2,099) (625) 1,188
---------- ---------- ----------
Net income $ 6,832 $ 2,335 $ 3,495
---------- ---------- ----------
---------- ---------- ----------
Income per common share,
before extraordinary items $ .57 $ .19 $ .15
Extraordinary items (.13) (.04) .08
---------- ---------- ----------
Net income per common share $ .44 $ .15 $ .23
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of shares 15,742 15,602 15,452
</TABLE>
See accompanying notes. F-3
<PAGE>
ACKERLEY COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
-----------
<TABLE>
<CAPTION>
Capital Common
Class B in excess stock in
Common common of par treasury
stock stock value Deficit (at cost)
----- ------- --------- ------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1992 $ 109 $ 59 $2,904 $(101,706) $(10,089)
Net income -- -- -- 3,495 --
----- ---- ------ --------- ----------
Balance, December 31, 1992 109 59 2,904 (98,211) (10,089)
Exercise of stock options
(Note 10) -- -- 41 -- --
Net income -- -- -- 2,335 --
----- ---- ------ --------- ----------
Balance, December 31, 1993 109 59 2,945 (95,876) (10,089)
Exercise of stock options
(Note 10) -- -- 62 -- --
Net income -- -- -- 6,832 --
----- ---- ------ --------- ---------
Balance, December 31, 1994 $ 109 $ 59 $3,007 $ (89,044) $ (10,089)
----- ---- ------ --------- ----------
----- ---- ------ --------- ----------
</TABLE>
See accompanying notes. F-4
<PAGE>
ACKERLEY COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------------
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 178,524 $ 166,218 $ 160,183
Cash paid to suppliers and employees (144,073) (131,972) (126,174)
Interest paid, net of amount capitalized (22,784) (19,167) (25,363)
------------ ------------ -----------
Net cash provided by operating activities 11,667 15,079 8,646
Cash flows from investing activities:
Proceeds from the sale of properties 13,306 -- 16,969
Payment for acquisitions (17,397) -- --
Capital expenditures (8,794) (3,478) (3,864)
Proceeds from sale of note receivable -- 4,500 --
Other, net (6,162) (6,499) (1,765)
------------ ------------ -----------
Net cash provided by (used in) investing activities (19,047) (5,477) 11,340
Cash flows from financing activities:
Borrowings under Credit Agreements 30,126 71,875 --
Borrowings under senior notes -- 120,000 --
Payments under Credit Agreements (27,180) (157,625) (22,175)
Payments under subordinated notes -- (45,000) --
Other, net (10) 872 2
------------ ------------ -----------
Net cash provided by (used in) financing activities 2,936 (9,878) (22,173)
------------ ------------ -----------
Net decrease in cash and cash equivalents (4,444) (276) (2,187)
Cash and cash equivalents at beginning of period 6,732 7,008 9,195
------------ ------------ -----------
Cash and cash equivalents at end of period $ 2,288 $ 6,732 $ 7,008
------------ ------------ -----------
------------ ------------ -----------
Reconciliation of net income to net cash provided by
operating activities:
Net income applicable to common shares $ 6,832 $ 2,335 $ 3,495
Adjustments to reconcile net income to net cash
provided by operating activities:
Income taxes -- 133 --
Disposition of assets (2,506) 759 (2,147)
Loss on debt extinguishment 2,099 625 --
Depreciation and amortization 10,883 12,018 13,915
Gain on sale of property and equipment (209) (722) (209)
Changes in assets and liabilities, net of effects
from acquisitions:
Accounts receivable (6,691) (5,478) (1,517)
Other current assets 315 3,063 (458)
Accounts payable and accruals (2,821) (683) (384)
Accrued interest 820 2,345 (2,838)
Deferred revenue 2,191 1,632 893
Other, net 754 (948) (2,104)
------------ ------------ -----------
Net cash provided by operating activities $ 11,667 $ 15,079 $ 8,646
------------ ------------ -----------
------------ ------------ -----------
Supplemental disclosure of noncash
transactions - broadcast rights acquired
and broadcast obligations assumed $ 6,020 $ 6,854 $ 7,475
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
See accompanying notes. F-5
<PAGE>
ACKERLEY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION - The accompanying financial statements
consolidate the accounts of Ackerley Communications, Inc. and its subsidiaries
(the "Company"), substantially all of which are wholly owned. Minority interest
is not material. All significant intercompany transactions have been eliminated
in consolidation.
(b) REVENUE RECOGNITION - Display advertising revenue is recognized
ratably on a monthly basis over the period in which advertisement displays are
posted on the advertising structures or in the display units. Broadcast revenue
is recognized in the period in which the advertisements are aired. Payments
from clients, which are received in excess of one month's advertising, are
recorded as deferred revenue. Ticket payments are recorded as deferred revenue
when received and recognized as revenue ratably as home basketball games are
played.
(c) PROPERTY AND EQUIPMENT - Property and equipment are carried on the
basis of cost. Maintenance, repairs, and renewals, which neither materially add
to the value of the property nor appreciably prolong its life, are charged to
expense as incurred. When operating property and equipment are retired or sold,
any funds received are credited to an asset pool with no gain or loss
recognized, unless all assets in the pool are fully depreciated. Depreciation
of property and equipment is provided on the straight-line and accelerated
methods over the estimated useful lives of five to 40 years.
(d) INTANGIBLE ASSETS - Intangible assets are carried on the basis of cost
and are amortized principally on the straight-line method over estimated useful
lives, ranging from one to 40 years. Franchises are recorded at cost and
represent the acquisition cost of the rights to operate display units in
airports. Goodwill represents the cost of acquired businesses in excess of
amounts assigned to certain tangible and intangible assets at the dates of
acquisition.
(e) BROADCAST RIGHTS AND OBLIGATIONS - Television films and syndication
rights acquired under license agreements (broadcast rights) and the related
obligations incurred are recorded as assets and liabilities at the time the
rights are available for broadcasting based upon the gross amount of the
contract. The capitalized costs are amortized on an accelerated basis over the
contract period
F-6
<PAGE>
ACKERLEY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------
or the estimated number of showings, whichever results in the greater aggregate
monthly amortization. Broadcast rights are carried at the lower of unamortized
cost or net realizable value. The estimated cost of broadcast rights to be
amortized during the next year has been classified as a current asset.
(f) DEFERRED COMPENSATION - Certain player and other personnel contracts
include deferred compensation provisions. The present value of such deferred
compensation is recorded as an obligation and charged to operating expenses
ratably over the contract period.
(g) INCOME PER COMMON SHARE - Income per common share is calculated by
dividing net income by the weighted average number of shares of common stock,
Class B common stock, and if dilutive, common stock equivalents outstanding
during the period.
(h) CASH EQUIVALENTS - The Company considers investments in highly liquid
debt instruments with a maturity of three months or less when purchased to be
cash equivalents.
(i) CONCENTRATION OF CREDIT RISK AND FINANCIAL INSTRUMENTS - The Company
sells advertising to local and national companies throughout the United States.
The Company performs ongoing credit evaluations of its customers and generally
does not require collateral. The Company maintains an allowance for doubtful
accounts at a level which management believes is sufficient to cover potential
credit losses. The Company invests its excess cash in short-term investments
with major banks. The Company has not experienced any losses on these
investments. The carrying value of financial instruments, which include cash,
receivables, payables, and long-term debt, approximates market value at December
31, 1994.
The Company uses interest rate swap and cap agreements to modify the
interest rate characteristics of its long-term debt and attempts to effectively
maintain a portion of the debt with floating interest rates. These agreements
generally involve the exchange of fixed or floating rate payment obligations
without an exchange of the underlying principal amount. The differential to be
paid or received is accrued as interest rates change and is recognized as an
adjustment to interest expense related to the debt. The related amount payable
to or receivable from counterparties is
<PAGE>
ACKERLEY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------
included in other current liabilities or assets. The fair values of the swap
and cap agreements are not recognized in the financial statements.
(j) RECLASSIFICATIONS - Certain prior year amounts have been
reclassified to conform to the 1994 presentation.
2. DISPOSITIONS
On March 9, 1994, the Company sold radio station WAXY(FM) in Fort
Lauderdale, Florida to Clear Channel Radio, Inc. for approximately $14.0 million
in cash, of which $13 million was for the net assets of the radio station and
$1.0 million was for a prepaid outdoor advertising contract. The $2.5 million
gain on the sale is included in disposition of assets. The net book value of
WAXY(FM) at the date of the sale was approximately $10.5 million.
During 1993, the Company sold a long-term note receivable originally
obtained in connection with the sale of a broadcast operation. The difference
between the face amount of the note and the sales proceeds of approximately
$0.5 million is reflected as a loss on disposition of assets in 1993.
In 1992, the Company sold certain assets at its Portland, Oregon broadcast
location, resulting in a gain of $1.1 million included in disposition of assets.
In 1991, the Company incurred losses related to disposition of assets totaling
$22.2 million, of which $5.6 million related to the sale of land and buildings,
$10.5 million related to the sale of WBOS(FM), and $6.1 million related to
certain intangible assets at WAXY(FM). These transactions, which were finalized
in 1992, ultimately resulted in a gain in 1992 of $1 million included in
disposition of assets.
3. INVESTMENT IN RADIO PARTNERSHIP
The Company entered into an agreement with Century Management, Inc. which
resulted in the formation of New Century Seattle Partners, L.P. (the
"Partnership") for the purpose of operating the assets of KJR(AM), KJR-FM and
KUBE(FM). This venture was approved by the Federal Communications Commission
("FCC") and closed on July 14, 1994, at which time the Company contributed the
assets of KJR(AM) and KJR-FM, with a book value of $5.5 million, to the
Partnership.
<PAGE>
ACKERLEY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------
Also on July 14, 1994, the Partnership purchased the assets of KUBE(FM) for
approximately $17.7 million financed by bank borrowings.
Century Management, Inc. is the general partner of the Partnership and KJR
Radio, Inc., a wholly owned subsidiary of the Company, is a limited partner
holding approximately 97% of the equity interests in the Partnership after
payment of certain preferred distributions to the other limited partners over
the next three to four years.
The following table summarizes on an unaudited, pro forma basis the
consolidated results of operations of the Company for 1994, 1993, and 1992
giving pro forma effect to the investment in New Century Seattle Partners, L.P.
as if the investment had been made on January 1, 1992. These pro forma
consolidated statements do not necessarily reflect the results of operations
which would have occurred had such investment taken place on the date indicated.
Due to the Company's 97% ownership interest in the partnership, the result of
the partnership's operations after the actual date of investment are included in
the Company's consolidated balance sheets and statements of operations.
Minority interests are not material.
<TABLE>
<CAPTION>
(In thousands except per share amounts)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net revenue $ 188,945 $ 175,537 $ 169,044
Operating expenses 182,762 174,670 167,600
Income before extraordinary items 8,282 1,492 256
Net income applicable to common shares 6,183 867 1,444
Net income per common share .39 .06 .09
</TABLE>
4. ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------ -------
<S> <C> <C> <C>
Balance at beginning of year $ 941 $ 910 $ 950
Additions charged to operating expense 1,375 811 1,299
Write-offs of receivables, net of recoveries (1,156) (780) (1,339)
------- ------ -------
Balance at end of year $ 1,160 $ 941 $ 910
------- ------ -------
</TABLE>
<PAGE>
ACKERLEY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
5. PROPERTY AND EQUIPMENT
At December 31, 1994 and 1993, property and equipment consisted of the
following:
<TABLE>
<CAPTION>
Estimated
1994 1993 useful life
-------- -------- -----------
(In thousands)
<S> <C> <C> <C>
Land $ 6,920 $ 6,929
Advertising structures 73,687 71,287 9-15 years
Broadcast equipment 48,121 47,782 10 years
Building and improvements 25,289 21,607 20-40 years
Office furniture and equipment 14,328 13,436 10 years
Transportation and other equipment 9,379 9,282 5-15 years
-------- --------
177,724 170,323
Less accumulated depreciation 113,235 108,707
-------- --------
$64,489 $61,616
-------- --------
-------- --------
</TABLE>
6. INTANGIBLES
At December 31, 1994 and 1993, intangibles consisted of the following:
<TABLE>
<CAPTION>
Estimated
1994 1993 useful life
------- ------- -----------
(In thousands)
<S> <C> <C> <C>
Goodwill $32,572 $23,438 15-40 years
Favorable leases and contracts 21,294 23,594 1-10 years
Broadcasting licenses and agreements 14,950 16,190 1-10 years
Employment contracts 14,054 14,054 1-7 years
Franchises 13,130 13,130 1-13 years
Advertising client base 8,005 8,005 5 years
Other 5,186 5,943 1-30 years
Music and film libraries 1,441 1,441 1-10 years
Noncompete agreements and other covenants 2,300 2,300 5 years
Program development 1,112 1,112 6-15 years
-------- --------
114,044 109,207
Less accumulated amortization 77,328 77,438
-------- --------
$36,716 $31,769
-------- --------
-------- --------
</TABLE>
<PAGE>
ACKERLEY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
The intangible assets described above were recorded as a result of various
acquisitions of businesses including $17.0 million of goodwill in 1994 related
to the acquisition of KUBE(FM) as disclosed in note 3 to the consolidated
financial statements. Cost represents the net assets' appraised value or
management's best estimate of the fair value at the dates of acquisition.
7. DEBT
Long-term debt at December 31, 1994 and 1993 reflected the following:
<TABLE>
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Credit Agreements $ 49,070 $ 64,250
Senior notes 120,000 120,000
Subordinated notes payable 35,000 35,000
Partnership debt 18,076 --
Deferred employment compensation, net of
imputed interest discount of $1,528 in 1994
and $1,480 in 1993 4,872 3,687
Other 7,866 8,739
-------- --------
234,884 231,676
Less amounts classified as current 7,777 16,562
-------- --------
$ 227,107 $ 215,114
-------- --------
-------- --------
</TABLE>
Aggregate annual maturities of long-term debt during the five-year period
ending December 31, 1999, are as follows (in thousands):
<TABLE>
<CAPTION>
Deferred
Credit compensation
Agreements and other
---------- ---------
<S> <C> <C>
1995 $ 1,711 $ 6,066
1996 7,945 2,621
1997 15,660 1,102
1998 29,356 2,143
1999 27,005 282
</TABLE>
<PAGE>
ACKERLY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
---------
On February 17, 1995, the Company completed a refinancing of its senior
bank debt. The refinancing consisted of the repayment of outstanding
indebtedness of approximately $51.3 million under the 1993 Credit Agreement, and
the execution of the 1995 Credit Agreement and the initial borrowing thereunder
of $52.0 million. Losses related to the extinguishment of debt are reflected as
an extraordinary item in the 1994 statement of operations. Aggregate annual
maturities reflect the refinancing as if it occurred at December 31, 1994.
The 1995 Credit Agreement provides for borrowings up to $65.0 million from
five banks, which includes the availability of up to $7.5 million of a letter of
credit facility. Usage of the letter of credit facility reduces total available
borrowings. At December 31, 1994, $49.1 million of borrowings were outstanding,
and $5.9 million of the letter of credit facility was utilized. Interest on
borrowings is payable quarterly based on either the prime rate or LIBOR, at the
discretion of the Company, plus a margin determined by the Company's total
leverage ratio, as defined in the 1995 Credit Agreement. At December 31, 1994,
interest on borrowings was payable at LIBOR (6.0% at December 31, 1994) plus
2.25%. Interest on the letter of credit facility is payable quarterly at a
rate determined by the Company's total leverage ratio. At December 31, 1994,
interest on the letter of credit facility was payable at 2.25%. Based on the
balance outstanding, principal payments are due quarterly from June 30, 1995,
through June 30, 2000. The 1995 Credit Agreement has certain restrictive
covenants which require, among other things, that the Company maintain certain
debt coverage ratios. In addition, the Company is restricted as to borrowings,
the amount of dividend payments on common stock, stock repurchases, and sales of
assets.
The Company has $120 million borrowed at December 31, 1994 under senior
secured notes, with an effective interest rate of 10.75%. Interest payments are
due semiannually in April and October. All principal is due in a single payment
of $120 million on October 1, 2003. The senior notes include certain
restrictive covenants similar to the 1995 Credit Agreement mentioned above.
The Company has $35 million borrowed at December 31, 1994 from several
insurance companies under various subordinated notes payable agreements, with
effective interest rates ranging from 10.48% to 11.2%. Interest payments are
due quarterly. Principal payments of $2.5 million, $12.5 million, $10 million,
and $10 million are due in 1997 through 2000, respectively. The
F-12
<PAGE>
ACKERLY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
---------
subordinated notes payable agreements include certain restrictive covenants
similar to the 1995 Credit Agreement mentioned above.
All outstanding stock of the Company's subsidiaries is pledged as
collateral for the 1995 Credit Agreement and senior notes; accordingly,
substantially all of the Company's assets are effectively pledged as collateral.
At December 31, 1994, the Company had outstanding four interest rate
contracts with various financial institutions having a notional principal amount
of $51.5 million. The Company's risk in these transactions is the cost of
replacing, at current market rates, these contracts in the event of default by
the counterparty. Management believes the risk of incurring such losses is
remote.
8. INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by FASB
Statement No. 109, "Accounting for Income Taxes." There was no cumulative effect
on income of adopting Statement No. 109 as of January 1, 1993, as the Company
had significant net operating loss carryforwards for tax purposes. At December
31, 1994, the Company has net operating loss carryforwards of approximately
$93.8 million that expire in the years 1999 through 2007 and investment tax
credit carryforwards of approximately $1.4 million that expire in the years 1996
through 2000.
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.
F-13
<PAGE>
ACKERLY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------
Significant components of the Company's deferred tax liabilities and
assets are as follows (amounts in thousands):
<TABLE>
<CAPTION>
December 31,
----------------------
1994 1993
---- ----
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation $ 8,846 $ 9,229
Other - 615
-------- --------
Total deferred tax liabilities 8,846 9,844
Deferred tax assets:
Net operating loss carryforwards 35,867 34,595
Book over tax amortization 1,795 2,356
Asset valuation allowances 865 2,655
Tax credit carryforwards 1,538 1,419
Deferred compensation agreements 1,672 1,410
Accrued bonuses and vacation 290 647
Other 664 461
-------- --------
Total deferred tax assets 42,691 43,543
Valuation allowance for deferred tax assets (33,845) (33,699)
-------- --------
Net deferred tax assets 8,846 9,844
-------- --------
Net deferred taxes $ 0 $ 0
-------- --------
-------- --------
</TABLE>
Significant components of the provision for income taxes attributable to
continuing operations are as follows (amounts in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
1994 1993
---- ----
<S> <C> <C>
Current:
Federal $ 68 $ 125
State 5 8
-------- -------
73 133
Deferred - -
-------- -------
Provision for income taxes $ 73 $ 133
-------- -------
-------- -------
</TABLE>
F-14
<PAGE>
ACKERLY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
---------
The reconciliation of income taxes attributable to continuing operations
computed at the U.S. federal statutory tax rate to income tax expense is as
follows (amounts in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
1994 1993
---- ----
<S> <C> <C>
Tax at U.S. statutory rate (34%) $2,348 $ 1,052
State income taxes, net of federal benefit
and other 283 132
Net operating loss carryforwards (2,626) (1,176)
Alternative minimum tax 68 125
------ -------
Provision for income taxes $ 73 $ 133
------ -------
------ -------
</TABLE>
The Company utilized net operating loss carryforwards to completely
offset its 1992 tax expense.
9. EMPLOYEE BENEFIT PLAN
The Company has a voluntary defined contribution 401(k) savings and
retirement plan for the benefit of its nonunion employees, who may contribute
from 2% to 15% of their compensation. This amount, plus a matching amount up to
4% provided by the Company, is contributed to the plan ($700,000 in 1994,
$611,000 in 1993, and $574,000 in 1992). The Company may also make an
additional voluntary contribution to the plan.
10. STOCKHOLDERS' DEFICIENCY
The Class B common stock has the same rights as common stock, except
that the Class B common stock has ten times the voting rights of common stock
and is restricted as to its transfer. The Class B common stock may be converted
into common stock at any time at the option of the stockholder.
Between January and June 1981, the Company agreed to sell shares of its
common stock and Class B common stock to key employees and officers at fair
market value at the time the agreements
F-15
<PAGE>
ACKERLY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
were executed. The stock is issued upon payment to the Company of the agreed
purchase price. At December 31, 1993, rights to purchase 84,375 shares of
common stock and Class B common stock were outstanding at prices ranging from
$1.83 to $2.00 per share (an aggregate of $319,842). At December 31, 1994,
rights to purchase 67,500 shares of common stock and Class B common stock were
outstanding at prices ranging from $1.83 to $4.00 per share (an aggregate of
$258,228). In 1994, rights to purchase 16,875 shares of common and 16,875
shares of Class B common were exercised at an average price of $1.8256 per
share.
The Company's Employee Stock Option Plan (the "Plan") was approved by
the Board of Directors and the stockholders of the Company in 1983. In 1994,
the Plan was amended to extend the term of the plan and to increase the amount
of common stock reserved for issuance to 500,000 shares. In connection with the
Class B common stock dividend in June 1987, the Company amended the Plan to
provide for the distribution of one share of Class B common stock for each share
of common stock subject to outstanding options under the Plan on such date,
which distribution occurs at the time an optionee exercises an option.
At December 31, 1994, options to purchase 246,000 shares of common
stock and 10,000 shares of Class B common stock were outstanding under the Plan
at prices ranging from $1.375 to $9.50 (an aggregate of $495,750). Options to
purchase 16,732 and 10,000 shares of common stock and Class B common stock were
exercisable at December 31, 1993. Options to purchase 20,000 and 10,000 shares
of common stock and Class B common stock were exercisable at December 31, 1994.
Options to purchase 6,000 shares were exercised in 1993 at a price of $3.42 per
share. No options were exercised in 1994.
11. COMMITMENTS AND CONTINGENCIES
The Company is involved in litigation with various municipalities and
regulatory agencies as the result of condemnation proceedings and licensing and
permit renewal disputes, which could result in the removal of advertising
structures. While it is not possible to forecast the outcome of the various
actions, it is management's opinion that such actions will not result in any
material adverse effect on the results of operations or financial condition of
the Company.
F-16
<PAGE>
ACKERLEY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
The Company has recorded other assets of $3.7 million representing
amounts due from certain state agencies. Such amounts are being contested by
the state agencies. However, the Company is actively pursuing full collection
of the amounts it is owed and believes it will ultimately be successful in these
efforts.
The Company incurred expenses of $288,000, $298,000, and $165,000 in
1994, 1993, and 1992, respectively, for legal services provided by a law firm,
one of whose partners is an officer of the Company. The Company has incurred
transportation costs of $2,001,000 and made advance payments of $92,000 at
December 31, 1994, to a company controlled by the Company's major stockholder.
The Company has employment contracts extending beyond December 31,
1994. Most of these contracts require that payments continue to be made if the
individual should be unable to perform because of death or disability. Future
minimum obligations under these contracts are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1995 $ 25,709
1996 22,752
1996 13,835
1998 11,761
1999 10,883
Later years 29,433
--------
$114,373
--------
--------
</TABLE>
The Company is required to make the following minimum operating lease
payments for equipment and facilities under noncancelable lease agreements which
expire in more than one year as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1995 $ 1,464
1996 1,020
1997 799
1998 685
1999 512
Later years 433
-------
$ 4,913
-------
-------
</TABLE>
<PAGE>
ACKERLEY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
Rent expense for operating leases for the years ended December 31, 1994,
1993, and 1992 aggregated $2,609,000, $3,007,000, and $3,172,000, respectively.
The Company is required to make the following minimum display
advertising franchise payments which expire in more than one year as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
1995 $11,455
1996 8,864
1997 7,735
1998 2,828
1999 260
-------
$31,142
-------
-------
</TABLE>
Franchise fee expense for the years ending December 31, 1994, 1993, and
1992 aggregated $17,551,000, $17,945,000, and $17,753,000, respectively.
<PAGE>
ACKERLEY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
12. INDUSTRY SEGMENT INFORMATION
The Company is engaged in three business segments: out-of-home media,
broadcasting, and other. Selected financial information for these segments is
presented as follows (in thousands):
<TABLE>
<CAPTION>
Out-of-home Broad-
media casting Other Consolidated
----------- -------- -------- ------------
YEAR ENDED DECEMBER 31, 1994:
<S> <C> <C> <C> <C>
Net revenue $ 85,436 $ 81,559 $ 19,107 $186,102
-------- -------- -------- --------
-------- -------- -------- --------
Operating cash flow before gain (expenses) listed below: $ 27,028 $ 37,229 $(20,967) 43,290
Disposition of assets - 2,506 - 2,506
Depreciation and amortization (5,297) (4,954) (632) (10,883)
-------- -------- -------- --------
Income (loss) before interest, income taxes, and
extraordinary item $ 21,731 $ 34,781 $(21,599) 34,913
-------- -------- --------
-------- -------- --------
Interest expense 25,909
--------
Income before taxes and extraordinary item $ 9,004
--------
--------
Identifiable assets $ 54,291 $ 86,952 $ 29,540 $170,783
-------- -------- -------- --------
-------- -------- -------- --------
Capital expenditures, net of retirements
and disposals $ 2,709 $ 2,036 $ 3,990 $ 8,735
-------- -------- -------- --------
-------- -------- -------- --------
YEAR ENDED DECEMBER 31, 1993:
Net revenue $ 74,876 $ 75,521 $ 20,220 $170,617
-------- -------- -------- --------
-------- -------- -------- --------
Operating cash flow before gain (expenses) listed below: $ 19,541 $ 35,998 $(17,238) $ 38,301
Disposition of assets - - (759) (759)
Depreciation and amortization (5,517) (5,962) (539) (12,018)
-------- -------- -------- --------
Income (loss) before interest, income taxes, and
extraordinary item $ 14,024 $ 30,036 $(18,536) 25,524
-------- -------- --------
-------- -------- --------
Interest expense (22,431)
--------
Income before taxes and extraordinary item $ 3,093
--------
--------
Identifiable assets $ 53,984 $ 74,233 $ 32,274 $160,491
-------- -------- -------- --------
-------- -------- -------- ---------
Capital expenditures, net of retirements and disposals $ 856 $ 1,966 $ 656 $ 3,478
-------- -------- -------- --------
-------- -------- -------- ---------
YEAR ENDED DECEMBER 31, 1992:
Net revenue $ 78,652 $ 70,190 $ 15,684 $164,526
-------- -------- -------- --------
-------- -------- -------- --------
Operating cash flow before gain (expenses) listed below: $ 24,082 $ 29,702 $(14,711) $ 39,073
Disposition of assets - 1,446 701 2,147
Depreciation and amortization (5,581) (7,842) (493) (13,916)
-------- -------- -------- --------
Income (loss) before interest, income taxes, and
extraordinary item $ 18,501 $ 23,306 $(14,503) 27,304
-------- -------- --------
-------- -------- --------
Interest expense (23,809)
--------
Income before taxes and extraordinary item $ 3,495
--------
--------
Identifiable assets $ 57,141 $ 75,258 $ 33,425 $165,824
-------- -------- -------- --------
-------- -------- -------- --------
Capital expenditures, net of retirements and disposals $ 2,899 $ 384 $ 581 $ 3,864
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
F-19
<PAGE>
ACKERLEY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
The "Other" segment consists of basketball operations (other
than the basketball team's TV and radio operations which are
included in the "Broadcasting" segment) and the Corporate office in
1994, 1993, and 1992 as well as an airport magazine in 1993 and
1992. Net revenue for the "Other" segment consists principally of
revenues from the basketball operations.
13. SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table sets forth a summary of the quarterly results of
operations for the years ended December 31, 1994 and 1993 (in thousands except
per share information):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1994
- ----
Net revenue $48,095 $43,199 $37,982 $56,826
Operating cash flow before depreciation,
amortization, and interest expense 7,756 11,120 9,677 14,737
Net income before extraordinary item 1,565 2,292 543 4,531
Net income 1,565 2,292 543 2,432
Net income per share before
extraordinary item .10 .15 .03 .29
Net income per share .10 .15 .03 .16
1993
- ----
Net revenue $43,374 $45,480 $33,806 $47,957
Operating cash flow before depreciation,
amortization, interest expense, and
loss on disposition 5,696 12,437 8,527 11,641
Net income (loss) before extraordinary item (2,166) 4,407 (25) 744
Net income (loss) (2,166) 4,407 (25) 119
Net income (loss) per share before
extraordinary item (.14) .29 - .04
Net income (loss) per share (.14) .29 - -
</TABLE>
F-20
<PAGE>
CONFORMED COPY
THIRD RESTATED
CERTIFICATE OF INCORPORATION
OF
ACKERLEY COMMUNICATIONS, INC.
The present name of this corporation is Ackerley Communications, Inc. (the
"Corporation"). The Corporation was incorporated under the name Ackerley
Incorporated. By adopting this Third Restated Certificate of Incorporation, the
Second Restated Certificate of Incorporation is being further amended by
deleting all references to the Nonvoting Common and Preferred Stock and the
designation of all rights and preferences with respect thereto, and by making
certain other technical and punctuational changes. The original Certificate of
Incorporation of the Corporation was filed on June 9, 1978. This Third Restated
Certificate of Incorporation was duly proposed by the directors and adopted by
the stockholders of the Corporation in accordance with the provisions of
Sections 245, 242, and 228 of the Delaware General Corporation Law.
The Second Restated Certificate of Incorporation of the Corporation is
hereby amended and restated to read in full as follows:
FIRST: The name of the Corporation is Ackerley Communications, Inc.
SECOND: The registered office of the Corporation in the State of Delaware
is to be located at 11th Floor, Rodney Square North, llth and Market Streets,
City of Wilmington, County of New Castle, and the name of its registered agent
at such address is Bruce M. Stargatt.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH: The total number of shares of all classes of stock which the
Corporation is authorized to issue is TWENTY-FOUR MILLION NINE HUNDRED SEVENTY-
TWO THOUSAND TWO HUNDRED AND THIRTY (24,972,230), divided into two (2) classes
as follows: (i) Eighteen Million (18,000,000) shares of Common Stock with a par
value of One Cent ($.0l) per share (the "Common Stock"); and (ii) Six Million
Nine Hundred Seventy-Two Thousand Two Hundred Thirty (6,972,230) shares of Class
B Common Stock with a par value of One Cent ($.0l) per share (the "Class B
Common Stock").
- 1 -
<PAGE>
A statement of the designations and the powers, preferences and rights and
the qualifications, limitation or restrictions shall be as to the Common Stock
and Class B Common Stock as set forth below:
COMMON STOCK
Except as otherwise provided herein, all shares of Common Stock and Class B
Common Stock will be identical and will entitle the holders thereof to the same
rights and privileges.
Part 1. VOTING RIGHTS.
Except as otherwise required by law, the holders of Common Stock will be
entitled to one (1) vote per share on all matters to be voted on by the
Corporation's stockholders. The holders of Class B Common Stock will be
entitled to ten (10) votes per share on all matters to be voted on by the
Corporation's stockholders. Neither the Common Stock nor the Class B Common
Stock shall have cumulative voting rights, whether voting as separate classes or
a single class. Except as otherwise required by law, Common Stock and Class B
Common Stock shall vote as a single class on all matters presented for a vote of
the stockholders of the Corporation.
Part 2. RESTRICTIONS ON TRANSFER OF CLASS B COMMON STOCK.
(a) No person holding shares of Class B Common Stock of record (a "Class
B Holder") may transfer, and the Corporation shall not register the transfer of,
any shares of Class B Common Stock, whether by sale, assignment, gift, bequest,
appointment, or otherwise, except to a Permitted Transferee (a "Permitted
Transfer"). The term Permitted Transferee has the following meanings with
respect to each Class B Holder:
(i) The following persons shall be "Permitted Transferees" of each
Class B Holder who is a natural person:
A. The spouse or former spouse of such class B Holder; any
Original Holder (as defined in clause (c) of this Part 2) or the
spouse or former spouse of any Original Holder; any lineal descendant
of any Original Holder or of the spouse or former spouse of any
original Holder; and any spouse or former spouse of such lineal
descendant (hereinafter such Class B Holder's "Family Members");
B. The trustee or trustees of a voting trust of which a
Controlling Number (as defined in clause (c) of this Part 2) of such
trustees are any of the following (each a "Qualified Persons"):
(1) such Class B Holder, (2) one of such Class B Holder's Family
Members, (3) an executive officer (as defined in Rule 3b-7 of the
General Rules and Regulations under the Exchange Act, as
- 2 -
<PAGE>
in effect on July 21, 1987, the effective date of the Second Restated
Certificate of Incorporation) of the Corporation or any wholly owned
subsidiary of the Corporation, or (4) any person who is the duly
designated initial or subsequent successor of an Original Holder in
accordance with the terms of such voting trust;
C. The trustee or trustees of a trust (other than a voting
trust) solely for the benefit of such, Class B Holder or one or more
of such Class B Holder's Permitted Transferees described in each
subclause of this clause (a) other than subclause (b) or this
subclause (C);
D. Any organization contributions to which are deductible for
federal income, estate or gift tax purposes or any split-interest
trust described in Section 664 of the Internal Revenue Code as it may
from time to time be amended, and of which a Controlling Number of the
members of the Board or Directors or other governing body or group
having the ultimate authority, INTER ALIA, to vote, dispose or direct
the voting or disposition of the shares of Class B Common Stock held
by such organization ("Governing Body",) are Qualified Persons (a
"Charitable Organization");
E. A corporation of which a majority of the outstanding shares
of capital stock entitled to vote generally for the election of
directors is beneficially owned by, or a partnership of which a
majority of the partnership interests entitled to participate in the
management of the partnership are beneficially owned by, such Class B
Holder or his or her Permitted Transferees described in each subclause
of this clause (i) other than this subclause (E); and
F. If the Class B Holder is deceased, bankrupt or insolvent,
the estate of such Class B Holder.
(ii) In the case of one or more Class B Holders holding shares of
Class B Common Stock as trustees pursuant to a voting trust or any other
trust (other than a Charitable Organization or a trust described in clause
(d) below) as a result of a Permitted Transfer, "Permitted Transferee"
means, with respect to each share of Class B Common Stock so transferred to
such trustees, (A) any person who transferred such share of Class B Common
Stock to such trustees and (B) any Permitted Transferee of any such
transferor, and, with respect to each Subsequent Class B Share (as defined
in (c) of this Part 2) held by such trustees, any person who is a Permitted
Transferee with respect to the share of Class B Common Stock in respect of
which such Subsequent Class B Share was issued.
- 3 -
<PAGE>
(iii) In the case of one or more Class B Holders holding shares of
Class B Common Stock as trustees pursuant to a trust (other than a voting
trust or a Charitable Organization) which was irrevocable on July 21, 1987,
the effective date of the Second Restated Certificate of Incorporation,
"Permitted Transferee" means any person to whom or for whose benefit
principal may be distributed either during or at the end of the term of
such trust whether by power of appointment or otherwise.
(iv) In the case of any Charitable Organization that is a Class B
Holder, "Permitted Transferee" means, (A) with respect to any share of
Class B Common Stock transferred to such Charitable Organization in a
Permitted Transfer, the transferor in such Permitted Transfer and any
Permitted Transferee of such transferor and (B) with respect to each
Subsequent Class B Share held by such Charitable Organization, any person
who is a Permitted Transferee with respect to the share of Class B Common
Stock in respect of which such Subsequent Class B share was issued.
(v) In the case of a Class B Holder that is a corporation or
partnership (other than a Charitable Organization) holding shares of Class
B Common Stock as a result of a Permitted Transfer, "Permitted Transferee"
means with respect to each share of Class B Common Stock so transferred to
such corporation or partnership (A) any person who transferred such share
of Class B Common Stock to such corporation or partnership and (B) any
Permitted Transferee of any such transferor, and, with respect to each
Subsequent Class B Share held by such corporation or partnership, any
person who is a Permitted Transferee with respect to the share of Class B
Common Stock in respect of which such Subsequent Class B Share was issued.
(vi) In the case of a Class B Holder that is the estate of a
deceased, bankrupt or insolvent Class B Holder, "Permitted Transferee"
means a Permitted Transferee of such deceased, bankrupt or insolvent Class
B Holder.
(b) Notwithstanding anything to the contrary set forth herein, any Class
B Holder may pledge his shares of Class B Common Stock to a pledgee pursuant to
a bona fide pledge of such shares as collateral security for indebtedness due
to the pledgee, provided that such shares shall not be transferred to or
registered in the name of the pledgee and shall remain subject to the provisions
of this Part 2. In the event of foreclosure or other similar action with
respect to such shares by the pledgee, such pledges shares of Class B Common
Stock may only be transferred to a Permitted Transferee of the pledgor or
converted into shares of Common Stock, as the pledgee may elect.
- 4 -
<PAGE>
(c) For purposes of this Part 2:
(i) The term "Controlling Number" means the minimum number of
trustees, in the case of a trust, or members of a Governing Body, in the case of
any other form of entity, whose affirmative vote is necessary to take any action
on, or whose negative vote, abstention or failure to attend is sufficient to
prevent any action with respect to the voting or disposition of shares of
capital stock held by such entity;
(ii) The term "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(iii) The term "Original Holder" means any person to whom or trust to
which shares of Class B Common Stock are issued in connection with the first
issuance of such shares as a part of the 1987 stock dividend of the Corporation.
(iv) The term "Subsequent Class B Share" means any share of Class B
Common Stock issued by the Corporation to a Class B Holder in respect of an
existing share of Class B Common Stock held by such Class B Holder.
(v) The relationship of any person that is derived by or through
legal adoption shall be considered a natural one.
(vi) A minor for whom shares of Class B Common Stock are held
pursuant to the Uniform Gifts to Minors Act, as in effect in any state, or any
similar law, shall be considered a Class B Holder.
(vii) unless otherwise specified, the term "person" means both
natural persons and legal entities.
(viii) Without derogating from the election conferred upon the
Corporation pursuant to paragraph clause (d) below, each reference to a
corporation shall include any successor corporation resulting from merger or
consolidation; and each reference to a partnership shall include any successor
partnership resulting from the death or withdrawal of a partner.
(ix) The term "beneficial owner" has the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act,
as in effect on July 21, 1987, the effective date of the Second Restated
Certificate of Incorporation.
(d) If at any time after July 21, 1987, the effective date of the Second
Restated Certificate of Incorporation, any of the following events shall occur:
(i) A Controlling Number of the trustees of any voting trust that is
a Class B Holder shall cease to be Qualified Persons;
- 5 -
<PAGE>
(ii) A Controlling Number of the Governing Body of any Charitable
Organization that is a Class B Holder shall cease to be Qualified Persons;
or
(iii) A corporation or partnership that first became a Class B Holder
as a result of a Permitted Transfer shall thereafter by reason of any
transfer of the beneficial ownership of the capital stock or partnership
interests thereof cease to be a Permitted Transferee of the transferor in
such Permitted Transfer;
then, at any time after the occurrence of any such event, upon the election of
the Corporation given by written notice to the trustees of such voting trust,
Charitable Organization, corporation or, partnership, as the case may be,
without further act on anyone's part, each share of Class B Common Stock held by
such entity shall be converted into one share of Common Stock, effective upon
the giving of such notice, and the stock certificates formerly representing the
shares of Class B Common Stock held by such entity shall thereupon and
thereafter be deemed to represent such shares of Common Stock.
(e) Anything contained in this Part 2 to the contrary notwithstanding:
(i) Shares of Class B Common Stock may be registered in the names of
more than one person only if each person in whose name the shares of Class
B Common Stock are to be registered is a Permitted Transferee of each such
other person. If shares of Class B Common Stock are registered in the
names of more than one person in accordance with this subclause (i) , then
any transfer of such shares of Class B Common Stock to any Permitted
Transferee of any person in whose name such shares are registered shall be
a Permitted Transfer.
(ii) Any transfer of shares of Class B Common Stock to an employee
benefit plan established and maintained by the corporation or any wholly
owned subsidiary of the Corporation or any trustee or fiduciary with
respect to any such plan in such capacity shall be a Permitted Transfer,
and any such plan, trustee or fiduciary shall be a Permitted Transferee of
any Class B Holder.
(f) Any purported transfer of record or beneficial ownership of shares of
Class B Common Stock other than in accordance, with the terms of this Part 2
shall, without any act on anyone's part, result in the conversion of each
share of the purportedly transferred share of Class B Common Stock into one
share of Common Stock effective on the date of such purported transfer, and the
stock certificates formerly representing such shares of Class B Common Stock
shall thereupon and thereafter be deemed to represent such number of shares of
Common Stock.
- 6 -
<PAGE>
(g) Shares of Class B Common Stock may be issued to, or registered in the
names of the beneficial owners thereof, or in "street" or "nominee" name.
The corporation may, in connection with preparing a list of stockholders
entitled to vote at any meeting of stockholders, or as a condition to the
transfer or the registration of shares of Class B Common Stock on the
Corporation's books, require the furnishing of such affidavits or other proof as
it deems necessary to establish that the registered owner of such shares is in
fact the beneficial owner of such shares.
(h) The Corporation shall note on the certificates for shares of Class B
Common Stock that the shares represented by such certificates are subject to the
restrictions on transfer and registration of transfer imposed by this Part 2.
Part 3. DIVIDENDS. When and as dividends are declared thereon, whether
payable in cash, property or securities of the Corporation, the holders of the
Common Stock and Class B Common Stock will be entitled to share equally, share
for share, in such dividends.
Part 4. CONVERSION.
4.01 CONVERSION OF CLASS B COMMON STOCK. Each record holder of Class B
Common Stock is entitled, at any time to convert any or all of the shares of
such holder's Class B Common Stock into the same number of shares of Common
Stock; provided, that no holder of Class B Common Stock is entitled to convert
any share or shares of Class B Common Stock to the extent that, as a result of
such conversion, such holder or its affiliates would directly or indirectly own,
control, or have power to vote a greater quantity of securities of any kind
issued by the Corporation than such holder and its affiliates are permitted to
own, control or have power to vote under any law or under any regulation, rule
or other requirement of any governmental authority at any time applicable to
such holder and its affiliates. The Corporation shall at all times reserve and
keep available, solely for the purpose of issuance upon conversion of
outstanding shares of Class B Common Stock, such number of shares of Common
Stock as may be issuable upon the conversion of all such outstanding shares of
Class B Common Stock.
4.02 CONVERSION PROCEDURE.
(a) Each conversion of shares of Class B Common Stock into shares of
Common stock will be effected by the surrender of the certificate or
certificates representing the shares to be converted at the principal office of
the Corporation or, at the Corporation's election, at the office of the
Corporation's designated transfer agent at any time during normal business
hours, together with a written notice by the holder of such Class B Common
Stock, stating that such holder desires to convert the shares, or a stated
number of shares, of Class B Common Stock
- 7 -
<PAGE>
represented by such certificate or certificates into Common Stock and that upon
such conversion such holder and its affiliates will not directly or indirectly
own, control or have the power to vote a greater quantity of securities of any
kind issued by the Corporation than such holder and its affiliates are permitted
to own, control or have the power to vote under any applicable law, regulation,
rule or other governmental requirement (and the receipt of such statement will
obligate the Corporation to issue such Common Stock). Such conversion will be
deemed to have been effected on the date on which such certificate or
certificates have been surrendered and such notice has been received, and at
such time the rights of the holder of the converted Class B Common Stock as such
holder will cease and the person or persons in whose name or names the
certificate or certificates for shares of Common Stock are to be issued upon
such conversion will be deemed to have become the holder or holders of record of
the shares of Common Stock represented thereby.
(b) Promptly after such surrender and the receipt of such written
notice, the Corporation will issue, and deliver in accordance with the
surrendering holder's instructions (a) the certificate or certificates for the
Common Stock issuable upon such conversion and (b) a certificate representing
any Class B Common Stock which was represented by the certificate or
certificates delivered to the Corporation in connection with such conversion but
which was not converted.
(c) If the Corporation in any manner subdivides or combines the
outstanding shares of the class of Common Stock or Class B Common Stock, the
outstanding shares of the other class will be proportionately subdivided or
combined.
(d) The issuance of certificates for Common Stock upon conversion of
Class B common Stock, will be made without charge to the holders of such shares
for any issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the related issuance of
Common Stock.
(e) The Corporation will not close its books against the transfer of
Class B Common Stock or of Common Stock issued or issuable upon conversion of
Class B Common Stock in any manner which would interfere with the timely
conversion of Class B Common Stock.
Part 5. REGISTRATION OF TRANSFER.
The Corporation will keep at its principal office (or such other place as
the Corporation reasonably designates) a register for the registration of shares
of Common Stock and Class B Common Stock. Upon the surrender of any certificate
representing shares of any such class at such place, the Corporation or its
designated transfer agent will, at the request of the registered holder of such
certificate, execute and deliver a new certificate or certificates in exchange
therefor representing in the aggregate
- 8 -
<PAGE>
the number of shares of such class represented by the surrendered certificate,
and the Corporation forthwith will cancel such surrendered certificate.
Each such new certificate will be registered in such name and will represent
such number of shares of such class as is requested by the holder of the
surrendered certificate and will be substantially identical in form to the
surrendered certificate. The issuance of new certificates will be made without
charge to the holders of the surrendered certificates for any issuance tax in
respect thereof or other cost incurred by the Corporation in connection with
such issuance.
Part 6. REPLACEMENT.
Upon receipt of evidence, reasonably satisfactory to the Corporation (an
affidavit of the registered holder will be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing one or
more shares of Common Stock or Class B Common Stock, and in the case of any such
loss, theft or destruction, upon receipt of indemnity reasonably satisfactory
to the Corporation (provided that if the holder is an institutional investor its
own agreement will be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation will (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
the number of shares of such class represented by such lost, stolen, destroyed
or mutilated certificate and dated the date of such lost, stolen, destroyed or
mutilated certificate.
FIFTH: So long as the Corporation or any of its subsidiaries hold
authority from the Federal Communications Commission (or any successor thereto)
to operate any television or radio broadcast station, if the Corporation has
reason to believe that the ownership, or proposed ownership, of shares of
capital stock of the Corporation by any stockholder or any person presenting any
shares of capital stock of the Corporation for transfer into his name (a
"Proposed Transferee") may be inconsistent with, or in violation of, any
provision of the Federal Communications Laws (as hereinafter defined) such
stockholder or Proposed Transferee, upon request of the Corporation, shall
furnish promptly to the Corporation such information (including without
limitation, information with respect to citizenship, other ownership interests
and affiliations) as the Corporation shall reasonably request to determine
whether the ownership of, or the exercise of any rights with respect to, shares
of capital stock of the Corporation by such stockholder or Proposed Transferee
is inconsistent with, or in violation of, the Federal Communications Laws. For
purposes of this Article FIFTH, the term "Federal Communications Laws" shall
mean any law of the United States now or hereafter in effect (and any regulation
thereunder) pertaining to the ownership of, or the exercise of rights of
ownership with respect to capital stock of corporations holding, directly or
indirectly, television or radio station authorizations, including, without
limitation, the Communications Act of 1934, as amended (the "Communications
Act"), and regulations thereunder pertaining to the ownership, or the
- 9 -
<PAGE>
exercise of the rights of ownership, of capital stock of corporations holding,
directly or indirectly, television or radio station authorizations, by (i)
aliens, as defined in or under the Communications Act, as it may be amended from
time to time, (ii) persons and entities having interests in television or radio
stations, newspapers and cable television systems or (iii) persons or entities,
unilaterally or otherwise, seeking direct or indirect control of the
Corporation, as construed under the Communications Act, without having
obtained any requisite prior Federal regulatory approval to such control.
If any stockholder or Proposed Transferee from whom information is
requested should fail to respond to such request pursuant to the first paragraph
of this Article or the Corporation shall conclude that the ownership of, or the
exercise of any rights of ownership with respect to, shares of capital stock of
the Corporation, by such stockholder or Proposed Transferee, could result in any
inconsistency with, or violation of, the Federal Communications Laws, the
Corporation may refuse to permit the transfer of shares of capital stock of the
Corporation to such Proposed Transferee, or may suspend those rights of stock
ownership the exercise of which would result in any inconsistency with, or
violation of, the Federal Communications Laws, such refusal of transfer or
suspension to remain in effect until the requested information has been received
or until the Corporation has determined that such transfer, or the exercise of
such suspended rights, as the case may be, is permissible under the Federal
Communications Laws, and the Corporation may exercise any and all appropriate
remedies, at law or in equity, in any court of competent jurisdiction, against
any such stockholder or Proposed Transferee, with a view towards obtaining such
information or preventing or curing any situation which would cause any
inconsistency with, or violation of, any provision of the Federal Communications
Laws.
The Corporation may note on the certificates of its capital stock that the
shares represented by such certificates are subject to the restrictions set
forth in this Article.
For purposes of this Article, the word "person" shall include not only
natural persons but partnerships, associations, corporations, joint ventures and
other entities and the word "regulation" shall include not only regulations but
rules, published policies and published controlling interpretations by an
administrative agency or body empowered to administer a statutory provision of
the Federal Communications Laws.
SIXTH: Provisions for the management of the business and for the conduct
of the affairs of the Corporation and provisions creating, defining, limiting
and regulating the powers of this Corporation, the directors and stockholders
are as follows:
(1) The board of directors shall have the power to make, adopt,
alter, amend and repeal the bylaws of the Corporation
- 10 -
<PAGE>
without the assent or vote of the stockholders, including, without limitation,
the power to fix, from time to time, the number of directors which shall
constitute the whole board of directors of the Corporation subject to the right
of the stockholders to alter, amend and repeal the bylaws made by the board of
directors.
(2) Election of directors of the Corporation need not be written
ballot unless the bylaws so provide.
(3) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the board of directors of the Corporation
are hereby expressly empowered to exercise all such powers and to do all such
acts and things as may be exercised or done by the Corporation; subject,
nevertheless, to the provisions of the statutes of the State of Delaware and of
the Certificate of Incorporation as they may be amended, altered or changed from
time to time and to any bylaws from time to time made by the directors or
stockholders; provided, however, that no bylaws so made shall invalidate any
prior act of the board of directors which would have been valid if such bylaw
had not been made.
SEVENTH: The Corporation shall, to the full extent permitted by law,
including, without limitation, Section 145 of the Delaware General Corporation
Law, indemnify all directors, officers, employees, agents and other persons whom
it may indemnify pursuant thereto against any liability, and the expenses
incurred in defense of such liability, that may be asserted, against or incurred
by such person arising out of such person's status with or service to or at the
request of the Corporation. The Corporation shall pay the expenses of any
director or officer in defense of such liability in advance of the final
disposition of the matter upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation. Nothing contained
herein shall be deemed to require or make mandatory the purchase and maintenance
of insurance as may be permitted under Section 145(g) of the Delaware General
Corporation Law.
EIGHTH: No director or former director of the Corporation shall be
personally liable to this Corporation or any of its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (a) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) pursuant to Section
174 of the Delaware General Corporation Law, (d) for any transaction from which
the director derived an improper personal benefit, or (e) for any act or
omission occurring prior to the date this Article EIGHTH became effective.
Any repeal or modification of this Article EIGHTH shall not adversely affect any
right or protection of a director or former director of the Corporation existing
at the time of such repeal or modification
- 11 -
<PAGE>
with respect to acts or omissions occurring prior to such repeal or
modification.
DATED: July 20 , 1990.
-----------------
ACKERLEY COMMUNICATIONS, INC.
/s/ Barry A. Ackerley
----------------------------------------
Barry A. Ackerley
Chairman and Chief Executive Officer
ATTEST:
/s/ Denis M. Curley
- ------------------------------
Denis M. Curley
Assistant Secretary
- 12 -
<PAGE>
CONFORMED COPY
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
ACKERLEY COMMUNICATIONS, INC.
ACKERLEY COMMUNICATIONS, INC., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify:
1. That at a duly convened special meeting of the Board of Directors of
the Corporation, resolutions were duly adopted setting forth a proposed
amendment to the Certificate of Incorporation of the Corporation, declaring said
amendment to be advisable and calling for its submission to the shareholders of
the Corporation. The proposed amendment approved by resolution by the Board of
Directors is as follows:
FOURTH: The total number of shares of all classes of stock which the
Corporation is authorized to issue is FIFTY-SIX MILLION NINE HUNDRED
SEVENTY-TWO THOUSAND TWO HUNDRED THIRTY (56,972,230), divided into two (2)
classes as follows: (i) Fifty Million (50,000,000) shares of Common stock
with a par value of One Cent ($.0l) per share (the "Common Stock"); and
(ii) Six Million Nine Hundred Seventy-Two Thousand Two Hundred Thirty
(6,972,230) shares of Class B Common Stock with a par value of One Cent
($.0l) per share (the "Class B Common Stock").
2. That pursuant to such resolutions of the Board of Directors, the
shareholders of the Corporation duly adopted the proposed amendment to the
Certificate of Incorporation at the duly convened annual meeting of the
shareholders of the Corporation.
3. That the aforesaid amendment was duly adopted in accordance with the
provisions of Sections 242 and 222 of the General Corporation Law of the State
of Delaware.
<PAGE>
IN WITNESS WHEREOF, Ackerley Communications, Inc. has caused this
certificate to be signed by William N. Ackerley, President, and attested by
Denis M. Curley, Assistant Secretary, this 6th day of May, 1994.
ACKERLEY COMMUNICATIONS, INC.
By: /s/ William N. Ackerley
-------------------------------
William N. Ackerley, President
Attest:
/s/ Denis M. Curley
- ------------------------------
Denis M. Curley,
Assistant Secretary
- 2 -
<PAGE>
-------------------------------------------------
CREDIT AGREEMENT
dated as of February 17, 1995
among
ACKERLEY COMMUNICATIONS, INC.,
THE BANKS,
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Documentation Agent,
and
NATWEST BANK N.A.,
as Administrative Agent
--------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. General Interpretation . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE II
THE CREDITS
2.1. The Loan Facility. . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2. [Intentionally Omitted]. . . . . . . . . . . . . . . . . . . . . . 15
2.3. Facility Letters of Credit . . . . . . . . . . . . . . . . . . . . 15
2.3.1. Obligation to Issue. . . . . . . . . . . . . . . . . . . 15
2.3.2. Types and Amounts. . . . . . . . . . . . . . . . . . . . 15
2.3.3. Conditions . . . . . . . . . . . . . . . . . . . . . . . 16
2.3.4. Procedure for Issuance of
Facility Letters of
Credit . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.3.5. Reimbursement Obligations. . . . . . . . . . . . . . . . 17
2.3.6. Payment of Reimbursement Obligations . . . . . . . . . . 18
2.3.7. Letter of Credit Participations. . . . . . . . . . . . . 19
2.3.8. Compensation for Facility
Letters of Credit. . . . . . . . . . . . . . . . . . . . 19
2.4. Payment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.5. Mandatory Reductions of Aggregate Commitment . . . . . . . . . . . 19
2.6. Additional Mandatory Principal Payments;
Additional Mandatory Reductions of
Aggregate Commitment . . . . . . . . . . . . . . . . . . . . . . . 20
2.7. Optional Principal Payments. . . . . . . . . . . . . . . . . . . . 21
2.8. Fees; Commitment Reductions. . . . . . . . . . . . . . . . . . . . 21
2.8.1. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.8.2. Commitment Fee; Voluntary
Reduction of Aggregate
Commitment . . . . . . . . . . . . . . . . . . . . . . . 21
2.9. Method of Borrowing. . . . . . . . . . . . . . . . . . . . . . . . 22
2.10. Borrowing Notices: Method of Selecting
Types and Eurodollar Interest Periods
for Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.11. Method of Selecting Types and Eurodollar
Interest Periods for Conversion and
Continuation of Loans. . . . . . . . . . . . . . . . . . . . . . . 23
2.12. Applicable Margin. . . . . . . . . . . . . . . . . . . . . . . . . 24
2.13. Method of Payment. . . . . . . . . . . . . . . . . . . . . . . . . 25
2.14. Notes; Telephonic Notices. . . . . . . . . . . . . . . . . . . . . 25
-i-
<PAGE>
2.15. Interest Payment Dates; Interest Basis. . . . . . . . . . . . . . . 25
2.16. Notification of Loans, Interest Rates,
Prepayments and Commitment Reductions . . . . . . . . . . . . . . . 26
2.17. Lending Installations . . . . . . . . . . . . . . . . . . . . . . . 26
2.18. Post Default Rate . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.19. Prepayment of Loans and Cash
Collateralization of Facility Letters of
Credit upon Change in Control . . . . . . . . . . . . . . . . . . . 27
2.20. Non-Receipt of Funds by the
Administrative Agent. . . . . . . . . . . . . . . . . . . . . . . . 27
2.21. Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . 28
2.22. Collateral Security; Further Assistance . . . . . . . . . . . . . . 28
ARTICLE III
CHANGE IN CIRCUMSTANCES; INDEMNIFICATION
3.1. Yield Protection . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.2. Availability of Interest Rate. . . . . . . . . . . . . . . . . . . 30
3.3. Failure to Pay or Borrow on Certain Dates. . . . . . . . . . . . . 30
3.4. Changes in Capital Adequacy Regulations. . . . . . . . . . . . . . 31
3.5. Bank Certificates; Survival of Indemnity . . . . . . . . . . . . . 31
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Credit Extension . . . . . . . . . . . . . . . . . . . . . 32
4.2. Each Credit Extension. . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Corporate Existence and Standing; Capital
Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.2. Authorization and Validity . . . . . . . . . . . . . . . . . . . . 35
5.3. No Conflict; Authorizations. . . . . . . . . . . . . . . . . . . . 35
5.4. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 35
5.5. Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . 36
5.6. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.7. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.9. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.10. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.11. Accuracy of Information. . . . . . . . . . . . . . . . . . . . . . 36
5.12. Regulation U . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.13. Material Agreements. . . . . . . . . . . . . . . . . . . . . . . . 37
5.14. Senior and Subordinated Indebtedness . . . . . . . . . . . . . . . 37
5.15. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 37
-ii-
<PAGE>
ARTICLE VI
COVENANTS
6.1. Financial Reporting. . . . . . . . . . . . . . . . . . . . . . . . 37
6.2. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.3. Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . 40
6.4. Conduct of Business; Maintenance of
Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.5. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.6. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.7. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 41
6.8. Maintenance of Properties. . . . . . . . . . . . . . . . . . . . . 41
6.9. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.10. Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.11. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.12. Merger; Sale of Assets . . . . . . . . . . . . . . . . . . . . . . 42
6.13. Sale of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.14. Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . 43
6.15. Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.16. Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.17. Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.18. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.19. Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.20. Subordinated Indebtedness. . . . . . . . . . . . . . . . . . . . . 46
6.21. Operation of Business. . . . . . . . . . . . . . . . . . . . . . . 46
6.22. Total Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . 46
6.23. Senior Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . 46
6.24. Interest Coverage Ratio. . . . . . . . . . . . . . . . . . . . . . 47
6.25. Fixed Charge Coverage Ratio. . . . . . . . . . . . . . . . . . . . 47
ARTICLE VII
DEFAULTS
7.1. Representations and Warranties . . . . . . . . . . . . . . . . . . 47
7.2. Nonpayment of Notes. . . . . . . . . . . . . . . . . . . . . . . . 47
7.3. Breach of Covenants. . . . . . . . . . . . . . . . . . . . . . . . 48
7.4. Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.5. Nonpayment of Other Indebtedness . . . . . . . . . . . . . . . . . 48
7.6. Voluntary Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . 48
7.7. Involuntary Bankruptcy . . . . . . . . . . . . . . . . . . . . . . 48
7.8. Government Seizure . . . . . . . . . . . . . . . . . . . . . . . . 49
7.9. Judgments and Orders . . . . . . . . . . . . . . . . . . . . . . . 49
7.10. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.11. Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.12. Other Loan Documents . . . . . . . . . . . . . . . . . . . . . . . 50
7.13. Rate Hedging Obligations . . . . . . . . . . . . . . . . . . . . . 50
7.14. Invalidity of Pledge Agreement . . . . . . . . . . . . . . . . . . 50
7.15. Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . 50
-iii-
<PAGE>
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.2. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.3. Preservation of Rights . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. . . . . . . . . . . . . . . . . . . . 54
9.2. Governmental Regulation. . . . . . . . . . . . . . . . . . . . . . 54
9.3. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.4. Readings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.5. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.6. Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.7. Several Obligations; Benefits of this
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.8. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.9. Numbers of Documents . . . . . . . . . . . . . . . . . . . . . . . 55
9.10. Severability of Provisions . . . . . . . . . . . . . . . . . . . . 55
9.11. Nonliability of Banks. . . . . . . . . . . . . . . . . . . . . . . 55
9.12. CHOICE OF LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.13. CONSENT TO JURISDICTION, WAIVER OF JURY
TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.14. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.15. Limitation of Rights . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE X
THE ADMINISTRATIVE AGENT AND THE DOCUMENTATION AGENT
10.1. Appointment and Powers . . . . . . . . . . . . . . . . . . . . . . 57
10.2. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.3. General Immunity . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.4. No Responsibility for Loans, Recitals,etc. . . . . . . . . . . . . 58
10.5. Right to Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 58
10.6. Action on Instructions of Banks. . . . . . . . . . . . . . . . . . 58
10.7. Employment of Managing Agents' and Counsel . . . . . . . . . . . . 59
10.8. Reliance on Documents; Counsel . . . . . . . . . . . . . . . . . . 59
10.9. Managing Agents' Reimbursement and
Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.10. Rights as a Lender . . . . . . . . . . . . . . . . . . . . . . . . 59
10.11. Bank Credit Decision . . . . . . . . . . . . . . . . . . . . . . . 60
10.12. Successor Managing Agents. . . . . . . . . . . . . . . . . . . . . 60
10.13. Distribution of Information. . . . . . . . . . . . . . . . . . . . 60
10.14. Collateral Releases. . . . . . . . . . . . . . . . . . . . . . . . 61
10.15. Managing Agents' Fees. . . . . . . . . . . . . . . . . . . . . . . 61
-iv-
<PAGE>
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.2. Ratable Payments . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 62
12.2. Participations . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.2.1. Permitted Participants; Effect . . . . . . . . . . . . . 62
12.2.2. Voting Rights. . . . . . . . . . . . . . . . . . . . . . 63
12.2.3. Benefit of Setoff. . . . . . . . . . . . . . . . . . . . 63
12.3. Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
12.3.1. Permitted Assignments. . . . . . . . . . . . . . . . . . 63
12.3.2. Effect; Effective Date . . . . . . . . . . . . . . . . . 63
12.4. Dissemination of Information . . . . . . . . . . . . . . . . . . . 64
12.5. Tax Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE XIII
NOTICES
13.1. Giving Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
13.2. Change of Address. . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE XIV
COUNTERPARTS
14.1. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
-v- <PAGE>
Annex 1 - Provisions for Alternative Dispute Resolution
EXHIBITS
- --------
Exhibit A - Promissory Note
Exhibit B-1 - Opinion of Counsel
Exhibit B-2 - Opinion of FCC Counsel
Exhibit C - Compliance Certificate
Exhibit D - [Intentionally Omitted]
Exhibit E - Assignment Agreement
Exhibit F - [Intentionally Omitted]
SCHEDULES
- ---------
Schedule 1 - Subsidiaries and Other Investments
Schedule 2 - Other Indebtedness
Schedule 3 - Existing Liens
Schedule 4 - Outstanding Shares
-vi-
<PAGE>
ACKERLEY COMMUNICATIONS, INC.
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of February 17, 1995, is by and
among ACKERLEY COMMUNICATIONS, INC., the Banks, FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Documentation Agent, and NATWEST BANK N.A., as Administrative
Agent. Capitalized terms used in this introductory paragraph and the recitals
below not otherwise defined, shall have the meanings given such terms in Section
1.1 of this Agreement.
RECITALS:
A. The Company entered into a credit agreement dated as of
October 7, 1993 (the "1993 Credit Agreement") with The First National Bank of
Chicago, as Agent, and National Westminster Bank, USA, as Co-Agent, and certain
banks, pursuant to which such banks made certain loans and advances to the
Company. The obligations under the 1993 Credit Agreement were secured by
certain shares of stock pledged by the Company and certain Subsidiaries of the
Company pursuant to the Pledge Agreement.
B. The Company has requested that the Managing Agents and the
Banks enter into this Credit Agreement and extend the Loans and issue the
Facility Letters of Credit hereunder for purposes of refinancing existing
indebtedness under the 1993 Credit Agreement and for the purposes set forth
herein. The Company intends for the Pledge Agreement to remain in full force
and effect and for the Pledged Stock to secure the obligations arising
hereunder. For purposes of the Pledge Agreement, this Agreement and the Loans
made and Facility Letters of Credit issued hereunder shall be deemed to be a
refinancing of the 1993 Credit Agreement and the obligations arising thereunder.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1. DEFINED TERMS. For purposes of this Credit Agreement, in
addition to the terms defined elsewhere in this Credit Agreement, the following
terms shall have the meanings set forth below:
"Acquisition" means any transaction, or series of related
transactions, consummated on or after the date of this Agreement by which the
Company or any Subsidiary (i) acquires any going business or all or
substantially all of the assets of any firm, corporation or division thereof,
other than a Subsidiary, whether through purchase of assets, merger or otherwise
or (ii) directly or indirectly acquires (in one transaction or as the most
recent
<PAGE>
transaction in a series of transactions) (a) any of the securities of a
corporation (other than a Subsidiary) which have ordinary voting power for the
election of directors (other than securities having such power only by reason of
the happening of a contingency) or (b) any of the partnership interests of a
partnership (other than a Subsidiary).
"Administrative Agent" means NatWest Bank N.A. in its capacity as
administrative agent for the Banks pursuant to Section 10.1, and not in its
individual capacity as a Bank, and any successor Administrative Agent appointed
pursuant to Section 10.12.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person. A Person shall be deemed to control another Person if the
controlling Person owns 10% or more of any class of voting securities (or other
ownership interests) of the controlled Person or possesses, directly or
indirectly, the power to direct or cause the direction of the management or
policies of the controlled Person, whether through ownership of stock, by
contract or otherwise.
"Aggregate Commitment" means the aggregate of the Commitments of
all the Banks, as reduced from time to time pursuant to the terms hereof.
"Agreement" means this Credit Agreement, as it may be amended or
modified and in effect from time to time.
"Alternate Base Rate" means, for any day, a rate of interest per
annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of
Federal Funds Effective Rate for such day plus 1/2% per annum.
"Amended Partnership Agreement" has the meaning assigned to such
term in the Contribution Agreement.
"Applicable Margin" is defined in Section 2.12.
"Authorizations" means all filings, recordings and registrations
with, and all validations or exemptions, approvals, orders, authorizations,
consents, franchises, licenses, certificates and permits from, the FCC, other
Governmental Authorities, professional sports associations and any other
Persons.
"Authorized Officer" means any of the Chairman of the Board of
Directors and Chief Executive Officer, the President and Chief Operating Officer
or the Senior Vice President, Chief Financial Officer and Treasurer of the
Company, acting singly.
2
<PAGE>
"Banks" means the banks listed on the signature pages of this
Agreement and their respective successors and assigns.
"Base Eurodollar Rate" means, with respect to a Eurodollar Advance
for the relevant Eurodollar Interest Period, the rate determined by the
Administrative Agent to be the rate at which deposits in U.S. Dollars are
offered by the Administrative Agent to first-class banks in the London interbank
market at or before 11:00 a.m. (New York time) two Business Days prior to the
first day of such Eurodollar Interest Period, in the approximate amount of such
Eurodollar Advance and having a maturity approximately equal to such Eurodollar
Interest Period.
"Borrowing Date" means the date on which a Loan is made hereunder.
"Borrowing Notice" is defined in Section 2.10.
"Business Day" means (i) with respect to borrowing, payment or
rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday)
on which banks are open for business in Charlotte and New York and on which
dealings in U.S. Dollars are carried on in the London interbank market and (ii)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
are open for business in Charlotte and New York.
"Capital Expenditures" of a Person means the aggregate amount of
all purchases or acquisitions of items considered to be capital items in
accordance with Generally Accepted Accounting Principles, including, without
limitation, all expenditures capitalized in accordance with Generally Accepted
Accounting Principles relating to property, plant, or equipment on the balance
sheet of such Person, and excluding Acquisitions permitted pursuant to
Section 6.15 of this Agreement.
"Capitalized Lease" means any lease of property which would be
capitalized on a balance sheet of the Company or a Subsidiary, prepared in
accordance with Generally Accepted Accounting Principles.
"Capitalized Lease Obligations" means the amount of the
obligations of the Company and the Subsidiaries under Capitalized Leases which
would be shown as a liability on a balance sheet of the Company or a Subsidiary,
prepared in accordance with Generally Accepted Accounting Principles.
"Change in Control" means the failure of the Ackerley Family to
own, of record and beneficially, with full power to vote, at least 51% of the
voting stock of the Company. As used herein "Ackerley Family" means (i) Barry
A. Ackerley and the spouse and lineal descendants of Barry A. Ackerley, whether
by blood or adoption, (ii) any trusts for the exclusive benefit of the
3
<PAGE>
individuals referred to in clause (i) above or the executor or administrator of
the estate of or other legal representative of the individuals referred to in
clause (i) above, and (iii) any other Person, at least a majority of the
outstanding voting stock of which is owned, of record and beneficially, by any
of the Persons referred to in clause (i) or (ii) above.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time.
"Collateral Agent" means First Trust of California, National
Association, in its capacity as Pledgee under and as defined in the Pledge
Agreement, and any successor thereto.
"Commitment" means, with respect to any Bank, the obligation of
such Bank to make Loans and issue Facility Letters of Credit not exceeding the
amount set forth underneath such Bank's signature below under the column
entitled "Commitments", as such amount may be amended, supplemented or reduced
from time to time pursuant to the terms hereof.
"Commitment Termination Date" means June 30, 2000 or any earlier
date on which the Aggregate Commitment is cancelled by the Company or otherwise
terminated pursuant to this Agreement.
"Company" means Ackerley Communications, Inc., a Delaware
corporation, and its successors and assigns.
"Compliance Certificate" means a compliance certificate in
substantially the form of Exhibit "C" hereto, with appropriate insertions,
signed by the Chief Financial Officer of the Company, showing the calculations
necessary to determine compliance with this Agreement and stating that no
Default or Unmatured Default exists, or if any Default or Unmatured Default
exists, describing the nature thereof and any action the Company is taking or
proposes to take with respect thereto.
"Contribution Agreement" means that certain Contribution Agreement
dated as of February 4, 1994 among New Century, Century Management, Inc., KJR
Radio, Inc. and the Company, as in effect on the Closing Date.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company or any Subsidiary, are treated
as a single employer under Section 414(b) or 414(c) of the Code.
"Conversion/Continuation Notice" is defined in Section 2.11.
4
<PAGE>
"Default" means an event described in Section 7.
"Documentation Agent" means First Union National Bank of North
Carolina in its capacity as documentation agent hereunder pursuant to Section
10.1, and not in its individual capacity as a Bank, and any successor
Documentation Agent appointed pursuant to Section 10.12.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurodollar Advance" means a Loan which bears interest at a
Eurodollar Rate.
"Eurodollar Interest Period" means, with respect to a Eurodollar
Advance, a period of one, two, three or six months commencing on a Business Day
and selected by the Company pursuant to Section 2.10 or 2.11. A month means a
period starting on one day in a calendar month and ending on the numerically
corresponding day in the next calendar month. If there is no such numerically
corresponding day in the month in which a Eurodollar Interest Period ends, such
Eurodollar Interest Period shall end on the last Business Day of such month. If
a Eurodollar Interest Period would otherwise end on a day which is not a
Business Day, such Eurodollar Interest Period shall end on the next succeeding
Business Day, PROVIDED, HOWEVER, that if said next succeeding Business Day falls
in a new calendar month, such Eurodollar Interest Period shall end on the
immediately preceding Business Day.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for
the relevant Eurodollar Interest Period, the sum of (i) the quotient of (a) the
Base Eurodollar Rate applicable to such Eurodollar Interest Period, divided by
(b) one minus the Reserve Requirement (expressed as a decimal) applicable to
such Eurodollar Interest Period plus (ii) the Applicable Margin. The Eurodollar
Rate shall be rounded, if necessary, to the next higher 1/16 of 1%.
"Excess Cash Flow" means, for any fiscal year, (i) Operating Cash
Flow minus (ii) the sum of (a) Capital Expenditures, (b) mandatory scheduled
principal reductions or payments made on Indebtedness (exclusive of mandatory
prepayments made pursuant to Section 2.6 (i) during such period), (c) Interest
Expense, (d) taxes actually paid and (e) $2,250,000, all calculated for such
fiscal year for the Company and the Subsidiaries on a consolidated basis in
accordance with Generally Accepted Accounting Principles consistently applied.
"Facility Letter of Credit" means any Letter of Credit issued by
the Issuer for the account of the Company pursuant to the terms of Section 2.3.
5
<PAGE>
"Facility Letter of Credit Obligations" means, at any date of
determination thereof, all liabilities whether actual or contingent, of the
Company to the Issuer and the Banks in respect of the Facility Letters of
Credit, including, without limitation, the sum of (a) Reimbursement Obligations
and (b) the aggregate undrawn face amount of the outstanding Facility Letters of
Credit.
"FCC" means the Federal Communications Commission or any other
regulatory body which succeeds to the functions of the Federal Communications
Commission.
"Federal Funds Effective Rate" means, for any day, a fluctuating
interest rate per annum equal to the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers on such day, as published for such day (or, if such day
is not a Business Day, for the preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 11:00 a.m. (New
York time) on such day on such transactions received by the Administrative Agent
from three federal funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion.
"First Union" means First Union National Bank of North Carolina in
its individual capacity, and its successors and assigns.
"Fixed Charge Coverage Ratio" means, as at the end of any fiscal
quarter, the ratio of (a) the sum of Operating Cash Flow for the four fiscal
quarters then ended minus the sum of (i) cash taxes paid during such fiscal
quarters then ended; (ii) Capital Expenditures for the fiscal quarters then
ended (other than Capital Expenditures financed with insurance proceeds to
replace damaged, destroyed, lost or stolen fixed assets); (iii) cash dividends
paid for the fiscal quarters then ended; and (iv) cash capital contributions
from the Company or any Subsidiary to New Century made during such fiscal
quarters then ended, to (b) the sum of (i) mandatory principal payments required
to be made on Indebtedness during the fiscal quarters then ended (exclusive of
mandatory prepayments made in respect of (1) Excess Cash Flow during such period
and (2) net cash proceeds from any Sale); and (ii) Interest Expense for the
fiscal quarters then ended.
"Floating Rate" means a rate per annum equal to the sum of (i) the
Alternate Base Rate plus (ii) the Applicable Margin, changing when and as the
Alternate Base Rate changes.
"Floating Rate Advance" means a Loan which bears interest at the
Floating Rate.
6
<PAGE>
"Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles, as recognized by the American Institute of
Certified Public Accountants, consistently applied and maintained on a
consistent basis for the Company, as applicable, throughout the period indicated
and consistent with the prior financial practices of the Company as reflected on
the Financials so as to properly reflect the financial condition, and the
results of operations and cash flow of the Company, as applicable; PROVIDED,
HOWEVER, that, in the event that changes in Generally Accepted Accounting
Principles shall be mandated by the Financial Accounting Standards Board, or any
similar accounting body of comparable standing, or shall be recommended by the
Company's certified public accountants, to the extent that such changes would
modify or could modify such accounting principles or the interpretation or
application thereof, such changes shall be followed with respect to the
interpretation of this Agreement only from and after the date the Company and
the Agent and the Required Banks shall have amended this Agreement to the extent
necessary to reflect any such changes in the financial covenants and other terms
and conditions of this Agreement.
"Governmental Authority" means any federal, state or local
regulatory, governmental or public body or authority or any subdivision thereof.
"Guaranty" means any agreement by which the Company or any
Subsidiary assumes, guarantees, endorses, contingently agrees to purchase or
provide funds for the payment of, or otherwise becomes liable for the obligation
of any other Person, or agrees to maintain the net worth or working capital or
other financial condition of any other Person or otherwise assure any creditor
of such other Person against loss, including, without limitation, the contingent
liability of the Company or any Subsidiary under any Letter of Credit or surety
bond, but excluding endorsements of instruments for deposit or collection in the
ordinary course of business.
"Indebtedness" means the Company's and each Subsidiary's
(i) obligations for borrowed money, (ii) obligations representing the deferred
purchase price of property (other than accounts payable arising in connection
with the purchase of inventory on terms customary in the trade and Program
Obligations), (iii) obligations, whether or not assumed, secured by Liens or
payable out of the proceeds or production from property now or hereafter owned
or acquired by the Company or any Subsidiary, (iv) obligations which are
evidenced by notes, acceptances or other instruments, (v) Capitalized Lease
Obligations and (vi) obligations arising under or in connection with Guaranties.
"Interest Coverage Ratio" means, as at any date of calculation,
the ratio of (i) Operating Cash Flow for the four consecutive fiscal quarters
ending on or most recently ended prior to
7
<PAGE>
such date of calculation to (ii) Interest Expense for the four consecutive
fiscal quarters ending on or most recently ended prior to such date of
calculation.
"Interest Expense" means, for any period of calculation, the
aggregate amount of interest, whether paid in cash or accrued as a liability, on
Indebtedness (including Rate Hedging Obligations and excluding the amortization
of any facility fees paid in connection with this or any earlier financing, and
interest paid or accrued on behalf of New Century), all calculated for such
period for the Company and the Subsidiaries on a consolidated basis in
accordance with Generally Accepted Accounting Principles consistently applied.
"Investment" means any loan, advance, extension of credit (other
than accounts receivable arising in the ordinary course of business), or
contribution of capital by the Company or any Subsidiary to any other Person
other than a Subsidiary, or any investment in, or purchase or other acquisition
of, the stock, notes, partnership interests, debentures or other securities of
any other Person other than a Subsidiary, made by the Company or any Subsidiary.
"Issuance Date" means, with respect to any Facility Letter of
Credit, the date on which such Facility Letter of Credit is issued hereunder.
"Issuer" means NatWest, in its capacity as the issuer of the
Facility Letters of Credit.
"Lending Installation" means any office, branch, subsidiary or
affiliate of any Bank or either of the Managing Agents.
"Letter of Credit" means a letter of credit or similar instrument
which is issued upon the application of the Company or any Subsidiary or upon
which the Company or any Subsidiary is account party or for which the Company or
any Subsidiary is in any way liable.
"Letter of Credit Request" is defined in Section 2.3.4.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, claim, charge, encumbrance, preference, priority or
other security interest or preferential arrangement of any kind or nature
whatsoever (including, without limitation, the interest of a vendor or lessor
under any conditional sale, Capitalized Lease or other title retention
agreement) in, of or on any of the Company's or any Subsidiary's property.
"Loan" means any loan made under this Agreement.
"Loan Documents" means this Agreement, the Notes, the Pledge
Agreement, all outstanding Facility Letters of Credit and any other
8
<PAGE>
documents or instruments which may be executed and delivered by the Company in
connection herewith (including without limitation any Rate Hedging Agreements
entered into between the Company and any Bank), as the same may be amended or
modified and in effect from time to time.
"Managing Agents" means the Administrative Agent and the
Documentation Agent and their respective successors and assigns.
"Material Adverse Effect" means a material adverse effect on (i)
the business, properties, condition (financial or otherwise), results of
operations, or prospects of the Company and the Subsidiaries taken as a whole,
(ii) the ability of the Company to perform its obligations under the Loan
Documents, or (iii) the validity or enforceability of any of the Loan Documents
or the rights or remedies of the Managing Agents or the Banks thereunder.
"Multiemployer Plan" means a Plan maintained pursuant to a
collective bargaining agreement or any other arrangement to which the Company or
any member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"NatWest" means NatWest Bank N.A. in its individual capacity, and
its successors and assigns.
"New Century" means New Century Seattle Partners, L.P., a limited
partnership organized under the laws of the State of Delaware, and its
successors and assigns.
"Note Agreements" means, collectively, (i) that certain Note
Agreement (the "Series A and B Note Agreement"), dated as of December 1, 1988,
as amended by that certain Agreement of Waiver and Amendment dated as of
September 30, 1990 and that certain Amendment Agreement dated as of October 1,
1991, between the Company and Phoenix Home Life Insurance Company (as assignee
of a Note Agreement from Home Life Insurance Company), and (ii) those certain
separate Note Agreements (the "1989 Note Agreements"), each dated as of December
1, 1989, as amended by that certain Agreement of Waiver and Amendment dated as
of September 30, 1990 and that certain Amendment Agreement dated as of October
1, 1991, among the Company, CIG & Co. (as assignee of certain Note Agreements
from Connecticut General Life Insurance Company), Southern Farm Bureau Annuity
Insurance Company, The Travelers Insurance Company, The Travelers Indemnity
Company, and Phoenix Home Life Insurance Company (as assignee of a Note
Agreement from Home Life Insurance Company).
"Note" means a promissory note in substantially the form of
Exhibit "A" hereto, duly executed and delivered to the Administrative Agent by
the Company and payable to the order of a Bank in the amount of its Commitment,
including any amendment, modification, renewal or replacement of such promissory
note.
9
<PAGE>
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, all Facility Letter of Credit Obligations, all accrued
and unpaid fees and all other obligations of the Company and the Subsidiaries to
the Banks or to any Bank, the Issuer, the Managing Agents or any indemnified
party hereunder arising under the Loan Documents.
"Operating Cash Flow" means, for any period of calculation, (i)
pre-tax income or deficit, as the case may be (excluding 50% of any National
Basketball Association expansion fee income recognized by the Company or any of
its Subsidiaries in any such period and excluding extraordinary gains or losses
and any gain (or loss) from any sale, lease, transfer or other disposition of
any property, asset or business and excluding any income from equity
investments) plus, to the extent deducted in calculating pre-tax income or
deficit, (a) all depreciation and amortization expense (including the
amortization of Program Obligations), and (b) interest expense (net of interest
income), minus (ii) Program Obligation Payments, all calculated for such period
for the Company and the Subsidiaries on a consolidated basis in accordance with
Generally Accepted Accounting Principles consistently applied. In the case of
any Sale or Acquisition by the Company or any Subsidiary during any period of
calculation, the definition of Operating Cash Flow shall, for purposes of
determining Total Leverage Ratio, Senior Leverage Ratio and Applicable Margin,
be adjusted to give effect to such Sale or Acquisition, as if such Sale or
Acquisition occurred on the first day of such period, (x) in the case of a Sale,
by decreasing, if positive, or increasing, if negative, Operating Cash Flow by
the Operating Cash Flow in respect of such Sale during such period or (y) in the
case of an Acquisition, by increasing, if positive, or decreasing, if negative,
Operating Cash Flow by the Operating Cash Flow in respect of such Acquisition
during such period.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last Business Day of each March, June,
September and December.
"PBGC" means the Pension Benefit Guaranty Corporation, and its
successors and assigns.
"Person" means any natural person, corporation, firm, joint
venture, partnership, association, enterprise, trust, unincorporated
organization, government or any department or agency of any government.
"Plan" means an employee pension benefit plan which is covered by
Title IV of ERISA or which is subject to the minimum funding standards under
Section 412 of the Code as to which the Company or any member of the Controlled
Group may have any liability.
10
<PAGE>
"Pledge Agreement" means the Pledge Agreement dated October 1,
1993 between the Company, as Pledgor, and First Trust of California, National
Association, as pledgee, as such agreement may be amended, restated, modified or
supplemented and in effect from time to time.
"Pledged Stock" shall have the meaning given such term in the
Pledge Agreement.
"Prime Rate" means a rate per annum equal to the prime rate of
interest announced by the Administrative Agent from time to time, changing when
and as said prime rate changes.
"Pro Rata Share" means, with respect to each Bank, the percentage
amount set forth opposite such Bank's name below:
Bank Percentage
---- ----------
NatWest 26.15%
First Union 26.15%
Seattle-First National Bank 16.92%
The Long Term Credit Bank 15.39%
Union Bank 15.39%
"Program Obligations" means the obligations of the Company and the
Subsidiaries with respect to the acquisition of the right to broadcast films and
other programming material, payable in a form other than barter.
"Program Obligation Payments" means, for any period of calculation, an
amount equal to the aggregate amount paid in cash by or on behalf of the Company
and the Subsidiaries during such period with respect to, or on account of,
Program Obligations.
"Purchasers" is defined in Section 12.3.1.
"Put and Call Agreement" means the Put and Call Agreement, in the form
attached as Exhibit B to the Contribution Agreement, dated as of February 4,
1994 between the shareholders named therein and KJR Radio, Inc.
"Rate Hedging Agreements" means (i) any and all agreements, devices or
arrangements designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates applicable to
such party's assets, liabilities or exchange transactions, including, but not
limited to, dollar-denominated or cross-currency interest rate exchange
agreements, forward currency exchange agreements, interest rate cap or collar
protection agreements, forward rate currency or interest rate options, puts and
warrants, and (ii) any and all
11
<PAGE>
cancellations, buybacks, reversals, terminations or assignments of any of the
foregoing.
"Rate Hedging Obligations" means any and all obligations of the Company,
whether absolute or contingent and howsoever and whensoever created, arising,
evidenced or acquired (including all renewals, extensions and modifications
thereof and substitutions therefor), under any and all Rate Hedging Agreements.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"Reimbursement Obligations" means, at any time, the aggregate of the
obligations of the Company to the Issuer in respect of all unreimbursed payments
or disbursements made by the Issuer under or in respect of the Facility Letters
of Credit.
"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however, that a failure to meet the
minimum funding standards of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043 (a) of ERISA or
Section 412 (d) of the Code.
"Required Banks" means at least two Banks in the aggregate holding at least
66-2/3% of the aggregate unpaid principal amount of the outstanding Loans and
Facility Letter of Credit Obligations, or, if no Loans or Facility Letters of
Credit are outstanding at least two Banks in the aggregate holding at least
66-1/2% of the Aggregate Commitment.
"Reserve Requirement" means, with respect to any Eurodollar Interest
Period, the daily average during such Eurodollar Interest Period of the maximum
aggregate reserve requirement (including all basic, supplemental, marginal and
other reserves and taking into account any transitional adjustments or other
scheduled changes in reserve requirements during such Interest Period) which is
imposed
12
<PAGE>
on member banks of the Federal Reserve System under Regulation D on Eurocurrency
liabilities.
"Sale" means the sale, lease, transfer or other disposition (including,
without limitation, any disposition accomplished by way of a merger) of any
property, asset or business of the Company or any Subsidiary to any other
Person, other than a Subsidiary, other than any sale, lease, transfer or other
disposition contemplated by Section 6.12(ii)(a) or (b) with respect to which the
aggregate net proceeds realized by the Company or such Subsidiary shall equal
$250,000 or more on an annual basis.
"Secured Obligations" means, collectively, (i) the Obligations, (ii) all
Rate Hedging Obligations of the Company owing to one or more Banks and (iii) all
indebtedness, obligations and liabilities of the Company, direct or contingent,
owing to one or more Banks in connection with Facility Letters of Credit (or
applications therefor) which have been issued by one or more Banks.
"Senior Indebtedness" means all Indebtedness other than Subordinated
Indebtedness.
"Senior Leverage Ratio" means, as at any date of calculation, the ratio of
(i) Senior Indebtedness outstanding on such date of calculation (other than
contingent obligations under Guaranties) to (ii) Operating Cash Flow for the
period consisting of the four consecutive fiscal quarters ending on or most
recently ended prior to such date of calculation.
"Senior Note Indenture" means that certain Indenture dated October 1, 1993
between the Company and First Bank National Association, in its capacity as
Indenture Trustee, governing the Senior Notes, as it may be amended or modified
and in effect from time to time.
"Senior Notes" means, collectively, the 10-3/4% Senior Notes in the
aggregate principal amount of $120,000,000 issued pursuant to the Senior Note
Indenture.
"Senior Subordinated Notes" means, collectively, (i) the 11.16% Senior
Subordinated Notes in the aggregate principal amount of $12,500,000 due December
15, 1997 issued pursuant to the Series A and B Note Agreement, of which
$2,500,000 remains outstanding, (ii) the 11.20% Senior Subordinated Notes in the
aggregate principal amount of $12,500,000 due December 15, 1998 issued pursuant
to the Series A and B Note Agreement, of which $2,500,000 remains outstanding,
and (iii) the 10.48% Senior Subordinated Notes in the aggregate principal amount
of $30,000,000 due December 15, 2000, issued pursuant to the 1989 Note
Agreements, of which $30,000,000 remains outstanding, as such amounts may be
reduced from time to time.
13
<PAGE>
"Single Employer Plan" means a Plan maintained by the Company or any member
of the Controlled Group for employees of the Company or any member of the
Controlled Group.
"Station" means any radio or television station owned or operated by the
Company or any Subsidiary, including, without limitation, the following: KGET-
TV, Bakersfield, California; KCBA-TV, Salinas, California; KKTV, Colorado
Springs, Colorado; WIXT-TV, Syracuse, New York; and KVOS-TV, Bellingham,
Washington.
"Subordinated Indebtedness" means the Indebtedness evidenced by the Senior
Subordinated Notes and any and all other Indebtedness the payment of which is
subordinated to payment of the Secured Obligations to the written satisfaction
of the Required Banks.
"Subsidiary" means any corporation, or any similar entity, more than 50% of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by the Company or by one or more
Subsidiaries or by the Company and one or more Subsidiaries, or any similar
foreign business organization which is so owned or controlled. For purposes of
this Agreement and the other Loan Documents, New Century shall not be deemed to
be a Subsidiary.
"Total Leverage Ratio" means, as at any date of calculation, the ratio of
(a) the sum of (i) Indebtedness outstanding on such date of calculation (other
than contingent obligations under Guaranties) plus (ii) the amount of earned
deferred compensation for which the Company or any Subsidiary is liable on such
date of calculation to (b) Operating Cash Flow for the period consisting of the
four consecutive fiscal quarters ending on or most recently ended prior to such
date of calculation.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Loan, its nature as a Floating Rate
Advance or Eurodollar Advance.
"Unfunded Liabilities" means, (i) in the case of Single Employer Plans, the
amount (if any) by which the present value of all vested nonforfeitable benefits
under such Plan exceeds the fair market value of all Plan assets allocable to
such benefits, all determined as of the then most recent valuation date for such
Plans, and (ii) in the case of Multiemployer Plans, the withdrawal liability
that would be incurred by the Controlled Group if all members of the Controlled
Group completely withdrew from all Multiemployer Plans.
"Unmatured Default" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
14
<PAGE>
"Wholly-Owned Subsidiary" of the Company means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by the Company or one or more wholly-owned
Subsidiaries of the Company, or by the Company and one or more wholly-owned
Subsidiaries of the Company, or (ii) any partnership, association, joint venture
or similar business organization 100% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled.
1.2 GENERAL INTERPRETATION. For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the terms
defined in this Article include the plural as well as the singular, the words
"hereof," "herein," "hereto," "in this Agreement" and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision, and references in this Agreement to Articles,
Sections, and Exhibits refer to Articles and Sections of and Exhibits to this
Agreement.
ARTICLE II
THE CREDITS
2.1. THE LOAN FACILITY. Each Bank severally agrees, on the terms and
conditions set forth in this Agreement, to make Loans to the Company from time
to time prior to the Commitment Termination Date in amounts not to exceed in the
aggregate at any one time outstanding the amount of its Commitment. Loans shall
be made from the several Banks ratably in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment. Subject to the terms
of this Agreement, the Company may borrow, repay and reborrow Loans at any time
prior to the Commitment Termination Date. The Loans may be Floating Rate
Advances or Eurodollar Advances, or a combination thereof, determined in
accordance with Sections 2.10 and 2.11.
2.2. [INTENTIONALLY OMITTED].
2.4. FACILITY LETTERS OF CREDIT.
2.3.1. OBLIGATION TO ISSUE. The Issuer agrees, on the terms and
conditions set forth in this Agreement, to issue for the account of the Company
Facility Letters of Credit in accordance with this Section 2.3, from time to
time during the period commencing on the date hereof and ending on the Business
Day prior to the Commitment Termination Date.
2.3.2. TYPES AND AMOUNTS. The Issuer shall have no obligation to:
15
<PAGE>
(i) issue any Facility Letter of Credit if the aggregate maximum
amount then available for drawing under Facility Letters of
Credit issued by the Issuer, after giving effect to the Facility
Letter of Credit requested hereunder, shall exceed any limit
imposed by law or regulation upon the Issuer;
(ii) issue any Facility Letter of Credit if, after giving effect
thereto, the aggregate amount of the Loans and the Facility
Letter of Credit Obligations would exceed the Aggregate
Commitment;
(iii) issue any Facility Letter of Credit which has an expiration date
(a) later than twelve (12) months after the Issuance Date thereof
or (b) after the Commitment Termination Date; or
(iv) issue any Facility Letter of Credit if, after giving effect
thereto, (a) the aggregate amount of Facility Letters of Credit
outstanding would exceed $7,500,000, or (b) the number of
Facility Letters of Credit outstanding would exceed 8.
2.3.3. CONDITIONS. In addition to being subject to the satisfaction
of the conditions contained in Section 4.2, the obligation of the Issuer to
issue any Facility Letter of Credit is subject to the satisfaction in full of
the following conditions:
(i) the Company shall have delivered to the Issuer at such times and
in such manner as the Issuer may reasonably prescribe such
documents and materials as may be required pursuant to the terms
of the proposed Facility Letter of Credit and the proposed
Facility Letter of Credit shall be reasonably satisfactory to the
Issuer as to form and content; and
(ii) as of the Issuance Date, no order, judgment or decree of any
court, arbitrator or governmental authority shall purport by its
terms to enjoin or restrain the Issuer from issuing the proposed
Facility Letter of Credit and no law, rule or regulation
applicable to any Bank and no request or directive (whether or
not having the force of law) from any governmental authority with
jurisdiction over the Issuer shall prohibit or request that the
Issuer refrain from the issuance of Letters of Credit generally
or the issuance of such proposed Facility Letter of Credit in
particular.
16
<PAGE>
2.3.4. PROCEDURE FOR ISSUANCE OF FACILITY LETTERS OF
CREDIT.
(i) The Company shall give the Issuer twenty (20) days' prior written
notice of any requested issuance of a Facility Letter of Credit
(except that, in lieu of such written notice, the Company may
give the Issuer (x) notice of such request by tested facsimile or
other tested arrangement satisfactory to the Issuer or (y)
telephonic notice of such request if confirmed in writing by
delivery to the Issuer (1) immediately of a telecopy of the
written notice required hereunder which has been signed by an
Authorized Officer or (2) promptly (but in no event later than
the requested time of issuance) of a copy of the written notice
required hereunder containing the original signature of an
Authorized Officer). Each such notice (each a "Letter of Credit
Request") shall be irrevocable once the relevant Facility Letter
of Credit is issued and shall specify the stated amount of the
Facility Letter of Credit requested, the Issuance Date (which day
shall be a Business Day) of such requested Facility Letter of
Credit, the date on which such requested Facility Letter of
Credit is to expire (which date shall be a Business Day and shall
in no event be later than the Commitment Termination Date), the
purpose for which such Facility Letter of Credit is to be issued,
and the Person for whose benefit the requested Facility Letter of
Credit is to be issued. At the time such Letter of Credit
Request is made, the Company shall also provide the Issuer with a
copy of the form of the Facility Letter of Credit it is
requesting be issued. Such Letter of Credit Request, to be
effective, must be received by the Issuer not later than 3:00
p.m. (New York time) on the last Business Day on which notice can
be given under this Section 2.3.4(i).
(ii) Subject to the terms and conditions of this Section 2.3.4 and
provided that the applicable conditions set forth in Sections 4.2
and 2.3.3 have been satisfied, the Issuer shall, on the requested
Issuance Date, issue the requested Facility Letter of Credit for
the account of the Company in accordance with the Issuer's usual
and customary business practices.
(iii) The Issuer shall not be obligated to extend or amend any Facility
Letter of Credit unless the requirements of this Section 2.3.4
are met as if a
17
<PAGE>
new Facility Letter of Credit were being requested and issued.
2.3.5. REIMBURSEMENT OBLIGATIONS.
(i) The Issuer shall promptly notify the Company of any draw under a
Facility Letter of Credit. The Company shall reimburse the
Issuer at the Issuer's address specified pursuant to
Section 13.1, or at any other Lending Installation specified in
writing by the Issuer to the Company, for the ratable account of
the Issuer and the Banks, in immediately available funds, for
draws under a Facility Letter of Credit no later than the
Business Day next succeeding the date of payment by the Issuer by
10:00 a.m. (Seattle time) on the date when due, provided,
however, that if the Issuer notifies the Company of such a draw
on or after the Business Day next succeeding the date of payment
by the Issuer, the Company shall be required to reimburse the
Issuer no later than 10:00 a.m. (Seattle time) on the Business
Day next succeeding the date of such notification. Each payment
delivered to the Issuer for the account of any Bank shall be
delivered promptly by the Issuer to such Bank in the same type of
funds which the Issuer received at its address specified pursuant
to Section 13.1 or at any Lending Installation specified in a
notice received by the Issuer from such Bank.
(ii) Any Reimbursement Obligation with respect to any Facility Letter
of Credit shall bear interest from the date of the relevant draws
under the relevant Facility Letter of Credit at the interest rate
for Floating Rate Advances not paid at maturity as calculated in
accordance with Section 2.18.
(iii) Any action taken or omitted to be taken by the Issuer under or in
connection with any Facility Letter of Credit, if taken or
omitted in the absence of willful misconduct or gross negligence,
shall not put the Issuer under any resulting liability to the
Company. In determining whether to pay under any Facility Letter
of Credit, the Issuer shall have no obligation relative to the
Company other than to confirm that any documents required to be
delivered under such Letter of Credit appear to comply on their
face with the requirements of such Letter of Credit.
2.3.6. PAYMENT OF REIMBURSEMENT OBLIGATIONS. The Company agrees to
pay to the Issuer the amount of all Reimbursement
18
<PAGE>
Obligations, interest and other amounts payable to the Issuer under or in
connection with any Facility Letter of Credit immediately when due, irrespective
of any claim, set-off, defense or other right which the Company or any
Subsidiary may have at any time against the Issuer or any other Person, under
all circumstances, including without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or any
of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or other right which
the Company or any Subsidiary may have at any time against a
beneficiary named in a Facility Letter of Credit or any
transferee of any Facility Letter of Credit (or any Person for
whom any such transferee may be acting), the Issuer, any Bank, or
any other Person, whether in connection with this Agreement, any
Facility Letter of Credit, the transactions contemplated herein
or any unrelated transactions (including any underlying
transactions between the Company or any Subsidiary and the
beneficiary named in any Facility Letter of Credit);
(iii) any draft, certificate or any other document presented under the
Facility Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Loan Documents;
or
(v) the occurrence of any Default or Unmatured Default.
2.3.7. LETTER OF CREDIT PARTICIPATIONS. Each Bank severally agrees
to purchase from the Issuer a participation in each Facility Letter of Credit
issued by the Issuer in an amount equal to such Bank's Pro Rata Share thereof
and in the event of a drawing under any Facility Letter of Credit, to make
payment to the Issuer in the manner provided in Section 2.9.
2.3.8. COMPENSATION FOR FACILITY LETTERS OF CREDIT. The Company
shall pay to the Issuer, (i) upon the date of issuance and upon the date of a
renewal, $250 for each Facility Letter of Credit issued by the Issuer, and (ii)
on each Payment Date and upon the expiration date of any Facility Letter of
Credit, for distribution to the Banks based on their Pro Rata Share of the
Facility Letter of Credit Obligations, a fee equal to (A) the amount obtained by
dividing (x) the dollar amount obtained by multiplying the then-
19
<PAGE>
existing Applicable Margin for Eurodollar Advances, determined in accordance
with Section 2.12 of this Agreement (expressed as a decimal), by the average
daily aggregate maximum amount available to be drawn under all outstanding
Facility Letters of Credit during such period, by (y) 365, MULTIPLIED by (B) the
number of actual days elapsed during such period.
2.4. PAYMENT OF LOANS. The Company shall repay the Loans: (i) in full, on
the Commitment Termination Date; (ii) in full, upon the occurrence of any
Default and acceleration of the Obligations by the Managing Agents pursuant to
this Agreement, or upon the occurrence of a Default under Sections 7.6 or 7.7
and the automatic acceleration of the Obligations pursuant to Article VIII;
(iii) in part, immediately in the event that the total Loans plus Facility
Letters of Credit outstanding at any time under all of the Notes exceeds the
Aggregate Commitment at such time, in the amount of such excess; and (iv) in
part, immediately upon demand by any Bank, in the event that the aggregate
amount of Loans from any Bank exceeds such Bank's Commitment, in the amount of
such excess.
2.5. MANDATORY REDUCTIONS OF AGGREGATE COMMITMENT. On each of the dates
set forth below, the Aggregate Commitment shall be permanently reduced by the
amount set forth below opposite each of the dates set forth below.
<TABLE>
<CAPTION>
Reduction Date Reduction Amount
-------------- ----------------
<S> <C>
June 30, 1995 $2,166,666.66
September 30, 1995 $2,166,666.67
December 31, 1995 $2,166,666.67
March 31, 1996 $2,437,500.00
June 30, 1996 $2,437,500.00
September 30, 1996 $2,437,500.00
December 31, 1996 $2,437,500.00
March 31, 1997 $2,843,750.00
June 30, 1997 $2,843,750.00
September 30, 1997 $2,843,750.00
December 31, 1997 $2,843,750.00
March 31, 1998 $3,656,250.00
June 30, 1998 $3,656,250.00
September 30, 1998 $3,656,250.00
December 31, 1998 $3,656,250.00
March 31, 1999 $3,656,250.00
June 30, 1999 $3,656,250.00
September 30, 1999 $3,656,250.00
December 31, 1999 $3,656,250.00
March 31, 2000 $4,062,500.00
June 30, 2000 $4,062,500.00
</TABLE>
20
<PAGE>
2.6. ADDITIONAL MANDATORY PRINCIPAL PAYMENTS; ADDITIONAL MANDATORY
REDUCTIONS OF AGGREGATE COMMITMENT.
(i) In addition to the mandatory payments required under Section 2.4,
the Company shall make the following mandatory payments:
(a) Concurrently with the consummation of any Sale by the
Company or any Subsidiary, the Company shall make a
mandatory payment on the Loans outstanding in an amount
equal to the sum of (1) 100% of the net cash proceeds
realized in connection with such Sale, and (2) a dollar
amount equal to 25% of the agreed-upon value of any equity
securities received by the Company as consideration in
connection with any such Sale.
(b) On or before April 30, 1996, the Company shall make a
mandatory payment on the Loans outstanding in an amount
equal to 25% of Excess Cash Flow, if positive, for the
fiscal year ending December 31, 1995, and on or before April
30 of each year thereafter, the Company shall make a
mandatory payment on the Loans outstanding in an amount
equal to 50% of Excess Cash Flow, if positive, for the most
recently ended fiscal year.
(ii) The mandatory payments made pursuant to clause (i) of this
Section 2.6 shall be applied to principal of the outstanding
Loans.
(iii) Concurrently with each mandatory payment on the Loans made
pursuant to this Section 2.6, the Aggregate Commitment shall be
permanently reduced by a like amount. Any and all reductions of
the Aggregate Commitment or mandatory prepayments required to be
made pursuant to clause (i)(a)(2) or clause (i)(b) of this
Section 2.6 shall be applied to the pro rata reduction of the
then remaining scheduled reductions of the Aggregate Commitment,
and any and all reductions of the Aggregate Commitment or
mandatory prepayments required to be made pursuant to clause
(i)(a)(1) of this Section 2.6 shall be applied to the reduction
of the then remaining scheduled reductions of the Aggregate
Commitment in the inverse order of maturity.
2.7. OPTIONAL PRINCIPAL PAYMENTS. The Company may from time to time pay
all outstanding Floating Rate Advances or, in a minimum
21
<PAGE>
aggregate amount of $500,000 or in integral multiples of $500,000 if in excess
thereof, any portion of the outstanding Floating Rate Advances, upon two
Business Days' notice to the Administrative Agent. Subject to Section 3.3, the
Company may from time to time pay all outstanding Eurodollar Advances or, in a
minimum aggregate amount of $500,000 (or any integral multiple of $500,000 if in
excess thereof), any portion of the outstanding Eurodollar Advances, upon three
Business Days' prior written notice to the Administrative Agent, provided,
however, that after giving effect to such payment, each outstanding Eurodollar
Advance shall be in a minimum amount of $500,000.
2.8. FEES; COMMITMENT REDUCTIONS.
2.8.1. FEES. The Company agrees to pay to the Managing Agents and
each of the Banks fees in such amounts as set forth in a separate fee letter
dated December 21, 1994 for the Managing Agents and each of the Banks, which
fees shall be due and payable to the Managing Agents and each Bank on the date
of execution of this Agreement. Such fees shall be fully earned when due and
non-refundable when paid.
2.8.2. COMMITMENT FEE; VOLUNTARY REDUCTION OF AGGREGATE COMMITMENT.
The Company agrees to pay to the Administrative Agent for the account of each
Bank a commitment fee of .50% per annum calculated on a year consisting of 360
days based upon the actual number of days elapsed, on the average daily
unborrowed portion of such Bank's Commitment from the date of this Agreement to
and including the Commitment Termination Date, payable on each Payment Date
after the date of this Agreement and on the Commitment Termination Date. The
Company may permanently reduce the Aggregate Commitment in whole, or in part
ratably among the Banks in integral multiples of $500,000, upon at least ten
Business Days' written notice to the Administrative Agent, which notice shall
specify the amount of any such reduction; provided, however, that the Aggregate
Commitment may not be reduced below the principal amount of the outstanding
Loans and Facility Letters of Credit. If the Aggregate Commitment is terminated
in its entirety, all accrued commitment fees in respect of the Aggregate
Commitment shall be payable on the effective date of such termination.
2.9. METHOD OF BORROWING. Not later than 11:00 a.m. (New York time) on
each Borrowing Date, each Bank shall make available its Loan or Loans in funds
immediately available in New York to the Administrative Agent at its address
specified pursuant to Section 13. The Administrative Agent will make the funds
so received from the Banks available to the Company at the Administrative
Agent's aforesaid address.
2.10. BORROWING NOTICES: METHOD OF SELECTING TYPES AND EURODOLLAR INTEREST
PERIODS FOR LOANS. The Company may select the Type and, in the case of
Eurodollar Advances, the Eurodollar
22
<PAGE>
Interest Periods applicable to each Loan from time to time. With respect to
each Loan, the Company shall give the Administrative Agent irrevocable notice (a
"Borrowing Notice") not later than 11:00 a.m. New York time at least one
Business Day before the Borrowing Date of each Floating Rate Advance and three
Business Days before the Borrowing Date of each Eurodollar Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day, of such Loan,
(ii) the aggregate amount of such Loan,
(iii) the Type of Loan selected, and
(iv) in the case of each Eurodollar Advance, the Eurodollar Interest
Period applicable thereto, subject to the provisions of the
definition of Eurodollar Interest Period.
The unpaid principal amount of each Eurodollar Advance shall bear interest from
and including the first day of the Eurodollar Interest Period applicable thereto
to (but not including) the last day of such Eurodollar Interest Period at the
Eurodollar Rate applicable to such Eurodollar Advance. Floating Rate Advances
shall bear interest at the Floating Rate and the interest rate on any Floating
Rate Advances shall change when and as the Alternate Base Rate changes. Each
Floating Rate Advance shall be in the minimum amount of $500,000 (and in
integral multiples of $500,000 if in excess thereof) and each Eurodollar Advance
shall be in the minimum amount of $500,000 (and in integral multiples of
$500,000 if in excess thereof); provided, however, that any Floating Rate
Advance may be in the aggregate amount of the unused Aggregate Commitment, and
provided further that no more than six different Eurodollar Interest Periods may
exist at any one time. The Company may not select the Eurodollar Rate for a
Loan if there exists a Default or Unmatured Default hereunder. The Company
shall select Eurodollar Interest Periods with respect to Eurodollar Advances
which end on or prior to the Commitment Termination Date.
2.11. METHOD OF SELECTING TYPES AND EURODOLLAR INTEREST PERIODS FOR
CONVERSION AND CONTINUATION OF LOANS.
(i) The Company may elect from time to time, subject to the
provisions of Section 2.12, to convert all or any part of a
Floating Rate Advance into a Eurodollar Advance or a Eurodollar
Advance into a Floating Rate Advance; provided that any
conversion of any Eurodollar Advance shall be made on, and only
on, the last day of the Eurodollar Interest Period applicable
thereto.
23
<PAGE>
(ii) Floating Rate Advances shall continue as Floating Rate Advances
unless and until such Floating Rate Advances are converted into
Eurodollar Advances, Eurodollar Advances shall continue as
Eurodollar Advances until the end of the then applicable
Eurodollar Interest Period therefor, at which time such
Eurodollar Advance shall be automatically converted into a
Floating Rate Advance unless the Company shall have given the
Administrative Agent notice in accordance with Section 2.11(iv)
requesting that, at the end of such Eurodollar Interest Period,
such Eurodollar Advance continue as a Eurodollar Advance for the
same or another Eurodollar Interest Period.
(iii) Notwithstanding anything to the contrary contained in Section
2.11(i) or 2.11(ii), no Loan may be converted into or continued
as a Eurodollar Advance (except with the consent of the Required
Banks) when any Default or Unmatured Default has occurred and is
continuing.
(iv) The Company shall give the Administrative Agent irrevocable
notice (a "Conversion/Continuation Notice") of each conversion of
a Loan or continuation of a Eurodollar Advance not later than
11:00 a.m. (New York time) at least two Business Days, in the
case of a conversion into a Floating Rate Advance, or three
Business Days, in the case of a conversion into or continuation
of a Eurodollar Advance, prior to the date of the requested
conversion or continuation, specifying:
(a) the requested date (which shall be a Business Day) of such
conversion or continuation;
(b) the amount and Type of the Loan to be converted or
continued; and
(c) the amount and Type(s) of Loan(s) into which such Loan is to
be converted or continued and, in the case of a conversion
into or continuation of a Eurodollar Advance, the duration
of the Eurodollar Interest Period applicable thereto.
2.12. APPLICABLE MARGIN. The Applicable Margin for Floating Rate
Advances and Eurodollar Advances shall be determined based on the Total Leverage
Ratio, as more specifically set forth below:
24
<PAGE>
Total Leverage Ratio Floating Rate Eurodollar Rate
-------------------- ------------- ---------------
Greater than or equal to 5.00 to
1.00 1.375% 2.625%
Less than 5.00 to 1.00 but greater
than or equal to 4.50 to 1.00 1.00% 2.25%
Less than 4.50 to 1.00 but greater
than or equal to 4.00 to 1.00 0.75% 2.00%
Less than 4.00 to 1.00 0.50% 1.75%
provided, however, that prior to April 30, 1997, with respect to Loans, the
Applicable Margin corresponding to a Total Leverage Ratio of less than 4.00 to
1.00 shall be 0.75% for Floating Rate Advances and 2.00% for Eurodollar Advances
and, with respect to compensation for Facility Letters of Credit pursuant to
Section 2.3.8, the Applicable Margin for Eurodollar Advances shall be determined
as specifically set forth in the table above. The Total Leverage Ratio shall be
determined from the then most recent quarterly or annual consolidated financial
statements and Compliance Certificate delivered by the Company pursuant to
Sections 6.1(i), 6.1(ii) or 6.1(iii). The adjustment, if any, to the Applicable
Margin shall be effective on the fifth Business Day after the delivery of such
financial statements and Compliance Certificate. Until such financial
statements and Compliance Certificate for the first complete fiscal quarter
ending after the date hereof have been delivered, the maximum Applicable Margin
shall apply. In the event that the Company shall at any time fail to furnish to
the Banks the financial statements and Compliance Certificate required to be
delivered pursuant to Sections 6.1(i), 6.1(ii) or 6.1(iii), the maximum
Applicable Margin shall apply until such time as such financial statements and
Compliance Certificate are so delivered.
2.13. METHOD OF PAYMENT. All payments of principal, interest and fees
hereunder shall be made in immediately available funds to the Administrative
Agent at the Administrative Agent's address specified pursuant to Article XIII,
or at any other Lending Installation specified in writing by the Administrative
Agent to the Company, by 10:00 a.m. (Seattle time) on the date when due and
shall be made ratably among the Banks (except for payments of fees pursuant to
Section 10.15, which shall be made solely to the Administrative Agent) on or
before the time a principal payment is made on any of the Loans, the Company
shall inform the Administrative Agent as to the proportionate application of
such payment to the Floating Rate Advances and Eurodollar Advances. Each
payment delivered to the Administrative Agent for the account of any Bank shall
be delivered promptly by the Administrative Agent to such Bank in the same type
of funds which the Administrative
25
<PAGE>
Agent received at its address specified pursuant to Section 13 or at any Lending
Installation specified in a notice received by the Administrative Agent from
such Bank. The Administrative Agent is hereby authorized to charge the account
of the Company for each payment of principal, interest and fees as it becomes
due.
2.14. NOTES; TELEPHONIC NOTICES. The Loans shall be evidenced by the
Notes. Each Bank is hereby authorized to record the principal amount of each
Loan and each repayment on the schedule attached to the appropriate Note,
provided, however, that the failure to so record shall not affect the Company's
obligations under the Notes. The Company hereby authorizes the Banks and the
Managing Agents to extend, convert and continue Loans based on telephonic
notices made by any person or persons the Managing Agents or any Bank in good
faith believes to be acting on behalf of the Company. The Company agrees to
confirm to the Managing Agents promptly any telephonic notice in writing signed
by an Authorized Officer. If the written confirmation differs in any material
respect from the action taken by the Managing Agents and the Banks, the records
of the Managing Agents and the Banks shall govern absent manifest error.
2.15. INTEREST PAYMENT DATES; INTEREST BASIS. Interest accrued on each
Floating Rate Advance shall be payable on each Payment Date hereafter, on any
date on which such Floating Rate Advance is prepaid, whether due to acceleration
or otherwise, and at maturity. Interest on Floating Rate Advances shall be
calculated for actual days elapsed on the basis of a 365-day year. Interest
accrued on each Eurodollar Advance shall be payable on the last day of its
applicable Eurodollar Interest Period and, in the case of a Eurodollar Interest
Period longer than three months, on the last day of each three-month interval
during such Eurodollar Interest Period, on any date on which such Eurodollar
Advance is prepaid, whether by acceleration or otherwise, and at maturity.
Interest on Eurodollar Advances and all commitment fees shall be calculated for
actual days elapsed on the basis of a 360-day year. Interest shall be payable
for the day a Loan is made but not for the day of any payment on the amount paid
if payment is received prior to 10:00 a.m. (Seattle time) at the place of
payment. If any payment of principal of or interest on a Loan shall become due
on a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and, in the case of a principal payment, such extension
of time shall be included in computing interest in connection with such payment.
2.16. NOTIFICATION OF LOANS, INTEREST RATES, PREPAYMENTS AND COMMITMENT
REDUCTIONS. Promptly after receipt thereof, the Administrative Agent will
notify each Bank of the contents of each commitment reduction notice, Borrowing
Notice, Conversion/Continuation Notice and repayment notice. The Administrative
Agent will notify each Bank of the interest rate applicable to each Eurodollar
Advance promptly upon determination
26
<PAGE>
of such interest rate and will give each Bank prompt notice of each change in
the Alternate Base Rate.
2.17. Lending Installations. Each Bank may book its Loans at any
Lending Installation selected by such Bank and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Notes shall be deemed held by each Bank for
the benefit of such Lending Installation. Each Bank may, by written or telex
notice to the Administrative Agent and the Company, designate a Lending
Installation through which Loans are made and for whose account Loan payments
are to be made.
2.18. POST DEFAULT RATE. Notwithstanding any other provision of this
Agreement, after the occurrence and during the continuance of a Default, the
Loans and any Reimbursement Obligations shall bear interest until paid in full
at the following rates per annum:
(i) Floating Rate Advances shall bear interest at a rate equal to the
Floating Rate plus 2% per annum;
(ii) Eurodollar Advances shall bear interest, (a) for the remainder of
the Eurodollar Interest Period at the higher of (1) the rate
otherwise in effect for the existing Eurodollar Interest Period
plus 2% per annum and (2) the Floating Rate plus 2% per annum,
and (b) thereafter, at a rate equal to the Floating Rate plus 2%
per annum; and
(iii) Reimbursement Obligations shall bear interest at a rate equal to
the Floating Rate plus 2% per annum.
2.19. PREPAYMENT OF LOANS AND CASH COLLATERALIZATION OF FACILITY
LETTERS OF CREDIT UPON CHANGE IN CONTROL. If a Change in Control shall occur,
the Required Banks shall have the right, by written notice given to the Company,
to terminate the obligations of the Banks to make Loans and to demand that the
Company prepay the Notes in full in which case the Notes will become due and
payable, and the Issuer shall have the right, by written notice given to the
Company, to terminate its obligations to issue Facility Letters of Credit
hereunder and to demand that the Company deposit cash collateral with the
Administrative Agent in an amount equal to 100% of the then outstanding Facility
Letters of Credit. Such cash collateral shall be deposited and held by the
Administrative Agent for the benefit of the Issuer in a non-interest bearing
collateral account to secure payment of the Facility Letter of Credit
Obligations. Such notice may be given not earlier than 20 days after and not
later than 90 days after the first to occur of (i) receipt by the Administrative
Agent of written notice from the Company of a Change in Control or (ii) the date
on which the Administrative Agent or any Bank, having
27
<PAGE>
otherwise obtained actual knowledge of a Change in Control, notifies the Company
thereof.
The Company shall prepay the Notes and deposit such cash collateral on the date
specified by the Company (the "Specified Payment Date") in a written notice
given to the Administrative Agent not less than 20 days prior to the Specified
Payment Date. The Specified Payment Date shall not be later than 90 days after
the earlier of (i) the date on which the Required Banks sent the notice to the
Company demanding prepayment or (ii) the date on which the Issuer sent the
notice to the Company demanding cash collateral. Notwithstanding the foregoing
provisions and whether or not the notice provisions above are satisfied, if as a
result of a Change in Control the Company is required to prepay other
Indebtedness, the Company will prepay the Notes and deposit such cash collateral
prior to or simultaneously with the prepayment of such other Senior Indebtedness
and prior to the prepayment of such other Subordinated Indebtedness.
2.20. NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. Unless the
Company or a Bank, as the case may be, notifies the Administrative Agent prior
to the date on which it is scheduled to make payment to the Administrative Agent
of (i) in the case of a Bank, the proceeds of a Loan or (ii) in the case of the
Company, a payment of principal, interest or fees to the Administrative Agent
for the account of the Banks, that it does not intend to make such payment, the
Administrative Agent may assume that such payment has been made. The
Administrative Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption.
If such Bank or the Company, as the case may be, has not in fact made such
payment to the Administrative Agent, the recipient of such payment shall, on
demand by the Administrative Agent, repay to the Administrative Agent the amount
so made available together with interest thereon in respect of each day during
the period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to (i) in the case of payment by a Bank, the
Federal Funds Effective Rate for such day or (ii) in the case of payment by the
Company, the interest rate applicable to the relevant Loan.
2.21. WITHHOLDING TAX EXEMPTION. At least five Business Days prior to
the first date on which interest or fees are payable hereunder for the account
of any Bank, each Bank that is not incorporated under the laws of the United
States of America, or a state thereof, agrees that it will deliver to each of
the Company and the Administrative Agent two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, certifying in either case
that such Bank is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States federal income
taxes. Each Bank which so
28
<PAGE>
delivers a Form 1001 or 4224 further undertakes to deliver to each of the
Company and the Administrative Agent two additional copies of such form (or a
successor form) on or before the date that such form expires (currently, three
successive calendar years for Form 1001 and one calendar year for Form 4224) or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent forms so delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably requested by the Company or the
Administrative Agent, in each case certifying that such Bank is entitled to
receive payments under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes, unless an event
(including, without limitation, any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Bank from duly completing and delivering any such form with respect to it and
such Bank advises the Company and the Administrative Agent that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax.
2.22. COLLATERAL SECURITY; FURTHER ASSISTANCE.
(i) The Secured Obligations shall be secured by a Lien on and
security interest in the Pledged Stock under the terms and
provisions contained in the Pledge Agreement.
(ii) In connection with any exercise by the Managing Agents or any
Bank of its right and remedies under the Loan Documents, it may
be necessary to obtain the prior consent or approval of certain
Persons, including, without limitation, professional sports
associations, the FCC and other Governmental Authorities. Upon
the exercise by the Managing Agents, any Bank or the Collateral
Agent of any power, right, privilege or remedy pursuant to any
Loan Document which requires any Authorization, the Company will
execute and deliver, or will cause the execution and delivery of
all applications, certificates, instruments and other documents
and papers that the Managing Agents, such Bank or the Collateral
Agent may be required to obtain for such Authorization. Without
limiting the generality of the foregoing, the Company will use
its best efforts to obtain from the appropriate Persons the
necessary consents and approvals, if any: (a) for the transfer,
if required for the effectuation of clause (b) below, to the
Managing Agents, the Banks or the Collateral Agent upon the
occurrence of a Default, of any Authorization in respect of any
Subsidiary's operations; (b) for the effectuation
29
<PAGE>
of any sale or sales of Pledged Stock upon the occurrence of a
Default; and (c) for the exercise of any other right or remedy of
the Managing Agents, any Bank or the Collateral Agent under any
Loan Document. The Managing Agents and the Banks will cooperate
with the Company in preparing the filing with the FCC and any
other Persons of all requisite applications required to be
obtained by the Company under this Section 2.22(ii).
ARTICLE III
CHANGE IN CIRCUMSTANCES; INDEMNIFICATION
3.1. YIELD PROTECTION. If at any time on or after the Closing Date, the
adoption of any law or the application of any governmental or quasi-governmental
rule, regulation, policy, guideline or directive, whether or not having the
force of law, or any change therein, or any change in the interpretation or
administration thereof, or compliance of any Bank with any such law, rule,
regulation, policy, guideline or directive,
(i) subjects any Bank or any applicable Lending Installation to any
tax, duty, charge or withholding on or from payments due from the
Company (excluding federal taxation of the overall net income of
any Bank), or changes the basis of taxation of payments to any
Bank in respect of its Loans or participations in or issuance of
any Facility Letters of Credit or other amounts due it hereunder,
or
(ii) imposes or increases or deems applicable any reserve (other than
reserves included in the Reserve Requirement with respect to
Eurodollar Advances), special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, any Bank or any applicable Lending Installation, or
(iii) imposes any other condition the result of which is to increase
the cost to any Bank or any applicable Lending Installation of
making, funding or maintaining U.S. Dollar loans or letters of
credit or reduces any amount receivable by any Bank or any
applicable Lending Installation in connection with U.S. Dollar
loans or letters of credit, or requires any Bank or any
applicable Lending Installation to make any payment calculated by
reference to the amount of loans held or interest received by it
or letters of credit issued by it or participated in by it, by an
amount deemed material by such Bank,
30
<PAGE>
then, within 15 days of demand by such Bank, the Company shall pay such Bank
that portion of such increased expense incurred or the amount of reduction in an
amount received which such Bank determines in good faith is attributable to
making, funding and maintaining its Loans, its participations in or issuance of
Facility Letters of Credit and its Commitment (or any portion thereof).
3.2. AVAILABILITY OF INTEREST RATE. If any Bank determines in good faith
that maintenance of its Eurodollar Loans at a suitable Lending Installation
would violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Required Banks determine in good faith that
(i) deposits of a type and maturity appropriate to match fund Eurodollar
Advances are not available or (ii) the Base Eurodollar Rate does not accurately
reflect the cost of making or maintaining a Eurodollar Advance, then the
Administrative Agent shall suspend the availability of the Eurodollar Rate and
require any Eurodollar Advances to be converted to Floating Rate Advances.
3.3. FAILURE TO PAY OR BORROW ON CERTAIN DATES. If any payment of a
Eurodollar Advance occurs on a date which is not the last day of the applicable
Eurodollar Interest Period (whether due to a mandatory payment, an optional
payment, or otherwise), or a Eurodollar Advance is not made on the date
specified by the Company for any reason other than default by the Banks, the
Company will indemnify each Bank for any loss or cost incurred by it resulting
therefrom, including, without limitation, any loss or cost in liquidating or
employing deposits or contractual undertakings acquired to fund or maintain such
Eurodollar Advance.
3.4. CHANGES IN CAPITAL ADEQUACY REGULATIONS. If a Bank determines in good
faith the amount of capital required or expected to be maintained by such Bank,
any Lending Installation of such Bank or any corporation controlling such Bank
is increased as a result of a Change, then, within 15 days of demand by such
Bank, the Company shall pay such Bank the amount necessary to compensate for any
shortfall in the rate of return on the portion of such increased capital which
such Bank determines in good faith is attributable to this Agreement, its Loans
or its obligation to make Loans hereunder (after taking into account such Bank's
policies as to capital adequacy). "Change" means (i) any change after the date
of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of
or change in any other law, governmental or quasi-governmental rule, regulation,
policy, guideline, interpretation, or directive (whether or not having the force
of law) after the date of this Agreement which affects the amount of capital
required or expected to be maintained by any Bank or any Lending Installation or
any corporation controlling any Bank. "Risk-Based Capital Guidelines" means (i)
the risk-based capital guidelines in effect in the United States on the date of
this Agreement, including transition rules, and (ii) the corresponding capital
31
<PAGE>
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices Entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
3.5. BANK CERTIFICATES; SURVIVAL OF INDEMNITY. To the extent reasonably
possible, each Bank shall designate an alternate Lending Installation with
respect to its Eurodollar Advances to reduce any liability of the Company to
such Bank under Section 3.1 or to avoid the unavailability of the Eurodollar
Rate under Section 3.2, so long as such designation is not, in the sole opinion
of such Bank, disadvantageous to such Bank. A certificate of a Bank as to the
amount due under Section 3.1, 3.3 or 3.4 shall be final, conclusive and binding
on the Company in the absence of manifest error. Determination of amounts
payable under such Sections in connection with a Eurodollar Advance shall be
calculated as though each Bank funded its portion of the Eurodollar Advance
through the purchase of a deposit of the type and maturity corresponding to the
deposit used as a reference in determining the Eurodollar Rate applicable to
such Eurodollar Advance. Unless otherwise provided herein, the amount specified
in the certificate shall be payable on demand after receipt by the Company of
the certificate. The obligations under Sections 3.1, 3.3 and 3.4 shall survive
payment of the Obligations and termination of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. INITIAL CREDIT EXTENSION. The Banks shall not be required to make the
initial Loans hereunder or issue the initial Facility Letter of Credit, unless:
(i) The Company has furnished to the Documentation Agent, with
sufficient copies for the Banks, the following, each dated or
dated as of the Closing Date (or such earlier date as shall be
acceptable to the Banks):
(a) Copies of the articles of incorporation, together with all
amendments thereto, and certificates of good standing in
respect of the Company certified by the appropriate
governmental officer in the jurisdiction of incorporation of
the Company.
(b) Copies, certified on the Closing Date by the Secretary
or an Assistant Secretary of the Company, of its Bylaws,
Board of Directors' resolutions (and resolutions of other
bodies,
32
<PAGE>
if any are deemed necessary by counsel for the Documentation
Agent) authorizing the execution, delivery and performance
of this Agreement and the other Loan Documents.
(c) An incumbency certificate, dated the Closing Date, executed
by the Secretary or an Assistant Secretary of the Company,
which shall identify by name and title and bear the
signature of the officers of the Company authorized to sign
this Agreement and the other Loan Documents and to make
borrowings hereunder. The Banks shall be entitled to rely
on such incumbency certificates for all purposes hereunder
until informed of any change in writing by the Company.
(d) A copy of the Pledge Agreement, together with copies of (1)
stock certificates representing the Pledged Stock and (2)
stock powers duly executed in blank.
(e) A written opinion of Graham & Dunn, corporate counsel to the
Company, dated the Closing Date, addressed to the Banks in
substantially the form of Exhibit "B-1" hereto.
(f) A written opinion of Rubin, Winston, Diercks, Harris &
Cooke, general and FCC counsel to the Company, dated the
Closing Date, addressed to the Banks in substantially the
form of Exhibit "B-2" hereto.
(g) A certificate, dated the Closing Date, signed by the Chief
Financial Officer of the Company stating that on said date,
the Company is not engaged in any litigation that could have
a Material Adverse Effect on the Company, no Default or
Unmatured Default has occurred and is continuing and, since
the date of the most recent financial statements delivered
to the Banks, no material adverse change shall have occurred
in the condition of the Company's operations, properties,
business or prospects of the Company and its Subsidiaries,
taken as a whole.
(h) A Note payable to the order of each Bank.
(i) Copies of the Senior Note Indenture, as in effect on the
Closing Date, certified as true and correct by an Authorized
Officer.
33
<PAGE>
(j) A Compliance Certificate, dated the Closing Date,
indicating that the Company is in compliance with the
covenants set forth in this Agreement after giving effect to
the initial Loans.
(k) Evidence satisfactory to the Banks and their respective
counsel that the Company shall have made all filings and
registrations or obtained all Authorizations which are or
may be prerequisites to the validity, enforceability or non-
voidability of the Loan Documents or the pledge of the
capital stock of the Subsidiaries delivered pursuant to the
Pledge Agreement.
(l) Such other documents as any Bank may reasonably request.
(ii) The Company shall have paid, or concurrently with the making of
such Loan shall pay, in full all unpaid principal and accrued and
unpaid interest and fees outstanding under that certain Credit
Agreement dated as of October 7, 1993, as heretofore amended,
among the Company, the banks party thereto and The First National
Bank of Chicago, as agent for such banks and NatWest as co-agent
for such banks, as of the date of payment, and the Company shall
have permanently cancelled and terminated the commitments of such
banks to extend loans thereunder, all in form and substance
satisfactory to the Managing Agents and the Banks.
(iii) The Company shall have paid the facility fee required
pursuant to Section 2.8.1.
(iv) The Company shall have reimbursed the Managing Agents for all
expenses due and payable hereunder and shall have paid the
Managing Agents all fees payable in connection herewith.
4.2. EACH CREDIT EXTENSION. The Banks shall not be required to make any
Loan and the Issuer shall not be required to issue any Facility Letter of Credit
unless on the applicable Borrowing Date or Issuance Date (including, without
limitation, the initial Borrowing Date or Issuance Date):
(i) After giving effect to the Loan or Facility Letter of Credit,
there exists no Default or Unmatured Default.
34
<PAGE>
(ii) After giving effect to the Loan or Facility Letter of Credit, the
representations and warranties contained in Section 5 are true
and correct as if made on and as of the Borrowing Date or
Issuance Date, as applicable, except for changes in the Exhibits
or Schedules hereto reflecting transactions permitted by this
Agreement.
(iii) All legal matters incident to the borrowing or issuance, as
applicable, shall be satisfactory to the Banks and their counsel.
Each Borrowing Notice and each Letter of Credit Request shall constitute a
representation and warranty that the conditions set forth in Sections 4.2 (i)
and (ii) have been satisfied. Any Bank may require a duly completed Compliance
Certificate as a condition to the making of a Loan or the issuance of a Facility
Letter of Credit, which Compliance Certificate shall contain calculations based
upon the financial information most recently furnished pursuant to Section
6.1(i) or 6.1(ii).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Banks, as of the Closing Date
and each Borrowing Date, that:
5.1. CORPORATE EXISTENCE AND STANDING; CAPITAL STRUCTURE. Each of the
Company and the Subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite authority to conduct its business in each
jurisdiction in which its business is conducted, except for any jurisdictions
where the failure to be in good standing or to have such authority will not
result in any material liabilities or have a Material Adverse Effect. There are
no authorized, issued or outstanding shares of capital stock of the Company or
any Subsidiary, or rights or options to acquire any shares of such capital
stock, except as set forth in Schedule "4" hereto.
5.2. AUTHORIZATION AND VALIDITY. The Company has the corporate power and
authority and legal right to execute and deliver the Loan Documents to which it
is a party and perform its obligations thereunder. The execution and delivery
of the Loan Documents by the Company and the performance of its respective
obligations thereunder have been duly authorized by proper corporate proceedings
and each Loan Document constitutes the valid and binding obligation of the
Company and is enforceable against the Company in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally.
35
<PAGE>
5.3. NO CONFLICT; AUTHORIZATIONS. Neither the execution and delivery by
the Company of the Loan Documents, the consummation of the transactions therein
contemplated, nor compliance with the provisions thereof will violate any law,
rule, regulation, order, writ, judgment, injunction, decree or award binding on
the Company or the Company's articles of incorporation or by-laws or the
provisions of any indenture, instrument or agreement to which the Company is a
party or is subject, or by which it, or its property, is bound, or conflict with
or constitute a default thereunder, or result in the creation or imposition of
any Lien pursuant to the terms of any such indenture, instrument or agreement.
No Authorization is required to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, any of the Loan Documents.
5.4. FINANCIAL STATEMENTS. The December 31, 1993 audited and the September
30, 1994, unaudited consolidated financial statements of the Company and the
Subsidiaries heretofore delivered to the Banks were prepared in accordance with
Generally Accepted Accounting Principles in effect on the respective dates such
statements were prepared and fairly present the consolidated financial condition
and operations of the Company and the Subsidiaries at such dates and the
consolidated results of their operations for the respective periods then ended.
5.5. MATERIAL ADVERSE CHANGE. There has been no material adverse change in
the business, properties, prospects, condition (financial or otherwise) or
results of operations of the Company and the Subsidiaries, taken as a whole,
since September 30, 1994.
5.6. TAXES. The Company and the Subsidiaries have filed all United States
federal tax returns and all other tax returns which are required to be filed and
have paid all taxes due pursuant to said returns or pursuant to any assessment
received by the Company or any Subsidiary, except such taxes, if any, as are
being contested in good faith and as to which adequate reserves have been
provided. The United States income tax returns of the Company and the
Subsidiaries have been audited by the Internal Revenue Service through the
fiscal year ended December 31, 1985. No tax liens have been filed and no claims
are being asserted with respect to any such taxes. The charges, accruals and
reserves on the books of the Company and the Subsidiaries in respect of any
taxes or other governmental charges are adequate.
5.7. LITIGATION. There is no litigation or proceeding pending or, to the
knowledge of any of their officers, threatened against the Company or any
Subsidiary which might have a Material Adverse Effect.
5.8. SUBSIDIARIES. Schedule "1" hereto contains an accurate list of all of
the presently existing Subsidiaries, setting forth
36
<PAGE>
their respective jurisdictions of incorporation and the percentage of their
respective capital stock owned by the Company or other Subsidiaries. All of the
issued and outstanding shares of capital stock of the Subsidiaries have been
duly authorized and issued and are fully paid and non-assessable.
5.9. ERISA. The Unfunded Liabilities of all Plans do not in the aggregate
exceed $700,000. Each Plan complies in all material respects with all
applicable requirements of law and regulations, no Reportable Event has occurred
with respect to any Plan, neither the Company nor any other members of the
Controlled Group has withdrawn from any Plan or initiated steps to do so, and no
steps have been taken to terminate any Plan.
5.10. DEFAULTS. No Default or Unmatured Default has occurred and is
continuing.
5.11. ACCURACY OF INFORMATION. No information, exhibit or report
furnished by the Company or any Subsidiary to the Managing Agents or to any Bank
in connection with the negotiation of the Loan Documents contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statements contained therein not misleading.
5.12. REGULATION U. Margin stock (as defined in Regulation U) constitutes
less than 25% of those assets of the Company and the Subsidiaries which are
subject to any limitation on sale, pledge or other restriction hereunder.
5.13. MATERIAL AGREEMENTS. Neither the Company nor any Subsidiary is a
party to any agreement or instrument or subject to any charter or other
corporate restriction materially and adversely affecting its business,
properties or assets, operations or condition (financial or otherwise). Neither
the Company nor any Subsidiary is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in (i)
any agreement to which it is a party, which default might have a Material
Adverse Effect or (ii) any agreement or instrument evidencing or governing
Indebtedness of the Company or any Subsidiary.
5.14. SENIOR AND SUBORDINATED INDEBTEDNESS. The Senior Notes are pari
pasu with the Secured Obligations and there is no Indebtedness that is senior in
priority or pari pasu to the Senior Notes and the Secured Obligations, other
than certain permitted indebtedness secured by liens permitted pursuant to
Section 6.18. The Secured Obligations constitute Senior Indebtedness which is
entitled to the benefits of the subordination provisions of all outstanding
Subordinated Indebtedness.
5.15. COMPLIANCE WITH LAWS. The Company and the Subsidiaries have
complied in all material respects with all applicable
37
<PAGE>
statutes, rules, regulations, orders and restrictions of any domestic or foreign
government or any instrumentality or agency thereof, having jurisdiction over
the conduct of their respective businesses or the ownership of their respective
properties. Neither the Company nor any Subsidiary has received any notice to
the effect that its operations are not in material compliance with any of the
requirements of applicable federal, state and local environmental, health and
safety statutes and regulations or the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action might have a Material Adverse Effect.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Banks shall
otherwise consent in writing:
6.1. FINANCIAL REPORTING. The Company will maintain, for itself and each
Subsidiary, a system of accounting established and administered in accordance
with Generally Accepted Accounting Principles, and furnish to the Banks:
(i) Within 90 days after the close of each of its fiscal years, an
unqualified audit report certified by independent certified
public accountants, acceptable to the Banks, prepared in
accordance with Generally Accepted Accounting Principles on a
consolidated basis for itself and the Subsidiaries, including
balance sheets as of the end of such period, related profit and
loss and reconciliation of surplus statements, and a statement of
changes in financial position, accompanied by any management
letter prepared by said accountants and by a certificate of said
accountants that, in the course of their examination necessary
for their certification of the foregoing, they have obtained no
knowledge of any Default or Unmatured Default, or if, in the
opinion of such accountants, any Default or Unmatured Default
shall exist, stating the nature and status thereof.
(ii) Within 45 days after the close of each of the first three fiscal
quarters of each of its fiscal years, for itself and the
Subsidiaries, (a) consolidated unaudited balance sheets as at the
close of each such period and consolidated statements of profit
and loss and reconciliation of surplus statements and a
consolidated statement of changes in financial position from the
beginning of such
38
<PAGE>
fiscal year to the end of such period and for the corresponding
period in the preceding fiscal year and (b) for itself and its
operating divisions, the following statements set forth in
comparative form: (1) consolidating statements of profit and loss
for such quarter and for the period from the beginning of such
fiscal year to the end of such quarter, and (2) consolidating
statements of profit and loss for the corresponding periods in
the preceding fiscal year.
(iii) Together with the financial statements required hereunder, a
Compliance Certificate.
(iv) As soon as possible and in any event within 60 days after the
beginning of each of its fiscal years, a copy of the annual
budget for the Company and its operating divisions for such
fiscal year.
(v) Within 180 days after the close of each fiscal year, a statement
of the Unfunded Liabilities of each Plan, if any, certified as
correct by an actuary enrolled under ERISA.
(vi) As soon as possible and in any event within 10 days after the
Company knows that any Reportable Event has occurred with respect
to any Plan, a statement, signed by the Chief Financial Officer
of the Company, describing said Reportable Event and the action
which the Company proposes to take with respect thereto.
(vii) As soon as possible and in any event within 10 days after receipt
by the Company, a copy of (a) any notice or claim to the effect
that the Company or any Subsidiary is or may be liable to any
Person as a result of the release by the Company, any of the
Subsidiaries, or any other Person of any toxic or hazardous waste
or substance into the environment, and (b) any notice alleging
any violation of any federal, state or local environmental,
health or safety law or regulation by the Company or any
Subsidiary, which might, in either case, have a Material Adverse
Effect.
(viii) Promptly upon the furnishing thereof to the shareholders of the
Company, copies of all financial statements, reports and proxy
statements so furnished.
(ix) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly,
39
<PAGE>
monthly or other regular reports which the Company or any
Subsidiary files with the Securities and Exchange Commission.
(x) As soon as possible and in any event within five days after the
receipt by the Company or any Subsidiary from the FCC or any
other Governmental Authority or filing or receipt thereof by the
Company or any Subsidiary, (a) a copy of any order or notice of
the FCC or any other Governmental Authority or any court of
competent jurisdiction which designates any material
Authorization of the Company or any Subsidiary, or any
application therefor, for a hearing, or which refuses renewal or
extension of, or revokes, materially modifies, terminates or
suspends any Authorization now or hereafter held by the Company
or any Subsidiary which is required to construct or operate any
Station or its other businesses in compliance with all applicable
laws and regulations, (b) a copy of any competing application
filed with respect to any Authorization of the Company or any
Subsidiary, or any citation, notice of violation or order to show
cause issued by the FCC or any Governmental Authority with
respect to the Company or any Subsidiary which is available to
the Company or any Subsidiary and (c) a copy of any notice or
application by the Company or any Subsidiary requesting authority
to or notifying the FCC of its intent to cease broadcasting on
any broadcast station for any period in excess of 10 days.
(xi) Promptly upon the distribution thereof copies of any reports,
certificates, notices and other information furnished to the
holders of Subordinated Indebtedness.
(xii) Contemporaneously with each Sale, a Compliance Certificate.
(xiii) Such other information (including non-financial information) as
the Managing Agents or any Bank may from time to time reasonably
request.
6.2. USE OF PROCEEDS. The Company will use the proceeds of the Loans to
finance acquisitions, refinance existing indebtedness, finance capital
expenditures, provide working capital and for general corporate purposes. The
Company will not, nor will it permit any Subsidiary to, use any of the proceeds
of the Loan (i) to purchase or carry any "margin stock" (as defined in
Regulation U) or (ii) to acquire any security in any transaction which is
40
<PAGE>
subject to Sections 13 and 14 of the Securities Exchange Act of 1934.
6.3. NOTICE OF DEFAULT. The Company will, and will cause each Subsidiary
to, give prompt notice in writing to the Banks of (i) the occurrence of any
Default or Unmatured Default and of any other development, financial or
otherwise, which might have a Material Adverse Effect, or (ii) any federal,
state or local statute, regulation or ordinance or judicial or administrative
order limiting or controlling the operations of the Company or any Subsidiary
which has been issued or adopted hereafter and which is of material adverse
importance or effect in relation to the operation of the Company or any
Subsidiary.
6.4. CONDUCT OF BUSINESS; MAINTENANCE OF AUTHORIZATIONS. The Company
will, and will cause each Subsidiary to, (i) carry on and conduct its business
in substantially the same manner and in substantially the same fields of
enterprise as it is presently conducted; (ii) do all things necessary to remain
duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted; and (iii) do all things necessary to renew, extend and continue in
effect all Authorizations which may at any time and from time to time be
necessary to operate any Station or any of its other businesses in compliance
with all applicable laws and regulations where the failure to so renew, extend
or continue in effect or to so comply could have a Material Adverse Effect.
6.5. TAXES. The Company will, and will cause each Subsidiary to, pay when
due all taxes, assessments and governmental charges and levies upon it or its
income, profits or property, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been set aside.
6.6. INSURANCE. The Company will, and will cause each Subsidiary to,
maintain insurance in such amounts and covering such risks as is consistent with
sound business practice.
6.7. COMPLIANCE WITH LAWS. The Company will, and will cause each
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject, including,
without limitation, all rules and regulations promulgated by the FCC or any
other Governmental Authority and those relating to environmental, health and
safety protection, where the failure to so comply might, singly or in the
aggregate, have a Material Adverse Effect.
6.8. MAINTENANCE OF PROPERTIES. The Company will, and will cause each
Subsidiary to, do all things necessary to maintain, preserve, protect and keep
its properties in good repair, working
41
<PAGE>
order and condition, and make all necessary and proper repairs, renewals and
replacements so that its business carried on in connection therewith may be
properly conducted at all times.
6.9. INSPECTION. The Company will, and will cause each Subsidiary to,
permit the Banks, by their representatives and agents, to inspect any of the
properties, corporate books and financial records of the Company and each
Subsidiary, to examine and make copies of the books of accounts and other
financial records of the Company and each Subsidiary, and to discuss the
affairs, finances and accounts of the Company and each Subsidiary with, and to
be advised as to the same by, their respective officers at such reasonable times
and intervals as the Banks may designate.
6.10 DIVIDENDS. The Company will not, nor will it permit any Subsidiary
to, declare or pay any dividends on its capital stock (other than dividends
payable in its own common stock) or redeem, repurchase or otherwise acquire or
retire any of its capital stock at any time outstanding or enter into an
agreement obligating it to do any of the foregoing, except (i) any Wholly-Owned
Subsidiary may declare and pay dividends to the Company or any Wholly-Owned
Subsidiary and (ii) provided that the Total Leverage Ratio is less than 5.00 to
1.0, the Company may pay dividends or make distributions in an amount not to
exceed 20% of Excess Cash Flow for such fiscal year. Notwithstanding any
provision contained in this Section 6.10, the Company may pay dividends in an
aggregate amount of up to $750,000 in each fiscal year provided no Default or
Unmatured Default has occurred or is continuing or is projected to occur after
giving effect to such payment.
6.11. INDEBTEDNESS. The Company will not, nor will it permit any
Subsidiary to, create, incur or suffer to exist any Indebtedness, except:
(i) The Loans and the Facility Letters of Credit.
(ii) Capitalized Lease Obligations not to exceed $10,000,000 in the
aggregate at any one time outstanding.
(iii) Intercompany advances which may be created from time to time in
connection with the customary usages of the demand deposit
accounts maintained by the Company and the Subsidiaries in the
ordinary course of business; provided, however, that no
intercompany advances may be made or incurred between the Company
and New Century or any Subsidiary and New Century except to fund
transactions contemplated by the Put and Call Agreement or
Sections 3(g)(i) or (ii) of the Amended Partnership Agreement.
42
<PAGE>
(iv) The Senior Subordinated Notes.
(v) Guaranties permitted under Section 6.17.
(vi) The Senior Notes.
(vii) Other Indebtedness existing on the date hereof and described in
Schedule "2" hereto.
6.12. MERGER; SALE OF ASSETS.
(i) The Company will not, nor will it permit any Subsidiary to, merge
or consolidate with or into any other Person, except any
Subsidiary may merge into any other Subsidiary.
(ii) The Company will not, nor will it permit any Subsidiary to, sell,
lease, transfer or otherwise dispose of any of its property,
assets or business to any other Person, except to any Subsidiary
and except:
(a) Sales of equipment and inventory in the ordinary course of
business in bona fide arms-length transactions provided such
sales do not exceed $250,000 in the aggregate on an annual
basis and no Default or Unmatured Default exists at the time
of or after giving effect to any such sale.
(b) The Sale of property or assets which are no longer used or
useful in the business of the Company or any Subsidiary,
provided that, within 90 days of any such Sale, the Company
or such Subsidiary, as the case may be, shall replace such
property or assets with property or assets having
substantially equivalent or greater value.
6.13. SALE OF ACCOUNTS. The Company will not, nor will it permit any
Subsidiary to, sell or otherwise dispose of any notes receivable or accounts
receivable, with or without recourse except for any such transaction with a
Subsidiary.
6.14. SALE AND LEASEBACK. The Company will not, nor will it permit any
Subsidiary to, sell or transfer any property in order to concurrently or
subsequently lease as lessee such or similar property except for any such
transaction with a Subsidiary.
6.15. ACQUISITIONS. The Company will not, nor will it permit any
Subsidiary to, consummate any Acquisition; PROVIDED, HOWEVER, that this Section
6.15 shall not preclude (i) an
43
<PAGE>
Acquisition if the consideration paid by the Company or any Subsidiary in
connection with such Acquisition and all other Acquisitions consummated during
the same fiscal year does not, in the aggregate, exceed $10,000,000; provided
that the Company will not be precluded, as a result of such Acquisition or
Acquisitions, from complying, on a pro forma basis, with the financial covenants
in this Article VI, or (ii) any other Acquisition if (a) the Person whose
capital stock, assets, or other ownership interests are being purchased or
otherwise acquired is engaged in substantially the same fields of enterprise in
which the Company and its Subsidiaries are engaged at the time of such
Acquisition, (b) the Company will not be precluded, as a result of the
Acquisition, from complying, on a pro forma basis, with the financial covenants
in this Article VI, and (c) the Acquisition is not reasonably likely to cause
the Total Leverage Ratio, calculated on a pro forma basis, to exceed 4.50 to
1.00; or (iii) the investment by KJR Radio, Inc. in Century Management, Inc.
upon the exercise by the Shareholders (as defined in the Put and Call Agreement)
of the put contemplated by Section 1.1(a) of the Put and Call Agreement.
Notwithstanding any other provisions contained herein, the Company will not, nor
will it permit any Subsidiary to, purchase a professional sports team or
franchise for an amount exceeding $5,000,000 without the written consent of the
Required Banks.
6.16. INVESTMENTS. The Company will not, nor will it permit any
Subsidiary to, make or suffer to exist any Investments (including without
limitation, loans and advances to, and other Investments in, Subsidiaries), or
commitments therefor, or to create any Subsidiary other than a Wholly-Owned
Subsidiary or to become or remain a partner in any partnership or joint venture,
except:
(i) Short-term obligations of, or fully guaranteed by, the United
States of America.
(ii) Commercial paper rated A1 or better by Standard and Poor's
Corporation or P1 or better by Moody's Investors Service, Inc.
(iii) Demand deposit accounts maintained in the ordinary course of
business.
(iv) Certificates of deposit issued by commercial banks having
capital, supplies and undivided profits aggregating in excess of
$200,000,000 and whose long-term certificates of deposit or debt
obligations are rated at least A (or equivalent) by Standard &
Poor's Corporation or A2 (or equivalent) by Moody's Investors
Services, Inc.
(v) Intercompany advances permitted under Section 6.11(iii),
provided, however, that any capital
44
<PAGE>
contributions from the Company or any Subsidiary to New Century
shall be permitted so long as no Event of Default has occurred or
is continuing. All such capital contributions to New Century
shall be limited to an aggregate amount of $1,000,000 per annum
in addition to the capital contribution required pursuant to
Section 3(g)(i) of the Amended Partnership Agreement, which
required capital contribution shall not exceed $600,000.
(vi) Investments resulting from transactions entered into pursuant to
the Put and Call Agreement or the Amended Partnership Agreement.
(vii) Investments in existence on the date hereof and described in
Schedule "1" hereto.
6.17. GUARANTIES. The Company will not, nor will it permit any Subsidiary
to, make or suffer to exist any Guaranties (including, without limitation, any
Guaranty of the obligations of a Subsidiary or New Century), except:
(i) Guaranties incurred in connection with airport advertising
contracts up to an aggregate amount (without duplication) of
$7,000,000 payable in any calendar year for all such Guaranties.
(ii) Guaranties of obligations of Subsidiaries incurred in the
ordinary course of business up to an aggregate amount for all
such Guaranties of $500,000.
(iii) The Guaranty by the Company of the obligations of KJR Radio, Inc.
under Section 3.1(g)(i) of the Amended Partnership Agreement.
6.18. LIENS. The Company will not, nor will it permit any Subsidiary
to, create, incur, or suffer to exist any Lien, except:
(i) Liens for taxes, assessments or governmental charges or levies on
its property if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in
good faith and by appropriate proceedings.
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary
course of business which secure payment of obligations not more
than 60 days past due.
45
<PAGE>
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or
other social security or retirement benefits, or similar
legislation.
(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar
character and which do not in any material way affect the
marketability of the same or interfere with the use thereof in
the business of the Company or the Subsidiaries.
(v) Lessors' interests under Capitalized Leases.
(vi) Liens created by the Pledge Agreement or any other Loan Document.
(vii) Liens existing on the date hereof and described in Schedule "3"
hereto.
6.19. AFFILIATES. The Company will not, and will not permit any
Subsidiary to, enter into any transaction (including, without limitation, (i)
the purchase or sale of any property or service and (ii) any arrangement or
agreement providing for the payment by the Company or any Subsidiary of any
management fees or service charges for management, advisory or similar services)
with, or make any payment or transfer to, any Affiliate except in the ordinary
course of business and pursuant to the reasonable requirements of the Company's
or such Subsidiary's business and upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than the Company or such Subsidiary
would obtain in a comparable arms-length transaction (and, in the case of any
such management fees or service charges, only if and to the extent that such
management fees and service charges are subordinated to payment of the Secured
Obligations to the written satisfaction of the Banks).
6.20 SUBORDINATED INDEBTEDNESS. The Company will not, nor will it permit
any Subsidiary to, make any amendment or modification to the indenture, note or
other agreement evidencing or governing any Subordinated Indebtedness, or
directly or indirectly prepay, purchase, redeem, retire or otherwise acquire any
Subordinated Indebtedness in excess of 105% of the par value of such
Subordinated Indebtedness, provided that this Section 6.19 shall not prevent the
Company from paying any Subordinated Indebtedness at maturity if permitted to do
so pursuant to the subordination provisions related to such Subordinated
Indebtedness.
6.21. OPERATION OF BUSINESS. The Company will not, nor will it permit any
Subsidiary to, engage in the operation of any
46
<PAGE>
business, other than that in which it is presently engaged and businesses
reasonably related thereto.
6.22. TOTAL LEVERAGE RATIO. The Company will maintain, as at the last day
of each fiscal quarter ending during the periods set forth below, a Total
Leverage Ratio not greater than the ratio set forth below opposite each such
period:
Period Ratio
--------------------------- -----
The Closing Date through September 30, 1995 5.50 to 1.00
October 1, 1995 through December 31, 1995 5.25 to 1.00
January 1, 1996 through June 30, 1996 5.00 to 1.00
July 1, 1996 through December 31, 1996 4.75 to 1.00
January 1, 1997 through June 30, 1997 4.50 to 1.00
July 1, 1997 through December 31, 1997 4.25 to 1.00
January 1, 1998 through June 30, 1998 4.00 to 1.00
At all times thereafter 3.75 to 1.00
6.23. SENIOR LEVERAGE RATIO. The Company will maintain, as at the last
day of each fiscal quarter ending during the periods set forth below, a Senior
Leverage Ratio not greater than the ratio set forth below opposite each such
period:
Period Ratio
--------------------------- -----
The Closing through September 30, 1995 5.00 to 1.00
October 1, 1995 through December 31, 1995 4.75 to 1.00
January 1, 1996 through June 30, 1996 4.50 to 1.00
July 1, 1996 through December 31, 1996 4.25 to 1.00
January 1, 1997 through June 30, 1997 4.00 to 1.00
July 1, 1997 through December 31, 1997 3.75 to 1.00
January 1, 1998 through June 30, 1998 3.50 to 1.00
At all times thereafter 3.25 to 1.00
6.24. INTEREST COVERAGE RATIO. The Company will maintain, as at the last
day of each fiscal quarter ending during the periods set forth below, an
Interest Coverage Ratio not less than the ratio set forth below opposite each
such period:
Period Ratio
---------------------------- -----
The Closing Date through December 31, 1995 1.85 to 1.00
At all times thereafter 2.00 to 1.00
6.25. FIXED CHARGE COVERAGE RATIO. The Company will maintain, as at the
last day of each fiscal quarter, a Fixed Charge Coverage Ratio of not less than
the ratio set forth below opposite each such period:
47
<PAGE>
Period Ratio
---------------------------- -----
The Closing through June 30, 1996 1.075 to 1.00
At all times thereafter 1.25 to 1.00
ARTICLE VIII
DEFAULTS
The occurrence of any one or more of the following events shall constitute
a Default:
7.1. REPRESENTATIONS AND WARRANTIES. Any representation or warranty made
by or on behalf of the Company or any Subsidiary to the Banks or the Managing
Agents under or in connection with this Agreement, any Loan, any Facility Letter
of Credit, or any certificate or information delivered in connection with this
Agreement or any other Loan Document shall be materially false on the date as of
which made.
7.2. NONPAYMENT OF NOTES. Nonpayment of principal of any Note within five
days after the same becomes due, or of any Reimbursement Obligation within five
days after the same becomes due, or nonpayment of interest on any Note or of any
commitment fee or other obligations within five days after the same becomes due.
7.3. BREACH OF COVENANTS. The breach by the Company of any of the terms
or provisions of Article VI of this Agreement.
7.4. OTHER PROVISIONS. The breach by the Company (other than a breach
which constitutes a Default under Section 7.1, 7.2 or 7.3) of any of the terms
or provisions of this Agreement which is not remedied within 30 days after
written notice from the Administrative Agent or any Bank.
7.5. NONPAYMENT OF OTHER INDEBTEDNESS. Failure of the Company or any
Subsidiary to pay within five days after the same becomes due or when payment is
demanded any Indebtedness in excess of $100,000; or the default by the Company
or any Subsidiary in the performance of any term, provision or condition
contained in any agreement under which any such Indebtedness was created or is
governed, the effect of which is to cause, or to permit the holder or holders of
such Indebtedness to cause, such Indebtedness to become due prior to its stated
maturity; or any such Indebtedness shall be declared to be due and payable or
required to be prepaid (other than by a regularly scheduled payment) prior to
the stated maturity thereof.
7.6. VOLUNTARY BANKRUPTCY. The Company or any Subsidiary shall (i) have
an order for relief entered with respect to it under
48
<PAGE>
the federal bankruptcy laws as now or hereafter in effect, (ii) not pay, or
admit in writing its inability to pay, its debts generally as they become due,
(iii) make an assignment for the benefit of creditors, (iv) apply for, seek,
consent to, or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any substantial part of its
property, (v) institute any proceeding seeking an order for relief under the
federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate
it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors or fail to file an answer or other pleading denying the material
allegations of any such proceeding filed against it, (vi) take any corporate
action to authorize or effect any of the foregoing actions set forth in this
Section 7.6 or (vii) fail to contest in good faith any appointment or proceeding
described in Section 7.7.
7.7. INVOLUNTARY BANKRUPTCY. Without the application, approval or consent
of the Company or any Subsidiary, a receiver, trustee, examiner, liquidate or
similar official shall be appointed for the Company or any Subsidiary or any
substantial part of its property, or a proceeding described in Section 7.6(v)
shall be instituted against the Company or any Subsidiary and such appointment
continues undischarged or such proceeding continues undismissed or unstayed for
a period of 30 consecutive days.
7.8. GOVERNMENT SEIZURE. Any court, government or governmental agency
shall condemn, seize or otherwise appropriate, or take custody or control of all
or any substantial portion of the property of the Company or any Subsidiary.
7.9. JUDGMENTS AND ORDERS. The Company or any Subsidiary shall fail
within 30 days to pay, bond or otherwise discharge any judgment or order for the
payment of money in excess of $100,000, which is not stayed on appeal or
otherwise being appropriately contested in good faith.
7.10. ERISA. The Unfunded Liabilities of all Plans of the Company and the
Subsidiaries shall exceed $50,000 in the aggregate or the Company's or any
Subsidiary's pro rata share of the Unfunded Liabilities of the Plan or Plans
maintained by the National Basketball Association shall exceed $650,000 or any
Reportable Event shall occur in connection with any Plan.
7.11. AUTHORIZATION. (i) Any Authorization (including, without
limitation, any FCC license) necessary for the ownership or essential for the
operation by the Company or any Subsidiary of any Station shall expire, and on
or prior to such expiration, the same shall not have been renewed or replaced by
another Authorization authorizing substantially the same operations of such
Station; or (ii) any Authorization (including, without limitation, any FCC
49
<PAGE>
license) necessary for the ownership or essential for the operation of any
Station shall be cancelled, revoked, terminated, rescinded, annulled, suspended
or modified in a materially adverse respect, or shall no longer be in full force
and effect, or the grant or the effectiveness thereof shall have been stayed,
vacated, reversed or set aside, and such action shall be no longer subject to
further administrative or judicial review; or (iii) the FCC shall have issued,
on its own initiative and not upon the complaint of or at the request of a third
party, any hearing designation order in any non-comparative license renewal
proceeding or license revocation proceeding involving any license necessary for
the ownership or essential for the operation of any Station by the Company or
any Subsidiary; or (iv) in any non-comparative license renewal proceeding or
license revocation proceeding initiated by the FCC upon the complaint of or at
the request of a third party or any comparative (i.e., multiple applicant)
license renewal proceeding, in each case involving any license necessary for the
ownership or essential for the operation of any of the Stations by the Company
or any Subsidiary, any administrative law judge of the FCC (or successor to the
functions of an administrative law judge of the FCC) shall have issued an
initial decision to the effect that the Company or any Subsidiary lacks the
basic qualifications to own or operate any of the Stations or is not deserving
of a renewal expectancy, and such initial decision shall not have been timely
appealed or shall otherwise have become an order that is final and no longer
subject to further administrative or judicial review; or (v) any franchise
issued by any professional sports association which is required or essential to
the ownership or operation of the Seattle Supersonics shall be modified in any
materially adverse respect, cancelled, revoked, terminated, rescinded, annulled
or suspended or shall no longer be in full force and effect (provided, however,
that none of the foregoing events described in clauses (i), (ii), (iii), (iv) or
(v) of this Section 7.11 shall constitute a Default if such expiration,
cancellation, revocation or other loss would not materially adversely affect the
value of the Pledged Stock or have a Material Adverse Effect) or (vi) any
Station shall fail for any period of five consecutive calendar days to operate
or maintain any broadcast signal, and such failure is not covered by business
interruption insurance.
7.12. OTHER LOAN DOCUMENTS. The occurrence of any "default", as defined
in any Loan Document (other than this Agreement or the Notes) or the breach of
any of the terms or provisions of any Loan Document (other than this Agreement
or the Notes), which default or breach continues beyond any period of grace
therein provided.
7.13. RATE HEDGING OBLIGATIONS. Nonpayment by the Company of any Rate
Hedging Obligation, or the breach by the Company of any material term, provision
or condition contained in any agreement, device or arrangement giving rise to
any Rate Hedging Obligation, which breach continues beyond any period of grace
therein provided.
50
<PAGE>
7.14. INVALIDITY OF PLEDGE AGREEMENT. The Pledge Agreement shall for any
reason have failed to create a valid and perfected first priority security
interest in any collateral purported to be covered thereby, except as permitted
by the terms thereof, or the Pledge Agreement shall fail to remain in full force
or effect or any action shall be taken to discontinue or to assert the
invalidity or, unenforceability of the Pledge Agreement.
7.15. HAZARDOUS SUBSTANCES. The Company or any Subsidiary shall be the
subject of any proceeding or investigation pertaining to the release by the
Company or any of its Subsidiaries, or any other Person of any toxic or
hazardous waste or substance into the environment, or any violation of any
federal, state or local environmental, health or safety law or regulation, which
would, in either case, have a Material Adverse Effect.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. ACCELERATION.
(i) If any Default described in Section 7.6 or 7.7 occurs and is
continuing with respect to the Company, (a) the obligations of the Issuer to
issue Facility Letters of Credit and the Banks to make Loans hereunder shall
automatically terminate and the Obligations shall immediately become due and
payable without presentment, demand, protest or notice of any kind, all of which
the Company hereby expressly waives and without any election or action on the
part of the Managing Agents or any Bank and (b) the Company will be and become
thereby unconditionally obligated, without the need for demand or the necessity
of any act or evidence, to deliver to the Administrative Agent, at its address
specified pursuant to Article XIII, for deposit into a non-interest bearing
collateral account with the Administrative Agent, over which the Company shall
have no access or control (the "Letter of Credit Collateral Account") to be held
in such account and applied by the Banks as provided in Section 5(f) of the
Pledge Agreement, an amount (the "Collateral Shortfall Amount") equal to the
excess, if any, of
(1) 100% of the sum of the aggregate maximum amount remaining available to
be drawn under Facility Letters of Credit (assuming compliance with
all conditions for drawing thereunder), and other Facility Letter of
Credit Obligations due and payable in respect of, the Facility Letters
of Credit issued and outstanding as of such time, OVER
(2) the amount on deposit in the Letter of Credit Collateral Account at
such time that is free and clear of all
51
<PAGE>
rights and claims of third parties and that has not been applied by
the Banks against the Obligations.
(ii) If any Default occurs and is continuing (other than a Default
described in Section 7.6 or 7.7 with respect to the Company), (a) the Required
Banks may terminate or suspend the obligations of the Banks to make Loans
hereunder, or declare the Obligations to be due and payable, or both, whereupon
the Obligations shall become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which the Company hereby expressly
waives and (b) the Required Banks may cause the Issuer to, upon notice delivered
to the Company, terminate or suspend the obligations of the Issuer to issue
Facility Letters of Credit and if the Required Banks have exercised their right
to accelerate the Loans under clause (ii)(a) of this Section 8.1 or if no Loans
are outstanding, make demand on the Company to deliver (and the Company will,
forthwith upon demand by the Issuer and without necessity of further act or
evidence, be and become thereby unconditionally obligated to deliver), to the
Administrative Agent, at its address specified pursuant to Article XIII, for
deposit into the Letter of Credit Collateral Account an amount equal to the
Collateral Shortfall Amount to be held in such account and applied by the
Administrative Agent as provided herein.
(iii) If at any time while any Default is continuing, the Administrative
Agent determines that the Collateral Shortfall Amount at such time is greater
than zero, the Administrative Agent may make demand on the Company to deliver
(and the Company will, forthwith upon demand by the Administrative Agent and
without necessity of further act or evidence, be and become thereby
unconditionally obligated to deliver), to the Administrative Agent as additional
funds to be deposited and held in the Letter of Credit Collateral Account an
amount equal to such Collateral Shortfall Amount at such time (or such lesser
amount as may be so requested).
(iv) At any time while any Default is continuing, the Administrative Agent
may at any time and from time to time after funds are deposited in the Letter of
Credit Collateral Account, apply such funds to the payment of the Facility
Letter of Credit Obligations.
(v) Neither the Company nor any Person claiming on behalf of or through
the Company shall have any right to withdraw any of the funds held in the Letter
of Credit Collateral Account. After all of the Secured Obligations have been
paid in full, and provided no litigation, proceeding or claim for rescission or
restoration of any such payment of the Secured Obligations is pending or
threatened against the Administrative Agent or any Bank, any funds remaining in
the Letter of Credit Collateral Account shall be
52
<PAGE>
returned by the Administrative Agent to the Company or paid to whoever may be
legally entitled thereto at such time.
(vi) The Administrative Agent shall exercise reasonable care in the
custody and preservation of any funds held in the Letter of Credit Collateral
Account and shall be deemed to have exercised such care if such funds are
accorded treatment substantially equivalent to that which the Administrative
Agent accords its own property, it being understood that the Administrative
Agent shall not have any responsibility for taking any necessary steps to
preserve rights against any Persons with respect to any such funds.
(vii) If, within 14 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Banks to make Loans
hereunder as a result of any Default (other than any Default as described in
Section 7.6 or 7.7 with respect to the Company) and before any judgment or
decree for the payment of the Obligations due shall have been obtained or
entered, the Required Banks (in their sole discretion) shall so direct, the
Administrative Agent shall, by notice to the Company, rescind and annul such
acceleration and/or termination.
8.2. AMENDMENTS. Subject to the provisions of this Section 8.2, the
Required Banks (or the Managing Agents with the consent in writing of the
Required Banks) and the Company may enter into agreements supplemental hereto or
to any other Loan Document for the purpose of adding any provisions to this
Agreement or such other Loan Document or changing in any manner the rights of
the Banks or the Company hereunder or thereunder or waiving or consenting to any
Default hereunder or thereunder; PROVIDED, HOWEVER, that no such supplemental
agreement, waiver or consent shall, without the consent of each Bank affected
thereby:
(i) Change the maturity of any Loan or Note or reduce the principal amount
thereof, or reduce the rate or extend the time of payment of interest
or fees thereon.
(ii) Change the percentage or number specified in the definition of
Required Banks.
(iii) Extend the Commitment Termination Date or reduce the amount or extend
the payment date for, the mandatory payments required under Section
2.4, 2.5 or 2.6 or increase the amount of the Commitment of any Bank
hereunder, or permit the Company to assign its rights or obligations
under this Agreement.
(iv) Release or substitute any collateral pledged under the Pledge
Agreement or any other Loan Document.
(v) Amend this Section 8.2.
53
<PAGE>
(vi) Modify the terms applicable to the Facility Letters of Credit without
the consent of the Managing Agents.
No amendment of any provision of this Agreement or any other Loan Document
relating to the Managing Agents shall be effective without the written consent
of the Managing Agents. Each of the Managing Agents may waive payment of any
fees payable to it hereunder without obtaining the consent of any of the Banks.
8.3. PRESERVATION OF RIGHTS. No delay or omission of the Banks or the
Managing Agents to exercise any right under the Loan Documents shall impair such
right or be construed to be a waiver of any Default or an acquiescence therein,
and any single or partial exercise of any such right shall not preclude other or
further exercise thereof or the exercise of any other right, and no waiver,
amendment or other variation of the terms, conditions or provisions of the Loan
Documents whatsoever shall be valid unless in writing signed by the Banks
required pursuant to Section 8.2. and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by law
afforded shall be cumulative and all shall be available to the Managing Agents
and the Banks until the Obligations have been paid in full.
ARTICLE IX
GENERAL PROVISIONS
9.1. SURVIVAL OF REPRESENTATIONS. All representations and warranties of
the Company contained in this Agreement shall survive delivery of the Notes, the
making of the Loans and the issuance of Facility Letters Of Credit herein
contemplated.
9.2. GOVERNMENTAL REGULATION. Anything contained in this Agreement to the
contrary notwithstanding, no Bank shall be obligated to extend credit to the
Company in violation of any limitation or prohibition provided by any applicable
statute or regulation.
9.3. TAXES. Any taxes (excluding federal income taxes on the overall net
income of any Bank) payable or ruled payable by any Governmental Authority in
respect of the Loan Documents shall be paid by the Company, together with
interest and penalties, if any.
9.4. READINGS. Section headings in the Loan Documents are for convenience
of reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.
9.5. ENTIRE AGREEMENT. The Loan Documents embody the entire agreement and
understanding among the Company, the Managing Agents and the Banks and supersede
all prior agreements and understandings
54
<PAGE>
among the Company, the Managing Agents and the Banks relating to the subject
matter thereof.
9.6. ACCOUNTING. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Generally Accepted
Accounting Principles.
9.7. SEVERAL OBLIGATIONS; BENEFITS OF THIS AGREEMENT. The respective
obligations of the Banks hereunder are several and not joint and no Bank shall
be the partner or agent of any other (except to the extent to which the Managing
Agents are authorized to act as such). The failure of any Bank to perform any
of its obligations hereunder shall not relieve any other Bank from any of its
obligations hereunder. This Agreement shall not be construed so as to confer
any right or benefit upon any Person other than the parties to this Agreement
and their respective successors and assigns.
9.8. EXPENSES. The Company shall reimburse the Managing Agents for any and
all costs, internal charges and out-of-pocket expenses (including reasonable
attorneys' fees and time charges of attorneys for the Managing Agents, which
attorneys may be employees of the Managing Agents) paid or incurred by the
Managing Agents in connection with the preparation, review, execution, delivery,
amendment, modification, administration, collection and enforcement of the Loan
Documents; PROVIDED, HOWEVER, that the costs and expenses incurred by the
Managing Agents in connection with the preparation, review, execution and
delivery of the Loan Documents shall be subject to the dollar limitation set
forth in the letter from the Managing Agents to the Company dated as of December
21, 1994. The Company shall reimburse the Banks for any and all costs, internal
charges and out-of-pocket expenses (including reasonable attorneys' fees and
time charges of attorneys for the Banks, which attorneys may be employees of the
Banks) paid or incurred by any Bank in connection with the collection and
enforcement of the Loan Documents. The Company further agrees to indemnify the
Managing Agents and each Bank, their respective directors, officers and
employees, against all losses, claims, damages, penalties, judgments,
liabilities and expenses (including, without limitation, all expenses of
litigation or preparation therefor, whether or not either of the Managing Agents
or any Bank is a party thereto) which any of them may pay or incur in connection
with or arising out of the direct or indirect application of the proceeds of any
Loan hereunder or the use or intended use of any Facility Letter of Credit. The
obligations of the Company under this Section shall survive the termination of
this Agreement.
9.9. NUMBERS OF DOCUMENTS. All statements, notices and requests hereunder
shall be furnished to the Administrative Agent
55
<PAGE>
with sufficient counterparts so that the Managing Agents may furnish one to each
of the Banks.
9.10. SEVERABILITY OF PROVISIONS. Any provision in any Loan Document that
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
9.11. NONLIABILITY OF BANKS. The relationship between the Company and the
Banks and the Managing Agents shall be solely that of borrower and lender.
Neither the Managing Agents nor any Bank shall have any fiduciary
responsibilities to the Company. Neither the Managing Agents nor any Bank
undertakes any responsibility to the Company to review or inform the Company of
any matter in connection with any phase of the Company's business or operations.
9.12. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF
NORTH CAROLINA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9.13. CONSENT TO JURISDICTION, WAIVER OF JURY TRIAL. THE COMPANY HEREBY
CONSENTS TO THE JURISDICTION OF ANY STATE COURT WITHIN MECKLENBURG COUNTY, NORTH
CAROLINA OR ANY FEDERAL COURT LOCATED WITHIN THE WESTERN DISTRICT OF THE STATE
OF NORTH CAROLINA, FOR ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
ANY OF THE LOAN DOCUMENTS AND CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY
REGISTERED OR CERTIFIED MAIL DIRECTED TO THE COMPANY AT THE ADDRESS INDICATED IN
THIS CREDIT AGREEMENT OR AT SUCH OTHER ADDRESS AS THE COMPANY MAY HAVE
DESIGNATED IN WRITING TO THE ADMINISTRATIVE AGENT, AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED UPON THE ACTUAL RECEIPT THEREOF, PROPER POSTAGE PREPAID
AND PROPERLY ADDRESSED. TO THE EXTENT PERMITTED BY LAW, THE COMPANY, EACH
MANAGING AGENT AND EACH BANK VOLUNTARILY AND KNOWINGLY WAIVES TRIAL BY JURY AND
WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER
VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING INSTITUTED
HEREUNDER, OR ARISING OUT OF OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS, OR
ANY PROCEEDING TO WHICH A MANAGING AGENT OR A BANK OR ANY AFFILIATE OF A
MANAGING AGENT OR A BANK IS A PARTY, INCLUDING ANY ACTIONS BASED UPON, ARISING
OUT OF OR IN CONNECTION WITH ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE MANAGING AGENTS OR ANY BANK OR THE
COMPANY, AND THE COMPANY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. IN THE EVENT THAT THE COMPANY'S,
A MANAGING AGENT'S OR ANY BANK'S WAIVER OF JURY TRIAL HEREIN SHALL
56
<PAGE>
BE DETERMINED TO BE INVALID OR UNENFORCEABLE AS A MATTER OF LAW, THE COMPANY,
THE MANAGING AGENTS AND THE BANKS AGREE THAT THE PROVISIONS OF ANNEX 1 TO THE
CREDIT AGREEMENT SHALL GOVERN AS TO THE MATTERS SET FORTH THEREIN. NOTHING IN
THIS SECTION SHALL AFFECT THE RIGHT OF THE MANAGING AGENTS OR ANY BANK TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE
MANAGING AGENTS OR ANY BANK TO BRING ANY ACTION AND PROCEEDING AGAINST THE
COMPANY OR THE PLEDGED STOCK IN THE COURTS OF ANY JURISDICTION THAT HAS
JURISDICTION OVER THE COMPANY OR THE PLEDGED STOCK.
9.14. CONFIDENTIALITY. The Managing Agents and each Bank agrees to hold
any confidential information which it may receive from the Company pursuant to
this Agreement in confidence, except for disclosure (i) to other Banks and their
respective Affiliates, (ii) to legal counsel, accountants and other professional
advisors to such Bank, (iii) to regulatory officials, (iv) requested pursuant to
or required by law, regulation, or legal process, (v) in connection with any
legal proceeding to which such Bank is a party, (vi) permitted by Section 10.13
and (vii) permitted by Section 12.4.
9.15. LIMITATION OF RIGHTS. Notwithstanding any other provision of this
Agreement or any other Loan Document, any foreclosure on, sale, transfer, or
other disposition of, or the exercise of any right to vote or consent with
respect to, any of the collateral purported to be covered by the Pledge
Agreement or any other Loan Document as provided herein or in any other Loan
Document or any other action taken or proposed to be taken by the Managing
Agents or any Bank hereunder or thereunder which would affect the operational,
voting, or other control of the Company or any Subsidiary, shall be pursuant to
Section 310 (d) of the Communications Act of 1934, as amended, and to the
applicable rules and regulations thereunder and, if and to the extent required
thereby, subject to the prior consent of the FCC.
ARTICLE X
THE ADMINISTRATIVE AGENT AND THE DOCUMENTATION AGENT
10.1. APPOINTMENT AND POWERS. (i) NatWest Bank N.A. is hereby appointed
Administrative Agent hereunder and under the other Loan Documents, and each of
the Banks irrevocably authorizes the Administrative Agent to act as the agent of
such Bank. The Administrative Agent agrees to act as such upon the express
conditions contained in this Section 10 and in the other Loan Documents. The
duties of the Administrative Agent shall be administrative in nature and the
Administrative Agent shall not have a fiduciary relationship in respect of any
Bank by reason of this Agreement or any other Loan Document. In performing its
functions and duties under this Agreement and the other Loan
57
<PAGE>
Documents, the Administrative Agent shall act solely as the agent of the Banks
and does not assume and shall not be deemed to have assumed any obligation
towards or relationship of agency or trust with or for the Company, except that
the Administrative Agent shall hold in trust for the benefit of the Banks as
their interests may appear all payments received by the Administrative Agent for
the account of the Banks hereunder.
(ii) First Union National Bank of North Carolina is hereby appointed
Documentation Agent hereunder and under the other Loan Documents, and each of
the Banks irrevocably authorizes the Documentation Agent to act as the agent of
such Bank. The Documentation Agent agrees to act as such upon the express
conditions contained in this Section 10 and in the other Loan Documents. The
duties of the Documentation Agent shall be administrative in nature and the
Documentation Agent shall not have a fiduciary relationship in respect of any
Bank by reason of this Agreement or any other Loan Document. In performing its
functions and duties under this Agreement and the other Loan Documents, the
Documentation Agent shall act solely as the agent of the Banks and does not
assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for the Company, except that the
Documentation Agent shall hold in trust for the benefit of the Banks as their
interests may appear all payments received by the Documentation Agent for the
account of the Banks hereunder.
10.2. POWERS. The Managing Agents shall have and may exercise such powers
as are specifically delegated to the Managing Agents by the terms of the Loan
Documents, together with such powers as are reasonably incidental thereto. The
Managing Agents shall have no implied duties to the Banks, or any obligation to
the Banks to take any action under the Loan Documents except any action
specifically provided by the Loan Documents to be taken by the Managing Agents.
10.3. GENERAL IMMUNITY. Neither the Managing Agents nor any of their
directors, officers, agents or employees shall be liable to the Banks or any
Bank for any action taken or omitted to be taken by them under or in connection
with any Loan Document except their own gross negligence or wilful misconduct.
10.4. NO RESPONSIBILITY FOR LOANS, RECITALS, ETC. Neither the Managing
Agents nor any of their directors officers, agents or employees shall be
responsible for or be bound to ascertain, inquire into, or verify (i) any
statement, warranty or representation made in connection with any Loan Document
or any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of any obligor under any Loan Document; (iii) the
satisfaction of any condition specified in Section 4 except receipt of items
required to be delivered to the Managing Agents; (iv) the validity,
effectiveness or genuineness of any Loan Document or any other instrument or
writing furnished in connection
58
<PAGE>
therewith or (v) the perfection, priority, condition, value or sufficiency of
any of the collateral purported to be covered by any Loan Document.
10.5. RIGHT TO INDEMNITY. The Managing Agents shall be fully justified in
failing or refusing to take any action under the Loan Documents unless they
shall first be indemnified to their satisfaction by the Banks pro rata against
any and all liability, cost and expense which may be incurred by them by reason
of taking or continuing to take any such action.
10.6. ACTION ON INSTRUCTIONS OF BANKS. The Managing Agents shall in all
cases be fully protected in acting, or in refraining from acting, under the Loan
Documents in accordance with written instructions signed by the Banks required
for such action pursuant to Section 8.2, and such instructions and any action
taken or failure to act pursuant thereto shall be binding on all of the Banks
and on all holders of the Notes.
10.7. EMPLOYMENT OF MANAGING AGENTS' AND COUNSEL. The Managing Agents may
execute any of their respective duties as Managing Agents by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Banks, except as to money or securities received by it or its authorized agents,
for the default or misconduct of any such agents or attorneys-in-fact selected
by it with reasonable care. The Managing Agents shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and their
respective duties hereunder.
10.8. RELIANCE ON DOCUMENTS; COUNSEL. The Managing Agents shall be
entitled to rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and, in respect
to legal matters, upon the opinion of counsel selected by the Managing Agents,
which counsel may be employees of either Managing Agent.
10.9. MANAGING AGENTS' REIMBURSEMENT AND INDEMNIFICATION. The Banks agree
to reimburse and indemnify the Managing Agents ratably in proportion to their
respective Commitments (i) for any amounts not reimbursed by the Company for
which the Managing Agents are entitled to reimbursement by the Company under the
Loan Documents (other than the fee referred to in Section 10.15), (ii) for any
other expenses incurred by the Managing Agents on behalf of the Banks, in
connection with the preparation, execution, delivery, administration, workout,
restructure, collection and enforcement of the Loan Documents and (iii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Managing Agents in any way
relating to or arising out of the Loan Documents or any other document delivered
in connection therewith or the
59
<PAGE>
transactions contemplated thereby, or the enforcement of any of the terms
thereof or of any such other documents, provided that no Bank shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the Managing Agents.
10.10. RIGHTS AS A LENDER. With respect to their respective Commitments,
Loans made by them and each Note issued to them, NatWest and First Union shall
have the same rights and powers hereunder and under any other Loan Document as
any Bank and may exercise the same as though they were not the Managing Agents,
and the term "Bank" or "Banks" shall, unless the context otherwise indicates,
include NatWest and First Union in their individual capacities, as the case may
be. NatWest and First Union, as the case may be may accept deposits from, lend
money to, and generally engage in any kind of banking or trust business with the
Company or any Subsidiary as if they were not the Managing Agents.
10.11. BANK CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon the Managing Agents or any other Bank
and based on the financial statements referred to in Section 5.4 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also acknowledges
that it will, independently and without reliance upon the Managing Agents or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
10.12. SUCCESSOR MANAGING AGENTS. Either Managing Agent may resign at any
time by giving written notice thereof to the Banks and the Company, and may be
removed at any time with or without cause by written notice received by such
Managing Agent from the Required Banks. Upon any such resignation or removal,
the Required Banks shall have the right to appoint, on behalf of the Banks, a
successor Managing Agent. If no successor Managing Agent shall have been so
appointed by the Required Banks and shall have accepted such appointment within
thirty days after the retiring Managing Agent's giving notice of resignation or
receiving notice of removal, then the retiring Managing Agent may appoint, on
behalf of the Banks, a successor Managing Agent. Such successor Managing Agent
shall be a Bank or a commercial bank having capital and retained earnings of at
least $200,000,000. Upon the acceptance of any appointment as a Managing Agent
hereunder by a successor Managing Agent, such successor Managing Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Managing Agent, and the retiring Managing Agent shall
be discharged from its duties and obligations under the Loan Documents. After
any retiring Manager Agent's resignation or removal hereunder as Managing Agent,
the provisions of this Section 10 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by
60
<PAGE>
it while it was acting as a Managing Agent under the Loan Documents.
10.13. DISTRIBUTION OF INFORMATION. The Company authorizes the Managing
Agents, as the Managing Agents may elect in their sole discretion, and each Bank
to discuss with and furnish to the Banks or to any other Person having an
interest in the Secured Obligations (whether as a guarantor, pledgor of
collateral, participant, purchaser or otherwise) all financial statements, audit
reports and other information pertaining to the Company and the Subsidiaries,
whether such information was provided by the Company or prepared or obtained by
the Managing Agents. Neither the Managing Agents nor any of their employees,
officers, directors or agents makes any representation or warranty regarding any
audit reports or other analyses of the Company's and the Subsidiaries' condition
which the Managing Agents may elect to distribute, whether such information was
provided by the Company or prepared or obtained by the Managing Agents, nor
shall the Managing Agents or any of their respective employees, officers,
directors or agents be liable to any Person receiving a copy of such reports or
analyses for any inaccuracy or omission contained in or relating thereto.
10.14. COLLATERAL RELEASES. The Banks hereby empower and authorize the
Managing Agents to execute and deliver to the Company or any, Subsidiary any
such agreements, documents or instruments as shall be necessary or appropriate
to effect any releases of collateral which shall be permitted by the terms
hereof or of any other Loan Document or which shall otherwise have been approved
by the Required Banks (or, if required by the terms of Section 8.2, all of the
Banks) in writing.
10.15. MANAGING AGENTS' FEES. The Company agrees to pay the
Administrative Agent for the account of the Managing Agents such fees as
heretofore agreed in a fee letter between the Company and the Managing Agents
dated December 21, 1994.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. SETOFF. In addition to, and without limitation of, any rights of
the Banks under applicable law, if the Company becomes insolvent, however
evidenced, or any Default or Unmatured Default occurs, any indebtedness from any
Bank to the Company (including all account balances, whether provisional or
final and whether or not collected or available) may be offset and applied
toward the payment of the Obligations owing to such Bank, whether or not the
Obligations, or any part hereof, shall then be due.
11.2. RATABLE PAYMENTS. In case at any time any Bank, whether by setoff
or otherwise, has payment made to it upon its Loans
61
<PAGE>
(other than payments received pursuant to Section 3.1, 3.3 or 3.4) in a greater
proportion than received by any other Bank, such Bank so receiving such greater
proportionate payment agrees to purchase a portion of the Loans held by the
other Banks so that after such purchase each Bank will hold its ratable
proportion of Loans. Any such purchase shall be made first, of Floating Rate
Advances and second, of Eurodollar Advances. If any Bank, whether in connection
with setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligations or such amounts which may be
subject to set off, such Bank agrees, promptly upon demand, to take such action
necessary such that all Banks share in the benefits of such collateral ratably
in proportion to their Loans. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made. If an
amount to be setoff is to be applied to Indebtedness of the Company to a Bank,
other than Indebtedness evidenced by any of the Notes held by such Bank, such
amount shall be applied ratably to such other Indebtedness and to the
Indebtedness evidenced by such Notes.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. SUCCESSORS AND ASSIGNS. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Company and the
Banks and their respective successors and assigns, except that the Company shall
not have the right to assign its rights or obligations under the Loan Documents
and any assignment by any Bank must be made in compliance with Section 12.3.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes hereof unless and until such payee complies with
Section 12.3, in the case of an assignment thereof, or, in the case of any other
transfer, a written notice of such transfer is filed with the Administrative
Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be
bound by all the terms and provisions of the Loan Documents. Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or consent is the holder of any Note, shall be conclusive
and binding on any subsequent holder, transferee or assignee of such Note or of
any Note or Notes issued in exchange therefor.
12.2. PARTICIPATIONS.
12.2.1. PERMITTED PARTICIPANTS; EFFECT. Any Bank may, in the
ordinary course of its commercial banking business and in accordance with
applicable law, at any time sell to one or more banks or other entities
("Participants") participating interests in any Loan owing to such Bank,
any Note held by such Bank, any Bank's Pro Rata Share of or participation
in
62
<PAGE>
any Facility Letter of Credit, all or any portion of the Commitment of such
Bank or any other interest of such Bank under the Loan Documents. Each
such participation sold by a Bank shall be in a minimum amount equal to the
lesser of (a) $5,000,000 and (b) such Bank's Commitment. In the event of
any such sale by a Bank of participating interests to a Participant, such
Bank's obligations under the Loan Documents shall remain unchanged, such
Bank shall remain solely responsible to the other parties hereto for the
performance of such obligations, such Bank shall remain the holder of any
such Note for all purposes under the Loan Documents, all amounts payable by
the Company under this Agreement shall be determined as if such Bank had
not sold such participating interests, and the Company and the Managing
Agents shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under the Loan
Documents.
12.2.2. VOTING RIGHTS. Each Bank shall retain the sole right to
approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than
any amendment. modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which forgives
principal, interest or fees or reduces the interest rate or fees payable
with respect to any such Loan or Commitment, postpones any date fixed for
any regularly-scheduled payment of principal of, or interest or fees on,
any such Loan or Commitment, releases any guarantor of any such Loan or
releases any substantial portion of collateral, if any, securing any such
Loan.
12.2.3. BENEFIT OF SETOFF. The Company agrees that each Participant
shall be deemed to have the right of setoff provided in Section 11.1 in
respect of its participating interest in amounts owing under the Loan
Documents to the same extent as if the amount of its participating interest
were owing directly to it as a Bank under the Loan Documents, provided that
each Bank shall retain the right of setoff provided in Section 11.1 with
respect to the amount of participating interests sold to each Participant.
The Banks agree to share with each Participant, and each Participant, by
exercising the right of setoff provided in Section 11.1, agrees to share
with each Bank, any amount received pursuant to the exercise of its right
of setoff, such amounts to be shared in accordance with Section 11.2 as if
each Participant were a Bank.
12.3. ASSIGNMENTS.
12.3.1. PERMITTED ASSIGNMENTS. Any Bank may, in the ordinary course
of its commercial banking business and in accordance with applicable law,
at any time assign to one or
63
<PAGE>
more banks or other entities ("Purchasers") all or any part of its rights
and obligations under the Loan Documents. Each such assignment made by a
Bank shall be in a minimum amount equal to the lesser of (a) $5,000,000,
and (b) such Bank's Commitment. Each such assignment shall be
substantially in the form of Exhibit "E" hereto. Unless a Default has
occurred and is continuing, the consent of the Company and the Managing
Agents shall be required prior to an assignment becoming effective with
respect to a Purchaser which is not a Bank or an Affiliate thereof. Such
consent shall be substantially in the form attached as Exhibit "II" to
Exhibit "E" hereto and shall not be unreasonably withheld.
12.3.2. EFFECT; EFFECTIVE DATE. Upon (i) delivery to the Managing
Agents of a notice of assignment, substantially in the form attached as
Exhibit "I" to Exhibit "E" hereto (a "Notice of Assignment") , together
with any consents required by Section 12.3.1, and (ii) except in the case
of a Bank making an assignment to an Affiliate of such Bank, payment of a
$2,500 fee by the assigning Bank to the Administrative Agent for processing
such assignment, such assignment shall become effective on the effective
date specified in such Notice of Assignment. On and after the effective
date of such assignment, such Purchaser shall for all purposes be a Bank
party to this Agreement and any other Loan Document executed by the Banks
and shall have all the rights and obligations of a Bank under the Loan
Documents, to the same extent as if it were an original party hereto, and
no further consent or action by the Company, the Banks or the Managing
Agents shall be required to release the transferor Bank with respect to the
percentage of the Aggregate Commitment (or portion thereof) and Loans
assigned to such Purchaser. Upon the consummation of any assignment to a
Purchaser pursuant to this Section 12.3.2. the transferor Bank, the
Managing Agents and the Company shall make appropriate arrangements so that
a replacement Note or replacement Notes are issued to such transferor Bank
and a new Note or new Notes or, as appropriate, a replacement Note or
replacement Notes, are issued to such Purchaser, in each case in principal
amounts reflecting their respective Commitments, as adjusted pursuant to
such assignment.
12.4. DISSEMINATION OF INFORMATION. The Company authorizes each Bank to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Bank's possession
concerning the creditworthiness of the Company and the Subsidiaries; provided
that each Transferee agrees to be bound by Section 9.15 of this Agreement.
12.5. TAX TREATMENT. If any interest in any Loan Document is transferred
to any Transferee which is organized under the laws of any jurisdiction other
than the United States or any State thereof,
64
<PAGE>
the transferor Bank shall cause such Transferee, concurrently with the
effectiveness of such transfer, to comply with the provisions of Section 2.21.
ARTICLE XIII
NOTICES
13.1 GIVING NOTICE. Except as otherwise permitted by Section 2.14 with
respect to borrowing, conversions and continuation notices, all notices and
other communications provided to any party hereto under this Agreement or any
other Loan Document shall be in writing or by telex or by facsimile and
addressed or delivered to such party at its address set forth below its
signature hereto or at such other address as may be designated by such party in
a notice to the other parties. Any notice, if mailed and properly addressed
with postage prepaid, shall be deemed given when received; any notice, if
transmitted by telex or facsimile, shall be deemed given when transmitted
(answerback confirmed in the case of telexes and telephone confirmation (by an
Authorized Officer in the case of the Company) of receipt in the case of
facsimile).
13.2. CHANGE OF ADDRESS. The Company, each Managing Agent and any Bank
may each change the address for service of notice upon it by a notice in writing
to the other parties hereto.
ARTICLE XIV
COUNTERPARTS
14.1. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. This Agreement shall be effective when it has been executed by the
Company, each Managing Agent and the Banks and each party has notified the
Managing Agents by telex or telephone that it has taken such action.
65
<PAGE>
IN WITNESS WHEREOF, the Company, the Banks and each Managing Agent have
executed this Agreement as of the date first above written.
ACKERLEY COMMUNICATIONS, INC.
By: /s/ Denis M. Curley
------------------------------
Denis M. Curley,
Senior Vice President/Treasurer/
C.F.O.
800 Fifth Avenue
Suite 3770
Seattle, WA 98104
Telephone: (206) 624-2888
Facsimile: (206) 623-7853
Attn: Mr. Denis M. Curley
Senior Vice President/
Treasurer
66
<PAGE>
NATWEST BANK N.A.,
Individually and as Administrative
Agent
By: /s/ A. Sade
--------------------------------
Title: V.P.
-----------------------------
175 Water Street
New York, NY 10038
Telephone: (212) 602-2576
Facsimile: (212) 602-2663
Attn: Mr. Alexander Sade
Media Division
Commitment: $17,000,000
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, Individually and as
Documentation Agent
By: /s/ J.W. Wood
-------------------------------
Title: V.P.
----------------------------
One First Union Center
301 South College Street
Charlotte, N.C. 28288
Telephone: (704) 374-3242
Facsimile: (704) 383-4092
Attn: Mr. James W. Wood
Capital Markets Group
Commitment: $17,000,000
67
<PAGE>
SEATTLE-FIRST NATIONAL BANK
By: /s/ Stan Diddams
---------------------------------
Title: Vice President
------------------------------
Columbia SeaFirst Center
12th Floor
701 5th Avenue
Seattle, WA 98104
Telephone: (206) 358-8003
Facsimile: (206) 358-3113
Attn: Mr. Stan Diddams
Northwest National
Division
Commitment: $11,000,000
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., Los Angeles Agency
By: /s/ G. Imai
---------------------------------
Title: Joint General Manager
------------------------------
444 South Flower Street
Suite 3700
Los Angeles, CA 90071
Telephone: (213) 629-5777
Facsimile: (213) 622-6908
Attn: Ms. Joanne Chou
Commitment: $10,000,000
UNION BANK
By: /s/ J. Kevin Sampson
---------------------------------
Title: Asst. Vice President
-----------------------------
445 South Figueroa Street
Los Angeles, CA 90051
Telephone: (213) 236-6249
Facsimile: (213) 236-5747
Attn: Ms. Shannon Ward
Communications/Media Group
Commitment: $10,000,000
68
<PAGE>
PROVISIONS FOR ALTERNATIVE DISPUTE RESOLUTION
---------------------------------------------
1. ARBITRATION. Except as otherwise specifically set forth in the Credit
Agreement or agreed to in writing by the Company, the Managing Agents and the
Banks, and except as expressly provided otherwise in Section 3 below, in the
event that the Company's, a Managing Agent's or any Bank's waiver of trial by
jury contained in Section 9.13 of the Credit Agreement is determined to be
invalid or unenforceable as a matter of law, then any action, dispute, claim or
controversy between the parties, whether sounding in contract, tort, or
otherwise, arising under the Credit Agreement or any of the Loan Documents or
any proceeding to which a Managing Agent or a Bank is a party, including any
actions based upon, arising out of, or in connection with any course of conduct,
course of dealing, statement (whether oral or written), or actions of the
Managing Agents or any Bank or the Company ("Dispute" or "Disputes"), shall be
resolved by arbitration as set forth in this Annex. Such Disputes shall be
resolved by binding arbitration in accordance with Title 9 of the United States
Code, as amended, and the Commercial Arbitration Rules of the American
Arbitration Association ("AAA"), as in effect from time to time (the "Rules").
In the event of any inconsistency between the Rules and the provisions of this
Annex, the provisions of this Annex shall supersede the Rules. All statutes of
limitations that would otherwise be applicable shall apply to any arbitration
proceeding hereunder. In any arbitration proceeding subject to the provisions
of this Annex, the arbitrator is specifically empowered to decide (by documents
only, or with a hearing, at the arbitrator's sole discretion) pre-hearing
motions that are substantially similar to pre-hearing motions to dismiss and
motions for summary adjudication. Judgment upon the award rendered may be
entered in any court having jurisdiction. Whenever an arbitration is required,
the parties shall select an arbitrator in the manner provided in Section 4
below.
2. JUDICIAL REFERENCE. If a Dispute is not submitted to arbitration as
provided in Section 1 above for any reason, but becomes the subject of a
judicial action, at any point in the proceeding, any party may elect to have any
specific questions of fact or law, or all questions of fact or law, determined
by a reference in accordance with Rule 53 of the North Carolina Rules of Civil
Procedure (or the equivalent rule of another State, as applicable). A party
shall not waive the right to request such judicial reference for any remaining
questions of fact or law to be decided by virtue of the party's initiating or
participating in judicial or other proceedings or by failure to request such a
reference up to any point in a judicial proceeding. Whenever such
<PAGE>
an election is made, the parties shall designate to the court a single referee
selected in the manner provided in Section 4 below. Judgment upon the award
rendered shall be entered in the court in which such proceeding was commenced.
3. REMEDIES. No provision of, nor the exercise of any rights under,
Sections 1 or 2 above shall limit or otherwise affect the right of the Bank (1)
to proceed and foreclose against any of the Collateral by the exercise of a
power of sale available under the Security Instruments and applicable law, (2)
to exercise any self help remedies available under the Credit Agreement or any
Loan Document and applicable law, including, without limitation, setoff, or to
exercise any other nonjudicial rights and remedies available to it under any of
the Loan Documents and applicable law, or (3) to obtain provisional or ancillary
remedies, including, without limitation, injunctive relief and the appointment
of a receiver, from a court having jurisdiction before, during or after the
pendency of any arbitration or referral. The Managing Agents' or any Bank's
pursuit of provisional or ancillary remedies, or its exercise of self help and
other nonjudicial remedies, shall not constitute a waiver of its right to submit
the Dispute to arbitration or judicial reference.
4. SELECTION OF ARBITRATOR OR REFEREE. Whenever an arbitration is
required under Section 1 above or a referral is required under Section 2 above,
the arbitrator or referee shall be selected in accordance with this Section 4.
Except as otherwise provided, the arbitrator or referee shall be an attorney or
retired judge selected in accordance with the Rules of the AAA. Any arbitrator
or referee selected under this Section 4 shall be knowledgeable in the subject
matter of the Dispute. Qualified retired judges shall be selected through
panels maintained by AAA, or any North Carolina Superior Court (or a court, of
an equivalent or higher level, of another State) or private organization
providing such services. A single arbitrator who is an attorney but is not a
retired judge shall have the power to render a maximum award of $100,000. Where
any party makes timely written request prior to appointment of the arbitrator,
or where the claim of any party exceeds $100,000, the arbitrator shall be a
retired judge formerly sitting on the bench in a North Carolina Superior Court
or any higher State court (or a court, of an equivalent level, of another
State), or a retired Federal court judge formerly sitting on the bench in a
United States Court of Appeals or any Federal District Court. A single
arbitrator who is a retired judge shall have the power to render a maximum award
of $1,000,000. Where any party seeks an award in excess of $1,000,000, the
Dispute shall be decided by a majority vote of three arbitrators, at least one
of whom shall meet the requirements for retired judges set forth herein. For
purposes of this Section 4, the computation of the maximum award an arbitrator
may make shall include any amounts awarded for arbitration fees,
2
<PAGE>
attorneys fees and all other related costs provided by Section 5 below.
5. MISCELLANEOUS. The Credit Agreement and all other Loan Documents
shall be interpreted, and the resolution of all Disputes and the rights and
liabilities of the parties shall be determined, in accordance with the internal
laws (as opposed to conflicts of law provisions) of the State of North Carolina;
provided that any arbitration questions arising under this Annex on dispute
resolution shall be governed in accordance with Title 9 of the United States
Code, as amended. This Annex is incorporated into and made a part of the Credit
Agreement by this reference, constitutes the entire agreement of the parties
with respect to its subject matter and supersedes all prior discussions,
arrangements, negotiations and other communications on dispute resolution. To
the extent any provision of this Annex is prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Annex. Capitalized terms used herein
without definition shall have the meanings assigned to them in the Credit
Agreement. The provisions of this Annex shall survive any termination or
expiration of the Credit Agreement until payment in full of the obligations
thereunder, unless the parties otherwise expressly agree in writing. The
arbitrator shall have the power to award to the prevailing party recovery of all
costs, expenses and fees incurred by it (including reasonable attorneys' fees,
administrative fees, arbitrators' fees, and court costs), and in particular, but
without limitation of the foregoing, shall have the power to award to either
party hereto, whether or not such party shall be the prevailing party in an
arbitration, recovery of all costs, expenses and fees incurred by it (including
reasonable attorneys' fees, administrative fees, arbitrators' fees, and court
costs), but only to the extent payable or reimbursable by the other party under
the applicable provisions of the Credit Agreement.
3
<PAGE>
EXHIBIT "A"
PROMISSORY NOTE
$____________ February 17, 1995
Ackerley Communications, Inc., a Delaware corporation (the "Company"),
promises to pay to the order of _______________________ (the "Bank") the lesser
of the principal sum of _________________ Dollars and the aggregate unpaid
principal amount of all Loans made by the Bank to the Company pursuant to
Section 2.1 of the Agreement (as hereinafter defined), in immediately available
funds at the main office of NatWest Bank N.A. in New York, New York, as
Administrative Agent, or as otherwise set forth in the Agreement, together with
interest on the unpaid principal amount hereof at the rates and on the dates set
forth in the Agreement. The Company shall make such mandatory payments on the
Loans as are required by Sections 2.4 and 2.6 of the Agreement.
The Company shall pay all Loans in part as set forth in the Agreement and
in full on the Commitment Termination Date.
The Bank shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to the
benefits of, the Credit Agreement, dated as of February 17, 1995 (as amended or
modified and in effect from time to time, the "Agreement"), among the Company,
the Banks named therein, and NatWest Bank N.A., as Administrative Agent and
First Union National Bank of North Carolina as Documentation Agent, to which
Agreement reference is hereby made for a statement of the terms and conditions
under which this Note may be prepaid or its maturity date accelerated. This
Note is secured pursuant to the Pledge Agreement, as more specifically described
in the Agreement, and reference is made thereto for a statement of the terms and
provisions thereof. Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to such terms in the Agreement.
In the event this Note is not paid when due at any stated or accelerated
maturity, the Company agrees to pay all Obligations, including without
limitation all attorneys' fees and expenses incurred in connection with
collection of the Obligations.
This Note has been executed and delivered in Charlotte, North Carolina and
shall be governed by and construed in accordance with the internal laws and
judicial decisions of the State of North
A-1
<PAGE>
Carolina. The Company hereby submits to the jurisdiction and venue of the
federal and state courts located in Mecklenburg County, North Carolina, although
the Bank shall not be limited to bringing an action in such courts.
IN WITNESS WHEREOF, the Company has caused this Note to be executed under
seal by its duly authorized corporate offices as of the day and year first year
above written.
ACKERLEY COMMUNICATIONS, INC.
[CORPORATE SEAL] By: ______________________________
Title: ____________________________
ATTEST:
Dennis M. Curley Tax Identification Number: 91-1043807
Assistant Secretary
A-2
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF ACKERLEY COMMUNICATIONS, INC.,
DATED FEBRUARY 17, 1995
Maturity
Principal of Amount
Amount Type Eurodollar of
of of Interest Principal Unpaid Notation
Date Loan Loan Period Payment Balance Made By
- ---- --------- ---- ---------- --------- ------- --------
A-3
<PAGE>
EXHIBIT "B-1"
OPINION OF COUNSEL
February 17, 1995
NatWest Bank N.A.
175 Water Street
New York, NY 10038
Attn: Alex Sade
Media Division
First Union National Bank of North Carolina
One First Union Center
301 South College Street
Charlotte, North Carolina 28288
Attn: James W. Wood
Re: Ackerley Communications, Inc.
-----------------------------
Ladies and Gentlemen:
We have acted as corporate counsel for Ackerley Communications, Inc. (the
"Company") and have represented the Company in connection with its execution and
delivery of a Credit Agreement dated as of February 17, 1995 (the "Agreement")
among the Company, the Banks, NatWest Bank N.A., as Administrative Agent and
First Union National Bank of North Carolina as Documentation Agent, providing
for Loans and Facility Letters of Credit in the aggregate principal amount of up
to $65,000,000. All capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to them in the Agreement.
In connection with rendering this opinion, we have reviewed original, or copies
certified or otherwise identified to our satisfaction, of the Company's Third
Restated Certificate of Incorporation, bylaws of the Company as amended and
restated ("Bylaws"), the Consent Resolutions dated ______________, 1995 of the
Board of Directors of the Company (collectively, the "Resolutions"), the Note
Agreements, the Loan Documents and such other documents and matters of fact and
law as we have deemed necessary for purposes of this opinion. In reviewing the
foregoing, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to or reviewed by us as originals, and the conformity
to the authentic original documents of all other documents submitted to or
examined by us as certified, conformed or reproduced copies. As to questions of
fact material to these opinions, we have relied upon certificates of public
officials and statements, certificates or representations, written
B-1
<PAGE>
or oral, of officers or representatives of the Company without seeking to
independently establish or otherwise verify them.
Whenever a statement in this opinion is qualified by "known to us," "we are
not aware," "to the best of our knowledge," or a similar phrase, it is intended
to indicate that, during the course of our representation of the Company, no
information that would give us current actual knowledge of the inaccuracy or
such statement has come to the attention of those attorneys in this firm who
have rendered legal services in connection with the representation described in
the introductory paragraph of this opinion letter. However, we have not
undertaken any independent investigation to determine the accuracy of such
statement. Any limited inquiry undertaken by us during the preparation of this
opinion letter should not be regarded as such an investigation, and no inference
as to our knowledge of any matters bearing on the accuracy of any such statement
should be drawn from the fact of our representation of the Company.
Based upon and subject to the foregoing and the assumptions, limitations
and qualifications set forth below, it is our opinion that:
1. The Company and each Subsidiary are corporations validly existing and
in good standing under the laws of their respective states of incorporation.
2. The execution and delivery of the Loan Documents by the Company and
the performance by the Company of its obligations under the Loan Documents have
been duly authorized by all necessary corporate action and proceedings on the
part of the Company and will not:
(a) require any consent of the Company's shareholders;
(b) violate any law, rule or regulation binding on the Company or any
order, writ, judgment, injunction, decree or award binding on the
Company of which we have knowledge, or the Company's certificate or
articles of incorporation or bylaws or any indenture, instrument or
agreement binding upon the Company of which we have knowledge; or
(c) result in, or require, the creation or imposition of any Lien pursuant
to the provisions of any indenture, instrument or agreement binding
upon the Company of which we have knowledge.
3. The Loan Documents have been duly executed and delivered by the
Company and constitute legal, valid and binding obligations of the Company, each
enforceable in accordance with its terms except as enforcement thereof may be
limited by
B-2
<PAGE>
(a) applicable bankruptcy, insolvency, moratoria, reorganization,
fraudulent conveyance, or similar laws now or hereinafter in effect
affecting the rights of creditors generally, or
(b) general principles of equity and public policy under applicable law,
regardless of whether such enforceability is considered in a
proceeding in equity or at law.
4. The Secured Obligations constitute "Superior Debt" as such term is
defined in the Note Agreements, and are entitled to the benefits of the
subordination provisions set forth in the Note Agreements.
5. To the best of our knowledge, there is no litigation or proceeding
pending against the Company or any Subsidiary which, if adversely determined,
could result in a liability to the Company in excess of $100,000.
6. The provisions of the Pledge Agreement are sufficient to create, in
favor of the Collateral Agent and the Banks, a perfected security interest in
the Pledged Stock (as defined in the Pledge Agreement). All of the shares of
Pledged Stock are duly authorized, validly issued, fully paid and nonassessable
and, to the best of our knowledge, are not subject to any pledge, mortgage,
hypothecation, lien, charge, encumbrance or security interest, except for the
security interest of the Collateral Agent, as pledgee for the benefit of the
Banks and the holders of the Senior Notes under the Pledge Agreement.
7. No Authorization, which has not been obtained by the Company, is
required to be obtained by the Company in connection with the execution and
delivery of the Loan Documents, the borrowings under the Agreement, and the
payment or performance by the Company of the Obligations.
8. The authorized capital stock of the Company ("Stock") consists of
50,000,000 shares of Common Stock, par value one cent ($.01) per share ("Common
Stock"), and 6,972,230 shares of Class B Common Stock, par value one cent ($.01)
per share ("Class B Common Stock"). As of February 6, 1995, there were
9,562,433 issued and outstanding shares of Common Stock and 5,901,861 issued and
outstanding shares of Class B Common Stock, and all such shares of Common Stock
and Class B Common Stock have been duly and validly issued, are fully paid and
non-assessable and are free from preemptive or other rights to subscribe for or
purchase such shares.
All of the opinions herein expressed are specifically based upon and
subject to the following assumptions, limitations and qualifications:
B-3
<PAGE>
A. We have assumed that (i) all parties, other than the Company, have complied
with all applicable laws, statutes and regulations relating to their power
and authority to enter into the Loan Documents, and to effect the
transactions contemplated therein, (ii) that all parties to each of the
Loan Documents (other than the Company) have the power and authority to
execute, deliver and perform the Loan Documents, and such documents are
legal, valid and binding obligations of such parties, enforceable against
them in accordance with their respective terms, (iii) that there are no
agreements or other documents between the parties to the Loan Documents
that are inconsistent with or that modify the Loan Documents or would
otherwise have an effect on this opinion, (iv) the Company has sufficient
rights in the Pledged Stock for a security interest to attach to the
Pledged Stock, (v) the shares of Pledged Stock are evidenced by validly
executed certificates that have been delivered and endorsed to, and are in
the possession of, the Collateral Agent for the benefit of the Collateral
Agent and the Banks, pursuant to the Pledge Agreement, (vi) the Banks have
given value to the Company pursuant to the Loan Documents, and (vii) there
has been no mutual mistake of fact or misunderstanding, fraud, duress,
undue influence, or a breach of any applicable obligation of good faith and
fair dealing.
B. The Loan Documents state that they are governed by North Carolina law.
Consequently, we have not examined the question of what law would govern
the interpretation or enforcement of such document, and our opinion is
based upon the assumption that the internal laws of the State of Washington
and the federal laws of the United States would govern the provisions of,
and transactions contemplated by, the Loan Documents. We note that if the
Loan Documents are not, in fact, valid, binding and enforceable under the
laws of the State of North Carolina, the Loan Documents may not be enforced
by a Washington court under applicable conflict of law principles. We
express no opinion as to whether a court located in the State of Washington
would hold that the State of Washington is a proper forum in which to
enforce the Loan Documents.
C. Our opinion in paragraph 2(b) with respect to the violation of any laws or
regulations, and our opinion in paragraph 7 with respect to Authorizations,
is limited to those governmental approvals, filings, registrations, laws or
regulations applicable to transactions of the type described in the
Agreement and the other Loan Documents and to entities engaged in the types
of businesses engaged in by the Company and the Subsidiaries, and
specifically excludes any opinion related to federal communications laws or
FCC matters.
D. The opinions expressed in this letter are qualified to the extent that the
validity, binding nature, and enforceability
B-4
<PAGE>
of any of the terms of the Loan Documents may be limited or otherwise
affected by applicable Washington laws or judicial decisions governing such
provisions, or by judicial discretion or general principles of equity or
public policy, but such matters should not render the Loan Documents
invalid as a whole, and there exist, in the Loan Documents or pursuant to
applicable law, legally adequate remedies for the realization of the
principal benefits intended to be conferred upon the Banks by the Loan
Documents.
E. To extent that our opinion in paragraph no. 8 relates to preemptive and
other subscription or purchase rights that do not arise under applicable
corporate law or the articles or bylaws of the Company, the opinion is
based upon the best of our knowledge.
F. We express no opinion as to (i) the title or ownership of the Pledged
Stock, or (ii) the priority of any lien or security interest created or
purported to be created by any of the Loan Documents.
G. This opinion is provided to you as a legal opinion only, and not as a
guaranty or warranty of the matters discussed herein. Our opinion is
limited to matters expressly stated herein, and no other opinions may be
implied or inferred.
The attorneys in this firm are members of the Bar of the State of Washington.
We do not hold ourselves out as being conversant with the laws of any
jurisdiction other than those of the United States of America and the State of
Washington and the corporate laws of the State of Delaware.
The opinions expressed in this letter are solely for the benefit of the Managing
Agents and the Banks and their respective participants, assignees and other
transferee. They may not be relied upon in any manner or for any purpose by any
other person or entity without our express written consent.
Very truly yours,
GRAHAM & DUNN
B-5
<PAGE>
Name of Subsidiaries
--------------------
B-6
<PAGE>
EXHIBIT "B-2"
OPINION OF FCC COUNSEL
February 17, 1995
National Westminster Bank
175 Water Street
New York, NY 10038
Attn: Alex Sade
Media Division
First Union National Bank of North Carolina
One First Union Center
301 South College Street
Charlotte, North Carolina 28288
Attn: James W. Wood
Re: Ackerley Communications, Inc.
-----------------------------
Ladies and Gentlemen:
We are general counsel, as well as special counsel respecting Federal
Communications Commission ("FCC") matters, for Ackerley Communications, Inc,
(the "Company") and the Subsidiaries. We have represented the Company in
connection with its execution and delivery of a Credit Agreement dated as of
February 17, 1995 (the "Agreement") among the Company, the Banks, NatWest Bank
N.A., as Administrative Agent and First Union National Bank of North Carolina as
Documentation Agent, providing for Loans and Facility Letters of Credit in the
aggregate principal amount of up to $65,000,000. Capitalized terms used herein
and not otherwise defined herein shall have the meanings attributed to such
terms in the Agreement.
In connection with rendering this opinion, we have reviewed original, or
copies certified or otherwise identified to our satisfaction, of the Loan
Documents and such other documents and matters of fact and law as we have deemed
necessary for purposes of this opinion. In reviewing the foregoing, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to or reviewed by us as originals, and the conformity to the authentic
original documents of all other documents submitted to or examined by us as
certified, conformed or reproduced copies. As to questions of fact material to
these opinions, we have relied upon certificates of public officials and
statements, certificates or representations, written or oral, of officers or
representatives of the Company without seeking to independently establish or
B-2-1
<PAGE>
otherwise verify them, as stated on the certificates and documents furnished to
us. Except to the extent we are expressly opining with respect to the Company
having all requisite power and authority, our opinion assumes that the parties
to each of the documents to which reference is made above have the power and
authority to execute, deliver and perform such documents, and that such
documents are valid as to such parties and binding upon such parties in
accordance with their terms.
1. The execution and delivery of the Loan Documents by the Company and the
performance by the Company of the Obligations will not:
(b) violate any law, rule or regulation (including, without
limitation, any law, rule or regulation of the FCC) binding on
the Company or any Subsidiary or any order, writ, judgment,
injunction, decree or award binding on the Company or any
Subsidiary of which we have knowledge, or any indenture,
instrument or agreement binding upon the Company or any
Subsidiary of which we have knowledge; or
(c) result in, or require, the creation or imposition of any Lien
pursuant to the provisions of any indenture, instrument or
agreement binding upon the Company or any Subsidiary of which we
have knowledge.
2. There is no proceeding or investigation pending before the FCC or
threatened by the FCC against the Company or any Subsidiary which, if adversely
determined, would have a Material Adverse Effect. To the best of our knowledge
after due inquiry, each of the Company and the Subsidiaries is in compliance
with all applicable statutes, rules, regulations and orders of the FCC.
3. Except for requirements of the FCC pertaining to license transfers in
the event of foreclosure, no Authorization of any Governmental Authority or any
other Person, which has not been obtained by the Company or a Subsidiary, is
required to be obtained by the Company or a Subsidiary in connection with the
execution and delivery of the Loan Documents, the borrowings under the
Agreement, the pledge of the Pledged Stock or the performance by the Company of
the Obligations.
4. The Pledge Agreement does not constitute the transfer, assignment or
disposition in any manner, voluntarily or involuntarily, directly or indirectly,
of any license issued as of this date by the FCC in connection with the
operations of the Company or any Subsidiary.
B-2-2
<PAGE>
All of the opinions herein expressed are specifically subject to the
following limitations and qualifications:
A. We have assumed (i) that all parties, other than the Company, have
complied with all applicable laws, statutes and regulations relating
to their power and authority to enter into the Loan Documents, and to
effect the transactions contemplated therein, (ii) that the Loan
Documents are the legal, valid and binding obligations of such parties
enforceable against them in accordance with their respective terms,
and (iii) that there are no agreements or other documents between the
parties to the Loan Documents which are inconsistent with or which
modify the Loan Documents.
B. This opinion is provided to you as a legal opinion only, and not as a
guaranty or warranty of the matters discussed herein. Our opinion is
limited to matters expressly stated herein, and no other opinions may
be implied or inferred.
C. Our opinions are qualified in their entirety by the affect, if any, of
all matters which may be subject to judicial discretion or general
principles of equity or public policy; provided, that such
requirements should not, in our opinion, materially diminish or
interfere with the practical realization by the Banks of the rights
and benefits intended to be conferred on them by the Loan Documents.
The attorneys in this firm are members of the Bar of the District of
Columbia. We do not hold ourselves out as being conversant with the laws of any
jurisdiction other than those of the United States of America, the District of
Columbia and the laws, rules and regulations of the Federal Communications
Commission.
The opinions expressed in this letter are solely for the benefit of the
Managing Agents and the Banks and their respective participants, assignees and
other transferee. They may not be relied upon in any manner or for any purpose
by any other person or entity without our express written consent.
Very truly yours,
RUBIN, WINSTON, DIERCKS,
HARRIS & COOKE
B-2-3
<PAGE>
EXHIBIT "C"
COMPLIANCE CERTIFICATE
(SECTION 6.1(iii))
TO: NatWest Bank N.A., individually and as Administrative Agent and First Union
National Bank of North Carolina as Documentation Agent, and the other Banks
party to the Agreement (as hereinafter defined)
Gentlemen:
Reference is hereby made to Section 6.1(iii) of the Credit Agreement, dated as
of February __, 1995 (as the same may be amended or modified from time to time,
the "Agreement"), among Ackerley Communications, Inc., the Banks, NatWest Bank
N.A., as Administrative Agent and First Union National Bank of North Carolina as
Documentation Agent. All capitalized terms used herein and not otherwise
defined herein shall have the respective meanings attributed to such terms in
the Agreement. The Company hereby certifies and warrants to the Banks as of the
date hereof that:
(a) All of the representations and warranties set forth in Section 5 of
the Agreement are true and correct.
(b) There exists no Default or Unmatured Default.
(c) There has been no material adverse change in the financial condition
of the Company and its Subsidiaries from that shown on the most recent
financial statements furnished to the Banks.
(d) As of _________________, 19__ there were no violations of Sections
6.22, 6.23, 6.24 and 6.25 as shown by the calculations set forth in
Schedule I attached hereto, all of which calculations are true,
complete and correct.
The foregoing certifications, together with the calculations set forth in
Schedule I hereto, are made and delivered this ______ day of ________________,
19__.
________________________________
C-1
<PAGE>
SCHEDULE I
ACKERLEY COMMUNICATIONS, INC.
COMPLIANCE CERTIFICATE FOR FISCAL QUARTER ENDING ______________
ALL DOLLARS IN THOUSANDS (000)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
DEFINITIONS
-----------
1. Calculation of Operating Cash Flow
Fiscal Fiscal Fiscal Fiscal 4 Fiscal
Quarter Quarter Quarter Quarter Quarters
Ending Ending Ending Ending Ending
<S> <C> <C> <C> <C> <C>
______, 19__ ______, 19__ ______, 19__ ______, 19__ ______, 19__
A. Pre-Tax Income or Deficit Excluding
Extraordinary Gains or Losses and 50% $___________ $___________ $___________ $___________ $___________
of NBA expansion fee income recognized
in any such period
Exclude: Gains or Losses on the
Sale of Assets ___________ ___________ ___________ ___________ ___________
B. Depreciation and Amortization Expense ___________ ___________ ___________ ___________ ___________
(including Amortization of Program
Obligations)
C. Interest Expense ___________ ___________ ___________ ___________ ___________
D. Program Obligation Payments (___________) (___________) (___________) (___________) (___________)
Total Operating Cash Flow $___________ $___________ $___________ $___________ $___________
----------- ----------- ----------- ----------- -----------
2. Calculation of Indebtedness
A. Senior Indebtedness (other than contingent
obligations under Guaranties) $_______________
B. Senior Subordinated Notes _______________
C. Capitalized Lease Obligations _______________
Total $_______________
---------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C-2
<PAGE>
I. Section 6.22. TOTAL LEVERAGE RATIO
A. Calculation of Indebtedness
1. Indebtedness outstanding on the
last day of the fiscal quarter
ending ___________, 19__
(derived in Schedule I above) $__________
2. Earned deferred compensation for
which the Company is liable $__________
3. Sum of 1 and 2 $__________
4. Operating Cash Flow for the four
fiscal quarters ending
___________, ____ (derived in
Schedule I above) $__________
B. Ratio of A3 to A4: :1.00
---------
Permitted ratio
as of _____________ :1.00
---------
II. Section 6.23. SENIOR LEVERAGE RATIO
A. Senior Indebtedness outstanding
on the last day of the fiscal
quarter ending ____________, ____ $__________
B. Operating Cash Flow for
the four fiscal quarters
ending ___________, ____
(derived in Schedule I above) $__________
C. Ratio of A to B: :1.00
----------
D. Permitted Ratio :1.00
----------
III. Section 6.24. INTEREST COVERAGE RATIO
A. Operating Cash Flow for the four fiscal
quarters ending ____________, ____ (as
derived in Schedule I above) $__________
B. Interest Expense for the four
fiscal quarters ending on
___________, ____ $__________
C. Ratio of A to B: :1.00
-----------
D. Permitted Ratio: :1.00
-----------
C-3
<PAGE>
IV. SECTION 6.25. FIXED CHARGE COVERAGE RATIO
A. Operating Cash Flow for the four
fiscal quarters ending _____________, ____
(derived in Schedule I above) $__________
B. Cash taxes paid $__________
C. Capital Expenditures $__________
D. Cash Dividends paid $__________
E. Cash Capital Contributions to New Century $__________
F. Sum of B, C, D and E $__________
G. Difference between A minus F $__________
H. Mandatory principal payments
(Exclusive of mandatory prepayments
made in respect of (1) Excess Cash
Flow and (2) net cash proceeds from
any Sale) $__________
I. Interest Expense $__________
J. Sum of H and I $__________
K. Ratio of F to J :1.00
-----------
Permitted ratio as of
____________, ____ :1.00
-----------
V. CALCULATION OF EXCESS CASH FLOW PAYMENT
PURSUANT TO SECTION 2.6(i)(b)
A. Operating Cash Flow $__________
B. Capital Expenditures $__________
C. Principal reductions or payments made
on Indebtedness (exclusive of mandatory
prepayments made in respect of (1) Excess
Cash Flow during such period and (2) net
cash proceeds from any Sale) $__________
D. Interest Expense $__________
E. Cash taxes paid $__________
F. Cash reserve $ 2,250,000
---------
G. The sum of B, C, D, E and F $__________
C-4
<PAGE>
H. Difference between A minus G
(Excess Cash Flow) $__________
I. Mandatory prepayment to Banks
(25% on 4/30/96 and 50% on each April 30
thereafter) $__________
VI. PERMITTED DIVIDENDS PURSUANT TO SECTION 6.10
A. Excess Cash Flow as determined above (V H) $__________
B. Mandatory Prepayment to Banks (V I) $__________
C. Difference between A minus B $__________
(Aggregate amount available for Dividends
and Capital Contributions)
D. Total Leverage Ratio (I B)
(Must be less than 5.00 to 1.00) $__________
E. Product of A times 20%
(Dividends Permitted) $__________
F. Dividends paid
(Notwithstanding D and E, may be
up to $750,000 in each fiscal year) $__________
C-5
<PAGE>
EXHIBIT "D"
[INTENTIONALLY OMITTED]
D-1
<PAGE>
EXHIBIT "E"
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
______________________________ (the "Assignor") and _________________________
(the "Assignee") is dated as of _____________, 19__. The parties hereto agree
as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement,
dated as of February __, 1995 (which, as it may be amended, modified, renewed or
extended from time to time, is herein called the "Credit Agreement"), among
Ackerley Communications, Inc. (the "Company"), certain banks party thereto
NatWest Bank N.A., as Administrative agent for such banks and First Union
National Bank of North Carolina, as Documentation Agent for such banks.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings attributed to them in the Credit Agreement. The Assignor desires to
assign to the Assignee, and the Assignee desires to assume from the Assignor, an
undivided interest (the "Purchased Percentage") in the Commitment of the
Assignor such that after giving effect to the assignment and assumption
hereinafter provided, the Commitment of the Assignee shall equal $___________
and its percentage of the Aggregate Commitment shall equal _____%.
2. ASSIGNMENT. For and in consideration of the assumption of obligations
by the Assignee set forth in Section 3 hereof and the other consideration set
forth herein, and effective as of the Effective Date (as hereinafter defined),
the Assignor does hereby sell, assign, transfer and convey all of its right,
title and interest in and to the Purchased Percentage of (i) the Commitment of
the Assignor (as in effect on the Effective Date), (ii) any Loans and Facility
Letters of Credit outstanding on the Effective Date and (iii) the Credit
Agreement and the other Loan Documents. Pursuant to Section 12.3.2 of the
Credit Agreement, on and after the Effective Date, the Assignee shall have the
same rights, benefits and obligations as the Assignor had under the Loan
Documents with respect to the Purchased Percentage of the Loan Documents, all
determined as if the Assignee were a "Bank" under the Credit Agreement with
_____% of the Aggregate Commitment. The Effective Date shall be the later of
________________ or two Business Days (or such shorter period agreed to by the
Administrative Agent) after a Notice of Assignment substantially in the form of
Exhibit "I" attached hereto and any consents substantially in the form of
Exhibit "II" attached hereto required to be delivered to the Administrative
Agent by Section 12.3.2 of the Credit Agreement have been delivered to the
Administrative Agent. In no event will the Effective Date occur if the payments
required to be made by the Assignee to the Assignor on the Effective Date under
Section 4 and 5 hereof are not made on the proposed Effective Date. The
Assignor will notify the Assignee of the proposed Effective Date on the Business
Day prior to the proposed Effective Date.
E-1
<PAGE>
3. ASSUMPTION. For and in consideration of the assignment of rights by
the Assignor set forth in Section 2 hereof and the other consideration set forth
herein, and effective as of the Effective Date, the Assignee does hereby accept
that assignment, and assume and covenant and agree fully, completely and timely
to perform, comply with and discharge, each and all of the obligations, duties
and liabilities of the Assignor under the Loan Documents which are assigned to
the Assignee hereunder, which assumption includes, without limitation, the
obligation to fund the unfunded portion of the Aggregate Commitment in
accordance with the provisions set forth in the Credit Agreement as if the
Assignee were a "Bank" under the Credit Agreement with _____% of the Aggregate
Commitment. The Assignee agrees to be bound by all provisions relating to
"Banks" under and as defined in the Loan Documents, including, without
limitation, provisions relating to the dissemination of information and the
payment of indemnification.
4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee
shall be entitled to receive from the Administrative Agent all payments of
principal, interest and fees and Reimbursement Obligations with respect to the
Purchased Percentage of the Assignor's Commitment, Loans and Facility Letters of
Credit. The Assignee shall advance funds directly to the Administrative Agent
with respect to all Loans and reimbursement payments made on or after the
Effective Date. In consideration for the sale and assignment of Loans and
Facility Letters of Credit hereunder, (i) with respect to all Floating Rate
Advances made by the Assignor outstanding on the Effective Date, the Assignee
shall pay the Assignor, on the Effective Date, an amount equal to the Purchased
Percentage of all such Floating Rate Advances; (ii) with respect to each
Eurodollar Advance made by the Assignor outstanding on the Effective Date, (a)
on the last day of the Eurodollar Interest Period therefor or (b) on such
earlier date agreed to by the Assignor and the Assignee or (c) on the date on
which any such Eurodollar Advance either becomes due (by acceleration or
otherwise) or is prepaid (the date as described in the foregoing clauses (a),
(b) or (c) being hereinafter referred to as the "Payment Date"), the Assignee
shall pay the Assignor an amount equal to the Purchased Percentage of such
Eurodollar Advance and (iii) with respect to each Facility Letter of Credit
outstanding on the Effective Date, the Assignee shall pay the Assignor, on the
Effective Date, an amount equal to the Purchased Percentage of all such Facility
Letters of Credit. On and after the Effective Date, the Assignee will also
remit to the Assignor any amounts of interest on Loans and fees received from
the Administrative Agent which relate to the Purchased Percentage of Loans made
by the Assignor accrued for periods prior to the Effective Date, in the case of
Floating Rate Advances, or the Payment Date, in the case of Eurodollar Advances,
and not heretofore paid by the Assignee to the Assignor. In the event interest
for the period from the Effective Date to but not including the Payment Date is
not paid by the Company with respect to any Eurodollar Advance sold by the
Assignor to the Assignee hereunder, the Assignee shall pay to the Assignor
E-2
<PAGE>
interest for such period on such Eurodollar Advance at the applicable rate
provided by the Credit Agreement. In the event that either party hereto
receives any payment to which the other party hereto is entitled under this
Assignment Agreement, then the party receiving such amount shall promptly remit
it to the other party hereto.
5. FEES PAYABLE BY ASSIGNEE. On each day on which the Assignee receives
a payment of interest or commitment fees under the Credit Agreement (other than
a payment of interest or commitment fees which the Assignee is obligated to
deliver to the Assignor pursuant to Section 4 hereof, which shall be excluded in
determining fees payable to the Assignor pursuant to this Section), the Assignee
shall pay to the Assignor a fee. The amount of such fee shall be the difference
between (i) the amount of such interest or fee, as applicable, received by the
Assignee and (ii) the amount of the interest or fee, as applicable, which would
have been received by the Assignee if each interest rate was _____ of 1% less
than the interest rate paid by the Company or if the commitment fee was _____ of
1% less than the commitment fee paid by the Company, as applicable. In
addition, the Assignee agrees to pay _____% of the fee required to be paid to
the Administrative Agent pursuant to Section 12.3.2 of the Credit Agreement.
6. CREDIT DETERMINATION; LIMITATIONS ON ASSIGNOR'S LIABILITY. The
Assignee represents and warrants to the Assignor that it is capable of making
and has made and shall continue to make its own credit determinations and
analysis based upon such information as the Assignee deemed sufficient to enter
into the transaction contemplated hereby and not based on any statements or
representations by the Assignor. It is understood and agreed that the
assignment and assumption hereunder are made without recourse to the Assignor
and that the Assignor makes no representation or warranty of any kind to the
Assignee and shall not be responsible for (i) the due execution, legality,
validity, enforceability, genuineness, sufficiency or collectability of the
Credit Agreement or any other Loan Document, including without limitation,
documents granting the Assignor and the other Banks a security interest in
assets of the Company or any guarantor, (ii) any representation, warranty or
statement made in or in connection with any of the Loan Documents, (iii) the
financial condition or creditworthiness of the Company or any guarantor,
(iv) the performance of or compliance with any of the terms or provisions of any
of the Loan Documents, (v) inspecting any of the property, books or records of
the Company or (vi) the validity, enforceability, perfection, priority,
condition, value or sufficiency of any collateral securing or purporting to
secure the Loans. Neither the Assignor nor any of its officers, directors,
employees, agents or attorneys shall be liable for any mistake, error of
judgment, or action taken or omitted to be taken in connection with the Loans or
the Loan Documents, except for its or their own bad faith or willful misconduct.
B-3
<PAGE>
7. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor
in connection with or arising in any manner from the Assignee's performance or
non-performance of obligations assumed under this Assignment Agreement.
8. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
have the right pursuant to Sections 12.3.1 and 12.3.2 of the Credit Agreement to
assign the rights which are assigned to the Assignee hereunder to any entity or
person, provided that (i) any such subsequent assignment does not violate any of
the terms and conditions of the Loan Documents or any law, rule, regulation,
order, writ, judgment, injunction or decree and that any consent required under
the terms of the Loan Documents has been obtained, (ii) the assignee under such
assignment from the Assignee shall agree to assume all of the Assignee's
obligations hereunder in a manner satisfactory to the Assignor and (iii) the
Assignee is not thereby released from any of its obligations to the Assignor
hereunder.
9. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the Aggregate
Commitment occurs between the date of this Assignment Agreement and the
Effective Date, the percentage of the Aggregate Commitment assigned to the
Assignee shall remain the percentage specified in Section I hereof and the
dollar amount of the Commitment of the Assignee shall be recalculated based on
the reduced Aggregate Commitment.
10. ENTIRE AGREEMENT. This Assignment Agreement ****[and the attached
consent]**** embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings between the parties
hereto relating to the subject matter hereof.
11. GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of North Carolina.
12. NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth under each party's name on the signature pages hereof.
E-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR] (NAME OF ASSIGNEE)
By: _________________________ By: ___________________________
Title: ______________________ Title: ________________________
Address: ____________________ Address: ______________________
____________________ ______________________
E-5
<PAGE>
EXHIBIT I
NOTICE OF ASSIGNMENT
To: ****[ACKERLEY COMMUNICATIONS, INC.
______________________________
______________________________]****
NATWEST BANK N.A., as Administrative Agent
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Documentation
Agent
From: [NAME OF ASSIGNOR]
[NAME OF ASSIGNEE]
______________, 19__
1. We refer to that certain Credit Agreement, dated as of February __,
1995 (which, as it may be amended, modified, renewed or extended from time to
time, is herein called the "Credit Agreement") among Ackerley Communications,
Inc, (the "Company") certain banks party thereto (each a "Bank"), including
____________________ (the "Assignor"), NatWest Bank N.A., as administrative
agent for the Banks (as such, the "Administrative Agent") and First Union
National Bank of North Carolina, as documentation agent for the Banks (as such,
the "Documentation Agent"). Capitalized terms used herein and in any consent
delivered in connection herewith and not otherwise defined herein or in such
consent shall have the meanings attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered to
****[the Company and]**** the Administrative Agent pursuant to Section 12.3.2 of
the Credit Agreement.
3. The Assignor and ________________________ (the "Assignee") have
entered into an Assignment Agreement, dated as of ________________, 19__,
pursuant to which, among other things, the Assignor has sold, assigned,
delegated and transferred to the Assignee, and the Assignee has purchased,
accepted and assumed from the Assignor, an undivided interest in and to all of
the Assignor's rights and obligations under the Credit Agreement and the other
Loan Documents such that Assignee's percentage of the Aggregate Commitment shall
equal _____%, effective as of the "Effective Date" (as hereinafter defined). The
"Effective Date" shall be the later of _______________, 19__ or two Business
Days (or such shorter period as agreed to by the Administrative Agent) after
this Notice of Assignment and any consents and fees required by Sections 12.3.1
_________________
****To be included only if consent must be obtained from the Company pursuant to
Section 12.3.1 of the Credit Agreement.
E-6
<PAGE>
and 12.3.2 of the Credit Agreement have been delivered to the Administrative
Agent, provided that the Effective Date shall not occur if any condition
precedent agreed to by the Assignor and the Assignee has not been satisfied.
4. As of this date, the percentage of the Assignor in the Aggregate
Commitment and Loans is _____%. As of the Effective Date, the percentage of the
Assignor in the Aggregate Commitment and Loans will be _____% (as such
percentage may be reduced or increased by assignments which become effective
prior to the assignment to the Assignee becoming effective) and the percentage
of the Assignee in the Aggregate Commitment and Loans will be _____%.
5. The Assignor and the Assignee hereby give ****[to the Company and]****
the Administrative Agent notice of the assignment and delegation referred to
herein. The Assignor will confer with the Administrative Agent before
____________, 19__ to determine if the Assignment Agreement will become
effective on such date pursuant to Section 3 hereof, and will confer with the
Administrative Agent to determine the Effective Date pursuant to Section 3
hereof if it occurs thereafter. The Assignor shall notify the Administrative
Agent if the Assignment Agreement does not become effective on any proposed
Effective Date as a result of the failure to satisfy the conditions precedent
agreed to by the Assignor and the Assignee. At the request of the
Administrative Agent, the Assignor will give the Administrative Agent written
confirmation of the occurrence of the Effective Date.
6. The Assignee hereby accepts and assumes the assignment and delegation
referred to herein and agrees as of the Effective Date (i) to perform fully all
of the obligations under the Credit Agreement and the other Loan Documents which
it has hereby assumed and (ii) to be bound by the terms and conditions of the
Credit Agreement and the other Loan Documents as if it were a "Bank".
7. The Assignor and the Assignee request and agree that any payments to
be made by the Administrative Agent to the Assignor on and after the Effective
Date shall, to the extent of the assignment referred to herein, be made entirely
to the Assignee, it being understood that the Assignor and the Assignee shall
make between themselves any desired allocations.
8. The Assignor or the Assignee shall pay to the Administrative Agent on
or before the Effective Date the processing fee of $2,500 required by Section
12.3.2 of the Credit Agreement.
9. The Assignor and the Assignee request and direct that the
Administrative Agent and the Documentation Agent prepare and cause the Company
to execute and deliver [a new Note or new Notes or, as
_____________________
****To be included only if consent must be obtained from the Company pursuant to
Section 12.3.1 of the Credit Agreement.
E-7
<PAGE>
appropriate,] a replacement Note or replacement Notes, to the Assignor and the
Assignee in accordance with Section 12.3.2 of the Credit Agreement. The
Assignor [and the Assignee] agree[s] to deliver to the Administrative Agent the
original Note[s] received by it from the Company upon its receipt of a new
Note[s] in the amount set forth above.
10. The Assignee advises the Administrative Agent that the address listed
below is its address for notices under the Credit Agreement:
_________________________
_________________________
_________________________
ASSIGNOR ASSIGNEE
By: ________________________ By: _________________________
Title: _____________________ Title: ______________________
E-8
<PAGE>
EXHIBIT II
CONSENT AND RELEASE
TO: [NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
_________________________ __________________________
_________________________ __________________________
______________, 199__
1. We acknowledge receipt from _______________________ (the "Assignor")
and _______________________ (the "Assignee") of the Notice of Assignment, dated
as of _______________, 19__ (the "Notice"). Capitalized terms used herein and
not otherwise defined herein shall have the meanings attributed to them in the
Notice.
2. In consideration of the assumption by the Assignee of the obligations
of the Assignor as referred to in the Notice, the Company hereby (i) irrevocably
consents, as required by Section 12.3.1 of the Credit Agreement, to the
assignment and delegation referred to in the Notice and (ii) as of the Effective
Date, irrevocably reduces the percentage of the Assignor in the Aggregate
Commitment by the percentage of the Aggregate Commitment assigned to the
Assignee and releases the Assignor from all of its obligations to the Company
under the Loan Documents to the extent that such obligations have been assumed
by the Assignee.
**** 3. The Company directs the Administrative Agent and the Documentation
Agent to prepare for issuance by the Company new Notes as requested by the
Assignor and the Assignee in the Notice.****
4. In consideration of the assumption by the Assignee of the obligations
of the Assignor as referred to in the Notice, the Administrative Agent hereby
(i) irrevocably consents, as required by Section 12.3.1 of the Credit Agreement,
to the assignment and delegation referred to in the Notice, (ii) as of the
Effective Date, irrevocably releases the Assignor from its obligations to the
Managing Agents under the Loan Documents to the extent that such obligations
have been assumed by the Assignee, and (iii) agrees that, as of the Effective
Date, the Administrative Agent shall consider the Assignee as a "Bank" for all
purposes under the Loan Documents to the extent of the assignment and delegation
referred to in the Notice.
ACKERLEY COMMUNICATIONS, INC. NATWEST BANK N.A., as Administrative Agent
By: ________________________ By: __________________________
Title: _____________________ Title: _______________________
__________________
****To be included only if consent must be obtained from the Company pursuant to
Section 12.3.1 of the Credit Agreement.
E-9
<PAGE>
EXHIBIT "F"
[INTENTIONALLY OMITTED]
F-1
<PAGE>
SCHEDULE "1"
SUBSIDIARIES AND OTHER INVESTMENTS
(SEE SECTIONS 5.8 AND 6.16)
Outstanding Capital Jurisdiction of
Subsidiaries Stock Owned 100% By Incorporation
------------ ------------------- ---------------
Ackerley Airport Ackerley
Advertising, Inc. Communications, Inc. Washington
("ACI")
Ackerley ACI Washington
Communications
Group, Inc.
Cypress ACI Washington
Broadcasting, Inc.
KGET TV, Inc. ACI Washington
KJR Radio, Inc. ACI Washington
KKTV, Inc. ACI Washington
KVOS TV, Inc. ACI Washington
KVOS TV, Ltd. KVOS TV, Inc. British Columbia,
Canada
Seattle SuperSonics, ACI Washington
Inc.
TC Aviation, Inc. ACI Oregon
WIXT TV, Inc. ACI Washington
Jurisdiction
Investments Ownership of Formation
----------- --------- ------------
New Century Seattle Limited partnership Delaware
Partners, L.P. interests representing
approximately 80% of
the equity investors
-1-
<PAGE>
SCHEDULE "2"
OTHER INDEBTEDNESS
(SECTION 6.11)
Guaranty of Ackerley Communications, Inc. of capital
contribution requirements of KJR Radio, Inc., pursuant to Section 3.1(g)(i) of
the Amended Partnership Agreement.
<PAGE>
SCHEDULE "3"
EXISTING LIENS
(SECTION 6.18)
None.
<PAGE>
SCHEDULE "4"
OUTSTANDING SHARES
(SECTION 5.1)
<TABLE>
<CAPTION>
Number of
Name of Company Class of Shares Authorized Shares Shares Issued Options
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ackerley Communications, Inc. Common 50,000,000 9,562,433
-----------------------------------------------------------------------------------------
Class B Common 6,972,230 5,901,861 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Ackerley Airport Advertising, Inc. Common 500 100 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Cypress Broadcasting, Inc. Common 50,000 100 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
KGET TV, Inc. Common 50,000 100 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
KJR Radio, Inc. Common 50,000 100 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
KKTV, Inc. Common 50,000 100 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
KVOS TV, Inc. Common 50,000 100 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
KVOS TV, Ltd. Common 10,000 1 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Seattle SuperSonics, Inc. Common 50,000 100 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
TC Aviation, Inc. Common 5,000 1,000 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
WIXT TV, Inc. Common 50,000 100 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(Local Currency--Single Jurisdiction)
[logo] [REGISTERED TRADEMARK]
International Swap Dealers Association, Inc.
MASTER AGREEMENT
June 23, 1994
dated as of............................
National Westminster Bank USA Ackerley Communications, Inc.
.................................. and ........................................
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 12 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value
on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the required
currency. Where settlement is by delivery (that is, other than by
payment), such delivery will be made for receipt on the due date in the
manner customary for the relevant obligation unless otherwise specified in
the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing, (2)
the condition precedent that no Early Termination Date in respect of the
relevant Transaction has occurred or been effectively designated and (3)
each other applicable condition precedent specified in this Agreement.
Copyright -C- 1992 by International Swap Dealers Association, Inc.
<PAGE>
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be
made in the Schedule or a Confirmation by specifying that subparagraph (ii)
above will not apply to the Transactions identified as being subject to the
election, together with the starting date (in which case subparagraph (ii) above
will not, or will cease to, apply to such Transactions from such date). This
election may be made separately for different groups of Transactions and will
apply separately to each pairing of branches or offices through which the
parties make and receive payments or deliveries.
(d) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered
into) that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its obligations
under this Agreement and any obligations it has under any Credit Support
Document to which it is a party and has taken all necessary action to
authorise such execution, delivery and performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance
do not violate or conflict with any law applicable to it, any provision of
its constitutional documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
2
<PAGE>
(iv) CONSENTS. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with; and
(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding in
equity or at law)).
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party any
forms, documents or certificates specified in the Schedule or any Confirmation
by the date specified in the Schedule or such Confirmation or, if none is
specified, as soon as reasonably practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:--
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or 2(d)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the
party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(d) or to give
notice of a Termination Event or any agreement or obligation under Section
4(a)) to be complied with or performed by the party in accordance with this
Agreement if
3
<PAGE>
such failure is not remedied on or before the thirtieth day after notice of
such failure is given to the party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to be
complied with or performed by it in accordance with any Credit Support
Document if such failure is continuing after any applicable grace
period has elapsed;
(2) the expiration or termination of such Credit Support Document or
the failing or ceasing of such Credit Support Document to be in full
force and effect for the purpose of this Agreement (in either case
other than in accordance with its terms) prior to the satisfaction of
all obligations of such party under each Transaction to which such
Credit Support Document relates without the written consent of the
other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the validity
of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation made or repeated or deemed to
have been made or repeated by the party or any Credit Support Provider of
such party in this Agreement or any Credit Support Document proves to have
been incorrect or misleading in any material respect when made or repeated
or deemed to have been made or repeated,
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party (1)
defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of, an acceleration of obligations under, or an early termination of, that
Specified Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or delivery due
on the last payment, delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default continues for at
least three Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims, repudiates or
rejects, in whole or in part, a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate it or act
on its behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default, event
of default or other similar condition or event (however described) in
respect of such party, any Credit Support Provider of such party or any
applicable Specified Entity of such party under one or more agreements or
instruments relating to Specified Indebtedness of any of them (individually
or collectively) in an aggregate amount of not less than the applicable
Threshold Amount (as specified in the Schedule, which has resulted in such
Specified Indebtedness becoming, or becoming capable at such time of being
declared, due and payable under such agreements or instruments, before it
would otherwise have been due and payable or (2) a default by such party,
such Credit Support Provider or such Specified Entity (individually or
collectively) in making one or more payments on the due date thereof in an
aggregate amount of not less than the applicable Threshold Amount under
such agreements or instruments (after giving effect to any applicable
notice requirement or grace period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such party or
any applicable Specified Entity of such party:-
(1) is dissolved (other than pursuant to a consolidation, amalgamation
or merger); (2) becomes insolvent or is unable to pay its debts or
fails or admits in writing its inability generally to pay its debts as
they become due; (3) makes a general assignment, arrangement or
composition with or for the benefit of its creditors; (4) institutes
or has instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors' rights, or a
petition is presented for its
4
<PAGE>
winding-up or liquidation, and, in the case of any such proceeding or
petition instituted or presented against it such proceeding or
petition (A) results in a judgment of insolvency or bankruptcy or the
entry of an order for relief or the making of an order for its
winding-up or liquidation or (B) is not dismissed, discharged, staved
or restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its winding-up,
official management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or becomes subject
to the appointment of an administrator, provisional liquidator,
conservator, receiver, trustee, custodian or other similar official
for it or for all or substantially all its assets, (7) has a secured
party take possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal process
levied, enforced or sued on or against all or substantially all its
assets and such secured party maintains possession, or any such
process is not dismissed, discharged, stayed or restrained, in each
case within 30 days thereafter; (8) causes or is subject to any event
with respect to it which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the events specified
in clauses (1) to (7) (inclusive); or (9) takes any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support Provider
of such party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and, at
the time of such consolidation, amalgamation, merger or transfer:-
(1) the resulting, surviving or transferee entity fails to assume all
the obligations of such party or such Credit Support Provider under
this Agreement or any Credit Support Document to which it or its
predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by such
resulting, surviving or transferee entity of its obligations under
this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, and, if specified to be applicable, a Credit
Event Upon Merger if the event is specified pursuant to (ii) below or an
Additional Termination Event if the event is specified pursuant to (iii) below:-
(i) ILLEGALITY. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a result
of a breach by the party of Section 4(b)) for such party (which will be the
Affected Party):-
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in respect of
such Transaction or to comply with any other material provision of
this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or such
Credit Support Provider) has under any Credit Support Document
relating to such Transaction;
(ii) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is specified
in the Schedule as applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified Entity of X consolidates
or amalgamates with, or merges with or into, or transfers all or
substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate. will
be the Affected Party); or
5
<PAGE>
(iii) ADDITIONAL TERMINATION EVENT. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying the
nature of that Termination Event and each Affected Transaction and will
also give such other information about that Termination Event as the other
party may reasonably require.
(ii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(1) occurs
and there are two Affected Parties, each party will use all reasonable
efforts to reach agreement within 30 days after notice thereof is given
under Section 6(b)(i) on action to avoid that Termination Event.
(iii) RIGHT TO TERMINATE. If:-
(1) an agreement under Section 6(b)(ii) has not been effected with
respect to all Affected Transactions within 30 days after an Affected
Party gives notice under Section 6(b)(i); or
(2) an Illegality other than that referred to in Section 6(b)(ii), a
Credit Event Upon Merger or an Additional Termination Event occurs,
either party in the case of an Illegality, any Affected Party in the case
of an Additional Termination Event if there is more than one Affected
Party, or the party which is not the Affected Party in the case of a Credit
Event Upon Merger or an Additional Termination Event if there is only one
Affected Party may, by not more than 20 days notice to the other party and
provided that the relevant Termination Event is then continuing, designate
a day not earlier than the day such notice is effective as an Early
Termination Date in respect of all Affected Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under Section
6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
6
<PAGE>
(ii) Upon the occurrence or effective designation of an Early Termination
Date, no further payments or deliveries under Section 2(a)(i) or 2(d) in
respect of the Terminated Transactions will be required to be made, but
without prejudice to the other provisions of this Agreement. The amount,
if any, payable in respect of an Early Termination Date shall be determined
pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of
written confirmation from the source of a quotation obtained in determining
a Market Quotation, the records of the party obtaining such quotation will
be conclusive evidence of the existence and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event of
Default) and on the day which is two Local Business Days after the day on
which notice of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a Termination Event).
Such amount will be paid together with (to the extent permitted under
applicable law) interest thereon (before as well as after judgment), from
(and including) the relevant Early Termination Date to (but excluding) the
date such amount is paid, at the Applicable Rate. Such interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an
Event of Default:--
(1) FIRST METHOD AND MARKET QUOTATION. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the Non-
defaulting Party the excess, if a positive number, of (A) the sum of
the Settlement Amount (determined by the Non-defaulting Party) in
respect of the Terminated Transactions and the Unpaid Amounts owing to
the Non-defaulting Party over (B) the Unpaid Amounts owing to the
Defaulting Party.
(2) FIRST METHOD AND LOSS. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this Agreement.
(3) SECOND METHOD AND MARKET QUOTATION. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the sum
of the Settlement Amount (determined by the Non-defaulting Party) in
respect of the Terminated Transactions and the Unpaid Amounts owing to
the Non-defaulting Party less (B) the Unpaid Amounts owing to the
Defaulting Party. If that amount is a positive number, the Defaulting
Party will pay it to the Non-defaulting Party; if it is a negative
number, the Non-defaulting Party will pay the absolute value of that
amount to the Defaulting Party.
(4) SECOND METHOD AND LOSS. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative
7
<PAGE>
number, the Non-defaulting Party will pay the absolute value of that
amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event:--
(1) ONE AFFECTED PARTY. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies,
except that, in either case, references to the Defaulting Party and to
the Non-defaulting Party will be deemed to be references to the
Affected Party and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all the Transactions
are being terminated, Loss shall be calculated in respect of all
Terminated Transactions.
(2) TWO AFFECTED PARTIES. If there are two Affected Parties:--
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions, and
an amount will be payable equal to (I) the sum of (a) one-half of
the difference between the Settlement Amount of the party with
the higher Settlement Amount ("X") and the Settlement Amount of
the party with the lower Settlement Amount ("Y") and (b) the
Unpaid Amounts owing to X less (II) the Unpaid Amounts owing to
Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the Transactions
are being terminated, in respect of all Terminated Transactions)
and an amount will be payable equal to one-half of the difference
between the Loss of the party with the higher Loss ("X") and the
Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if it
is a negative number, X will pay the absolute value of that amount to
Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be
subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other under
this Agreement (and retained by such other party) during the period from
the relevant Early Termination Date to the date for payment determined
under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate of
loss and not a penalty. Such amount is payable for the loss of bargain and
the loss of protection against future risks and except as otherwise
provided in this Agreement neither party will be entitled to recover any
additional damages as a consequence of such losses.
7. TRANSFER
Neither this Agreement nor any interest or obligation in or under this Agreement
may be transferred (whether by way of security or otherwise) by either party
without the prior written consent of the other party, except that:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8
<PAGE>
8. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in respect
of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable
and may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding supplement to
this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
9. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees,
incurred by such other party by reason of the enforcement and protection of its
rights under this Agreement or any Credit Support Document to which the
Defaulting Party is a party or by reason of the early termination of any
Transaction, including, but not limited to, costs of collection.
10. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date it is
delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
9
<PAGE>
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered
or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
11. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or re-
enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
12. DEFINITIONS
As used in this Agreement:--
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
10
<PAGE>
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, all Transactions affected by the occurrence of such
Termination Event and (b) with respect to any other Termination Event, all
Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"APPLICABLE RATE" means:--
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section
6(d)(ii)) on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is
specified as such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iii).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"LAW" includes any treaty, law, rule or regulation and "LAWFUL" AND "UNLAWFUL"
will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located, (c) in
relation to any notice or other communication, including notice contemplated
under Section 5(a)(i), in the city specified in the address for notice provided
by the recipient and, in the case of a notice contemplated by Section 2(b), in
the place where the relevant new account is to be located and (d) in relation to
Section 5(a)(v)(2), in the relevant locations for performance with respect to
such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, an amount that party reasonably
determines in good faith to be its total losses and costs (or gain, in which
case expressed as a negative number) in connection with this Agreement or that
Terminated Transaction or group of Terminated Transactions, as the case may be,
including any loss of bargain, cost of funding or, at the election of such party
but without duplication, loss or cost incurred as a result of its terminating,
liquidating, obtaining or reestablishing any hedge or related trading position
(or any gain
11
<PAGE>
resulting from any of them). Loss includes losses and costs (or gains) in
respect of any payment or delivery required to have been made (assuming
satisfaction of each applicable condition precedent) on or before the relevant
Early Termination Date and not made, except, so as to avoid duplication, if
Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a
party's legal fees and out-of-pocket expenses referred to under Section 9. A
party will determine its Loss as of the relevant Early Termination Date, or, if
that is not reasonably practicable, as of the earliest date thereafter as is
reasonably practicable. A party may (but need not) determine its Loss by
reference to quotations of relevant rates or prices from one or more leading
dealers in the relevant markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference Market-
maker to enter into a transaction (the "Replacement Transaction") that would
have the effect of preserving for such party the economic equivalent of any
payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation. any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction
would be subject to such documentation as such party and the Reference Market-
maker may, in good faith, agree. The party making the determination (or its
agent) will request each Reference Market-maker to provide its quotation to the
extent reasonably practicable as of the same day and time (without regard to
different time zones) on or as soon as reasonably practicable after the relevant
Early Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided,
it will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the Lime in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under
12
<PAGE>
this Agreement another contract, applicable law or otherwise) that is exercised
by, or imposed on, such payer.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Market Quotations (whether positive or negative) for each Terminated
Transaction or group of Terminated Transactions for which a Market Quotation is
determined; and
(b) such party's Loss (whether positive or negative and without reference to
any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"TERMINATION EVENT" means an Illegality or, if specified to be applicable, a
Credit Event Upon Merger or an Additional Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined
13
<PAGE>
by the party obliged to make the determination under Section 6(e) or, if each
party is so obliged, it shall be the average of the fair market values
reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
National Westminster Bank USA Ackerley Communications, Inc.
.................................. ...............................
(Name of Party) (Name of Party)
/s/ Joram Friedman /s/ Denis Curley
By:............................... By:..............................
Name: Joram Friedman Name: Denis Curley
Title: Senior Vice President Title: Senior VP/Treasurer
Date: Date: 8/22/94
14
<PAGE>
CONFORMED COPY
(LOCAL CURRENCY-SINGLE JURISDICTION)
SCHEDULE
TO THE
MASTER AGREEMENT
DATED AS OF JUNE 23,1994
BETWEEN
NATIONAL WESTMINSTER BANK USA AND ACKERLEY COMMUNICATIONS, INC.
("PARTY A") ("PARTY B")
PART I
TERMINATION PROVISIONS
(a) "SPECIFIED ENTITY" means in relation to Party A for the purpose of:
Sections 5(a)(v) (Default under
Specified Transaction), Not Applicable
Section 5(a)(vi) (Cross Default), Not Applicable
Section 5(a)(vii) (Bankruptcy), Not Applicable
Section 5(b)(iv) (Credit Event Upon Merger), Not Applicable
and in relation to Party B FOR the purpose of:
Sections 5(a)(v) (Default under Specified
Transaction), All Affiliates
Section 5(a)(vi) (Cross Default), All Affiliates
Section 5(a)(vii) (Bankruptcy), All Affiliates,
excluding GRADH-105,
Inc. and any Non-material
Affiliate
Section 5(b)(iv) (Credit Event Upon Merger), All Affiliates
(b) "SPECIFIED TRANSACTION" will have the meaning specified in Section 12 of
this Agreement.
(c) The "CROSS DEFAULT" provision of Section 5(a)(vi) WILL NOT apply to Party A
and WILL apply to Party B.
If such provisions apply:
"SPECIFIED INDEBTEDNESS" will have the meaning specified in Section 12 of
this Agreement, except that such term shall not include obligations in
respect of deposits received in the ordinary course of a party's banking
business.
"THRESHOLD AMOUNT" means, USD 10 Million (or its equivalent in other
currency).
(d) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) WILL NOT
apply to Party A and WILL apply to Party B.
(e) THE "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) WILL NOT apply
to Party A and WILL NOT apply
1
<PAGE>
to Party B.
(f) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e) of this
Agreement:
(i) Market Quotation will apply.
(ii) The Second Method will apply.
(g) ADDITIONAL TERMINATION EVENT will not apply.
PART 2
AGREEMENT TO DELIVER DOCUMENTS
For the purpose of Section 4(a) of this Agreement, each party agrees to
deliver the following documents, as applicable: -
PARTY FORM/DOCUMENT/CERTIFICATE DATE BY WHICH COVERED BY
REQUIRED TO TO BE SECTION 3(D)
DELIVER DELIVERED REPRESENTATION
DOCUMENT
Party A and Evidence of Authority of Upon execution Yes
Party B Signatories of this Agreement
Party B Opinion of Counsel in the Upon execution
form of Exhibit I of this
Agreement Yes
Party B Copy (certified by an Upon execution Yes
officer) of the board of this
resolution (or equivalent Agreement
authorizing documentation)
permitting the entering into
of this Agreement and
Transactions hereunder
Party B Financial Statements prepared Upon execution
in accordance with generally this Agreement
accepted accounting principles
PART 3
MISCELLANEOUS
(a) ADDRESSES FOR NOTICES. For the purpose of Section 12(a) of this
Agreement:-
Addresses for notices or communications to Party A:-
Address: NatWest Financial Markets Group, 22nd Floor
10 Exchange Place
Jersey City, NJ 07302
Attention: Capital Markets
Facsimile: (201)547-2884 Telephone: (201) 547-2811
Addresses for notices or communications to Party B:-
Address: 800 Fifth Avenue; Suite 3770
Seattle, WA 98104
Attention: Denis Curley, Chief Financial Officer
2
<PAGE>
Facsimile: (206)623-7853 Telephone: (206) 624-2888
(b) CALCULATION AGENT. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction.
(c) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document: Not
Applicable.
(d) CREDIT SUPPORT PROVIDER. Credit Support Provider means in relation to Party
A: Not Applicable.
Credit Support Provider means in relation to Party B: Not Applicable.
(e) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law doctrine.
(f) NETTING OF PAYMENTS. Subparagraph (ii) of Section 2(c) of this Agreement
will not apply to any Transactions (in each case starting from the date of
this Agreement.
(g) "AFFILIATE" will have the meaning specified in Section 14 of this
Agreement.
PART 4
OTHER PROVISIONS
(1) 1991 ISDA Definitions. The 1991 Definitions published by ISDA (the
"Definitions") are incorporated by reference herein. Any terms used and not
otherwise defined herein which are contained in the Definitions shall have the
meanings set forth herein.
(2) Set-off. A new Section 6(f) is hereby added, to read in its entirety as
follows:
"(f) Set-off. All payments under this Agreement and all transactions will
be made without set-off or counterclaim except as provided in this Section
or elsewhere herein. If as of any payment date Party B shall have
defaulted in any payment of principal or interest on any indebtedness to
Party A beyond the period of grace, if any, provided in the instrument or
agreement pursuant to which such indebtedness was created, Party A is
irrevocably authorized without notice to Party B, any such notice being
expressly waived by Party B, to set off and appropriate and apply all or
any part of any amount required to be paid to Party B hereunder or under
any Confirmation against and on account of such indebtedness. Party A
agrees to notify Party B promptly of any such set-off and application. The
rights of Party A under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which
Party A may have, whether pursuant to the instrument or agreement, pursuant
to which such indebtedness was created or otherwise. Nothing in this
Section shall derogate from any right of set-off counterclaim or right to
withhold payment under applicable law."
(3) Representation and Warranty. Section 3(a) is amended by adding the
following paragraph (vi):
"(vi) Eligible Swap Participant. It is an "eligible swap participant" as
that term is defined by the United States Commodity Futures Trading
Commission in 17 C.F.R. Section 35.1(b)(2)."
(4) The definition of "Default Rate" contained in Section 12 of the Agreement
is amended to read in its entirety as follows:
"Default Rate" means a rate per annum equal to (a) for each day from and
including the due date thereof to and including the fifth day therefrom;
the Federal Funds Rate and (b) from and including the sixth day from the
due date thereof to but excluding the date such amount is paid; a rate per
annum
3
<PAGE>
equal to the Prime Rate (the rate established from time to time by Party A
as its "prime rate") plus 2% per annum. Such interest shall be computed on
the basis of a 360-day year for actual days elapsed and shall be payable
from time to time on demand. Default Rate will be applied on the basis of
Compounding as if the overdue amount were a Notional Amount and using daily
Compounding Dates; and interest will accrue and be payable before as well
as after judgment.
(5) Waiver of Jury Trial. Each party hereby irrevocably waives its respective
right to jury trial with respect to any litigation arising under; or in
connection with; this Agreement or any Transaction."
(6) Consent to Recording. The Parties agree that each may electronically
record all telephonic conversations between them and that any such recordings
may be submitted in evidence to any court or in any Proceedings for the purpose
of establishing any matters pertinent to any Transaction.
(7) Additional Covenants; Representations and Warranties. In addition to those
contained herein; Party B agrees to observe; perform and comply with all
Covenants; Representations and Warranties made by it in the Credit Agreement and
Security Agreement dated as of October 7; 1993 among Ackerley Communications;
Inc.; The Banks; The First National Bank of Chicago, as Agent and National
Westminster Bank USA; as Co-Agent (as amended from time to time; the "Credit and
Security Agreement") (including the definitions of terms and related ancillary
provisions used therein which appear elsewhere in the Credit and Security
Agreement) shall be automatically incorporated by reference into this Agreement
(as such covenants are in effect immediately prior to the date of such
incorporation) as of the earlier to occur of the date (i) such Credit and
Security Agreement is terminated or (ii) Party A ceases to be a party thereto;
provided, that (i) all references to "Lenders", the "Agent," and any "Lender"
shall be deemed to mean Party A; (ii) all references to "this Agreement,"
"Agreement," "hereto" and "hereof," any "Note" and the "Notes" shall be deemed
to mean this Agreement; and (iii) the terms "Default" or "Event of Default"
shall be deemed to have the meaning given "Event of Default" herein.
(8) Definitions. The following definition shall appear in Section 12 after the
definition of 'Non-defaulting Party":
"Non-material Affiliate" shall mean any Affiliate whose total net assets
equal zero.
(9) Notices. Section 10(a)(iii) is amended by deleting the words "a
responsible employee" and substituting in its place the words "an authorized
officer."
NATIONAL WESTMINSTER BANK USA ACKERLEY COMMUNICATIONS, INC.
By: /s/ Joram Friedman By: /s/ Denis M. Curley
--------------------------- ---------------------------
Name: Joram Friedman Name: Denis M. Curley
Title: Senior Vice President Title: Senior Vice President/
Treasurer
4
<PAGE>
CONFORMED COPY
PREMISES USE
&
OCCUPANCY
AGREEMENT
between
THE CITY OF SEATTLE
and
SSI SPORTS, INC.
March 2, 1994
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- -----
I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A. "Advertising". . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
B. "Agreement". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
C. "Applicable Taxes" . . . . . . . . . . . . . . . . . . . . . . . . . 2
D. "Approval" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
E. "Basketball and Other Novelties" . . . . . . . . . . . . . . . . . . 3
F. "City" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
G. "Club Seats" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
H. "Coliseum" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
I. "Coliseum Redevelopment Project" . . . . . . . . . . . . . . . . . . 3
J. "Commissioner" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
K. "Courtside Club" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
L. "Current Facility" . . . . . . . . . . . . . . . . . . . . . . . . . 4
M. "Day of Game". . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
N. "Food" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
O. "Function Rooms" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
P. "Home Game". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Q. "NBA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
R. "Parking Garage" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
S. "Practice Facility". . . . . . . . . . . . . . . . . . . . . . . . . 4
T. "Premises" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
U. "Premium Seats". . . . . . . . . . . . . . . . . . . . . . . . . . . 5
V. "Premium Seat Marketing Agreement" . . . . . . . . . . . . . . . . . 5
W. "Project Architect". . . . . . . . . . . . . . . . . . . . . . . . . 5
X. "Seats". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Y. "Seattle Center Director". . . . . . . . . . . . . . . . . . . . . . 5
Z. "South Coliseum Parking Lot" . . . . . . . . . . . . . . . . . . . . 5
AA. "SS1". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
AB. "SS1 Box Office Facility". . . . . . . . . . . . . . . . . . . . . . 5
AC. "SS1 Retail Facility". . . . . . . . . . . . . . . . . . . . . . . . 5
AD. "SS1 Suite". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
AE. "SuperSonics". . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
AF. "Supplemental Parking Spaces". . . . . . . . . . . . . . . . . . . . 6
AG. "Term" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
AH. "Ticket Sales Proceeds". . . . . . . . . . . . . . . . . . . . . . . 6
AI. "Unlimited Use Facilities" . . . . . . . . . . . . . . . . . . . . . 6
AJ. "Use Commencement Date". . . . . . . . . . . . . . . . . . . . . . . 6
II. TERM; USE PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
III. TERMINATION OF CURRENT AGREEMENT PROVIDING
SEATTLE CENTER SPACE FOR SUPERSONICS HOME
GAMES USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
IV. COLISEUM DESIGN AND CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . 7
A. Necessity for Coordination and Communications
Between the Parties. . . . . . . . . . . . . . . . . . . . . . . . . 7
B. SSI Access to Information. . . . . . . . . . . . . . . . . . . . . . 7
1. Designation of "SSI Representative" . . . . . . . . . . . . . . 7
2. City Communication With SSI Representative. . . . . . . . . . . 7
C. Liaison Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 7
D. SSI Review of Design, Plans, Specifications and
<PAGE>
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
E. Change Orders Permitted at Project Manager's
Discretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
F. Emergency Decisions. . . . . . . . . . . . . . . . . . . . . . . . . 9
G. Design Changes Initiated by SSI. . . . . . . . . . . . . . . . . . . 9
H. No Facility Design or Construction Change Without
Mutual Approval. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1. Changes After Execution of Construction
Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2. Changes After Completion of Project . . . . . . . . . . . . . 10
I. Deviations from Approved Design and Report for
Not Approved Design or Construction Elements . . . . . . . . . . . .10
J. Acknowledgement of SSI Involvement and
Approval of Decision-Making. . . . . . . . . . . . . . . . . . . . .10
V. COLISEUM PLANNING & CONSTRUCTION SCHEDULE;
SSI OPPORTUNITIES TO VOID AGREEMENT . . . . . . . . . . . . . . . . . . .11
A. Importance to SSI & City of Timely Coliseum
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
B. Special Conditions for Expedited City
Financing of Coliseum Redevelopment Project. . . . . . . . . . . . .11
1. Third-party Commitments . . . . . . . . . . . . . . . . . . . .11
2. SSI Guarantee . . . . . . . . . . . . . . . . . . . . . . . . .11
3. Combined Third-party Commitments &
SSI Guarantee . . . . . . . . . . . . . . . . . . . . . . . . .12
C. Effect of Extension to SSI of Time to
Market Suites, Club Seats, and Title
Sponsorship on Coliseum Construction
Commencement and Completion Dates. . . . . . . . . . . . . . . . . .12
D. Conditions Allowing SSI Nullification of
This Agreement Prior to July 1, 1994 . . . . . . . . . . . . . . . .12
1. For Failure To Demolish Current Facility. . . . . . . . . . . .13
2. For Failure to Grant Approval Regarding
Practice Facility Design or Specifications. . . . . . . . . . .13
E. Condition Allowing SSI Nullification of
This Agreement Prior to September 1, 1994. . . . . . . . . . . . . .13
F. Damages for Untimely Completion of Project . . . . . . . . . . . . .13
1. Construction Contract Requirements. . . . . . . . . . . . . . .13
2. SSI's Share of City's Damages from
Contractor. . . . . . . . . . . . . . . . . . . . . . . . . . .13
3. SSI's Damages Share Are Additional Rights . . . . . . . . . . .14
VI. SCHEDULING OF HOME GAMES INTO SEATTLE
CENTER COLISEUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
A. City's Reserved Advanced Regular Season. . . . . . . . . . . . . . .14
B. SSI's Selection of Regular Season and
Preseason Game Dates . . . . . . . . . . . . . . . . . . . . . . . .14
1. SSI's Initial Selection of Dates. . . . . . . . . . . . . . . .14
2. SSI's Release of Dates Not Selected by NBA. . . . . . . . . . .15
C. SSI's Selection of Additional Event Dates. . . . . . . . . . . . . .15
D. Playoff Game Date Selection. . . . . . . . . . . . . . . . . . . . .15
E. SSI's Priority for Coliseum Use; SSI Relief
For City's Failure to Make Coliseum Available. . . . . . . . . . . .15
-ii-
<PAGE>
VII. PREMISES LICENSED FOR USE AND OCCUPANCY BY SSI. . . . . . . . . . . . . .16
A. Unlimited Use Facilities . . . . . . . . . . . . . . . . . . . . . .16
B. Basketball Court and Related Areas, and
Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
1. Facilities for Use on Any Day of Game . . . . . . . . . . . . .17
2. Facilities for Use on Other Than a Day of Game. . . . . . . . .17
C. Parking Areas and Spaces . . . . . . . . . . . . . . . . . . . . . .17
1. Day of Game Parking . . . . . . . . . . . . . . . . . . . . . .17
2. Parking on Other Than Day of Game . . . . . . . . . . . . . . .17
D. Ticket Sales Facilities. . . . . . . . . . . . . . . . . . . . . . .17
E. Restrictions on City's Right to Use or
Authorize Use of the Coliseum. . . . . . . . . . . . . . . . . . . .18
F. SSI First Right to Use & Occupy Coliseum for Other
Franchised Professional Sports Activities. . . . . . . . . . . . . .18
G. No Use of Common Areas . . . . . . . . . . . . . . . . . . . . . . .18
VIII. SSI PAYMENTS TO THE CITY. . . . . . . . . . . . . . . . . . . . . . . .19
A. Payments Due . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
1. Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
2. Additional Rent . . . . . . . . . . . . . . . . . . . . . . . .20
3. Service Charges . . . . . . . . . . . . . . . . . . . . . . . .20
B. Delinquencies. . . . . . . . . . . . . . . . . . . . . . . . . . . .23
C. Books and Records; Audit . . . . . . . . . . . . . . . . . . . . . .23
1. SSI's Record-keeping Obligation . . . . . . . . . . . . . . . .23
2. City's Recordkeeping Obligation . . . . . . . . . . . . . . . .24
3. Audits. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
D. Time Limitation on Assertion of Claim for Payment. . . . . . . . . .25
IX. UTILITY, PERSONNEL, AND OTHER SERVICES AND
RESPONSIBILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
A. General Utilities. . . . . . . . . . . . . . . . . . . . . . . . . .25
1. City Responsibilities . . . . . . . . . . . . . . . . . . . . .25
2. SSI Responsibilities. . . . . . . . . . . . . . . . . . . . . .26
B. First Aid Facility . . . . . . . . . . . . . . . . . . . . . . . . .26
C. Public Address Facilities. . . . . . . . . . . . . . . . . . . . . .26
D. Scoreboard and Time Clock Facilities . . . . . . . . . . . . . . . .26
1. Provision and Installation of Equipment . . . . . . . . . . . .26
2. Set-up Responsibilities . . . . . . . . . . . . . . . . . . . .27
3. Equipment Use . . . . . . . . . . . . . . . . . . . . . . . . .27
E. Personnel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
1. City-provided personnel . . . . . . . . . . . . . . . . . . . .27
2. Time for Commencement of Work . . . . . . . . . . . . . . . . .28
3. SSI's Required Personnel. . . . . . . . . . . . . . . . . . . .28
4. Seattle Police Department Personnel . . . . . . . . . . . . . .29
5. Joint Development of Personnel Performance
Standards . . . . . . . . . . . . . . . . . . . . . . . . . . .29
X. MAINTENANCE AND CARE RESPONSIBILITIES . . . . . . . . . . . . . . . . . .29
A. General City Responsibilities. . . . . . . . . . . . . . . . . . . .29
B. City Obligation to Annually Reserve Funds
for Repairs. . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
C. City Obligation to Perform General Renovation
of Coliseum in 2003. . . . . . . . . . . . . . . . . . . . . . . . .29
D. SSI Remedy for City's Failure to Perform
-iii-
<PAGE>
Maintenance or Repairs . . . . . . . . . . . . . . . . . . . . . . .30
E. SSI's Repair, Maintenance and Care Responsibilities. . . . . . . . .30
F. SSI Maintenance and Repair of SSI-Provided or
-Installed Equipment . . . . . . . . . . . . . . . . . . . . . . . .31
G. City Remedy for SSI's Failure to Perform
Maintenance or Repairs . . . . . . . . . . . . . . . . . . . . . . .31
H. SSI Assistance with City Recycling Efforts . . . . . . . . . . . . .31
XI. CITY'S SUPERVISION AND CONTROL OF SEATTLE
CENTER BUILDINGS AND GROUNDS AND ACTIVITIES . . . . . . . . . . . . . . .31
A. General City Rights. . . . . . . . . . . . . . . . . . . . . . . . .31
1. Appearance, Size & Location of Seattle
Center. . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
2. Traffic Regulation. . . . . . . . . . . . . . . . . . . . . . .31
3. Admission Charges . . . . . . . . . . . . . . . . . . . . . . .32
4. Rules & Regulation Promulgation . . . . . . . . . . . . . . . .32
5. Days & Hours For Operations . . . . . . . . . . . . . . . . . .32
6. Size, Number, Type & Identity of Concession
Operations. . . . . . . . . . . . . . . . . . . . . . . . . . .32
B. SSI Principal User . . . . . . . . . . . . . . . . . . . . . . . . .32
C. Supervision and Control of Coliseum. . . . . . . . . . . . . . . . .32
XII. SSI EXCLUSIVE RIGHTS REGARDING THE SALE OF FOOD,
BASKETBALL AND OTHER NOVELTIES, ADVERTISING, VIDEO
PRODUCTION AND BROADCAST RIGHTS . . . . . . . . . . . . . . . . . . . . .32
A. Exclusive Food Sales & Service Right . . . . . . . . . . . . . . . .32
B. Exclusive Novelties Concession Sales and
Rental Right . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
C. Exclusive Advertising Display Service Right. . . . . . . . . . . . .33
1. Advertising Display's Focus . . . . . . . . . . . . . . . . . .33
2. Advertisers' Obligation to Respect Family
Orientation of Seattle Center . . . . . . . . . . . . . . . . .33
3. Prohibition Against Any Advertising
Display for a Tobacco Product or Certain
Alcoholic Beverages . . . . . . . . . . . . . . . . . . . . . .34
4. Advertising Display Opportunities Available
for Hockey Franchise Acting as "Host Team"
in Coliseum . . . . . . . . . . . . . . . . . . . . . . . . . .34
5. City's Right to Temporarily Interrupt,
Without Compensation to SSI, Certain
Advertising Displays Due to Conflict with
Theatrical Performance or User's Policies
or Religious Tenet. . . . . . . . . . . . . . . . . . . . . . .34
6. City's Right to Temporarily Interrupt
Advertising Displays Upon Payment of
Compensation to SSI . . . . . . . . . . . . . . . . . . . . . .35
7. City's Right to Allow Temporary Advertising
Displays. . . . . . . . . . . . . . . . . . . . . . . . . . . .35
8. City Notice to SSI of Need for Advertising
Display Interruption; SSI's Implementation
of City Notice. . . . . . . . . . . . . . . . . . . . . . . . .35
9. City's Right to Scoreboard Message Center
Announcements at Home Game. . . . . . . . . . . . . . . . . . .36
10. Advertising Displays Constitute Improvements;
-iv-
<PAGE>
Standards for Construction and Attractiveness . . . . . . . . .36
11. Title Sponsorship Identification. . . . . . . . . . . . . . . .36
XIII. EXCLUSIVE VIDEO PRODUCTION, BROADCAST &
CABLECAST TRANSMISSION RIGHTS . . . . . . . . . . . . . . . . . . . . .37
XIV. TICKET ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . .37
A. SSI Responsibilities . . . . . . . . . . . . . . . . . . . . . . . .37
B. Complimentary Tickets. . . . . . . . . . . . . . . . . . . . . . . .37
XV. INDEMNIFICATION; INSURANCE. . . . . . . . . . . . . . . . . . . . . . . .37
A. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . .37
1. SSI to Indemnify City . . . . . . . . . . . . . . . . . . . . .37
2. City to Indemnify SSI . . . . . . . . . . . . . . . . . . . . .38
3. Indemnification Regarding Any Alteration,
Addition, or Improvement. . . . . . . . . . . . . . . . . . . .38
B. SSI's Liability Insurance. . . . . . . . . . . . . . . . . . . . . .38
1. Liability Limits. . . . . . . . . . . . . . . . . . . . . . . .38
2. Coverage. . . . . . . . . . . . . . . . . . . . . . . . . . . .39
3. Authorized Carriers . . . . . . . . . . . . . . . . . . . . . .39
4. Naming of City as Additional Insured. . . . . . . . . . . . . .39
C. Evidence of Insurance. . . . . . . . . . . . . . . . . . . . . . . .40
D. Assumption of Risk . . . . . . . . . . . . . . . . . . . . . . . . .40
E. Adjustments of Claims. . . . . . . . . . . . . . . . . . . . . . . .40
F. Remedies upon Failure to Insure. . . . . . . . . . . . . . . . . . .40
G. Mutual Release and Waiver. . . . . . . . . . . . . . . . . . . . . .41
XVI. COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . . . . . . . .41
A. Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
B. Nondiscrimination in Employment. . . . . . . . . . . . . . . . . . .41
C. Women's and Minority Business Enterprise
Utilization. . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
1. Incorporation of Seattle Municipal Code
Ch. 20.46 . . . . . . . . . . . . . . . . . . . . . . . . . . .42
2. SSI's WMBE Obligations. . . . . . . . . . . . . . . . . . . . .42
3. Noncompliance with SMC Ch. 20.46
Constitutes Material Breach . . . . . . . . . . . . . . . . . .43
D. Attendance and Safety Standards. . . . . . . . . . . . . . . . . . .43
E. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
F. Environmental Standards. . . . . . . . . . . . . . . . . . . . . . .43
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . .43
2. City Representations & Warranties . . . . . . . . . . . . . . .44
3. SSI's General Obligations . . . . . . . . . . . . . . . . . . .44
4. SSI's Obligations Upon Violation of
Conditions; City's Rights Upon SSI Violation. . . . . . . . . .44
5. Environmental Inspections & Testing . . . . . . . . . . . . . .45
6. SSI's Removal of Hazardous Substances . . . . . . . . . . . . .45
7. SSI's Reimbursement of City Costs . . . . . . . . . . . . . . .45
8. Indemnification . . . . . . . . . . . . . . . . . . . . . . . .45
XVII. CITY'S ACCESS TO PREMISES; INSPECTION, REPAIR,
AND IMPROVEMENT OF PREMISES. . . . . . . . . . . . . . . . . . . . . . .46
A. Access to Premises . . . . . . . . . . . . . . . . . . . . . . . . .46
B. Permitted Interference With Either Party's
-v-
<PAGE>
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
C. Retention and Use of Keys to Premises. . . . . . . . . . . . . . . .46
XVIII. NO NUISANCES OR OBJECTIONABLE ACTIVITY. . . . . . . . . . . . . . . . .47
XIX. SUBCONTRACTING AND TRANSFER OF OWNERSHIP. . . . . . . . . . . . . . . . .47
A. Subcontracting . . . . . . . . . . . . . . . . . . . . . . . . . . .47
B. Transfer Of Ownership Interest . . . . . . . . . . . . . . . . . . .47
1. SSI's Delivery of Instrument of
Assumption and Agreement. . . . . . . . . . . . . . . . . . . .47
2. Release of SSI Upon Total Assumption
of SSI's Obligations by Other Party . . . . . . . . . . . . . .47
3. Joint & Several Liability of SSI and
Other Party Where SSI's Obligations
Are Not Totally Assumed . . . . . . . . . . . . . . . . . . . .47
XX. RELATIONSHIP WITH NBA . . . . . . . . . . . . . . . . . . . . . . . . . .48
A. Warranty and Special Covenant. . . . . . . . . . . . . . . . . . . .48
1. SSI's Ownership of Valid NBA Franchise. . . . . . . . . . . . .48
2. No NBA Prohibition or Limitation on
SSI's Ability to Execute or Carry Out
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .48
3. NBA Commissioner Has Approved Agreement . . . . . . . . . . . .48
B. SSI Subject to NBA Rules and Regulations . . . . . . . . . . . . . .48
XXI. IMPROVEMENTS, ADDITIONS, AND ALTERATIONS. . . . . . . . . . . . . . . . .48
A. Prior Approval of Plans and Specifications
Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
B. No Representation or Liability Created by
Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
C. Work Inconsistent with Approved Plans and
Specifications . . . . . . . . . . . . . . . . . . . . . . . . . . .49
D. Extra Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . .49
E. Improvements, Additions, and Alterations
Become City Property . . . . . . . . . . . . . . . . . . . . . . . .49
F. Improvements, Additions & Alterations At
SSI Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
G. Construction Bond. . . . . . . . . . . . . . . . . . . . . . . . . .50
H. Construction Liability Insurance . . . . . . . . . . . . . . . . . .50
I. Delivery of "As-Built" Drawings. . . . . . . . . . . . . . . . . . .50
J. Testing of Premises. . . . . . . . . . . . . . . . . . . . . . . . .51
XXII. DAMAGE AND DESTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . .51
A. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
B. City Notice of Intentions Regarding
Rebuilding of Coliseum . . . . . . . . . . . . . . . . . . . . . . .51
1. Circumstances Under Which City
Obligated to Repair & Restore Coliseum
After Occurrence. . . . . . . . . . . . . . . . . . . . . . . .51
2. City Notice of Intent to Restore &
Repair Coliseum After Occurrence. . . . . . . . . . . . . . . .52
C. SSI Remedies During City Repair and
Restoration of Coliseum. . . . . . . . . . . . . . . . . . . . . . .52
D. No Liability for Termination . . . . . . . . . . . . . . . . . . . .53
-vi-
<PAGE>
XXIII. SUSPENSION OF OBLIGATIONS (FORCE MAJEURE) . . . . . . . . . . . . . . .53
XXIV. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
XXV. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
A. Disputes To Be Resolved Through Arbitration. . . . . . . . . . . . .54
B. Limitations on Arbitration Scope . . . . . . . . . . . . . . . . . .54
C. Notice of Demand for Arbitration . . . . . . . . . . . . . . . . . .55
D. Limitation on Judicial Relief. . . . . . . . . . . . . . . . . . . .55
XXVI. DEFAULT AND REMEDIES THEREFOR. . . . . . . . . . . . . . . . . . . . . .55
A. Act of Default and Breach by the Parties . . . . . . . . . . . . . .55
1. SSI's Failure to Insure . . . . . . . . . . . . . . . . . . . .55
2. SSI's Abandonment of Premises . . . . . . . . . . . . . . . . .55
3. SSI's Nonremittance of Amounts Due City . . . . . . . . . . . .55
4. City's Failure to Maintain Premises . . . . . . . . . . . . . .55
5. Violation of Other Provisions of Agreement. . . . . . . . . . .55
B. Notice to Cure . . . . . . . . . . . . . . . . . . . . . . . . . . .56
C. Rights Upon Default and Breach . . . . . . . . . . . . . . . . . . .56
1. City Rights Upon SSI Default & Breach . . . . . . . . . . . . .56
2. SSI Rights Upon City Default & Breach . . . . . . . . . . . . .56
D. Termination by Court Decree. . . . . . . . . . . . . . . . . . . . .56
XXVII. SURRENDER OF PREMISES; HOLDING OVER . . . . . . . . . . . . . . . . . .57
A. Surrender and Delivery . . . . . . . . . . . . . . . . . . . . . . .57
B. Removal of SSI's Property. . . . . . . . . . . . . . . . . . . . . .57
C. Storage of SSI's Property. . . . . . . . . . . . . . . . . . . . . .57
D. Holdover Use and Occupancy of Premises . . . . . . . . . . . . . . .57
E. No Claims for Removal. . . . . . . . . . . . . . . . . . . . . . . .57
XXVII. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . .58
A. City Warranty of Title and Authority . . . . . . . . . . . . . . . .58
B. Use of Language. . . . . . . . . . . . . . . . . . . . . . . . . . .58
C. Caption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
D. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
E. Time of Essence. . . . . . . . . . . . . . . . . . . . . . . . . . .58
F. Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . .58
G. No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
H. Limited Effect of Approval by
Seattle Center Director. . . . . . . . . . . . . . . . . . . . . . .59
I. No Relationship. . . . . . . . . . . . . . . . . . . . . . . . . . .59
J. Powers of the City . . . . . . . . . . . . . . . . . . . . . . . . .59
K. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . .59
L. Enforcement of this Agreement. . . . . . . . . . . . . . . . . . . .59
M. Invalidity of Particular Provisions. . . . . . . . . . . . . . . . .59
N. Costs of Suit and Attorneys' Fees. . . . . . . . . . . . . . . . . .59
O. Applicable Law; Venue. . . . . . . . . . . . . . . . . . . . . . . .59
P. Previous Agreements Superseded . . . . . . . . . . . . . . . . . . .59
Q. Construction of Agreement. . . . . . . . . . . . . . . . . . . . . .60
R. Incorporation of Exhibits; Entire Agreement. . . . . . . . . . . . .60
-vii-
<PAGE>
PREMISES USE & OCCUPANCY AGREEMENT
THIS AGREEMENT is entered into by and between THE CITY OF SEATTLE
(hereinafter "the City"), a municipal corporation of the State of Washington,
and SSI SPORTS, INC. (hereinafter "SSI"), a corporation organized and existing
under the laws of the State of Washington.
RECITALS
WHEREAS, SSI is the owner and operator of the "SuperSonics" as defined
herein; and
WHEREAS, the City is the owner and operator of the Current Facility; and
WHEREAS, the Current Facility is a thirty year old structure that can no
longer provide the SuperSonics with a playing venue that is either structurally
or economically comparable to the sites in which other NBA teams play; and
WHEREAS, it is not economically feasible for the SuperSonics to continue
playing professional basketball games in the Current Facility after the end of
the 1993-94 NBA championship playoffs; and
WHEREAS, the City desires to construct a new, state of the art professional
basketball playing facility in order to enhance the City but cannot do so
without a long-term, principal user; and
WHEREAS, in order to induce SSI to become the principal user of a new
playing facility on a long-term basis in lieu of having the SuperSonics play in
an alternative venue, and to maintain the SuperSonics NBA franchise in Seattle,
the City will construct a new Seattle Center Coliseum to replace the Current
Facility; and
WHEREAS, the City and SSI desire to enter into an agreement specifying the
terms and conditions under which SSI will use a new Seattle Center Coliseum and
certain other facilities at Seattle Center on a long-term basis for the playing
of professional basketball by the SuperSonics; and
WHEREAS, the City and SSI intend to refine their new Seattle Center
Coliseum use and occupancy agreement by continuing, after the execution of this
Agreement, to negotiate and reach agreement regarding the terms and conditions
under which SSI shall conduct and engage in, directly or indirectly through one
or more third parties with which SSI may subcontract to engage in and conduct
food and beverage concession sales and novelties concession sales in and from
such new Coliseum, which agreements shall become the Food and Beverage Service
Agreement and Novelties Concession
-1-
<PAGE>
Agreement the parties have intended to attach and incorporate into this
Agreement as Exhibits "H" and "I," respectively; and
WHEREAS, the City and SSI intend to further refine their new Seattle Center
Coliseum use and occupancy agreement by also continuing, after the execution of
this Agreement, to negotiate and possibly reach agreement regarding the terms
and conditions under which SSI may be permitted to conduct and engage in,
directly or indirectly through one or more third parties with which SSI may
subcontract to conduct and engage in, the operation of a full-service restaurant
in and from a proposed SSI restaurant facility on that portion of Lots 7 and 8,
Block 31, D. T. Denny's Plan of North Seattle (or "North Seattle Addition"), as
recorded in Vol. 2 of Plats, Page 77, Records of King County, Washington, that
is currently occupied by the West half of the structure commonly known as the
"NASA Building" located on such site, together with such structure and any other
building that SSI, with the Approval of the Seattle Center Director,
subsequently erects on such site for the operation of such sit-down service
restaurant;
NOW, THEREFORE,
IN CONSIDERATION of the mutual promises, covenants, agreements, and
performances described herein, the parties hereto agree as follows:
I. DEFINITIONS
All words in this Agreement bearing initial capitals, other than
proper nouns, section headings or words required to be capitalized for proper
usage, are defined terms and shall have the meanings specifically assigned to
them in this section.
As used in this Agreement, the following terms and words are
hereby defined as follows:
A. "Advertising" means any printed or verbal announcement or display
of any kind intended to promote, directly or indirectly, the sale or rental of a
service, an admission ticket to an event, an interest in a product, commodity or
other form of property, or the expression of any other commercial or
noncommercial message other than directional, health or safety messages.
B. "Agreement" means this Agreement, as from time to time amended in
accordance with the terms hereof, including the license to use the Coliseum for
Home Games.
C. "Applicable Taxes" means all taxes and governmentally imposed
assessments upon the charging of a fee for admission to any Home Game or upon
the exercise of any right granted by this Agreement.
-2-
<PAGE>
D. "Approval" means the prior written consent of a party hereto or a
designated representative thereof.
E. "Basketball and Other Novelties" means any general merchandise,
goods, wares, and publications including without limitation those bearing the
symbol, mark or name of the NBA, the SuperSonics, or any other NBA team, as well
as all other general merchandise or items without limitation, except Food,
offered for sale in the Coliseum at Home Games.
F. "City" means The City of Seattle.
G. "Club Seats" means the no more than 1,100 Seats within the
Coliseum, that are reserved on any Day of Game for holders of "Club" admission
tickets, as marked on the attached Exhibit "A" or as revised by SSI by a notice
to the Seattle Center Director transmitting a revised exhibit.
H. "Coliseum" means the enclosed sports facility with not less than
17,200 seats to be located on the following property, as more fully depicted on
Exhibit "B":
As Recorded In Records of
Block(s) Plat King County, Washington
31 Supplemental Plat of Vol. 3 of Plats, Page 80
D.T. Denny's Plan of
N. Seattle, EXCEPT the
West 93.06 feet of
Lots 9 & 10 thereof.
32 & 35 D.T. Denny's Home Vol. 3 of Plats, Page 115
Addition to Seattle
36 D.T. Denny's Third Vol. 1 of Plats, Page 145
Addition to Seattle
and renovated as contemplated by the parties herein, together with all
equipment, fixtures, and other appurtenances incorporated therein pursuant to
this Agreement.
I. "Coliseum Redevelopment Project" means all work of any kind or
nature associated with the demolition of the Current Facility; the construction
of those portions of the Coliseum that are to be completed by the City pursuant
to this Agreement, rather than by SSI or any of its subcontractors,
concessionaires, or any other entity; and the City's modification, in any
respect, of any other City property that is required in connection with any such
work, including but not limited to City utility lines serving the Coliseum, the
SSI Retail Facility, and Practice Facility.
J. "Commissioner" means the party designated by the NBA as the
principal officer of the NBA.
-3-
<PAGE>
K. "Courtside Club" means approximately 500 seats within the
"Courtside Club Area" of the Coliseum designated on the attached Exhibit "A"
that are reserved on any Day of Game for holders of "Courtside" admission
tickets.
L. "Current Facility" means the structure that the SuperSonics
currently use for the playing of professional basketball games in Seattle,
Washington.
M. "Day of Game" means the portion of the calendar day on which a
Home Game is scheduled to be played in the Coliseum commencing at 9:00 AM and
ending at 12:00 midnight of that day, unless otherwise specifically provided in
this Agreement.
N. "Food" means any item of food or drink, without limitation except
for water made available from public drinking fountains or sinks, that is sold,
given without charge, or in any other manner dispensed in or from the Coliseum.
O. "Function Rooms" means and includes the Guest Lounge together
with its adjacent restroom, coat closet and vestibule, and the areas on the
Lower Concourse Level of the Coliseum designated as "shell space" on the
attached Exhibit "C".
P. "Home Game" means l) any pre-season, regular season, conference
playoff, or championship playoff professional basketball game played pursuant to
a schedule established by the NBA in which the host team is the SuperSonics
except for up to four (4) of such games that the NBA determines shall not be
played in Seattle, such as a demonstration game scheduled by the NBA to be
played in a city without an NBA franchise or in a foreign country, and 2) five
additional events for which no admission is charged, or where an admission
charge (less Applicable Taxes) is donated to a nonprofit charitable
organization.
Q. "NBA" means the National Basketball Association and its
successors, assigns or designees or the professional basketball league or
organization of which SSI is a member.
R. "Parking Garage" means a multi-deck parking facility at Warren
Avenue and Thomas Street having the maximum number of parking spaces allowable
under applicable law, ordinance and regulation, a portion of which facility is
made available for use and occupancy by SSI as provided in Subsection VII. C of
this Agreement.
S. "Practice Facility" means the site depicted on the attached
Exhibit "D" and made available to SSI pursuant to the Ground Lease Agreement
attached hereto as Exhibit "E," providing for the construction and use of a
building thereon for the practicing of basketball and the installation or
erection of signage as allowed by law.
-4-
<PAGE>
T. "Premises" means the areas identified in Subsections VII.A-D,
hereof, and made available to SSI for use and occupancy pursuant to this
Agreement.
U. "Premium Seats" means those seats located in areas designated as
Suites, the Courtside Club, and Club Seat areas of the Coliseum.
V. Premium Seat Marketing Agreement" means the March 22, 1993
"Premium Seat Tickets, Title Sponsorship and Marquee Changeable Copy Sign
Marketing Agreement" executed by the parties, as amended.
W. "Project Architect" means NBBJ, the professional architectural
firm of that name in Seattle, Washington, or such other architect(s) or
architectural firm(s) as may be designated by the Seattle Center Director as the
principal architect for work on the Coliseum Redevelopment Project.
X. "Seats" means any seats in the Coliseum from which professional
basketball events may be viewed.
Y. "Seattle Center Director" means the Director of the City's
Seattle Center Department or such official's designee.
Z. "South Coliseum Parking Lot" means the passenger vehicle parking
stalls on the south side of the Coliseum in the area depicted on the attached
Exhibit "B."
AA. "SSI" means SSI Sports, Inc., the corporation owning and
operating the Seattle NBA franchise, and its successor(s), assigns, or
designees.
AB. "SSI Box Office Facility" means the office space (if any) on the
west side of the Coliseum that has been designed for ticket sales administration
purposes and one ticket booth immediately contiguous to such office space.
AC. "SSI Retail Facility" means the approximately 5,000 square feet
of street-level space plus such additional basement space as shall be designated
by the Seattle Center Director in the West Court Building located on the West
93.06 feet of Lots 9 and 10, and the South 45.08 feet of the West 93.06 feet of
Lot 11, Block 31, D. T. Denny's Plan of North Seattle (or "North Seattle
Addition"), as recorded in Vol. 2 of Plats, Page 77, Records of King County,
Washington, as depicted on the attached Exhibit "F" made available to SSI
hereunder for the development of a retail sales business.
AD. "SSI Suite" means the center court luxury suite in the Coliseum
that is directly opposite the basketball scorers' table location.
-5-
<PAGE>
AE. "SuperSonics" means the NBA professional basketball team owned
and operated by SSI, and its successors, transferees or assignees.
AF. "Supplemental Parking Spaces" means the number of parking spaces
outside the Parking Garage that are necessary to park the vehicles of Courtside
Club ticket holders, Club Seat ticket holders, members of the press, SuperSonics
sponsors, and SuperSonics employees for any Home Game that cannot be
accommodated in the Parking Garage, which spaces shall include spaces in Seattle
Center's "Lot 4" and any parking lot developed at the site of the High School
Memorial Stadium on property owned, leased, or otherwise under the control of
the City.
AG. "Term" means the Term of this Agreement as set forth in Article
11.
AH. "Ticket Sales Proceeds" means the gross revenue derived from the
sale of tickets for a Home Game plus the value of all "complimentary" tickets
provided or exchanged for any goods or service less applicable admission taxes.
AI. "Unlimited Use Facilities" means the SSI Retail Facility, SSI Box
Office Facility, the Practice Facility, and the following areas in the Coliseum:
the approximately 6,000 square feet of space designated as the Home Team
Dressing Room, the Training Room, SSI storage facilities, and SSI Suite, as
depicted on the attached Exhibit "G-1."
AJ. "Use Commencement Date" means the date when SSI may legally
commence its use, enjoyment, and occupancy of the Coliseum as documented by the
City's issuance of a Certificate of Occupancy for the Coliseum.
II. TERM; USE PERIOD
The Term of this Agreement shall commence on the date it is executed
by an authorized representative of each of the parties hereto. SSI's use and
occupancy rights to the Premises shall commence on the Use Commencement Date.
SSI's use and occupancy rights with respect to the Premises and the Term of this
Agreement shall end on September 30, 2010, unless terminated earlier pursuant to
the provisions hereof.
Subject to the provisions of this Agreement, SSI shall schedule and
ensure that the SuperSonics play all Home Games other than pre-season games
exclusively in the Coliseum after the Use Commencement Date.
-6-
<PAGE>
III. TERMINATION OF CURRENT AGREEMENT PROVIDING SEATTLE
CENTER SPACE FOR SUPERSONICS HOME GAMES USE
Notwithstanding anything to the contrary in the agreement executed on
or about July 19, 1983, between the City and SSI's predecessor in interest, the
Seattle SuperSonics Corporation, regarding use of the Current Facility, and the
seven amendments to that agreement, such agreement shall terminate as of August
1, 1994, and SSI and the City shall have no further obligations to each other
under that amended agreement except as to any unresolved liabilities that may
have arisen during the period that agreement was in effect, including but not
limited to, any sums due and owing to the City as a consequence of SSI's use of
the Current Facility during the SuperSonics' 1993-94 season including conference
and championship games and the provision of City services in connection with
such use. This Article shall supersede any other provision of this Agreement to
the contrary and shall be applicable in the event this Agreement becomes null
and void or unenforceable for any reason.
IV. COLISEUM DESIGN AND CONSTRUCTION
A. Necessity for Coordination and Communications Between the
Parties. The City and SSI acknowledge and agree that the development and
preparation of documents required for the City's Invitation To Bid on the
Coliseum Redevelopment Project and for the issuance of permits relating to such
work, are all complex and time-consuming tasks requiring close cooperation by
SSI. Such cooperation requires, in particular, the City communicating to SSI
any request for a decision by SSI in a timely manner that will permit SSI
reasonable opportunity to respond, as set forth herein, and SSI's communicating
to the City and the Project Architect, SSI's final decisions about aspects of
such City work that are desired, needed, and required by SSI, including but not
limited to comments and Approvals with respect to detailed plans and
specifications for such work.
B. SSI Access to Information.
1. Designation of "SSI Representative": SSI shall designate a
single individual (the "SSI Representative") who shall be responsible for SSI
involvement with, and SSI's responses and Approval regarding the design and
construction of the Coliseum Redevelopment Project. SSI may change the SSI
Representative upon written notice to the City.
2. City Communication With SSI Representative: The City shall
direct all requests for SSI action and Approval regarding Coliseum Redevelopment
Project design and construction issues to the SSI Representative and cause the
SSI Representative to receive a copy of all architectural and design plans and
specifications for all construction elements and materials of the Coliseum
Redevelopment Project that are received by the Seattle Center Director.
-7-
<PAGE>
C. Liaison Meetings. After consultation with the SSI Representative
and the Director, the Project Manager shall schedule Coliseum Redevelopment
Project liaison meetings to be held not less frequently than bi-weekly, for
discussions between the Project Manager, the SSI Representative and, as required
depending on the state of the Coliseum Redevelopment Project, the Project
Architect and/or the Construction Manager (if any). Upon the Project Manager's
receipt of a request by SSI, or at such additional times as the Project Manager
deems necessary, the Project Manager shall invite and schedule, as desired, the
Project Architect, Construction Contractor's representative(s) and Coliseum
Redevelopment Project consultant(s) to attend any such meeting(s) to facilitate
continuing discussions and information gathering by the parties hereto regarding
the Coliseum Redevelopment Project. A party may also invite to any such meeting
any other person but the expense (if any) of such other person's attendance and
participation shall not constitute an expense of the Coliseum Redevelopment
Project unless the same is authorized by the Project Manager. The SSI
Representative's receipt of notice of, or participation in, any such meeting
shall not constitute, by itself, SSI Approval of any matter discussed during
such meeting.
D. SSI Review of Design, Plans, Specifications and Construction.
The Project Manager shall ensure that the SSI Representative is provided the
opportunity to become actively involved and to serve as an equal participant
with the City in on-going decision-making with respect to the design and
construction of the Coliseum Redevelopment Project, whether such decision-making
occurs during the Design phase or the construction phase of the Project. In
this connection, and in recognition that the Coliseum Redevelopment Project is
being designed and built primarily for SSI's use and must meet SSI's needs, the
Project Manager shall ensure that in the bi-weekly liaison meetings and
otherwise, as necessary, until completion of construction, the SSI
Representative is provided a reasonable opportunity to review and comment on all
design features of the Coliseum Redevelopment Project affecting the playing or
viewing of professional basketball or such rights or obligations as SSI may have
pursuant to this Agreement, including but not limited to specific Coliseum
designs, plans, and specifications and changes thereto, including both
functional or aesthetic components, as well as on the status of construction
progress. Any question regarding whether or not a design, plan or specification
change or a construction related matter requires review and participation by the
SSI Representative shall be resolved in favor of its being significant and
warranting the involvement of the SSI Representative in decision-making with
respect thereto. The SSI Representative shall review and provide comment, as
contemplated in this subsection in an expeditious and reasonable manner;
provided, that in the event the SSI Representative's review of, and comment on,
any particular design, plan, or specification element or any proposed change
thereto is required on or by a particular date and time, the Project Manager
shall
-8-
<PAGE>
provide reasonable advance notice to the SSI Representative of such need and
identify the specific date by when such review and comment must be completed and
provided. If, in the exercise of his or her reasonable discretion under the
circumstances, the Project Manager determines that the SSI Representative's
response is required so quickly that there is insufficient time to allow for
written notice of the need for such SSI Representative's review and comment by
the critical date, such notice may be given orally, but shall then be
immediately confirmed in writing by the Project Manger. In the event that no
comment is received by the Project Manager on or by the specific date for
response, from or on the behalf of the SSI Representative, and provided
reasonable advance notice has been provided to the SSI Representative as
contemplated herein, then SSI shall be deemed to have waived its opportunity to
review and comment on the particular matter(s) made available to it for review
and comment, and the City may proceed as if the SSI Representative had reviewed
and commented consistent with the Project Manager's decision with respect to the
reviewable matter(s).
E. Change Orders Permitted at Project Manager's Discretion. In
circumstances where immediate response by the SSI Representative is not
feasible, the Project Manager may approve the changes without SSI Approval.
Such discretion pertains to changes which will not result in significant
functional change to the Coliseum Redevelopment Project or its component parts
or have an adverse structural effect on the Coliseum Redevelopment Project or in
any manner substantially and negatively affect the rights or obligations of SSI
under this Agreement.
F. Emergency Decisions. The Project Manager may make decisions
without the SSI Representative's Approval in emergency situations where (i) the
Project Manager reasonably believes that destruction of property or injury to
any person is likely to occur in the absence of such decision-making; (ii) there
is no time to consult with the SSI Representative prior to the making of the
decision by the Project Manager; and (iii) the Project Manager's actions in such
circumstances are reasonable and are limited to dealing with the emergency
circumstances. After making any such decision, the Project Manager shall
immediately notify the SSI Representative of the nature of the emergency
circumstances and his or her decision with respect to such circumstances.
G. Design Changes Initiated by SSI. SSI shall have an unrestricted
and unlimited right to propose changes in the design or construction change
request initiated by or on the behalf of SSI or the City with respect to the
Coliseum Redevelopment Project contemplated herein or any aspect thereof.
Implementation of such changes shall require the City's prior Approval, which
Approval shall not be unreasonably withheld or delayed. A design change
proposed by SSI shall be deemed reasonable unless it results in a cost increase
for which SSI does not assume full responsibility; is structurally,
-9-
<PAGE>
mechanically or electrically unsafe or unsound; is aesthetically incompatible
with other structures at the Seattle Center as determined by the Seattle Center
Director; would adversely impact in a substantial manner the City's operations
of the Coliseum or any other facility of the Seattle Center or the rights and
interests of any other user or potential user of a Seattle Center facility other
than the Coliseum; or is inconsistent with the Seattle Municipal Code, the
Revised Code of Washington, or Federal law, or any rule or regulation
implementing any such legislation.
H. No Facility Design or Construction Change Without Mutual
Approval.
1. Changes After Execution of Construction Contract: After
execution of the Construction Contract, no design or construction change request
initiated by or on the behalf of SSI or the City that would materially and
adversely affect the playing, exhibition, or viewing of a Home Game or the
exercise of any other right granted to SSI hereunder shall be implemented
without the prior Approval of the SSI Representative and the Project Manager
(and such other official(s) of the City as may be required by law, City Charter,
ordinance, rule, regulation or policy), except to the extent expressly permitted
to the Project Manager pursuant to the other provisions of this Article IV.
2. Changes After Completion of Project: After the completion
of the Coliseum Redevelopment Project, no change in the Coliseum that would
materially and adversely affect the playing, exhibition, or viewing of a Home
Game or the exercise of any other right granted to SSI hereunder shall be
implemented by either party without the prior Approval of SSI and the Seattle
Center Director (and such other official(s) of the City as may be required by
law, City Charter, ordinance, rule, regulation or policy).
I. Deviations from Approved Design and Report for Not Approved
Design or Construction Elements. In the event the City knows that the design or
construction of any component of the Coliseum Redevelopment Project included in
any portion of the Premises specified in Subsections VII.A-D, hereof, deviates
from the design that has received SSI Approval, the Project Manager shall give
immediate notice of such fact to SSI. If such deviation would materially and
adversely affect the playing or viewing of NBA basketball in the Coliseum or
adversely affect any right or obligation of SSI under this Agreement, then SSI
may give the Seattle Center Director notice of SSI's desire to have such
deviation remedied. Upon receipt of such notice, the Seattle Center Director
shall require the Project Architect and/or construction contractor, as
applicable, to correct the deviation or otherwise reasonably satisfy SSI's
objections to the same. In the event the City, upon learning of such a
deviation, fails to give SSI the notice required above, or if the City fails
-10-
<PAGE>
to take such action as is reasonably necessary under the circumstances to
require correction of such deviation as provided above, then the City shall be
responsible for costs later incurred during the course of construction to cure
the deviation.
J. Acknowledgement of SSI Involvement and Approval of Decision
Making: SSI and the City acknowledge that through the date of this Agreement,
they have been mutually consulted in connection with all phases of the design
process, that they have been equal participants in all significant decisions
regarding the redevelopment of the Coliseum, that they have received in a timely
manner all architectural and design plans, specifications, and correspondence
relating to the redevelopment of the Coliseum, and that no significant decision
affecting the Coliseum's functional operation, safety, or aesthetics that has
heretofore been disclosed to SSI or the City by the other, by the Project
Architect, or which they otherwise were aware, has been made without their
respective participation and agreement. Except as to the design aspects of the
portions of the Coliseum to be provided to SSI pursuant to the Food and Beverage
Service Agreement and Novelties Concession Agreement, SSI and the City hereby
waive, release and forever discharge the other party and their respective
officers, agents, and employees from any and all claims for reimbursement,
demands, damages, suits, and causes of action of any kind or nature whatsoever
arising out of or related in any respect to any act or omission by the City or
SSI, or any such act or omission of any of their officers, agents, or employees
with respect to the Coliseum's design. Nothing contained herein shall be deemed
a release by SSI or the City against any third party.
V. COLISEUM PLANNING & CONSTRUCTION SCHEDULE; SSI OPPORTUNITIES TO VOID
AGREEMENT
A. Importance to SSI & City of Timely Coliseum Construction: The
City and SSI agree that construction of the Coliseum will cause a severe
economic hardship of revenue and dislocation to SSI and the City, and that time
is of the essence in the completion of the Coliseum so that it will be available
to SSI and the City on the Use Commencement Date. In addition, the City and SSI
agree that use of the Premises by SSI and the City requires months of advance
preparation by SSI and the City, and that delays in the financing or
construction of the Coliseum making it unavailable to SSI or the City on or by
the later of October l, 1995, or the Use Commencement Date will severely damage
SSI and the City.
B. Special Conditions for Expedited City Financing of Coliseum
Redevelopment Project: In order to enable the City to sell bonds for the
financing of the Coliseum Redevelopment Project at an earlier point than could
occur under the timeframe contemplated in the Memorandum of Understanding
approved by Resolution 28726 and to thereby take advantage of potentially more
favorable interest rates for such financing, in addition to
-11-
<PAGE>
acting according to the time schedule contemplated in such Memorandum of
Understanding or pursuant to any other authority, the City may sell bonds to
finance such Project from and after the date the Seattle Center Director has
received the following financing assurances (hereinafter the "assurance date"):
1. Third-party Commitments:
a. One or more third-party commitments to secure rights to
the use and occupancy of at least 44 Suites and 250 Club Seats and the use of
tickets to events available for the same, and under the payment terms generally
required from the lessees or acquirers of interests in such Suites and Seats,
respectively; and
b. An irrevocable commitment to secure the rights and
benefits of "title sponsorship" for the Coliseum for the full term of this
Agreement in consideration for compensation payable to the City of not less than
$500,000 per annum for the Term of this Agreement; or
2. SSI Guarantee: An irrevocable written guarantee by SSI, not
requiring any additional consideration to be effective, to remit to the City all
of the payments that would be receivable by the City for the acquisition of the
rights and interests in and to the following, which rights and interests SSI may
acquire upon making such payments, as applicable; Provided, that in the event
SSI provides to the Seattle Center Director the guarantee contemplated in this
subsection and thereupon acquires interests in and to one or more Suites, Club
Seats, the "title sponsorship," or any combination thereof, nothing herein shall
limit the authority of SSI, during the time the "Marketer" under the Premium
Seat Marketing Agreement is endeavoring to market the "title sponsorship," any
Suite, or any Club Seat to the general public, to lease, assign, or otherwise
transfer to one or more third parties, without further liability under its
guarantee, any of the interests SSI has guaranteed or acquired with respect to
any Suite, Club Seat, or the "title sponsorship" pursuant to this subsection:
a. The number of Suites that equals the difference between
44 and the aggregate number of Suites that other parties have committed to lease
or otherwise acquire an interest in and to as of the assurance date; and
b. The number of Club Seats that equals the difference
between 250 and the aggregate number of Club Seats that other parties have
committed to lease or otherwise acquire an interest in as of the assurance date;
and
c. The "title sponsorship" for the Coliseum; or
-12-
<PAGE>
3. Combined Third-party Commitments & SSI Guarantee: A
combination of the third-party commitments contemplated in Subsection V.B. 1,
hereof, and the SSI guarantee contemplated in Subsection V.B.2, hereof.
C. Effect of Extension to SSI of Time to Market Suites, Club Seats,
and Title Sponsorship on Coliseum Construction Commencement and Completion
Dates: In the event that the City Council determines, on or after June 10,
1994, based upon the final Seattle Center Director/SSI joint report contemplated
in the Premium Seat Marketing Agreement, that if additional time were allowed
for the required marketing, there would be a substantial likelihood that the
minimum number of binding commitments identified in Subsection V.B, hereof,
could be achieved; and SSI recommends to the City Council that such additional
time be allowed for the necessary marketing to be done; and such necessary
commitments are secured within the City Council's extended deadline, then the
September 1, 1994 construction commencement deadline and the October 1, 1995
construction completion deadline respectively specified in Subsections V.E and
V.F, hereof, and the Use Commencement Date shall each be extended by thirty (30)
days plus the number of additional days allowed by the City Council for the
securing of such minimum number of commitments.
D. Conditions Allowing SSI Nullification of This Agreement Prior to
July 1, 1994:
1. For Failure To Demolish Current Facility: The parties
acknowledge and agree that the Coliseum is to be built on the site of the
Current Facility and that demolition of the unneeded portion of the Current
Facility is a critical and material benchmark toward the completion of the
Coliseum in a timely manner. Therefore, notwithstanding any other provision of
this Agreement, if, for any reason whatsoever, SSI has delivered to the Seattle
Center Director the commitments and guarantees described in Subsection V.B,
hereof, on or by the date specified in such subsection, but demolition of the
unneeded portion of the Current Facility has not commenced on or before July
1,1994, then SSI, at its sole option, may declare this Agreement void. For the
purpose of this subsection,the term "demolition" shall include but is not
limited to the permanent removal of any fixtures and furnishings that the City
intends to scrap or salvage from the Current Facility.
2. For Failure to Grant Approval Regarding Practice Facility
Design or Specifications: In the event that SSI and the Seattle Center Director
and such other official(s) of the City having Approval authority with respect to
the Practice Facility do not agree regarding the design and specifications of
the same, including on-premises signage, so that the required building permits
are issued for such structure on or by the assurance date identified in
Subsection V.B, then SSI, at its sole discretion, may declare this Agreement
void, assuming such
-13-
<PAGE>
Practice Facility and on-premises signage proposed by SSI conforms to all
applicable City codes. It is understood by the parties hereto that signage for
the Practice Facility will be governed by the February 4,1994 communication from
the Director of Construction and Land Use that is attached hereto as Exhibit
"X."
E. Condition Allowing SSI Nullification of This Agreement Prior to
September 1, 1994: In the event that, for any reason whatsoever, construction
of the Coliseum does not commence September 1, 1994, and if the construction
commencement and completion dates are not extended pursuant to Subsection V.C,
hereof, or otherwise extended as the parties hereto shall agree upon, then SSI,
at its sole option, may declare this Agreement as null and void.
F. Damages for Untimely Completion of Project.
1. Construction Contract Requirements: The City shall not
enter into any contract for the construction of the Coliseum Redevelopment
Project unless such contract includes the following: (a) a specific schedule
for the construction of the Coliseum Redevelopment Project that provides for the
completion of the Project on or before October 1, 1995, or such later date as is
authorized by Subsection V.C, hereof, or is otherwise agreed upon by the parties
hereto, and (b)a specific provision for the payment to the City of damages in
the event that construction of the Project is not completed on or before such
date, each of which provisions shall be subject to SSI's prior Approval; and the
City secures and maintains through the Use Commencement Date, builder's risk
insurance providing coverage of not less than the periodically-determined value
of the Coliseum Redevelopment Project at various stages of construction.
2. SSI's Share of City's Damages from Contractor: If the
Coliseum is not ready for SSI use and occupancy by the first Home Game scheduled
to be played in the 1995-96 NBA regular season, the City shall pay to SSI as
damages in lieu of any and all other damages payable to SSI by the City, ninety
percent (90%) of the amount that the City secures from any contractor for the
failure to complete construction of the Coliseum Redevelopment Project on or by
October 1,1995, or such later date as is authorized by Subsection V.C, hereof,
or is otherwise agreed upon by the parties hereto, provided that the aggregate
amount received by SSI shall not be greater than the product of the number of
Home Games (other than pre-season games) that cannot be played in the Coliseum
after October 1, 1995, or such later date as is authorized by Subsection V.C,
hereof, or is otherwise agreed upon by the parties hereto, whichever is the
latest, due to such contractor's failure to complete such construction,
multiplied by one hundred thousand dollars ($100,000.00).
-14-
<PAGE>
3. SSI's Damages Share Are Additional Rights: The rights
granted to SSI pursuant to the provisions of this subsection shall be in
addition to any other rights and remedies SSI may have against any person (other
than the City) arising from the failure to complete construction of the Coliseum
Redevelopment Project on or before October 1, 1995, or such later date as is
authorized pursuant to Subsection V.C, hereof, or is otherwise agreed upon by
the parties hereto.
VI. SCHEDULING OF HOME GAMES INTO SEATTLE CENTER COLISEUM
A. City's Reserved Advanced Regular Season: On or by January 2,
1995, and on or by every January 31st thereafter through 2010, the City shall
provide SSI with a preliminary schedule identifying seventy (70) dates between
November 1st and the next succeeding April 30th (or any revised term of the NBA
regular season) that the City will reserve for SSI use as a regular season Day
of Game during the next succeeding NBA regular season. Fifty (50) of those
dates shall be nonconsecutive but separated by a period of no greater than seven
consecutive days and shall not include any Monday; at least fifteen (15) of the
fifty (50) dates shall be Fridays, and fifteen (15) shall be Saturdays. The
twenty (20) other dates may be consecutive with themselves and with any of the
fifty other dates and may include up to four (4) Mondays. The City expressly
agrees that all such dates shall be reserved for the exclusive use of SSI, and
that neither the City, itself, nor any third party shall be allowed to use the
Coliseum for any purpose, unless and until such dates are selected or rejected
by SSI.
B. SSI's Selection of Regular Season and Preseason Game Dates: On
or by August 15, 1995, and on or by every August 15th through 2010, SSI shall:
1. SSI's Initial Selection of Dates: Select the particular
dates for regular season Home Games established by the NBA for the next such
season from the seventy (70) proposed dates for the playing of regular season
Home Games at the Coliseum, or such alternative dates as the NBA shall have
designated as Home Game dates if such alternative dates have not been previously
booked by the Seattle Center by the time such designation is communicated by
notice to the Seattle Center Director, and provide notice to the Seattle Center
Director regarding which dates have been selected. Upon receipt of such notice,
the Seattle Center Director shall schedule and reserve the Coliseum on each
selected Day of Game for SSI's potential use. Any date not identified as a
"selected date" in such a notice shall be deemed to be a rejected date, and the
City may use each such date for whatever purposes it desires.
2. SSI's Release of Dates Not Selected by NBA: Immediately
after receiving notice from the NBA of the dates established by the NBA for Home
Games, provide notice to the Seattle Center Director that all other dates then
reserved by the
-15-
<PAGE>
City for SSI use are released for whatever use the City may make of such date.
C. SSI's Selection of Additional Event Dates: On or by September 1,
1995, and on or before every succeeding September 1st through 2010,SSI shall
notify the-Seattle Center Director of any additional dates desired for preseason
games and the five (5) additional events referenced in Subsection I.P.2) of this
Agreement in the Coliseum, upon receipt of which notice the Seattle Center
Director shall schedule and reserve for SSI use of the Coliseum on each such
selected Day of Game except for dates that as of the Seattle Center Director's
receipt of such notice, had already been committed or are being reserved or held
for another event.
D. Playoff Game Date Selection: SSI shall provide notice to the
Seattle Center Director of all additional dates during the months of April, May
and June that have been tentatively scheduled or are desired by the NBA or SSI
for conference playoff and championship Home Games, immediately after the NBA
advises SSI of the scheduling of, or the NBA's desire for, the same. Upon
receipt of such notice from SSI, the Seattle Center Director shall schedule and
reserve the Coliseum for SSI's use on each such selected dates.
E. SSI's Priority for Coliseum Use; SSI Relief For City's Failure to
Make Coliseum Available: In the event that any provision of this section shall
no longer satisfy the requirements of the NBA, then the parties shall negotiate
an amendment to such provision to satisfy the NBA's requirements. In any event,
the parties expressly agree that the provisions are intended to assure that the
City gives sole priority to SSI over all other users of the Coliseum in order to
ensure that the SuperSonics play basketball at the Coliseum each and every Home
Game and that any other use whatsoever by the City or any third person shall be
preempted by such SSI use except where such other use is or would be pursuant to
a contract between the City and a third party that was executed prior to the
City's receipt of notice from SSI of the NBA's requirements. It is further
expressly agreed by the parties that the failure of the City to make the
Coliseum available as contemplated herein for all Home Games at which the
SuperSonics are to play an NBA basketball game would result in irreparable
injury to SSI which could not be redressed through the payment of damages alone,
and that therefore the City acknowledges and concedes that SSI shall be entitled
to injunctive and such other equitable relief as a court may deem appropriate to
prevent any use or occupancy of the Coliseum which conflicts with SSI's use and
occupancy of the Coliseum as authorized herein for such purpose, in addition to
any other remedies available to SSI.
VII. PREMISES LICENSED FOR USE AND OCCUPANCY BY SSI
-16-
<PAGE>
Except as otherwise provided herein, the City hereby grants to SSI the
exclusive right and license to full and unrestricted use, enjoyment and
occupancy of the Premises and the right and license to authorize others
designated by SSI to use, enjoy and occupy the Premises, as provided herein in
consideration of SSI's payment of the sums specified in Article VIII, hereof,
and compliance with all other applicable terms and conditions of this Agreement:
A. Unlimited Use Facilities: During the entire Term hereof, SSI
shall have sole and exclusive use, custody and occupancy of the Unlimited Use
Facilities all without interruption or restriction except as otherwise provided
herein.
B. Basketball Court and Related Areas, and Fixtures:
1. Facilities for Use on Any Day of Game: On each Day of Game,
SSI shall have the exclusive use of the areas in the Coliseum necessary for the
playing, exhibition, attendance at, and viewing of professional basketball,
including all equipment and fixtures required for the exhibition of professional
basketball including but not limited to the basketball court, baskets, timing
clocks, and scoreboards; visiting team's locker room; sound, lighting, and
public address systems; and all other equipment and fixtures as may be required
by this Agreement, as depicted on Exhibit "G-2," EXCEPT for the following
portions thereof, which are reserved for exclusive use by the City or one or
more third parties unless Approval for SSI use of any of the same is given by
the Seattle Center Director in the Food and Beverage Service Agreement, the
Novelties Concession Agreement, or otherwise:
a. All portions designated as "Suite" or "storage" other
than the Suite and three storage areas provided to SSI as part of the Unlimited
Use Facilities;
b. All areas designated "electrical," "mechanical,"
"chillers," "ATM," "control room," "janitor," "machine," mezzanine," "radio
control room," "communications," "telecommunications, or "first aid;"
c. The offices and "staging" area in the Southwest
quadrant of the Event Level, the tunnel to the Northwest Pavilion on the Suite
Level, and the areas on the Main Concourse Level designated "fire control" or
"security" together with the adjoining passage;
d. All men's and women's restrooms outside of those in the
Unlimited Use Facilities, whether intended for Suite users, members of a general
audience, crew, or other users;
e. All areas in the Northeast and Southeast quadrants of
the Event Level, regardless of the designation of the room; and
-17-
<PAGE>
f. All areas designated as "Vendor Commissary,"
"Concession," and all portions of "Annex D Pavilion"including but not limited to
the loading dock, shell space, locker rooms, generator room, primary electrical
room, and existing kitchen and receiving.
g. SSI's rights with respect to access to and within the
Coliseum under this Agreement shall be non-exclusive, and shall be exercised in
common with the City and other Seattle Center facility or area users requiring
access thereto.
2. Facilities for Use on Other Than a Day of Game: On other
than any Day of Game, SSI shall be provided for practice purposes, if no other
user or event has been scheduled to use the portions of the Coliseum necessary
for the practicing of professional basketball on such day and if such facility
does not need to be prepared in any respect on such day for any user or event
scheduled for any subsequent day and if the City does not need to do maintenance
or repair work on the Coliseum that would be interfered with by such SSI use or
that would interfere with such SSI use, those portions of the Coliseum equipment
and fixtures that are necessary for the practicing of professional basketball on
such day including but not limited to the basketball court, baskets, timing
clocks, and scoreboard.
C. Parking Areas and Spaces:
1. Day of Game Parking: On every Day of Game, beginning two
hours prior to the start of a Home Game and ending two hours after the
conclusion of such activity,the South Coliseum Parking Lot and at least 574
parking spaces in the Parking Garage, or in the Supplemental Parking Spaces, or
in a combination thereof shall be provided to SSI for the exclusive use of
Premium Seat ticket holders, SSI employees, SuperSonics sponsors, and members of
the press credentialed by SSI. SSI shall allocate parking rights first in the
Parking Garage, and then in the Supplemental Parking Spaces in the following
manner: First, three spaces shall be allocated to each Suite; Second, one space
for every four Courtside Club tickets issued; Third, one space for each four
Club Seat tickets issued; and Fourth, in such order as SSI desires, one space
for each SuperSonics sponsor, one space for each member of the press
credentialed by SSI, and one space for each SSI employee.
2. Parking on Other Than Day of Game: Whenever the Coliseum is
made available to SSI for basketball practicing on other than a Day of Game, SSI
may also use, without additional charge, the South Coliseum Parking Lot so long
as such use is restricted to the parking of vehicles of only SSI personnel.
D. Ticket Sales Facilities: SSI shall be provided all ticket booths
in the Coliseum on each Day of Game.
-18-
<PAGE>
E. Restrictions on City's Right to Use or Authorize Use of the
Coliseum: The City shall make the Coliseum available for use by individuals and
entities other than SSI only according to a schedule that ensures SSI will play
all Home Games other than preseason games in the Coliseum. The City shall not
use the Coliseum for any purpose, nor permit the use of the Coliseum by any
other person or entity for any purpose, on any Day of Game without the Approval
of SSI. The City shall not permit the Coliseum to be used for semi-professional
or professional basketball, whether or not sanctioned by the NBA, without the
approval of SSI, other than any presentation of basketball played by the "Harlem
Globetrotters." Except as provided in the preceding sentence and Subsection
VII.F, hereof, nothing herein shall restrict the ability or right of the City to
use the Coliseum or permit the use of the Coliseum by others for any purpose on
any dates not used by SSI provided such use by others does not impair SSI's full
enjoyment of all use and occupancy rights granted to it herein by the City.
F. SSI First Right to Use & Occupy Coliseum for Other Franchised
Professional Sports Activities: SSI is hereby granted the first right to use
and occupy the Coliseum for the playing and viewing of a series of professional
sports events involving any professional sport franchise other than one
associated with the playing of semi-professional or professional hockey, which
right shall be exercisable only as follows: In the event the Seattle Center
Director receives a request by a third party for the use and occupancy of the
Coliseum for a series of events by any such professional sport franchise, the
Seattle Center Director shall provide notice to SSI of the general terms and
conditions under which such use would receive Seattle Center approval (including
the amount of rent and the types of other charges applicable to such use) and
the date by when SSI must execute an agreement with the City for such additional
use and occupancy (which agreement may be subject to City Council authorization
and shall be outside the scope of this Agreement). In the event SSI fails to
execute a contract with the City for such additional use by the Seattle Center
Director's specified date, SSI shall be deemed to have waived such right with
respect to that proposed use and the City shall be free to execute an agreement
for such Coliseum use with any other party. Notwithstanding any other provision
hereof, all use and occupation of the Coliseum by SSI pursuant to the right
granted in this subsection shall be governed solely by the terms and conditions
of the pertinent separate agreement executed with respect thereto and not by
this Agreement.
G. No Use of Common Areas: Neither SSI nor any of its officers,
employees, invitees, concessionaires, contractors or any of their subcontractors
shall use any portion of Seattle Center not specifically granted to SSI for its
use and occupancy hereunder, to meet governmental requirements peculiar to SSI's
operations on the Premises or otherwise, without the Seattle Center Director's
Approval. Whenever SSI or any of its officers,
-19-
<PAGE>
employees, invitees, concessionaires, contractors or any of their subcontractors
shall require any equipment, separate area or special facility to satisfy any
such governmental requirement, such equipment, area, and facility shall be
located within the Premises at SSI's sole expense.
VIII. SSI PAYMENTS TO THE CITY
A. Payments Due: In consideration of the license to full use and
enjoyment of the Premises, the right to engage in concession sales of Food as
well as Basketball and Other Novelties, all as provided in the separate
agreements authorizing such use attached as Exhibits "H" and "I", hereto, and
the providing to SSI of various services and facilities, all subject to the
provisions of this Agreement; and the marketing of Suite, Courtside Club, and
Club seats and tickets, the Coliseum's "title sponsorship," and opportunities
for display advertising on changeable-copy "marquee" signs, all subject to the
provisions of the Marketing Agreement, as amended by the parties thereto, SSI
shall pay to the City the following sums:
1. Rent:
a. Annual Rent: An initial annual rent of $800,000, for
the period of October 1, 1995, through September 30, 1996, and for each twelve-
month period from and after October 1, 1996, an adjusted annual rent as provided
in Subsection VIII.A.1.b, hereof, which shall be due and payable in
approximately equal quarterly installments, in advance, on the first day of each
and every three-month period during the Term hereof; Provided, that in the event
SSI's use and occupancy does not commence on October 1, 1995, or such later date
as is authorized by Subsection V.C, hereof, or is otherwise agreed upon by the
parties hereto, whichever is the latest, then the annual rent or adjusted annual
rent shall be prorated on a daily basis, and SSI shall pay only the pro-rated
annual rent or adjusted annual rent during the period between the Use
Commencement Date and the next succeeding September 30th.
b. CPI Adjustment: The annual rent shall be increased
each October 1st, beginning in 1996, to reflect the total percentage increase in
the "West-A" Consumer Price Index (CPI) for All Urban Consumers, All Items
(1982-84 = 100), as published by the U.S. Department of Labor, Bureau of Labor
Statistics, or its successor, between September of the year in which the
adjustment is made and September of the immediately preceding year; provided,
that in no event shall any annual adjustment be less than +3% or more than +7%
of the annual rent or adjusted annual rent due for the immediately preceding 12-
month period; provided, further, that in the event such CPI is discontinued or
if the formula upon which the CPI is based is substantially changed, the parties
shall agree upon another similar index to be used to calculate the contemplated
adjustments, and in the event of an inability to agree, the
-20-
<PAGE>
parties shall request the American Arbitration Association or its successor to
establish an appropriate adjustment standard; provided, further, that in the
event of change in the index base of (1982-84 = 100) the parties shall apply
whatever conversion factor is necessary to establish the true percentage in the
CPI in any year(s) in which the index base is changed, and shall thereafter
apply the most recently revised base index; provided, further, that in no such
twelve-month period shall the amount of the annual rent, as adjusted, paid by
SSI be less than $800,000.
2. Additional Rent: In addition to the annual rent, or
adjusted annual rent, SSI shall Pay to the City the following additional rent,
which shall be added to and paid as part of the next proximate quarterly payment
after SSI has received ticket revenue or within thirty (30) days after the date
of an invoice for such rent, as specified below:
a. For preseason games: In the event that the Coliseum is
used pursuant to this Agreement for the playing of any preseason game that is
not one of the five additional, annual events defined herein as a Home Game,
then unless the net receipts received from the sale of tickets to any such games
are donated to charity, SSI shall pay to the City, without invoice, an
additional amount equal to eight and one-half percent (8 1/2%) of the Ticket
Sales Proceeds for such games.
b. For conference or championship Home Games: For the use
of the Coliseum during the term of this Agreement for the playing of any
conference or championship Home Games for any NBA season (the "post-season play-
off series"), then SSI shall pay to the City, without invoice, an additional
amount equal to eight and one-half percent (8 1/2%) of the Ticket Sales Proceeds
for the first two Home Games played in the Coliseum during any such post-season
playoff series. SSI shall retain all revenues from the sale of tickets for all
other conference or championship Home Games played during any such post-season
playoff series.
c. For more than 41 NBA regular season Home Games: In the
event that the NBA regular season is expanded to more than 41 Home Games, then
SSI shall pay to the City, without invoice, an additional amount equal to eight
and one-half percent (8 1/2%) of the Ticket Sales Proceeds for such additional
Home Games.
3. Service Charges: SSI shall pay to the City as a service
charge, and not as rent, within thirty (30) days after presentation of an
invoice therefor unless otherwise specified below, the following:
a. For the City's provision of additional vehicle parking
spaces: The then-applicable parking charge imposed by the City for City-owned
parking spaces, and paid by the City for non-City owned parking spaces,for the
use (i) on any
-21-
<PAGE>
Day of Game by Premium Seat ticket holders, SuperSonics sponsors, SSI employees,
and members of the press credentialed by SSI of any parking space in excess of
those in the South Coliseum Parking Lot and 574 of the total number provided at
SSI request in the Parking Garage and as Supplemental Parking Spaces, and (ii)
on any day other than a Day of Game, of any parking space provided at SSI
request in excess of the number allocated pursuant to Subsection VII.C, hereof,
for the holders of Suite Seat Parking Passes and, subject to the Seattle Center
Director's Approval, the holders of Club Seat Parking Passes.
b. For first aid facility services: The full costs
incurred by the City in providing the first aid facility and health care
personnel described in Subsection IX.B, hereof.
c. For Seattle Police Department services: The full costs
incurred for providing Seattle Police Department law enforcement officers for
crowd control to protect SSI employees and basketball game officials, if such
law enforcement officers receive compensation from the City for such activity.
d. Coliseum's "title sponsorship" and marquee Advertising
revenue: The net revenue derived from the sale or licensing of rights to the
Coliseum's "title sponsorship" and from the sale or leasing of the right to any
display opportunity for Advertising on any changeable-copy "marquee" sign on or
associated with the Coliseum, until the City has received a total of $750,000,
per year, from such sources, after which SSI shall pay the City fifty percent
(50%) of such net revenue. For the purpose of this subsection, the term "net
revenue" shall mean the gross receipts from such activity less the expenses
incurred in the marketing of such sponsorship and Advertising that were
authorized by the parties' March 22, 1993 Marketing Agreement or the latest
amendment thereto or any successor to such agreement.
e. Coliseum Advertising fee: The sum of $750,000 for the
exclusive right to construct or have constructed within the Coliseum Advertising
displays and to exercise any of the rights granted by Subsection XII.C, hereof,
with respect to such Advertising, which sum shall be payable in five parts, each
due on or by October 1st of the year in which the specified NBA basketball
season commences:
NBA basketball season occurring
after the Use Commencement Date: Amount Due:
-------------------------------- -----------
First season $250,000
Second season $200,000
Third season $150,000
Fourth season $100,000
Fifth season $ 50,000
-22-
<PAGE>
f. Percentage of gross receipts from Food sales from
concession stands: For the exclusive right to offer for sale and to sell Food
in and from concession stands in the Coliseum, that percentage of gross receipts
from such Food sales at events other than Home Games that is specified in the
Food and Beverage Service Agreement that is now or will be attached hereto as
Exhibit "H."
g. Percentage of gross receipts from Food services in
Suites, Club Seat areas, and Function Rooms: For the exclusive right to offer
for sale and to sell Food in Suites, the food service areas associated with Club
Seats, and Function Rooms, that percentage of the gross receipts from such Food
sales at events other than Home Games that is specified in the Food and Beverage
Service Agreement that is or will be attached hereto as Exhibit "H."
h. Percentage of Club Seat gross receipts: For the
exclusive right to offer for sale and to sell any interest in Club Seats in the
Coliseum including admission tickets to Homes Games viewable therefrom and the
Seats provided thereby, that percentage of gross receipts from such sales during
the respective calendar years specified below, which percentage payment shall be
due and payable, without invoice, within thirty-one (31) days after the end of
each calendar quarter in such year:
YEAR PERCENTAGE OF GROSS RECEIPTS DUE:
---- ---------------------------------
1995 60%
1996 58%
1997 56%
1998 54%
1999 52%
2000 50%
2001 48%
2002 46%
2003 44%
2004 42%
2005 and thereafter 40%
i. Percentage of Suite gross receipts: For the exclusive
right to offer for sale and to sell any interest in a Suite in the Coliseum
including admission tickets to Home Games and other events viewable therefrom
and use of the Seats therein, that percentage of gross receipts from such sales
during the respective calendar years specified below, which percentage payment
shall be due and payable, without invoice, within thirty-one (31) days after the
end of each calendar quarter in such year:
-23-
<PAGE>
YEAR PERCENTAGE OF GROSS RECEIPTS DUE:
---- ---------------------------------
1995 80%
1996 78%
1997 76%
1998 74%
1999 72%
2000 70%
2001 68%
2002 66%
2003 64%
2004 62%
2005 and thereafter 60%
j. Percentage of gross receipts from Basketball and Other
Novelties: For the exclusive right to offer for sale or rental and to sell or
rent Basketball and Other Novelties on the Premises as authorized in the
Novelties Concession Agreement that is or will be attached hereto as Exhibit
"1," that percentage of gross receipts generated on other than a Day of Game
that is specified in such agreement.
k. Event service costs in excess of City base costs: For
the providing of stage labor, admission, spotlight operators, and other
personnel as well as facilities and equipment specifically requested by SSI to
facilitate the production of any SSI pre-, mid-, or post-Home Game special
activity that is not ordinarily a part of the normal course of producing and
exhibiting a basketball game, the amount by which the City's actual costs for
providing such personnel, facilities, and equipment for such special activity
(calculated at the applicable rate(s) therefor, as published in the then-current
Seattle Center Event Service Manual or its successor publication) exceed the
average City costs for the presentation of a Home Game at which no SSI pre-,
mid-, or post-Home Game special activity occurred during the last half of the
second NBA regular season after the Use Commencement Date.
l. Coliseum conversion for basketball practicing: For the
conversion of the Coliseum to make it usable for basketball practicing on a day
other than a Day of Game pursuant to Subsection VII.B.2, hereof, if the
basketball floor and related equipment have been removed from the event floor to
enable another use to be made of such facility, and, if a third party is
scheduled to make a different use of the Coliseum before the next Home Game, for
the reconversion of the Coliseum to permit such third party's use, the aggregate
charge imposed for the personnel, facilities, and equipment required for such
conversion and reconversion calculated at the applicable City rate(s) therefor,
as published in the then-current Seattle Center Event Service Manual or its
successor publication.
m. Courtside press facilities modification: For the
modification of courtside facilities at SSI's request to
-24-
<PAGE>
accommodate an increased number of press credentialed by SSI as provided by
Subsection IX.D.2.a, the reimbursement of all reasonable out-of-pocket costs
incurred by the City in performing such modification work including but not
limited to the expense to add the requested communication lines, television
cables, other equipment, and furnishings.
B. Delinquencies: All payments shall be delinquent if not paid on
or by the date due. Delinquent sums shall bear interest at a rate of l% per
month until paid. Payments made after a delinquency shall be applied first to
accrued interest, and then to the principal sums due.
C. Books and Records; Audit:
1. SSI's Record-keeping Obligation: SSI shall keep true,
separate, accurate, complete and auditable records of gross receipts from the
following:
a. All tickets and credentials issued or sold for
admission to Home Games in the Coliseum (separately identifying revenue from
Club Seats, general admission Seats, and Suite sales or rentals);
b. The sale at events other than Home Games of Food served
or provided in and from the concession stands in the Coliseum;
c. The sale at events other than Home Games of Food served
or provided in and to Suites and the Food service areas associated with Club
Seats in the Coliseum;
d. The sale or rental of Basketball and Other Novelties at
events other than Home Games;
e. The sale of the right to procure any interest in Club
Seats or any ticket allowing use of such a Seat;
f. The sale or leasing of the right to procure any
interest in Suite Seats or any ticket allowing use of such a Seat;
g. The sale of "title sponsorship" rights for the
Coliseum; and
h. The sale of the right to any display opportunity on the
changeable copy "marquee" signs on or associated with the Coliseum.; and
i. The sale of any right to an Advertising display of any
kind or nature in the Coliseum, the revenue from which shall be calculated by
SSI's imputing a value thereto based upon such Coliseum Advertising display,
alone, whether or not
-25-
<PAGE>
such Advertising is sold or packaged in combination with other rights.
The form of all records shall be subject to the approval of the City. Such
records shall be retained in King County, Washington, for at least thirty-six
(36) months after the close of the calendar year in which they were generated or
received.
2. City's Recordkeeping Obligation: The City shall keep true,
separate and accurate complete and auditable records of all revenue and
appropriations received for the operation of the Coliseum and of all
expenditures and expenses made and incurred in the construction, maintenance and
operation of the Coliseum, and shall retain such records for at least thirty-six
(36) months after the close of the calendar year in which they were incurred or
paid. The City shall also keep separate categorical records for each expense
item for which the City invoices SSI for reimbursement pursuant to this
Agreement.
3. Audits: SSI and the City each shall permit the other party
from time to time as the other party deems necessary, upon ten (10) days' prior
notice, to annually inspect and audit in King County, Washington, during regular
working hours, all books and records required by this section as well as those
books and records pertaining to the providing or serving of Food by or through a
caterer, that are necessary to verify the accuracy of the revenue received or
payments previously made by SSI or expenditures or expenses paid by the City;
and shall supply the other party with, or shall permit it to make, copies of any
such books and records and any portion thereof, upon the other party's request.
SSI shall further ensure that such inspection, audit and copying right of the
City is a condition of any subagreement or other arrangement under which SSI
permits any other person or entity to carry on a business activity in or from
the Coliseum.
D. Time Limitation on Assertion of Claim for Payment: In the event
that either party claims an amount due to it had not been paid or that it has
paid an amount in excess of any obligation hereunder, said party shall notify
the other party of such claim within six (6) years of the time such amount was
due or in the event of fraud, within three (3) years after the discovery of the
same. The party against whom the claim lies shall pay such amount within thirty
(30) days after the date of such notice or submit that claim to arbitration
pursuant to the provisions of Article XXV of this Agreement.
IX. UTILITY, PERSONNEL, AND OTHER SERVICES AND
RESPONSIBILITIES
A. General Utilities.
1. City Responsibilities: Except as otherwise provided herein,
the City shall provide, at its sole expense,
-26-
<PAGE>
electricity, water, heating, air conditioning and ventilation, sewer and solid
waste removal, and all other utility services that are required for the use of
the Coliseum as contemplated herein, and shall have installed a reasonable
number of pay telephones in the Coliseum for public use and separate meters for
the measurement of electricity and water use in the SSI Retail Facility and
areas of the Coliseum provided to SSI under the Food and Beverage Service
Agreement. The City shall be responsible for the immediate repair of any
malfunction or failure of any utility service provided by the Seattle Center
Department and shall be liable for any interruption or impairment of SSI's use,
enjoyment and occupancy of the Coliseum or SSI Retail Facility resulting from
any such utility system malfunction or failure to repair such service that is
directly caused by an act or omission of Seattle Center Department personnel.
2. SSI Responsibilities: SSI shall secure, at no expense to
the City, all gas, electricity, water, sewage, and solid waste removal utility
services for the SSI Retail Facility, the Practice Facility, and all concession
areas within the Coliseum, and such separate telephone service SSI desires for
its own use of the Coliseum, the SSI Retail Facility and the Practice Facility,
and all meters required to measure SSI's receipt of such services that are not
installed by the City hereunder. SSI shall not install on the Premises any
fixture, furnishing, or trade equipment that exceeds the capacity of any utility
or waste facility for such location. SSI shall make arrangements with all
appropriate utility service providers for their direct billing to SSI for the
delivery of such services to SSI and shall pay, before delinquency, all fees and
charges for the installation, change, and relocation of every point or means of
service by any utility or waste line or system and such utility service.
B. First Aid Facility: The City shall provide and operate for the
benefit of SSI's officers, employees, and invites, commencing two (2) hours
prior to and ending forty-five (45) minutes after each Home Game, a first aid
facility in the Coliseum staffed by qualified paramedical personnel and equipped
with cardiac resuscitation and emergency intervention equipment of the sort that
is commonly available in Seattle "Medic One" units.
C. Public Address Facilities: Prior to SSI's first Home Game in the
Coliseum during the Term of this Agreement, the City shall install a state of
the art public address system and specialized musical sound system within the
Coliseum having technical characteristics agreed upon by SSI and the City. On
every Day of Game the City shall provide SSI with exclusive access to, and
control of, such systems. Notwithstanding any other provision hereof, the City
shall have the right to control and use the public address system on every Day
of Game for general safety, health, and legal announcements including but not
limited to those for emergency or crowd control purposes, all when and to the
extent determined necessary by the Seattle Center
-27-
<PAGE>
Director, Fire Chief, Police Chief, or any of their subordinate officers.
D. Scoreboard and Time Clock Facilities:
1. Provision and Installation of Equipment: SSI shall provide
and have installed in the Coliseum, at SSI's sole expense, the following
equipment:
a. A center court scoreboard having at least four sides
usable for professional and amateur basketball, hockey, wrestling, and tennis
game or match statistics documentation, complete with all necessary hoisting
equipment, as well as on each side, a changeable message center and Seattle
Center logo or designation of a size and appearance satisfactory to the Seattle
Center Director, together with the necessary hardware and software for the
programming of such scoreboard for such sporting events; provided, that to
satisfy its obligations regarding the center court scoreboard, SSI may use all
or any of those component parts of the scoreboard installed in the Current
Facility.
b. A scorers' table and reader boards all of a respective
size, weight, and storability that is subject to the Approval of the Seattle
Center Director, which shall not be unreasonably withheld, which scorers' table
and reader boards shall be part of the Advertising displays referred to in
Subsection XII.C, hereof, and which shall not be used by the City or any other
third person or entity except pursuant to Subsection IX.D.3, hereof, or with the
specific prior agreement of SSI.
2. Set-up Responsibilities: On every Day of Game, beginning
two hours prior to the scheduled time for the commencement of a Home Game and
ending two hours after the conclusion of such activity, the following facilities
shall be provided by the City, fully set up and ready for use at the City's sole
expense:
a. Courtside facilities designated by SSI and located
adjacent to the basketball court side lines and equipped with all necessary
tables and chairs for teams, officials, and members of the press credentialed by
SSI, including provision for telephone lines, television cables and other
equipment; Provided, that the courtside facilities designated by SSI shall not
be substantially different in size, weight, or storability from the courtside
facilities provided in the Current Facility without the prior Approval of the
Seattle Center Director; Provided, further, that if the number of press
credentialed by SSI is increased beyond the number contemplated in the plans and
specifications for the Coliseum that have received SSI's Approval, and if SSI
requests the City to modify such courtside facilities to accommodate such
increased number, the City shall undertake and complete such modifications and
SSI
-28-
<PAGE>
shall reimburse the City's expenses therefor, as provided in Subsection
VIII.A.3.m, hereof.
b. All Premium Seats and all other public seating within
the Coliseum configured for professional basketball, together with the Function
Rooms as depicted on the attached Exhibit "C" each equipped as specified in the
then-current Event Service Manual or its successor publication; and
c. All other areas or facilities within the Coliseum
necessary for SSI's use and enjoyment as provided by this Agreement.
3. Equipment Use: The scoreboard and its controlling
mechanisms shall be made available, without charge by SSI as provided in
Subsection IX.E.3, hereof, for use and operation in connection with any event in
the Coliseum on other than a Day of Game or for non-SSI activity for which such
use is desired by the City or any of its lessees or licensees.
E. Personnel:
1. City-provided personnel:
a. The City shall employ and provide, at its sole expense,
appropriately trained ticket takers, security personnel, parking attendants,
ushers, and janitorial maintenance, backboard repair, and all other support
personnel necessary to operate and maintain the Premises in an efficient and
orderly manner as contemplated herein. As part of this obligation, the City
shall provide at its sole expense at the Coliseum on each Day of Game, at least
two maintenance engineers who are fully competent to determine the cause of and
effect emergency repairs on all utility, and other component and operating
systems and fixtures within the Coliseum.
b. All determinations regarding the number, identity,
sufficiency of training, and competency, of all such personnel shall be subject
to the Approval of SSI; SSI disapproval shall be for only justifiable cause of a
nature and severity like that identified in SMC 4.04.230.F as of the date of
this Agreement. The City shall act within three (3) days to resolve any
complaint by SSI regarding the performance of duties by any individual employed
by the City who provides any service subject to the provisions of this
Agreement. The City warrants and represents that it shall be solely responsible
for any and all acts of omission or commission of all such personnel acting
within the scope of their respective duties, directly or in connection with this
Agreement and shall hold SSI harmless for any and all such acts.
2. Time for Commencement of Work: All personnel provided by
the City necessary for the operation of the Coliseum
-29-
<PAGE>
as a professional basketball game facility shall be on duty on each Day of Game
as follows:
-30-
<PAGE>
Personnel Time Duties Commence
--------- --------------------
Parking Garage and Supplemental Two and one-half (2 1/2)
Parking Area Attendants hours before scheduled
start of Home Game
Ticket takers/Ushers, Security Two and one-half (2 1/2)
Personnel hours before start of Home Game for
ticket takers and security assigned to
the West Door and access point for
Suites and Club Seats, with all other
such personnel one (1) hour before doors
are opened to the public
Maintenance, Janitorial, other Day of Game
support personnel not otherwise
specified herein
3. SSI's Required Personnel: SSI shall employ or otherwise
secure, train, as necessary, and have on duty at all Home Games in the Coliseum,
such ticket sellers, and scoreboard and game-in-progress information
controllers/operators and technicians, and security personnel for the protection
of SSI's players and game officials as SSI determines are needed. In addition,
upon five (5) days' notice by the City to SSI, SSI shall supply to the City for
direct service to, or under contract with, the City or any of its Coliseum
lessees or licensees, such number of fully trained scoreboard controlling
mechanism operator(s) as are desired by such Coliseum user, which mechanism
operator(s) shall operate the scoreboard controlling mechanism in the manner and
for event(s) and activity(ies) desired by the City or its lessees or licensees.
SSI may charge the City or such other Coliseum user for the providing of such
personnel a fee that does not exceed the pro-rated compensation regularly paid
by SSI for such operator(s) services.
4. Seattle Police Department Personnel: The City shall detail
Seattle Police Department law enforcement officers to control traffic associated
with Home Games, provide security for the Coliseum, and if requested by SSI, for
crowd control to protect players and officials in connection with SSI's use of
the Coliseum.
5. Joint Development of Personnel Performance Standards: SSI
and the City shall jointly develop performance standards for all persons
employed by the City and SSI who provide any service subject to the provisions
of the Agreement as well as performance standards for other operational issues.
Each party shall promptly act on all complaints by the other regarding the job
performance of its respective employees.
-31-
<PAGE>
X. MAINTENANCE AND CARE RESPONSIBILITIES
A. General City Responsibilities: Except as specifically provided
in Subsections X.E. and X.F., hereof, the City shall keep the exterior of the
SSI Retail Facility and Coliseum including, but not limited to, roofs, floors,
walls, foundations, structures and structural elements, and all areas
immediately adjacent thereto, together with the Coliseum's interior rooms,
spaces, doors, windows, fixtures, equipment, appurtenances and systems
(including, but not limited to, plumbing, heating, ventilating, air
conditioning, sound, and lighting) in good working order and repair and in a
neat, clean, safe and sanitary condition, and in compliance with the
requirements of all applicable laws, ordinances, rules and regulations at all
times throughout the term of this Agreement at the City's sole cost and expense.
The City shall immediately act to effect such repairs or replacements when
malfunctions or defects arise and, without limiting the generality of any of
this foregoing, shall keep the glass of all windows and doors clean and
presentable, replace immediately all broken glass, paint and refinish the
interior of the Coliseum at regular intervals, keep all exterior door closing
mechanisms functioning; and keep all pipes, drains, toilets, fixtures and basins
clean and free of debris and any obstruction.
B. City Obligation to Annually Reserve Funds for Repairs: The City
warrants that in addition to amounts necessary for ordinary maintenance, it
shall annually reserve for capital maintenance repairs, replacements or
improvements, no less than two hundred twenty-five thousand dollars ($225,000)
per annum, adjusted to include an increase of four percent (4%) per annum.
C. City Obligation to Perform General Renovation of Coliseum in
2003: In addition to the general maintenance obligation specified in Subsection
X.A, hereof, the City shall complete, after the conclusion of the 2002-03 NBA
season and prior to the beginning of the 2003-04 NBA season, a general
renovation of the Coliseum which shall include the complete refinishing and
painting of all interior surfaces, the replacement or reconditioning of all
seating, the replacement of all public address and sound system components that
are no longer state of the art or are unreasonably worn, and the replacement or
repair of all deteriorated fixtures, structural components or utility or other
component systems; Provided, further, that the total amount to be expended by
the City on such renovations shall not be less than three and one-half million
in 1993 dollars ($3,500,000) adjusted pursuant to the CPI adjustment formula set
forth in Subsection VIII.A.1.b, hereof. In order to ensure that such funds are
available, the City shall annually place an amount equal to approximately one-
seventh (l/7) of such aggregate amount into a subfund that may only be used for
the purposes set forth in this subsection.
-32-
<PAGE>
D. SSI Remedy for City's Failure to Perform Maintenance or Repairs:
In the event that the City fails to perform maintenance, repairs, replacements
or renovations as required by this Agreement, then SSI may provide the City with
notice which sets forth the nature of the condition requiring such action. In
the event that the City fails to perform maintenance, repair, replacement, or
renovation work within a reasonable time after the providing of such notice and
such failure has an adverse impact on SSI's full use of the Coliseum, then SSI
may elect to: (i) submit the matter to expedited arbitration, as provided in
Article XXV, herein, in order to secure an order compelling such performance
together with an award to SSI of damages resulting from the City's failure to
perform, or (ii) itself perform such maintenance, repair, replacement or
renovation, or cause the same to be performed at commercially reasonable rates
and offset the expenses incurred for such work against any other amount that is
payable by SSI to the City. In the event that SSI elects to itself perform or
cause such maintenance repair, replacement or renovation to be performed, then
the City shall either agree to such offset by SSI or reimburse SSI for such
expenses, or alternatively, submit to expedited arbitration the issue of whether
the amount of the offset claimed by SSI is commercially reasonable.
E. SSI's Repair, Maintenance and Care Responsibilities: SSI shall
keep the SSI Retail Facility,the Practice Facility, and the Unlimited Use
Facilities of the Coliseum and all improvements to the same including but not
limited to all structural, mechanical, electrical systems as well as all
fixtures, equipment, appurtenances and systems (including, but not limited to,
plumbing, heating, ventilating, air conditioning, electrical, sound, and
lighting), windows, interior spaces and interior doors therein in good working
order and repair, in a neat, clean, safe and sanitary condition, and in
compliance with the requirements of all applicable laws, ordinances, rules and
regulations, at all times throughout the term of this Agreement, all at no cost
and expense to the City. SSI shall immediately act to repair or replace any
defective or malfunctioning portion or system element in any such area or and,
without limiting the generality of any of the foregoing, shall keep the glass of
all windows and doors clean and presentable, replace immediately all broken
glass, paint and refinish the interior of the SSI Retail Facility, Practice
Facility, and Unlimited Use Facilities of the Coliseum at regular intervals,
keep all door closure mechanisms functioning; and keep all pipes, drains,
toilets, fixtures and basins within any such area clean and free of debris and
any obstruction. SSI shall not allow, or cause anything to be done whereby the
Premises is damaged in any manner, normal wear and tear excepted.
F. SSI Maintenance and Repair of SSI-Provided or -Installed
Equipment: SSI shall be responsible for providing or performing all
maintenance, repair and replacement of equipment
-33-
<PAGE>
that is provided by or installed by or for SSI pursuant to Subsection IX.D.1,
hereof, or otherwise, for use on the Premises.
G. City Remedy for SSI's Failure to Perform Maintenance or Repairs:
In the event that SSI fails to perform maintenance, repairs, replacements or
renovations as required by this Agreement, then the City may provide SSI with
notice that sets forth the nature of the condition requiring such action. In
the event that SSI fails to perform maintenance, repair, replacement, or
renovation work within a reasonable time after the providing of such notice and
such failure has an adverse impact on the City's full use and enjoyment of the
Coliseum, then the City may elect to: (i) submit the matter to expedited
arbitration, as provided in Article XXV, herein, in order to secure an order
compelling such performance together with an award to the City of damages
resulting from the SSI's failure to perform, or (ii) itself perform such
maintenance, repair, replacement or renovation, or cause the same to be
performed at commercially reasonable rates and offset the expenses incurred for
such work against any other amount that is payable by the City to SSI. In the
event that the City elects to itself perform or cause such maintenance repair,
replacement or renovation to be performed, then SSI shall either agree to such
offset by the City or reimburse the City for such expenses, or alternatively,
submit to expedited arbitration the issue of whether the amount of the offset
claimed by the City is commercially reasonable.
H. SSI Assistance with City Recycling Efforts: SSI and City
officials shall periodically consult with each other regarding how City
recycling objectives can best be achieved on the Premises.
XI. CITY'S SUPERVISION AND CONTROL OF SEATTLE CENTER
BUILDINGS AND GROUNDS AND ACTIVITIES
A. General City Rights: The City reserves the exclusive right,
without liability of any kind, to do the following so long as such actions do
not substantially interfere with the viewing and playing of professional
basketball games by the SuperSonics as contemplated herein:
1. Appearance, Size & Location of Seattle Center: Increase,
reduce, and change in any manner whatsoever the number, appearance, dimension,
and locations of the Seattle Center walks, buildings, landscaping, parking, and
service areas, and make improvements, alterations, and additions to the portions
of the Premises that have been made available to SSI for its use;
2. Traffic Regulation: Regulate all traffic within and
adjacent to the Seattle Center;
3. Admission Charges: Impose a reasonable charge for admission
to the Seattle Center and facilities
-34-
<PAGE>
therein, including parking facilities at any time or manner except as limited by
this Agreement;
4. Rules & Regulation Promulgation: Promulgate, from time to
time, reasonable rules and regulations regarding the use and occupancy of any
area of Seattle Center; provided that no such rule or regulation that would
directly or indirectly affect any right granted to SSI by this Agreement shall
be promulgated without the Seattle Center Director's having given prior notice
of such action to SSI and at least thirty (30) days to comment on such proposed
action unless such promulgation is because of an emergency reasonably declared
by the Seattle Center Director;
5. Days & Hours For Operations: Determine the days and hours
the Seattle Center and various business operations will be open to the public;
and
6. Size, Number, Type & Identity of Concession Operations:
Determine the size, number, and type and identity of concessions, stores,
businesses, and operations being conducted or undertaken at Seattle Center other
than in the SSI Retail Facility or as authorized in the Food and Beverage
Service Agreement or Novelties Concession Agreement.
B. SSI Principal User: The City expressly agrees that in all
matters to which this Agreement directly or indirectly applies, SSI is the
principal user of the Coliseum and that SSI's convenience and enjoyment of such
use shall be paramount to all other tenants and that no other use by a person or
entity other than the City shall be permitted to conflict with or impair SSI's
convenience and enjoyment of such use. The City shall take no action, or fail
to take any necessary action, which in any manner undermines or impinges upon or
restricts SSI's convenience and enjoyment of the Coliseum, unless specifically
and expressly provided for in this Agreement. All ambiguities in this Agreement
or disputes between the parties shall be resolved in accordance with this
paragraph.
C. Supervision and Control of Coliseum: The City shall at all times
exercise overall supervision and control of the Coliseum, and shall be
responsible for the construction, operation and maintenance of the same as well
as for all contiguous external areas and of all fixtures necessary for SSI's use
except as otherwise provided herein.
XII. SSI EXCLUSIVE RIGHTS REGARDING THE SALE OF FOOD,
BASKETBALL AND OTHER NOVELTIES, ADVERTISING, VIDEO PRODUCTION AND
BROADCAST RIGHTS
A. Exclusive Food Sales & Service Right: SSI is hereby granted the
exclusive right and obligation to sell Food within the Coliseum. The terms and
conditions of such exclusive right shall be as provided in the Food and Beverage
Service
-35-
<PAGE>
Agreement between the parties hereto, which agreement shall be subject to and
subordinate to this Agreement and is or shall be attached hereto as Exhibit "H;"
Provided, that such agreement shall not require separate authorization by
ordinance for City execution unless such agreement is inconsistent with the
provisions of paragraph 2.c) of Attachment l to the Memorandum of Understanding
approved by City Council Resolution 28726. It is expressly understood that the
City cannot grant this right to any other party during the Term of this
Agreement.
B. Exclusive Novelties Concession Sales and Rental Right: SSI is
hereby granted the exclusive right to offer for sale or rental, and to sell and
rent Basketball and Other Novelties at, in, and from the Coliseum on any Day of
Game; and at, in, and from the SSI Retail Facility during the Term of this
Agreement. The terms and conditions of such exclusive right shall be as
provided in the Novelties Concession Agreement between the parties hereto, which
agreement shall be subject to and subordinate to this Agreement and is or shall
be attached hereto as Exhibit "1;" Provided, that such agreement shall not
require separate authorization by ordinance for City execution unless such
agreement is inconsistent with the provisions of Attachment 1 to the Memorandum
of Understanding approved by City Council Resolution 28726. Nothing herein or
in such other agreement shall limit the right of SSI to publish, manufacture, or
distribute Basketball and Other Novelties outside the geographic area of the
Seattle Center. It is expressly understood that the City cannot grant this
right to any other party during the Term of this Agreement.
C. Exclusive Advertising Display Service Right: SSI is hereby
granted, subject to the provisions of Subsections XII.C.1-11, hereof, the
exclusive right to provide all Advertising display services within the Coliseum,
SSI Retail Facility, and Practice Facility as more specifically set forth below:
1. Advertising Display's Focus: All Advertising displays in
the interior of the Coliseum shall be designed, to the extent practicable (given
that the sides of the Coliseum are primarily glass) to be primarily viewable by
an audience that is inside, rather than outside, of the Coliseum.
2. Advertisers' Obligation to Respect Family Orientation of
Seattle Center: In exercising the rights granted by Subsection XII.C, SSI shall
ensure that all contracts, agreements and understandings made with respect to
the displaying of Advertising on the Premises require the advertiser to respect
the family orientation of Seattle Center and, in particular, the Coliseum and
SSI Retail Facility in developing copy and designs for Advertising to be
displayed in any such building, and to require that all such Advertising be
appropriate for Seattle Center and such building. In the event that the Seattle
Center Director, in the exercise of such official's reasonable
-36-
<PAGE>
discretion, determines that any Advertising displayed in the Coliseum or SSI
Retail Facility contains copy or any design element that is inappropriate to the
family orientation of Seattle Center, the Seattle Center Director may request
SSI to replace such Advertising. SSI shall request substitute Advertising in
the event that copy supplied by an advertiser does not reflect the family
orientation of Seattle Center.
3. Prohibition Against Any Advertising Display for a Tobacco
Product or Certain Alcoholic Beverages: In order to retain a family atmosphere
in the Premises, SSI shall not sell or display any Advertising for any tobacco
product anywhere on the Premises other than in the SSI Retail Facility, shall
not sell or display any Advertising for any alcoholic beverage other than beer
or wine that may be viewed in or from the lobby, concourses, or Seats of the
Coliseum. SSI may sell and display Advertising for alcoholic beverages other
than beer or wine only within the Food service areas associated with Club Seats
and in Suites and in a manner that does not enable people outside of such areas
to read such Advertising
4. Advertising Display Opportunities Available for Hockey
Franchise Acting as "Host Team" in Coliseum: Any semi-professional or
professional hockey franchise using the Coliseum for events in which its team
acts as the "host" or "home team" including but not limited to the Seattle
Thunderbirds Hockey Club, Inc. and its successors and assigns shall have the
exclusive right to provide Advertising services and to sell and display
Advertising solely on the dasherboards erected for any hockey game presented by
such entity in the Coliseum. SSI shall have the right to offer to the
purchasers of SSI's Coliseum Advertising or any portion thereof, the right to
advertise on the dasherboards at a charge to be set by the hockey franchise. If
the purchasers of SSI's Coliseum Advertising or any portion thereof elect not to
advertise on the dasherboards then the hockey franchise shall have the right to
sell Advertising rights on the dasherboards but only at the charge offered to
the purchasers of SSI's Coliseum Advertising or any portion thereof.
5. City's Right to Temporarily Interrupt, Without Compensation
to SSI, Certain Advertising Displays Due to Conflict with Theatrical Performance
or User's Policies or Religious Tenets: Notwithstanding the Advertising rights
granted to SSI herein, the City reserves the right to temporarily interrupt or
otherwise prevent the illumination or display of particular Advertising on any
and all signs installed by or for SSI in the Coliseum (other than the
scoreboard) for any event or activity other than an SSI use authorized under
this Agreement, without having to remit to SSI the payment contemplated in
Subsection XII.C.6, hereof, whenever the Seattle Center Director determines, in
the exercise of such official's discretion, that the illumination of such
Advertising on SSI's sign(s) would conflict with any aspect of a third party's
actual theatrical presentation or activity occurring within the area of the
-37-
<PAGE>
Coliseum in which Seats are located (as opposed to the lobby, box office,
concourses, concession facilities, the Food service areas associated with Club
Seats, SSI Unlimited Use Facilities, and similar areas of the Coliseum); or such
Advertising display (whether or not illuminated) would otherwise offend or be
offensive to any announced policy of the Western Interscholastic Athletic
Association, the National Collegiate Athletic Association, or any successor of
either such entity, or any third party Coliseum user as a result of a user's
religious tenet. (The exercise of this reserved right may be illustrated by the
following nonexclusive examples: If the Coliseum were licensed or leased for
use for the presentation of a musical or theatrical performance, circus, or
similar event for which a blacking-out of the house is required during any
portion of the performance itself (in contrast to the intermissions and the pre-
and post-performance ingress and egress periods), then the illumination of
Advertising displays in the area of the Coliseum in which Seats are located
could be extinguished during such portion of the performance. Similarly, if the
Coliseum were licensed or leased for use as the site of a religious
organization's convention, and the religion of the members of such organization
enjoined or proscribed the use of caffeinated beverages, and the Seattle Center
Director is advised that the displaying of Advertising for a caffeinated
beverage at such convention site would be offensive to the religious
organization, then the displaying on SSI's signs of a logo, trademark, service
mark, or other text or design element that promotes the sale or use, or contains
the tradename of any caffeinated beverage could be limited, restricted, or
otherwise interrupted during such third party's use of the Coliseum.) The
City's right to interrupt or prevent the displaying of Advertising as reserved
herein shall be exercised as specified in Subsection XII.C.8, hereof.
6. City's Right to Temporarily Interrupt Advertising Displays
Upon Payment of Compensation to SSI: The City may also temporarily interrupt or
otherwise prevent the displaying of any particular Advertising on any of SSI's
signs during an event upon the remittance to SSI of an amount equal to the pro-
rated charge for such Advertising according to the applicable, published rate
card for the same. For the purpose of this subsection, the term "event" shall
be limited to any activity or presentation occurring in the Coliseum pursuant to
a separate licensing agreement with the City authorizing such use, that is
sponsored by any provider, distributor, or manufacturer or a service or product
in competition with a service, product, or product line advertised on SSI's
signs including but not limited to a meeting of a corporation's shareholders,
one or more concerts by musicians on consecutive or non-consecutive days, or
regional or national sports competition or exhibition. The City's right to
interrupt or prevent the displaying of Advertising as reserved herein shall be
exercised as specified in Subsection XII.C.8, hereof.
-38-
<PAGE>
7. City's Right to Allow Temporary Advertising Displays:
Notwithstanding the Advertising rights granted to SSI herein, the City reserves
the right to permit, on such conditions as the Seattle Center Director may
specify in the exercise of such official's discretion, one or more third parties
to display temporary Advertising (whether for commercial or non-commercial
purposes) that is part of the presentation display of an event sponsor, such as
a message incorporated within the staging and lighting, but only during any
event or activity scheduled for presentation, in whole or in part, at the
Seattle Center, including but not limited to Advertising that is by or for one
or more entities or products in competition with any entity or product
advertised on the scoreboard or other sign(s) installed by or for SSI.
8. City Notice to SSI of Need for Advertising Display
Interruption; SSI's Implementation of City Notice: The City's right to
interrupt or prevent the displaying of Advertising, as reserved in Subsections
XII.C.4-6, hereof, may be effected after the Seattle Center Director has given
notice to SSI of such conflict, by requesting that SSI cover such sign(s) or the
image(s) thereon, or by not providing electricity to illuminate the same, and by
specifying the necessary period of such Advertising display interruption.
Immediately following SSI's receipt of such request, SSI shall cover or
discontinue the electricity service to the subject Advertising for the duration
of the specified interruption period.
9. City's Right to Scoreboard Message Center Announcements at
Home Games: At each Home Game SSI shall provide to the City, free of charge,
use of time on the scoreboard message center aggregating not less than four (4)
announcements of approximately fifteen (15) seconds, each, for the promotion of
events being or to be held at the Seattle Center.
10. Advertising Displays Constitute Improvements; Standards for
Construction and Attractiveness: All Advertising displays constructed pursuant
to this Agreement shall be deemed to be "improvements" subject to the provisions
of Article XXI, hereof. No such Advertising display shall interfere, in any
respect, with the City's maintenance of or service in the Coliseum. Unless
otherwise agreed by the parties hereto, the Advertising displays installed in
the Coliseum shall be limited to the number in, and shall have a quality of
construction and display attractiveness that is equivalent to, the displays in
the Salt Lake City Delta Center, as illustrated on Exhibit "J" attached hereto;
SSI and the Seattle Center Director intend, however, to cooperate in the joint
development of standards regarding Advertising displays for the Coliseum to
address issues of number, quality of construction, and display attractiveness in
a manner particularly suited to the Seattle market and the Coliseum as a unique
facility therein and as an integral component of Seattle Center.
Notwithstanding the provisions of
-39-
<PAGE>
Article XXV, hereof, in the event of any dispute regarding the number of
Advertising displays or the quality of construction or the display
attractiveness of any such Advertising display that cannot be resolved by
agreement of the parties, such dispute shall be referred to a special
Advertising display panel composed of three arbitrators. One such arbitrator
shall be selected by the Seattle Center Director, another by the President of
SSI, and the third selected by the other two arbitrators. No person shall be
eligible to serve as such an arbitrator if such person, or such person's spouse
or domestic partner is, or has been within the past two years, an employee of
either party hereto or if such person has, or has had within the past two years,
any contractual association with either party hereto.
11. Title Sponsorship Identification: Appropriate
identification signage shall be installed on the exterior and interior of the
Coliseum for the purpose of identifying and giving recognition to the Coliseum's
"title sponsor." All such signage shall be subject to the conditions of
Subsection XII.C.10, and Articles IV and XXI, hereof. No Advertising display of
SSI or any of other user of the Coliseum shall be erected or displayed in a way
that obstructs, covers or otherwise interferes with any identification of the
Coliseum by reference to the name of its "title sponsor."
XIII. EXCLUSIVE VIDEO PRODUCTION, BROADCAST & CABLECAST
TRANSMISSION RIGHTS
SSI hereby reserves and retains, for itself, the exclusive use and
control of all rights to all Home Games or any other professional basketball
games played in the Coliseum other than performances by the Harlem
Globetrotters, including exclusive rights to preserve, transmit, or reproduce
for hearing or viewing such games by whatever means or processes now exist or
may hereafter be developed for such preservation, transmission, or reproduction
including but not limited to radio and television broadcasting, motion picture
and still photography, video taping and closed circuit pay-per-view and all
forms of cablecasting or electronic transmission without any limitation. The
City shall require every other user of the Coliseum including the Harlem
Globetrotters to grant to SSI a first right of refusal with respect to the
exercising of any such preservation, transmission or reproduction rights for and
in connection with such other user's event or activity in the Coliseum;
Provided, that this obligation shall not apply to any other Coliseum user's
event or activity that, as of the date of such Coliseum use, is to be the
subject of a national network broadcast or cablecast, or that is the subject of
a contract enabling a third party to exercise any of such rights in the Coliseum
and at least one other performance venue.
XIV. TICKET ADMINISTRATION
-40-
<PAGE>
A. SSI Responsibilities: SSI shall have the exclusive
responsibility for and control of the administration of all sales of tickets to
Home Games except as otherwise provided in the Luxury Suite and Club Seat
Marketing Agreement, including but not limited to the printing and distribution
of tickets, the undertaking and conducting of group, season, and special package
sales; the establishment of any and all prices for basic admission to SSI events
and activities in the Coliseum and any service charge(s) thereon (but not the
establishment by any unit of government of any tax on any such admission or
service charges); collection and counting of receipts and accounting; and the
purchase, installation, and maintenance of all equipment used in connection with
such ticketing. As part of this responsibility, SSI shall assume all costs of
such administration.
B. Complimentary Tickets: SSI shall be authorized to determine in
its sole discretion the number and recipients of complimentary admission tickets
and credentials issued for admission to Home Games.
XV. INDEMNIFICATION; INSURANCE
A. Indemnification:
1. SSI to Indemnify City: Except as provided in Subsection
XV.A.3, hereof, SSI shall indemnify and hold the City harmless from any and all
losses, claims, actions, and damages suffered by any person or entity by reason
of or resulting from any negligent, reckless, or intentional act or omission of
SSI or any of its agents, employees, invitees, concessionaires, contractors and
any of their subcontractors in connection with use or occupancy of the Premises;
and if, as a consequence of any such act or omission, any suit or action is
brought against the City, SSI, upon notice of the commencement thereof, shall
defend the same at no cost and expense to the City, and promptly satisfy any
final judgment adverse to the City; Provided, that in the event the City
determines that one or more principles of governmental or public law are
involved, the City retains the right to participate in such action. Nothing
contained in this subsection shall be construed as requiring SSI to indemnify
the City against liability for damages arising out of bodily injury to persons
or damage to property caused by or resulting from the sole negligence of the
City or its officers, employees, or agents. The indemnification provided in
this subsection shall survive the expiration or earlier termination of this
Agreement.
2. City to Indemnify SSI: Except as provided in
Subsection XV.A.3, hereof, the City shall indemnify and hold SSI harmless from
any and all losses, claims, actions, and damages suffered by any person or
entity by reason of or resulting from any negligent, reckless, or intentional
act or omission of the City or any of its agents, employees, invitees,
-41-
<PAGE>
or contractors and any of their subcontractors in connection with use or
occupancy of the Premises; and if, as a consequence of any such act or omission,
any suit or action is brought against SSI, the City, upon notice of the
commencement thereof, shall defend the same at no cost and expense to SSI, and
promptly satisfy any final judgment adverse to SSI. Nothing contained in this
subsection shall be construed as requiring the City to indemnify SSI against
liability for damages arising out of bodily injury to persons or damage to
property caused by or resulting from the sole negligence of SSI or any of its
officers, employees, concessionaires, contractors, or agents. The
indemnification provided in this subsection shall survive the expiration or
earlier termination of this Agreement.
3. Indemnification Regarding Any Alteration, Addition, or
Improvement: Where any bodily injury or damage to property results from or
arises out of any construction, alteration, repair, addition to, subtraction
from, improvement to, or maintenance of, any building, road, excavation, or
other structure, project, development, or improvement attached to real estate,
including moving and demolition in connection therewith, the indemnification
provided pursuant to Subsections XV.A.1 and -.2, hereof, shall be limited to the
extent of the indemnitor's negligence. The indemnification provided in this
subsection shall survive the expiration or earlier termination of this
Agreement.
B. SSI's Liability Insurance: SSI shall maintain at all times
during the use period specified in Article II, hereof, at no cost or expense to
the City, one or more policies of commercial general liability insurance as
required below:
1. Liability Limits: The limitations of liability shall
not be less than Five Million Dollars ($5,000,000.00) Combined Single Limits
(bodily injury and property damage) with a deductible or self-insurance
retention of no more than Two Thousand Five Hundred Dollars ($2,500.00) for
property damage, only.
2. Coverage: Coverage shall be provided for all risk
liability on a "per occurrence" rather than "claims made" basis, for any injury,
death, damage and/or loss of any sort sustained by any person, organization or
corporation (including SSI, or any of its officers, employees and agents) in
connection with or arising out of any act or omission of SSI, or any of its
officers, employees, agents, or assigns upon the Premises and for any activity
performed by SSI under this Agreement and shall include, but need not be limited
to the following types (described in insurance industry terminology):
a. Premises operations liability (O, L & T or M & C);
b. Blanket contractual liability;
-42-
<PAGE>
c. Broad form property damage;
d. Independent contractor (O & CP);
e. Automobile liability for owned, leased, hired or non-
owned vehicles;
f. Products and/or completed operations;
g. Personal injury, including coverages A, B, and C with
no employee exclusion;
h. Fire legal liability;
i. Employees as additional insured; and
j. Copyright/Trademark/Tradename infringement.
All such insurance shall be primary to any other insurance that may be
valid and collectable. SSI is not required to provide insurance coverage
against the City's sole negligence, reckless act, breach of this Agreement, or
violation of any law.
3. Authorized Carriers: The insurance described herein shall
be obtained from insurance companies duly authorized to issue such policies in
the State of Washington, and having a rating of "A-" or better.
4. Naming of City as Additional Insured: The City shall be
named as an additional insured in such policy(ies) or an endorsement thereto, to
the extent provided in Subsection XV.B.1, above, in the following manner:
"The City of Seattle is an additional insured for all coverages
provided by this policy of insurance and shall be fully and
completely protected by this policy for any claim, suit, injury,
death, damage or loss of any sort sustained by any person,
organization or corporation in connection with activity upon or
use or occupancy of certain facilities and automobile parking
areas at Seattle Center, as well as any activity performed by the
principal insured or an affiliate of the principal insured under
a Premises Use & Occupancy Agreement with the City.
"The coverages provided by this policy to the City shall not be
terminated, reduced or otherwise changed in any respect without
providing at least thirty (30) days prior written notice to The
City of Seattle, c/o Seattle Center Facility Sales Office, 305
Harrison Street, Seattle, Washington 98109."
C. Evidence of Insurance: SSI shall deliver to the
Risk Manager
Finance Department
The City of Seattle
600 Fourth Avenue
Seattle, WA 98104
-43-
<PAGE>
or to such other official(s) and address(es) as City may hereafter specify, a
copy of all policies required hereunder, and all endorsements thereto or other
evidence to the reasonable satisfaction of the City Risk Manager or such
official's successor, that SSI has secured or renewed and is maintaining
insurance as required by this Agreement
1. not less than ten (10) days prior to SSI's first use of any
of the Premises pursuant to this Agreement; and
2. within five (5) City business days prior to the expiration
or renewal date of each such policy; and
3. within five (5) City business days after SSI's receipt of a
written request therefor.
D. Assumption of Risk: The placement and storage by SSI of personal
property on the Premises shall be the responsibility, and at the sole risk, of
SSI.
E. Adjustments of Claims: SSI shall provide for the prompt and
efficient handling of all claims for bodily injury, property damage or theft
arising out of the activities of SSI under this Agreement. SSI shall ensure
that all such claims, whether processed by SSI or SSI's insurer, either directly
or by means of an agent, will be handled by a person with a permanent office in
the Seattle area.
F. Remedies upon Failure to Insure: The Seattle Center Director
shall notify SSI whenever the Seattle Center Director has a reasonable belief
that SSI has failed to secure or maintain insurance as required by this
Agreement. Notwithstanding any other provision of this Agreement, after its
receipt of any such notice, SSI shall not enter upon the Premises until SSI has
secured and is maintaining insurance as required by this Agreement.
Alternatively, at the option of the Seattle Center Director, the City may
procure the required insurance for and at the ultimate expense of SSI, from
whatever source the Seattle Center Director or the City's Risk Manager deems
reasonable. In the event the insurance required of SSI is procured by the City,
SSI shall also reimburse all costs incurred by the City to secure such insurance
coverage as well as a service charge, the initial amount of which shall be Two
Hundred Fifty Dollars ($250.00); Provided, that from and after October 1, 1996,
such initial service charge shall be increased by the amount of the total CPI
adjustment that has been made in the annual rent pursuant to Subsection
VIII.A.1.b, hereof, from October 1, 1996, through the date each such service
charge becomes due and payable.
G. Mutual Release and Waiver: For and in consideration of the
execution of this Agreement, the City and SSI each hereby releases and relieves
the other, and waives its entire claim of recovery from the other for loss or
damage to
-44-
<PAGE>
owned or rented property arising out of or incident to fire, lightning and the
perils covered under any extended coverage insurance policy or endorsement
approved for use in the State of Washington, whether such loss or damage is due
to negligence of either party or any agent or employee of either or any other
person unless an insurance policy secured by either party hereto pursuant to
this Agreement or otherwise would become void upon the making of such release
and waiver.
XVI. COMPLIANCE WITH LAW
SSI and the City, each at its sole cost and expense, shall conform and
comply with all applicable laws of the United States and the State of
Washington, the Charter and ordinances of The City of Seattle, rules and
regulations of the Seattle Center, Fire, Health, and Police Departments and
licenses, permits and any directives issued by any authorized official thereof
with respect to such party's responsibilities under this Agreement. In this
connection,
A. Licenses: SSI shall obtain and maintain in full force and effect
during the Term of this Agreement, all licenses, permits and authorizations
required of it by law and conform with all applicable requirements of any
authorized person acting in connection therewith.
B. Nondiscrimination in Employment: SSI agrees to and shall comply
with all State and local laws and ordinances prohibiting discrimination with
regard to race, color, national origin, ancestry, creed, religion, political
ideology, age, sex, sexual orientation, marital status, or the presence of any
sensory, mental or physical handicap.
During the term of this Agreement,
"SSI shall not discriminate against any employee or
applicant for employment because of creed, religion,
race, color, sex, marital status, sexual orientation,
political ideology, ancestry, national origin, or the
presence of any sensory, mental or physical handicap,
unless based upon a bona fide occupational
qualification. SSI shall take affirmative action to
ensure that applicants are employed, and that employees
are treated during employment without regard to their
creed, religion, race, color, sex, national origin, or
the presence of any sensory, mental or physical
handicap. Such action shall include, but not be
limited to the following: employment, upgrading,
-45-
<PAGE>
demotion, or transfer; recruitment or recruitment
advertising; layoff or termination; rates of pay or other
forms of compensation; and selection for training, including
apprenticeship. SSI shall post in conspicuous places,
available to employees and applicants for employment,
notices to be provided by the City setting forth the
provision of this nondiscrimination clause. SSI shall take
affirmative action to ensure that all of its employees,
agents and subcontractors adhere to this provision;
Provided, nothing herein shall prevent an employer from
giving preference in employment to a member of his/her
immediate family.
"SSI shall, upon the request of the Director of the
City's Human Rights Department, or his/her designee
(hereinafter the `HRD Director') furnish to the HRD
Director on such form as may be provided therefor, a
report of the affirmative action taken by SSI in
implementing the terms of this provision, and shall
permit access to SSI's records of employment,
employment advertisements, application forms, other
pertinent data and records requested by the HRD
Director for the purpose of investigation to determine
compliance with this provision.
"If, upon investigation, the HRD Director determines
that there is probable cause to believe that SSI has
failed to comply with any of the terms of this
provision, SSI shall be so notified in writing. The
Seattle Center Director shall give SSI an opportunity
to be beard after ten (10) days notice. If the Seattle
Center Director concurs in the findings of the HRD
Director, the Seattle Center Director may suspend or
terminate this Agreement or withhold any funds due or
to become due to SSI pending compliance by SSI with the
terms of these provisions.
"Failure to comply with any of the terms of this
provision shall be a material breach of this
Agreement."
-46-
<PAGE>
C. Women's and Minority Business Enterprise Utilization:
1. Incorporation of Seattle Municipal Code Ch. 20.46: The
provisions of Seattle Municipal Code Ch. 20.46, (Women's and Minority Business
Enterprise Utilization Ordinance, as amended), are hereby incorporated by
reference and made a part hereof as if fully set forth herein.
2. SSI's WMBE Obligations: During the use period provided in
Article II, hereof, SSI shall:
a. Make every effort to utilize minority business
enterprises and women's business enterprises as subcontractors;
b. Require its subcontractors to make every effort to
utilize women's business enterprises and minority business enterprises; and
c. Maintain records reasonably necessary for monitoring
compliance with the provisions of Seattle Municipal Code Ch. 20.46.
3. Noncompliance with SMC Ch. 20.46 Constitutes Material
Breach: The failure of SSI or any of its subcontractors to comply with any of
the requirements of Seattle Municipal Code Ch. 20.46 shall be a material breach
of this Agreement.
D. Attendance and Safety Standards: The Seattle Fire Chief or
his/her designee shall have the authority to determine, in the reasonable
exercise of his/her discretion, the number of persons that may be admitted to,
and safely and freely move about in, the Coliseum. SSI shall not sell or issue
Home Game tickets or credentials for admission to the Coliseum in an aggregate
number that exceeds the Seattle Fire Chiefs determined number. The City shall
not admit to the Coliseum more people than the number so determined by the
Seattle Fire Chief. SSI shall not permit any chair or movable seat or other
obstruction to be erected or placed in any Coliseum passageway or fire exit.
Sidewalks, grounds, entries, passages, vestibules, halls, elevators, abutting
streets and all ways of access to the Coliseum shall not be obstructed by SSI or
used for any purpose other than for ingress and egress to the Coliseum.
E. Taxes: SSI shall pay, before delinquency, all taxes, levies, and
assessments arising from its activities in, on, or involving occupancy and use
of any Seattle Center facility including, but not limited to, taxes arising out
of the occupancy of, or activity or business conducted in or from the Premises;
taxes levied on SSI's property, equipment, improvements; and taxes levied on
SSI's interest in this Agreement and any leasehold interest recognized by Ch.
82.29A RCW, and in the event the State of Washington makes any demand upon the
City for the
-47-
<PAGE>
remittance of leasehold excise taxes payable by SSI as a consequence of SSI's
occupation of the Premises or withholds funds due to the City to enforce
collection of such leasehold excise taxes, SSI shall immediately pay the same
together with all interest and penalties accessed in connection therewith, or,
at its sole expense, shall contest such action and indemnify the City for all
sums expended by, or withheld by the State from, the City in connection with
such taxation; Provided, that SSI shall not be deemed to be in default as long
as SSI, in good faith, is contesting the validity or amount of any such taxes.
F. Environmental Standards:
1. Definitions: For the purpose of this subsection, the
following terms shall be defined as provided below unless the context clearly
requires a different meaning:
a. "Law or Regulation" means any environmentally related
local, state or federal law, regulation, ordinance or order (including without
limitation any final order of any court of competent jurisdiction of which SSI
has knowledge), now or hereafter in effect including but not limited to the
Clean Air Act, the Federal Water Pollution Control Act, the Safe Drinking Water
Act, the Toxic Substances Control Act, the Comprehensive Environmental Response
Compensation and Liability Act as amended by the Superfund Amendments and
Reauthorization Act of 1986, the Resource Conservation and Recovery Act as
amended by the Solid and Hazardous Waste Amendments of 1984, the Occupational
Safety and Health Act, the Emergency Planning and Community Right-to-know Act of
1986, and the Solid Waste Disposal Act.
b. "Hazardous Substances" shall mean any hazardous, toxic,
or dangerous substance, waste, or material that is regulated under any federal,
state, or local statute, ordinance, or regulation relating to environmental
protection, contamination or cleanup.
2. City Representations & Warranties: The City represents and
warrants that, to the best of its knowledge, the Premises and the real property
on which the Premises are located do not contain any Hazardous Substances found
in violation of any applicable Law or Regulation. The City further represents
and warrants that, to the best of its knowledge, every mandatory requirement of
any applicable Law or Regulation with respect to environmental hazards or
Hazardous Substances affecting the Premises or the real property on which the
Premises is located has been complied with. The City will comply with every
applicable Law and Regulation regulating Hazardous Substances found in, on or
about the Premises or the real property on which the Premises are located and
promptly remedy any violation of each such Law or Regulation except with respect
to Hazardous Substances generated or disposed of by SSI, or any of its
employees, agents, concessionaires, or contractors or any of its
-48-
<PAGE>
contractor's subcontractors or materialmen, or other persons or entities.
3. SSI's General Obligations: SSI shall not cause to occur
upon the Premises or permit the Premises to be used to generate, produce,
manufacture, refine, transport, treat, store, handle, dispose, transfer, or
process Hazardous Substances except in compliance with all applicable Laws and
Regulations. SSI shall provide the Seattle Center Director with SSI's USEPA
Waste Generator Number if SSI's activities require such compliance, and with
copies of all Material Safety Data Sheets (MSDS), Generator Annual Dangerous
Waste Reports, environmentally related regulatory permits or approvals
(including revisions or renewals) and any correspondence SSI receives from, or
provides to, any governmental unit or agency in connection with SSI's handling
of Hazardous Substances or the presence, or possible presence, of any Hazardous
Substance on the Premises.
4. SSI's Obligations Upon Violation of Conditions; City's
Rights Upon SSI Violation: If SSI violates any of the terms of this section
concerning the presence or use of Hazardous Substances or the handling or
storing of hazardous wastes, such shall promptly take such action as is
necessary to mitigate and correct the violation. If SSI does not act in a
prudent and prompt manner, the City reserves the right, but not the obligation,
to act in place (for which purpose SSI hereby appoints the City as its agent),
to come onto the Premises and to take such action as the City deems necessary to
ensure compliance or to mitigate the violation. If the Seattle Center Director
determines that SSI is in violation of any law or regulation, or that SSI's
actions or inactions present a threat of violation or a threat of damage to the
Premises, the City reserves the right to enter onto the Premises and take such
corrective or mitigating action as the City deems necessary. All costs and
expenses incurred by the City where an actual violation had or would have
occurred shall become immediately due and payable by SSI upon presentation of an
invoice therefor.
5. Environmental Inspections & Testing: SSI shall provide the
City with access to the Premises to conduct an annual environmental inspection
in January of each year of the term hereof or at such other time as may be
mutually agreed upon. In addition, SSI shall permit the City access to the
Premises at any time, upon reasonable notice, for the purpose of conducting
environmental testing at the City's expense. SSI shall not conduct or permit
others to conduct environmental testing on the Premises without first obtaining
the Seattle Center Director's written consent, which shall not be unreasonably
withheld. SSI shall promptly inform the Seattle Center Director of the
existence of any environmental study, evaluation, investigation or results of
any environmental testing conducted on the Premises whenever the same becomes
known to SSI, and SSI shall provide a written copy of the same to the Seattle
Center Director within thirty (30) days after the preparation of any such
material.
-49-
<PAGE>
6. SSI's Removal of Hazardous Substances: Prior to vacation of
the Premises, in addition to all other requirements under this Agreement, SSI
shall remove any Hazardous Substances that SSI or any of its employees, agents,
concessionaires, or contractors, or any of its contractor's subcontractors has
placed on the Premises during the term of SSI's use of the Premises, and shall
demonstrate such removal to the Seattle Center Director's reasonable
satisfaction.
7. SSI's Reimbursement of City Costs: In addition to any
remedy provided above, the City shall be entitled to full reimbursement from SSI
whenever the City incurs any cost resulting from SSI's violation of any of the
terms of this section, including, but not limited to, the cost of clean-up or
any other remedial activity, fines, penalties assessed directly against the
City, injuries to third persons or other property, and loss of revenue resulting
from an inability to release or market the Premises due to its environmental
condition as the result of SSI's violation of the terms of this Agreement (even
if such loss of revenue occurs after the expiration or earlier termination of
this Agreement).
8. Indemnification: In addition to all other indemnities
provided in this Agreement, and notwithstanding the expiration or earlier
termination of this Agreement, SSI and the City agree to defend, indemnify and
hold the other free and harmless from any and all claims, causes of action,
regulatory demands, liabilities, fines, penalties, losses, and expenses,
including without limitation cleanup or other remedial costs (and including
attorneys' fees, costs and all other reasonable litigation expenses when
incurred and whether incurred in defense of actual litigation or in reasonable
anticipation of litigation), arising from the existence or discovery of any
Hazardous Substance on the Premises or on the real property on which the
Premises are located resulting from a violation of the terms of this section, or
the migration of any Hazardous Substance from the Premises or from the real
property on which the Premises are located to other property or into the
surrounding environment that is the result of a violation of the terms of this
section, by that party whether (a) made, commenced or incurred during the term
of this Agreement, or (b) made commenced or incurred after the expiration or
termination of this Agreement if arising out of an event occurring during the
term of this Agreement. The indemnification provided in this subsection shall
survive the expiration or earlier termination of this Agreement.
XVII. CITY'S ACCESS TO PREMISES; INSPECTION, REPAIR,
AND IMPROVEMENT OF PREMISES
A. Access to Premises: SSI and the City shall provide each other
with access to the Premises at all reasonable times to inspect the same and to
make any repair, improvement,
-50-
<PAGE>
alteration or addition thereto or any property owned by or under the other
party's control as provided in this Agreement.
B. Permitted Interference With Either Party's Operations: In
inspecting, and in making repairs, alterations, additions, and improvements,
either party may erect barricades and scaffolding in and outside of the
Premises, and may otherwise interfere with the conduct of the other party's
business and operations where such action is reasonably required by the nature
of the work; and such interference shall not be deemed to be a breach or default
under this Agreement. The City shall use its best efforts to minimize
interference with access to and from the Premises and with SSI business and
operations in, on, or from the Premises.
C. Retention and Use of Keys to Premises: Each party shall deliver
to the other such keys as are necessary to enable the other party at any time,
to unlock any door in and to the Premises for which such party may have a
reasonable need of access, excluding doors to vaults, safes, and files. In
addition, City shall have the right to use any and all means that the Seattle
Center Director deems proper to obtain entry to the Premises in an emergency
without liability to SSI except for any failure to exercise due care for SSI's
property. Any entry to the Premises obtained by either party by reasonable
means shall not be construed or be deemed, under any circumstances, to be a
forcible or unlawful entry into, or a detainer of, the Premises or a termination
of SSI's license to use and occupy the Premises or any portion thereof.
XVIII. NO NUISANCES OR OBJECTIONABLE ACTIVITY
Neither party shall permit any objectionable noise, odor, dust, vibration,
or other similar substance or condition to remain on or be emitted from the
Premises; or create any nuisance in or adjacent to the Premises; or do anything
on the Premises that will create an unreasonable danger to life or limb;
Provided, that noise emanating from the audience during a Home Game shall not be
subject to this provision.
XIX. SUBCONTRACTING AND TRANSFER OF OWNERSHIP
A. Subcontracting: SSI shall not subcontract to another person or
entity other than an entity controlled by SSI any of its responsibilities or
obligations under this Agreement without the prior Approval of the Seattle
Center Director, which Approval shall not be unreasonably withheld. Any
subcontract shall be subject to all pertinent terms and provisions of this
Agreement. No subcontract under this Agreement shall release or relieve SSI of
or from any of the obligations on SSI's part to be kept and performed under this
Agreement; provided, however, that provisions of this Subsection XIX.A shall be
inapplicable and
-51-
<PAGE>
without effect with respect to the assignment or other transfer of this
Agreement as part of the sale, assignment, or other transfer of any ownership
interest, in whole or in part, in SSI or interest in the Seattle SuperSonics NBA
Franchise.
B. Transfer Of Ownership Interest:
1. SSI's Delivery of Instrument of Assumption and Agreement:
In the event of the sale, assignment or other transfer of any ownership interest
in the SuperSonics or in SSI, or both to any third party or parties, SSI shall
cause to be delivered to the Seattle Center Director, immediately after such
assignment, sale, or transfer, an instrument, in writing, executed by the
assignee, grantee, purchaser or transferee, in which such person shall assume
and agree to perform all of the terms and provisions of this Agreement to the
extent to the interest acquired. Except as is provided in Subsections XIX.B.2
and -.3, hereof, there shall be no other restraints on the assignment, grant,
purchase, sale or other transfer by SSI of any ownership interest in the
SuperSonics or in SSI.
2. Release of SSI Upon Total Assumption of SSI's Obligations by
Other Party: Upon the delivery by SSI of an instrument of assumption and
agreement as contemplated in Subsection XIX.B.1, hereof, executed by the
assignee, grantee, purchaser, or transferee acquiring one hundred percent (100%)
of SSI's interest in the SuperSonics and this Agreement, each and every
obligation of SSI hereunder shall become null and void as to SSI and SSI shall
have no further direct or indirect liability or obligation hereunder to the
extent of that assumption, notwithstanding any other provision of this
Agreement.
3. Joint & Several Liability of SSI and Other Party Where SSI's
Obligations Are Not Totally Assumed: In the event less than one hundred percent
(100%) of SSI's interest in the SuperSonics and this Agreement is assigned,
granted, purchased by, or transferred to, one or more other persons or entities,
SSI shall remain jointly and severally liable with such other persons and
entities for the performance of its obligations hereunder.
XX. RELATIONSHIP WITH NBA
A. Warranty and Special Covenant: SSI hereby warrants to, and
specially covenants and agrees with, the City as follows:
1. SSI's Ownership of Valid NBA Franchise: SSI is the owner and
holder of a valid effective NBA franchise that permits and authorizes the SSI to
operate a professional basketball team in the Coliseum; and
-52-
<PAGE>
2. No NBA Prohibition or Limitation on SSI's Ability to Execute
or Carry Out Agreement: No rule, regulation, policy, Constitution or Bylaw (or
any provision of any thereof) of the NBA prohibits, limits or affects in any
manner or respect the right or power of SSI to enter into, accept, or perform
each and every one of the terms, commitments and provisions of this Agreement;
and
3. NBA Commissioner Has Approved Agreement: This Agreement
has been approved by the Commissioner.
B. SSI Subject to NBA Rules and Regulations. The activities of SSI
in owning and playing a professional basketball team in the NBA and in matters
related to such activities and the obligations of the Seattle NBA team under
this Agreement are subject to the Constitution, Bylaws, and Rules and
Regulations of the NBA; provided, however, that nothing in such Constitution,
Bylaws, Rules and Regulations shall relieve SSI of its obligation to pay amounts
in accordance with this Agreement except in the instance of a strike or work
slowdown directed against the NBA or SSI by professional basketball players
employed by SSI or a lockout of such players by SSI or the NBA during which SSI
does not use the Coliseum for any purpose.
XXI. IMPROVEMENTS, ADDITIONS, AND ALTERATIONS
A. Prior Approval of Plans and Specifications Required: SSI shall
submit to the Seattle Center Director, for Approval, schematic designs, design
development drawings, and final working drawings and specifications for the
undertaking of any and all demolition, construction, improvement, alteration or
addition in or on the Premises or any portion thereof other than a portion
solely within the Unlimited Use Facilities unless a City structural, utility, or
mechanical system is affected by such work, or such work is likely to increase
the extent or cost of maintenance required of the City under this Agreement, and
unless the design, drawings, and specifications relate to the exterior
appearance of the Practice Facility or SSI Retail Facility, in which case SSI
shall submit such designs, drawings and specifications to the Seattle Center
Director for Approval. All such designs, drawings and plans shall be prepared
by a licensed architect or engineer, who shall have affixed to the same his/her
signature and seal. SSI shall not begin any demolition or the construction of
any improvement, addition, or alteration in or on the Premises subject to the
Approval of the Seattle Center Director until after such Approval has been
given, which Approval shall not be unreasonably withheld.
B. No Representation or Liability Created by Approval: The Approval
of such plans and specifications by the Seattle Center Director shall not
constitute an opinion or representation by the City as to their compliance with
any law or ordinance or their adequacy for other than the Seattle Center
-53-
<PAGE>
Department's purposes; and such Approval shall not create or form the basis of
any liability on the part of the City or any of its officers, employees, or
agents for any injury or damage resulting from any inadequacy or error therein
or any failure to comply with applicable laws or ordinances.
C. Work Inconsistent with Approved Plans and Specifications: No
improvement, alteration, or addition shall be constructed, placed, or erected on
the Premises except in accordance with plans and specifications therefor with
respect to which the Seattle Center Director has given Approval. Immediately
following SSI's receipt of notice by the Seattle Center Director of any
variation between the approved plans and specifications and any improvement,
addition, or alteration in, on, or being made to the Premises, SSI shall either
desist from occupation, use, and operation of such improvement, addition, or
alteration and remove it from the Premises or make it consistent with such
approved plans and specifications or submit the matter within ten days to
arbitration pursuant to the provisions of Article XXV to determine whether the
variation was materially different than what was approved. No change shall be
made to any electrical wiring or other utility serving the Premises as of the
commencement date of this Lease or at any time subsequent thereto, other than a
change made by a properly licensed electrical contractor or electrician, or
plumbing contractor or plumber.
D. Extra Charges: In the event an improvement, addition, or
alteration made or desired to be made by SSI requires or would require any
change in any facility, utility or service provided by the City, SSI shall pay,
as an additional charge, any costs incurred by the City in making such change or
otherwise in connection therewith.
E. Improvements, Additions, and Alterations Become City Property:
All improvements, additions, and alterations made to the Premises by SSI
including but not limited to the Coliseum scoreboard and other equipment to be
provided by SSI pursuant to Subsection IX.D.1.a, hereof, shall become the
property of the City upon the expiration of the Term, and shall remain in, and
be surrendered with the Premises, as a part thereof at that time without
molestation, disturbance, or injury. Trade fixtures and equipment of SSI
including but not limited to Advertising displays installed by or for SSI shall
remain the property of SSI and may be removed by SSI upon the expiration or
earlier termination of this Agreement, consistent with the requirements of
Subsection XXVII.B, hereof.
F. Improvements, Additions & Alterations At SSI Expense: All
improvements, additions, and alterations made to the Premises by SSI to convert
the same to the condition desired by SSI shall be at the expense of SSI and at
no cost to the City unless otherwise specifically agreed by the parties, in
writing.
-54-
<PAGE>
G. Construction Bond: Prior to commencing any alteration, addition
or improvement work on the Premises, SSI, if required by the Seattle Center
Director, shall file with such official a good and sufficient corporate surety
bond subject to approval by the City Attorney as to form and surety, conditioned
upon the completion and installation of said addition, alteration or improvement
as described in plans submitted to and given Approval by the Seattle Center
Director and in accordance with the provisions of this Agreement and all
licenses, permits, ordinances, statutes, regulations and laws governing the
making of the same, and further conditioned upon the payment of all persons
supplying labor and material for the making of said addition, alteration or
improvement, and upon the making of said addition, alteration, or improvement
without cost and expense to the City; provided, however, that the Seattle Center
Director may waive or reduce this surety bond requirement if, in the opinion of
the Seattle Center Director, such surety bond coverage either is unavailable or
available only at an cost deemed by the Seattle Center Director to be
unreasonable under the circumstances.
H. Construction Liability Insurance: SSI shall require its general
contractor to furnish and maintain, at no cost to the City, during the full
period of the making of any part of any physical addition, alteration or
improvement to the Premises having a cost of Five Thousand Dollars ($5,000.00)
or more, a policy of public liability and property damage insurance issued by an
insurance company licensed to do business in the State of Washington, protecting
SSI and the City from any and all claims for damages for personal injury,
including death, and for property loss or damage that may arise from any
activity related to the making of said addition, alteration or improvement,
whether such activity is by SSI, its contractor(s), any subcontractor, or by
anyone directly or indirectly employed by or under contract to any of them.
Said policy shall provide coverage in the following minimum amounts: One
Million Dollars ($1,000,000) Combined Single Limit, One Million Dollars
($1,000,000) Annual Aggregate. Such policy shall name The City of Seattle as an
additional insured and provide that the terms thereof cannot be modified or
terminated without thirty (30) days' prior written notice to the City, all in
the manner and form required by the City's Risk Manager or such official's
successor. Evidence of such insurance must be provided to the City's Risk
Manager consistent with the requirements of Subsection XV.C, hereof, prior to
the commencement of any such work. All such insurance shall be primary to any
insurance maintained by the City.
I. Delivery of "As-Built" Drawings: Immediately after the
completion of each improvement, addition, or alteration to the Premises, SSI
shall deliver to the Seattle Center Director a complete set of reproducible
drawings on mylar sheets not smaller than 2' x 3' reflecting the final "as-
built" condition of said improvement, addition and alteration, together with
either the original or a copy of all maintenance and operation manuals
-55-
<PAGE>
necessary for the repair and maintenance of any structural, mechanical, or
electrical building system or piece of equipment installed on the Premises that
is not a removable trade fixture.
J. Testing of Premises: SSI may make such tests, borings and other
minor disturbances of the Premises as may be necessary to develop designs and
plans for all required or desired improvements, additions and alterations to the
Premises, including installations and modifications to accommodate changes in
trade fixtures intended for use on the Premises. A report of the findings and
results of each such test or boring shall be submitted to the Seattle Center
Director within thirty (30) days after the date such findings and results are
obtained.
XXII. DAMAGE AND DESTRUCTION
A. Notice: In the event that the Coliseum, or any portion thereof,
is destroyed or damaged in any manner that limits or prevents the playing,
exhibition, attendance at, or viewing of a Home Game, or the exercise by SSI of
any other rights granted to it by this Agreement (an "Occurrence"), SSI or the
City, as the case may be, shall submit a notice to the other party regarding the
existence and extent of such damage or destruction within forty-eight (48) hours
after such party's discovery of the Occurrence.
B. City Notice of Intentions Regarding Rebuilding of Coliseum:
1. Circumstances Under Which City Obligated to Repair & Restore
Coliseum After Occurrence: In the event of an Occurrence, the City shall
immediately undertake such repair and restoration work as may be necessary to
completely restore the Coliseum to at least the condition it was in immediately
prior to the Occurrence where (i) the reason for the Occurrence was a risk that
was not excluded from coverage under Subsections B.1.a-g of the "Causes of Loss
- - Special Form" standard 1S0 1983, 1989 Special Risk Property Insurance Form
("CP 10 30 10 90") and (ii) the cost of such work is estimated to not exceed "Y"
in the following formula:
Y = C x N where:
--
15
"C" = the total cost paid by the City to construct and equip the
Coliseum; and
"N" = the number of full years remaining in the Agreement term;
Provided, that even if the City is not obligated to restore and repair the
Coliseum according to the above formula, the City may,
-56-
<PAGE>
nonetheless, at its election, perform such restoration and repair pursuant to
the provisions of this Article XXII.
2. City Notice of Intent to Restore & Repair Coliseum After
Occurrence: The City shall give notice to SSI as soon as practicable after the
Occurrence regarding the City's assessment of the extent of damage or
destruction that has occurred and of the City's determination whether or not to
restore and repair the Coliseum; Provided, that such notice to SSI shall not be
given later than one hundred (100) calendar days after the Occurrence. In
addition, if such notice advises SSI of the City's determination to not restore
or repair the Coliseum, the notice shall also set forth in detail the reasons
why such determination is in compliance with the terms of this Article XXII.
C. SSI Remedies During City Repair and Restoration of Coliseum:
1. In the event that the City undertakes and completes the
repair and restoration of the Coliseum after an Occurrence, then the annual rent
or adjusted rent and additional rent required by Subsections VIII.A.1 and 2,
hereof, shall be abated by an amount equal to "Z" in the following formula:
N AS
-- --
Z = 41 x R x T5 where:
"N" = the number of Home Games that could not be played in the
Coliseum because of the Occurrence that were scheduled
between the date of the Occurrence and the Use Commencement
Date for the repaired Coliseum;
"R" = the annual rent or adjusted annual rent, as appropriate, due
between the date of the Occurrence and the Use Commencement
Date for the repaired Coliseum;
"AS" = the number of Seats from which a Home Game cannot be
reasonably viewed because of the Occurrence; and
"TS" = the total number of Seats in the Coliseum.
2. City's Liability for SSI Damages After Thirteenth Month
Following Occurrence & Prior To Restoration of Coliseum: In the event that
Coliseum repair and restoration work required because of an Occurrence takes
longer than one hundred (100) days, in addition to the abatement of rent and
adjusted rent as provided in Subsection XXII.C.1, hereof, the City shall
compensate SSI for all damages and losses that SSI reasonably incurs as a result
of the Occurrence from the first day of the
-57-
<PAGE>
thirteenth (13th) month after the Occurrence through the latest Use Commencement
Date.
D. No Liability for Termination: The termination of this Agreement
by either the City or SSI as provided in this Article XXII, hereof, shall not
create any liability on or of the terminating party for the benefit of the other
party.
XXIII. SUSPENSION OF OBLIGATIONS (FORCE MAJEURE)
Whenever a party's performance of any obligation under this Agreement
except those obligations set forth in Article rn is prevented by an act of war
or warlike operation by a foreign nation; a labor dispute including a strike,
lock-out, or walkout including such labor dispute between SSI or the NBA and
players employed by the NBA; then the performance of such affected obligation
shall be suspended, but only for so long as such performance remains beyond the
reasonable control of such party. SSI's obligations hereunder shall not be
suspended, however, if during any such labor dispute, SSI uses any portion of
the Premises for the practicing for, or the playing of, any professional
basketball game by persons who are not participants in such labor dispute.
XXIV. NOTICES
Any notice or communication to be given by one party to the other under
this Agreement must be in writing; and if given by registered or certified mail,
such notice or communication shall be deemed to have been given and received
when a registered or certified letter containing such notice or communication,
properly addressed, with postage prepaid, is deposited in the United States
mail, but if given otherwise than by registered or certified mail, it shall be
deemed to have been given when received by the party to whom it is addressed.
Such notices or communications shall be delivered or sent to the following
respective addresses or to such other addresses as the parties, from time to
time, may specify in writing:
If to the City:
Seattle Center Director
Seattle Center Department
The City of Seattle
305 Harrison Street
Seattle, WA 98109
If to SSI:
SSI Sports, Inc.
Attn: President
190 Queen Anne Avenue North
-58-
<PAGE>
2nd Floor
Seattle, WA 98109
XXV. ARBITRATION
A. Disputes To Be Resolved Through Arbitration: All claims,
disputes and other matters in question between the parties arising out of, or
relating to provisions of this Agreement shall be decided by binding arbitration
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect unless the parties mutually agree otherwise or unless
the claim, dispute, or matter in question relates to the provisions of Article
II ("Term; Use Period"), Article III ("Termination of Current Agreement
Providing Seattle Center Space for SuperSonics Home Games Use"), Article IV
("Coliseum Design and Construction"), Article V ("Coliseum Planning &
Construction Schedule; SSI Opportunities to Void Agreement"), Subsection XVI.F
("Hazardous Substances") or Article XIX ("Subcontracting and Transfer of
Ownership"). The dispute shall be determined by majority vote of a panel of
three arbitrators, unless the parties agree to have the matter decided by a
single arbitrator. The written decision of the arbitrator(s) shall be final and
binding on all parties to the arbitration proceeding. The costs and expenses
(including reasonable attorneys' fees) of the arbitration proceeding shall be
assessed in favor of the prevailing party by the arbitrator(s), and the
assessment shall be set forth in the decision and award of the arbitrator(s).
The parties recognize that a need may arise for a more expeditious resolution of
disputes concerning Article IV ("Coliseum Design and Construction") and
therefore will make their best efforts to develop a mutually satisfactory
informal dispute resolution mechanism for such matters.
B. Limitations on Arbitration Scope: No arbitration arising out of
or relating to this Agreement shall include, by consolidation, joinder or in any
other manner any parties other than the parties to this Agreement and any other
persons substantially involved in a common question of fact or law, whose
presence is required if complete relief is to be accorded in the arbitration.
No parties other than the parties to this Agreement shall be included as an
original third party or additional third party to an arbitration whose interest
or responsibility is insubstantial. Any consent to arbitration involving an
additional person or persons shall not constitute consent to arbitration of any
dispute not described therein. The foregoing agreement to arbitrate and any
other agreement to arbitrate with any additional parry duly consented to by the
parties hereto shall be specifically enforceable under prevailing arbitration
law.
C. Notice of Demand for Arbitration: Notice of the demand for
arbitration shall be filed in writing with the other
-59-
<PAGE>
party and with the American Arbitration Association. The demand for arbitration
shall be made within a reasonable time after the claim, dispute or other matter
in question has arisen, and in no event shall it be made after the date when
institution of legal or equitable proceedings based on such claim, dispute or
other matter in question would be barred by the applicable statute of
limitations.
D. Limitation on Judicial Relief: No proceedings based upon any
claim arising out of or related to this Agreement shall be instituted in any
court by any party hereto against any other parry hereto except (i) an action to
compel arbitration pursuant to this Section, (ii) an action to enforce the award
of the arbitration panel rendered in accordance with this Section, (iii) to file
arbitration award as a judgment, and (iv) proceedings brought by SSI for
injunctive relief or any other interim remedy to protect SSI's rights under this
Agreement.
XXVI. DEFAULT AND REMEDIES THEREFOR
A. Act of Default and Breach by the Parties: In addition to the
acts and omission described this Agreement, the following acts and omissions
shall constitute a default and material breach of this Agreement:
1. SSI's Failure to Insure: The failure of SSI to comply with
all of the requirements of Article XV, hereof, regarding insurance; or
2. SSI's Abandonment of Premises: The abandonment or vacating
of the Premises by SSI without cause; or
3. SSI's Nonremittance of Amounts Due City: The failure of SSI
without cause to pay to the City, in a timely manner, the amounts due under
Article VIII, hereof; or
4. City's Failure to Maintain Premises: The failure of the
City to maintain the Premises as required by this Agreement; or
5. Violation of Other Provisions of Agreement: The failure by
either party to perform or the violation of any other condition, warranty,
covenant or provision of this Agreement where such default or deficiency in
performance was not remedied within a reasonable time unless -a specific period
of time is specifically provided for herein.
B. Notice to Cure: In the event either party fails to perform any
obligation hereunder, whether imposed by law, ordinance, regulation, or
otherwise, or violates any provision of this Agreement, the other party shall
notify such party of such failure or violation and, except where impracticable,
shall provide the other with a reasonable period to correct, remedy or
-60-
<PAGE>
cease such failure or violation, which period shall not exceed ninety (90) days
after the date of such notice unless the nature of the notified party's
obligation is such that more than ninety (90) days is reasonably required for
its performance, in which case the notified party shall not be in default if,
within such ninety (90) day period, it commences the activity necessary to
enable it to perform and thereafter diligently undertakes such activity to its
completion. Nothing in this Agreement shall enable SSI to avoid liability for
interest on any delinquent payments due to the City.
C. Rights Upon Default and Breach: After expiration of the cure
period provided pursuant to Subsection XXVI.B, hereof:
1. City Rights Upon SSI Default & Breach: In the event SSI
fails to correct, remedy, or cease such failure or violation within the time
specified in the City's notice, the City may thereafter terminate this Agreement
without any further proceedings, reenter the Premises, lease and license others
to use said Premises and receive rent and license fees therefor as if this
Agreement had not been made; provided, that SSI shall remain liable for the full
amount due to the City pursuant to Article VIII, hereof, as and when due, but
may offset against such liability the amount received by the City as a
consequence of such subsequent lease or license. The City shall also have such
other remedies as may be available to it, which shall include, without
limitation, injunctive relief and damages. The City shall take all reasonable
measures to mitigate any damages.
2. SSI Rights Upon City Default & Breach: In the event the
City fails to correct, remedy, or cease such failure or violation within the
time specified in SSI's notice, then in addition to any other remedies available
to SSI, which shall include, without limitation, injunctive relief, damages, and
the withholding of rent, SSI may terminate this Agreement, whereupon all SSI's
obligations that had not been incurred as of the effective termination date,
including the obligation to pay future rent, shall terminate.
D. Termination by Court Decree: In the event that any court having
jurisdiction renders a decision that has become final and that prevents the
performance by the City of any of its obligations under this Agreement, either
party may terminate this Agreement, without recourse, by providing written
notice of termination to the other party, specifying the effective date thereof,
as of which date all rights and obligations that accrued prior to the effective
date of termination shall terminate.
XXVII. SURRENDER OF PREMISES; HOLDING OVER
A. Surrender and Delivery: Upon the expiration or termination of
the use period specified in Article II, hereof,
-61-
<PAGE>
whichever is earlier, SSI shall surrender the Premises and promptly deliver to
the Seattle Center Director all keys SSI, its officers, agents, and employees
may have to the Seattle Center and the Premises.
B. Removal of SSI's Property: Prior to the expiration of the use
period specified in Article R, hereof, or in the event this Agreement is
terminated, within fifteen (15) days after the termination date, whichever is
earlier, the SSI shall remove, at its sole expense, all trade fixtures, trade
furnishings, trade equipment, Advertising displays and other personal property
owned or installed by SSI in, on, or from the Premises, taking due care to not
unreasonably injure or damage the Premises, and shall make such repairs to the
Premises as shall be necessary to restore the same to their condition as of the
commencement date of the use period specified in Article II, hereof, ordinary
wear and tear and improvements, additions, and alterations approved by the City
excepted. Notwithstanding any other provision hereof, improvements, additions,
and alterations installed on the Premises by the City or by SSI with the City's
Approval shall not be removed without the express, written authorization of the
Seattle Center Director.
C. Storage of SSI's Property: In the event SSI fails to remove all
fixtures, furnishings, trade equipment, and other personal property owned by SSI
on or by the time specified in Subsection XXVII.B, hereof, the City may, but
shall not be required to, remove such material from the Premises and store the
same, all at SSI's expense; and in the event the City removes or arranges for
the storage of such material, SSI shall reimburse the City for all costs
incurred in connection with such removal or storage, including any
administrative costs, which reimbursement shall be paid within thirty (30) days
after the date of the City's invoice therefor.
D. Holdover Use and Occupancy of Premises: In the event SSI, with
the consent of the City, holds over after the expiration or termination of the
use period specified in Article II, hereof, whichever is earlier, SSI shall be
bound by all of the provisions of this Agreement during such holdover period.
E. No Claims for Removal: In no event shall SSI make any claim or
demand upon the City nor shall the City be liable for any inconvenience,
annoyance, disturbance, or loss of business or any other damages suffered by SSI
arising out of such removal operations under Subsections XXVII.B and C., hereof.
XXVIII. MISCELLANEOUS PROVISIONS
A. City Warranty of Title and Authority: The City represents and
warrants to SSI that the City holds fee simple title to the Premises, free from
any liens or encumbrances and has the full right, power and authority to enter
into this Agreement with
-62-
<PAGE>
SSI. Subject to SSI's compliance with all applicable terms and conditions of
this Agreement, the City covenants and agrees that throughout the term of this
Agreement, SSI shall be permitted to lawfully, peaceably and quietly have, hold,
occupy and enjoy the Premises and any appurtenant rights granted to SSI
hereunder during the term without hindrance or ejectment by the City or the
successors or assigns of the City or anyone acting by, through or on behalf of
the City.
B. Use of Language: Words used in the neuter gender include the
masculine and feminine; and words used in the singular or plural includes the
other as the context may require.
C. Captions: The titles of sections and subsections are for convenience
only and do not define or limit the contents.
D. Amendments: No modification or amendment of the provisions of this
Agreement shall be effective unless written and signed by the authorized
representatives of the parties hereto. The parties hereto expressly reserve the
right to modify this Agreement from time to time by mutual agreement.
E. Time of Essence: Time is of the essence in this Agreement.
F. Remedies Cumulative: Except as otherwise provided herein, rights
under this Agreement are cumulative; failure to exercise on any occasion any
right shall not operate to forfeit such right on another occasion. Each party
shall also have any other remedy given by the law. The use of one remedy shall
not be taken to exclude or waive the right to use another.
G. No Waiver: No action other than a written notice by one party to the
other specifically stating that such notice has the effect of waiver, shall
constitute a waiver of any particular breach or default of such other party. No
such notice shall waive SSI's failure to fully comply with any other term,
condition, or provision of this Agreement, irrespective of any knowledge any
City officer, employee, or agent may have of any breach or default of, or
noncompliance with, such other term, condition, or provision. No waiver of full
performance by either party shall be construed, or operate, as a waiver of any
subsequent default of any of the terms, covenants and conditions of this
Agreement. The payment or acceptance of rent for any period after a default
shall not be deemed a waiver of any right or acceptance of defective
performance.
H. Limited Effect of Approval by Seattle Center Director: Action of the
Seattle Center Director pursuant to or in implementation of this Agreement does
not constitute any official action by any other City Department or official that
may be required by law, City Charter, ordinance, rule or regulation before SSI
may rightfully commence, suspend, enlarge, or terminate any
-63-
<PAGE>
particular undertaking or may obtain or exercise any particular right or
privilege under this Agreement.
I. No Relationship: In no event shall the City be construed to be a
partner, associate, or joint venturer of SSI, or any party associated with SSI.
SSI is not an agent of the City for any purpose whatsoever. SSI shall not
create any obligation or responsibility on behalf of the City or bind the City
in any manner.
J. Powers of the City: Nothing contained in this Agreement shall be
considered to diminish the governmental or police powers of the City.
K. Binding Effect: The provisions, covenants and conditions in this
Agreement apply to bind the parties, their legal representatives, successors,
and assigns.
L. Enforcement of this Agreement: The obligations of the parties to this
Agreement are unique in nature; this Agreement may be specifically enforced by
either party.
M. Invalidity of Particular Provisions: Should any term, provision,
condition or other portion of this Agreement or the application thereof be held
to be inoperative, invalid or unenforceable, the remainder of this Agreement or
the application of such term or provision to persons or circumstances other than
those to which it is held invalid or unenforceable shall not be affected thereby
and shall continue in full force and effect.
N. Costs of Suit and Attorneys' Fees: If either party shall commence
suit to enforce any terms or condition or covenant herein, or in any other
action for relief against the other, declaratory or otherwise, arising out of
this Agreement, the nonprevailing party in such action shall pay the prevailing
party, in addition to any judgment, a reasonable sum as attorneys' fees together
with costs of litigation through arbitration or trial including appellate
proceedings.
O. Applicable Law; Venue: This Agreement shall be construed under the
Law of the State of Washington. Venue for any action brought hereunder shall be
in King County, Washington.
P. Previous Agreements Superseded: The terms and conditions of this
Agreement supersede the terms, obligations and conditions of any existing or
prior agreement or understanding, written or oral, between the parties regarding
the Premises other than the terms, obligations and conditions of the March
22,1993 Memorandum of Understanding, which is superseded only to the extent the
terms and conditions of this Agreement are inconsistent with such Memorandum of
Understanding or as expressly provided herein.
Q. Construction of Agreement: The parties to this Agreement acknowledge
that it is a negotiated agreement, that they have had
-64-
<PAGE>
the opportunity to have this Agreement reviewed by their respective legal
counsel, and that the terms and conditions of this Agreement are not to be
construed against any party on the basis of such party's draftsmanship thereof.
R. Incorporation of Exhibits; Entire Agreement: This Agreement,
including the following attached exhibits:
Exhibit "A" Coliseum Floorplan showing Club Seat and Courtside Seat
locations
Exhibit "B" Coliseum Site Map showing, inter alia, the South
Coliseum Parking Lot
Exhibit "C" Coliseum Floorplan showing Function Room locations
Exhibit "D" Map showing Practice Facility site
Exhibit "E" Ground Lease for Practice Facility site
Exhibit "F" Map showing SSI Retail Facility location
Exhibit "G-1" Coliseum Floorplans showing SSI Unlimited Use
Facilities
Exhibit "G-2" Coliseum Floorplans showing authorized SSI use and
occupancy areas on any Day of Game
Exhibit "H" Food and Beverage Service Agreement
Exhibit "1" Novelties Concession Agreement
Exhibit "J" Photographs of "Look & Feel" of Salt Lake City Delta
Center
Exhibit "X" February 4, 1994 communication from Director of
Construction and Land Use
which exhibits, by this reference, are incorporated herein, contains and
constitutes all of the covenants, promises, agreements, and conditions, either
oral or written, between the parties regarding the subject matter thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by having their authorized representatives affix their signatures in
the space below:
SSI SPORTS, INC. THE CITY OF SEATTLE
By: /s/ Barry A. Ackerley By: /s/ Virginia Anderson
--------------------------- ----------------------------
Chairman Seattle Center Director
By: /s/ Robert Whitsitt
---------------------------
President
Pursuant to Ordinance _________
-65-
<PAGE>
STATE OF WASHINGTON )
) ss:
COUNTY OF KING )
On this 2nd day of March , 1994, before me, the undersigned, a
Notary Public in and for the State of Washington, duly commissioned and sworn,
personally appeared Virginia Anderson, to me known to be the Seattle Center
Director, who executed the foregoing instrument, and acknowledge said instrument
to be the free and voluntary act and deed of The City of Seattle, for the uses
and purposes herein mentioned, and on oath stated that she is authorized to
execute said instrument.
WITNESS my hand and official seal hereto affixed the day and year in this
certificate above written.
/s/ Carolyn C. Gossard Carolyn C. Gossard
----------------------- ---------------------------
(Signature) (Print or type name)
NOTARY PUBLIC in and for the State of Washington, residing at Seattle. My
appointment expires 11/28/96.
-66-
<PAGE>
STATE OF WASHINGTON )
) ss:
COUNTY OF KING )
On this 24th day of February, 1994, before me personally appeared Bob
Whitsitt, to me known to be the President of SSI Sports, Inc., the corporation
that executed the foregoing instrument, and acknowledged said instrument to be
the free and voluntary act and deed of said corporation, for the uses and
purposes therein mentioned, and further that said officer has the authority to
sign on behalf of said corporation.
WITNESS my hand and official seal hereto affixed the day and year in this
certificate above written.
/s/ Sarah Furtado Sarah Furtado
- -------------------------------- -------------------------------
(Signature) (Print or type name)
NOTARY PUBLIC in and for the State of Washington, residing at King County. My
appointment expires 10/21/96.
STATE OF WASHINGTON )
) ss:
COUNTY OF KING )
On this 14th day of March, 1994, before me personally appeared Barry
Ackerley, to me known to be the Chairman of the Board of SSI Sports, Inc., the
corporation that executed the foregoing instrument, and acknowledged said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and further that said officer has the
authority to sign on behalf of said corporation.
WITNESS my hand and official seal hereto affixed the day and year in this
certificate above written.
/s/ Mary Dawn Robertson Mary Dawn Robertson
- ------------------------------- --------------------------
(Signature) (Print or type name)
NOTARY PUBLIC in and or State of Washington, residing at Seattle.
My appointment expires 1/25/98.
-67-
<PAGE>
SUBSIDIARIES
Name Under Which Subsidiary Does Business State of Incorporation
- ----------------------------------------- ----------------------
Ackerley Airport Advertising, Inc. Washington
Ackerley Communications Group, Inc. Washington
Cypress Broadcasting, Inc. Washington
KGET TV, Inc. Washington
KJR Radio, Inc. Washington
KKTV, Inc. Washington
KVOS TV, Inc. Washington
KVOS TV, Ltd. British Columbia,
Canada
Seattle SuperSonics, Inc. Washington
TC Aviation, Inc. Oregon
WIXT TV, Inc. Washington
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Ackerley Communications, Inc.
We have audited the accompanying consolidated balance sheets of Ackerley
Communications, Inc. as of December 31, 1994 and 1993, and the related
consolidated statements of operations, stockholders' deficiency, and cash flows
for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Ackerley Communications, Inc. at December 31, 1994 and 1993, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Seattle, Washington
March 3, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned Director of Ackerley Communications, Inc. (the "Company")
hereby appoints each of Barry A. Ackerley and Denis M. Curley his true and
lawful attorney and agent, in name and on behalf of the undersigned, to do any
and all acts and things and execute any and all instruments which the attorney
and agent may deem necessary or advisable to cause the 1994 Annual Report on
Form 10-K to be filed with the Securities and Exchange Commission, and likewise
to sign any and all amendments (the signing of any such instrument to be
conclusive evidence that the attorney considers such instrument necessary or
desirable), without the other and with full power of substitution and
revocation, and hereby ratifying all that any such attorney or his substitute
may do by virtue hereby.
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Power of Attorney has been signed by the following person in the capacity
indicated on this 20th day of March, 1995.
/s/ Michel C. Thielen
-------------------------------
Michel C. Thielen
Director
