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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934
SCOTT CABLE COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its charter)
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<S> <C>
TEXAS 75-1766202
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
FOUR LANDMARK SQUARE, SUITE 302
STAMFORD, CONNECTICUT 06901
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(Address of principal executive (Zip Code)
offices)
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Registrant's telephone number, including area code ____(203) 323-1100____
Securities to be registered pursuant to Section 12(b) of the Act:
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<S> <C>
TITLE OF EACH NAME OF EACH EXCHANGE ON WHICH
CLASS EACH CLASS IS TO BE REGISTERED
IS TO BE -------------------------
REGISTERED None
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None
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Securities to be registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK
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(Title of Class)
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ITEM 1. BUSINESS.
GENERAL
Scott Cable Communications, Inc. ("Scott" or the "Company") is engaged in
the ownership and operation of cable television systems in suburban and rural
markets in the United States. As of January 22, 1997, Scott owned and operated
twenty-four systems, serving approximately 76,000 subscribers and passing
approximately 118,000 homes located in ten states (Arkansas, California, Texas,
Colorado, Louisiana, New Mexico, Ohio, North Dakota, Virginia and Nebraska). All
of the Company's systems are located in areas that are in reasonably close
proximity to systems operated by major multiple system operators. The Company's
systems are operated under the trade name American Cable Entertainment.
The Company's systems currently offer customers various levels of cable
services consisting of a combination of broadcast television signals and
satellite television signals. For an extra monthly charge, the Company's systems
also offer "premium" television services to their customers. These services
(such as Home Box Office-Registered Trademark-, Cinemax-Registered Trademark-,
Showtime-Registered Trademark- and The Movie Channel-Registered Trademark- ) are
satellite-delivered channels that consist principally of feature films, live
sporting events, concerts and other special entertainment features, presented
without commercial interruption. The service options offered vary from system to
system, depending upon a system's channel capacity and viewer interests. Rates
for services also vary from market to market and according to the type of
services selected. Substantially all of the Company's systems currently offer a
"broadcast basic" package, one or more satellite service tiers and several
premium services. Subscribers may choose various combinations of such services.
The Company's systems are located in suburban and rural markets. The Company
believes non-urban systems generally involve less economic risk than systems in
large urban markets since service in non-urban markets is often necessary to
receive a wide variety of television signals (including local broadcast
stations) and non-urban markets typically offer less competitive entertainment
alternatives than urban markets. The Company also believes that non-urban
systems have lower labor, marketing and system construction costs and higher and
more predictable operating cash flow margins than systems in large urban
markets.
The cable television industry is subject to extensive governmental
regulations at the federal, state and local levels. In June 1995, the Federal
Communications Commissions (the "FCC") extended relief from the rate regulatory
provisions of the Cable Television Consumer Protection and Competition Act of
1992 (the "1992 Cable Act") to small cable operators such as the Company,
thereby enabling greater flexibility in establishing service rates. In February
1996, Congress enacted the 1996 Telecommunications Act (the "1996 Telecom Act")
which, among other things, deregulated all levels of service, except broadcast
basic service, to small cable operators such as the Company. The Company
believes that it has the opportunity to increase cash flow generated by its
systems as a result of these developments.
The Company's executive offices are located at Four Landmark Square, Suite
302, Stamford, Connecticut 06901. The Company's telephone number is (203)
323-1100. Scott was incorporated in Texas on May 14, 1981. Unless the context is
otherwise, the term the "Company" shall mean Scott Cable Communications, Inc.
BACKGROUND
In January 1988, Simmons Communications Merger Corp. merged (the "Merger")
with and into the Company pursuant to a merger agreement whereby each share of
common stock of the Company was converted into the right to receive $27.25 in
cash or approximately $129.3 million in the aggregate. As a result of the
Merger, the Company became highly leveraged.
In October 1992, the 1992 Cable Act was enacted and the FCC imposed
extensive regulations on the rates charged by cable television owners and
operators. Beginning in 1993, the Company's revenue and cash flow were adversely
impacted by these regulations as the Company was required to reduce many of its
service rates effective September 1993 and again in August 1994.
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In 1993, the Company extended the maturity date of its senior indebtedness
to November 1995 and in conjunction with such extension, agreed to make
principal payments of $15 million in January 1994 and $18 million in March 1995.
As part of the Company's efforts to satisfy these mandatory payment obligations
and provide additional working capital, Scott sold cable systems located in
Rancho Cucamonga, California in January 1994 for $23.6 million and Missouri,
Oklahoma, Kansas and northern Texas for $12.4 million in February 1995.
In October 1995, the Company failed to make an interest payment on its
outstanding subordinated debentures and in November 1995, the Company's senior
secured debt aggregating approximately $34.4 million matured and the Company
failed to pay such debt on maturity. The Company entered into 90-day standstill
agreements with holders of its senior bank loans and notes and holders of its
senior subordinated notes in order to seek refinancing alternatives; however,
the Company was unable to refinance its obligations or negotiate a restructuring
on favorable terms prior to the expiration of the agreements.
BANKRUPTCY
In February 1996, the Company, together with Ace-Texas, Inc., Ace-East,
Inc., Ace-U.S., Inc., Ace-South, Inc., Ace-West, Inc., and Ace-Central, Inc.,
all of which were holding companies whose only assets were the then issued and
outstanding shares of capital stock of the Company (collectively the "Holding
Companies" and together with the Company, the "Debtors"), filed a voluntary
petition for relief under Chapter 11 of the United States Bankruptcy Code, as
amended (the "Bankruptcy Code"), with the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"). On August 29, 1996, the Debtors
filed their Joint Plan of Reorganization, and on October 23, 1996 and November
1, 1996, respectively, the Debtors filed their First and Second Amended Joint
Plan of Reorganization. During this period, the Company sought new financing to
replace approximately $62.3 million of debt which had matured and negotiated new
terms for approximately $88.4 million of subordinated and junior subordinated
debt, including the deferral of cash interest payments for several years. On
December 6, 1996, the Bankruptcy Court confirmed the Debtors Second Amended
Joint Plan of Reorganization, as modified (the "Plan of Reorganization" or the
"Plan") and the Plan became effective on December 18, 1996.
The purpose of the Plan was to enable the Company to refinance a portion of
its debt and restructure a portion of its debt in order to extend maturities and
enhance the Company's value through anticipated cash flow growth during the next
several years. The Plan of Reorganization generally provided for (i) the
Company's continued operations; (ii) the consummation of a senior, secured
credit facility for up to $67.5 million in loans for cash distributions to
creditors and working capital; (iii) the payment in full in cash of allowed
claims of holders of the Company's senior secured credit agreement and senior
secured notes aggregating approximately $31.4 million, holders of the senior
secured subordinated notes aggregating approximately $17.6 million and unsecured
zero coupon notes aggregating approximately $13.3 million; (iv) the issuance of
restructured secured notes, cash and 75,000 shares of Class C Common Stock to
the holders of unsecured public subordinated debentures in the aggregate amount
of $55.1 million, which includes accrued interest; (v) the issuance of
restructured secured notes and 24,000 shares of Class B Common Stock to the
holders of unsecured junior subordinated notes in the aggregate amount of $38.9
million; (vi) the payment of cash to holders of the Company's equity securities
prior to the bankruptcy filing and the cancellation of such stock; and (vii) the
issuance of 1,000 shares of Class A Common Stock to the manager of the Company's
systems.
CABLE TELEVISION SYSTEMS
A cable television system receives television, radio and data signals at the
system's "headend" by means of off-air antennas, microwave relay systems and
satellite earth stations. These signals are then modulated, amplified and
distributed, primarily through coaxial and fiber optic distribution systems, to
deliver a wide variety of channels of television programming, primarily
entertainment and informational video programming to the homes of subscribers
who pay fees for this service, generally on a monthly basis.
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A cable television system may also originate its own television programming and
other information services for distribution through the system. Cable television
systems generally are constructed and operated pursuant to non-exclusive
franchises or similar licenses granted by local governmental authorities for a
specified period of time.
A customer generally pays an initial installation charge and fixed monthly
fees for basic and premium television services and for other services (such as
the rental of converters and remote control devices). Such monthly service fees
constitute the primary source of revenues for the systems. In addition to
customer revenues, the systems receive revenue from additional fees paid by
customers for pay-per-view programming of movies and special events and from the
sale of available advertising spots on advertiser-supported programming. The
systems also offer to their customers home shopping services, which pay the
systems a share of revenues from sales of products in the system's service area.
THE SYSTEMS
The Company's systems are divided into nine separate operating groups or
systems located in ten states. All of the Company's systems are located in areas
that are in reasonably close proximity to systems operated by major multiple
system operators. The following is a summary of certain operating data, as of
December 31, 1996, with respect to each system:
<TABLE>
<CAPTION>
PERCENTAGE
OPERATING GROUPS HOMES BASIC BASIC PREMIUM PREMIUM OF TOTAL
OR SYSTEMS PASSED SUBSCRIBERS PENETRATION UNITS PENETRATION SUBSCRIBERS
- ------------------------------------------------- --------- ----------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alamogordo....................................... 24,009 13,933 58.0% 4,837 34.7% 18.3%
Bellefontaine.................................... 10,881 7,480 68.7% 3,456 46.2% 9.9%
Chadron.......................................... 5,603 4,048 72.2% 1,472 36.4% 5.3%
Cortez........................................... 2,850 2,026 71.1% 995 49.1% 2.7%
Dickinson........................................ 6,700 5,241 78.2% 1,123 21.4% 6.9%
Marksville....................................... 17,229 11,911 69.1% 4,012 33.7% 15.7%
Suburban Houston................................. 30,774 14,841 48.2% 10,312 69.5% 19.6%
Radford.......................................... 15,363 12,247 79.7% 4,196 34.3% 16.1%
Tahoe............................................ 5,015 4,203 83.8% 1,507 35.9% 5.5%
--------- ----------- --- ----------- --- ---
Total............................................ 118,424 75,930 64.1% 31,910 42.0% 100%
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ALAMOGORDO GROUP. The Alamogordo group is comprised of four systems in New
Mexico serving the communities of the City of Alamogordo (including Holloman Air
Force Base and Tularosa), High Rolls, Carrizozo and Truth or Consequences
("TC"). This group has four headends serving seven franchises, the earliest of
which is scheduled to expire in 2003. As of December 31, 1996, the Alamogordo
group passed 24,009 homes and served 13,933 subscribers, representing
approximately 18.3% of the total subscribers in the Company's systems. Basic
penetration in the Alamogordo group as of such date was approximately 58.0%.
The system serving the City of Alamogordo is the largest of the Alamogordo
group, serving over 70% of the plant miles from a single headend and one
microwave receive site. The portion of the system serving the City of Alamogordo
operates at 300 MHz, has a channel capacity of 37 and currently uses 37
channels. The Company expects the Alamogordo portion of the system to be
upgraded in 1997 and upon the consummation of the upgrade, the Company estimates
that approximately 90% of the system will be capable of passing 550 MHz and will
have a channel capacity of 78 channels. The Holloman portion of the Alamogordo
system is operating at 550 MHz, is capable of carrying 78 channels, and
currently uses 56 channels. The Tularosa portion of the system operates at 450
MHz, has a channel capacity of 62 and currently uses 56 channels. The Carrizozo
system passes 450 MHz, has the capacity to carry 62 channels and currently uses
21 channels. The TC system is operating at 300 MHz, has a capacity to carry 37
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channels, and currently uses 34 channels. The High Rolls system is capable of
carrying 24 channels and currently uses 18 channels.
The communities served by the Alamogordo group are situated in the southern
portion of New Mexico, about 100 miles north of Las Cruces. The Company believes
that the military bases of White Sands and Holloman have a significant influence
on the economy in the area covered by the Alamogordo group.
BELLEFONTAINE. The Bellefontaine system, located in central Ohio, serves
five franchises from a single headend and microwave receive site. Two of the
system's five franchises are scheduled for renewal by the end of 1997. As of
December 31, 1996, the Bellefontaine system passed 10,881 homes and served 7,480
subscribers, representing approximately 9.9% of the total subscribers in the
Company's systems. Basic penetration in the Bellefontaine system was
approximately 68.7% as of such date. The Bellefontaine system operates at 330
MHz, has a channel capacity of 43 and currently uses 43 channels. The Company
intends to rebuild this group in 1999 to 450 MHz.
The communities served by this system include Bellefontaine, Huntsville,
Russells Point, Zanesfield, Indian Lake and Lakeview, Ohio. Bellefontaine is
located 50 miles northeast of Dayton and 50 miles northwest of Columbus. Tourism
is a major industry in Bellefontaine. In addition, the Company believes that the
local economy is influenced by corporate developments of Honda of America and
Bellemar Parts Industries, which have operations in the area.
CHADRON GROUP. The Chadron group is comprised of five systems in Nebraska
serving the communities of Chadron, Crawford, Hemingford, Rushville and Gordon.
This group has five headends serving five franchises, the earliest of which is
scheduled to expire in 1999. As of December 31, 1996, the Chadron group passed
5,603 homes and served 4,048 subscribers, representing approximately 5.3% of the
total subscribers in the Company's systems. Basic penetration in the Chadron
group was approximately 72.2% as of such date. Each of the Chadron, Crawford,
Gordon and Rushville systems operates at 330 MHz, is capable of carrying 42
channels, and currently uses 39, 21, 33 and 33 channels, respectively. The
Hemingford system is operating at 450 MHz, has a channel capacity of 62 channels
and currently uses 24 channels. The Company intends to upgrade the Rushville and
Gordon portions of the system in 1999 to 450 MHz.
The Company believes that the economy in the Chadron community is influenced
by the operations of Chadron State College. The number of subscribers tend to
decline in the summer months and then increase in September when classes resume.
CORTEZ. The Cortez system, located in Colorado, is a 330 MHz system capable
of carrying, and currently uses, 42 channels. This system operates from a single
headend serving one franchise area, which franchise expires in 2001. As of
December 31, 1996, the Cortez system passed 2,850 homes and served 2,026
subscribers, representing approximately 2.7% of the total subscribers in the
Company's systems. Basic penetration in the Cortez group was approximately 71.1%
as of such date. The Company intends to upgrade this system in 1998 to 450 MHz.
DICKINSON. The Dickinson system is a 330 MHz system, located in North
Dakota, which operates from a single headend serving one franchise area, which
franchise is scheduled to expire in 1999. The Dickinson system is situated 100
miles west of Bismark, North Dakota on Interstate 94. As of December 31, 1996,
the Dickinson system passed 6,700 homes and served 5,241 subscribers,
representing approximately 6.9% of the total subscribers in the Company's
systems. Basic penetration in the Dickinson system was approximately 78.2% as of
such date. The Dickinson system has a channel capacity of 42 and is currently
using 41 channels. The Dickinson system is scheduled to be upgraded to 450 MHz
in 1999.
MARKSVILLE GROUP. The Marksville group is comprised of four systems in
Louisiana serving the communities of Marksville, Jena, LaSalle and Winsboro and
two systems in Arkansas serving the
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communities of Crossett and Fordyce. This group has six headends and serves a
total of 13 franchises, only one of which expires before the year 2000 (expiring
in 1998). As of December 31, 1996, the Marksville group passed 17,229 homes and
served 11,911 subscribers, representing approximately 15.7% of the total
subscribers in the Company's systems. Basic penetration in the Marksville group
was approximately 69.1% as of such date. The Marksville, Crossett and Fordyce
systems are 330 MHz systems, are capable of carrying 42 channels and currently
use 42, 39, and 38 channels, respectively. The Winsboro system is a 300 MHz
system capable of carrying 37 channels and currently uses 36 channels. Each of
the Jena and LaSalle systems is a 550 MHz system capable of carrying 78 channels
and currently uses 30 channels. The system serving the City of Crossett is the
largest in the Marksville group. The Company intends to upgrade the Crossett and
Marksville systems to 450 MHz in 1998. The Winnsboro system is scheduled to be
rebuilt in 1999 to 550 MHz. The Jena and LaSalle systems were rebuilt in 1996.
SUBURBAN HOUSTON. The suburban Houston group is comprised of four systems
in Texas serving portions of Montgomery County, Clay Road, Ranch Country and
Manvel, all outside the City of Houston. This group is the Company's largest. It
has four headends which serve a total of four franchises, one of which expires
in August 1997. As of December 31, 1996, the suburban Houston group passed
30,774 homes and served 14,841 subscribers, representing approximately 19.6% of
the total subscribers in the Company's systems. Basic penetration in the
suburban Houston group was approximately 48.2% as of such date. The Montgomery
County system is the largest of the group, and is capable of carrying and
currently uses 54 channels. This system was upgraded to 400 MHz in 1996. The
Company intends to rebuild this system to 750 MHz in 1999. The Clay Road system
is a 450 MHz system with a channel capacity of 62 and currently uses 57
channels. Each of the Ranch Country and Manvel systems is a 330 MHz system
capable of carrying 42 channels and currently uses 37 and 40 channels,
respectively.
Among the Company's nine operating groups, the suburban Houston group has
experienced the most significant growth over the past several years.
RADFORD. The Radford system, located in Virginia, serves three franchises
from a single headend and microwave receive site. The earliest franchise in this
system is scheduled to expire in 1999. As of December 31, 1996, the Radford
system passed 15,363 homes and served 12,247 subscribers, representing
approximately 16.1% of the total subscribers in the Company's systems. Basic
penetration in the Radford group was approximately 79.7% as of such date. The
Radford system has the capacity to carry and currently uses 42 channels. A
portion of the Radford system operates at 330 MHz. The remaining portion of this
system was built within the last three years and is capable of passing 450 MHz
and carrying 62 channels. The Company intends to upgrade the remainder of the
system to 450 MHz in 1997.
The communities served by this system include Radford, Pulaski County and
Christiansburg. The Company believes that the economy in Radford is influenced
by the operations of Radford University. Cable subscribers tend to decline in
the summer months and then increase in September when classes resume. The
communities served by this system are located in the western portion of Virginia
about 40 miles south of Roanoke.
TAHOE. The Tahoe system is a 330 MHz system that has a channel capacity of
42 and currently uses 41 channels. This system is located south of Lake Tahoe,
California and operates from a single headend serving one franchise area, which
is scheduled to expire in 2001. As of December 31, 1996, the Tahoe system passed
5,015 homes and served 4,203 subscribers, representing approximately 5.5% of the
total subscribers in the Company's systems. Basic penetration in the Tahoe
system was approximately 83.8% as of such date. The Company intends to upgrade
the Tahoe system in 2000 to 450 MHz.
The community served by the Tahoe system benefits from the tourism generated
by Lake Tahoe. Most of the population in this region is employed in jobs within
the service, retail and hospitality sectors.
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NON-URBAN MARKETS
The Company believes that non-urban cable television systems generally
involve less economic risk than systems in large urban markets. Cable television
service is often necessary in non-urban markets to receive a wide variety of
television signals (including local broadcast stations). In addition, these
markets typically offer fewer competing entertainment alternatives than large
urban markets. As a result, non-urban cable television systems usually have a
higher basic penetration rate (i.e., the number of homes subscribing to basic
cable service as a percentage of homes passed by cable) and a more stable
customer base with less "churning" (i.e., customer turnover) than systems in
large urban markets. In addition, non-urban systems generally do not carry as
many off-air television broadcast signals and, as a result, such systems are not
required to have the channel capacity that may be required of large urban
systems. The Company believes that non-urban systems also have lower labor,
marketing and system construction costs and higher and more predictable
operating cash flow margins than urban systems.
SUBSCRIBER RATES AND SERVICES
The Company's revenues are derived principally from monthly subscription
fees for basic, satellite and premium services and one-time installation fees
for new subscribers. Subscribers are free to terminate services at any time
without additional charge, but are charged a reconnection fee to resume service.
The Company's systems currently offer customers various levels of cable services
consisting of a combination of broadcast television signals and satellite
television signals. For an extra monthly charge, the Company's systems also
offer "premium" television services to their customers. These services (such as
Home Box Office-Registered Trademark-, Cinemax-Registered Trademark-,
Showtime-Registered Trademark- and The Movie Channel-Registered Trademark-) are
satellite-delivered channels that consist principally of feature films, live
sporting events, concerts and other special entertainment features, presented
without commercial interruption. The service options offered by the Company vary
from system to system, depending upon a system's channel capacity and viewer
interests. Rates for services also vary from market to market and according to
the type of services selected. Substantially all of the Company's systems
currently offer a "broadcast basic" package, one or more satellite service tiers
and several premium services. Subscribers may choose various combinations of
such services.
SYSTEM REBUILDS AND UPGRADES
The Company is continuously engaged in the rebuilding and upgrading of its
systems to increase channel capacity. The Company's rebuilding and upgrading
programs over the last several years have consisted primarily of replacing low
channel capacity cable plant with new higher channel capacity trunk and feeder
lines and adding headend electronics to utilize increased channel capacity. For
the years ended December 31, 1994, 1995 and 1996, capital expenditures by the
Company for system rebuilds or upgrades totalled approximately $216,000,
$899,000 and $1,882,000, respectively. In addition, the Company anticipates that
it will spend approximately $12.2 million over the next four years to upgrade
and rebuild its systems and approximately $3.6 million for additional plant
construction (enabling it to pass approximately 11,600 additional homes). The
Company's policy has been to utilize fiber optic technology in its rebuild
projects, when it is appropriate. The Company believes that the addition of
fiber optics in plant construction will extend system reach, improve picture
quality, allow for increased channel capacity and improve system reliability.
The Company has been closely monitoring developments in the area of digital
compression, a technology that is expected to enable cable operators to increase
the channel capacity of cable television systems by permitting a significantly
increased number of video signals to fit in a cable television system's existing
band-width. Digital compression technology is still considered to be
developmental and to date has not been widely used by cable system operators.
Assuming the cost of digital converters declines significantly from current
levels, the Company believes that the utilization of digital compression
technology may be a cost-effective method of increasing channel capacity in some
of its systems rather than rebuilding such systems with higher capacity
distribution plant. The use of digital compression may also
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expand the number and types of services offered, such as near video on demand
services and enhance the development of current and future revenue sources. The
Company has no current plans to use digital compression technology and there can
be no assurance that any or such use would result in a cost-effective means of
increasing channel capacity or increasing the revenues of the Company.
ANCILLARY SERVICES
The Company expects to realize growth from pay-per-view services,
advertising revenues and revenues from its affiliation with home shopping
services. Pay-per-view programming, which generally consists of recently
released movies and special events (such as boxing, wrestling matches and other
sporting events and concerts), offers subscribers an opportunity to view movies
or such events individually. The Company expects that pay-per-view revenues will
increase over time as desirable sporting events become more consistently
available and as system upgrades allow the Company to make pay-per-view movies
available in more systems.
The Company, through independent contractors, sells available advertising
spots on advertiser-supported programming and offers home shopping services to
its subscribers. The home shopping services usually pay the Company a share of
revenues from sales of products in a system's service area.
MARKETING
The Company markets its cable television services through radio, cable
television, direct mail and newspaper advertising, reinforced by door-to-door
solicitation and telemarketing. In addition to marketing efforts to attract new
customers, the Company frequently conducts campaigns to encourage existing
customers to purchase higher service levels. The Company also implements, from
time to time, promotions, office sale campaigns and new extension home marketing
to increase subscriber growth. The Company employs a marketing director who
supervises its marketing efforts. The Company's marketing activities are
conducted through its employees and independent contractors.
DECENTRALIZED MANAGEMENT
The Company operates its systems from nine operating groups or systems to
maximize operating effectiveness and to minimize supervisory costs. Each area is
managed by a group or system manager who has broad operating authority within
the limits of annual operating plans and capital budgets. Purchasing and, in
certain instances, hiring and training are performed at the regional level. The
Company believes that its decentralized management structure promotes operating
efficiency, employee motivation and responsiveness to the communities it serves.
The group or system managers generally have familiarity with local markets,
historical relationships with the Company and significant experience in the
cable television industry. The Company believes that this is an important
component in the delivery of customer service and maintenance of strong
relations with local authorities in franchise areas.
The Company has a regional office in Irving, Texas principally for its
operational, engineering and administrative activities. J. Paul Morbeck, the
Company's Senior Vice President -- Operations, is responsible for the day-to-day
supervision of the group or system managers.
CUSTOMER SERVICE AND COMMUNITY RELATIONS
The Company places a strong emphasis on customer service and community
relations and believes that success in these areas is critical to its business.
The Company has established and believes it maintains good relationships with
its governmental franchise authorities and plans to continue these relationships
through periodic contacts with the respective franchise officials concerning the
Company's progress to date
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and future plans. There can be no assurance; however, that the Company will
maintain good relations with its governmental franchise authorities.
PROGRAMMING
The Company has various contracts to obtain basic, satellite and premium
programming for its systems from program suppliers with compensation generally
being based on a fixed fee per customer or a percentage of the gross receipts
for the particular service. Some program suppliers provide volume discount
pricing structures and/or offer marketing support to the Company. The Company's
programming contracts with such suppliers are generally for fixed periods of
time ranging from one to ten years and are subject to negotiated renewal. The
Company also arranges for some of its programming through American Cable
Entertainment Programming Company, Inc. ("AmPro"). Bruce A. Armstrong, the
Company's President and Chief Executive Officer, is the sole stockholder of
AmPro. The Company does not pay any compensation to AmPro in connection with
this arrangement.
The Company's cable programming costs have increased significantly in recent
years. The Company participates with the National Cable Television Cooperative
in order to purchase some of its programming at lower rates than may be
otherwise available to the Company. No assurances can be given that the
Company's programming costs will not increase substantially in the near future
or that other materially adverse terms will not be added to the Company's
programming arrangements.
FRANCHISES
Cable television systems generally operate under non-exclusive franchises
granted by local governmental authorities. These franchises typically contain
many conditions such as time limitations on commencement and completion of
construction; conditions of service including the minimum number of channels;
types of programming and provisions for free service to schools and certain
other public institutions; and the maintenance of insurance and indemnity bonds.
Certain provisions of local franchises are subject to federal regulation.
As of December 31, 1996, the Company held 40 franchises. These franchises,
all of which are non-exclusive, generally provide for the payment of fees to the
issuing authority based on system revenues. Annual franchise fees for the
Company's systems range from less than 1% to 5% of the gross revenues generated.
For the nine months ended September 30, 1996 and the years ended December 31,
1993, 1994 and 1995, franchise fees incurred by the Company as a percentage of
total system revenues were approximately 2.6%, 3.0%, 2.5% and 2.6%,
respectively. With limited exceptions, franchise fees are passed directly
through to the customers on their monthly bills. General business or utility
taxes may also be imposed on the Company's systems in various jurisdictions.
Federal regulations prohibit franchising authorities from imposing franchise
fees in excess of 5% of gross revenues and also permit the cable operator to
seek renegotiation and modification of franchise requirements if warranted by
"changed circumstances". Most of the Company's franchises can be terminated
prior to their stated expiration date for uncured breaches of material
provisions. As of January 22, 1997, the Company has never had a franchise
revoked, and the Company has been able to obtain the renewal or extension of all
of its franchises as they expire on satisfactory terms.
The Cable Communications Policy Act of 1984 (the "1984 Cable Act") provides
for, among other things, an orderly franchise renewal process whereby the
renewal of a franchise license issued by a governmental authority may not be
unreasonably withheld. The law also requires that incumbent franchisees' renewal
applications must be assessed on their own merits and not as part of a
comparative process with competing applications. If renewal is withheld or a
franchise is revoked, and the franchise authority chooses to acquire the system,
Federal law provides minimum standards for compensation to the system owner.
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COMPETITION
The Company's systems compete with other communications and entertainment
media, including conventional off-air television broadcasting service. Cable
television service was first offered as a means of improving television
reception in markets where terrain factors or remoteness from major cities
limited the availability of off-air television. In some of the areas served by
the Company's systems, a substantial variety of broadcast television programming
can be received off-air. The extent to which cable television service is
competitive with broadcast stations depends in significant part upon the cable
television system's ability to provide an even greater variety of programming
than that available off-air. Cable television systems also are susceptible to
competition from other video programming delivery systems, from other forms of
home entertainment such as video cassette recorders, and, in varying degrees,
from sources of entertainment in the community, including motion picture
theaters, live theater and sporting events.
Cable television systems may compete with wireless program distribution
services such as multi-channel, multipoint distribution service ("MMDS"). MMDS
uses low power microwave frequencies to transmit television programming over the
air to subscribers. The ability of MMDS to compete with cable television systems
has been limited in the past by the limited amount of analog channel capacity
and other technical issues. The Company currently competes with MMDS systems in
portions of its suburban Houston, Bellefontaine, Dickinson and Marksville
groups. Additional competition exists from private cable television systems
serving condominiums, apartment complexes and other private residential
developments. The operators of these private systems, known as Master Antenna
Television ("MATV") and Satellite Master Antenna Television ("SMATV"), often
enter into exclusive agreements with apartment building owners or homeowners'
associations that preclude operators of franchised cable television systems from
serving residents of such private complexes. The Company currently competes with
SMATV systems in its suburban Houston group.
In recent years, the FCC has adopted policies for authorizing new
technologies and providing a more favorable operating environment for certain
existing technologies. Such policies have the potential to create substantial
additional competition to cable television systems. These technologies include,
among others, direct broadcast satellite to home services ("DBS") whereby high
frequency signals are transmitted by satellite to receiving facilities located
on the premises of the subscribers. DBS providers have achieved significant
growth over the past several years. The magnitude of competition from these
various sources and its effect on the Company's business cannot be predicted
with any certainty.
The 1992 Cable Act requires cable programmers under certain circumstances to
offer their programming to operators of DBS, MMDS and other multi-channel video
systems at not unreasonably discriminatory prices. Advances in communications
technology and changes in the marketplace are constantly occurring. Therefore,
it is not possible to predict the effect that ongoing future developments might
have on the Company's systems.
Since the Company's systems operate under non-exclusive franchises, other
operators (including municipal franchising authorities themselves), may obtain
permission to build cable television systems in competition with the Company's
systems in areas in which they presently operate. In the past five years, less
than 1% of the existing mileage in the Company's franchise areas have been
overbuilt. Although the Company is unaware of any pending applications for
franchises which would result in overbuilding in communities currently served by
its systems, there can be no assurance that overbuilds in such communities will
not occur. The Company is unable to predict the extent to which it would be
adversely affected as a result of overbuilds.
The 1996 Telecom Act allows local telephone and electric companies to
provide video services competitive with services provided by cable systems.
These competitors may increase the number of cable overbuilds. In addition,
these and other entities may rely on local MMDS service to deliver multichannel
competition. MMDS facilities are licensed by the FCC and provide video services
over-the-air on a subscription basis to households equipped with special
receiving equipment.
9
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GOVERNMENT REGULATION
The cable television industry is subject to extensive governmental
regulations at the federal, state and local levels. The following is a summary
of federal laws and regulations affecting the operation of the cable television
industry and a description of certain state and local laws. This summary does
not purport to describe all present, proposed, or possible laws and regulations
affecting the industry. Future legislative and regulatory changes could
adversely affect the Company's operations. Moreover, Congress and the FCC have
frequently revisited the subject of cable regulation.
CABLE RATE REGULATION. In October 1992, Congress enacted the 1992 Cable
Act. The 1992 Cable Act subjected all cable systems to extensive rate
regulation, unless they face "effective competition" in their local franchise
area. Federal law defines "effective competition" on a community-specific basis
as requiring either low penetration by the incumbent cable operator, appreciable
penetration by competing multichannel video providers ("MVPs") or the presence
of a competing MVP affiliated with a local telephone company.
Although the FCC rules control, local government units (commonly referred to
as local franchising authorities or "LFAs") are primarily responsible for
administering the regulation of the lowest level of cable--the basic service
tier, which typically contains local broadcast stations and public, educational
and government access channels. Before an LFA begins basic service rate
regulation, it must certify to the FCC that it will follow applicable federal
rules, and many LFAs have voluntarily declined to exercise this authority. LFAs
also have primary responsibility for regulating cable equipment rates. Under
federal law, charges for various types of cable equipment must be unbundled from
each other and from monthly charges for programming services.
The FCC itself directly administers rate regulation of any cable programming
service tiers, which typically contain satellite-delivered programming. Under
the 1996 Telecom Act, the FCC can regulate satellite tier service rates only if
an LFA first receives at least two complaints from local subscribers within 90
days of a satellite tier service rate increase and then files a formal complaint
with the FCC. When new satellite tier service rate complaints are filed, the FCC
now considers only whether the incremental increase is justified and will not
reduce the previously established satellite tier service rate.
Under the FCC's rate regulations promulgated in connection with the 1992
Cable Act, most cable systems were required to reduce their non-premium rates in
1993 and 1994, and since have had their rate increases governed by a complicated
price cap scheme that allows for the recovery of inflation and certain increased
costs, as well as providing some incentive for expanding channel carriage. The
FCC has modified its rate adjustment regulations to allow for annual rate
increases and to minimize previous problems associated with regulatory lag.
Operators also have the opportunity of bypassing this "benchmark" scheme in
favor of traditional cost-of-service regulation in cases where the latter
methodology appears favorable. Premium cable services offered on a per-channel
or per-program basis remain unregulated, as do affirmatively marketed packages
consisting entirely of new programming product. Federal law requires basic
service to be offered to all cable subscribers, but limits the ability of
operators to require the purchase of any satellite tier service before
purchasing premium services offered on a per-channel or per-program basis.
THE 1995 SMALL SYSTEMS ORDER. In June 1995, the FCC issued an order (the
"Small Systems Order") adopting new rules that reduce the regulatory burdens of
the 1992 Cable Act on small cable systems owned by multiple system operators
serving fewer than 400,000 subscribers. Under the Small Systems Order, systems
with fewer than 15,000 subscribers owned by an operator with fewer than 400,000
subscribers have a simplified cost-of-service showing, whereby basic and
satellite tier service rates averaging less than $1.24 per channel are presumed
reasonable. The Company serves fewer than 400,000 subscribers and, therefore,
qualifies for the new FCC rules. Under the Small Systems Order, the regulatory
benefits accruing to small cable systems remain effective even if such systems
are later acquired by a multiple system operator which serves in excess of
400,000 subscribers.
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<PAGE>
THE 1996 TELECOM ACT. The 1996 Telecom Act provides additional relief for
small cable operators. For franchising units with less than 50,000 subscribers
and owned by an operator with less than one percent of the nation's cable
subscribers (i.e., approximately 600,000 subscribers), satellite tier rate
regulation is automatically eliminated. The Company's systems qualify for the
favorable rate treatment afforded small cable operators. The 1996 Telecom Act
sunsets FCC regulation of satellite tier rates for all systems (regardless of
size) on March 31, 1999. It also relaxes existing uniform rate requirements by
specifying that uniform rate requirements do not apply where the operator faces
"effective competition," and by exempting bulk discounts to multiple dwelling
units, although complaints about predatory pricing still may be made to the FCC.
CABLE ENTRY INTO TELECOMMUNICATIONS. The 1996 Telecom Act provides that no
state or local laws or regulations may prohibit or have the effect of
prohibiting any entity from providing any interstate or intrastate
telecommunications service. States are authorized; however, to impose
"competitively neutral" requirements regarding universal service, public safety
and welfare, service quality, and consumer protection. State and local
governments also retain their authority to manage the public rights-of-way and
may require reasonable, competitively neutral compensation for management of the
public rights-of-way when cable operators provide telecommunications service.
The favorable pole attachment rates afforded cable operators under federal law
can be gradually increased by utility companies owning the poles (beginning in
2001) if the operator provides telecommunications service, as well as cable
service, over its plant.
TELEPHONE COMPANY ENTRY INTO CABLE TELEVISION. The 1996 Telecom Act allows
telephone companies to compete directly with cable operators by repealing the
historic telephone company/cable cross-ownership ban. This will allow local
exchange carriers ("LECs") to compete with cable operators both inside and
outside their telephone service areas. Certain LECs have begun offering cable
services.
Under the 1996 Telecom Act, an LEC providing video programming to
subscribers will be regulated as a traditional cable operator (subject to local
franchising and federal regulatory requirements), unless the LEC elects to
provide its programming via an "open video system" ("OVS"). To qualify for OVS
status, the LEC must reserve two-thirds of the system's activated channels for
unaffiliated entities.
Although LECs and cable operators can now expand their offerings across
traditional service boundaries, the general prohibition remains on LEC buyouts
(i.e., any ownership interest exceeding 10%) of co-located cable systems, cable
operator buyouts of co-located LEC systems, and joint ventures between cable
operators and LECs in the same market. The 1996 Telecom Act provides a few
limited exceptions to this buyout prohibition, including a carefully
circumscribed "rural exemption." The 1996 Telecom Act also provides the FCC with
the limited authority to grant waivers of the buyout prohibition (subject to LFA
approval).
ELECTRIC UTILITY ENTRY INTO TELECOMMUNICATIONS/CABLE TELEVISION. The 1996
Telecom Act provides that registered utility holding companies and subsidiaries
may provide telecommunications services (including cable television)
notwithstanding the Public Utilities Holding Company Act. Electric utilities
must establish separate subsidiaries, known as "exempt telecommunications
companies" and must apply to the FCC for operating authority.
ADDITIONAL OWNERSHIP RESTRICTIONS. The 1996 Telecom Act eliminates
statutory restrictions on broadcast/cable cross-ownership (including broadcast
network/cable restrictions), but leaves in place existing FCC regulations
prohibiting local cross-ownership between television stations and cable systems.
The 1996 Telecom Act also eliminates the three-year holding period required
under the 1992 Cable Act's "anti-trafficking" provision. The 1996 Telecom Act
leaves in place existing restrictions on cable cross-ownership with SMATV and
MMDS facilities, but lifts those restrictions where the cable operator is
subject to "effective competition." In January 1995, however, the FCC adopted
regulations which permit cable operators to own and operate SMATV systems within
their franchise area, provided that such operation is consistent with local
cable franchise requirements.
11
<PAGE>
Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a cable
system from devoting more than 40% of its activated channel capacity to the
carriage of affiliated national program services. A companion rule establishing
a nationwide ownership cap on any cable operator equal to 30% of all domestic
cable subscribers has been stayed pending further judicial review.
MUST CARRY/RETRANSMISSION CONSENT. The 1992 Cable Act contains broadcast
signal carriage requirements that allow local commercial television broadcast
stations to elect once every three years to require a cable system to carry the
station ("must carry") or to negotiate for payments for granting permission to
the cable operator to carry the station ("retransmission consent"). Less popular
stations typically elect "must carry," and more popular stations typically elect
"retransmission consent." Must carry requests can dilute the appeal of a cable
system's programming offerings, and retransmission consent demands may include
substantial payments or other concessions. Either option has a potentially
adverse affect on the Company's business. Additionally, cable systems are
required to obtain retransmission consent for all "distant" commercial
television stations (except for commercial satellite-delivered independent
"superstations" such as WTBS). The constitutionality of the must carry
requirements have been challenged and a decision from the U.S. Supreme Court is
pending.
ACCESS CHANNELS. LFAs can include franchise provisions requiring cable
operators to set aside certain channels for public, educational and governmental
access programming. Federal law also requires cable systems to designate a
portion of their channel capacity (up to 15% in some cases) for commercial
leased access by unaffiliated third parties. The FCC has adopted rules
regulating the terms, conditions and maximum rates a cable operator may charge
for use of this designated channel capacity, but use of commercial leased access
channels has been relatively limited. The FCC is now reconsidering its rules,
and proposed revisions could reduce rates significantly and make commercial
leased access a more attractive option for third party programmers. Should this
occur, the Company's control over its channel line-up would be reduced and the
quality of that line-up may decline.
ACCESS TO PROGRAMMING. The 1992 Cable Act imposed restrictions on the
dealings between cable operators and cable programmers, and precludes video
programmers affiliated with cable companies from favoring cable operators over
competitors and requires such programmers to sell their programming to other
multichannel video distributors. This provision limits the ability of vertically
integrated cable programmers to offer exclusive programming arrangements to
cable companies.
OTHER FCC OR FAA REGULATIONS. In addition to the FCC regulations noted
above, there are other FCC and Federal Aviation Authority (the "FAA")
regulations covering such areas as equal employment opportunity, subscriber
privacy, programming practices (including, among other things, syndicated
program exclusivity, network program nonduplication, local sports blackouts,
indecent programming, lottery programming, political programming, sponsorship
identification, and children's programming advertisements), registration of
cable systems and facilities licensing, maintenance of various records and
public inspection files, frequency usage, lockbox availability, antenna
structure notification, tower marking and lighting, consumer protection and
customer service standards, technical standards, and consumer electronics
equipment compatibility. The FCC has the authority to enforce its regulations
through the imposition of substantial fines, the issuance of cease and desist
orders and/or the imposition of other administrative sanctions, such as the
revocation of FCC licenses needed to operate certain transmission facilities
used in connection with cable operations.
COPYRIGHT. Cable television systems are subject to federal copyright
licensing covering carriage of television and radio broadcast signals. In
exchange for filing certain reports and contributing a portion of their revenues
to a federal copyright royalty pool, cable operators can obtain blanket
permission to retransmit copyrighted material on broadcast signals. In addition,
the cable industry pays music licensing fees to Broadcast Music, Inc. and is
negotiating a similar arrangement with American Society of Composers, Authors
and Publishers. Copyright clearances for nonbroadcast programming services are
arranged through private negotiations.
12
<PAGE>
STATE AND LOCAL REGULATION. Cable television systems generally are operated
pursuant to nonexclusive franchises granted by a municipality or other state or
local government entity in order to cross public rights-of-way. Federal law now
prohibits franchise authorities from granting exclusive franchises or from
unreasonably refusing to award additional franchises. Cable franchises generally
are granted for fixed terms and in many cases include monetary penalties for
non-compliance and may be terminable if the franchisee fails to comply with
material provisions.
The terms and conditions of franchises vary materially from jurisdiction to
jurisdiction. Each franchise generally contains provisions governing cable
operations, franchise fees, system construction and maintenance obligations,
system channel capacity, design and technical performance, customer service
standards, and indemnification protections. A number of states subject cable
television systems to the jurisdiction of centralized state governmental
agencies, some of which impose regulation of a character similar to that of a
public utility. Although LFAs have considerable discretion in establishing
franchise terms, there are certain federal limitations.
Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees as a condition of renewal. Similarly, if a franchise
authority's consent is required for the purchase or sale of a cable system or
franchise, such authority may attempt to impose more burdensome or onerous
franchise requirements in connection with a request for consent. Historically,
franchises have been renewed for cable operators that have provided satisfactory
services and have complied with the terms of their franchises. See
"--Franchises."
EMPLOYEES
At January 22, 1997, the Company had 130 employees, of which 118 were
full-time salaried or hourly employees and 12 were part-time employees. None of
the Company's employees is represented by a labor union or covered by a
collective bargaining agreement. The Company believes it has good relations with
its employees.
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ITEM 2. FINANCIAL INFORMATION.
SELECTED FINANCIAL DATA
The following selected financial data (i) as of and for the years ended
December 31, 1991, 1992, 1993, 1994 and 1995 and (ii) as of September 30, 1996
and for the nine months ended September 30, 1995 and 1996 are derived from the
consolidated financial statements of the Company. The Company's consolidated
balance sheet data as of December 31, 1991, 1992, 1993, 1994 and 1995 and the
consolidated statements of operations data for each of the five years ended
December 31, 1995 are derived from the audited consolidated financial statements
of the Company, including the Company's consolidated financial statements which
appear elsewhere in this Form 10. The data presented as of September 30, 1996
and for the nine months ended September 30, 1995 and 1996 are derived from the
unaudited consolidated financial statements of the Company which appear
elsewhere in this Form 10. The Company's consolidated financial statements have
been prepared in accordance with generally accepted accounting principles. In
the opinion of management, the selected financial data as of September 30, 1996
and for the nine months ended September 30, 1995 and 1996 have been prepared on
the same basis as the audited consolidated financial statements and reflect all
adjustments, which are of a normal recurring nature, necessary to present fairly
the financial data for the periods presented. The results of operations for any
interim period are not necessarily indicative of the Company's results of
operations for the full fiscal year. The selected financial data 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 of the Company and the other financial information
included elsewhere in this Form 10.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1995 1996
---------- --------- ---------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues..................................... $ 41,437 $ 36,747 $ 34,077 $ 29,585 $ 28,088 $ 21,003 $ 22,140
Total operating, selling, general and
administrative expenses.................... 20,426 18,096 16,962 15,002 14,093 10,551 11,222
Depreciation and amortization................ 17,884 12,665 10,472 9,860 9,246 6,850 5,706
Other operating costs........................ 1,243 1,102 1,403 1,439 1,526 945 996
---------- --------- ---------- --------- --------- --------- ---------
Operating income............................. 1,884 4,884 5,240 3,284 3,223 2,657 4,216
Reorganization items (2)..................... -- -- -- -- -- -- (1,965)
Interest expense............................. (23,183) (19,931) (18,665) (17,641) (16,838) (12,554) (6,110)
Gain (loss) on sale of systems and marketable
securities................................. -- 16,766 (37) 15,853 5,700 5,700 3
Income tax (expense) benefit................. (28) (14,633) 629 (436) (764) (14) 1
Other income (expense), net(1)............... -- 3,714 (120) -- -- -- --
---------- --------- ---------- --------- --------- --------- ---------
Net income (loss)............................ $ (21,327) $ (9,200) $ (12,953) $ 1,060 $ (8,679) $ (4,211) $ (3,855)
---------- --------- ---------- --------- --------- --------- ---------
---------- --------- ---------- --------- --------- --------- ---------
</TABLE>
14
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<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, SEPTEMBER 30
------------------------------------------------------------ --------------
1991 1992 1993 1994 1995 1996
---------- ---------- ----------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS) (IN THOUSANDS)
BALANCE SHEET DATA:
Total assets................................ $ 143,601 $ 86,970 $ 81,257 $ 67,643 $ 52,498 $ 54,440
Long-term debt.............................. 214,153 166,527 173,476 159,322 150,656 151,305
Shareholders' deficiency.................... (77,945) (87,145) (100,099) (99,039) (107,717) (111,572)
</TABLE>
- ------------------------
(1) Other income (expense), net is comprised of utilization of net operating
loss carryforwards of $3,714 in 1992, extraordinary gain on extinguishment
of debt of $455 in 1993, and cumulative effect of changes in accounting
principles of $575 in 1993.
(2) Reorganization items for the nine months ended September 30, 1996 consist of
expenses and other costs directly related to the reorganization of the
Company since the Chapter 11 filing.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
BACKGROUND. In January 1988, Simmons Communications Merger Corp. merged
with and into the Company pursuant to a merger agreement whereby each share of
common stock of the Company was converted into the right to receive $27.25 in
cash or approximately $129.3 million in the aggregate. As a result of the
Merger, the Company became highly-leveraged.
In October 1992, the 1992 Cable Act was enacted and the FCC imposed
extensive regulations on the rates charged by cable television owners and
operators. Beginning in 1993, the Company's revenue and cash flow were adversely
impacted from these regulations as the Company was required to reduce many of
its service rates effective September 1993 and again in August 1994.
In 1993, the Company extended the maturity date of its senior indebtedness
to November 1995 and in conjunction with such extension, agreed to make
principal payments of $15 million in January 1994 and $18 million in March 1995.
As part of the Company's efforts to satisfy these mandatory payment obligations
and provide additional working capital, Scott sold cable systems located in
Rancho Cucamonga, California in January 1994 for $23.6 million and Missouri,
Oklahoma, Kansas and northern Texas for $12.4 million in February 1995.
In October 1995, the Company failed to make an interest payment on its
outstanding subordinated debentures and in November 1995, the Company's senior
secured debt aggregating approximately $34.4 million matured and the Company
failed to pay such debt on maturity. The Company entered into 90 day standstill
agreements with holders of its senior bank loans and notes and holders of its
senior subordinated notes in order to seek refinancing alternatives; however,
the Company was unable to refinance its obligations or negotiate a restructuring
on favorable terms prior to the expiration of the agreements.
In February 1996, the Company filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code. Subsequently, the Company sought new
financing to replace approximately $62.3 million of debt which had matured and
negotiated new terms for approximately $88.4 million of subordinated and junior
subordinated debt, including the deferral of cash interest payments for several
years. In December 1996, the Bankruptcy Court confirmed the Plan of
Reorganization and it became effective on December 18, 1996 concurrently with
the Company's consummation of a new senior, secured credit facility which
provides for up to $67.5 million in loans and the issuance of Senior and Junior
PIK Notes in the aggregate principal amount of $88.4 million. See "--Liquidity
and Capital Resources."
REVENUES. The Company's revenues are derived principally from monthly
subscription fees for basic, satellite and premium services. The Company's
systems currently offer customers various levels of cable services consisting of
a combination of broadcast television signals and satellite television signals.
For an
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<PAGE>
extra monthly charge, the Company's systems also offer "premium" television
services to their customers. These services (such as Home Box
Office-Registered Trademark-, Cinemax-Registered Trademark-,
Showtime-Registered Trademark- and The Movie Channel-Registered Trademark-) are
satellite-delivered channels that consist principally of feature films, live
sporting events, concerts and other special entertainment features, presented
without commercial interruption. The service options offered by the Company vary
from system to system, depending upon a system's channel capacity and viewer
interests. Rates for services also vary from market to market and according to
the type of services selected. Substantially all of the Company's systems
currently offer a "broadcast basic" package, one or more satellite service tiers
and several premium services. Subscribers may choose various combinations of
such services.
For the nine months ended September 30, 1996 and 1995, the Company derived
approximately $17.3 million and $16.4 million, respectively, from basic cable
service and $2.1 million and $2.1 million, respectively, from premium cable
service. For the years ended December 31, 1995, 1994 and 1993, the Company
derived approximately $22.0 million, $23.2 million and $25.9 million,
respectively, from basic cable service and approximately $2.8 million, $2.9
million and $3.4 million, respectively, from premium cable service.
OPERATING EXPENSES. Operating expenses are principally comprised of
expenses associated with technical personnel and the costs of programming
services. Generally, increases are based on inflation, change in plant miles and
system configuration and increases in subscriber revenue. Historically, basic
programming expenses have risen faster than inflation and this trend is expected
to continue.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
are principally comprised of expenses associated with the system offices and
related personnel, which generally increase annually based on inflation and
subscriber levels. General and administrative expenses also contain costs
associated with billing services which are expected to increase as certain
systems upgrade their billing systems as needed.
MARKETING EXPENSES. Over the past three years, the Company has maintained
marketing expenses at low and relatively consistent levels. This is primarily
due to the fact that the Company's non-urban and rural markets require cable for
basic television reception.
HISTORICAL NET LOSSES. The Company has incurred net losses in four of the
five years ended December 31, 1995. The principal items contributing to these
net losses are the high levels of interest expense (due to the Company's
highly-leveraged financial condition), depreciation of fixed assets and
amortization of intangibles in those periods. The Company believes that
recurring net losses are not uncommon for cable television companies and expects
that such losses will continue. However, the Company believes that future cash
flow from operations and its existing debt facilities will provide sufficient
working capital for operations for the next several years. See "--Liquidity and
Capital Resources."
BUSINESS STRATEGY. The Company believes that non-urban cable television
systems generally involve less economic risk than systems in large urban
markets. Cable television service is often necessary in non-urban markets to
receive a wide variety of television signals (including local broadcast
stations). In addition, these markets typically offer fewer competing
entertainment alternatives than large urban markets. As a result, non-urban
cable television systems usually have a higher basic penetration rate (i.e., the
number of homes subscribing to basic cable service as a percentage of homes
passed by cable) and a more stable customer base with less "churning" (i.e.,
customer turnover) than systems in large urban markets. Non-urban systems
generally do not carry as many off-air television broadcast signals and, as a
result, such systems are not required to have the channel capacity that may be
required of large urban systems. The Company believes that non-urban systems
also have lower labor, marketing and system construction costs and higher and
more predictable operating cash flow margins than large urban markets.
16
<PAGE>
In June 1995, the FCC extended relief from the rate regulatory provisions of
the 1992 Cable Act to small cable operators such as the Company, thereby
enabling greater flexibility in establishing service rates. In February 1996,
Congress enacted the 1996 Telecom Act which, among other things, deregulated all
levels of service, except broadcast basic service, to small cable operators such
as the Company. The Company believes that it has the opportunity to increase
system cash flow as a result of continued subscriber growth, the recently
adopted Small Systems Order and the 1996 Telecom Act. As noted above, this
federal legislation significantly reduced the impact of rate regulation on the
Company by eliminating certain regulatory burdens imposed by the 1992 Cable Act.
As part of its plan to increase system cash flow, Scott intends to implement a
targeted capital spending program to rebuild and upgrade the suburban Houston
group, Alamogordo, Radford and several smaller systems over the next several
years.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1995
REVENUES. Revenues for the nine months ended September 30, 1996 increased
by approximately $1.1 million or 5.4% to $22.1 million from $21.0 million over
the comparable period for the prior period. This increase is primarily
attributable to a higher average monthly revenue per subscriber and an increase
in the number of subscribers.
Basic revenues, which accounted for approximately 78% of total revenues
increased by approximately $900,000 and premium service revenues remained
relatively stable over the period. Other revenue increased by 11.4% or $283,000.
Increases in pay-per-view revenue, advertising revenue, connection charges, and
revenue from franchise fees passed through to subscribers accounted for the bulk
of this increase.
TOTAL OPERATING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Total
operating, selling, general and administrative expenses for the nine months
ended September 30, 1996 increased by 6.4% to $11.2 million from $10.6 million
for the prior period. This increase was primarily attributable to the costs
associated with basic programming, which rose by $479,000 or 17.5% in the 1996
period. This increase is primarily the result of higher costs per average
subscriber. General inflationary increases and the higher number of subscribers
served accounts for the balance of the increase.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the nine
months ended September 30, 1996 decreased by 17% to $5.7 million from $6.8
million in the prior period. This decrease was attributable to $1.1 million of
lower amortization on deferred financing costs which became fully amortized in
1995.
INTEREST EXPENSE (NET). Interest expense net of interest income for the
nine months ended September 30, 1996 decreased by 51% to $6.1 million from $12.6
million in the prior period. This decrease was primarily attributable to the
fact that the Company did not incur interest on its unsecured debt while it was
in bankruptcy.
NET LOSS. Net loss for the nine months ended September 30, 1996 decreased
by 7.1% to $3.9 million from $4.2 million in the prior period.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH DECEMBER 31, 1994
REVENUES. Revenues for the year ended December 31, 1995 decreased by
approximately 5.1% to $28.1 million from $29.6 million in the previous period.
This decrease was attributable primarily to the sale in February 1995 of several
systems, serving approximately 9,500 equivalent basic subscribers in the
aggregate, and, to a lessor extent the sale in January 1994 of a system serving
approximately 11,500 basic subscribers. See "Item 1.--Business -- Background."
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<PAGE>
The overall decrease in revenues for 1995 was partially offset by an
increase of $1.2 million in basic revenues for systems currently owned which was
achieved through a higher level of average equivalent basic subscribers and a
higher basic revenue per average subscriber. Revenue from pay television for the
1995 period decreased by 3.9% due principally to a lower level of average pay
units. Other revenue decreased by 4.3%.
TOTAL OPERATING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Total
operating, selling, general and administrative expenses for the year ended
December 31, 1995 decreased by 6.1% to $14.1 million from $15.0 million for the
prior year. Amounts included in such expenses for systems sold in 1994 and 1995
were $1.9 million lower in 1995 than in 1994. For systems currently owned, costs
and expenses increased by $1.0 million in 1995 as compared to 1994.
Approximately 50% of this increase was attributable to higher programming costs
for basic service for the year ended December 31, 1995 which increased by 11.6%
per average subscriber.
For systems currently owned, personnel related costs comprised 27% of such
expenses for the year ended December 31, 1995 and were relatively unchanged, as
inflationary increases were offset by more favorable experience in group
insurance and workmen's compensation expenses. General inflationary increases
and costs related to a 3% higher average level of basic subscribers were the
principal cause of the additional increase.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the year
ended December 31, 1995 decreased by 6.2% to $9.2 million from $9.9 million in
the prior year. This decrease was principally attributable to the sale of assets
in February 1995. See "Item 1.--Business--Background."
INTEREST EXPENSE (NET). Interest expense net of interest income for the
year ended December 31, 1995 decreased by 4.5% to $16.8 million from $17.6
million in the prior year. This decrease was primarily attributable to lower
levels of debt outstanding.
NET LOSS. Net loss for the year ended December 31, 1995 was $8.7 million
compared to $1.0 million in income for the prior year. This change was the
result of a $10.2 million decrease in gains from asset sales from $15.9 million
in 1994 to $5.7 million in 1995 offset in part by the factors described above.
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH DECEMBER 31, 1993
REVENUES. Revenues for the year ended December 31, 1994 decreased by $4.5
million or 13.2% to $29.6 million from $34.1 million for the previous year. This
decrease was principally due to the sale in January 1994 of the system serving
Rancho Cucamonga, California, which generated revenues of $4.7 million for the
year ended December 31, 1993 as compared to $400,000 for 1994.
Basic revenues, which accounted for approximately 78% of total revenue in
1994, decreased by $2.7 million or approximately 10.6% to $23.2 million from
$25.9 million. This decrease was primarily attributable to 6,600 average fewer
subscribers, combined with a 6.2% decrease in average basic revenue per
subscriber, resulting from rate reductions mandated by the FCC in connection
with the 1992 Cable Act. Revenue from premium cable service decreased by
$500,000 or 14.7% as the Company's average pay units decreased by 10.4% and the
average revenue per pay unit declined by 4.8%. These reductions in average basic
subscribers and pay units are due to the sale of the system serving Rancho
Cucamonga, California, which served 11,500 basic subscribers and 6,700 pay units
at the time of its sale. Other revenue decreased from $4.7 million to $3.5
million due to the system sale as well as from lower revenue from equipment
rentals and connection charges, each as a result of the 1992 Cable Act.
TOTAL OPERATING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Total
operating, selling, general and administrative expenses for the year ended
December 31, 1994 decreased by $2.0 million from $17.0 million to $15.0 million
or 11.6%, principally as a result of the system sale discussed above. Due to the
rate reductions mandated by the FCC rate regulations, programmers kept rate
increases to a minimum during
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<PAGE>
1994 which resulted in the average cost per subscriber increasing by only 4.8%,
considerably less than what had been experienced in recent years.
A 7.5% lower level of average basic subscribers, offset in part by general
inflationary increases, also contributed to the bulk of the additional decrease
in expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the year
ended December 31, 1994 decreased by 5.8% to $9.9 million from $10.5 million in
the prior year. This decrease was principally attributable to the sale of assets
in January 1994. See "Item 1.--Business--Background."
INTEREST EXPENSE (NET). Interest expense net of interest income for the
year ended December 31, 1994 decreased by 5.5% to $17.6 million from $18.7
million in the prior year. This decrease was primarily attributable to lower
levels of debt outstanding.
NET INCOME (LOSS). Net income for the year ended December 31, 1994 was $1.0
million compared to a net loss of $13.0 million for the prior year. This change
was substantially due to gains from asset sales of $15.9 million in 1994, offset
in party by the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has been highly leveraged since the Merger in 1988. In addition,
governmental regulations such as the 1992 Cable Act have adversely affected the
Company's cash flow and its ability to service its debt. In February 1996, the
Company filed a voluntary petition for relief under Chapter 11 of the Bankruptcy
Code in order to refinance a portion of its senior debt which had matured and
restructure a portion of its debt. The Company emerged from bankruptcy in
December 1996. The following discussion includes a summary of certain material
terms of the Company's material outstanding indebtedness.
LOAN AGREEMENT. In December 1996, the Company entered into a loan agreement
with Finova Capital Corporation (the "Loan Agreement") for a senior, secured
credit facility in the aggregate amount of $67.5 million. The credit facility
includes a $57.5 million term loan and up to $10.0 million in revolving loans.
The loans are secured by, among other things, a lien on substantially all of the
Company's real and personal property, and a pledge by the Company's stockholders
of all of the issued and outstanding shares of common stock in the Company. The
proceeds of the initial loans ($63.0 million) were used to refinance existing
indebtedness pursuant to the terms and provisions of the Plan of Reorganization
and the revolving loans will be used to provide the Company with additional
working capital.
The term loan matures on January 2, 2002. The principal balance of the term
loan is payable in quarterly principal installments commencing in January 1998
with an aggregate of $1,050,000 payable in 1998, $1,550,000 due in 1999,
$2,200,000 due in 2000 and $2,600,000 due in 2001. In addition, under the Loan
Agreement, the Company is required to use 75% of its annual "excess cash flow,"
as defined in the Loan Agreement, to reduce the principal outstanding under the
term loan starting with cash flow for the year ending December 31, 1997. The
revolving loans also mature on January 2, 2002. Unused portions of the revolving
loans may be borrowed and reborrowed at the Company's discretion subject to the
applicable commitment and borrowing base limitations.
The outstanding term and revolving loans currently bear interest at 1.5% per
annum above the Citibank, N.A. corporate base rate. The margin above the
corporate base rate is subject to change in the event the Company does not meet
a fixed ratio of outstanding loans to operating cash flow, which is measured
each quarter. As of January 22, 1997, the Company had $57.5 million outstanding
pursuant to the term loan and $5.5 million outstanding pursuant to the revolving
loan facility.
Subject to certain exceptions, the Loan Agreement prohibits or restricts,
among other things, the incurrence of liens, the incurrence of indebtedness,
certain fundamental corporate changes (including mergers, acquisitions and sales
of assets), dividends, the making of specified investments and certain
transactions with affiliates. In addition, the Loan Agreement contains financial
covenants requiring the
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<PAGE>
Company to maintain certain ratios including outstanding loans under the Loan
Agreement to cash flow, debt service to cash flow and capital expenditures.
SENIOR PIK NOTES. On December 18, 1996, the Company executed an indenture
with Fleet National Bank, as Trustee (the "Senior Indenture"), pursuant to which
the Company will issue an aggregate of $49,500,000 in 15% Senior Subordinated
Pay-in-Kind Notes due March 18, 2002 (the "Senior PIK Notes"). The Senior PIK
Notes will be issued to a depository on behalf of the holders of certain claims
under the Plan of Reorganization. The Senior PIK Notes will be secured by, among
other things, a lien on substantially all of the Company's real and personal
property which liens will be subordinate to the liens created under the Loan
Agreement. Interest will accrue on the outstanding balance of the Senior PIK
Notes at 15% per annum, however, interest will not be paid in cash but rather by
an additional note issued by the Company. The principal amount and all accrued
interest with respect to the Senior PIK Notes will be due and payable on March
18, 2002.
Subject to certain exceptions, the Senior Indenture prohibits or restricts,
among other things, the incurrence of liens, the incurrence of indebtedness,
certain fundamental corporate changes (including mergers, acquisitions and sales
of assets), dividends, the making of specified investments and certain
transactions with affiliates. The Senior Indenture does not require the Company
to maintain any financial ratios.
JUNIOR PIK NOTES. On December 18, 1996, the Company executed an indenture
with Fleet National Bank, as Trustee (the "Junior Indenture"), pursuant to which
the Company will issue an aggregate of $38,925,797 in 16% Junior Subordinated
Pay-in-Kind Notes due July 18, 2002 (the "Junior PIK Notes"). The Junior PIK
Notes will be secured by, among other things, a lien on substantially all of the
Company's real and personal property which liens will be subordinate to the
liens created under the Loan Agreement and the Senior Indenture. Interest will
accrue on the outstanding balance of the Junior PIK Notes at 16% per annum,
however, interest will not be paid in cash but rather by an additional note
issued by the Company. The principal amount and all accrued interest with
respect to the Junior PIK Notes will be due and payable on July 18, 2002.
Subject to certain exceptions, the Junior Indenture prohibits or restricts,
among other things, the incurrence of liens, the incurrence of indebtedness,
certain fundamental corporate changes (including mergers, acquisitions and sales
of assets), dividends, the making of specified investments and certain
transactions with affiliates. The Junior Indenture does not require the Company
to maintain any financial ratios.
SYSTEM UPGRADES AND REBUILDS. The Company's rebuilding and upgrading
programs over the last several years have consisted primarily of replacing low
channel capacity cable plant with new higher channel capacity trunk and feeder
lines and adding headend electronics to utilize increased channel capacity. For
the years ended December 31, 1994, 1995 and 1996, capital expenditures by the
Company for system rebuilds or upgrades totalled approximately $216,000,
$899,000 and $1,882,000, respectively. In addition, the Company anticipates that
over the next four years it will spend approximately $12.2 million to upgrade
and rebuild its systems and approximately $3.6 million for additional plant
construction (enabling it to pass approximately 11,600 additional homes). The
Company's policy has been to utilize fiber optic technology in its rebuild
projects, when it is appropriate. The Company believes that the addition of
fiber optics in plant construction will extend system reach, improve picture
quality, allow for increased channel capacity and improve system reliability.
The cable television business requires substantial financing for
construction, maintenance and expansion of cable plant. The Company has
historically financed its capital needs through long-term debt and, to a lesser
extent, through cash provided from operating activities.
Based on the Company's current plan of operations, it is anticipated that
the Company's projected cash flow from operations and current debt facilities
will provide sufficient working capital for operations,
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<PAGE>
debt service requirements and planned capital expenditures for the next several
years. However, there can be no assurance that the Company will not require
additional financing prior to that time. The Company's capital requirements
depend on, among other things, whether the Company is successful in generating
increased revenues and cash flow, governmental regulations affecting the cable
television industry generally and the Company's systems in particular, the
ability of the Company to successfully renew its franchise agreements and
competing technological and market developments.
INFLATION
Certain of the Company's expenses, such as those for wages and benefits, for
equipment repair and replacement, and for billing and marketing, increase with
general inflation. However, the Company does not believe that its financial
results have been, or will be, adversely affected by inflation, provided that it
is able to increase its service rates periodically.
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<PAGE>
ITEM 3. PROPERTIES.
A cable television system consists of four principal operating components.
The first component, the headend, receives television, radio, satellite and
other signals by means of special antennas. The second component, the
distribution network (which originates at the headend and extends throughout the
system's service area) consists of microwave relays, coaxial or fiber optic
cables placed on utility poles or buried underground and associated electronic
and passive equipment. The third component, the "drop", extends from the
distribution network to each customer's home and connects the distribution
system to the customer's television set. The fourth component of the system is
the converter, a device that changes the frequency of the television signals
carried on the system to frequencies that a customer's television can receive.
The Company has made available converters that can be "addressed" by sending
coded signals from the headend through the system to the addressable converter.
Addressable converters enable the system operator to change the customer's level
of service without visiting the customer's home. Addressable converters improve
system programming flexibility and operating procedures, allow system operators
to change the level of service to a customer on short notice and enable
customers to select pay-per-view programming events.
The Company's principal physical assets consist of cable television systems,
including signal receiving, encoding, decoding and processing equipment,
distribution systems, customer drops and converters for its cable television
systems. The signal receiving equipment typically includes a tower, antennas for
the reception of off-air television signals and earth stations for the reception
of satellite delivered programming. Headends, consisting of antennas and
associated electronic equipment, are necessary for the processing, amplification
and modulation of signals and are located near the receiving equipment. The
Company's distribution systems typically consist of coaxial and fiber optic
cables, passives and related electronic equipment. Customer equipment typically
consists of the customer drop and converter. The physical components of the
systems require maintenance and periodic replacement or upgrading for
technological advances. The Company believes all of its principal physical
assets are in reasonably good condition for their age and location.
The Company's cables generally are attached to utility poles under pole
rental agreements with local public utilities, although in some areas the
distribution cable is buried in underground ducts or trenches. The FCC regulates
most pole attachment rates under the Federal Pole Attachment Act.
The Company owns or leases parcels of real property for signal reception
sites (antenna towers and headends), microwave facilities and business offices.
As of January 22, 1997, the Company owned four parcels of real estate and leased
38 parcels for various uses. The Company believes that its properties, both
owned and leased, are in good condition and are suitable and adequate for the
Company's business operations.
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<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Company has three classes of common stock, par value $0.10 per share
(the "Common Stock"), issued and outstanding. The following table sets forth
certain information regarding the ownership of each class of Common Stock and,
except for the election of directors and other matters referred to below in this
Form 10, the total voting power of the outstanding Common Stock, as of January
22, 1997, by (i) each person known by the Company to own beneficially more than
five percent of any class of outstanding Common Stock; (ii) each director of the
Company; and (iii) all executive officers and directors of the Company as a
group (9 persons). Pursuant to a pledge agreement, dated as of December 18,
1996, by and among all of the record holders of the Company's issued and
outstanding shares of Common Stock and Finova Capital Corporation ("Finova"),
individually and as agent for the lenders (the "Lenders") under the Loan
Agreement, all of such shares have been pledged to the Lenders as collateral for
the Company's obligations under the Loan Agreement.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
COMMON STOCK(1) COMMON STOCK(2) COMMON STOCK(3)
------------------------ ------------------------ ------------------------ PERCENT OF
NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT TOTAL
OF SHARES OF CLASS OF SHARES OF CLASS OF SHARES OF CLASS VOTING POWER
----------- ----------- ----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Name Media/Communications Partners
Limited Partnership et al(4)...... -- -- 15,466 64.4% -- -- 47.6%
Allstate Insurance
Company(5)........................ -- -- 7,999 33.3 -- -- 24.6
Fleet National Bank, as
depositary(6)..................... -- -- -- -- 75,000 100% 23.1
Scott Cable Management Company,
Inc.(7)........................... 1,000 100% -- -- -- -- 3.1
Bruce A. Armstrong(8)............... -- -- -- -- -- -- --
John M. Flanagan, Jr................ -- -- -- -- -- -- --
Day L. Patterson.................... -- -- -- -- -- -- --
Steven C. Fox....................... -- -- -- -- -- -- --
Jerold S. Earl...................... -- -- -- -- -- -- --
J. Paul Morbeck..................... -- -- -- -- -- -- --
Richard H. Churchill, Jr.(9)........ -- -- -- -- -- -- --
William Q. Derrough................. -- -- -- -- -- -- --
Jarlath A. Johnston................. -- -- -- -- -- -- --
All executive officers and directors
as a group (9 persons)(8)(9)...... -- -- -- -- -- -- --
</TABLE>
- ------------------------
(1) Each share of Class A Common Stock generally has ten votes per share. The
holders of Class A Common Stock, voting as a separate class, are entitled to
elect two of the Company's five directors, except as otherwise described
herein. No share of Class A Common Stock may be transferred until all of the
shares of Class C Common Stock have been converted into shares of Class A
Common Stock pursuant to the Company's Amended and Restated Articles of
Incorporation, except as otherwise provided in the Management Agreement. See
"Item 11.--Description of Registrant's Securities To Be Registered--Class A
Common Stock."
(2) Each share of Class B Common Stock generally has ten votes per share. The
holders of Class B Common Stock, voting as a separate class, are entitled to
elect one of the Company's five directors. See "Item 11.--Description of
Registrant's Securities To Be Registered--Class B Common Stock."
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<PAGE>
(3) Each share of Class C Common Stock generally has one vote per share. The
holders of Class C Common Stock, voting as a separate class, are entitled to
elect two of the Company's five directors. Each share of Class C Common
Stock will automatically convert into one share of Class A Common Stock upon
the earlier of December 31, 1999 or a "transaction event" (as described
below). The beneficial ownership of the Class C Common Stock is transferable
only with the proportional share of the Senior PIK Notes issued to the
holders under the Plan of Reorganization. See "Item 11.-- Description of
Registrant's Securities To Be Registered--Class C Common Stock."
(4) Media/Communications Partners Limited Partnership, Chestnut Street Partners,
Inc., Milk Street Partners, Inc. and TA Investors hold 13,920, 665, 240 and
641 shares, respectively, of the Class B Common Stock, representing an
aggregate of 47.6% of the combined voting power of the Company's Common
Stock. Such entities are under common control. The address of
Media/Communications Partners Limited Partnership is 75 State Street,
Boston, Massachusetts 02109.
(5) The address of Allstate Insurance Company is 3075 Sanders Road, Northbrook,
Illinois 60062.
(6) Pursuant to the terms of the deposit agreement, dated as of December 18,
1996 (the "Deposit Agreement"), by and among the Company, Fleet National
Bank, as depositary (the "Depositary"), and Fleet National Bank, as trustee
for holders (the "Holders") of the Senior PIK Notes, the Depositary is the
record holder of the 75,000 shares of Class C Common Stock on behalf of the
Holders, and not as principal, and, accordingly, it has no obligation to
vote such shares other than pursuant to the written instructions of the
Holders in accordance with such agreement. The Depositary disclaims
beneficial ownership of the 75,000 shares of Class C Common Stock held by it
pursuant to the Deposit Agreement. The mailing address of Fleet National
Bank is Corporate Trust Department, One Federal Street, Boston,
Massachusetts 02110.
(7) The Company and Scott Cable Management Company, Inc. have entered into a
management agreement, dated December 18, 1996, pursuant to which the Manager
acts as the manager, supervisor and operator of the Company's cable
television systems and directs all actions with respect to operations and
management other than extraordinary decisions. The Manager is the registered
owner of 1,000 shares of the Company's Class A Common Stock. See "Item
11.--Description of Registrant's Securities to be Registered--Class A Common
Stock."
(8) Mr. Bruce A. Armstrong, the Company's President and Chief Executive officer,
is the sole stockholder of the Manager and may be deemed to beneficially own
the shares of Class A Common Stock held by the Manager. See "Item
5.--Directors and Executive Officers--General."
(9) Mr. Richard H. Churchill, Jr. is an indirect equity holder in
Media/Communications Partners Limited Partnership, a stockholder of Milk
Street Partners, Inc. and a partner of TA Investors and may be deemed to
beneficially own shares of Common Stock in proportion to his percentage of
equity ownership in each of such entities.
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<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
GENERAL
MANAGER. The Company and Scott Cable Management Company, Inc. (the
"Manager") entered into a management agreement, dated December 18, 1996 (the
"Management Agreement"), pursuant to which the Manager acts as the manager,
supervisor and operator of the Company's cable television systems and directs
all actions concerning the operation and management of the systems other than
extraordinary decisions. The Management Agreement terminates on December 31,
1999, unless earlier terminated in accordance with its terms. Bruce A.
Armstrong, a member of the Company's Board of Directors and its President and
Chief Executive Officer, is the sole stockholder of the Manager. The Manager has
been managing the Company's systems for over eight years. All of the Company's
executive officers, other than Mr. J. Paul Morbeck, are employees of an
affiliate of the Manager. The Company pays the Manager a monthly fee equal to
four and one-quarter percent of its gross revenues, plus reimbursement of
out-of-pocket expenses up to a maximum of $300,000 per year, unless such
additional expense reimbursement has been otherwise approved. The Manager also
is entitled to receive an additional one-quarter percent of the Company's gross
revenues each year if certain performance levels are achieved.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
- --------------------------------------- --- ----------------------------------------------
<S> <C> <C>
Bruce A. Armstrong..................... 49 President, Chief Executive Officer and
Director
John M. Flanagan, Jr. ................. 54 Senior Vice President, Chief Financial Officer
and Director
Day L. Patterson....................... 53 Senior Vice President, General Counsel and
Secretary
Steven C. Fox.......................... 46 Vice President--Finance, Treasurer and
Assistant Secretary
Jerold S. Earl......................... 48 Vice President--Engineering
J. Paul Morbeck........................ 45 Senior Vice President--Operations
Richard H. Churchill, Jr. ............. 44 Director
William Q. Derrough.................... 32 Director
Jarlath A. Johnston.................... 48 Director
</TABLE>
The business experience of each of the persons listed above for at least the
last five years is as follows:
BRUCE A. ARMSTRONG has been the Company's President since 1993 and Chief
Executive Officer since January 1994. From 1988 to 1993, Mr. Armstrong was the
Company's Executive Vice President. Mr. Armstrong has been engaged in the cable
industry for 25 years and has had a broad range of management experience at the
system, regional and corporate levels. From 1984 to 1988, Mr. Armstrong held
various top management positions with Jones Intercable, Inc., including serving
as the President of Jones Spacelink, Ltd., a public company, from 1987 to 1988.
Prior to 1984, Mr. Armstrong was a general manager and a Vice President at
Teltron Cable TV. Mr. Armstrong began his career as a system manager for Tele-
Communications, Inc., after graduating college and serving in the Air Force.
JOHN M. FLANAGAN, JR. has been a Senior Vice President and Chief Financial
Officer of the Company since 1993. From 1989 to 1992, he served as Vice
President of Finance and Treasurer of Metro Mobil CTS, Inc. From 1981 to 1989,
Mr. Flanagan was the Vice President--Finance and Chief Financial Officer of
Essex Communications Corp. and Affiliated Companies. Prior to 1981, Mr. Flanagan
served in various accounting and financial positions at Teleprompter Corporation
and prior to that was in public accounting
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<PAGE>
with Deloitte Haskins and Sells. Mr. Flanagan has over 18 years of experience in
the cable television industry.
DAY L. PATTERSON has been Senior Vice President, General Counsel and
Secretary of the Company since 1988. Prior to 1988, Mr. Patterson served as Vice
President and General Counsel of Group W Satellite Communications, and then as
Vice President and Chief Counsel at the cable division of Westinghouse
Broadcasting & Cable. Mr. Patterson first joined the cable industry in 1980 as
General Counsel of Cablevision Systems Corp. Mr. Patterson began his legal
career at a major law firm in New York City.
STEVEN C. FOX has been the Vice President--Finance, Treasurer and Assistant
Secretary since 1993. Since 1989, Mr. Fox has served as the Company's corporate
controller. Mr. Fox served as the Corporate Controller of Multivision Cable T.V.
Corp. from 1988 to 1989 and as Regional Controller for Rogers Cable Systems of
America, Inc. from 1985 to 1988. Mr. Fox began his career in the cable
television industry at Cablecom General, Inc. as Corporate Controller from 1974
to 1985, and General Manager of a subsidiary. Mr. Fox has over 22 years of
experience in the cable television industry.
JEROLD S. EARL has been Vice President--Engineering since 1989. Prior to
that, he served as Director of Engineering for Jones Spacelink, Ltd. from 1987
to 1989 and was a Division Engineer with Jones Intercable, Inc. with
responsibility for 17 systems from 1985 to 1987. From 1972 to 1985, Mr. Earl
held various technical positions with Teltron Cable TV. Mr. Earl has over 24
years of experience in the cable television industry.
J. PAUL MORBECK joined the Company as Regional Manager in 1987, became a
Vice President in 1992 and became Senior Vice President--Operations in 1996.
From 1975 to 1987, Mr. Morbeck served in various positions in the cable
television industry including Director of Operations for a Warner Amex cable
division, District Manager for Group W Satellite Communications, and System
Manager at Warner Cable Communications Inc. Mr. Morbeck has 27 years of
experience in the cable industry.
RICHARD H. CHURCHILL, JR. has been a director of the Company since December
1996. Mr. Churchill is a partner of Media/Communications Partners, a
Boston-based risk capital firm founded in 1986 which specializes in making
private investments in the media, communications and telecommunications
industries ("M/C Partners"). Mr. Churchill is a founding partner of M/C Partners
and has concentrated his investment activities in the cable television and radio
industries. Prior to his joining M/C Partners, Mr. Churchill was a partner at TA
Associates, which he joined in 1978. Mr. Churchill is a graduate of Harvard
Graduate School of Business (1978) and Dartmouth College (1974).
WILLIAM Q. DERROUGH has been a director of the Company since December 1996.
Mr. Derrough has been Senior Vice President of Chanin and Company LLC, a Los
Angeles-based investment banking firm, since December 1995. He has served in
various positions with Chanin and Company LLC since July 1991. Prior to joining
Chanin and Company LLC, Mr. Derrough was a corporate finance generalist in the
Los Angeles offices of Salomon Brothers Inc. from 1989 through 1991. He holds a
bachelors degree from the University of California, Berkeley. He is also a
director of Strategic Partners, Inc., a privately-held Los Angeles based
designer and manufacturer of medical uniforms, school uniforms and institutional
work shoes.
JARLATH A. JOHNSTON has been a director of the Company since December 1996.
Since 1994, Mr. Johnston has been an independent consultant providing advice on
media financings and restructurings. From 1986 to 1990, Mr. Johnston served as a
Vice President and from 1990 to 1994 as a Director in the Investment Bank Media
Group at Salomon Brothers Inc. From 1984 to 1986, Mr. Johnston served as Vice
President in the Media Division of Bankers Trust Company and from 1980 to 1984
he served as Assistant Vice President of the Media Department at Citibank, N.A.
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<PAGE>
BOARD OF DIRECTORS
COMPOSITION OF THE BOARD OF DIRECTORS. The Company's Amended and Restated
Articles of Incorporation (the "Articles of Incorporation") provide that the
Board of Directors will consist of five members as of the effective date of the
Plan of Reorganization, two who are considered to be Class A Common Stock
directors, two who are considered to be Class C Common Stock directors (until
such stock is converted into Class A Common Stock, at which time there will be
four Class A Common Stock directors) and one who is considered to be a Class B
Common Stock director. Directors are elected annually.
As of January 22, 1997, Messrs. Armstrong and Flanagan serve as Class A
Common Stock directors, Mr. Churchill serves as the Class B Common Stock
director and Messrs. Derrough and Johnston serve as Class C Common Stock
directors.
SPECIAL PROVISIONS REGARDING BOARD ACTION. Except as otherwise provided in
the Articles of Incorporation or below, an act of a majority of the members of
the Board of Directors present at any meeting at which a quorum is present
constitutes Board authorization. Notwithstanding the foregoing, the Articles of
Incorporation provide that a vote of four of the Company's five directors is
required for Board authorization regarding the following Company actions:
incurrence of significant additional debt; extraordinary capital expenditures;
the declaration of any dividend; the commencement of a voluntary case under the
Bankruptcy Code or any similar bankruptcy or insolvency proceeding; or the
consent of an involuntary petition for relief. In addition, the Class C Common
Stock directors have the sole responsibility to make decisions on behalf of the
Board of Directors with respect to the early termination of the Management
Agreement as a result of a breach thereof, the selection of a new manager upon
such termination, and whether the Management Agreement will be renewed at the
end of its term.
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<PAGE>
ITEM 6. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
The Company's Chief Executive Officer and other executive officers, other
than J. Paul Morbeck, have not earned or been paid or awarded any plan or
non-plan compensation by the Company for services rendered for the year ended
December 31, 1996. Each of such persons are paid by an affiliate of the Manager
for services rendered to the Company. Pursuant to the Management Agreement, the
Manager is paid a management fee (and additional fees upon the satisfaction of
certain conditions) by the Company in connection with the management and
operation of the Company's systems. See "Item 7.--Certain Relationships and
Related Transactions."
For the year ended December 31, 1996, the Company paid Mr. Morbeck a base
salary of $120,730 and a bonus of $12,000. The bonus was based on Mr. Morbeck's
performance in 1995 but was paid by the Company in 1996. The Company did not
grant any options to purchase Common Stock to any person in the year ended
December 31, 1996 and no options to purchase Common Stock are outstanding.
DIRECTOR COMPENSATION
Pursuant to the Plan of Reorganization, the Company is required to pay each
director a monthly fee of $2,500, other than any director who is either a member
of the official creditors' committee (or an officer, employee or affiliate of
such member) or an officer, employee or affiliate of the Manager or an officer,
employee or affiliate of a holder of the Junior PIK Notes (including the Class B
Common Stock). Messrs. Derrough and Johnston are the only directors entitled to
receive monthly fees under this provision. All directors are reimbursed by the
Company for any actual out-of-pocket expenses incurred in performing their
duties as directors.
28
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The following is a discussion of certain transactions entered into by the
Company and its principal stockholders, executive officers and directors. The
Company believes that the terms of these transactions were no less favorable to
the Company than would have been obtained from non-affiliated third parties for
similar transactions at the time of such transactions. The Company's current
policy is that all transactions between the Company and its directors, officers
and principal stockholders should be on terms no less favorable to the Company
than could be obtained from unaffiliated parties.
Scott Cable Management Company, Inc. is the Manager of the Company's
systems. Bruce A. Armstrong, the Company's President and Chief Executive Officer
is the sole stockholder of the Manager. Pursuant to the Management Agreement,
the Manager acts as the manager, supervisor and operator of the systems and
directs all actions concerning operations and management other than
extraordinary decisions. Pursuant to the terms of the Management Agreement, the
Company is required to pay the Manager a management fee equal to 4.25% of the
Company's gross revenues (as defined in the agreement) and, subject to the
satisfaction of certain conditions, an additional management fee of 0.25% of
gross revenues. The Company is also required to reimburse the Manager for its
reasonable out-of-pocket expenses up to a maximum of $300,000 per year, unless
such additional expense reimbursement has been otherwise approved. The
Management Agreement expires on December 31, 1999, unless it is terminated
earlier in accordance with its terms. For the years ended December 31, 1994,
1995 and 1996, the Company has paid the Manager $1,439,000, $1,264,000 and
$1,225,000 respectively, for services rendered pursuant to the Management
Agreement or a prior management agreement.
The Company arranges for some of its programming through American Cable
Entertainment Programming Company, Inc. ("AmPro"). Bruce A. Armstrong, the
Company's President and Chief Executive Officer, is the sole stockholder of
AmPro. The Company does not pay any compensation to AmPro in connection with
this arrangement.
In March 1996, Chanin and Company LLC ("Chanin") was retained by the
Official Committee of Unsecured Creditors (the "Committee") as its financial
advisor in connection with the Company's proceedings before the Bankruptcy
Court. William Q. Derrough, a director of the Company, is a Senior Vice
President of Chanin. Pursuant to the engagement letter, the Company agreed to
pay Chanin a monthly advisory fee of $50,000, plus the sum of $250,000 in
connection with the confirmation of the Plan of Reorganization. The Company is
also required to reimburse Chanin for all reasonable out-of-pocket expenses. As
of January 22, 1996, the Company has paid Chanin $460,000 in fees, representing
approximately 80% of the amount owed by the Company for monthly advisory fees,
and $52,741.47 in expenses. To date, the Company owes Chanin $90,000 for monthly
advisory fees and the $250,000 fee payable in connection with the confirmation
of the Plan.
For further information concerning certain arrangements between the Company
and its directors and executive officers, see "Item 4.--Security Ownership of
Certain Beneficial Owners and Management," "Item 5.--Directors and Executive
Officers" and "Item 6--Executive Compensation."
29
<PAGE>
ITEM 8. LEGAL PROCEEDINGS.
In February 1996, the Company, together with other corporations who held the
then issued and outstanding capital stock of the Company (the "Holding
Companies" and together with the Company, the "Debtors"), filed a voluntary
petition for relief under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware. On December 6, 1996, the
Bankruptcy Court confirmed the Debtors' Second Amended and Restated Joint Plan
of Reorganization dated October 31, 1996, as modified. Pursuant to the Plan of
Reorganization, the Company is required to file objections to the proof of
claims filed by its former creditors by March 18, 1997. The Company intends to
object to the proof of claims filed by CIG & Co. and Metropolitan Life Insurance
Company (collectively, the "Insurance Companies"). The proof of claims filed by
the Insurance Companies includes the payment of interest on indebtedness under
the Company's then outstanding Senior Secured Notes (which matured in November
1995) at the default rate during the proceedings before the Bankruptcy Court.
The Bankruptcy Court required the Company to put in escrow an aggregate of
$387,000 pending the resolution of this claim.
Other than as described above and ordinary and routine litigation incidental
to its business operations, the Company is not involved in any pending legal
proceedings.
30
<PAGE>
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
NO PUBLIC MARKET; NO OUTSTANDING CONVERTIBLE SECURITIES
The Company's Common Stock is not traded on any established public trading
market. In addition, none of the Company's currently issued and outstanding
shares of Common Stock is subject to outstanding options or warrants to
purchase, or securities convertible or exchangeable into Common Stock, except as
described herein. Each share of Class C Common Stock will automatically convert
into one share of Class A Common Stock upon the earlier of December 31, 1999 or
a "transaction event". A "transaction event" generally includes any merger,
consolidation, liquidation, reorganization or dissolution of the Company, any
sale of all of the Company's systems or any similar transaction such as a
reclassification of the capital stock of the Company or the dividend or other
distribution of any corporate assets to the Company's stockholders.
SHARES ELIGIBLE FOR FUTURE SALE
All of the Company's outstanding shares of Class B and Class C Common Stock
were issued in December 1996 in reliance upon Section 1145(a) of the Bankruptcy
Code and such shares are considered to be sold in a public offering pursuant to
Section 1145(c). Accordingly, none of the Company's 24,000 shares of Class B
Common Stock or 75,000 shares of Class C Common Stock constitute "restricted
securities" as defined in Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act"), and such shares are freely saleable under the Securities
Act, unless the holders thereof are considered to be "underwriters." All of the
1,000 shares of Class C Common Stock are "restricted securities" within the
meaning of Rule 144 since such shares were issued and sold by the Company in a
private transaction in reliance upon an exemption from registration under the
Securities Act and may be sold only if they are registered under the Securities
Act or unless an exemption from registration, such as the exemption provided by
Rule 144 under the Securities Act, is available.
In general, under Rule 144, as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
restricted shares for at least a two-year period (as computed under Rule 144) is
entitled to sell within any three-month period a number of such shares that does
not exceed the greater of (i) 1% of the then outstanding shares of Common Stock
and (ii) the average weekly trading volume in the Company's Common Stock during
the four calendar weeks immediately preceding such sale. Sales under Rule 144
are also subject to certain provisions relating to the manner and notice of sale
and the availability of current public information about the Company. A person
(or persons whose shares are aggregated) who is not deemed an affiliate of the
Company at any time during the 90 days immediately preceding a sale, and who has
beneficially owned restricted shares for at least a three-year period (as
computed under Rule 144), would be entitled to sell such shares under Rule
144(k) without regard to the volume limitation and other conditions described
above.
Notwithstanding the foregoing, there are significant prohibitions and/or
restrictions on the sale of shares of Common Stock. Pursuant to a pledge
agreement, dated as of December 18, 1996, by and among all of the record holders
of the Company's issued and outstanding shares of Common Stock and Finova,
individually and as agent for the Lenders under the Loan Agreement, all of such
shares have been pledged to the Lenders as collateral for the Company's
obligations under the Loan Agreement. In addition, the Plan provides that,
except as provided in the Management Agreement, the Class A Common Stock may not
be transferred until the Class C Common Stock has automatically converted into
Class A Common Stock. The Plan also provides that the beneficial ownership of
the Class C Common Stock may be transferred only with the proportional share of
the Senior PIK Notes issued to the holders thereof. The Company has also agreed
not to register any shares of Class C Common Stock under the Securities Act for
sale by security holders prior to the conversion to Class A Common Stock.
31
<PAGE>
Given the complex and subjective nature of the question of whether a
particular holder may be an "underwriter", the Company recommends that potential
sellers and/or purchasers of the Common Stock consult with counsel concerning,
among other things, whether they may freely sell such Common Stock without
registration under the Securities Act.
HOLDERS
As of January 22, 1997, there was one record holder of the Class A Common
Stock, six record holders of Class B Common Stock and one record holder of Class
C Common Stock. Fleet National Bank, as the Depositary under the Deposit
Agreement, holds the Class C Common Stock on behalf of the holders of the Senior
PIK Notes.
DIVIDENDS
The Company has not declared or paid any cash dividends on its Common Stock
at any time and does not anticipate doing so in the foreseeable future. Under
Texas law, the Company may not declare dividends on its common stock if, after
giving effect to the dividend, the Company would be rendered insolvent or the
"distribution" of such dividend exceeds the surplus of the Company. In addition,
the Loan Agreement and the Senior and Junior Indentures prohibit the Company
from paying any dividends. The Company's Articles of Incorporation provide that
the declaration of any dividend must be approved by the vote of four of the five
directors of the Company present at any meeting at which there is a quorum.
The Company intends to retain any future earnings to repay indebtedness or
finance the growth and development of its business. Any determination as to the
payment of dividends will be at the discretion of the Board of Directors and
will depend on, among other things, the prohibitions and provisions described
above, the Company's operating results, financial condition, capital
requirements, contractual provisions which restrict or prohibit the declaration
of dividends and such other factors as the Board of Directors may deem relevant.
32
<PAGE>
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The following discussion sets forth certain information with respect to each
class of securities sold by the Company, within the three years ended January
22, 1997, which were not registered under the Securities Act. The information
includes identity of the class, the name or identity of purchasers, the dates of
sale, the title and number of securities sold and the consideration received by
the Company for the issuance of such securities.
COMMON STOCK. All of the Company's outstanding shares of Common Stock were
issued in December 1996. The shares of Class A Common Stock was issued in a
transaction not involving a public offering under Section 4(2) of the Securities
Act and the shares of Class B and Class C Common Stock were issued in reliance
upon Section 1145(a) of the Bankruptcy Code. In accordance with the Plan of
Reorganization, the Company issued the following securities on December 18,
1996:
CLASS A COMMON STOCK. Pursuant to the Plan, 1,000 shares of Class A Common
Stock were issued to Scott Cable Management Company, Inc. for incentive
purposes.
CLASS B COMMON STOCK. Pursuant to the Plan, each holder of the Company's
unsecured junior subordinated notes due 2003 in the aggregate principal amount
of $38.9 million is entitled to receive (i) a negotiable certificate
representing each holder's PRO RATA share of an undivided interest in 85% of the
Junior PIK Notes and (ii) a negotiable certificate representing each holder's
PRO RATA share of 24,000 shares of Class B Common Stock.
CLASS C COMMON STOCK. Pursuant to the Plan, each holder of the Company's
publicly-held 12 1/4% unsecured subordinated debentures due 2001 in the
aggregate principal amount of $55.1 million is entitled to receive (i) its PRO
RATA share of a cash payment of $6,087,153 (representing accrued interest of
$5,087,153, a $500,000 payment to reduce the principal amount of the claim and a
restructuring fee of $500,000), (ii) a negotiable certificate representing each
holder's PRO RATA share of an undivided interest in the Senior PIK Notes and
75,000 shares of the Company's Class C Common Stock and (iii) a negotiable
certificate representing each holder's PRO RATA share of an undivided interest
in 15% of the Junior PIK Notes.
33
<PAGE>
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
GENERAL
The Company's authorized capital stock consists of 175,000 shares of Common
Stock, with each share having a par value of $0.10, of which 76,000 shares are
designated as Class A Common Stock, 24,000 shares are designated as Class B
Common Stock and 75,000 shares are designated as Class C Common Stock. As of
January 22, 1997, the following shares of each class of Common Stock were issued
and outstanding: 1,000 shares of Class A Common Stock; 24,000 shares of Class B
Common Stock; and 75,000 shares of Class C Common Stock.
All of the classes of the Company's Common Stock have the same preferences,
limitations and relative rights other than with respect to voting rights and
provisions regarding conversion and transferability. The Company may not declare
dividends on its Common Stock if, after giving effect to the dividend, the
Company would be rendered insolvent or the "distribution" of such dividend
exceeds the surplus of the Company. In addition, the Loan Agreement and the
Senior and Junior Indentures prohibit the Company from paying any dividends. The
Company's Articles of Incorporation provide that the declaration of any dividend
must be approved by the vote of four of the five directors of the Company
present at any meeting at which there is a quorum. Any determination as to the
payment of dividends will be at the discretion of the Board of Directors.
Holders of the Company's common stock do not have preemptive or subscription
rights. There are no redemption or sinking fund provisions in the Company's
Articles of Incorporation. The Articles of Incorporation prohibit the Company
from issuing non-voting equity securities.
Pursuant to a pledge agreement, dated as of December 18, 1996, by and among
all of the record holders of the Company's issued and outstanding shares of
Common Stock and Finova, individually and as agent for the Lenders under the
Loan Agreement, all of such shares have been pledged to the Lenders as
collateral for the Company's obligations under the Loan Agreement.
CLASS A COMMON STOCK
Each share of Class A Common Stock has ten votes per share, except that with
respect to the election of directors the holders of Class A Common Stock, voting
as a separate class, are entitled to elect two of the Company's five directors,
and upon the conversion of Class C Common Stock to Class A Common Stock, as
described below, four of the five directors. The Class A Common Stock may not be
transferred until the Class C Common Stock has automatically converted into
Class A Common Stock in accordance with its terms, except as otherwise provided
in the Management Agreement. In the event that the Management Agreement
terminates as a result of a breach thereof or if a "transaction event" has not
occurred by January 1, 2000, the Manager must deposit its Class A Common Stock
with the Depository pursuant to the Deposit Agreement, and all of the Manager's
ownership interest in the Company will terminate. A "transaction event"
generally includes any merger, consolidation, liquidation, reorganization or
dissolution of the Company, the sale of all of the Company's systems and any
similar transactions, including the reclassification of the Company's capital
stock or the dividend or other distribution of any corporate assets to its
shareholders. See "Item 4.--Security Ownership of Certain Beneficial Owners and
Management." and "Item 5.--Directors and Executive Officers--Manager."
CLASS B COMMON STOCK
Each share of Class B Common Stock has ten votes per share, except that with
respect to the election of directors the holders of Class B Common Stock, voting
as a separate class, are entitled to elect one of the Company's five directors.
34
<PAGE>
CLASS C COMMON STOCK
Each share of Class C Common Stock has one vote per share, except that with
respect to the election of directors the holders of Class C Common Stock, voting
as a separate class, are entitled to elect two of the Company's five directors.
Each share of the Class C Common Stock will automatically convert into one share
of Class A Common Stock upon the earlier of December 31, 1999 or a "transaction
event". Upon the conversion of the Class C Common Stock into Class A Common
Stock, the holders of the Class A Common Stock (including the holders of shares
of converted Class C Common Stock), voting as a separate class, will be entitled
to elect four out of five of the Company's directors. The beneficial ownership
of the Class C Common Stock may be transferred only with the proportional share
of the Senior PIK Notes issued to the holders pursuant to the Plan of
Reorganization.
Any amendment to the Articles of Incorporation concerning approval by the
Board of Directors with respect to certain determinations concerning the
Management Agreement must be approved by the affirmative vote of a majority of
the shares of holders of the Class C Common Stock, voting as a separate class.
35
<PAGE>
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 2.02-1 of the Texas Business Corporation Act permits a corporation
(which includes the Company) to indemnify a person who was, is, or is threatened
to be made a named defendant or respondent in a proceeding because the person is
or was serving the corporation as a director, officer, employee or similar
functionary, only if such person conducted himself in good faith and reasonably
believed that his conduct was in the corporation's best interests and, in the
case of a criminal proceeding, he had no reasonable cause to believe his conduct
was unlawful.
The Texas Business Corporation Act provides generally that a person may be
indemnified against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by the person in connection with the proceeding,
except that if the person is found liable to the corporation or is found liable
on the basis that a personal benefit was improperly received, the
indemnification is limited to reasonable expenses actually incurred. No
indemnification may be made in respect of any proceeding in which the person is
found liable for wilful or intentional misconduct in the performance of his duty
to the corporation.
The Articles of Incorporation require the Company to indemnify each director
and officer for reasonable expenses incurred in connection with any proceeding
(as defined therein, which includes any threatened, pending or completed
proceeding whether civil, criminal, administrative, arbitrative or
investigative) to the maximum extent permitted, and in the manner prescribed by,
the Texas Business Corporation Act and any other applicable law. The Articles of
Incorporation also permit the Company to advance expenses to such persons. The
Company's Amended and Restated By-Laws (the "By-Laws") require the Company to
indemnify any person who was or is party to, or threatened to be a party to, a
proceeding against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred in connection with
such proceeding to the fullest extent and in the manner set forth in and
permitted by the Texas Business Corporation Act and any other applicable law.
The Plan requires the Company to maintain directors' and officers' liability
insurance in the amount of $5,000,000 which covers certain acts or omissions of
the Company's directors and officers. In November 1995, the Company also placed
an aggregate of $500,000 in an indemnification fund for the payment of any
claims against the Company's directors or officers giving rise to
indemnification under the indemnification escrow and the Texas Business
Corporation Act (the "Indemnification Escrow"). The Indemnification Escrow
terminates on November 15, 2000.
36
<PAGE>
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's audited consolidated financial statements for the years ended
December 31, 1995, 1994 and 1993, respectively, and the Company's unaudited
consolidated financial statements for the nine months ended September 30, 1996
and 1995 are set forth at the end of this Form 10 and begin on page F-1.
37
<PAGE>
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no changes in or disagreements with the Company's
independent public accountants during the last two fiscal years.
38
<PAGE>
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Index of Financial Statements
The following financial statements of the Company are included at the
indicated page in this registration statement:
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report............................................................... F-1
Consolidated Balance Sheets--December 31, 1995 and 1994.................................... F-2
Consolidated Statements of Operations--For the Years Ended December 31, 1995, 1994 and
1993...................................................................................... F-3
Consolidated Statements of Cash Flows--For the Years Ended December 31, 1995, 1994 and
1993...................................................................................... F-4
Consolidated Statements of Shareholders' Deficiency--For the Years Ended December 31, 1995,
1994 and 1993............................................................................. F-5
Notes to Consolidated Financial Statements................................................. F-6
</TABLE>
<TABLE>
<S> <C>
Consolidated Balance Sheet (Unaudited)--September 30, 1996............... F-16
Consolidated Statements of Operations (Unaudited)--For the Nine Months
Ended September 30, 1996 and 1995....................................... F-17
Consolidated Statements of Cash Flows (Unaudited)--For the Nine Months
Ended September 30, 1996 and 1995....................................... F-18
Consolidated Statement of Shareholders' Deficiency (Unaudited)--For the
Nine Months Ended September 30, 1996.................................... F-19
Notes to Consolidated Financial Statements (Unaudited)................... F-20
</TABLE>
(b) Financial Statement Schedule
(i) Schedule VIII--Valuation Accounts
(c) Exhibits
The following documents are filed as part of this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1 --Debtors' Second Amended Joint Plan of Reorganization dated October 31, 1996.
3.1 --Amended and Restated Articles of Incorporation.
3.2 --Bylaws.
4.1 --Form of certificate of Class A Common Stock.
10.1 --Loan Agreement dated December 18, 1996 between Scott Cable Communications, Inc. and Finova Capital
Corporation.
10.2 --Subordination Agreement dated as of December 18, 1996 among Fleet National Bank, as Trustee, Fleet
National Bank, as Trustee, Scott Cable Communications, Inc. and Finova Capital Corporation.
10.3 --Security Agreement dated as of December 18, 1996 between Scott Cable Communications, Inc. and Finova
Capital Corporation.
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.4 --Pledge Agreement dated as of December 18, 1996 among Scott Cable Management Company, Inc.,
Media/Communications Partners Limited Partnership, Chestnut Street Partners, Inc., Milk Street
Partners, Inc., TA Investors, Northeast Ventures II, Allstate Insurance Company, Fleet National Bank,
as Trustee, and Finova Capital Corporation.
10.5 --Indenture dated as of December 18, 1996 between Scott Cable Communications, Inc. and Fleet National
Bank, as Trustee (with respect to the 15% Senior Subordinated Pay-In-Kind Notes due March 18, 2002
(the "Senior PIK Notes")).
10.6 --Deposit Agreement dated as of December 18, 1996 between and among Scott Cable Communications, Inc.,
Fleet National Bank and Fleet National Bank, as Trustee.
10.7 --Subordination Agreement dated as of December 18, 1996 among Fleet National Bank, as Trustee, Fleet
National Bank, as Trustee, and Scott Cable Communications, Inc. (with respect to the Senior PIK
Notes).
10.8 --Security Agreement dated as of December 18, 1996 between Scott Cable Communications, Inc. and Fleet
National Bank, as Trustee (with respect to the Senior PIK Notes).
10.9 --Indenture dated as of December 18, 1996 between Scott Cable Communications, Inc. and Fleet National
Bank, as Trustee (with respect to the 16% Junior Subordinated Pay-In-Kind Notes due July 18, 2002 (the
"Junior PIK Notes")).
10.10 --Security Agreement dated as of December 18, 1996 between Scott Cable Communications, Inc. and Fleet
National Bank, as Trustee (with respect to the Junior PIK Notes).
10.11 --Management Agreement dated December 18, 1996 between Scott Cable Communications, Inc. and Scott Cable
Management Company, Inc.
10.12 --Escrow Agreement dated November 15, 1995 by and between Scott Cable Communications, Inc. and Baer
Marks & Upham LLP.
10.13 --Escrow Agreement dated as of December 18, 1996 by and among CIG & Co., Metropolitan Life Insurance
Company, Scott Cable Communications, Inc. and First Union Bank of Connecticut.
11.1 --Statement regarding computation of per share earnings. (Not included as the computation can be clearly
determined from the material contained in the registration statement.)
21.1 --Subsidiaries of the Company.
27.1 --Financial Data Schedule.
</TABLE>
40
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
SCOTT CABLE COMMUNICATIONS, INC.
Date: February 3, 1997 By: /s/ BRUCE A. ARMSTRONG
-----------------------------------------
Bruce A. Armstrong
PRESIDENT AND CHIEF EXECUTIVE OFFICER
41
<PAGE>
INDEPENDENT AUDITORS' REPORT
Scott Cable Communications, Inc.:
We have audited the accompanying consolidated balance sheets of Scott Cable
Communications, Inc. (the "Company") and subsidiaries as of December 31, 1995
and 1994 and the related consolidated statements of operations, shareholders'
deficiency and cash flows for each of the three years in the period ended
December 31, 1995. Our audits also included the financial statement schedule
listed in the index at Item 15(a). These consolidated financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Scott Cable Communications,
Inc. and subsidiaries as of December 31, 1995 and 1994 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, on February
14, 1996, the Company filed for reorganization under Chapter 11 of the Federal
Bankruptcy Code. The accompanying financial statements do not purport to reflect
or provide for the consequences of the bankruptcy proceedings. In particular,
such financial statements do not purport to show: (a) as to assets, their
realizable value on a liquidation basis or their availability to satisfy
liabilities; (b) as to prepetition liabilities, the amounts that may be allowed
for claims or contingencies, or the status and priority thereof; (c) as to
stockholder accounts, the effect of any changes that may be made in the
capitalization of the Company; or (d) as to operations, the effect of any
changes that may be made in its business.
The accompanying consolidated financial statements have been prepared
assuming that Scott Cable Communications, Inc. and subsidiaries will continue as
a going concern. As discussed in Note 1, the Company is presently unable to meet
its scheduled long term debt maturity repayments and the Company's Cash
Collateral Stipulation expires on December 31, 1996. These circumstances raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
Deloitte & Touche LLP
Stamford, Connecticut
March 15, 1996
F-1
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
ASSETS
INVESTMENT IN CABLE TELEVISION SYSTEMS:
Land and land improvements..................................................... $ 18,523 $ 18,523
Vehicles....................................................................... 1,264,342 1,282,458
Buildings and improvements..................................................... 127,326 129,695
Office furniture and equipment................................................. 288,390 302,175
CATV distribution systems and related equipment................................ 35,194,410 33,033,661
--------------- ---------------
Total fixed assets......................................................... 36,892,991 34,766,512
Less accumulated depreciation.................................................. (21,300,452) (17,865,397)
--------------- ---------------
Total fixed assets--net.................................................... 15,592,539 16,901,115
FRANCHISE COSTS--net........................................................... 7,490,598 11,065,253
GOODWILL--net.................................................................. 20,548,366 21,229,506
DEFERRED CHARGES--net.......................................................... 1,522,155
DEFERRED FEDERAL INCOME TAXES.................................................. 938,220
ASSETS HELD FOR SALE--net...................................................... 6,570,281
CASH AND CASH EQUIVALENTS (including restricted cash of $2,632,183 and
$5,139,840 in 1995 and 1994, respectively)................................... 6,964,927 8,530,967
ACCOUNTS RECEIVABLE less allowance for doubtful accounts of $103,695 in 1995
and $48,715 in 1994.......................................................... 452,048 231,781
PREPAID AND OTHER ASSETS....................................................... 1,449,556 653,228
--------------- ---------------
TOTAL...................................................................... $ 52,498,034 $ 67,642,506
--------------- ---------------
--------------- ---------------
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
LIABILITIES:
Notes and loans payable........................................................ $ 150,656,454 $ 159,321,531
Accounts payable and accrued expenses.......................................... 8,670,455 6,211,934
Unearned income................................................................ 180,780 182,983
Converter deposits............................................................. 20,829 21,242
Deferred state income taxes.................................................... 686,971 943,452
--------------- ---------------
Total liabilities.......................................................... 160,215,489 166,681,142
--------------- ---------------
COMMITMENTS (See Note 7)
SHAREHOLDERS' DEFICIENCY:
Common stock--100 shares authorized, issued and outstanding, no par value...... 1,000 1,000
Additional paid-in-capital..................................................... 4,238,850 4,238,850
Deficit........................................................................ (111,957,305) (103,278,486)
--------------- ---------------
Total shareholders' deficiency............................................. (107,717,455) (99,038,636)
--------------- ---------------
TOTAL...................................................................... $ 52,498,034 $ 67,642,506
--------------- ---------------
--------------- ---------------
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Revenue.......................................................... $ 28,087,568 $ 29,585,220 $ 34,077,395
Costs and expenses:
Operating expenses............................................. 9,441,480 9,764,735 11,010,362
Selling, general and administrative expenses................... 4,651,224 5,237,316 5,952,131
Management fees................................................ 1,263,941 1,439,090 1,403,178
Depreciation and amortization.................................. 9,245,698 9,859,500 10,472,264
-------------- -------------- --------------
Total costs and expenses..................................... 24,602,343 26,300,641 28,837,935
-------------- -------------- --------------
Operating Income................................................. 3,485,225 3,284,579 5,239,460
Reorganization costs............................................. (261,669)
Interest expense, net of interest income of $441,517 in 1995,
$327,609 in 1994, and $126,001 in 1993......................... (16,838,286) (17,641,554) (18,664,766)
Gain on sale of marketable securities............................ 2,516,479
Gain (loss) on sale of cable television systems and other
assets......................................................... 5,699,717 13,336,584 (37,177)
-------------- -------------- --------------
(Loss) income before income taxes................................ (7,915,013) 1,496,088 (13,462,483)
Income tax (expense) benefit..................................... (763,806) (435,483) 629,013
-------------- -------------- --------------
Income (loss) before extraordinary items and cumulative effect of
change in accounting principle................................. (8,678,819) 1,060,605 (12,833,470)
Extraordinary item--gain on extinguishment of debt (net of taxes
of $22,087).................................................... 455,230
-------------- -------------- --------------
Income (loss) before cumulative effect of change in accounting
principle...................................................... (8,678,819) 1,060,605 (12,378,240)
Cumulative effect of change in accounting principle-- adoption of
SFAS No. 109................................................... (575,639)
-------------- -------------- --------------
Net (loss) income............................................ $ (8,678,819) $ 1,060,605 $ (12,953,879)
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income................................................ $ (8,678,819) $ 1,060,605 $ (12,953,879)
Adjustment to reconcile net (loss) income to cash provided by
operating activities:
Depreciation................................................. 3,467,748 3,712,600 4,603,884
Amortization................................................. 5,777,950 6,146,900 5,868,380
Accretion of Notes and Loans Payable......................... 6,348,835 6,906,529 6,887,595
Deferred federal and state income taxes...................... 681,738 71,409 (77,177)
(Gain) loss on sale of cable television system and other
assets..................................................... (5,699,717) (15,853,063) 37,177
Changes in assets and liabilities:
Classification of current assets and liabilities to be sold.... 88,958 (65,062)
(Decrease) increase in unearned income......................... (2,203) (178,376) 58,434
(Increase) decrease in accounts receivable..................... (220,267) 363,161 (55,049)
(Increase) decrease in prepaid and other assets................ (796,328) (201,201) 53,419
Decrease in converter deposits................................. (413) (1,104) (3,339)
Increase (decrease) in accounts payable and accrued expenses... 2,458,521 (638,287) (399,393)
-------------- -------------- --------------
Net cash provided by operating activities........................ 3,337,046 1,478,131 3,954,990
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................... (2,309,803) (1,795,234) (2,557,927)
Net proceeds from sale of cable television system and other
assets....................................................... 12,420,629 26,833,554 (37,177)
-------------- -------------- --------------
Net cash provided by (used in) investing activities............ 10,110,826 25,038,320 (2,595,104)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on Senior bank credit facility........................ (15,737,274)
Payments on Senior Zero Notes--series A, B, and C.............. (37,374,480)
Payments on Senior Note--series D.............................. (8,883,301)
Payments on Senior Subordinated Zero Coupon Notes.............. (15,610,510)
Payments on Zero Coupon Subordinated Notes..................... (9,680,178)
Increase in deferred charges................................... (166,942) (3,443,826)
(Payments on) Issuance of Senior debt:
Senior bank loan............................................... (4,015,917) (5,793,135) 18,137,274
Senior Secured Notes........................................... (10,959,037) (15,231,911) 46,257,781
Senior Subordinated Notes...................................... 15,610,510
Zero Coupon Subordinated Notes................................. 9,680,178
Other notes payable............................................ (38,958) (35,483) (2,338,576)
-------------- -------------- --------------
Net cash used in financing activities............................ (15,013,912) (21,227,471) (3,382,402)
-------------- -------------- --------------
Net change in cash and cash equivalents.......................... (1,566,040) 5,288,980 (2,022,516)
Cash and cash equivalents--Beginning of year..................... 8,530,967 3,241,987 5,264,503
-------------- -------------- --------------
Cash and cash equivalents--End of year........................... $ 6,964,927 $ 8,530,967 $ 3,241,987
-------------- -------------- --------------
-------------- -------------- --------------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest......................... $ 8,366,909 $ 11,237,413 $ 12,486,914
-------------- -------------- --------------
-------------- -------------- --------------
Cash paid during the year for income taxes..................... $ 86,400 $ 500,711 $ 1,316,503
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
COMMON STOCK*
------------------------
<S> <C> <C> <C> <C> <C>
NUMBER ADDITIONAL TOTAL
OF SHARES STATED PAID-IN SHAREHOLDERS'
AUTHORIZED VALUE CAPITAL DEFICIT DEFICIENCY
------------- --------- ------------ --------------- ---------------
BALANCE AT
DECEMBER 31, 1992....................... 100 $ 1,000 $ 4,238,850 $ (91,385,212) $ (87,145,362)
NET INCOME................................ (12,953,879) (12,953,879)
--- --------- ------------ --------------- ---------------
BALANCE AT
DECEMBER 31, 1993....................... 100 1,000 4,238,850 (104,339,091) (100,099,241)
NET INCOME................................ 1,060,605 1,060,605
--- --------- ------------ --------------- ---------------
BALANCE AT
DECEMBER 31, 1994....................... 100 1,000 4,238,850 (103,278,486) (99,038,636)
NET LOSS.................................. (8,678,819) (8,678,819)
--- --------- ------------ --------------- ---------------
BALANCE AT
DECEMBER 31, 1995....................... 100 $ 1,000 $ 4,238,850 $ (111,957,305) $ (107,717,455)
--- --------- ------------ --------------- ---------------
--- --------- ------------ --------------- ---------------
</TABLE>
- ------------------------
* Consists of 100 shares with no par value.
See notes to consolidated financial statements.
F-5
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PETITION FOR REORGANIZATION UNDER CHAPTER 11 AND BASIS OF PRESENTATION
PETITION FOR REORGANIZATION UNDER CHAPTER 11
On November 15, 1995 the Bank Loans and Senior Notes of Scott Cable
Communications, Inc., and Subsidiaries (the "Company") aggregating approximately
$34,440,000 matured. The Company has not been in compliance with certain of the
covenants in its debt agreements, including the timely payment of principal and
interest. Such lack of compliance and failure to make payments on a timely basis
afforded certain remedies to the holders of the debt, including acceleration of
the maturity of the debt. The holders of the Bank Loans and Senior Notes
(collectively the "Senior Debt") have entered into an agreement (the "Standstill
Agreement") with the Company whereby the Senior Debt holders have agreed not to
take any action against the Company to collect the indebtedness until February
15, 1996. In exchange for the Standstill Agreement, the Company agreed to repay
$3,000,000 of principal outstanding on November 15, 1995 and to pay in full all
interest accrued but unpaid on the Senior Debt for the period from August 15,
1995 through November 15, 1995 in the aggregate amount of approximately
$924,000. The Company has also agreed to prepay in full all interest which would
accrue from November 15, 1995 to February 15, 1996 on the Senior Debt in the
aggregate amount of approximately $884,000. In addition, the Company agreed to
accrue an additional 2% interest as a default rate for the period from November
15, 1995 to February 15, 1996.
Also on November 15, 1995, the Company entered into a similar Standstill
Agreement with the holders of its Senior Subordinated Notes which matured on
January 15, 1996 in the amount of approximately $17,630,000. The Senior
Subordinated Notes Standstill Agreement is effective through March 1, 1996. In
exchange for the Standstill Agreement, the Company agreed to pay in full all
interest accrued but unpaid on the Senior Subordinated Notes for the period from
August 15, 1995 through November 15, 1995 in the aggregate amount of
approximately $564,000. The Company also agreed to prepay in full all interest
which would accrue from November 15, 1995 to February 15, 1996 on the Senior
Subordinated Notes in the aggregate amount of approximately $564,000. In
addition, the Company agreed to accrue an additional 2% interest as a default
rate for the period from January 15, 1996 to February 15, 1996.
On February 14, 1996, the Company and its parent corporations filed a
voluntary petition for relief under Chapter 11 of Title 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") with the United States Bankruptcy Court
for the District of Delaware (the "Court"). Pursuant to the Bankruptcy Code, the
Company is continuing to operate its business and manage its assets as a
debtor-in-possession.
On March 7, 1996, the Court approved a Cash Collateral Stipulation which
provides for the Company's use of its cash collateral through December 31, 1996,
for expenditures including normal ongoing operating expenses, necessary capital
expenditures, management fees, and the costs of the Chapter 11 case. The Company
believes that its permitted use of Cash Collateral will enable it to operate and
manage its cable systems and business operations efficiently throughout the term
of the agreement.
In consideration for the use of Cash Collateral the Company has agreed to
grant the Senior Debt holders and the Senior Subordinated Note holders a
replacement lien on all of the Company's property, assets, and rights acquired
after February 14, 1996 . The Company has also agreed to pay interest monthly in
arrears in cash to the Senior Debt holders. The Company's right to use its Cash
Collateral under the agreement is subject to termination before December 31,
1996 under certain conditions.
F-6
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. PETITION FOR REORGANIZATION UNDER CHAPTER 11 AND BASIS OF PRESENTATION
(CONTINUED)
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All material intercompany transactions and
balances have been eliminated in consolidation. The consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles applicable to a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
Accordingly, the consolidated financial statements do not reflect adjustments or
provide for the potential consequences of the bankruptcy proceedings of the
Company. In particular, the consolidated financial statements do not purport to
show: (a) the realizable value of assets on a liquidation basis or their
availability to satisfy liabilities; (b) prepetition liability amounts that may
be allowed for claims or contingencies or the status and priority thereof; (c)
the effect of any changes that may be made to the capitalization of the Company;
or (d) the effect of any changes that may be made in the Company's business
operations. The outcome of these matters is not presently determinable. As
discussed in Note 1, the Company is presently unable to meet its scheduled long
term debt maturity repayments and the Company's Cash Collateral Stipulation
expires on December 31, 1996. These conditions raise substantial doubt as to the
Company's ability to continue as a going concern.
Due to the bankruptcy proceedings, substantially all claims against the
Company, prior to February 14, 1996, are subject to the automatic stay
provisions under the Bankruptcy Code while the Company continues business
operations as a debtor-in-possession. Unrecorded or disputed prepetition claims
may arise from the determination of the Bankruptcy Court of allowed claims for
contingencies and other disputed amounts.
Since the filing date, the Company has initiated preliminary discussions
with the official committee of its unsecured creditors that was appointed by the
U.S. Trustee pursuant to the Bankruptcy Code. The timing of any filing of a Plan
of reorganization cannot be predicted.
The accompanying consolidated financial statements have been prepared
assuming that Scott Cable Communications, Inc. and subsidiaries will continue as
a going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of the uncertainties referred to
herein and in the preceding paragraphs.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FORMATION OF COMPANY
On January 20, 1988, Simmons Communications Merger Corp. ("Simmons") merged
with Scott Cable Communications, Inc. ("Old Scott") to form Scott Cable
Communications, Inc. (the "Company"), the surviving corporation. Simmons was
formed for the purpose of acquiring and merging with Old Scott and had no
operations prior to the merger. The Company owns and operates cable television
systems throughout the United States.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
F-7
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting periods. Actual results could differ from those estimates.
INVESTMENT IN CABLE TELEVISION SYSTEMS
Reception and distribution facilities and equipment additions are stated at
cost. Depreciation is provided using the straight-line method over the estimated
useful lives of the assets (four to twenty years).
Franchise acquisition costs are amortized over an average of ten years using
the straight-line method. Accumulated amortization of franchise costs aggregated
$27,788,470 at December 31, 1995 and $24,330,316 at December 31, 1994. During
1995, $116,501 of fully amortized franchise acquisition costs were written off.
Deferred charges at December 31, 1994 consist of $3,500,286 of loan
acquisition costs and $164,075 of organization costs. Approximately $110,600 of
organization costs were written off directly to amortization expense.
Accumulated amortization of deferred charges aggregated $3,500,286 at December
31, 1995 and $2,142,185 at December 31, 1994. The loan acquisition costs are
amortized over the life of the related debt and organization costs are amortized
over four years. During 1995, $164,075 of fully amortized deferred charges were
written off.
Goodwill is amortized over forty years. Accumulated amortization of goodwill
aggregated $6,320,700 at December 31, 1995 and $5,639,560 at December 31, 1994.
VALUATION OF INTANGIBLE ASSETS
The Company, on an annual basis, undertakes a review and valuation of the
net carrying value, recoverability and write-off of all categories of its
intangible assets. The Company in its valuation considers current market values
of its properties, competition, prevailing economic conditions, government
policy including taxation, and the Company's and the industry's historical and
current growth patterns, as well as the recoverability of the cost of its
intangible assets based on a comparison of estimated undiscounted operating cash
flows
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and liquid investments with a
maturity of three months or less from the date of purchase.
RESTRICTED CASH
Approximately $2,632,000 and $5,140,000 of cash at December 31, 1995 and
December 31, 1994, respectively, was held in a cash collateral account and is
unavailable to the Company without permission of its senior lenders. The
decrease in the restricted cash was due to payments on Senior Debt.
Approximately $500,000 of cash at December 31, 1995 was held in an escrow
account to provide funds for indemnification of the Company's Officers and
Directors.
F-8
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS No. 109"). The
statement requires the use of an asset and liability approach for financial
accounting and reporting for income taxes. The cumulative effect of this
adoption on net income of prior years was $575,639, which is reflected
separately in the accompanying consolidated statement of operations for the year
ended December 31, 1993.
SUBSCRIPTION REVENUES
Subscription revenues received in advance of services rendered are deferred
and recorded as income in the period in which the related services are provided.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade receivables. Concentrations of
credit risk with respect to trade receivables are limited due to the large
number of customers comprising the Company's customer base.
DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount reported in the balance sheets for cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses
approximates fair value because of the immediate or short-term maturity of these
financial instruments. Management does not believe it is practicable to estimate
the fair value of the Company's debt facilities. (See Note 4).
RECLASSIFICATIONS
Certain 1994 and 1993 financial statement amounts have been reclassified to
conform with the current year presentation.
3. DISPOSITIONS
On January 31, 1994 the Company sold its cable television system serving
Rancho Cucamonga, California and surrounding communities for approximately
$23,600,000. The carrying value of the assets sold at the date of sale, net of
accumulated depreciation and amortization were as follows:
<TABLE>
<S> <C>
Reception and distribution facilities and equipment............. $5,857,332
Franchise Cost.................................................. 1,106,426
Goodwill........................................................ 3,340,830
</TABLE>
The net gain on this transaction was $13,495,263.
On October 17, 1994 Scott sold all of its holdings in QVC, Inc. The gain on
sale was $2,516,479.
On July 29, 1994 a subsidiary of the Company sold a building for $750,000.
The proceeds of the sale were used to pay down debt. The sale resulted in a loss
of $151,724.
F-9
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. DISPOSITIONS (CONTINUED)
On February 17, 1995 the Company sold its cable television systems located
in Missouri, Oklahoma, Kansas, and northern Texas. The assets, net of
liabilities to be assumed by Buyer, are classified as assets held for sale on
the Consolidated Balance Sheet at December 31, 1994.
The sales proceeds of this transaction were $12,374,000 of which $11,974,954
was used to make mandatory prepayments of debt. The carrying value of the assets
sold at the date of sale, net of accumulated depreciation and amortization were
as follows:
<TABLE>
<S> <C>
Reception and distribution facilities and equipment............. $1,348,461
Franchise cost.................................................. 1,066,589
Goodwill........................................................ 4,244,189
</TABLE>
The net gain on the transaction was approximately $5,700,000.
4. NOTES AND LOANS PAYABLE
Notes and loans payable at December 31, 1995 and 1994 are comprised of the
following:
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
SECURED LENDERS
Senior Debt
Bank Loans (a)............................................. $ 8,328,221 $ 12,344,139
Senior Notes:
Series A Senior Secured Notes(b)....................... 12,869,261 18,597,432
Series B Senior Secured Notes(c)....................... 3,979,365 5,742,095
Series C Senior Secured Notes(d)....................... 1,836,466 2,631,627
Series D Senior Secured Notes(e)....................... 4,425,675 6,395,112
-------------- --------------
Total Senior Debt.................................... 31,438,988 45,710,405
Senior Subordinated Notes(f)............................... 17,632,698 16,982,023
-------------- --------------
Total Secured Debt................................... 49,071,686 62,692,428
Zero Coupon Subordinated Notes(g)............................ 13,106,860 11,610,229
Subordinated Debentures(h)................................... 50,000,000 50,000,000
Junior Subordinated Debentures(i)............................ 38,477,908 34,979,915
Other........................................................ 0 38,959
-------------- --------------
Total Notes and Loans Payable.............................. $ 150,656,454 $ 159,321,531
-------------- --------------
-------------- --------------
</TABLE>
- ------------------------
(a) The Bank Loans consist of borrowings from three banks under an amended and
restated credit agreement. The loans matured on November 15, 1995. This
agreement provided for interest at 1.5 percentage points over the banks'
prime rate (or 2.5 percentage points over LIBOR) until maturity. Interest
only was payable quarterly in arrears on the fifteenth day of February, May,
August, and November of each year. Under the terms of the Standstill
Agreement, the Company paid interest at the full contract rate (prime plus
1.5%) for the quarters ended November 15, 1995 and February 15, 1996, and
agreed to accrue an additional 2% interest as a default rate for the quarter
ended
F-10
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. NOTES AND LOANS PAYABLE (CONTINUED)
February 15, 1996. Under the terms of the Cash Collateral Stipulation, the
Company will pay interest monthly in arrears beginning March 31, 1996 at
prime plus 1.5%.
(b) Series A Senior Secured Notes were due November 15, 1995. They were
originally issued in the principal amount of $25,837,408 on June 30, 1993,
with a stated interest rate of 11.39%. The note was divided into a Cash-Pay
Principal component and a Non-Cash Pay Principal component, in the amounts
of $25,610,754 and $226,654, respectively. Interest on the Cash-Pay
Principal component was payable quarterly in arrears on the fifteenth day of
February, May, August, and November at the rate of 7.85%. The balance of
quarterly interest on the Cash-Pay Principal and the interest on the Non-
Cash Pay Principal was deferred and accreted quarterly into the Non-Cash Pay
Principal. The total amount of accreted interest included in the Series A
Senior Secured Notes including the original Non-Cash Pay Principal was
approximately $1,268,000 and $1,238,000 at December 31, 1995 and 1994,
respectively . During the year ended December 31, 1995, approximately
$348,000 of such accreted interest was paid.
(c) Series B Senior Secured Notes were due November 15, 1995. They were
originally issued in the principal amount of $7,950,634 on June 30, 1993
with a stated interest rate of 11.6%. The note was divided into a Cash-Pay
Principal component and a Non-Cash Pay Principal component in the amounts of
$7,876,789 and $73,845, respectively. Interest on the Cash-Pay Principal
component was payable quarterly in arrears on the fifteenth day of February,
May, August, and November at the rate of 7.85%. The balance of quarterly
interest on the Cash-Pay Principal and the interest on the Non-Cash Pay
Principal was deferred and accreted quarterly into the Non-Cash Pay
Principal. The total amount of accreted interest included in the Series B
Senior Secured Notes including the original Non-Cash Pay Principal was
approximately $415,000 and $405,000 at December 31, 1995 and 1994,
respectively. During the year ended December 31, 1995, approximately
$114,000 of such accreted interest was paid.
(d) Series C Senior Secured Notes were due November 15, 1995. They were
originally issued in the principal amount of $3,586,438 on June 30, 1993
with a stated interest rate of 12.59%. The note was divided into a Cash-Pay
Principal component and a Non-Cash Pay Principal component in the amounts of
$3,544,436 and $42,002, respectively. Interest on the Cash-Pay Principal
component was payable quarterly in arrears on the fifteenth day of February,
May, August, and November at the rate of 7.85%. The balance of quarterly
interest on the Cash-Pay Principal and the interest on the Non-Cash Pay
Principal was deferred and accreted quarterly into the Non-Cash Pay
Principal. The total amount of accreted interest included in the Series C
Senior Secured Notes including the original Non-Cash Pay Principal was
approximately $239,000 and $232,000 at December 31, 1995 and 1994,
respectively. During the year ended December 31, 1995, approximately $65,000
of such accreted interest was paid.
(e) Series D Senior Secured Notes were due November 15, 1995. They were
originally issued in the principal amount of $8,883,301 on June 30, 1993
with a stated interest rate of 11.4%. The notes were divided into a Cash-Pay
Principal component and a Non-Cash Pay Principal component in the amounts of
$8,805,155 and $78,146, respectively. Interest on the Cash-Pay Principal
component was payable quarterly in arrears on the fifteenth day of February,
May, August, and November at the rate of 7.85%. The balance of quarterly
interest on the Cash-Pay Principal and the interest on the Non-Cash Pay
Principal was deferred and accreted quarterly into the Non-Cash Pay
Principal. The total amount of accreted and unpaid interest included in the
Series D Senior Secured Notes including the
F-11
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. NOTES AND LOANS PAYABLE (CONTINUED)
original Non-Cash Pay Principal was approximately $438,000 and $428,000 at
December 31, 1995 and 1994, respectively. During the year ended December 31,
1995, approximately $120,000 of such accreted interest was paid.
Under the terms of the Standstill Agreement (see Note 1), the Company paid
interest at the full stated interest rate on the entire principal balance
for each series of Senior Notes for the quarters ended November 15, 1995 and
February 15, 1996, and agreed to accrue an additional 2% interest as a
default rate for the quarter ended February 15, 1996. Under the terms of the
Cash Collateral Stipulation, the Company will pay interest monthly in
arrears beginning March 31, 1996 at the full stated interest rate on the
entire outstanding principal balance of the Senior Notes.
(f) Senior subordinated notes due January 15, 1996 were issued on June 30, 1993
in the principal amount of $15,610,510 with a stated interest rate of 12.8%.
The note was divided into a Cash-Pay Principal component and a Non-Cash
Principal component in the amounts of $15,406,376 and $204,134,
respectively. Interest on the Cash-Pay Principal component is payable
quarterly in arrears on the fifteenth day of February, May, August, and
November at the rate of 7.5%. The balance of quarterly interest on the
Cash-Pay Principal and the interest on the Non-Cash Pay Principal was
deferred and accreted quarterly into the Non-Cash Pay Principal. The total
amount of accreted and unpaid interest included in the Senior Subordinated
Note balance was approximately $2,022,000 and $1,372,000 at December 31,
1995 and 1994, respectively.
Under the terms of the Standstill Agreement (see Note 1), the Company paid
interest at 12.8% on the entire principal balance of the Senior Subordinated
Notes for the quarters ended November 15, 1995 and February 15, 1996, and
agreed to accrue an additional 2% interest as a default rate for the period
January 15 through February 15, 1996. After that date, interest will accrue
at 12.8%.
(g) Zero coupon subordinated notes due March 15, 1996 were issued on July 8,
1993 in the principal amount of $13,448,184 with a stated interest rate of
12.5%. Interest accretes and compounds semi-annually on June 30 and December
31st.
(h) Subordinated debentures due April 15, 2001 with interest at 12.25% were
issued in 1986. Mandatory sinking fund payments of $7,500,000 each are due
April 15, 1996 and each April 15 thereafter through April 15, 2000. Interest
is payable semi-annually on April 15 and October 15. The Company did not
make the interest payment due October 15, 1995 in the amount of $3,062,500.
Such amount has been included in accounts payable and accrued expenses at
December 31, 1995.
(i) Junior subordinated debentures were issued on January 20, 1988 in the
principal amount of $18,000,000 bearing interest at a rate of 10%. Interest,
which compounds semi-annually, is payable annually in the form of additional
debentures. The original maturity date was extended to November 15, 2003.
The Other Note payable was due January 1, 1996 and bore interest at 11%.
By virtue of certain security and pledge agreements, the holders of the
Senior Debt are secured by a first lien on substantially all of the
Company's assets including, but not limited to, all tangible property and
fixtures, all material leasehold interests, all cash and all liquid
investments, and the Company's stock. The Senior Subordinated Notes are
secured by second liens on the Company's assets.
F-12
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. NOTES AND LOANS PAYABLE (CONTINUED)
The Company has not been in compliance with certain of the covenants in its
debt agreements, including the timely payment of principal and interest. (See
Note 1).
As a result of the filing under Chapter 11 of Title 1 under the Bankruptcy
Code (See Note 1), Management does not believe it is practicable to estimate the
fair value of the Company's debt facilities.
DEBT MATURITIES
The following summarizes the maturities of amounts outstanding at December
31, 1995. There have been no changes to the maturities of the amounts
outstanding as a result of the matters discussed in Note 1.
<TABLE>
<S> <C>
Past due...................................................... $31,438,988
1996.......................................................... 39,046,628
1997.......................................................... 7,500,000
1998.......................................................... 7,500,000
1999.......................................................... 7,500,000
2000.......................................................... 7,500,000
Thereafter.................................................... 93,998,895
-----------
Total......................................................... 194,484,511
Less discounted interest...................................... 43,828,057
-----------
Total......................................................... $150,656,454
-----------
-----------
</TABLE>
5. INCOME TAXES
The components of the net deferred income tax assets (liabilities) at
December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Deferred tax assets............................................ $ 13,857,441 $ 14,226,666
Deferred tax liabilities....................................... (9,672,864) (12,368,060)
------------- -------------
Net deferred tax asset......................................... 4,184,577 1,858,606
Less: valuation allowance...................................... (4,871,548) (1,863,838)
------------- -------------
Total net deferred income tax assets (liabilities)............. $ (686,971) $ (5,232)
------------- -------------
------------- -------------
</TABLE>
The net deferred income tax assets (liabilities) are reflected in the
consolidated balance sheets as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Deferred income tax assets.......................................... $ 938,220
Deferred income tax liabilities..................................... $ (686,971) (943,452)
----------- -----------
Total net deferred income tax asset (liabilities)................... $ (686,971) $ (5,232)
----------- -----------
----------- -----------
</TABLE>
F-13
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
Deferred tax assets relate primarily to net operating losses, investment tax
credits and Federal Alternative Minimum Tax credit carryforwards. Deferred tax
liabilities relate to temporary differences between book and tax depreciation
and amortization expenses, and deferred gain on installment sales.
In 1995 the valuation allowance changed by $3,007,710 . The valuation
allowance relates to net operating loss carryforwards and tax credits that are
not expected to be realized before their expiration.
Income tax expense (benefit) consisted of the following:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal.............................................. $ 55,007 $ 236,000
State and local...................................... 27,061 127,643 $ 23,803
----------- ----------- -----------
82,068 363,643 23,803
Deferred:
Federal.............................................. 938,220 (225,085) (372,833)
State & local........................................ (256,482) 296,925 (279,983)
----------- ----------- -----------
$ 763,806 $ 435,483 $ (629,013)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The Company has net operating loss carryforwards for income tax purposes at
December 31, 1995 of approximately $28,900,000 expiring in years 2003 through
2008. The sale of cable television systems in 1995 (see Note 3) resulted in a
tax gain of approximately $12,000,000. Additionally, the Company anticipates the
recognition (for tax purposes only) of a deferred gain on an installment sale of
approximately $9,300,000. No current tax liability is expected to result from
the recognition of the deferred gain due to the availability of the net
operating loss carryforwards. The Company also has investment tax credit
carryforwards, after reductions required by the Tax Reform Act of 1986, of
approximately $1,387,000 expiring in years 1999 through 2003.
The difference between the income tax benefit computed at the Federal
Statutory tax rate and the provision for income tax expense for 1995 is due
primarily to limitations on the use of the net operating loss generated during
the year.
6. TRANSACTIONS WITH RELATED PARTIES
Scott Cable Management Company, Inc. ("Management") acts as manager for the
Company. In accordance with the management agreement, Management is paid a
management fee equal to 3% of total revenues (as defined in the management
agreement) for January through March 1993, and 4.5% thereafter. The management
fee was $1,263,941 for 1995, $1,439,090 for 1994, and $1,403,178 for 1993.
Additionally, the Company paid Management for out-of-pocket expenses in the
amount of $66,162 for 1995, $77,840 for 1994, and $118,645 for 1993. In
accordance with the Standstill Agreement described in Note 1, management fees
may be paid through February 15, 1996. As discussed in Note 1, the Cash
Collateral Stipulation provides for the Company's use of its cash collateral
through December 31, 1996 for expenditures including management fees.
F-14
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS
At December 31, 1995 future minimum lease payments, by year and in the
aggregate, under noncancelable operating leases for equipment, office space and
tower site rental were as follows:
<TABLE>
<CAPTION>
OPERATING LEASES
----------------
<S> <C>
1996........................................................................ $ 184,667
1997........................................................................ 184,925
1998........................................................................ 95,749
1999........................................................................ 64,193
2000........................................................................ 38,950
Thereafter.................................................................. 103,500
--------
Minimum lease payment....................................................... $ 671,984
--------
--------
</TABLE>
Rent expense for the year ended December 31, 1995, 1994, and 1993 was $472,452,
$560,741, and $603,983, respectively.
8. 401(K) RETIREMENT SAVINGS PLAN
The Company's employees are covered by a 401(k) retirement/savings plan
covering all employees who meet service requirements. Total plan expenses for
the years ended December 31, 1995, 1994, and 1993 were $7,482, $8,082, and
$8,217, respectively.
9. REGULATORY MATTERS
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act") which regulates
the cable television industry. Pursuant to the 1992 Cable Act, the Federal
Communications Commission (the "FCC") has issued numerous regulations which
include provisions regarding rates and other matters. As a result of these
rules, the Company was required to reduce many of its basic service rates
effective September 1, 1993, and again on August 1, 1994.
On June 5, 1995, the FCC extended regulatory rate relief to small cable
operators. All of the Company's cable systems qualified for this regulatory
relief, which allows for greater flexibility in establishing rates (including
increases). On February 8, 1996, Congress enacted the 1996 Telecommunications
Act, which, among other things, immediately deregulated all levels of service
except broadcast basic service for small cable operators for which all of the
Company's cable systems qualified.
F-15
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET--AT SEPTEMBER 30, 1996
UNAUDITED
<TABLE>
<S> <C>
ASSETS
INVESTMENT IN CABLE TELEVISION SYSTEMS:
Land and land improvements........................................................................ $ 18,523
Vehicles.......................................................................................... 1,385,249
Buildings and improvements........................................................................ 127,326
Office furniture and equipment.................................................................... 216,661
CATV distribution systems and related equipment................................................... 38,516,112
------------
Total Fixed Assets................................................................................ 40,263,871
Less accumulated depreciation..................................................................... (23,785,257)
------------
Total Fixed Assets--net........................................................................... 16,478,614
FRANCHISE COSTS--net................................................................................ 4,878,974
GOODWILL--net....................................................................................... 20,048,564
DEFERRED FINANCING COSTS............................................................................ 407,227
CASH AND CASH EQUIVALENTS (including restricted cash of $2,363,460)................................. 10,680,240
ACCOUNTS RECEIVABLE less allowance for doubtful accounts of $97,248................................. 737,027
PREPAID AND OTHER ASSETS............................................................................ 1,208,943
------------
TOTAL ASSETS.................................................................................. $ 54,439,589
------------
------------
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
LIABILITIES:
Post-Petition:
Accounts payable.................................................................................. $ 885,032
Accrued Interest--Secured......................................................................... 2,028,129
Other............................................................................................. 2,667,864
Income taxes payable.............................................................................. 7,973
Deferred state income taxes....................................................................... (13,349)
Unearned income................................................................................... 184,342
------------
Total Post-Petition Liabiliites................................................................... 5,759,991
------------
Pre-Petition:
Notes and loans payable--Secured.................................................................. 49,071,685
Notes and loans payable--Unsecured................................................................ 102,233,401
Accounts payable.................................................................................. 405,010
Accrued Interest--Secured......................................................................... 184,781
Accrued Interest--Unsecured....................................................................... 5,087,152
Other accrued liabilities......................................................................... 2,581,080
Income taxes payable.............................................................................. (18,508)
Deferred state income taxes....................................................................... 686,972
Converter deposits................................................................................ 20,403
------------
Total Pre-Petition Liabilities.................................................................... 160,251,976
------------
Total Liabilities................................................................................. 166,011,967
------------
COMMITMENTS AND CONTINGENCIES (See Note 7)
SHAREHOLDERS' DEFICIENCY:
Common stock--100 shares authorized, issued and outstanding, no par value......................... 1,000
Additional paid-in-capital........................................................................ 4,238,850
Deficit........................................................................................... (115,812,228)
------------
Total shareholders' deficiency.................................................................... (111,572,378)
------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY................................................ $ 54,439,589
------------
------------
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
UNAUDITED
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Revenues........................................................................... $ 22,140,107 $ 21,003,382
Costs and expenses:
Operating expenses............................................................... 7,644,268 7,075,146
Selling, general and administrative expenses..................................... 3,578,018 3,476,032
Management fees.................................................................. 996,304 945,153
Depreciation and amortization.................................................... 5,706,136 6,849,772
------------- -------------
Total Costs and Expenses..................................................... 17,924,726 18,346,103
------------- -------------
Operating Income................................................................... 4,215,381 2,657,279
Reorganization items............................................................... (1,964,811)
Interest expense--net of interest income of $334,977 in 1996 and $337,017 in 1995
($7,174,193 of post-petition interest on unsecured debt was not recorded--See
Note 3).......................................................................... (6,109,542) (12,554,480)
Gain on sale of cable television systems and other assets.......................... 3,000 5,699,717
------------- -------------
Loss before income taxes........................................................... (3,855,972) (4,197,484)
Income tax benefit (expense)....................................................... 1,049 (13,630)
------------- -------------
Net loss........................................................................... $ (3,854,923) $ (4,211,114)
------------- -------------
------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-17
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
UNAUDITED
<TABLE>
<CAPTION>
1996 1995
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................................................... $ (3,854,923) $ (4,211,114)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation................................................................... 2,594,711 2,549,641
Amortization................................................................... 3,111,425 4,300,131
Accretion in Notes and Loans payable........................................... 648,636 5,047,199
Deferred Federal and state income taxes........................................ (13,349) (143,134)
Gain on sale of cable television systems and other assets...................... 3,000 (5,699,717)
Changes in assets and liabilities:
Increase (decrease) in unearned income........................................... 3,562 (73,576)
Increase in accounts receivable.................................................. (284,979) (340,697)
Decrease in prepaid and other assets............................................. 240,613 76,728
Decrease in converter deposits................................................... (426) (333)
Increase in accounts payable and accrued expenses................................ 5,168,591 1,638,239
(Decrease) increase in income taxes payable...................................... (10,534) 38,946
------------- --------------
Net cash provided by operating activities.......................................... 7,606,327 3,182,313
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................................. (3,507,151) (1,794,147)
Net proceeds from disposal of assets............................................. 23,364 12,531,048
Increase in deferred charges..................................................... (47,198)
------------- --------------
Net cash provided by (used in) investing activities................................ (3,483,787) 10,689,703
------------- --------------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Payments on senior bank credit facility.......................................... (3,221,213)
Payments on senior notes- Series A, B, C, & D.................................... (8,753,741)
Payments on other notes payable.................................................. (28,821)
Increase in deferred finance charges............................................. (407,227)
------------- --------------
Net cash used in financing activities.............................................. (407,227) (12,003,775)
------------- --------------
Net change in cash and cash equivalents............................................ 3,715,313 1,868,241
Cash and cash equivalents--Beginning of period..................................... 6,964,927 8,530,967
------------- --------------
Cash and cash equivalents--End of period........................................... $ 10,680,240 $ 10,399,208
------------- --------------
------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the nine months for interest...................................... $ 2,463,116 $ 6,131,978
------------- --------------
------------- --------------
Cash paid during the nine months for income taxes.................................. $ 216,480 $ 42,509
------------- --------------
------------- --------------
</TABLE>
See notes to consolidated financial statements.
F-18
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIENCY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
UNAUDITED
<TABLE>
<CAPTION>
COMMON STOCK
------------------------
<S> <C> <C> <C> <C> <C>
NUMBER ADDITIONAL TOTAL
OF SHARES STATED PAID-IN SHAREHOLDERS'
AUTHORIZED VALUE CAPITAL DEFICIT DEFICIENCY
------------- --------- ------------ --------------- ---------------
BALANCE AT
December 31, 1995....................... 100 $ 1,000 $ 4,238,850 $ (111,957,305) $ (107,717,455)
NET LOSS.................................. (3,854,923) (3,854,923)
--- --------- ------------ --------------- ---------------
BALANCE AT
September 30, 1996...................... 100 $ 1,000 $ 4,238,850 $ (115,812,228) $ (111,572,378)
--- --------- ------------ --------------- ---------------
--- --------- ------------ --------------- ---------------
</TABLE>
See notes to consolidated financial statements.
F-19
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(UNAUDITED)
1. PETITION FOR REORGANIZATION UNDER CHAPTER 11
On November 15, 1995 the Bank Loans and Senior Notes of Scott Cable
Communications, Inc., and Subsidiaries (the "Company") aggregating approximately
$34,440,000 matured. The Company had not been in compliance with certain of the
covenants in its debt agreements, including the timely payment of principal and
interest. Such lack of compliance and failure to make payments on a timely basis
afforded certain remedies to the holders of the debt, including acceleration of
the maturity of the debt. The holders of the Bank Loans and Senior Notes
(collectively the "Senior Debt") entered into an agreement (the "Standstill
Agreement") with the Company whereby the Senior Debt holders agreed not to take
any action against the Company to collect the indebtedness until February 15,
1996. In exchange for the Standstill Agreement, the Company agreed to repay
$3,000,000 of principal outstanding on November 15, 1995 and to pay all interest
on the Senior Debt for the period from August 15, 1995 through February 15, 1996
in the aggregate amount of approximately $1,808,000. In addition, the Company
agreed to accrue an additional 2% interest as a default rate for the period from
November 15, 1995 to February 15, 1996.
Also on November 15, 1995, the Company entered into a similar Standstill
Agreement with the holders of its Senior Subordinated Notes which were to mature
on January 15, 1996 in the amount of approximately $17,630,000. The Senior
Subordinated Notes Standstill Agreement was effective through March 1, 1996. In
exchange for the Standstill Agreement, the Company agreed to pay all interest on
the Senior Subordinated Notes for the period from August 15, 1995 through
February 15, 1996 in the aggregate amount of approximately $1,128,000. In
addition, the Company agreed to accrue an additional 2% interest as a default
rate for the period from January 15, 1996 to February 15, 1996.
On February 14, 1996, the Company and its parent corporations filed a
voluntary petition for relief under Chapter 11 of Title 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") with the United States Bankruptcy Court
for the District of Delaware (the "Court"). Pursuant to the Bankruptcy Code, the
Company continued to operate its business and manage its assets as a
debtor-in-possession through December 18, 1996.
On March 7, 1996 the Court approved a Cash Collateral Stipulation which
provided for the Company's use of its cash collateral through December 31, 1996,
for expenditures including normal ongoing operating expenses, necessary capital
expenditures, management fees, and the costs of the Chapter 11 case. The Company
believes that its permitted use of Cash Collateral will enable it to operate and
manage its cable systems and business operations efficiently throughout the term
of the agreement.
In consideration for the use of Cash Collateral the Company granted the
Senior Debt holders and the Senior Subordinated Note holders a replacement lien
on all of the Company's property, assets, and rights acquired after February 14,
1996 . The Company agreed to pay interest monthly in arrears in cash to the
Senior Debt holders. The Company's right to use its Cash Collateral under the
agreement is subject to termination before December 31, 1996 under certain
conditions.
On December 6, 1996, the Court confirmed the Company's Second Amended Joint
Plan of Reorganization (the "Plan"). On December 18, 1996 the Plan became
effective as a result of, among other things: the closing of a $67,500,000
credit facility and payment in full of the Senior Debt, Senior Subordinated
Notes, and the Zero Coupon Subordinated Notes (See Note 3). In addition, certain
payments were made to the Indenture Trustee on behalf of the holders of the
Subordinated Debentures. The Plan further calls for the issuance of two new
series of subordinated secured payment-in-kind notes ("PIK") in replacement of
the Subordinated Debentures and the Junior Subordinated Debentures. The Plan
also calls for payment in full of all allowed unsecured pre-petition liabilities
(and therefore, liabilities reflected on the balance
F-20
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(UNAUDITED) (CONTINUED)
1. PETITION FOR REORGANIZATION UNDER CHAPTER 11 (CONTINUED)
sheet are not subject to compromise); cancellation for the existing common stock
of the Company, issuance of a new Class C common stock representing seventy-five
percent of the equity to the Subordinated Debentureholders, issuance of new
Class B common stock representing twenty-four percent of the equity to the
Junior Subordinated Debentureholders; and, issuance of a new Class A common
stock to Management representing one percent of the equity. See Note 3 for a
further discussion of the refinancing in connection with the Plan.
REORGANIZATION ITEMS
Reorganization items consist of expenses directly related to the
reorganization of the Company since the Chapter 11 filing. Reorganization items
totalling $1,964,811 were included in the consolidated statement of operations
for the nine months ended September 30, 1996 and are summarized as follows:
<TABLE>
<S> <C>
Legal fees................. $ 989,035
Financial advisory fees.... 922,819
Other...................... 52,957
---------
Total.................. $1,964,811
---------
---------
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All material intercompany transactions and
balances have been eliminated in consolidation. The financial statements do not
reflect the recapitalization of the Company as outlined in Note 1. The
accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities and commitments in the normal course of business. However, as a
result of the Chapter 11 proceedings, which are more fully described in the
preceding Note, such realization of assets and liquidation of liabilities was
subject to significant uncertainties and Bankruptcy Court approval at September
30, 1996. As described in the previous Note, subsequent to September 30, 1996
the Company's Plan was approved by the Bankruptcy Court and became effective on
December 18, 1996.
The Company's financial statements as of September 30, 1996, have been
presented in conformity with Statement of Position 90-7, "Financial Reporting By
Entities in Reorganization under the Bankruptcy Code". The statement requires a
segregation of liabilities subject to compromise by the Bankruptcy Court as of
the bankruptcy filing date and separate, disclosure of expenses directly related
to the reorganization of the Company. As described in Note 1 under the Plan as
approved none of the liabilities reflected on the Consolidated balance sheet at
September 30, 1996 are subject to compromise. The Consolidated Statement of
Operations for the nine months ended September 30, 1996 separately discloses
expenses related to the Chapter 11 proceedings. See "Reorganization Items"
within Note 1. Interest expense on the Company's unsecured obligations ceased to
accrue at the filing date (See Note 3).
FORMATION OF COMPANY
On January 20, 1988, Simmons Communications Merger Corp. ("Simmons") merged
with Scott Cable Communications, Inc. ("Old Scott") to form Scott Cable
Communications, Inc. (the "Company"), the
F-21
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(UNAUDITED) (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
surviving corporation. Simmons was formed for the purpose of acquiring and
merging with Old Scott and had no operations prior to the merger. The Company
owns and operates cable television systems throughout the United States.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. Actual results could differ from those estimates.
INVESTMENT IN CABLE TELEVISION SYSTEMS
Reception and distribution facilities and equipment additions are stated at
cost. Depreciation is provided using the straight-line method over the estimated
useful lives of the assets (four to twenty years).
Franchise acquisition costs are amortized over an average of ten years using
the straight-line method. Accumulated amortization of franchise costs aggregated
$30,400,094 at September 30, 1996.
Goodwill is amortized over forty years. Accumulated amortization of goodwill
aggregated $6,820,501 at September 30, 1996.
VALUATION OF INTANGIBLE ASSETS
The Company, on an annual basis, undertakes a review and valuation of the
net carrying value, recoverability and write-off of all categories of its
intangible assets. The Company in its valuation considers current market values
of its properties, competition, prevailing economic conditions, government
policy including taxation, and the Company's and the industry's historical and
current growth patterns, as well as the recoverability of the cost of its
intangible assets based on a comparison of estimated undiscounted operating cash
flows.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and liquid investments with a
maturity of three months or less from the date of purchase.
RESTRICTED CASH
Approximately $2,363,000 of cash at September 30, 1996 was held in a cash
collateral account and was unavailable to the Company without permission of its
senior lenders. As a result of the refinancing of the Company's debt in
connection with the Company's Plan, this restriction was removed on December 18,
1996.
Approximately $500,000 of cash at September 30, 1996 was held in an escrow
account to provide funds for indemnification of the Company's Officers and
Directors.
F-22
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(UNAUDITED) (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS No. 109"). The
statement requires the use of an asset and liability approach for financial
accounting and reporting for income taxes.
SUBSCRIPTION REVENUES
Subscription revenues received in advance of services rendered are deferred
and recorded as income in the period in which the related services are provided.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade receivables. Concentrations of
credit risk with respect to trade receivables are limited due to the large
number of customers comprising the Company's customer base.
DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount reported in the balance sheet for cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses
approximates fair value because of the immediate or short-term maturity of these
financial instruments. Management does not believe it is practicable to estimate
the fair value of the Company's debt facilities. (See Note 3).
INTERIM FINANCIAL STATEMENTS
The accompanying consolidated balance sheet as of September 30, 1996, the
consolidated statements of operations, and cash flows for the nine months ended
September 30, 1996 and September 30, 1995 and the consolidated statement of
shareholders' deficiency for the nine months ended September 30, 1996 are
unaudited but, in the opinion of management, include all adjustments necessary
(consisting only of normal recurring adjustments) which are necessary to present
fairly the consolidated results for these interim periods.
F-23
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(UNAUDITED) (CONTINUED)
3. NOTES AND LOANS PAYABLE
Notes and loans payable at September 30, 1996 are comprised of the
following:
<TABLE>
<S> <C>
SECURED LENDERS
Senior Debt
Bank Loans(a)............................................... $ 8,328,221
Senior Notes:(b)
Series A Senior Secured Notes........................... 12,869,261
Series B Senior Secured Notes........................... 3,979,365
Series C Senior Secured Notes........................... 1,836,466
Series D Senior Secured Notes........................... 4,425,675
-----------
Total Senior Debt..................................... 31,438,988
Senior Subordinated Notes(c)................................ 17,632,698
-----------
Total Secured Debt.................................... 49,071,686
Zero Coupon Subordinated Notes(d)............................. 13,307,604
Subordinated Debentures(e).................................... 50,000,000
Junior Subordinated Debentures(f)............................. 38,925,797
-----------
Total Notes and Loans Payable............................... $151,305,087
-----------
-----------
</TABLE>
- ------------------------
(a) The Bank Loans consist of borrowings from three banks under an amended and
restated credit agreement. The loans matured on November 15, 1995. Under the
terms of the Standstill Agreement (see Note 1), the Company paid interest at
prime plus 1.5% for the quarters ended November 15, 1995 and February 15,
1996, and agreed to accrue an additional 2% interest as a default rate for
the quarter ending February 15, 1996. Under the terms of the Cash Collateral
Stipulation, the Company paid interest monthly in arrears beginning March
31, 1996 at prime plus 1.5%. Amounts outstanding under the bank loans were
repaid on December 18, 1996 (see Note 1).
(b) The Senior Secured Notes were due November 15, 1995. They were originally
issued in the principal amount of $46,257,781 on June 30, 1993, with stated
interest rates ranging from 11.39% to 12.59%. The notes were divided into
Cash-Pay Principal components and Non-Cash Pay Principal components, in the
aggregate amounts of $45,837,134 and $420,647, respectively. Interest on the
Cash-Pay Principal component was payable quarterly in arrears on the
fifteenth day of February, May, August, and November at the rate of 7.85%.
The balance of quarterly interest on the Cash-Pay Principal and the interest
on the Non-Cash Pay Principal was deferred and accreted quarterly into the
Non-Cash Pay Principal. The total amount of accreted interest included in
the Senior Secured Notes, including the original Non-Cash Pay Principal was
approximately $2,360,000 at September 30, 1996.
Under the terms of the Standstill Agreement (see Note 1), the Company paid
interest at the full stated interest rate on the entire principal balance
for each series of Senior Notes for the quarters ended November 15, 1995 and
February 15, 1996, and agreed to accrue an additional 2% interest as a
default rate for the quarter ended February 15, 1996. Under the terms of the
Cash Collateral Stipulation, the Company paid interest monthly in arrears
beginning March 31, 1996 at the full stated interest rate on the entire
outstanding principal balance of the Senior Notes. Amounts outstanding under
the Senior Secured Notes were repaid on December 18, 1996 (see Note 1).
F-24
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(UNAUDITED) (CONTINUED)
3. NOTES AND LOANS PAYABLE (CONTINUED)
(c) Senior Subordinated Notes due January 15, 1996 were issued on June 30, 1993
in the principal amount of $15,610,510 with a stated interest rate of 12.8%.
The note was divided into a Cash-Pay Principal component and a Non-Cash
Principal component in the amounts of $15,406,376 and $204,134,
respectively. Interest on the Cash-Pay Principal component was payable
quarterly in arrears on the fifteenth day of February, May, August, and
November at the rate of 7.5%. The balance of quarterly interest on the
Cash-Pay Principal and the interest on the Non-Cash Pay Principal was
deferred and accreted quarterly into the Non-Cash Pay Principal. The total
amount of accreted and unpaid interest included in the Senior Subordinated
Note balance was approximately $2,022,000 at September 30, 1996.
Under the terms of the Standstill Agreement (see Note 1), the Company paid
interest at 12.8% on the entire principal balance of the Senior Subordinated
Notes for the quarters ended November 15, 1995 and February 15, 1996, and
agreed to accrue an ladditional 2% interest as a default rate for the period
January 15th through February 15, 1996. Interest was accrued from February
15, 1996 through September 30, 1996 at the rate of 12.8%, but no payments
were made subsequent to February 14, 1996 until amounts outstanding under
the Senior Subordinated Notes (including accrued interest) were repaid on
December 18, 1996 (see Note 1).
(d) Zero Coupon Subordinated Notes due March 15, 1996 were issued on July 8,
1993 in the principal amount of $13,448,184 with a stated interest rate of
12.5%. Interest for the period February 15, 1996 through September 30, 1996
in the amount of $1,028,524 was not accrued as a result of the bankruptcy.
Under the terms of the Plan, amounts outstanding under the Zero Coupon
Subordinated Notes were repaid on December 18, 1996 based on the amount of
principal and accrued interest outstanding as of February 14, 1996. (see
Note 1).
(e) Subordinated debentures due April 15, 2001 with interest at 12.25% were
issued in 1986. Mandatory sinking fund payments of $7,500,000 each were due
April 15, 1996 and each April 15 thereafter through April 15, 2000. Interest
was payable semi-annually on April 15 and October 15. The Company did not
make any interest payments subsequent to April 15, 1995, and did not make
any sinking fund payments. Interest has been accrued through February 14,
1996. Interest for the period February 15, 1996 through September 30, 1996
in the amount of $3,845,138 was not accrued as a result of the bankruptcy,
and was not required to be paid under the terms of the Plan. The senior
subordinated debentures were refinanced on December 18, 1996 (see Note 1).
(f) Junior subordinated debentures were issued on January 20, 1988 in the
principal amount of $18,000,000 bearing interest at a rate of 10%. Interest,
which compounds semi-annually, is payable annually in the form of additional
debentures. The original maturity date was extended to November 15, 2003. No
interest has been accrued subsequent to February 14, 1996. Interest for the
period February 15, 1996 through September 30, 1996 in the amount of
$2,300,531 was not accrued as a result of the bankruptcy, and was not
required to be paid under the terms of the Plan. The junior subordinated
debentures were refinanced on December 18, 1996 (See Note 1).
By virtue of certain security and pledge agreements, the holders of the
Senior Debt are secured by a first lien on substantially all of the
Company's assets including, but not limited to, all tangible property and
fixtures, all material leasehold interests, all cash and all liquid
investments, and the Company's stock. The Senior Subordinated Notes are
secured by second liens on the Company's assets.
F-25
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(UNAUDITED) (CONTINUED)
3. NOTES AND LOANS PAYABLE (CONTINUED)
On the effective date of the Company's Plan of Reorganization, the note and
loans payable were:
<TABLE>
<S> <C>
Senior Credit Facility........................................ $63,000,000
Second Secured PIK Notes...................................... 49,500,000
Third Secured PIK Notes....................................... 38,925,797
-----------
$151,425,797
-----------
-----------
</TABLE>
The Senior Credit Facility is comprised of a $57,500,000 term loan due in
increasing quarterly installments beginning January, 1998 with a final payment
due on the maturity date (January 2, 2002), and a $10,000,000 Revolving Facility
due on the maturity date. Initially, interest is charged at the base rate plus
1.5%. As the leverage decreases, the rate is reduced by one-quarter of 1%.
The Second Secured PIK Notes bear interest semi-annually at the rate of 15%
and are due on March 18, 2002. At maturity, the notes will have a fully accreted
value of $105,846,852.
The Third Secured PIK Notes bear interest semi-annually at the rate of 16%
and are due on July 18, 2002. At maturity, the notes will have a fully accreted
value of $91,971,052.
The Senior Credit Facility is secured by a first lien on substantially all
of the Company's assets, including, but not limited to, all tangible property
and fixtures, all material leasehold interest, all cash and all liquid
investments, and the Company's stock. The Second and Third PIK Notes are secured
by second and third liens, respectively, on the Company's assets.
DEBT MATURITIES
The following summarizes the maturities of amounts outstanding as of
December 18, 1996 after giving effect to the refinancing in connection with the
Company's Plan of Reorganization.
<TABLE>
<S> <C>
1998.......................................................... $ 1,050,000
1999.......................................................... 1,550,000
2000.......................................................... 2,200,000
2001.......................................................... 2,600,000
Thereafter.................................................... 253,417,904
-----------
Total......................................................... 260,817,904
Less discounted interest...................................... 109,392,107
-----------
Total......................................................... $151,425,797
-----------
-----------
</TABLE>
4. DISPOSITION
On February 17, 1995 the Company sold its cable television systems located
in Missouri, Oklahoma, Kansas, and northern Texas. The assets, net of
liabilities to be assumed by Buyer, are classified as assets held for sale on
the Consolidated Balance Sheet at December 31, 1994.
F-26
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(UNAUDITED) (CONTINUED)
4. DISPOSITION (CONTINUED)
The sales proceeds of this transaction were $12,374,000 of which $11,974,954
was used to make mandatory prepayments of debt. The carrying value of the assets
sold at the date of sale, net of accumulated depreciation and amortization were
as follows:
<TABLE>
<S> <C>
Reception and distribution facilities and equipment............. $1,348,461
Franchise cost.................................................. 1,066,589
Goodwill........................................................ 4,244,189
</TABLE>
The net gain on the transaction was approximately $5,700,000.
5. INCOME TAXES
The components of the net deferred income tax assets (liabilities) at
September 30, 1996 were as follows:
<TABLE>
<S> <C>
Deferred tax assets............................................ $13,094,834
Deferred tax liabilities....................................... (8,579,906)
----------
Net deferred tax asset......................................... 4,514,928
Less: valuation allowance...................................... (5,188,551)
----------
Total net deferred income tax liabilities...................... $ (673,623)
----------
----------
</TABLE>
The net deferred income tax assets (liabilities) are reflected in the
consolidated balance sheets as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------
<S> <C>
Deferred income tax assets................................................ $ -0-
Deferred income tax liabilities........................................... (673,623)
----------
----------
Total net deferred income tax liabilities................................. $ (673,623)
----------
----------
</TABLE>
Deferred tax assets relate primarily to net operating losses, investment tax
credits and Federal Alternative Minimum Tax credit carryforwards. Deferred tax
liabilities relate to temporary differences between book and tax depreciation
and amortization expenses, and deferred gain on installment sales.
For the nine months ended September 30, 1996 the valuation allowance
increased by $317,003. The valuation allowance increased because the Company is
unable to determine that it is more likely than not at September 30, 1996 that
the deferred tax assets attributable to the current year loss will be realized.
The valuation allowance relates to net operating loss carryforwards and tax
credits that are not expected to be realized before their expiration.
F-27
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(UNAUDITED) (CONTINUED)
5. INCOME TAXES (CONTINUED)
Income tax (expense) benefit consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
<S> <C> <C>
Current:
Federal....................................................... $ (3,700) $ 83,400
State and local............................................... (8,600) 66,122
------------- -------------
(12,300) 149,522
Deferred:
Federal....................................................... -0- (10,009)
State & local................................................. 13,349 (153,143)
------------- -------------
$ 1,049 $ (13,630)
------------- -------------
------------- -------------
</TABLE>
The Company has net operating loss carryforwards for income tax purposes at
September 30, 1996 of approximately $28,100,000 expiring in years 2003 through
2008. Additionally, the Company anticipates the recognition (for tax purposes
only) of a deferred gain on an installment sale of approximately $9,300,000. No
current tax liability is expected to result from the recognition of the deferred
gain due to the availability of the net operating loss carryforwards. The
Company also has investment tax credit carryforwards, after reductions required
by the Tax Reform Act of 1986, of approximately $1,387,000 expiring in years
1999 through 2003.
The difference between the income tax benefit computed at the Federal
Statutory tax rate and the provision for income tax expense for 1995 is due
primarily to limitations on the use of the net operating loss generated during
the year.
6. TRANSACTIONS WITH RELATED PARTIES
Scott Cable Management Company, Inc. ("Management") acts as manager for the
Company. In accordance with the management agreement, Management is paid a
management fee equal to 4.5% of total revenues (as defined in the management
agreement). The management fee was $996,304 and $945,153 for the nine months
ended September 30, 1996 and 1995, respectively. Additionally, the Company paid
Management for out-of-pocket expenses in the amount of $40,582 and $50,407 for
the nine months ended September 30, 1996 and 1995, respectively.
In accordance with the Standstill Agreement described in Note 1, management
fees may be paid through February 15, 1996. As discussed in Note 1, the Cash
Collateral Stipulation provides for the Company's use of its cash collateral
through December 31, 1996 for expenditures including management fees.
The Company entered into a new management agreement with Management which
becomes effective January 1, 1997. Under the new agreement, Management is to be
paid a management fee equal to 4.25% of total revenues, plus an additional 0.25%
of revenues if certain conditions are met. The Company will also reimburse
Management for out-of-pocket expenses.
F-28
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(UNAUDITED) (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
At September 30, 1996 future minimum lease payments, by year and in the
aggregate, under noncancelable operating leases for equipment, office space and
tower site rental were as follows:
<TABLE>
<CAPTION>
FOR THE TWELVE
MONTHS ENDED
SEPTEMBER 30, OPERATING LEASES
--------------- ----------------
<S> <C>
1997........................................................................ $ 194,602
1998........................................................................ 127,081
1999........................................................................ 81,149
2000........................................................................ 49,768
2001........................................................................ 30,095
Thereafter.................................................................. 110,610
--------
Minimum lease payment....................................................... $ 593,305
--------
--------
</TABLE>
Rent expense for the nine months ended September 30, 1996 and 1995 was
approximately $350,880 and $357,778, respectively.
CONTINGENCIES
The Company is involved in litigation and regulatory matters which involve
certain claims which arise in the normal course of business, none of which, in
the opinion of management, is expected to have a materially adverse effect on
the Company's financial position or results of operations.
8. 401(K) RETIREMENT SAVINGS PLAN
The Company's employees are covered by a 401(k) retirement/savings plan
covering all employees who meet service requirements. Total plan expenses for
the nine months ended September 30, 1996, and 1995 were $7,210 and $7,019,
respectively.
9. REGULATORY MATTERS
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act") which regulates
the cable television industry. Pursuant to the 1992 Cable Act, the Federal
Communications Commission (the "FCC") has issued numerous regulations which
include provisions regarding rates and other matters.
On June 5, 1995, the FCC extended regulatory rate relief to small cable
operators. All of the Company's cable systems qualified for this regulatory
relief, which allows for greater flexibility in establishing rates (including
increases). On February 8, 1996, Congress enacted the 1996 Telecommunications
Act, which, among other things, immediately deregulated all levels of service
except broadcast basic service for small cable operators for which all of the
Company's cable systems qualified.
F-29
<PAGE>
SCHEDULE VIII
SCOTT CABLE COMMUNICATIONS, INC.
VALUATION ACCOUNTS
<TABLE>
<CAPTION>
COLUMN C
COLUMN B ADDITIONS
COLUMN A BALANCE AT ------------------------ COLUMN D COLUMN E
BEGINNING CHARGED TO BALANCE AT
OF CHARGED TO OTHER DEDUCTIONS END OF
DESCRIPTION PERIOD EXPENSE ACCOUNTS --DESCRIBE PERIOD
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------
(A)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993..................... $ 93,333 $ 372,557 $ 375,628 $ 90,262
Year ended December 31, 1994..................... 90,262 245,091 286,638 48,715
Year ended December 31, 1995..................... 48,715 304,484 249,504 103,695
Nine months ended September 30, 1996............. 103,695 192,584 199,031 97,248
</TABLE>
- ------------------------
(A) Accounts written off.
<PAGE>
Exhibit 2.1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
)
In re: ) Chapter 11
)
ACE-TEXAS, INC., ACE-EAST, INC., ) Case No. 96-166 (PJW)
ACE-U.S., INC., ACE-SOUTH, INC., )
ACE-WEST, INC., ACE-CENTRAL, INC., and ) (Jointly Administered)
SCOTT CABLE COMMUNICATIONS, INC., )
)
Debtors. )
)
DEBTORS' SECOND AMENDED JOINT PLAN OF REORGANIZATION
October 31, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
INTRODUCTION................................................................. 1
ARTICLE I
DEFINITIONS.................................................................. 1
1.1 Ace-Central............................................... 1
1.2 Ace-East.................................................. 1
1.3 Ace-South................................................. 1
1.4 Ace-Texas................................................. 1
1.5 Ace-US.................................................... 1
1.6 Ace-West.................................................. 1
1.7 Administrative Expense.................................... 2
1.8 Allowed Amount............................................ 2
1.9 Allowed Claim............................................. 3
1.10 Allowed [Class Designation] Claim or Allowed
[Class Designation] Interest.............................. 3
1.11 Ballot.................................................... 3
1.12 Bankruptcy Code........................................... 4
1.13 Bankruptcy Rules.......................................... 4
1.14 Business Day.............................................. 4
1.15 Cash...................................................... 4
1.16 Cash Collateral Stipulation............................... 4
1.17 Claim..................................................... 4
1.18 Claimant.................................................. 4
1.19 Class..................................................... 4
1.20 Committee................................................. 4
1.21 Confirmation Date......................................... 5
1.22 Confirmation Order........................................ 5
1.23 Court..................................................... 5
1.24 Debtors................................................... 5
1.25 Deficiency Claim.......................................... 5
1.26 Disclosure Statement...................................... 5
1.27 Disputed Claim............................................ 5
1.28 Distribution.............................................. 5
1.29 Distribution Date......................................... 5
1.30 Effective Date............................................ 6
1.31 Estates................................................... 6
1.32 Executory Contract........................................ 6
1.33 Executory Contract Claim.................................. 6
1.34 Fee Claim................................................. 6
1.35 Final Order............................................... 6
1.36 Finova.................................................... 6
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
1.37 Holding Companies......................................... 7
1.38 Intercompany Claim........................................ 7
1.39 Interest.................................................. 7
1.40 Junior Subordinated Note Documents........................ 7
1.41 Manager................................................... 7
1.42 New Class A Common Stock.................................. 7
1.43 New Class B Common Stock.................................. 7
1.44 New Class C Common Stock.................................. 7
1.45 New Common Stock.......................................... 7
1.46 New Management Agreement.................................. 8
1.47 New Restructured Second Secured PIK Note.................. 8
1.48 New Restructured Second Secured PIK Note
Indenture................................................. 8
1.49 New Restructured Third Secured PIK Note................... 8
1.50 New Restructured Third Secured PIK Note
Indenture................................................. 8
1.51 New Second PIK Note Indenture Trustee..................... 9
1.52 New Third PIK Note Indenture Trustee...................... 9
1.53 Old Common Stock.......................................... 9
1.54 Petition Date............................................. 9
1.55 Plan...................................................... 9
1.56 Post-Confirmation Credit Facility......................... 9
1.57 Pre-Petition Indenture Trustee............................ 9
1.58 Primary Obligor........................................... 9
1.59 Priority Claim............................................ 10
1.60 Public Subordinated Debentures............................ 10
1.61 Public Subordinated Debt Trust Indenture.................. 10
1.62 Public Subordinated Interest Cash Payment................. 10
1.63 Public Subordinated Principal Cash Payment................ 10
1.64 Public Subordinated Refinancing Fee....................... 10
1.65 Ratable or Ratable Share.................................. 10
1.66 Record Date............................................... 11
1.67 Reinstated or Reinstatement............................... 11
1.68 Reorganization Case....................................... 11
1.69 Reorganization Securities................................. 11
1.70 Reorganized Debtors....................................... 11
1.71 Reorganized Scott......................................... 11
1.72 Schedule.................................................. 11
1.73 Scott..................................................... 12
1.74 Secondary Liability Claim................................. 12
1.75 Secured Claim............................................. 12
1.76 Secured Lenders........................................... 12
1.77 Senior Secured Credit Agreement Documents................. 12
(ii)
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
1.78 Senior Secured Note Agreement Documents................... 12
1.79 Senior Secured Subordinated Note Documents................ 13
1.80 Special Provisions........................................ 13
1.81 Tax Claim................................................. 13
1.82 Taxes..................................................... 13
1.83 Unclaimed Property........................................ 13
1.84 Unsecured Claim........................................... 14
1.85 Zero Coupon Subordinated Note Documents................... 14
ARTICLE II
PAYMENT OF ADMINISTRATIVE EXPENSES
AND TAX CLAIMS............................................................. 14
2.1 Full Payment of Administrative Expenses................... 14
2.2 Full Payment of Tax Claims................................ 14
ARTICLE III
CLASSIFICATION OF OTHER CLAIMS AND INTERESTS ................................ 15
3.1 Class 1 Claims............................................ 15
3.2 Class 2 Claims............................................ 15
3.3 Class 3 Claims............................................ 15
3.4 Class 4 Claims............................................ 15
3.5 Class 5 Claims............................................ 15
3.6 Class 6 Claims............................................ 15
3.7 Class 7 Claims............................................ 15
3.8 Class 8 Claims............................................ 15
3.9 Class 9 Interests......................................... 15
3.10 Class 10 Interests........................................ 15
3.11 Class 11 Interests........................................ 15
3.12 Class 12 Interests........................................ 16
3.13 Class 13 Interests........................................ 16
3.14 Class 14 Interests........................................ 16
3.15 Class 15 Interests........................................ 16
ARTICLE IV
TREATMENT OF CLASSES OF CLAIMS AND INTERESTS................................. 16
4.1 Class 1 Claims (Priority Claims).......................... 16
4.2 Class 2 Claims (Secured Claims, other than Claims
in Classes 3 and 4.)...................................... 16
(iii)
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
4.3 Class 3 Claims (Secured Claims of holders of
Senior Secured Credit Agreement Documents and
Senior Secured Note Agreement Documents).................. 17
4.4 Class 4 Claims (Secured Claims of holders of
Senior Secured Subordinated Note Documents)............... 18
4.5 Class 5 Claims (Unsecured Claims of holders of
Zero Coupon Subordinated Note Documents).................. 18
4.6 Class 6 Claims (Unsecured Claims of the holders
of the Public Subordinated Debentures).................... 18
4.7 Class 7 Claims (Unsecured Claims of the holders
of Junior Subordinated Note Documents).................... 18
4.8 Class 8 Claims (Unsecured Claims other than
Claims in Classes 5 through 7)............................ 19
4.9 Class 9 Interests (Interests in Ace-Central).............. 19
4.10 Class 10 Interests (Interests in Ace-East)................ 19
4.11 Class 11 Interests (Interests in Ace-South)............... 19
4.12 Class 12 Interests (Interests in Ace-Texas)............... 19
4.13 Class 13 Interests (Interests in Ace-US).................. 19
4.14 Class 14 Interests (Interests in Ace-West)................ 19
4.15 Class 15 Interests (Interests in Scott)................... 20
ARTICLE V
IDENTIFICATION OF CLAIMS AND
EQUITY INTERESTS IMPAIRED BY THIS PLAN..................................... 20
5.1 Unimpaired Classes........................................ 20
5.2 Impaired Classes.......................................... 20
ARTICLE VI
MEANS OF IMPLEMENTATION OF THIS PLAN......................................... 20
6.1 General Provisions on Implementation...................... 20
6.2 Sources of Funding........................................ 20
6.3 Dissolution of Holding Companies.......................... 21
6.4 Reincorporation of Scott.................................. 21
ARTICLE VII
AMENDMENTS AND MODIFICATION.................................................. 21
7.1 Amendment of Plan......................................... 21
(iv)
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
ARTICLE VIII
EXECUTORY CONTRACTS.......................................................... 22
8.1 Assumption of Executory Contracts......................... 22
8.2 Classification of Rejection Claims........................ 23
ARTICLE IX
EFFECT OF THIS PLAN ON CLAIMS AND INTERESTS.................................. 23
9.1 Discharge................................................. 23
(a) Scope................................................ 23
(b) Injunction........................................... 23
(c) Release of Collateral................................ 24
(d) Applicability........................................ 24
9.2 Revesting and Vesting..................................... 24
9.3 Release of Primary Obligors............................... 25
9.4 Compromise of Default-Rate Interest Claim and
Release of Secured Lenders................................ 25
9.5 Retention and Enforcement of Claims....................... 26
9.6 Enforcement of Subordination Agreements................... 26
9.7 Distributions of Cash..................................... 26
9.8 Claims and Interests Objections........................... 26
9.9 Claims Reserve for Disputed Claims........................ 27
(a) Establishment of Reserve............................. 27
(b) Investment of Reserve Funds.......................... 27
(c) Payments of Subsequently Allowed Claims.............. 27
(d) Return of Reserve to Debtor.......................... 27
9.10 Unclaimed Distributions................................... 27
9.11 Special Provisions Relating to Distributions to
Holders of Public Subordinated Debentures................. 28
ARTICLE X
NEW COMMON STOCK AND CORPORATE GOVERNANCE PROVISIONS
RELATING TO REORGANIZED SCOTT.............................................. 30
10.1 Articles or Certificates of Incorporation................. 30
10.2 Issuance of New Common Stock.............................. 30
10.3 Voting Rights............................................. 30
10.4 Board of Directors........................................ 31
10.5 Compensation and Indemnifications of Directors............ 31
10.6 Convertibility............................................ 32
10.7 Transfer of Reorganization Securities..................... 32
10.8 Registration of New Class A Common Stock.................. 32
(v)
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
10.9 Charter Amendments........................................ 33
ARTICLE XI
CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS PLAN........................... 33
11.1 Conditions Precedent...................................... 33
11.2 Effect of Nonoccurrence of the Conditions to
Effectiveness............................................. 33
ARTICLE XII
POST-CONFIRMATION OPERATIONS AND MANAGEMENT.................................. 34
12.1 Pre-Effective Date Management............................. 34
12.2 New Management Agreement.................................. 34
ARTICLE XIII
ADMINISTRATIVE PROVISIONS.................................................... 34
13.1 Retention of Jurisdiction................................. 34
13.2 Governing Law............................................. 36
13.3 Corporate Action.......................................... 37
13.4 Effectuating Documents and Further Transactions........... 37
13.5 Grace Period.............................................. 37
13.6 Limitation of Liability................................... 37
13.7 Successors and Assigns.................................... 38
13.8 Confirmation Order and Plan Control....................... 38
13.9 Committee................................................. 38
13.10 Rules of Construction..................................... 38
(a) Undefined Terms...................................... 38
(b) Miscellaneous Rules.................................. 38
(vi)
<PAGE>
INTRODUCTION
These reorganization cases have been consolidated for procedural purposes
only and are being jointly administered pursuant to an order of the United
States Bankruptcy Court for the District of Delaware. The Debtors propose the
following joint plan of reorganization pursuant to section 1121(a) of the
Bankruptcy Code.
ARTICLE I
DEFINITIONS
For the purposes of this Plan, the following terms shall have the meanings
set forth below, and such meanings shall be equally applicable to the singular
and plural forms of the terms defined, unless the context otherwise requires.
1.1 Ace-Central means Ace-Central, Inc., a Delaware corporation and the
Debtor in Case No. 96-171 (PJW).
1.2 Ace-East means Ace-East, Inc., a Delaware corporation and the Debtor
in Case No. 96-167 (PJW).
1.3 Ace-South means Ace-South, Inc., a Delaware corporation and the Debtor
in Case No. 96-169 (PJW).
1.4 Ace-Texas means Ace-Texas, Inc., a Delaware corporation and the Debtor
in Case No. 96-166 (PJW).
1.5 Ace-US means Ace-U.S., Inc., a Delaware corporation and the Debtor in
Case No. 96-168 (PJW).
1.6 Ace-West means Ace-West, Inc., a Delaware corporation and the Debtor
in Case No. 96-170 (PJW).
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1.7 Administrative Expense means a Claim for payment of costs or expenses
of administration as specified in section 507(a)(1) of the Bankruptcy Code,
including, without limitation: (a) the actual, necessary costs and expenses
incurred after the Petition Date of preserving the Estates and operating the
businesses of the Debtors (such as wages, salaries, or commissions for services
rendered); (b) compensation for legal and other services and reimbursement of
expenses awarded pursuant to section 330(a) or 331 of the Bankruptcy Code; and
(c) all fees and charges assessed against the Estates pursuant to section 1930
of title 28 of the United States Code.
1.8 Allowed Amount means
(a) with respect to an Administrative Expense other than an
Executory Contract Claim, (i) if the Claim is a Fee Claim, the amount of such
Fee Claim that has been approved by a Final Order of the Court, or (ii) if the
Claim is based on indebtedness or obligations incurred in the ordinary course of
business of the Debtors, the amount of such Claim that has been agreed to by the
Debtors and such Claimant, failing which, the amount thereof as fixed by a Final
Order of the Court;
(b) with respect to a Tax Claim, the amount of such Claim that has
been or which may be agreed to by the Debtors and such Claimant, failing which,
the amount thereof as fixed by a Final Order of the Court;
(c) with respect to an Executory Contract Claim, the amount of such
Claim as determined in accordance with the procedures set forth in Section 8.1
of this Plan;
(d) with respect to a Priority Claim, a Secured Claim or an
Unsecured Claim, (i) if the holder of such Claim did not file proof thereof with
the Court within the applicable period of time fixed by the Court pursuant to
Rule 3003(c)(3) of the Bankruptcy Rules, (A) the amount of such Claim as listed
in the Schedules, so long as such Claim is not listed as disputed, contingent or
unliquidated, or (B) $0 if such Claim is listed in the Schedules as disputed,
contingent or unliquidated; (ii) if the holder of such Claim has filed proof
thereof with the Court within the applicable period of time fixed by the Court
pursuant to Rule 3003(c)(3) of
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the Bankruptcy Rules, (A) the amount stated in such proof if no objection to
such proof of Claim was interposed within the applicable period of time as fixed
by this Plan, the Bankruptcy Code, the Bankruptcy Rules or the Court, or (B) the
amount thereof as fixed by Final Order of the Court if an objection to such
proof was interposed within the applicable period of time fixed by this Plan,
the Bankruptcy Code, the Bankruptcy Rules or the Court; or (iii) the amount
thereof as fixed by this Plan; and
(e) with respect to any Interest in any of the Debtors, (i) if the
holder of such Interest did not file proof thereof with the Court within the
applicable period of time fixed by the Bankruptcy Court pursuant to Rule
3003(c)(3) of the Bankruptcy Rules, the amount of such Interest as listed in the
Schedules, so long as such Interest is not listed as disputed, contingent or
unliquidated, or (ii) if the holder of such Interest has filed proof thereof
with the Court within the applicable period of time fixed by the Court pursuant
to Rule 3003(c)(3) of the Bankruptcy Rules, (A) the amount stated in such proof
if no objection to such proof of Interest was interposed within the applicable
period of time fixed by this Plan, the Bankruptcy Code, the Bankruptcy Rules or
the Court, or (B) the amount thereof as fixed by Final Order of the Court if an
objection to such proof was interposed within the applicable period of time
fixed by this Plan, the Bankruptcy Code, the Bankruptcy Rules or the Court.
1.9 Allowed Claim or Allowed Interest means any Claim or Interest for
which an Allowed Amount has been determined.
1.10 Allowed [Class Designation] Claim or Allowed [Class Designation]
Interest means an Allowed Claim or an Allowed Interest in the specified Class.
1.11 Ballot means the ballot distributed to each Claimant and holder of an
Interest on which ballot such Claimant or Interestholder may (a) vote for or
against this Plan, and (b) in the case of holders of Claims in Classes 3 and 4,
designate acceptance of the offer and compromise set forth in Section 9.4 of
this Plan.
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1.12 Bankruptcy Code means title 11 of the United States Code, 11 U.S.C.
ss.ss. 101 et seq., as now in effect or hereafter amended to the extent such
amendment is applicable to the Debtors' Reorganization Cases.
1.13 Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure and
the local rules of the Court as now in effect or hereafter amended to the extent
such amendment is applicable to the Reorganization Cases.
1.14 Business Day means any day except a Saturday, Sunday, or "legal
holiday" as such term is defined in Bankruptcy Rule 9006(a).
1.15 Cash means cash and cash equivalents, including but not limited to
bank deposits, checks, and other similar terms.
1.16 Cash Collateral Stipulation means the Stipulation and Final Order
Regarding Limited Use of Collateral by Debtors and Granting Adequate Protection
to Canadian Imperial Bank of Commerce, National Bank of Canada, Merrill Lynch,
Pierce, Ferrer & Smith Incorporated, CIG & Co., New England Mutual Life
Insurance Company, The Mutual Life Insurance Company of New York, and MONY Life
Insurance Company of America, dated February 22, 1996, as amended or modified.
1.17 Claim means a claim against a Debtor as such term is defined in
section 101(5) of the Bankruptcy Code.
1.18 Claimant means the holder of an Allowed Claim.
1.19 Class means a group of Claims or Interests substantially similar to
each other as classified under this Plan.
1.20 Committee means the Official Creditors' Committee appointed in the
Reorganization Cases.
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1.21 Confirmation Date means the date the Court enters the Confirmation
Order on its docket.
1.22 Confirmation Order means the order of the Court confirming this Plan
pursuant to section 1129 of the Bankruptcy Code.
1.23 Court means the United States Bankruptcy Court for the District of
Delaware, or any other court exercising competent jurisdiction over any or all
of the Reorganization Cases or any proceeding therein.
1.24 Debtors means collectively Ace-Central, Ace-East, Ace-South,
Ace-Texas, Ace-US, Ace-West, and Scott (each of the Debtors is individually
referred to herein as a Debtor.)
1.25 Deficiency Claim means, with respect to a Secured Claim, a Claim in
the amount equal to the difference between the Allowed Amount of a Claim and the
amount of such Claim which is an Allowed Secured Claim.
1.26 Disclosure Statement means the Disclosure Statement, dated of even
date herewith, that relates to this Plan and is approved by the Court pursuant
to section 1125 of the Bankruptcy Code, as such Disclosure Statement may be
amended, modified, or supplemented (and all exhibits and schedules annexed
thereto or referred to therein.)
1.27 Disputed Claim means a Claim against the Debtors, the allowance of
which, in whole or in part, is the subject of a timely objection interposed by
the Debtors, the Reorganized Debtors or a party in interest, which objection has
not been settled.
1.28 Distribution means the distribution in accordance with this Plan of:
(a) Cash; or (b) Reorganization Securities, as the case may be.
1.29 Distribution Date means the date Distributions are made pursuant to
this Plan.
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1.30 Effective Date means 11:00 a.m., Eastern time (when a specific time
is contemplated), on a Business Day selected by the Debtors, on or after the
date each of the conditions set forth in Section 11.1 hereof has been satisfied
or waived as set forth therein.
1.31 Estates means the relevant estate created in each of the
Reorganization Cases by section 541 of the Bankruptcy Code.
1.32 Executory Contract means any of the contracts and unexpired leases to
which a Debtor is a party and was a party as of the Petition Date and which is
an executory contract or unexpired lease within the meaning of section 365 of
the Bankruptcy Code.
1.33 Executory Contract Claim means any Claim entitled to payment as cure
for or compensation in respect of a pecuniary loss directly resulting from the
occurrence of a default existing under and pursuant to an Executory Contract
heretofore or hereafter assumed by the Debtors pursuant to sections 365 or
1123(b)(2) of the Bankruptcy Code (and specifically shall not mean or include
any Claims which arose or arises as a result of any Debtor's rejection of an
Executory Contract pursuant to sections 365 or 1123(b)(2) of the Bankruptcy
Code).
1.34 Fee Claim means an Administrative Expense under applicable provisions
of the Bankruptcy Code in respect of compensation and reimbursement of expenses
of (a) professionals retained by the Debtors or the Committee in the
Reorganization Cases or (b) creditors and other parties in interest seeking a
claim for making a substantial contribution in the Reorganization Cases.
1.35 Final Order means an order or judgment of the Court as entered on the
docket of such court that has not been reversed, stayed, modified, or amended,
and as to which: (a) the time to appeal, seek review or rehearing, or petition
for certiorari has expired and no timely-filed appeal or petition for review,
rehearing, remand, or certiorari is pending; or (b) any appeal taken or petition
for certiorari filed has been resolved by the highest court to which the order
or judgment was appealed or from which certiorari was sought.
1.36 Finova means FINOVA Capital Corporation.
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1.37 Holding Companies means collectively, Ace-Central, Ace-East,
Ace-South, Ace-Texas, Ace-US and Ace-West.
1.38 Intercompany Claim means a Claim of any Debtor against any other
Debtor.
1.39 Interest means an equity security, within the meaning of section
101(16) of the Bankruptcy Code, in a Debtor.
1.40 Junior Subordinated Note Documents means, collectively, the Note
Purchase Agreement dated as of January 19, 1988 between Scott and the lenders
listed therein, as amended, and the Junior Subordinated Notes due 2003 issued
pursuant thereto by Scott and all other documents, instruments, and agreements
relating thereto.
1.41 Manager means Scott Cable Management Company, Inc.
1.42 New Class A Common Stock means the Class A common shares of
Reorganized Scott which shares are to be issued on the Effective Date and
distributed in the manner provided by this Plan.
1.43 New Class B Common Stock means the Class B common shares of
Reorganized Scott all of which shares are to be issued on the Effective Date and
distributed in the manner provided by this Plan.
1.44 New Class C Common Stock means the Class C common shares of
Reorganized Scott all of which shares are to be issued on the Effective Date and
distributed in the manner provided by this Plan.
1.45 New Common Stock means collectively, the New Class A Common Stock,
the New Class B Common Stock, and the New Class C Common Stock.
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1.46 New Management Agreement means the New Management Agreement to be
entered into between, among others, Reorganized Scott and the Manager.
1.47 New Restructured Second Secured PIK Note means the new secured
subordinated promissory notes to be issued by Reorganized Scott to the holders
of the Class 6 claim in substantially the form set forth in the New Restructured
Second Secured PIK Note Indenture. The New Restructured Second Secured PIK Notes
shall: (i) be in the initial aggregate principal amount of $49,500,000, (ii) pay
interest semi-annually through the issuance of additional New Restructured
Second Secured PIK Notes at the rate of 15% per annum on the unpaid principal
balance, (iii) mature five (5) years and three (3) months from the Effective
Date, subject to acceleration upon the occurrence of certain events, and (iv) be
secured by a lien on all of the assets of Scott, which lien shall be subordinate
to the lien to be granted pursuant to the Post-Confirmation Credit Facility.
1.48 New Restructured Second Secured PIK Note Indenture means the New
Restructured Second Secured Subordinated PIK Note Indenture between Reorganized
Scott and the New Second PIK Note Indenture Trustee, which governs the terms and
rights of holders of New Restructured Second Secured PIK Notes.
1.49 New Restructured Third Secured PIK Note means the new promissory note
to be issued by Reorganized Scott to the holders of the Class 6 and 7 claims in
substantially the form set forth in the New Restructured Third Secured PIK Note
Indenture. The New Restructured Third Secured PIK Note shall: (i) be in the
initial aggregate principal amount of $38,925,797, (ii) pay interest
semi-annually through the issuance of additional New Restructured Third Secured
PIK Notes at the rate of 16% per annum on the unpaid principal balance, (iii)
mature five (5) years and seven (7) months from the Effective Date, subject to
acceleration upon the occurrence of certain events, and (iv) be secured by a
lien on all of the assets of Scott, which lien shall be subordinate to the liens
granted to the holders of the (a) Post-Confirmation Credit Facility, and (b)
holders of the New Restructured Second Secured PIK Note.
1.50 New Restructured Third Secured PIK Note Indenture means the New
Restructured Third Secured Subordinated PIK Note Indenture between Reorganized
Scott and the
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New Third PIK Note Indenture Trustee, which governs the terms and rights of
holders of the New Restructured Third Secured PIK Notes.
1.51 New Second PIK Note Indenture Trustee means the Indenture Trustee
under the New Restructured Second Secured PIK Note Indenture.
1.52 New Third PIK Note Indenture Trustee means the Indenture Trustee
under the New Restructured Third Secured PIK Note Indenture.
1.53 Old Common Stock means the stock of a specified Debtor issued and
outstanding as of the Confirmation Date.
1.54 Petition Date means February 14, 1996.
1.55 Plan means this Second Amended Joint Plan of Reorganization for each
of the Debtors together with any amendments or modifications thereto as the
Debtors may file hereafter (such amendments or modifications only being
effective if approved by order of the Court).
1.56 Post-Confirmation Credit Facility means the credit facility evidenced
by the loan agreement and related documents between Reorganized Scott and Finova
which shall become effective on the Effective Date and which shall provide for
loans of $67.5 million through a term loan of $57.5 million and a revolving loan
commitment of $10 million secured by a first lien on (i) all of the assets of
Reorganized Scott and (ii) all of the New Common Stock.
1.57 Pre-Petition Indenture Trustee means Texas Commerce Bank, as
Indenture Trustee under the Public Subordinated Debt Trust Indenture, or its
successor(s).
1.58 Primary Obligor means a Debtor or non-Debtor affiliate that has
incurred a Claim for which a Secondary Liability Claim is also asserted against
a Debtor.
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1.59 Priority Claim means any Allowed Claim, entitled to priority pursuant
to section 507(a) of the Bankruptcy Code, other than: (a) an Administrative
Claim; or (b) a Tax Claim.
1.60 Public Subordinated Debentures means the 12 1/4% Subordinated
Debentures Due 2001 issued by Scott Cable Communications, Inc. pursuant to the
Public Subordinated Debt Trust Indenture.
1.61 Public Subordinated Debt Trust Indenture means the Indenture dated as
of March 15, 1986, between Scott Cable Communications, Inc. and MBank Dallas,
National Association (subsequently succeeded by Texas Commerce Bank), as
Trustee, pursuant to which the outstanding 12 1/4% Subordinated Debentures due
2001, were issued, as amended or supplemented.
1.62 Public Subordinated Interest Cash Payment means the Cash payment in
the aggregate sum of $5,087,153 to be made to the holders of Class 6 Claims on
the Effective Date.
1.63 Public Subordinated Principal Cash Payment means the Cash payment in
the aggregate sum of $500,000 to be made to the holders of Class 6 Claims on the
Effective Date.
1.64 Public Subordinated Refinancing Fee means the Cash payment in the
aggregate sum of $500,000 to be made to the holders of Class 6 Claims on the
Effective Date.
1.65 Ratable or Ratable Share means a number (expressed as a percentage)
equal to the proportion that an Allowed Claim or Allowed Interest in a
particular Class bears to the aggregate amount or number of: (a) Allowed Claims
or the Allowed Interests, as the case may be; plus (b) Disputed Claims (in their
aggregate face amount) or Disputed Interests, as the case may be, in such Class
as of the date of determination.
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1.66 Record Date means (a) for voting on the Plan, the date of entry of
the order approving the Disclosure Statement or such other date as the Court in
its discretion shall set and (b) for any Distribution under this Plan, the
Confirmation Date.
1.67 Reinstated or Reinstatement means leaving unaltered the legal,
equitable, and contractual rights to which a Claim entitles the holder of such
Claim in accordance with section 1124 of the Bankruptcy Code, including: (a)
curing all pre-petition and post petition defaults other than defaults relating
to the insolvency or financial condition of a Debtor or its status as a debtor
under the Bankruptcy Code; (b) reinstating the maturity date of the Claim; and
(c) compensating the holder of such Claim for damages incurred as a result of
its reasonable reliance on a provision allowing the Claim's acceleration.
Notwithstanding the immediately preceding sentence and section 1124 of the
Bankruptcy Code, a Claim shall be treated as Reinstated hereunder if the holder
thereof waives or modifies any covenant contained in the writing evidencing the
relevant Claim to make such covenant consistent with the restructured covenants.
1.68 Reorganization Case means the chapter 11 case of each Debtor pending
before the Court.
1.69 Reorganization Securities means, collectively: the New Common Stock,
the New Restructured Second Secured PIK Note and the New Restructured Third
Secured PIK Note.
1.70 Reorganized Debtors means each Debtor or its successor corporation,
on and after the Effective Date, as reorganized pursuant to this Plan.
1.71 Reorganized Scott means Scott, or a successor corporation, on and
after the Effective Date, as reorganized pursuant to this Plan.
1.72 Schedule means a Debtor's schedule of assets and liabilities, as may
be amended, filed with the Court pursuant to section 1106(a)(2) of the
Bankruptcy Code.
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1.73 Scott means Scott Cable Communications, Inc., a Texas Corporation,
and the Debtor in Case No. 96-172 (PJW).
1.74 Secondary Liability Claim means a Claim (other than an Intercompany
Claim) that arises from a Debtor being liable as a guarantor of, or otherwise
jointly, severally or secondarily liable for, any contractual, tort or other
obligation of or with another Debtor or non-Debtor affiliate, including any
Claim based upon: (a) guarantees of payment, collection or performance; (b)
indemnity bonds, obligations to indemnify, obligations to hold harmless or for
contribution; (c) performance bonds; (d) contingent liabilities arising out of
contractual obligations or out of undertakings (including any assignment or
other transfer) with respect to leases, operating agreements, management
contracts or other similar obligations made or given by a Debtor relating to the
performance of a Debtor or non-Debtor affiliate; (e) vicarious liability; or (f)
any other joint or several liability that any Debtor may have in respect of any
obligation that is the basis of a Claim.
1.75 Secured Claim means a Claim secured by a lien on the property of a
Debtor, which lien is not subject to avoidance under the Bankruptcy Code or
other applicable non-bankruptcy laws, as determined in accordance with section
506(a) of the Bankruptcy Code.
1.76 Secured Lenders means the holders of Claims in Classes 3 and 4 of
this Plan.
1.77 Senior Secured Credit Agreement Documents means, collectively, (i)
the Amended and Restated Credit Agreement dated as of June 30, 1993 among Scott
and the lenders listed therein or their successors and assigns (collectively,
the "Bank Lenders"), (ii) the amended and restated promissory notes issued
pursuant thereto by Scott to the Bank Lenders, (iii) the Security Documents (as
defined in the Amended and Restated Credit Agreement), and (iv) any and all
other documents, instruments and agreements relating to the foregoing including
the Cash Collateral Stipulation.
1.78 Senior Secured Note Agreement Documents means, collectively, (i) the
separate Amended and Restated Note Agreements each dated as of June 30, 1993
between Scott
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and the note purchasers named therein, (ii) the Series A Senior Secured Notes
due 1995, Series B Senior Secured Notes due 1995, Series C Senior Secured Notes
due 1995, and Series D Senior Secured Notes due 1995, and (iii) the Security
Documents (as defined in the Amended Restated Note Agreements), and (iv) any and
all other documents, instruments and agreements relating to the foregoing
including the Cash Collateral Stipulation.
1.79 Senior Secured Subordinated Note Documents means, collectively, the
(i) Amended and Restated Note Agreements each dated as of June 30, 1993 among
Scott and the lenders listed therein and the Senior Subordinated Notes due 1996
issued pursuant thereto by Scott to the lenders listed therein and (ii) any and
all other documents, instruments and agreements relating thereto including the
Cash Collateral Stipulation.
1.80 Special Provisions has the meaning ascribed to such term in Section
10.3 hereof.
1.81 Tax Claim means a Claim, entitled to priority pursuant to section
507(a)(7) of the Bankruptcy Code.
1.82 Taxes means all taxes, charges, fees, levies, imposts, or other
assessments by any federal, state, local, or foreign taxing authority including,
without limitation, income, excise, property, sales, transfer, employment,
payroll, franchising, profits, license, use, ad valorem, estimated severance,
stamp, occupation, and withholding taxes. Such term shall include any interest,
penalties, or additions attributable to, imposed on, or with respect to such
assessments.
1.83 Unclaimed Property means any Cash and Reorganization Securities
unclaimed on or after the first anniversary of the Effective Date. Unclaimed
Property shall include: (a) checks (and the funds represented thereby) and
Reorganization Securities, mailed to a Claimant and returned as undeliverable
without a proper forwarding address; (b) funds for uncashed checks; and (c)
checks (and the funds represented thereby) and Reorganization Securities not
mailed or delivered because no address to mail such property was available.
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1.84 Unsecured Claim means any Claim other than an Administrative Expense,
Priority Claim, Tax Claim or Secured Claim.
1.85 Zero Coupon Subordinated Note Documents means, collectively, the
Amended and Restated Zero Coupon Subordinated Notes due March 15, 1996, dated
July 8, 1993 issued by Scott to the lenders listed therein and any and all other
documents, instruments and agreements relating thereto.
ARTICLE II
PAYMENT OF ADMINISTRATIVE EXPENSES
AND TAX CLAIMS
2.1 Full Payment of Administrative Expenses. Each holder of an
Administrative Expense shall be paid the Allowed Amount of such Administrative
Expense in Cash on or before the Effective Date or upon such other terms as may
be agreed on between any holder of an Administrative Expense and the Debtors;
provided, however, that (a) the Allowed Amount of an Administrative Expense
representing actual, necessary costs and expenses incurred after the Petition
Date of preserving the Estates and operating the business of the Debtors (such
as wages, salaries, or commissions for services rendered) shall be assumed and
paid or performed by the Reorganized Debtors in accordance with the terms and
conditions of any agreements relating thereto or in the ordinary course of
business, except as may be otherwise provided herein, and (b) the Allowed Amount
of Fee Claims shall be paid in full no later than fifteen (15) days after the
entry of an order allowing such Fee Claim.
2.2 Full Payment of Tax Claims. Each holder of a Tax Claim shall be paid
in Cash on the Effective Date the Allowed Amount of such Tax Claim.
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ARTICLE III
CLASSIFICATION OF OTHER CLAIMS AND INTERESTS
3.1 Class 1 Claims. This Class consists of all Priority Claims.
3.2 Class 2 Claims. This Class consists of all Secured Claims, other than
the Claims described in Classes 3 and 4.
3.3 Class 3 Claims. This Class consists of the Claims arising out of the
Senior Secured Credit Agreement Documents and the Senior Secured Note Agreement
Documents.
3.4 Class 4 Claims. This Class consists of the Claims arising out of the
Senior Secured Subordinated Note Documents.
3.5 Class 5 Claims. This Class consists of the Claims arising out of the
Zero Coupon Subordinated Note Documents.
3.6 Class 6 Claims. This Class consists of the Claims arising out of the
Public Subordinated Debentures.
3.7 Class 7 Claims. This Class consists of the Claims arising out of the
Junior Subordinated Note Documents.
3.8 Class 8 Claims. This Class consists of all Unsecured Claims (including
Deficiency Claims), other than the Claims described in Classes 5 through 7.
3.9 Class 9 Interests. This Class consists of all Interests in
Ace-Central.
3.10 Class 10 Interests. This Class consists of all Interests in Ace-East.
3.11 Class 11 Interests. This Class consists of all Interests in
Ace-South.
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3.12 Class 12 Interests. This Class consists of all Interests in
Ace-Texas.
3.13 Class 13 Interests. This Class consists of all Interests in Ace-US.
3.14 Class 14 Interests. This Class consists of all Interests in Ace-West.
3.15 Class 15 Interests. This Class consists of all Interests in Scott.
ARTICLE IV
TREATMENT OF CLASSES OF CLAIMS AND INTERESTS
4.1 Class 1 Claims (Priority Claims). Each holder of a Priority Claim
shall be paid the Allowed Amount of such Priority Claim in Cash on the Effective
Date, or on such other terms as may be agreed on between any holder of such
Priority Claim and the Debtors.
4.2 Class 2 Claims (Secured Claims, other than Claims in Classes 3 and 4.)
At the option of the Debtors against which the Class 2 Claim is asserted, each
holder of an Allowed Class 2 Claim shall be treated in one of the four following
manners:
(a) The Debtors shall leave unaltered such holder's legal, equitable
and contractual rights with respect to such Secured Claim;
(b) Notwithstanding any contractual provisions or applicable law
that entitles the holder of such Secured Claim to demand or receive
accelerated payment of such Secured Claim after the occurrence of a
default, on the Effective Date the Debtors shall (i) cure any such default
that occurred before or after the Petition Date, other than a default of a
kind specified in section 365(b)(2) of the Bankruptcy Code, (ii) reinstate
the maturity of such Secured Claim as such maturity existed before
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such default, (iii) compensate the holder of such Secured Claim for any
damages incurred as a result of any reasonable reliance by such holder on
such contractual provision or such applicable law, and (iv) execute a
written undertaking in favor of such holder, whereby the Reorganized
Debtor assumes such Secured Claim;
(c) The holder thereof shall be paid the Allowed Amount of its
Secured Claim in Cash on the Effective Date with any Deficiency Claim
treated as a Class 8 Claim; or
(d) The holder thereof shall have its collateral returned in full
satisfaction of its Secured Claim with any Deficiency Claim treated as a
Class 8 Claim.
Notwithstanding the foregoing, the holder of an Allowed Class 2 Claim may
receive such less favorable treatment as may be agreed upon, in writing, by each
such holder and the Debtor against which the Class 2 Claim is asserted. Unless a
Debtor gives written notice to a holder of a Class 2 Claim at least ten (10)
days prior to the Confirmation Date that it has elected to treat such Class 2
Claim pursuant to subsection (a), (c) or (d) of this Section 4.2, the Debtors
shall be deemed to have elected to treat such Class 2 Claim pursuant to
subsection (b) of this Section 4.2. A copy of any notice given pursuant to the
immediately preceding sentence shall also be given to the Committee concurrently
with its delivery to the holder of such Class 2 Claim.
4.3 Class 3 Claims (Secured Claims of holders of Senior Secured Credit
Agreement Documents and Senior Secured Note Agreement Documents). In full
satisfaction of the Allowed Class 3 Claims, each holder thereof, or its
designated agent or representative, shall receive Cash (by wire transfer in
immediately available funds) on the Effective Date in the amount of its
respective Allowed Claim. In the event of a dispute between the Debtors and the
holder of a Class 3 Claim as to the amount of its Allowed Class 3 Claim, a
reserve in the amount
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of the portion of the Claim that is in dispute shall be established by the
Debtors subject to the terms and provisions of Section 9.9 of this Plan.
4.4 Class 4 Claims (Secured Claims of holders of Senior Secured
Subordinated Note Documents). In full satisfaction of the Allowed Class 4
Claims, each holder thereof, or its designated agent or representative, shall
receive Cash (by wire transfer in immediately available funds) on the Effective
Date in the amount of its respective Allowed Claim. In the event of a dispute
between the Debtors and the holder of a Class 4 Claim as to the amount of its
Allowed Claim 4 Claim, a reserve in the amount of the portion of the Claim that
is in dispute shall be established by the Debtors subject to the terms and
provisions of Section 9.9 of this Plan.
4.5 Class 5 Claims (Unsecured Claims of holders of Zero Coupon
Subordinated Note Documents). In full satisfaction of the Allowed Class 5
Claims, each holder thereof, shall receive Cash on the Effective Date in the
amount of its respective Allowed Claim.
4.6 Class 6 Claims (Unsecured Claims of the holders of the Public
Subordinated Debentures). In full satisfaction of the Allowed Class 6 Claims,
each holder thereof shall receive (subject to the provisions of Sections 9.11
and 10.7 hereof) on the Effective Date (a) its Ratable Share of the Public
Subordinated Interest Cash Payment, (b) its Ratable Share of the Public
Subordinated Principal Cash Payment, (c) its Ratable Share of the Public
Subordinated Refinancing Fee, (d) a negotiable certificate representing each
holders' Ratable Share of its undivided interest in the New Restructured Second
Secured PIK Notes and all of the New Class C Common Stock, and (e) a negotiable
certificate representing each holders' Ratable Share of its undivided interest
in fifteen (15%) percent of the New Restructured Third Secured PIK Notes.
4.7 Class 7 Claims (Unsecured Claims of the holders of Junior Subordinated
Note Documents). In full satisfaction of the Allowed Class 7 Claims, each holder
thereof shall receive on the Effective Date (a) a negotiable certificate
representing each holders' Ratable Share of its undivided interest in
eighty-five (85%) percent of the New Restructured Third Secured PIK Notes and
(b) its Ratable Share of all of the New Class B Common Stock.
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4.8 Class 8 Claims (Unsecured Claims other than Claims in Classes 5
through 7) In full satisfaction of the Allowed Class 8 Claims, each holder
thereof shall receive Cash on the Effective Date in the amount of their
respective Allowed Claim.
4.9 Class 9 Interests (Interests in Ace-Central). In full satisfaction of
such Interests, each holder of an Allowed Class 9 Interest shall receive on the
Effective Date its Ratable Share of the Distribution to be paid to Ace-Central
from Scott pursuant to Section 4.15 of this Plan.
4.10 Class 10 Interests (Interests in Ace-East). In full satisfaction of
such Interests, each holder of an Allowed Class 10 Interest shall receive its
Ratable Share of the Distribution to be paid to Ace-East from Scott pursuant to
Section 4.15 of this Plan.
4.11 Class 11 Interests (Interests in Ace-South). In full satisfaction of
such Interests, each holder of an Allowed Class 11 Interest shall receive on the
Effective Date its Ratable Share of the Distribution to be paid to Ace-South
from Scott pursuant to Section 4.15 of this Plan.
4.12 Class 12 Interests (Interests in Ace-Texas). In full satisfaction of
such Interests, each holder of an Allowed Class 12 Interest shall receive on the
Effective Date its Ratable Share of the Distribution to be paid to Ace-Texas
from Scott pursuant to Section 4.15 of this Plan.
4.13 Class 13 Interests (Interests in Ace-US). In full satisfaction of
such Interests, each holder of an Allowed Class 13 Interest shall receive on the
Effective Date its Ratable Share of the Distribution to be paid to Ace-US from
Scott pursuant to Section 4.15 of this Plan.
4.14 Class 14 Interests (Interests in Ace-West). In full satisfaction of
such Interests, each holder of an Allowed Class 14 Interest shall receive on the
Effective Date its Ratable Share of the Distribution to be paid to Ace-West from
Scott pursuant to Section 4.15 of this Plan.
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4.15 Class 15 Interests (Interests in Scott). In full satisfaction of such
Interests, each holder of an Allowed Class 15 Interest shall receive on the
Effective Date its Ratable Share of $100, which sum shall be distributed to the
holders of Allowed Interests in the Holding Companies in accordance with
Sections 4.9 through 4.14 of this Plan. On the Effective Date, all Interests in
Scott which existed prior to the Effective Date shall be deemed cancelled.
ARTICLE V
IDENTIFICATION OF CLAIMS AND
EQUITY INTERESTS IMPAIRED BY THIS PLAN
5.1 Unimpaired Classes. Claims in Class 1 are not impaired under this Plan
and are deemed to have accepted this Plan.
5.2 Impaired Classes. Claims in Classes 2 through 8 and Interests in
Classes 9 through 15 are classified as impaired under this Plan and,
consequently, are entitled to vote to accept or reject this Plan.
Notwithstanding the foregoing, the Debtors reserve the right to assert that the
holders of Claims in Classes 2, 3, 4, 5, and 8 are not impaired and,
consequently, are not entitled to vote to accept or reject this Plan.
ARTICLE VI
MEANS OF IMPLEMENTATION OF THIS PLAN
6.1 General Provisions on Implementation. This Plan shall be implemented
through the transactions set forth herein, including (a) the issuance and
delivery of the Reorganization Securities, the other Distributions to creditors
and holders of Interests required by Article IV, (b) the transactions required
by Article XI hereof; and (c) the execution of the New Management Agreement.
6.2 Sources of Funding. The funds and other consideration necessary to pay
Allowed Claims and the Allowed Amount of Administrative Expenses shall be
generated from: (i) Cash on hand including, without limitation, all cash
collateral (as such term is defined in section
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363(a) of the Bankruptcy Code); (ii) the issuance of the Reorganization
Securities; and (iii) the Post-Confirmation Credit Facility.
6.3 Dissolution of Holding Companies. On or promptly after the Effective
Date, each of the Holding Companies shall file and seek to obtain appropriate
certificates of dissolution with the appropriate governmental authorities under
applicable law.
6.4 Reincorporation of Scott. On the Effective Date, Scott shall be
reincorporated under the General Corporation Laws of the State of Delaware by
being merged into a wholly-owned subsidiary formed for this purpose. In the
event, however, the Debtors determine that the merger or reincorporation
violates any franchise or other agreement with third-parties, Reorganized Scott
will remain a Texas corporation. In either event, after the Effective Date, the
only Interests in Reorganized Scott shall be the New Common Stock.
ARTICLE VII
AMENDMENTS AND MODIFICATION
7.1 Amendment of Plan. The Debtors reserve the right to amend and modify
this Plan prior to the Confirmation Date in any manner they determine is
necessary to obtain confirmation of this Plan, to the extent permitted by the
Bankruptcy Code, the Bankruptcy Rules and the Court. To the extent permitted by
the Bankruptcy Code, the Bankruptcy Rules and the Court, such amendments may be
made at the hearing on confirmation of this Plan without further notice to any
party in interest except for an announcement in open court made on the record at
such hearing. After the Confirmation Date, the Debtors may, upon order of the
Court, in accordance with section 1127(b) of the Bankruptcy Code, remedy any
defects, or omissions or reconcile any inconsistency in this Plan in such manner
as may be necessary to carry out the purposes and intent of this Plan.
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ARTICLE VIII
EXECUTORY CONTRACTS
8.1 Assumption of Executory Contracts. On the Effective Date, all
Executory Contracts of each Debtor shall be deemed assumed on the Confirmation
Date, except: (a) any Executory Contracts that are the subject of separate
motions to reject filed pursuant to section 365 of the Bankruptcy Code by any of
the Debtors before the entry of the Confirmation Order; and (b) Executory
Contracts listed in the "Schedule of Rejected Executory Contracts" to be filed
by the Debtors with the Court and served on the Committee and all parties listed
therein no less than twenty (20) days prior to the scheduled hearing on
confirmation of this Plan. The Debtors shall also file with the Court and serve
upon the Committee and each party listed therein a "Schedule of Assumed
Executory Contracts" to be filed no later than twenty (20) days prior to the
scheduled hearing on confirmation of this Plan. Such schedule shall contain the
name of each party to an Executory Contract assumed by the Plan and a statement
of the amount of such party's Executory Contract Claim, if any. The Debtors'
failure to list any specific Executory Contract on the "Schedule of Assumed
Executory Contracts" shall not affect the assumption of such Executory Contract.
Unless an objection to assumption of an Executory Contract or a statement as to
the amount of a party's Executory Contract Claim is filed with the Court at
least five (5) days prior to the scheduled hearing on confirmation of this Plan,
all conditions precedent to the assumption of the Executory Contracts assumed
under this Plan shall be deemed to have been satisfied upon the payment by the
Debtors on the Effective Date of the Executory Contract Claim reflected in the
Schedule of Assumed Executory Contracts. If a party objects to assumption of an
Executory Contract or files with the Court a statement as to the amount of such
party's Executory Contract Claim and the amount of such Executory Contract Claim
is disputed by the Debtors, all requirements of section 365 of the Bankruptcy
Code with respect to the assumption by the Debtors of such Executory Contract
shall be deemed to have been satisfied in full upon the payment by the Debtors
of the Allowed Amount of such party's Executory Contract Claim promptly after
entry of a Final Order approving the assumption of the Executory Contract and/or
determining the Allowed Amount of such Executory Contract Claim, provided that
in any event, the Debtors must have otherwise remained in compliance with the
terms of such Executory Contract between the date such objections or statements
were due to be filed (or, if later, the date of any Court determination as to
the Debtor's obligations in connection with the assumption
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of an Executory Contract) and the date on which assumption actually occurs. The
claim arising from the rejection of Executory Contracts listed on the Schedule
of Rejected Executory Contracts shall be filed within thirty (30) days of the
Confirmation Date or be forever barred from enforcement or assertion in the
Court or any other court.
8.2 Classification of Rejection Claims. Any Claim arising out of the
rejection of Executory Contracts shall be a Class 8 Claim.
ARTICLE IX
EFFECT OF THIS PLAN ON CLAIMS AND INTERESTS
9.1 Discharge
(a) Scope. Except as otherwise provided in this Plan or in the
Confirmation Order, in accordance with section 1141(d)(1) of the Bankruptcy
Code, entry of the Confirmation Order acts as a discharge effective as of the
Effective Date of all debts of, Claims against, liens on, and Interests in each
of the Debtors, their assets, or properties, which debts, Claims, liens and
Interests arose at any time before the Effective Date. The discharge of the
Debtors shall be effective as to each Claim or Interest, regardless of whether a
proof of Claim or Interest therefore was filed, whether the Claim or Interest is
an Allowed Claim or Allowed Interest, or whether the holder thereof votes to
accept this Plan. On and after the Effective Date, as to every discharged Claim
and Interest, any holder of such Claim or Interest shall be precluded from
asserting against any Debtor formerly obligated with respect to such Claim or
Interest, or against such Debtors' assets or properties, any other or further
Claim or Interest based upon any document, instrument, act, omission,
transaction, or other activity of any kind or nature that occurred before the
Effective Date.
(b) Injunction. In accordance with section 524 of the Bankruptcy
Code, the discharge provided by this section and section 1141 of the Bankruptcy
Code, shall act, inter alia, as an injunction against the commencement or
continuation of any action, employment of process or act to collect, offset or
recover the Claims and Interests discharged hereby.
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(c) Release of Collateral. Except as otherwise provided under this
Plan: (i) the collateral agent for each holder of a Secured Claim, or if there
is no such collateral agent for any holder of a Secured Claim, each such holder
shall on the Effective Date: (x) turn over and release to the Reorganized Debtor
(or its successor, as the case may be) any and all property of the relevant
Debtor that secures or purportedly secures such Claim; and (y) execute such
documents and instruments as such Reorganized Debtor requires to evidence such
Claimant's release of such property; and (ii) on the Effective Date, all claims,
right, title and interest in such property shall revert to the relevant
Reorganized Debtor free and clear of all Claims and Interests, including,
without limitation, liens, charges, pledges, encumbrances and/or security
interests of any kind. No Distribution hereunder shall be made to or on behalf
of any holder of such Secured Claim unless and until such holder or the
collateral agent, as applicable, executes and delivers to the relevant Debtor or
Reorganized Debtor such release of liens.
(d) Applicability. Except as set forth in Sections 9.3 and 13.6 of
this Plan, notwithstanding anything contained herein to the contrary, none of
the provisions of this section shall be deemed applicable to any rights, claim,
or cause of action, whether asserted or yet to be asserted, against any person
or entity other than a Debtor.
9.2 Revesting and Vesting Without in any way limiting the provisions of
Section 9.1(c) hereof, and subject to the provisions of Section 6.3 hereof, each
of the Debtors shall, as a Reorganized Debtor continue to exist after the
Effective Date as a separate corporate entity, with all the powers of a
corporation under applicable law. Except as otherwise provided in this Plan, on
the Effective Date all property comprising the Estates of each Debtor shall
revest in the relevant Reorganized Debtor free and clear of all Claims, liens,
charges, encumbrances and Interests of creditors and equity security holders
(other than as expressly provided herein). As of the Effective Date, each
Reorganized Debtor may operate its businesses and use, acquire and dispose of
property and settle and compromise claims or interests without supervision of
the Court free of any restrictions of the Bankruptcy Code or Bankruptcy Rules,
other than those restrictions expressly imposed by this Plan or the Confirmation
Order. Without limiting the foregoing, each Reorganized Debtor may pay the
charges it incurs for professional fees, disbursements, expenses, or related
support services after the Confirmation Date without any application to the
Court.
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9.3 Release of Primary Obligors. Except as otherwise provided under this
Plan, effective as of the Effective Date, all holders of Claims against and
Interests in any of the Debtors receiving, or entitled to receive, payments or
Distributions pursuant to this Plan,in consideration for the promises and
obligations of the Debtors under this Plan, shall be deemed to have waived and
released all rights or Claims they had or might have had against any of the
Debtors based upon any Claim against a Primary Obligor and any Claim that also
gives rise to a Secondary Liability Claim. The release of the Debtors under this
section acts as an injunction against the commencement or continuation of any
action, employment of process or act to collect, offset or recover the claims
released hereby.
9.4 Compromise of Default-Rate Interest Claim and Release of Secured
Lenders. If any holder of a Claim in Classes 3 or 4 (i) accepts this Plan in
accordance with section 1126(c) of the Bankruptcy Code and (ii) indicates on its
Ballot that it waives the right to assert that the Debtors and/or Scott is
obligated under the respective Senior Secured Credit Agreement Documents, the
Senior Secured Note Agreement Documents, and the Senior Secured Subordinated
Note Documents (as applicable) to pay on and after the Petition Date through the
Effective Date, the respective default rates specified therein to such holder,
then, upon the Effective Date, each such holder (a) shall be paid the applicable
default rate of interest set forth in the respective applicable documents for,
in the case of a holder of a Class 3 Claim, the period from November 15, 1995
to, but not including, the Petition Date and, in the case of a holder of a Class
4 Claim, for the period from January 15, 1996 to, but not including, the
Petition Date; and (b) and their respective officers, directors, employees,
members and agents and any professional persons employed by any of them or
acting on their behalf shall be released from any and all claims, obligations,
suits, judgments, damages, rights, causes of action and liabilities whatsoever
(including, without limitation, those arising under the Bankruptcy Code),
whether known or unknown, foreseen or unforeseen, existing or hereafter arising
in law, equity or otherwise, based in whole or in part on any act, omission,
transaction, event or other occurrence taking place before, on or after the
Petition Date up to the Effective Date, in any way relating to their Claims and
their activities in the Reorganization Cases, including any and all Claims of
any party-in-interest arising from orders entered in the Reorganization Cases
providing for the payment of interest in respect of any Claims prior to the
Effective Date; provided, however, that the foregoing release shall not apply to
(i) any action or omission that constitutes actual fraud or
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criminal behavior, (ii) any agreement by such holder to be entered into pursuant
to or in connection with this Plan intended to be in force on or after the
Effective Date, or (iii) any obligation imposed by this Plan intended to be in
force on or after the Effective Date. The Confirmation Order shall contain a
permanent injunction to effectuate the release provided for in this Section.
9.5 Retention and Enforcement of Claims. Except as otherwise provided in
this Plan, or in any contract, instrument, release or other agreement entered
into in connection with this Plan or by order of the Court, in accordance with
section 1123(b) of the Bankruptcy Code, the Reorganized Debtors shall retain and
may enforce any claims, rights and causes of action under the Bankruptcy Code or
any other applicable law. Each Reorganized Debtor or any successor to it may
pursue those claims, rights and causes of action in accordance with what is in
its best interests.
9.6 Enforcement of Subordination Agreements. The Distributions to all
classes of Claims pursuant to this Plan shall not be subject to levy,
garnishment, attachment or other legal process by any other Claimant of another
Class by reason of any claimed contractual subordination rights.
9.7 Distributions of Cash. Except as otherwise provided in this Plan, at
the option of Reorganized Scott, any Cash payment to be made by Reorganized
Scott pursuant to this Plan may be made by check or wire transfer or as
otherwise required or provided in the applicable agreements, provided, however,
that all payments to the Pre-Petition Indenture Trustee shall be made by wire
transfer.
9.8 Claims and Interests Objections. Unless otherwise ordered by the
Court, all Claims objections shall be filed and served on the applicable
Claimant by ninety (90) days after the Effective Date or after a Claim is filed,
whichever is later. After the Confirmation Date, only the Reorganized Debtors
shall have the authority to file, settle, compromise, withdraw, or litigate to
judgment objections to Claims. The Reorganized Debtors may settle or compromise
any Disputed Claim, without Court approval and without notice to any party in
interest.
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9.9 Claims Reserve for Disputed Claims.
(a) Establishment of Reserve. The Debtors shall establish a claims
reserve and reserve therein, in trust for the account of each holder of a
Disputed Claim entitled to receive a Distribution of Cash and/or Reorganization
Securities, as applicable, the Cash and/or Reorganization Securities which would
otherwise be distributed to such holder under this Plan were such Disputed Claim
an Allowed Claim; provided, however, that to the extent the Court shall
determine that a good and sufficient Cash reserve or Reorganization Securities
reserve for a Disputed Claim is less than the full amount of the Distribution
with respect thereto, the Debtors shall reserve such lesser amount with respect
to such Disputed Claim . The property so reserved for the holder of such
Disputed Claim shall be distributed to such holder, only after and to the extent
such Disputed Claim becomes a subsequently Allowed Claim.
(b) Investment of Reserve Funds. All Cash held in such claims
reserve shall be invested in such interest bearing accounts or obligations as
the Debtors may determine from time to time with due regard for the need for
liquidity to pay subsequently Allowed Claims.
(c) Payments of Subsequently Allowed Claims. At such time as a
Disputed Claim becomes a subsequently Allowed Claim in whole or in part by Final
Order, any Cash Distributions due on account of such subsequently Allowed Claim
shall promptly be released from the claims reserve and delivered to the holder
of such subsequently Allowed Claim together with the portion of the interest
allocable to such Distributions.
(d) Return of Reserve to Debtor. The reserve allocable to the
portion of such Disputed Claim (including the interest earned thereon) that is
ultimately disallowed by Final Order shall be returned to the Debtors.
9.10 Unclaimed Distributions. At the end of One (1) year following the
date of Distribution to a holder of an Allowed Claim, the holders of Allowed
Claims theretofore entitled to Unclaimed Property shall cease to be entitled
thereto, and the Unclaimed Property in the claims reserve shall then be returned
to the Debtors.
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9.11 Special Provisions Relating to Distributions to Holders of Public
Subordinated Debentures.
(a) As of the close of business on the Record Date for purposes of
Distribution, the transfer ledger in respect of the Public Subordinated
Debentures shall be closed, and Scott and the Pre-Petition Indenture Trustee
shall have no obligations to recognize any transfer of the Public Subordinated
Debentures after the Record Date. Scott and the Pre-Petition Indenture Trustee
shall be entitled instead to recognize and deal for all purposes with respect to
this Plan with only those holders of record stated on the transfer ledger
maintained by the Pre-Petition Indenture Trustee for the Public Subordinated
Debentures as of the close of business on the Record Date.
(b) Any Distributions to which the holders of the Public Subordinated
Debentures are entitled shall be made to the Pre-Petition Indenture Trustee for
the benefit of the holders of the Public Subordinated Debentures in accordance
with the provisions of this Plan.
(c) If the Court does not approve the payment by Scott of compensation and
expense reimbursement claims made by the Pre-Petition Indenture Trustee under
the Pre-Petition Indenture, the Pre-Petition Indenture Trustee has advised Scott
that it intends to withhold a portion of the Cash Distribution it receives on
behalf of holders of Public Subordinated Debentures under this Plan until its
compensation and expense reimbursement claims are satisfied in full pursuant to
a lien for this purpose granted to the Pre-Petition Indenture Trustee under the
Indenture. Consequently, amounts actually received by holders of the Public
Subordinated Debentures may be less than the gross Distributions provided for
under this Plan by the amount of Distributions applied by the Pre-Petition
Indenture Trustee to its compensation and expense reimbursement claims.
(d) No holder of Public Subordinated Debentures shall be entitled to
receive any Distribution from the Pre-Petition Indenture Trustee respecting such
Claim unless and until such holder shall have first either (i) surrendered or
caused to be surrendered to such Pre-Petition Indenture Trustee the original
debentures held by it or (ii) in the event that such holder is unable to
surrender his original debenture because same has been lost, destroyed, stolen
or mutilated, (1) furnished such Pre-Petition Indenture Trustee with an executed
affidavit of loss and indemnity with respect thereto in form customarily
utilized for such purposes that is reasonably satisfactory to such Pre-Petition
Indenture Trustee and (2) provided to such Pre-Petition Indenture Trustee a bond
in such amount and form as the Pre-Petition Indenture Trustee shall direct,
sufficient to
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indemnify such Pre-Petition Indenture Trustee against any claim that may be made
against such Pre-Petition Indenture Trustee on account of the alleged loss,
theft or distribution of any such certificate or the distribution of property
hereunder. The method and procedure to be followed for surrendering debenture
certificates and for providing affidavits and bonds shall be prescribed by the
Pre-Petition Indenture Trustee upon reasonable notice to holders of the Public
Subordinated Debentures. Promptly upon surrender of such instruments, the
Pre-Petition Indenture Trustee shall cancel such debentures and deliver such
cancelled debentures to Reorganized Scott or otherwise dispose of such
debentures in such manner as Reorganized Scott may reasonably request. In the
event a holder of Public Subordinated Debentures fails to surrender its
debenture certificate(s) or provide an affidavit and adequate bond on or before
the first anniversary of the Effective Date, such holder shall be conclusively
deemed to have forfeited its Distribution under this Plan, and all such property
not claimed by such holder shall be returned to Reorganized Scott.
(e) On the Effective Date, the Indenture shall, except as provided in this
Plan, be deemed cancelled, terminated and of no further force or effect.
Notwithstanding the foregoing, such cancellation of the Public Subordinated
Debentures (x) shall not impair the rights of holders of the Public Subordinated
Debentures to receive Distributions on account of such Claims pursuant to this
Plan, (y) shall not impair the rights and duties under the Indenture as between
the Pre-Petition Indenture Trustee, and the beneficiaries of the trust or
arrangements created thereby, as set forth in the applicable provisions of the
Indenture, including inter alia, the rights of the Pre-Petition Indenture
Trustee to enforce its lien or (z) shall not impair Reorganized Scott's
indemnification obligations under the Indenture. The Public Subordinated
Debentures shall not be cancelled other than pursuant to this Section of this
Plan and, until such cancellation, such debentures shall be evidence of the
entitlement of the holder thereof to receive Distributions pursuant to this
Plan.
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ARTICLE X
NEW COMMON STOCK AND CORPORATE GOVERNANCE PROVISIONS
RELATING TO REORGANIZED SCOTT
10.1 Articles or Certificates of Incorporation. Subject to Section 6.4 of
this Plan, Reorganized Scott shall be reincorporated under the General
Corporation Law of the State of Delaware.
10.2 Issuance of New Common Stock. There shall be one thousand (1,000)
share of New Class A Common Stock issued on the Effective Date, which stock
shall be distributed to the Manager. There shall be twenty-four thousand
(24,000) shares of New Class B Common Stock issued on the Effective Date, which
stock shall be distributed to the Class 7 Claims. There shall be seventy-five
thousand (75,000) shares of New Class C Common Stock issued on the Effective
Date, which stock shall be distributed to the Class 6 Claims. At any time prior
to the Effective Date, the Debtors and the Committee may alter the number of
shares of New Class A Common Stock, New Class B Common Stock and New Class C
Common Stock required to be issued hereunder as long as there shall be
twenty-four (24) times the number of Class B shares issued as Class A shares
issued and seventy-five (75) times the number of Class C shares issued as Class
A shares.
10.3 Voting Rights. Except for the election of directors as set forth in
section 10.4 of this Plan, each share of New Class A Common Stock and New Class
B Common Stock shall have ten (10) votes per share and each share of New Class C
Common Stock shall have one (1) vote per share. All ordinary course decisions
shall be made by a majority vote of the Board of Directors. An "Extraordinary
Decision", as defined hereinafter, shall require the vote of four of the five
directors. Extraordinary Decisions are (i) incurrence of significant additional
debt, (ii) extraordinary capital expenditures not currently provided for in
Reorganized Scott's projections, (iii) the declaration of any dividend, (iv) the
commencement of a voluntary case under the Bankruptcy Code or any similar
bankruptcy or insolvency proceeding and (v) the consent to an involuntary
petition for relief under the Bankruptcy Code or any similar bankruptcy or
insolvency proceeding. In addition, (a) any decision with respect to whether the
New Management Agreement should be terminated as a result of a breach thereof,
all decisions with respect to the
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selection of a new manager upon any such breach, and whether the New Management
Agreement shall be renewed at the end of its term shall be made by the directors
chosen by the holders of the New Class C Common Stock, and (b) any amendment to
the corporate charter which would modify the corporate governance provisions set
forth in this sentence (collectively, the "Special Provisions") will require the
affirmative vote of the holders of the New Class C Common Stock voting as a
separate class.
10.4 Board of Directors. The board of directors of Reorganized Scott shall
consist of five (5) directors. Two (2) of the initial directors shall be
designated by the Committee and shall be deemed to be the directors chosen by
the holders of the New Class C Common Stock. The other three (3) initial
directors shall be designated by Scott which shall also designate which of such
initial three directors shall be deemed to be the directors chosen by the
holders of New Class A Common Stock and which shall be deemed to be the
directors chosen by the holders of the New Class B Common Stock. After the
Effective Date, directors shall be elected annually as follows: (a) the holders
of the New Class A Common Stock voting as a separate class shall be entitled to
elect two of five directors; (b) the holders of the New Class B Common Stock
voting as a separate class shall be entitled to elect one of five directors; (c)
the holders of the New Class C Common Stock shall be entitled to elect two of
five directors.
10.5 Compensation and Indemnifications of Directors. Each director shall
receive a fee of $2,500 per month, provided however, that any director who is
(i) a member of the Committee (or an officer, employee or affiliate of such
member) or (ii) an officer, employee or affiliate of the Manager or (iii) an
officer, employee or affiliate of a holder of Junior Subordinated Note
Documents, shall not receive any compensation from Reorganized Scott for serving
as a director. All directors shall be reimbursed by Reorganized Scott for any
actual out of pocket expense incurred in performing their duties as directors.
Notwithstanding any other provision contained in this Plan, upon maturity of the
New Restructured Second Secured PIK Notes, holders of the New Restructured Third
PIK Notes that were issued to the holders of the Junior Subordinated Note
Documents will receive an amount equal to eighty-five (85%) percent of the sum
of (i) monies available for distribution to all holders of the New Restructured
Third Secured PIK Notes plus (ii) compensation paid, if any, to the directors
appointed by the holders of the New Class C Common Stock. The balance shall be
paid to the holders of the New Restructured
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Third Secured PIK Notes issued to the holders of the Public Subordinated Debt.
All directors shall be indemnified by Reorganized Scott for certain acts and
omissions as set forth in the Charter and Reorganized Scott shall obtain and
maintain directors and officers liability insurance in the minimum amount of
$5,000,000.
10.6 Convertibility. The New Class C Common Stock shall automatically
convert into New Class A Common Stock upon the earlier to occur of December 31,
1999 or a Transaction Event. Transaction Event means (i) the merger,
consolidation, liquidation, reorganization or dissolution of Reorganized Scott,
(ii) the sale of all of the cable television systems currently owned by Scott,
and (iii) any similar transaction including, without limitation, the
reclassification of the capital stock of Reorganized Scott or the dividend or
other distribution of any corporate asset to shareholders. Upon the conversion
of the New Class C Common Stock and the selection of a new Board of Directors,
the Special Provisions with respect to the Board of Directors identified in
Section 10.3 of this Plan shall also terminate.
10.7 Transfer of Reorganization Securities. Except as provided in the New
Management Agreement, the New Class A Common Stock shall not be transferable
until the New Class C Common Stock converts into New Class A Common Stock.
Beneficial ownership of the New Class C Common Stock shall only be transferable
with the proportional share of the New Restructured Second Secured PIK Notes
issued to holders of Allowed Class 6 Claims. To implement the provisions of the
immediately preceding sentence, legal ownership of the New Class C Common Stock
and the New Restructured Second Secured PIK Notes issued to holders of Allowed
Class 6 Claims will be held by one or more trusts or depositories reasonably
acceptable to the Debtors and the Committee, and the holders of Allowed Class 6
Claims will receive the negotiable certificates referred to in Sections 4.6(d)
and (e) hereof.
10.8 Registration of New Class A Common Stock. Unless prohibited by
applicable securities law, Reorganized Scott will become a reporting company
under the Securities Exchange Act of 1934 no later than ninety (90) days after
the Effective Date by filing with the Securities and Exchange Commission a
Registration Statement on Form 10 with respect to the New Class A Common Stock.
Reorganized Scott will file the Form 10 no later than forty-five (45) days after
the Effective Date and will diligently pursue having such Registration
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Statement declared effective. Reorganized Scott will remain a reporting company
and will file all SEC reports required of a reporting company at least until the
New Restructured Second Secured PIK Notes are paid in full. Reorganized Scott
will not file a Registration Statement with respect to the New Class C Common
Stock or the New Restructured Second Secured PIK Notes prior to the date the New
Class A Common Stock converts into New Class A Common Stock, unless required by
applicable law.
10.9 Charter Amendments. The Debtors' Charter will be amended as of the
Effective Date to the extent necessary to (i) incorporate the provisions of
Article 10 of this Plan, (ii) authorize the issuance of the New Common Stock and
(iii) prohibit the issuance of nonvoting equity securities as required by
section 1123(a)(6) of the Bankruptcy Code.
ARTICLE XI
CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS PLAN
11.1 Conditions Precedent. Each of the following conditions precedent must
be satisfied or waived, as permitted, in order for the Effective Date to occur:
(a) The Confirmation Order shall have been entered.
(b) The Confirmation Order shall have become a Final Order, provided
however, that the Debtors may waive this condition if no stay pending
appeal is then in effect.
(c) The Post-Confirmation Credit Facility shall have closed.
(d) The New Management Agreement shall have been executed.
11.2 Effect of Nonoccurrence of the Conditions to Effectiveness. If each
of the conditions precedent to the Effective Date set forth in Section 11.1 of
this Plan have not been satisfied or duly waived by January 31, 1997, the
Confirmation Order will be vacated by the
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Court, provided however, that the January 31, 1997 date may be extended to
February 28, 1997 solely upon the consent of the Committee, and provided further
that the February 28, 1997 date may be extended beyond February 28, 1997 solely
upon the entry of an Order of the Court, after notice and a hearing. If the
Confirmation Order is vacated pursuant to this section, this Plan shall be null
and void in all respects, and nothing contained in the Plan shall: (a)
constitute a waiver or release of any claims against or Interests in the
Debtors; or (b) prejudice in any manner the rights of any of the Debtors,
including (without limitation) the right to seek a further extension of the
exclusivity periods under Section 1121(d) of the Bankruptcy Code.
ARTICLE XII
POST-CONFIRMATION OPERATIONS AND MANAGEMENT
12.1 Pre-Effective Date Management. Subject to the Debtors' obligations
under the Bankruptcy Code, between the Confirmation Date and the Effective Date,
management, control and operation of the Debtors shall continue to be the sole
responsibility of the Debtors and the Debtors shall have the right to operate in
the ordinary course of business without Court approval.
12.2 New Management Agreement. Upon commencement of the New Management
Agreement, the Manager shall make all decisions and supervise all actions with
respect to the operation and management of Reorganized Scott's systems in
accordance with the terms and conditions of the New Management Agreement.
ARTICLE XIII
ADMINISTRATIVE PROVISIONS
13.1 Retention of Jurisdiction. Notwithstanding confirmation of this Plan
or the occurrence of the Effective Date, the Court shall retain exclusive
jurisdiction for the following purposes:
(a) Determination of the allowability of Claims and Interests upon
objection to such Claims or Interests by a Debtor,
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<PAGE>
the Reorganized Debtors, other successors to any of the Debtors, or any
other party in interest and the validity, extent, priority and
nonavoidability of consensual and nonconsensual liens and other
encumbrances;
(b) Determination of tax liability pursuant to section 505 of the
Bankruptcy Code;
(c) Approval, pursuant to section 365 of the Bankruptcy Code, of all
matters related to the assumption, assumption and assignment, or rejection
of any Executory Contract or unexpired lease of any of the Debtors;
(d) Determination of requests for payment of Administrative Expenses
entitled to priority under section 507(a)(1) of the Bankruptcy Code,
including compensation of parties entitled thereto;
(e) Resolution of controversies and disputes regarding the
interpretation of this Plan;
(f) Implementation of the provisions of this Plan and entry of
orders in aid of confirmation and consummation of this Plan, including,
without limitation, appropriate orders to protect the Debtors and their
successors from actions by creditors and/or Interest holders of the
Debtors or any of them and resolving disputes and controversies regarding
property of the Estates and the Reorganized Debtors that is subject to
restructuring negotiations on and after the Confirmation Date;
(g) Modification of this Plan pursuant to section 1127 of the
Bankruptcy Code;
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<PAGE>
(h) Adjudication of any causes of action that arose preconfirmation
or in connection with the implementation of this Plan, including avoidance
actions, brought by a Debtor, Reorganized Debtors, other successors of any
of the Debtors as the representative of the Debtors' Estates or a party in
interest (as a representative of any Debtor's Estate);
(i) Entry of a Final Order closing the Reorganization Cases;
(j) Resolution of disputes concerning any Disputed claims reserve or
the administration thereof and Claims for disputed Distributions;
(k) The resolution of any disputes concerning whether a person or
entity had sufficient notice of the Reorganization Cases, the applicable
claims bar date, the hearing on the approval of the Disclosure Statement
as containing adequate information, the hearing on the confirmation of
this Plan for the purpose of determining whether a Claim or Interest is
discharged hereunder or for any other purpose; and
(l) To determine such other matters as may be set forth in the
Confirmation Order or which may arise in connection with this Plan or the
Confirmation Order.
13.2 Governing Law. Except to the extent the Bankruptcy Code, Bankruptcy
Rules, or other federal laws apply and except for Reinstated Claims governed by
another jurisdiction's law, the rights and obligations arising under this Plan
shall be governed by the laws of the State of New York, without giving effect to
principles of conflicts of law.
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<PAGE>
13.3 Corporate Action. The adoption of any new or amended and restated
certificates of incorporation and by-laws of each Reorganized Debtor, the
adoption, execution, and implementation of any employment agreement described in
this Plan and the other matters provided for under this Plan involving the
corporate or entity structure of any Debtor, Reorganized Debtor or corporate
action, as the case may be, shall be deemed to have occurred and be effective as
provided herein and shall be authorized and approved in all respects, without
any requirement of further action by stockholders or directors of any of the
Debtors or Reorganized Debtors, as the case may be. Without limiting the
foregoing, the Reorganized Debtors shall be authorized, without any further act
or action required, to issue all Reorganization Securities, any other securities
and any instruments required to be issued hereunder.
13.4 Effectuating Documents and Further Transactions. Each Debtor and
Reorganized Debtor shall be authorized to execute, deliver, file, or record such
documents, contracts, instruments, releases, and other agreements and take such
other action as may be necessary to effectuate and further evidence the terms
and conditions of this Plan.
13.5 Grace Period. With the exception of the payments required to be made
to the holders of Allowed Class 3 Claims and Allowed Class 4 Claims and to the
Pre-Petition Indenture Trustee, the Reorganized Debtors shall have thirty (30)
days to make any Distribution required to be made on the Effective Date without
being in default thereof.
13.6 Limitation of Liability. Neither the Debtors, the Reorganized
Debtors, the Committee (including their members), the Secured Lenders, any of
their respective officers, directors, employees or agents (acting in such
capacity), nor any professional persons employed by any of them shall have or
incur any liability to any entity for any action taken or omitted to be taken in
connection with or related to the formulation, preparation, dissemination,
implementation, confirmation, or consummation of this Plan, the Disclosure
Statement, or any contract, release or other agreement or document created or
entered into, or any other action taken or omitted to be taken in connection
with this Plan; provided, however, that the provision of this section shall have
no effect on the liability of any entity that would otherwise result from
37
<PAGE>
any action or omission to the extent that such action or omission is determined
in a Final Order to have constituted gross negligence or willful misconduct.
13.7 Successors and Assigns. The rights, benefits, and obligations of any
person or entity named or referred to in this Plan shall be binding upon, and
shall inure to the benefit of, the heir, executor, administrator, successor, or
assign of such person or entity.
13.8 Confirmation Order and Plan Control. To the extent of an
inconsistency among the Confirmation Order, this Plan or the Disclosure
Statement, this Plan controls the Disclosure Statement and the Confirmation
Order controls this Plan.
13.9 Committee. As of the Effective Date, the duties of the Committee will
terminate, except with respect to any appeal of an order in these cases, fee
applications, and any matters related to any proposed modifications to this
Plan.
13.10 Rules of Construction.
(a) Undefined Terms. Any term used herein that is not defined herein
shall have the meaning ascribed to any such term used in the Bankruptcy Code
and/or the Bankruptcy Rules, if used therein.
(b) Miscellaneous Rules. (i) The words "herein," "hereof,"
"hereunder," and other words of similar import refer to this Plan as a whole,
not to any particular section, subsection, or clause, unless the context
requires otherwise; (ii) whenever it appears appropriate from the context, each
term stated in the singular or the plural includes the singular and the plural,
and each pronoun stated in the masculine, feminine, or neuter includes the
masculine, feminine, and the neuter; (iii) captions and headings to articles and
sections of this Plan are inserted for convenience or reference only and are not
intended to be a part or to affect the
38
<PAGE>
interpretation of this Plan; and (iv) the rules of construction set forth in
section 102 of the Bankruptcy Code shall apply, unless superseded herein or in
the Confirmation Order.
Dated: Stamford, Connecticut
October 31, 1996
Respectfully submitted,
Ace-Central, Inc.
By: /s/Bruce A. Armstrong
------------------------------
Bruce A. Armstrong
Title: Chief Executive Officer
Ace-East, Inc.
By: /s/Bruce A. Armstrong
------------------------------
Bruce A. Armstrong
Title: Chief Executive Officer
Ace-South, Inc.
By: /s/Bruce A. Armstrong
------------------------------
Bruce A. Armstrong
Title: Chief Executive Officer
Ace-Texas, Inc.
By: /s/Bruce A. Armstrong
------------------------------
Bruce A. Armstrong
Title: Chief Executive Officer
Ace-U.S., Inc.
By: /s/Bruce A. Armstrong
------------------------------
Bruce A. Armstrong
Title: Chief Executive Officer
39
<PAGE>
Ace-West, Inc.
By: /s/Bruce A. Armstrong
------------------------------
Bruce A. Armstrong
Title: Chief Executive Officer
Scott Cable Communications, Inc.
By: /s/Bruce A. Armstrong
------------------------------
Bruce A. Armstrong
Title: Chief Executive Officer
BAER MARKS & UPHAM LLP
Special Counsel for Debtors and
Debtors in Possession
By: /s/Larry D. Henin
------------------------------
Larry D. Henin (LH-0437)
A Member of the Firm
805 Third Avenue
New York, New York 10022
(212) 702-5700
YOUNG, CONAWAY, STARGATT
& TAYLOR
Attorneys for Debtors and
Debtors in Possession
By: /s/Laura Davis Jones, Esq.
------------------------------
Laura Davis Jones, Esq.
Rodney Square North, 11th Floor
Wilmington, Delaware 19899
(302) 253-2234
40
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
SCOTT CABLE COMMUNICATIONS, INC.
ARTICLE ONE
SCOTT CABLE COMMUNICATIONS, INC. (the "Corporation"), pursuant to the
provisions of Articles 4.07 and 4.14 of the Texas Business Corporation Act,
hereby adopts Amended and Restated Articles of Incorporation (the "New Charter")
which accurately copy the Articles of Incorporation and all amendments thereto
as in effect to date (the "Current Charter") and as further amended by such New
Charter as hereinafter set forth, and which New Charter contains no other change
in any provision thereof.
ARTICLE TWO
The Current Charter of the Corporation is amended by the provisions of the
New Charter as follows:
a. Authorized Capital - Currently, the Corporation has the authority to
issue 100,000,000 shares of common stock, $0.10 par value per share. Pursuant to
the New Charter, the Corporation shall have the authority to issue 175,000
shares of common stock, $0.10 par value per share, of which 76,000 shares shall
be designated as "Class A Common Stock", 24,000 shall be designated as "Class B
Common Stock" and 75,000 shares shall be designated as "Class C Common Stock".
b. Voting Rights - Pursuant to the Current Charter, all shares of common
stock have the same voting rights. Under the New Charter, each share of Class A
Common Stock and Class B Common Stock shall have ten votes per share, while each
share of Class C Common Stock will have one vote per share. Further, each class
will be able to elect a certain number of the directors of the Corporation.
c. Conversion Feature - None of the Corporation's currently authorized
capital is convertible. Under the New Charter, the Class C Common Stock will
automatically convert into Class A Common Stock upon the occurrence of a
designated event.
d. Restrictions on Stock - The Current Charter has no restrictions on
transfer of any shares of its Authorized Stock or against the Corporation
issuing non-voting securities. The New Charter will provide for certain
restrictions.
<PAGE>
e. Board of Directors - The Current Charter set the initial board at three
directors and does not provide for any voting requirements with respect to
action taken by the Corporation's Board of Directors. The New Charter will set
the board at five directors and will require the super majority vote of the
Corporation's Board of Directors in certain specified instances and will require
certain actions to be taken by only one of the classes of directors.
f. Indemnification - Article VIII of the Current Charter is amended to
provide for new indemnification provisions.
g. Deletions - Articles VII (repurchase of shares), IX (interested
director transactions), XI (the Corporation's initial board) and XII (the name
and address of the incorporator) of the Current Charter are deleted in their
entirety.
h. Renumbering - Articles VIII, X and XI of the Current Charter are
renumbered as Articles VII, VIII and IX respectively, of the New Charter.
ARTICLE THREE
Each such amendment made by the New Charter has been effected pursuant to
the Second Amended Joint Plan of Reorganization (the "Plan of Reorganization")
of the Corporation and certain of its affiliates in their jointly administered
Chapter 11 bankruptcy proceeding in the United States Bankruptcy Court, District
of Delaware Case No. 96-166 (PJW) pursuant to an order or decree of said
Bankruptcy Court dated December 6, 1996, which Bankruptcy Court Order or decree
approved these Amended and Restated Articles of Incorporation. Said Bankruptcy
Court had jurisdiction of the case under the United States Bankruptcy Code, 11
U.S.C. ss.ss. 101 et seq. The effective date of these Amended and Restated
Articles of Incorporation is set forth in the statement of the Corporation
hereafter filed with the Secretary of State of the State of Texas described in
ARTICLE FIVE below.
ARTICLE FOUR
The Current Charter (including the original articles of incorporation and
all amendments and supplements thereto) is hereby superseded by the New Charter
which accurately copies the entire text of the Current Charter, as amended as
set forth in Article Two above. A complete copy of the New Charter is annexed
hereto as Exhibit A.
2
<PAGE>
ARTICLE FIVE
Pursuant to Article 10.03 of the Texas Business Corporation Act, the
effectiveness of these Amended and Restated Articles of Incorporation shall be
delayed and shall occur only upon the future consummation of, and pursuant to
the terms of, the Plan of Reorganization. A statement of the Corporation that
such condition has been satisfied, and the date on which such condition was
satisfied, will hereafter be filed with the Secretary of State of the State of
Texas in accordance with said Article 10.03 of the Texas Business Corporation
Act before the 90th day following the date of the filing of these Amended and
Restated Articles of Incorporation, which date is March 12, 1997.
SCOTT CABLE COMMUNICATIONS, INC.
By: /s/ Bruce A. Armstrong
---------------------------
Bruce A. Armstrong,
President
3
<PAGE>
EXHIBIT A: TEXT OF THE
RESTATED
ARTICLES OF INCORPORATION OF
SCOTT CABLE COMMUNICATIONS, INC.
ARTICLE I
The name of the Corporation is Scott Cable Communications, Inc.
ARTICLE II
The Corporation is to have perpetual existence.
ARTICLE III
The purposes for which the Corporation is organized are and include the
transaction of any and all lawful business for which corporations may be
incorporated under the Texas Business Corporation Act.
ARTICLE IV
a. Authorized Capital - The aggregate number of shares which the
Corporation shall have authority to issue is 175,000 shares of common stock,
with each share being of the par value of $0.10, of which 76,000 shares shall be
designated Class A Common Stock, 24,000 shares shall be designated Class B
Common Stock and 75,000 shares shall be designated as Class C Common Stock. Each
designated class of shares shall have the same preferences, limitations and
relative rights, except as set forth below.
b. Class A Common Stock - As a general matter, each share of Class A
Common Stock shall have ten votes per share. With respect to the election of
directors, the holders of the Class A Common Stock, voting as a separate class,
shall be entitled to elect two of the Corporation's five directors except that,
as of the "Effective Date" as defined below, the two Class A Common Stock
directors shall be designated by the Corporation. Notwithstanding the foregoing,
upon the conversion of the Class C Common Stock into Class A Common Stock, as
set forth in subparagraph (d) below (i) the holders of the Class A Common Stock,
voting as a separate class, and including the shares of Class A Common Stock
issued upon conversion of the Class C Common Stock, shall be entitled to elect
four out of five directors, (ii) the two then current Class A Directors shall be
deemed to have resigned and the holders of the Class A Common Stock, voting as a
separate class, and including the shares of the Class A Common Stock issued upon
conversion of the Class C Common Stock, shall be entitled to elect two directors
to fill the vacancy
4
<PAGE>
created by the resignation of said Class A Directors and (iii) the two then
current Class C Directors shall become Class A Directors.
c. Class B Common Stock - As a general matter, each share of Class B
Common Stock shall have ten votes per share. The holders of the Class B Common
Stock, voting as a separate class, shall be entitled to elect one of the
Corporation's five directors, except that, as of the "Effective Date", as
defined below, the Class B Common Stock director shall be designated by the
Corporation.
d. Class C Common Stock - Each share of Class C Common Stock shall have
one vote per share. The holders of the Class C Common Stock, voting as a
separate class, shall be entitled to elect two of the Corporation's five
directors except that, as of the "Effective Date", as defined below, the two
Class C Common Stock directors shall be designated by the "Committee", as
defined below. Each share of Class C Common Stock shall automatically be
converted into one share of Class A Common Stock upon the earlier to occur of
December 31, 1999 or a "Transaction Event", as defined below. All Class C Common
Stock that is so converted shall be deemed permanently cancelled and shall not
be available for reissue. Effective immediately upon such conversion, the
holders of the Class C Common Stock shall no longer be entitled to elect two of
the Corporation's five directors, the then current Class C Common Stock
directors shall become Class A Directors.
e. Special Voting Provisions - Any amendment to Article IX, paragraph (d)
shall require the affirmative vote of a majority of the holders of the Class C
Common Stock, voting as a separate class.
*f. Restrictions on Transfer - The Class A Common Stock shall not be
transferable until the Class C Common Stock has converted into Class A Common
Stock, as set forth in Article IV, paragraph (d) above, except as provided
otherwise in the "Management Agreement", as defined in Article IX paragraph (e)
below. Further, beneficial ownership of the Class C Common Stock shall only be
transferable with the proportional share of the new promissory note to be issued
by the Corporation to holders of the Class 6 and 7 Claims pursuant to the "Plan
of Reorganization", as defined below.
- ----------
* The Texas Business Corporation Act requires that transfer restrictions appear
in the articles of incorporation, by laws or shareholder's agreement as well as
noted conspicuously on the fact of the stock certificate(s). Since the Plan does
not specifically contemplate by law amendments, and to obviate the need for
another document (a shareholder's agreement), we have put the plan restrictions
in the amended charter.
5
<PAGE>
g. Non Voting Equity Securities - The Corporation is prohibited from
issuing non voting equity securities.
h. Certain Definitions -
(i) "Bankruptcy Proceedings" shall mean the Corporation's bankruptcy
case (No. 96-166 (PJW)), jointly administered with certain affiliates, in the
United States Bankruptcy Court for the District of Delaware.
(ii) "Committee" shall mean the Official Creditors' Committee
appointed in the Bankruptcy Proceedings.
(iii) "Effective Date" shall mean the date on which the Plan of
Reorganization is consummated.
(iv) "Plan of Reorganization" shall mean the Corporation's Second
Amended Joint Plan of Reorganization in its Bankruptcy Proceedings, as amended.
(v) "Transaction Event" shall mean (i) the merger, consolidation,
liquidation, reorganization or dissolution of the Corporation, (ii) the sale of
all of the cable television systems currently owned by the Corporation and (iii)
any similar transaction including, without limitation, the reclassification of
the capital stock of the Corporation or the dividend or other distribution of
any corporate assets to the Corporation's shareholders.
ARTICLE V
No Shareholder of this Corporation shall, by reason of his holding shares
hereof, have any preemptive or preferential right to purchase or subscribe to
any shares of any class of this Corporation, now or hereafter to be authorized,
or any notes, debentures, bonds or other securities convertible into or carrying
options or warrants to purchase shares of any class, now or hereafter to be
authorized, whether or not the issuance of any such shares or such notes,
debentures, bonds or other securities, would adversely affect the dividend or
voting rights of such Shareholder, other than such rights, if any, as the Board
of Directors, in its discretion from time to time, may grant and at such price
as the Board of Directors in its discretion may fix; and the Board of Directors
may issue shares of any class in this Corporation or any notes, debentures,
bonds or other securities convertible into or carrying options or warrants to
purchase shares of any class, without offering any such shares of any class,
either in whole or in part, to the existing Shareholders of any class.
6
<PAGE>
ARTICLE VI
The Corporation will not commence business until it has received, for the
issuance of its shares, consideration of the value of One Thousand Dollars
($1,000), consisting of money, labor done or property actually received, which
sum is not less than One Thousand Dollars ($1,000).
ARTICLE VII
The Corporation shall indemnify each director or officer of the
Corporation against reasonable expenses incurred by him in connection with a
proceeding in which he is a named defendant or respondent to the maximum extent
permitted, and in the manner prescribed, by the Texas Business Corporation Act
or other applicable law.
The Corporation may indemnify a person who was, is, or is threatened to be
made, a named defendant or respondent in a proceeding because the person is or
was a director, officer, employee or agent of the Corporation, or (although such
person neither is nor was an officer, employee or agent of the Corporation) is
or was serving at the request of the Corporation as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
of another foreign or domestic corporation for profit subject to the provisions
of the Texas Business Corporation Act, corporation for profit organized under
laws other than the laws of Texas, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise, against any
judgments, penalties (including excise and similar taxes), fines, settlements
and reasonable expenses actually incurred by the person in connection with the
proceeding to the maximum extent permitted, and in the manner prescribed, by the
Texas Business Corporation Act or other applicable law.
The Corporation may advance expenses to directors, officers, employees and
agents of the Corporation, and other persons serving at the request of the
Corporation (as provided above in this Article), to the maximum extent
permitted, and in the manner prescribed, by the Texas Business Corporation Act
or other applicable law.
The Corporation may purchase and maintain insurance or establish and
maintain another arrangement on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or who is or was serving at the
request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another foreign
or domestic corporation for profit subject to the provisions of the Texas
Business Corporation Act, corporation for profit organized under laws other than
the laws of Texas, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise, against or in respect of any
liability asserted against him and incurred by him in such a capacity or arising
out of his status as such a person, whether or not the Corporation would have
7
<PAGE>
the power to indemnify him against such liability under the provisions of these
Amended and Restated Articles of Incorporation or by statute. If the insurance
or other arrangement is with a person or entity that is not regularly engaged in
the business of providing insurance coverage, the insurance or arrangement may
provide for payment of a liability with respect to which the Corporation would
not have the power to indemnify the person only if including coverage for the
additional liability has been approved by the shareholders of the Corporation.
Without limiting the power of the Corporation to purchase, procure,
establish or maintain any kind of insurance or other arrangement, the
Corporation, may for the benefit of persons indemnified by the Corporation, (1)
create a trust fund; (2) establish any form of self-insurance; (3) secure its
indemnity obligation by grant of a security interest or other lien on the assets
of the Corporation; or (4) establish a letter of credit, guaranty or surety
arrangement. The insurance or other arrangement may be purchased, procured,
maintained or established within the Corporation or with any insurer or other
person deemed appropriate by the Board of Directors regardless of whether all or
part of the stock or other securities of the insurer or other person are owned
in whole or part by the Corporation. In the absence of fraud, the judgment of
the Board of Directors as to the terms and conditions of the insurance or other
arrangement and the identity of the insurer or other person participating in an
arrangement shall be conclusive and the insurance or arrangement shall not be
voidable and shall not subject the directors approving the insurance or
arrangement to liability, on any ground, regardless of whether directors
participating in the approval are beneficiaries of the insurance arrangement.
Any indemnification of or advance of expenses to a director in accordance
with this Article or the provisions of any statute shall be reported in writing
to the shareholders with or before the notice or waiver of notice of the next
shareholders' meeting or with or before the next submission to shareholders of a
consent to action without a meeting and, in any case, within the 12-month period
immediately following the date of the indemnification or advance.
These indemnification provisions shall inure to each of the directors,
officers, employees and agents of the Corporation, and other persons serving at
the request of the Corporation (as provided above in this Article), whether or
not the claim asserted against him is based on matters that antedate the
adoption of this Article, and in the event of his death shall extend to his
legal representatives; but such rights shall not be exclusive of any rights to
which he may be entitled.
For purposes of this Article, (1) the term "expenses" includes court costs
and attorneys' fees, (2) the term "proceeding" means any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, any appeal in such an action, suit or proceeding,
and any inquiry or investigation that could lead to such an action, suit or
proceeding, and
8
<PAGE>
(3) the term "director" means any person who is or was a director of the
Corporation and any person who, while a director of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar functionary of another
corporation for profit subject to the provisions of the Texas Business
Corporation Act, corporation for profit organized under laws other than the laws
of Texas, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise.
Notwithstanding any provision of this Article VII to the contrary, the
Corporation shall purchase and maintain insurance to the extent required in
order to comply with the Plan of Reorganization, as defined in Article IV,
paragraph (h) above.
ARTICLE VIII
The post office address of its registered office is c/o CT Corporation
System, 350 North St. Paul Street, Dallas, Texas 75201, and the name of its
registered agent at such address is CT Corporation System.
ARTICLE IX
(a) Current Directors - The number of Directors constituting the Board of
Directors prior to the Effective Date shall be fixed by, or in the manner
provided in, the Bylaws of the Corporation, and the names and addresses of the
persons who are serving as Directors of the Corporation prior to the Effective
Date are:
Bruce A. Armstrong
Four Landmark Square
Suite 302
Stamford, Connecticut 06901
John M. Flanagan, Jr.
Four Landmark Square
Suite 302
Stamford, Connecticut 06901
(b) Number and Classes of Directors - As of the Effective Date, as defined
in Article IV paragraph (h) above the Board of Directors of the Corporation
shall consist of five directors; two directors shall be considered Class A
Common Stock Directors, one director shall be considered the Class B Common
Stock Director and two directors shall be considered Class C Common Stock
Directors until the Class C Common Stock is converted, as described in Article
IV paragraph (d) above, after which time there shall be four Class A Common
Stock directors, and one Class B
9
<PAGE>
Common Stock director. Except with respect to the appointment of directors as of
the Effective Date, as described in Article IV above, directors shall be elected
annually.
(c) Action by the Board - As a general matter and subject to subparagraph
(d) of this Article IX, the act of a majority of the directors present at any
meeting at which there is quorum shall be the act of the Board of Directors of
the Corporation. Notwithstanding the foregoing, however, a vote of four of the
five directors of the Corporation shall be required with respect to each of the
following: (i) the incurrence of significant additional debt by the Corporation,
(ii) extraordinary capital expenditures by the Corporation not provided for in
the Corporation's projections presented as part of the Plan of Reorganization,
as defined in Article IV Paragraph (h) above, (iii) the declaration of any
dividend, (iv) the commencement of a voluntary case under the "Bankruptcy Code",
as defined below, or any similar bankruptcy or insolvency proceeding and (v) the
consent to an involuntary petition for relief under the "Bankruptcy Code" as
defined below, or any similar bankruptcy or insolvency proceeding.
(d) Special Provisions re: New Management Agreement - In addition, the
Class C Common Stock Directors shall have the sole responsibility for making any
decision on behalf of the Corporation's Board of Directors with respect to (i)
whether the "New Management Agreement", as defined below, should be terminated
as a result of a breach thereof, (ii) the selection of a new manager upon any
such breach and (iii) whether the "New Management Agreement", as defined below,
shall be renewed at the end of its term.
(e) Certain Definitions:
(i) "Bankruptcy Code" means Title 11 of the United States Code, 11 U.S.C.
ss.ss. 101 et seq., as now in effect or hereafter amended to the extent such
amendment is applicable to the Corporation's Bankruptcy Proceeding.
(ii) "New Management Agreement" means the New Management Agreement being
entered into or to be entered into between, among others, the Corporation and
Scott Cable Management Company, Inc. in connection with the Plan of
Reorganization.
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Exhibit 3.2
These By-Laws replace original By-Laws by virtue of the Merger of Simmons
Communications Merger Corp. and Scott Cable Communications, Inc.
<PAGE>
Exhibit 3.2
SIMMONS COMMUNICATIONS MERGER CORP.*
* * * * *
B Y - L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be located in Dallas, Texas.
Section 2. The corporation may also have offices at such other places both
within and without the State of Texas as the board of directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of directors
shall be held in New York, New York, at such place as may be fixed from time to
time by the board of directors. Said meetings may also be held at such other
place either within or without the State of Texas as shall be designated from
time to time by the board of directors and stated in the notice of the meeting.
Section 2. Annual meetings of shareholders, commencing with the year 1988,
shall be held on the 27th day of May if not a legal holiday, and if a legal
holiday, then on the next
* These By-Laws became the By-Laws of Scott Cable Communications, Inc. (the
"Company") by virtue of the merger of Simmons Communications Merger Corp.
with and into the Company.
<PAGE>
secular day following, at 10:00 A. M., at which they shall elect by a plurality
vote a board of directors, and transact such other business as may properly be
brought before the meeting.
Section 3. Written or printed notice of the annual meeting stating the
place, day and hour of the meeting shall be delivered not less than ten nor more
than fifty days before the date of the meeting, either personally or by mail, by
or at the direction of the president, the secretary, or the officer or persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any purpose other than the
election of directors may be held at such time and place within or without the
State of Texas as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Special meetings of the shareholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the president, the board of directors, or the
holders of not less than one-tenth of all the shares entitled to vote at the
meeting.
Section 3. Written or printed notice of a special meeting stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be delivered not less than ten nor more than fifty days
before the date of the meeting, either personally or by mail, by or at the
direction of the president, the secretary, or the officer or persons calling the
meeting, to each shareholder of record entitled to vote at such meeting.
2
<PAGE>
Section 4. The business transacted at any special meeting of shareholders
shall be limited to the purposes stated in the notice.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. A majority of the shareholders, holding shares of stock issued
and outstanding and entitled to vote, represented in person or by proxy, shall
constitute a quorum at all meetings of the shareholders for the transaction of
business except as otherwise provided by statute or by the articles of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the shareholders, the shareholders present in person or
represented by proxy shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 2. If a quorum is present, the affirmative vote of a majority of
the shares of stock represented at the meeting shall be the act of the
shareholders unless the vote of a greater number of shares of stock is required
by law or the articles of incorporation.
Section 3. Each outstanding share of stock, having voting power, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. A shareholder may vote either in person or by proxy executed in
writing by the shareholder or by his duly authorized attorney-in-fact.
3
<PAGE>
Section 4. Any action required to be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be one.(1) Directors need not be
residents of the State of Texas nor shareholders of the corporation. The
directors, other than the first board of directors, shall be elected at the
annual meeting of the shareholders, and each director elected shall serve until
the next succeeding annual meeting and until his successor shall have been
elected and qualified. The first board of directors shall hold office until the
first annual meeting of shareholders.
Section 2. Any vacancy occurring in the board of directors may be filled
by the shareholders at an annual or a special meeting or by the affirmative vote
of a majority of the remaining directors though less than a quorum of the board
of directors. A director elected to fill a vacancy shall be elected for the
unexpired portion of the term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors may be filled by election at an annual meeting or at a special meeting
of shareholders called for that purpose. A director elected to fill a newly
created directorship shall serve until the next succeeding annual meeting of
shareholders and until his successor shall have been elected and
- ----------
(1) The first sentence was amended on January 16, 1988 to read: "The number of
directors of the Corporation shall be no less than one nor more than
seven".
4
<PAGE>
qualified. Any directorship to be filled by reason of an increase in the number
of directors may also be filled by the board of directors for a term of office
until the next election of directors by shareholders; provided no more than two
directorships may be so filled during a period between any two successive annual
meetings of shareholders.
Whenever the holders of any class or series of shares are entitled to
elect one or more directors by the provisions of the articles of incorporation,
any vacancies in such directorships and any newly created directorships of such
class or series to be filled by reason of an increase in the number of such
directors may be filled by the affirmative vote of a majority of the directors
elected by such class or series then in office or by a sole remaining director
so elected, or by the vote of the holders of the outstanding shares of such
class or series, and such directorships shall not in any case be filled by the
vote of the remaining directors or the holders of the outstanding shares as a
whole unless otherwise provided in the articles of incorporation.
Section 3. The business affairs of the corporation shall be managed by its
board of directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the articles of
incorporation or by these by-laws directed or required to be exercised or done
by the shareholders.
Section 4. The directors may keep the books of the corporation, except
such as are required by law to be kept within the state, outside of the State of
Texas, at such place or places as they may from time to time determine.
Section 5. The board of directors, by the affirmative vote of a majority
of the directors then in office, and irrespective of any personal interest of
any of its members, shall
5
<PAGE>
have authority to establish reasonable compensation of all directors for
services to the corporation as directors, officers or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or special, may be
held either within or without the State of Texas.
Section 2. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the board of directors may be held upon
such notice, or without notice, and at such time and at such place as shall from
time to time be determined by the board.
Section 4. Special meetings of the board of directors may be called by the
president on five days' notice to each director, either personally or by mail or
by telegram; special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of two directors.
Section 5. Attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the
6
<PAGE>
business to be transacted at, nor the purpose of, any regular or special meeting
of the board of directors need be specified in the notice or waiver of notice of
such meeting.
Section 6. A majority of the directors shall constitute a quorum for the
transaction of business unless a greater number is required by law or by the
articles of incorporation. The act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the board of directors,
unless the act of a greater number is required by statute or by the articles of
incorporation. If a quorum shall not be present at any meeting of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 7. Unless otherwise restricted by the articles of incorporation or
these by-laws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing which shall set forth the action taken and be signed by all
members of the board of directors or of the committee as the case may be.
ARTICLE VII
COMMITTEES OF DIRECTORS
Section 1. The board of directors, by resolution adopted by a majority of
the full board of directors, may designate from among its members an executive
committee and one or more other committees, each of which shall be comprised of
one or more members and, to the extent provided in the resolution, shall have
and may exercise all of the authority of the board of directors, except that no
such committee shall have the authority of the board of directors in reference
to amending the articles of incorporation, approving a plan of merger or
consolidation,
7
<PAGE>
recommending to the shareholders the sale, lease, or exchange of all or
substantially all of the property and assets of the corporation otherwise than
in the usual and regular course of its business, recommending to the
shareholders a voluntary dissolution of the corporation or a revocation thereof,
amending, altering, or repealing the bylaws of the corporation or adopting new
bylaws for the corporation, filling vacancies in the board of directors or any
committee, filling any directorship to be filled by reason of an increase in the
number of directors, electing or removing officers or members of any committee,
fixing the compensation of any member of a committee, or altering or repealing
any resolution of the board of directors which by its terms provides that it
shall not be so amendable or repealable; and, unless the resolution expressly so
provides, no committee shall have the power or authority to declare a dividend
or to authorize the issuance of shares of the corporation.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
articles of incorporation or of these by-laws, notice is required to be given to
any director or shareholder, it shall not he construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director or
shareholder, at his address as it appears on the records of the corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram.
Section 2. Whenever any notice whatever is required to be given under the
provisions of the statutes or under the provisions of the articles of
incorporation or these by-
8
<PAGE>
laws, a waiver thereof in writing signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be a president and a secretary. The board of directors may
also elect or appoint such other officers, including assistant officers and
agents as may be deemed necessary.
Section 2. The board of directors at its first meeting after each annual
meeting of shareholders shall choose a president and a secretary neither of whom
need be a member of the board.
Section 3. The board of directors may also appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board of directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the board of directors. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.
9
<PAGE>
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the shareholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. The vice-president, if there is one, or if there shall be more
than one, the vice-presidents in the order determined by the board of directors,
shall, in the absence or disability of the president, perform the duties and
exercise the powers of the president and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the shareholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the shareholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose
10
<PAGE>
supervision he shall be. He shall have custody of the corporate seal of the
corporation and he, or an assistant secretary, shall have authority to affix the
same to any instrument requiring it and when so affixed, it may be attested by
his signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.
Section 10. The assistant secretary, if there is one, or if there be more
than one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer, if there is one, shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
11
<PAGE>
Section 13. If required by the board of directors, he shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 14. The assistant treasurer, if there is one, or, if there shall
be more than one, the assistant treasurers in the order determined by the board
of directors, shall, in the absence or disability of the treasurer, perform the
duties and exercise the powers of the treasurer and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by
certificates signed by the president and secretary or such other officers as may
be elected or appointed, and may be sealed with the seal of the corporation or a
facsimile thereof.
When the corporation is authorized to issue shares of more than one class
there shall be set forth upon the face or back of the certificate, or the
certificate shall have a statement that the corporation will furnish to any
shareholder upon request and without charge, a full statement of the
designations, preferences, limitations and relative rights of the shares of each
class authorized to be issued and, if the corporation is authorized to issue any
preferred or special class in series, the variations in the relative rights and
preferences between the shares of each
12
<PAGE>
such series so far as the same have been fixed and determined and the authority
of the board of directors to fix and determine the relative rights and
preferences of subsequent series. When the corporation is authorized to issue
shares of more than one class, every certificate shall also set forth upon the
face or the back of such certificate a statement that there is set forth in the
articles of incorporation on file in the office of the Secretary of State a full
statement of all the designations, preferences, limitations and relative rights,
including voting rights, of the shares of each class authorized to be issued and
the corporation will furnish a copy of such statement to the record holder of
the certificate without charge on written request to the corporation at its
principal place of business or registered office. Every certificate shall have
noted thereon any information required to be set forth by the Texas Business
Corporation Act and such information shall be set forth in the manner provided
in said Act.
Section 2. The signatures of the officers of the corporation upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent, or registered by a registrar, other than the corporation itself or an
employee of the corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate to be
issued in place of any certificate theretofore issued by the corporation alleged
to have been lost or destroyed. When authorizing such issue of a new
certificate, the board of directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
13
<PAGE>
deems expedient, and may require such indemnities as it deems adequate, to
protect the corporation from any claim that may be made against it with respect
to any such certificate alleged to have been lost or destroyed.
TRANSFERS OF SHARES
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, a new
certificate shall be issued to the person entitled thereto, and the old
certificate cancelled and the transaction recorded upon the books of the
corporation.
CLOSING OF TRANSFER BOOKS
Section 5. For the purpose of determining shareholders entitled to notice
of or to vote at any meeting of shareholders, or any adjournment thereof or
entitled to receive payment of any dividend, or in order to make a determination
of shareholders for any other proper purpose, the board of directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, fifty days. If the stock transfer books shall be closed for
the purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such books shall be closed for at least ten days
immediately preceding such meeting. In lieu of closing the stock transfer books,
the board of directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than fifty
days and, in case of a meeting of shareholders, not less than ten days prior to
the date on which the particular action, requiring such determination of
shareholders, is to be taken. If the stock transfer books are not closed and no
record date is fixed for the
14
<PAGE>
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the board of directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof.
REGISTERED SHAREHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Texas.
LIST OF SHAREHOLDERS
Section 7. The officer or agent having charge of the transfer books for
shares shall make, at least ten days before each meeting of shareholders, a
complete list of the shareholders entitled to vote at such meeting, arranged in
alphabetical order, with the address of each and the number of shares held by
each, which list, for a period of ten days prior to such meeting, shall be kept
on file at the registered office of the corporation and shall be subject to
inspection by any shareholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any shareholder during the whole time of
the meeting. The original share ledger or transfer book,
15
<PAGE>
or a duplicate thereof, shall be prima facie evidence as to who are the
shareholders entitled to examine such list or share ledger or transfer book or
to vote at any meeting of the shareholders.
ARTICLE XI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Subject to the provisions of the articles of incorporation
relating thereto, if any, dividends may be declared by the board of directors at
any regular or special meeting, pursuant to law. Dividends may be paid in cash,
in property or in shares of the capital stock, subject to any provisions of the
articles of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
16
<PAGE>
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by resolution
of the board of directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal, Texas".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or in any manner reproduced.
ARTICLE XII
AMENDMENTS
Section 1. These by-laws may be altered, amended, or repealed or new
by-laws may be adopted by the affirmative vote of a majority of the board of
directors at any regular or special meeting of the board subject to repeal or
change at any regular or special meeting of shareholders at which a quorum is
present or represented, by the affirmative vote of a majority of the stock
entitled to vote, provided notice of the proposed repeal or change be contained
in the notice of such meeting.
ARTICLE XIII
INDEMNIFICATION
Section 1. OF OFFICERS AND DIRECTORS. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative,
17
<PAGE>
by reason of the fact that he is or was a director or an officer of the
Corporation, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding to the fullest extent and in the manner set
forth in and permitted by the General Corporation Law, and any other applicable
law, as from time to time in effect. Such right of indemnification shall not be
deemed exclusive of any other rights to which such director or officer may be
entitled apart from the foregoing provisions. The foregoing provisions of this
Section 8.1 shall be deemed to be a contract between the Corporation and each
director and officer who serves in such capacity at any time while this Article
XIII and the relevant provisions of the General Corporation Law and other
applicable law, if any, are in effect, and any repeal or modification thereof
shall not affect any rights or obligations then existing with respect to any
state of facts then or theretofore existing or any action, suit or proceeding
theretofore or thereafter brought or threatened based in whole or in part upon
any such state of facts.
Section 2. INDEMNIFICATION OF OTHER PERSONS. The Corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was an employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses (including attorneys' fees) judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding to the fullest extent and in the manner set forth in
and permitted by the General Corporation Law,
18
<PAGE>
and any other applicable law, as from time to time in effect. Such right of
indemnification shall not be deemed exclusive of any other rights to which any
such person may be entitled apart from the foregoing provisions.
19
<PAGE>
CERTIFICATE BY SECRETARY
The undersigned, being the Secretary of the Corporation, hereby certifies
that the foregoing copy of bylaws are a true and correct copy of the bylaws of
the corporation and are in effect as of the date hereof.
IN WITNESS WHEREOF, I have signed this certification as of the 23rd day of
December, 1987.
/s/ Charles G. Lowe
----------------------------------
Charles G. Lowe, Secretary
<PAGE>
Exhibit 4.1
- ---------- -------------------------------------------------- ----------
NUMBER SHARES
A-0 Incorporated under the laws of the State of Texas
- ---------- -------------------------------------------------- ----------
- --------------------------------------------------------------------------------
--------------------------------
Scott Cable Communications, Inc.
--------------------------------
Total Authorized Issue 175,000 Shares
See Reverse for
Certain Definitions
76,000 Shares $0.10 Par Value 24,000 Shares $0.10 Par Value
Class A Common Stock Class B Common Stock
75,000 Shares $0.10 Par Value
Class C Common Stock
This r of
________________________________________________________________________________
Fully Paid and Non-Assessable Shares of Class A Common Stock of
Scott Cable Communications, Inc.
transferable only on the books of the Corporation by the holder thereof in
person or by a duly authorized Attorney upon surrender of this Certificate
properly endorsed.
Witness, the seal of the Corporation and the signatures of its duly authorized
officers.
Dated
_________________________________ _________________________________
Secretary [SEAL] President
- --------------------------------------------------------------------------------
CORPKIT NEW YORK
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ______Custodian_______
(Cust) (Minor)
TEN ENT -- as tenants by entireties under uniform Gifts to
Minors Act ___________
IT TEN -- as joint tenants with right of State
survivorship and not as tenants
in common.
Additional abbreviations may also be used though not in the above
list.
For value received __________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
represented by the within Certificate and do hereby irrevocably constitute and
appoint
________________________________________________________________________Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated_________________ 19__
In presence of
__________________________________ ___________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
Exhibit 10.1
LOAN AGREEMENT
BETWEEN
SCOTT CABLE COMMUNICATIONS, INC. ("BORROWER")
and
FINOVA CAPITAL CORPORATION ("LENDER")
Dated December 18, 1996
<PAGE>
TABLE OF CONTENTS
PRELIMINARY STATEMENT........................................................ 1
ARTICLE I.................................................................... 1
DEFINITIONS AND DETERMINATIONS............................................... 1
1.1 Definitions...................................................... 1
1.2 Time Periods..................................................... 17
1.3 Accounting Terms and Determinations.............................. 17
1.4 References....................................................... 17
1.5 Lender's or Agent's Discretion................................... 17
1.6 Borrower's Knowledge............................................. 18
ARTICLE II................................................................... 18
LOANS AND TERMS OF PAYMENT................................................... 18
2.1 Term Loan........................................................ 18
2.1.1 Amount and Disbursement.................................... 18
2.1.2 Use of Proceeds............................................ 18
2.1.3 Term Note.................................................. 18
2.1.4 Reborrowing................................................ 18
2.2 Revolving Loan................................................... 18
2.2.1 Amount and Disbursement.................................... 18
2.2.2 Reductions in Revolving Loan Commitment; Termination....... 18
2.2.3 Conditions of Disbursements................................ 18
2.2.4 Use of Proceeds............................................ 19
2.2.5 Revolving Note............................................. 19
2.2.6 Reborrowing................................................ 19
2.3 Interest......................................................... 19
2.3.1 Interest Rate.............................................. 19
2.3.2 Default Rate............................................... 19
2.3.3 Interest Computation....................................... 19
2.3.4 Maximum Interest........................................... 19
2.4 Principal and Interest Payments.................................. 20
2.4.1 Interest................................................... 21
2.4.2 Principal.................................................. 21
2.5 Late Charges..................................................... 21
2.6 Loan Fee......................................................... 21
2.7 Prepayments...................................................... 21
2.7.1 Voluntary Prepayments of the Term Loan..................... 22
2.7.2 Mandatory Prepayments of the Loans........................ 22
2.7.3 Prepayment Premium........................................ 23
2.7.4 No Prepayment Premium..................................... 23
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2.8 Payments after Event of Default.................................. 24
2.9 Method of Payment; Good Funds.................................... 24
ARTICLE III.................................................................. 24
SECURITY..................................................................... 24
ARTICLE IV................................................................... 24
CONDITIONS OF CLOSING........................................................ 24
4.1 Representations and Warranties................................... 24
4.2 Confirmation..................................................... 24
4.3 Minimum Operating Cash Flow of the System........................ 24
4.4 Appraisal........................................................ 24
4.5 Cash Equivalents................................................. 24
4.6 Subscribers...................................................... 25
4.7 Delivery of Documents............................................ 25
4.8 Performance; No Default.......................................... 26
4.9 Opinions of Counsel; Direction for Delivery...................... 26
4.10 Approval of Instruments and Security Interests................... 26
4.11 Security Interests............................................... 26
4.12 Environmental Audit.............................................. 26
4.13 Franchises and Licenses.......................................... 26
4.14 Financial Statements, Reports and Projections.................... 27
4.15 Material Adverse Change.......................................... 27
4.16 Use of Assets.................................................... 27
4.17 Broker Fees...................................................... 27
4.18 Insurance........................................................ 27
4.19 Indebtedness to be Refinanced.................................... 27
4.20 Payment of Fees and Expenses..................................... 27
ARTICLE V.................................................................... 28
REPRESENTATIONS AND WARRANTIES............................................... 28
5.1 Existence and Power.............................................. 28
5.2 Authority........................................................ 28
5.3 Borrower Capital Stock, Subsidiaries and Related Matters......... 28
5.3.1 Borrower Capital Stock..................................... 28
5.3.2 Subsidiaries............................................... 28
5.3.3 Restrictions............................................... 28
5.4 Binding Agreements............................................... 29
5.5 Business and Property of Borrower................................ 29
5.5.1 Business and Property..................................... 29
5.5.2 Licenses and Franchises................................... 29
5.5.3 Operating Agreements...................................... 29
5.5.4 Facility Sites............................................ 29
5.5.5 Leases.................................................... 29
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5.5.6 Real Estate............................................... 30
5.5.7 Operation and Maintenance of Equipment.................... 30
5.5.8 Ordinances................................................ 30
5.5.9 Indebtedness to be Refinanced............................. 30
5.5.10 Subordinated Indebtedness................................ 30
5.6 Title to Property; Liens......................................... 30
5.7 Projections and Financial Statements............................. 30
5.7.1 Financial Statements...................................... 30
5.7.2 Projections............................................... 31
5.8 Litigation....................................................... 31
5.9 Defaults in Other Agreements; Consents; Conflicting Agreements... 31
5.10 Taxes............................................................ 31
5.11 Compliance with Applicable Laws.................................. 32
5.12 Patents, Trademarks, Franchises, Agreements...................... 32
5.13 FCC and Copyright Matters........................................ 32
5.14 Environmental Matters............................................ 32
5.15 Application of Certain Laws and Regulations...................... 33
5.15.1 Investment Company Act................................... 33
5.15.2 Holding Company Act...................................... 33
5.15.3 Foreign or Enemy Status.................................. 33
5.15.4 Regulations as to Borrowing.............................. 33
5.16 Margin Regulations............................................... 33
5.17 Other Indebtedness............................................... 33
5.18 No Misrepresentation............................................. 33
5.19 Employee Benefit Plans........................................... 34
5.19.1 No Other Plans........................................... 34
5.19.2 ERISA and Code Compliance and Liability.................. 34
5.19.3 Funding.................................................. 34
5.19.4 Prohibited Transactions and Payments..................... 34
5.19.5 No Termination Event..................................... 34
5.19.6 ERISA Litigation......................................... 34
5.20 Employee Matters................................................. 35
5.20.1 Collective Bargaining Agreements; Grievances............. 35
5.20.2 Claims Relating to Employment............................ 35
5.21 Burdensome Obligations........................................... 35
5.22 Dwelling Units; Passes; Channel Capacity......................... 35
5.23 Subscribers...................................................... 35
ARTICLE VI................................................................... 35
AFFIRMATIVE COVENANTS........................................................ 35
6.1 Legal Existence; Good Standing................................... 36
6.2 Inspection....................................................... 36
6.3 Financial Statements and Other Information....................... 36
6.3.1 Monthly Statements........................................ 36
6.3.2 Quarterly Certifications.................................. 36
6.3.3 Annual Statements......................................... 36
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6.3.4 Compliance Certificates.................................. 37
6.3.5 Accountants' Certificate................................. 37
6.3.6 Audit Reports............................................ 37
6.3.7 Business Plans........................................... 37
6.3.8 ......................................................... 37
6.3.9 Notice of Suits, Adverse Events.......................... 38
6.3.10 Reports to Shareholders, Creditors and
Governmental Bodies ..................................... 38
6.3.11 ERISA Notices and Requests............................... 38
6.3.12 Other Information........................................ 39
6.4 Reports to Governmental Bodies and Other Persons................. 40
6.5 Maintenance of Licenses, Franchises and Other Agreements......... 40
6.6 Insurance........................................................ 40
6.6.1 Maintenance of Insurance.................................. 40
6.6.2 Claims and Proceeds....................................... 40
6.7 Future Leases.................................................... 41
6.8 Future Acquisitions of Real Property............................. 41
6.9 Environmental Matters............................................ 41
6.9.1 Compliance................................................ 41
6.9.2 Certification............................................. 42
6.9.3 Environmental Audit....................................... 42
6.10 Compliance with Laws............................................. 42
6.11 Taxes and Claims................................................. 42
6.12 Maintenance of Properties........................................ 42
6.13 Governmental Approvals........................................... 42
6.14 Future Franchise Agreements...................................... 42
ARTICLE VII.................................................................. 43
NEGATIVE COVENANTS........................................................... 43
7.1 Borrowing........................................................ 43
7.2 Liens............................................................ 43
7.3 Merger and Acquisition........................................... 43
7.4 Contingent Liabilities........................................... 43
7.5 Distributions.................................................... 43
7.6 Capital Expenditures............................................. 43
7.7 Payments of Indebtedness for Borrowed Money...................... 44
7.8 Obligations as Lessee Under Operating Leases..................... 44
7.9 Investments, Loans............................................... 44
7.10 Fundamental Business Changes..................................... 44
7.11 Facility Sites................................................... 44
7.12 Sale or Transfer of Assets....................................... 45
7.13 Amendment of Documents........................................... 45
7.14 Acquisition of Additional Properties............................. 45
7.15 Issuance of Equity Interests..................................... 45
7.16 Transactions with Affiliates..................................... 45
7.17 Compliance with ERISA............................................ 45
7.18................................................................... 46
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7.19 Fixed Charge Coverage............................................ 47
7.20 Debt Service Coverage............................................ 47
ARTICLE VIII................................................................. 48
DEFAULT AND REMEDIES......................................................... 48
8.1 Events of Default................................................ 48
8.1.1 Default in Payment........................................ 48
8.1.2 Breach of Covenants....................................... 48
8.1.3 Breach of Warranty........................................ 49
8.1.4 Default Under Other Indebtedness for Borrowed Money ...... 49
8.1.5 Bankruptcy................................................ 49
8.1.6 Judgments................................................. 49
8.1.7 Impairment of Licenses; Other Agreements.................. 49
8.1.8 Collateral................................................ 50
8.1.9 Interruption of Operations................................ 50
8.1.10 Plans.................................................... 50
8.1.11 Change in Management..................................... 50
8.2 Acceleration of Borrower's Obligations........................... 50
8.3 Remedies on Default.............................................. 51
8.3.1 Enforcement of Security Interests......................... 51
8.3.2 Other Remedies............................................ 51
8.4 Application of Funds............................................. 51
8.4.1 Expenses.................................................. 51
8.4.2 Borrower's Obligations.................................... 51
8.4.3 Surplus................................................... 51
8.5 Performance of Borrower's Obligations............................ 51
ARTICLE IX................................................................... 52
ADDITIONAL LENDERS AND PARTICIPANTS.......................................... 52
9.1 Assignment to Other Lenders...................................... 52
9.1.1 Assignment................................................ 52
9.1.2 Effect of Loan Assignment................................. 52
9.1.3 Substitution of Notes..................................... 52
9.1.4 Inspections............................................... 52
9.2 Participations................................................... 53
9.3 Appointment and Function of Agent................................ 53
9.4 Set Off and Sharing of Payments.................................. 53
9.5 Lenders' Decisions............................................... 53
ARTICLE X.................................................................... 54
CLOSING...................................................................... 54
ARTICLE XI................................................................... 54
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EXPENSES AND INDEMNITY....................................................... 54
11.1 Attorneys' Fees and Other Fees and Expenses...................... 54
11.1.1 Fees and Expenses for Preparation of Loan Instruments.... 54
11.1.2 Fees and Expenses in Enforcement of Rights or
Defense of Loan Instruments.............................. 54
11.2 Indemnity........................................................ 54
11.2.1 Brokerage Fees........................................... 55
11.2.2 General.................................................. 55
11.2.3 Operation of Collateral; Joint Venturers................. 55
11.2.4 Environmental Indemnity.................................. 55
ARTICLE XII.................................................................. 55
MISCELLANEOUS................................................................ 55
12.1 Notices.......................................................... 55
12.2 Survival of Loan Agreement; Indemnities.......................... 57
12.3 Further Assurance................................................ 57
12.4 Taxes and Fees................................................... 57
12.5 Severability..................................................... 57
12.6 Waiver........................................................... 57
12.7 Modification of Loan Instruments................................. 58
12.8 Captions......................................................... 58
12.9 Successors and Assigns........................................... 58
12.10 Remedies Cumulative............................................. 58
12.11 Entire Agreement; Conflict...................................... 58
12.12 APPLICABLE LAW.................................................. 58
12.13 JURISDICTION AND VENUE.......................................... 58
12.14 WAIVER OF RIGHT TO JURY TRIAL................................... 59
12.15 TIME OF ESSENCE................................................. 59
12.16 Estoppel Certificate............................................ 59
12.17 Consequential Damages........................................... 60
12.18 Counterparts.................................................... 60
12.19 No Fiduciary Relationship....................................... 60
12.20 Notice of Breach by Agent and Lenders........................... 60
12.21 Governmental Approval........................................... 60
vi
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LOAN AGREEMENT
This LOAN AGREEMENT, dated as of December 18, 1996, is between SCOTT CABLE
COMMUNICATIONS, INC., a Texas corporation ("Borrower"), and FINOVA CAPITAL
CORPORATION, a Delaware corporation ("FINOVA"), in its individual capacity and
as agent for all Lenders (this and all other capitalized terms used herein are
defined in Section 1.1 below).
PRELIMINARY STATEMENT:
A. Borrower is a reorganized debtor under the Bankruptcy Code pursuant to
the Plan of Reorganization confirmed by the Bankruptcy Court on December 6,
1996.
B. Borrower desires to borrow funds from FINOVA, which funds shall be used
(i) to make the payments to Borrower's creditors contemplated by the Plan of
Reorganization, (ii) to make capital expenditures in connection with the
expansion and improvement of the System, (iii) to pay transaction costs and (iv)
for working capital.
C. FINOVA has agreed to make the Loans upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, it is agreed as follows:
ARTICLE I
DEFINITIONS AND DETERMINATIONS
1.1 Definitions. As used in this Loan Agreement and in the other Loan
Instruments, unless otherwise expressly indicated herein or therein, the
following terms shall have the following meanings (such meanings to be
applicable equally to both the singular and plural forms of the terms defined):
Accountants: Deloitte & Touche or any other independent certified
public accounting firm selected by Borrower and reasonably satisfactory to
Lenders.
Accounting Changes: as defined in Section 1.3.
Accounts Decrease: for any period, the excess of the Eligible
Accounts at the beginning of such period over the Eligible Accounts at the
end of such period.
Accounts Increase: for any period, the excess of Eligible Accounts
at the end of such period over the Eligible Accounts at the beginning of
such period.
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ADA: the Americans with Disabilities Act of 1990, as amended, any
successor statute thereto, and the rules and regulations issued
thereunder, as in effect from time to time.
Additional Sums: as defined in subsection 2.3.4.
Affiliate: any Person that directly or indirectly, through one or
more intermediaries, controls or is controlled by or is under common
control with another Person. The term "control" means possession, direct
or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities or equity interests, by contract or otherwise. For the
purposes hereof (i) any Person which owns or controls, directly or
indirectly, 25% or more of the securities or equity interests, as
applicable, whether voting or non-voting, of any other Person shall be
deemed to "control" such Person and (ii) Scott Management and Bruce A.
Armstrong shall be deemed to be an Affiliate of Borrower.
Agent: FINOVA, as agent for all Lenders.
Amended and Restated Articles of Incorporation: the Amended and
Restated Articles of Incorporation of Borrower filed with the Secretary of
State of Texas on December 12, 1996.
Applicable Margin: shall have the meaning assigned to that term in
subsection 2.3.1.
Assignee: any Person to whom a Loan Assignment is made in compliance
with the provisions of subsection 9.1.1.
Assignment of Leases: a collateral assignment of leases executed by
Borrower in favor of Agent.
Assignment of Management Agreement: a collateral assignment of the
Management Agreement executed by Borrower in favor of Agent and
acknowledged by Scott Management.
Bankruptcy Code: the United States Bankruptcy Code, any successor
statute thereto, and the rules, regulations and legally binding policies
promulgated thereunder, as amended and in effect from time to time.
Bankruptcy Court: the United States Bankruptcy Court for the
District of Delaware.
Base Rate: the per annum rate of interest announced or published
publicly from time to time by Citibank, N.A. in New York, New York as its
corporate base (or equivalent) rate of interest, which rate shall change
automatically without notice and simultaneously with each change in such
corporate base rate. The Base Rate is
2
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a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer by Citibank, N.A. in New York, New
York.
Basic Financial Statements: as defined in subsection 6.3.3.
Borrower: has the meaning assigned to that term in the Preamble to
this Loan Agreement.
Borrower Capital Stock: all of the issued and outstanding capital
stock of Borrower and all warrants, options and other rights to purchase
capital stock of Borrower.
Borrower's Obligations: (i) any and all Indebtedness due or to
become due, now existing or hereafter arising, of Borrower to Lenders
and/or Agent, including, without limitation, the Loan Fee, pursuant to the
terms of this Loan Agreement or any other Loan Instrument and (ii) the
performance of the covenants of Borrower contained in the Loan
Instruments.
Business Day: any day other than a Saturday, Sunday or other day on
which banks in Phoenix, Arizona are required to close.
Cable Act: the Cable Communication Policy Act of 1984, the Cable
Television Consumer Protection and Competition Act of 1992, the
Telecommunications Act of 1996, any successor statute thereto, and the
rules, regulations and legally binding policies of the FCC promulgated
thereunder, as amended and in effect from time to time.
Cable Business: the business and operations involving the provision
of broadband telecommunications networks through a cable system facility,
consisting of a set of closed transmission paths and associated signal
generation, reception and control equipment, to multiple subscribers
within a community pursuant to a Franchise issued by a Franchisor, unless
such Franchise is not legally required and other telecommunications
businesses and activities generally engaged in by operators of cable
television systems.
Cable Statutes and Regulations: the Communications Act, the Cable
Act and the Ordinances.
Capital Expenditures: payments that are made or liabilities that are
incurred by Borrower for the lease, purchase, improvement, construction or
use of any Property, the value or cost of which under GAAP is required to
be capitalized and appears on Borrower's balance sheet in the category of
property, plant or equipment, without regard to the manner in which such
payments or the instruments pursuant to which they are made are
characterized by Borrower or any other Person.
Capitalized Lease: any lease of Property, the obligations for the
rental of which are required to be capitalized in accordance with GAAP.
3
<PAGE>
Cash Equivalents: the aggregate of Borrower's (i) cash on hand or in
any bank or trust company, and checks on hand and in transit, (ii) monies
on deposit in any money market account, and (iii) treasury bills,
certificates of deposit, commercial paper and readily marketable
securities at current market value having, in each instance, a maturity of
not more than 180 days.
Chief Financial Officer: the chief financial officer of Borrower,
who shall be a duly elected officer of Borrower.
Class A Stock: the Class A Common Stock of Borrower.
Class C Stock: the Class C Common Stock of Borrower.
Closing: the disbursement of the Term Loan.
Closing Certificate: a Closing Certificate executed by Borrower to
Agent.
Closing Date: the date of the Closing.
Code: the Internal Revenue Code of 1986, any successor statute
thereto, and the rules, regulations and legally binding policies
promulgated thereunder, as amended and in effect from time to time.
Collateral: (i) all existing and after-acquired Property of
Borrower, including without limitation all of Borrower's existing and
after-acquired accounts, goods, equipment, inventory, fixtures, general
intangibles, instruments, chattel paper, documents, money, deposit
accounts and investment property, (ii) the Borrower Capital Stock and
(iii) all proceeds of the foregoing.
Communications Act: the Communications Act of 1934, any successor
statute thereto, and the rules, regulations and legally binding policies
of the FCC promulgated thereunder, as amended and in effect from time to
time.
Compliance Certificate: a Compliance Certificate executed by
Borrower in the form of Exhibit 1.1A attached hereto.
Confirmation Order: a final order of the Bankruptcy Court not
subject to review or appeal confirming the Plan of Reorganization.
Debt/Cash Flow Ratio: the ratio of the Principal Balance as of the
last day of any quarter to Operating Cash Flow for the four quarter period
ending on such day.
Debt Service: during any period, all cash payments of principal,
interest, premium, loan fees and other charges with respect to
Indebtedness for Borrowed Money (other than principal payments on the
Revolving Loan, the Loan Fee, fees paid to Donaldson, Lufkin & Jenrette
and the restructuring fee paid to the holders of certain debentures issued
by Borrower), which payments are required or permitted to
4
<PAGE>
be made pursuant to this Loan Agreement and are due and payable during
such period.
Default Rate: a per annum rate equal to the applicable Base Rate
plus the Applicable Margin plus 2.0% per annum.
Default Rate Period: a period of time commencing on the date that an
Event of Default has occurred and ending on the date that such Event of
Default is cured or waived.
Eligible Accounts: at any given time, the aggregate of the face
amount of the accounts receivable of Borrower not over 60 days past due,
net of applicable reserves with respect to such accounts.
Employee Benefit Plan: any employee benefit plan within the meaning
of Section 3(3) of ERISA which (i) is maintained for employees of Borrower
or any ERISA Affiliate or (ii) has at any time within the preceding six
years been maintained for the employees of Borrower or any ERISA
Affiliate.
Environmental Audit: (i) a Phase I audit report with respect to a
parcel of real estate and such other studies and reports as Agent deems
necessary after review of the results of such Phase I audit report,
including, if required by Agent, soil and ground water tests, each such
report and study to be in form and content and issued by Persons
acceptable to Agent and (ii) a letter from each Person issuing each such
report or study entitling Lenders to rely thereon.
Environmental Certificate: an Environmental Certificate executed by
Borrower to Agent.
Environmental Compliance Certificate: an Environmental Compliance
Certificate in the form of Exhibit 1.1B.
Environmental Laws: any and all federal, state and local laws that
relate to or impose liability or standards of conduct concerning public or
occupational health and safety or protection of the environment, as now or
hereafter in effect and as have been or hereafter may be amended or
reauthorized, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C ss.9601
et seq.), the Hazardous Materials Transportation Act (42 U.S.C. ss.1802 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss.6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. ss.1251 et
seq.), the Toxic Substances Control Act (15 U.S.C. ss.2601 et seq.), the
Clean Air Act (42 U.S.C. ss.7901 et seq.), the National Environmental
Policy Act (42 U.S.C. ss.4231, et seq.), the Refuse Act (33 U.S.C. ss.407,
et seq.), the Safe Drinking Water Act (42 U.S.C. ss.300(f) et seq.), the
Occupational Safety and Health Act (29 U.S.C. ss.651 et seq.), and all
rules, regulations, codes, ordinances and guidance documents promulgated
or published thereunder, and the provisions of any licenses, permits,
orders and decrees issued pursuant to any of the foregoing.
5
<PAGE>
ERISA: the Employee Retirement Income Security Act of 1974, and any
successor statute thereto, and the rules, regulations and legally binding
policies promulgated thereunder, as amended and in effect from time to
time.
ERISA Affiliate: any Person who is a member of a group which is
under common control with Borrower, who together with Borrower is treated
as a single employer within the meaning of Section 414(b), (c) and (m) of
the Code.
Event of Default: any of the Events of Default set forth in Section
8.1.
Excess Cash Flow: for any period, (i) the Operating Cash Flow for
such period, (ii) plus the Accounts Decrease, if any, for such period and
(iii) minus (without duplication) the sum of the following for such
period: (A) Debt Service actually paid during such period, (B) amounts
actually paid by Borrower during such period with respect to Capital
Expenditures permitted pursuant to Section 7.6, whether or not such
Capital Expenditures were deemed to be made during such period and (C) the
Accounts Increase, if any, for such period.
Excess Interest: as defined in subsection 2.3.4.
FCC: the Federal Communications Commission or any Governmental Body
succeeding to its functions.
FCC License: an authorization, or renewal thereof, whether in the
form of a license, permit, certificate or otherwise, issued by the FCC
authorizing the construction and/or operation of facilities using the
radio, television, microwave or other frequencies under the licensing
control of the FCC pursuant to the Communications Act or Cable Act,
including but not limited to cable television relay service stations,
earth stations or business radio facilities.
FINOVA: has the meaning assigned to that term in the Preamble to
this Loan Agreement.
Franchise: an authorization, or renewal thereof, whether in the form
of a franchise, permit, license, resolution, contract, certificate,
agreement or otherwise, issued by a Franchisor authorizing the
construction and/or operation of a cable system.
Franchise Agreement: any agreement pursuant to which a Franchise is
granted to Borrower.
Franchisor: any Governmental Body empowered by federal, state or
local law to grant a Franchise.
Franchisor Consents: the consent of or notice to each applicable
Franchisor to the grant by Borrower to Agent of a Lien on the interest of
Borrower in all
6
<PAGE>
Franchise Agreements between such Franchisor and Borrower required by the
terms of such Franchise Agreement or applicable law.
Funding Date: the date of disbursement of an advance of the
Revolving Loan.
GAAP: generally accepted accounting principles as in effect from
time to time, which shall include but shall not be limited to the official
interpretations thereof by the Financial Accounting Standards Board or any
successor thereto.
Good Funds: United States Dollars available in Federal funds to (i)
FINOVA at or before 2:00 p.m., Phoenix time, on a Business Day and (ii)
any other Lender at the place and at or before the time designated in the
written direction delivered by such Lender to Borrower pursuant to clause
(ii) of Section 2.9.
Governmental Body: any foreign, federal, state, municipal or other
government, or any department, commission, board, bureau, agency, public
authority or instrumentality thereof or any court or arbitrator.
Hazardous Materials: any hazardous, toxic, dangerous or other waste,
substance or material defined as such in, regulated by or for purposes of
any Environmental Law.
Incipient Default: any event or condition which, with the giving of
notice or the lapse of time, or both, would become an Event of Default.
Indebtedness: all liabilities, obligations and reserves, contingent
or otherwise, which, in accordance with GAAP, would be reflected as a
liability on a balance sheet or would be required to be disclosed in a
financial statement, including, without duplication: (i) Indebtedness for
Borrowed Money, (ii) obligations secured by any Lien upon Property, (iii)
guaranties, letters of credit and other contingent obligations and (iv)
liabilities in respect of unfunded vested benefits under any Pension Plan
or in respect of withdrawal liabilities incurred under ERISA by Borrower
or any ERISA Affiliate to any Multiemployer Plan.
Indebtedness for Borrowed Money: without duplication, all
Indebtedness (i) in respect of money borrowed, (ii) evidenced by a note,
debenture or other like written obligation to pay money (including,
without limitation, all of Borrower's Obligations, Permitted Senior
Indebtedness and Subordinated Indebtedness), (iii) in respect of rent or
hire of Property under Capitalized Leases or for the deferred purchase
price of Property, (iv) in respect of obligations under conditional sales
or other title retention agreements and (v) all guaranties of any or all
of the foregoing.
Indebtedness to be Refinanced: the Indebtedness for Borrowed Money
of Borrower to be repaid on the closing date pursuant to the Plan of
Reorganization.
Landlord: a lessor under a lease of real property.
7
<PAGE>
Landlord Consent and Waiver: a landlord consent and waiver in favor
of Agent executed by the Landlord under each Lease.
Lease: any lease of real estate under which Borrower is the lessee.
Leasehold Property: any real estate which is the subject of a Lease.
Lender Addition Agreement: an agreement executed by a Lender and an
Assignee in connection with a Loan Assignment.
Lenders: FINOVA and each Assignee.
Lenders' Decisions: all determinations to be made by Lenders
pursuant to the terms of the Loan Instruments, including, without
limitation, any amendment or modification of any of the Loan Instruments,
determinations with respect to the declaration of Events of Default and
acceleration of Borrower's Obligations or any other obligation of any
Obligor, waivers of affirmative or negative covenants or other provisions
of the Loan Instruments, advancement of funds pursuant to any of the Loan
Instruments or the exercise of any rights or remedies granted to Lenders
or Agent pursuant to the terms of any of the Loan Instruments.
Licenses: all licenses, permits, consents, approvals and authority,
other than Franchises, issued by any Governmental Body in connection with
the operation of the System, including, without limitation, any applicable
FCC License.
Lien: any mortgage, pledge, assignment, lien, charge, encumbrance or
security interest of any kind, or the interest of a vendor or lessor under
any conditional sale agreement, Capitalized Lease or other title retention
agreement.
Loan Agreement: this Loan Agreement and any amendments or
supplements hereto.
Loan Assignment: the assignment by a Lender of (i) any portion of
such Lender's interest in Borrower's Obligations and (ii) any of such
Lender's other rights under any of the Loan Instruments.
Loan Fee: the fee to be paid by Borrower to FINOVA in accordance
with Section 2.6.
Loan Instruments:
(i) Loan Agreement;
(ii) Notes;
(iii) Subordination Agreement;
8
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(iv) Security Instruments;
(v) Closing Certificate;
(vi) Solvency Certificate;
(vii) Environmental Certificate;
(viii) Uniform Commercial Code financing statements filed in
connection with the Closing; and
(ix) other instruments and documents as Agent reasonably may
require in connection with the transactions
contemplated by this Loan Agreement.
Loans: collectively, the Term Loan and the Revolving Loan.
Loan Year: a period of time from the Closing Date or any anniversary
of the Closing Date to the immediately succeeding anniversary of the
Closing Date.
Management Agreement: the Management Agreement dated as of December
18, 1996 between Borrower and Scott Management.
Material Adverse Effect: (i) a material adverse effect upon the
business, operations, Property, profits or condition (financial or
otherwise) of Borrower or upon the validity, enforceability or priority of
the Security Interests or (ii) a material impairment of the ability of
Borrower to perform its obligations under any Loan Instrument to which it
is a party or of Agent or any Lender to enforce or collect any of
Borrower's Obligations.
Maturity Date: the earlier of (i) January 2, 2002 or (ii) or the
date on which Borrower's Obligations are accelerated pursuant to this Loan
Agreement.
Maximum Rate: as defined in subsection 2.3.4.
Maximum Revolving Loan Commitment: $10,000,000 less all reductions
in the Revolving Loan Commitment required by subsection 2.2.2.
Mortgages: a mortgage on each parcel of Real Property executed by
Borrower in favor of Agent.
Multiemployer Plan: any multiemployer plan as defined pursuant to
Section 3(37) of ERISA to which Borrower or any ERISA Affiliate makes, or
accrues an obligation to make contributions, or has made, or been
obligated to make, contributions within the preceding six years.
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Net Sale Proceeds: the gross proceeds payable to Borrower in
connection with any Permitted Asset Sale, less all reasonable, customary
and documented costs and expenses of such Permitted Asset Sale.
New Restructured Second Secured Indenture: the Indenture of even
date herewith between Borrower and the New Second PIK Note Indenture
Trustee.
New Restructured Second Secured PIK Instruments: the New
Restructured Second Secured Indenture, the New Restructured Second Secured
PIK Notes and all other documents and instruments executed in connection
with the Indebtedness evidenced thereby.
New Restructured Second Secured PIK Notes: as defined in the Plan of
Reorganization.
New Restructured Third Secured Indenture: the Indenture of even date
herewith between Borrower and the New Third PIK Note Indenture Trustee.
New Restructured Third Secured PIK Instruments: the New Restructured
Third Secured Indenture, the New Restructured Third Secured PIK Notes and
all other documents and instruments executed in connection with the
Indebtedness evidenced thereby.
New Restructured Third Secured PIK Notes: as defined in the Plan of
Reorganization.
New Second PIK Note Indenture Trustee: Fleet National Bank, a
national banking association.
New Third PIK Note Indenture Trustee: Fleet National Bank, a
national banking association.
Notes: collectively, the Term Note and the Revolving Note.
Obligor: any of the Obligors.
Obligors: collectively, Borrower and the Shareholders.
Operating Agreements: all right-of-entry agreements, access
agreements, advertising revenue contracts, equipment leases, video
programming distribution agreements, Pole Attachment Agreements, and
similar agreements relating to the operation of the Cable Business of
Borrower, excluding the Franchise Agreements and the Leases.
Operating Cash Flow: for any period, the net income of Borrower for
such period:
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(i) plus the sum of the following (without duplication), to
the extent deducted in determining net income of Borrower for such
period:
(A) losses from sales, exchanges and other dispositions
of Property not in the ordinary course of business;
(B) interest, fees and other charges paid or accrued on
Indebtedness, including, without limitation, interest on
Capitalized Leases that is imputed in accordance with GAAP;
(C) depreciation and amortization;
(D) income taxes which are accrued, but not paid, during
such period;
(E) extraordinary and non-recurring losses not in the
ordinary course of business;
(F) casualty losses;
(G) for the years 1996 and 1997, the Restructuring
Expenses for each such year; and
(H) any other non-cash item deducted in determining such
net income; and
(ii) minus the sum of the following (without duplication), to
the extent included in determining net income for such period:
(A) gains from sales, exchanges and other dispositions
of Property not in the ordinary course of business; and
(B) proceeds of any insurance other than business
interruption insurance.
Operating Lease: any lease (other than Pole Attachment Agreements)
which, under GAAP, is not required to be capitalized.
Ordinances: the statutes, laws, rules, regulations, resolutions and
ordinances, as amended and in effect from time to time, pursuant to which
a Franchise may be granted.
Participant: any Person to which a Lender sells or assigns a
Participation.
Participation: a sale or an assignment by a Lender of a
participating interest in (i) any portion of such Lender's interest in
Borrower's Obligations and (ii) any of such Lender's rights under any of
the Loan Instruments.
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Pay-Off Letter: a pay-off letter addressed to Agent from the holders
of the Indebtedness to be Refinanced.
PBGC: the Pension Benefit Guaranty Corporation or any Governmental
Body succeeding to the functions thereof.
Pension Plan: any Employee Benefit Plan, other than a Multiemployer
Plan, which is subject to the provisions of Part 3 of Subtitle B of Title
I of ERISA, Title IV of ERISA, or Section 412 of the Code and which (i) is
maintained for employees of Borrower or any ERISA Affiliate, or (ii) has
at any time within the preceding six years been maintained for the
employees of Borrower or any ERISA Affiliates.
Permitted Asset Sale: any bona fide sale of any Property of Borrower
in an arm's length transaction to a Person who is not an Affiliate of
Borrower, except to the extent permitted by Section 7.16, provided that
(i) the gross proceeds payable to Borrower in connection therewith are (A)
not less than the fair market value of such Property determined in a
manner reasonably satisfactory to Lenders and (B) payable solely in cash
and (ii) all documents and instruments executed by Borrower in connection
therewith are in form and substance reasonably satisfactory to Lenders.
Permitted Liens: any of the following Liens:
(i) the Security Interests;
(ii) the Permitted Senior Indebtedness Liens;
(iii) Liens for taxes or assessments and similar charges,
which either are (A) not delinquent or (B) being
contested diligently and in good faith by appropriate
proceedings, and as to which the Borrower has set aside
reserves on its books which are reasonably satisfactory
to Agent;
(iv) statutory Liens, such as mechanic's, materialman's,
warehouseman's, carrier's or other like Liens, incurred
in good faith in the ordinary course of business,
provided that the underlying obligations relating to
such Liens are paid in the ordinary course of business,
or are being contested diligently and in good faith by
appropriate proceedings and as to which Borrower has set
aside reserves on its books reasonably satisfactory to
Agent, or the payment of which obligations are otherwise
secured in a manner reasonably satisfactory to Agent;
(v) zoning ordinances, easements, licenses, reservations,
provisions, covenants, conditions, waivers or
restrictions on the use of Property and other title
exceptions, in each case, that are reasonably acceptable
to Agent;
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(vi) Liens in respect of judgments or awards with respect to
which no Event of Default would exist pursuant to
subsection 8.1.6;
(vii) Liens to secure payment of insurance premiums (A) to be
paid in accordance with applicable laws in the ordinary
course of business relating to payment of worker's
compensation, or (B) that are required for the
participation in any fund in connection with worker's
compensation, unemployment insurance, old-age pensions
or other social security programs; and
(viii) the Subordinated Liens.
Permitted Prior Liens: any of the following Liens:
(i) the Permitted Senior Indebtedness Liens;
(ii) the Permitted Liens described in clauses (iii) and (iv)
of the definition of Permitted Liens that are accorded
priority to the Security Interests by law; and
(iii) the Permitted Liens described in clauses (v) and (vii)
of the definition of Permitted Liens, subject to the
limitations set forth therein.
Permitted Senior Indebtedness: Indebtedness, other than Borrower's
Obligations, incurred to purchase tangible personal property or
Indebtedness incurred to lease tangible personal property pursuant to
Capitalized Leases, provided that (i) such Indebtedness existing as of the
Closing Date shall not exceed $50,000, (ii) during any Loan Year after the
Closing Date the amount of such Indebtedness at any one time outstanding
during such Loan Year shall not exceed $100,000, and (iii) no Event of
Default exists at the time or will be caused as a result of the incurrence
of any Indebtedness described in clause (ii).
Permitted Senior Indebtedness Liens: Liens that secure Permitted
Senior Indebtedness, provided that each such Lien attaches only to the
Property purchased or leased with the proceeds of the Permitted Senior
Indebtedness incurred with respect to such Property.
Person: any individual, firm, corporation, business enterprise,
trust, association, joint venture, partnership, Governmental Body or other
entity, whether acting in an individual, fiduciary or other capacity.
Plan of Reorganization: Debtors' Second Amended Joint Plan of
Reorganization dated October 31, 1996, as amended or modified, in Case No.
96-166 (PJW) (Jointly Administered) filed with the Bankruptcy Court.
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Pledge Agreement: a pledge agreement with respect to the Borrower
Capital Stock executed and delivered by the Shareholders in favor of
Agent.
Pole Attachment Agreement: any agreement, whether now in existence
or hereafter created, between Borrower and a municipality or public or
private utility company pursuant to which Borrower is permitted to use the
utility poles, trenches or easements of such public utility on which to
string or in which to bury the coaxial, fiber optic or other cable used to
operate any portion of the System.
Pole Attachment Authority: any Person who has entered into a Pole
Attachment Agreement with Borrower.
Principal Balance: the unpaid principal balance of the Loans or any
specified portion thereof outstanding from time to time.
Property: all types of real, personal or mixed property and all
types of tangible or intangible property.
Qualified Depository: a member bank of the Federal Reserve System
having a combined capital and surplus of at least $100,000,000.
Real Property: all interests in real estate owned by Borrower other
than the Leasehold Property.
Restructuring Expenses: all fees, costs and expenses incurred in
connection with the restructuring and refinancing of Borrower's
Indebtedness, including but not limited to the fees, costs and expenses
attributable to the registration of the Class A Stock under the Securities
Exchange Act of 1934.
Revolving Loan: the revolving loan to be made by Lenders to Borrower
pursuant to Section 2.2.
Revolving Loan Commitment: the commitment of Lenders to make the
Revolving Loan.
Revolving Note: a promissory note in the principal amount of
$10,000,000 executed and delivered by Borrower to FINOVA to evidence the
Revolving Loan, and any notes issued in substitution therefor pursuant to
subsection 9.1.3.
Scott Management: Scott Cable Management Company, Inc., a
Connecticut corporation.
Scott Management Fees: the management fees payable to Scott
Management pursuant to Section 5 of the Management Agreement.
Securities Act: the Securities Act of 1933, the Securities Exchange
Act of 1934, any successor statute thereto, and the rules, regulations and
legally binding policies of
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the Securities Exchange Commission promulgated thereunder, as amended and
in effect from time to time.
Security Agreement: a security agreement executed by Borrower in
favor of Agent.
Security Interests: the Liens in the Collateral granted to Agent
pursuant to the Security Instruments and any other document now or
hereafter executed by Borrower which purports to grant a Lien on the
Property of Borrower in favor of Agent.
Security Instruments: collectively, the Security Agreement, the
Pledge Agreement, the Assignment of Leases, the Mortgages and the
Assignment of Management Agreement.
Shareholders: collectively, Scott Management, Media/Communications
Partners Limited Partnership, a Delaware limited partnership, Chestnut
Street Partners, Inc., a Massachusetts corporation, Milk Street Partners,
Inc., a Massachusetts corporation, TA Investors, a Massachusetts general
partnership, Northeast Ventures II, a Connecticut general partnership,
Allstate Insurance Company, an Illinois insurance corporation, and the New
Second PIK Note Indenture Trustee.
Solvency Certificate: a solvency certificate executed by Borrower to
Agent.
Stated Rate: as defined in subsection 2.3.4.
Subordinated Credit Instruments: the New Restructured Second Secured
PIK Instruments and the New Restructured Third Secured PIK Instruments.
Subordinated Creditors: the holders of the New Restructured Second
Secured PIK Notes and the New Restructured Third Secured PIK Notes.
Subordinated Indebtedness: all Indebtedness now or hereafter owed by
Borrower to the Subordinated Creditors, whether pursuant to the
Subordinated Credit Instruments or otherwise.
Subordinated Liens: the Liens in the Collateral granted to the
Trustees pursuant to the Subordinated Credit Instruments.
Subordination Agreement: a subordination agreement among Agent,
Borrower and the Trustees.
Subscriber: any Person (i) with whom Borrower has a Subscription
Agreement and (ii) who is not more than 60 days delinquent in the payment
of any amounts due under such Subscription Agreement other than late fees.
For purposes of this Loan Agreement, the number of Subscribers under
Subscription Agreements covering multi-dwelling units or commercial
buildings shall be equal to the aggregate monthly basic charges billed
under such Subscription Agreements the payment of which is not more
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than 60 days delinquent divided by Borrower's monthly basic published
charge for the area in which the applicable multi-dwelling unit or
commercial building is located.
Subscriber Base Certificate: a certificate in the form of Exhibit
1.1C executed by Borrower and delivered pursuant to subsection 6.3.1.
Subscription Agreement: an agreement, whether written or oral, for
the use of the System, which agreement (i) is in full force and effect and
(ii) requires a monthly payment of not less than (A) if such agreement
covers a single dwelling unit, Borrower's monthly basic published charge
(reduced by a reasonable amount, not to exceed 10%, on account of senior
citizen discounts, or by a reasonable amount for a reasonable period of
time for promotional purposes) or (B) if such agreement covers a
multi-dwelling unit or commercial spaces, the monthly charge which
Borrower has negotiated for the use of the System by such multi-dwelling
unit or commercial spaces.
Subsidiary: any Person in which Borrower owns or controls, directly
or indirectly, 25% or more of the securities or equity interests of such
Person.
System: the cable television system facilities of Borrower
consisting of a set of closed transmission paths and associated signal
generation, reception and control equipment (including one or more
headends, trunk and lateral cables, subscriber drops, antennas, towers and
subscriber devices), operated in the locations described in Exhibit 5.5.4.
Term Loan: the loan to be made by Lenders to Borrower in the amount
of $57,500,000 pursuant to Section 2.1.
Term Note: a promissory note in the principal amount of $57,500,000
executed and delivered by Borrower to FINOVA to evidence the Term Loan,
and any notes issued in substitution therefor pursuant to subsection
9.1.3.
Termination Event: (i) a "Reportable Event" described in Section
4043 of ERISA for which the thirty day notice requirement has not been
waived; or (ii) the withdrawal of Borrower or any ERISA Affiliate from a
Pension Plan during a plan year in which it was a "substantial employer"
as defined in Section 4001(a)(2); or (iii) the termination of a Pension
Plan, the filing of a notice of intent to terminate a Pension Plan or the
treatment of a Pension Plan amendment as a termination under Section 4041
of ERISA; or (iv) the institution of proceedings to terminate, or the
appointment of a trustee with respect to, any Pension Plan by the PBGC; or
(v) any other event or condition which would constitute grounds under
Section 4042(a) of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan; or (vi) the partial or complete
withdrawal of Borrower or any ERISA Affiliate from a Multiemployer Plan;
or (vii) the imposition of a lien pursuant to Section 412 of the Code or
Section 302 of ERISA; or (viii) any event or condition which results in
the reorganization or insolvency of a Multiemployer Plan under Sections
4241 or 4245 of ERISA; or (ix) any event or condition which results in the
termination of a Multiemployer Plan under Section 4041A
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of ERISA or the institution by the PBGC of proceedings to terminate a
Multiemployer Plan under Section 4042 of ERISA.
Trustees: collectively, the New Second PIK Note Indenture Trustee
and the New Third PIK Note Indenture Trustee.
1.2 Time Periods. In this Loan Agreement and the other Loan Instruments,
in the computation of periods of time from a specified date to a later specified
date, (i) the word "from" means "from and including," (ii) the words "to" and
"until" each mean "to, but excluding" and (iii) the words "through," "end of"
and "expiration" each mean "through and including." Unless otherwise specified,
all references in this Loan Agreement and the other Loan Instruments to (i) a
"month" shall be deemed to refer to a calendar month, (ii) a "quarter" shall be
deemed to refer to a calendar quarter and (iii) a "year" shall be deemed to
refer to a calendar year.
1.3 Accounting Terms and Determinations. All accounting terms not
specifically defined herein shall be construed, all accounting determinations
hereunder shall be made and all financial statements required to be delivered
pursuant hereto shall be prepared in accordance with GAAP as in effect at the
time of such interpretation, determination or preparation, as applicable, except
that interim financial statements shall not be required to contain footnotes and
shall be subject to year-end adjustments. In the event that any Accounting
Changes (as hereinafter defined) occur and such changes result in a change in
the method of calculation of financial covenants, standards or terms contained
in this Loan Agreement, then Borrower and Lenders agree to enter into
negotiations to amend such provisions of this Loan Agreement so as to reflect
such Accounting Changes with the desired result that the criteria for evaluating
the financial condition of Borrower shall be the same after such Accounting
Changes as if such Accounting Changes had not been made. Until such amendments
are agreed upon, all determinations shall be based upon GAPP prior to such
Accounting Changes. For purposes hereof, "Accounting Changes" shall mean (i)
changes in generally accepted accounting principles required by the promulgation
of any rule, regulation, pronouncement or opinion by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants (or
any successor thereto) or other appropriate authoritative body and (ii) changes
in accounting principles as approved by the Accountants.
1.4 References. All references in this Loan Agreement to "Article,"
"Section," "subsection," "subparagraph," "clause" or "Exhibit," unless otherwise
indicated, shall be deemed to refer to an Article, Section, subsection,
subparagraph, clause or Exhibit, as applicable, of this Loan Agreement.
1.5 Lender's or Agent's Discretion. Whenever the terms "satisfactory to
Lenders or Agent," "determined by Lenders or Agent," "acceptable to Lenders or
Agent," "Lenders or Agent shall elect," "Lenders or Agent shall request," "at
the option or election of Lenders or Agent," or similar terms are used in the
Loan Instruments, except as otherwise specifically provided therein, such terms
shall mean satisfactory to, at the election or option of, determined by,
acceptable to or requested by Lenders or Agent, as applicable, in their or its
sole and unlimited discretion.
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1.6 Borrower's Knowledge. Any statements, representations or warranties
that are based upon the best knowledge of Borrower or an officer thereof shall
be deemed to have been made after due inquiry by Borrower or an officer, as
applicable, with respect to the matter in question.
ARTICLE II
LOANS AND TERMS OF PAYMENT
2.1 Term Loan.
2.1.1 Amount and Disbursement. The Term Loan shall consist of a term
loan from FINOVA to Borrower in the amount of $57,500,000. FINOVA shall
disburse the Term Loan to or as directed by Borrower when all of the terms
and conditions set forth in Article IV have been satisfied.
2.1.2 Use of Proceeds. The proceeds of the Term Loan shall be used
to provide funds to repay the Indebtedness to be Refinanced.
2.1.3 Term Note. The Term Loan shall be evidenced by the Term Note.
2.1.4 Reborrowing. Borrower shall not be entitled to reborrow any
portion of the Term Loan which is repaid or prepaid.
2.2 Revolving Loan.
2.2.1 Amount and Disbursement. Subject to the terms and conditions
of this Loan Agreement, during the period from the Closing Date to the
Maturity Date Lenders agree to make a revolving loan to Borrower in an
aggregate principal amount outstanding at any time not in excess of the
Maximum Revolving Loan Commitment. Lenders shall disburse advances of the
Revolving Loan to or as directed by Borrower subject to the conditions set
forth in subsection 2.2.3.
2.2.2 Reductions in Revolving Loan Commitment; Termination. The
Revolving Loan Commitment shall be reduced by the amount of all (i) Net
Sale Proceeds required to be applied to the Principal Balance of the
Revolving Loan pursuant to subsection 2.7.2 and (ii) insurance proceeds
applied to the Principal Balance of the Revolving Loan pursuant to
subsection 6.6.2. The Revolving Loan Commitment shall terminate upon the
prepayment in full of the Principal Balance of the Term Loan.
2.2.3 Conditions of Disbursements. The obligation of each Lender to
disburse advances of the Revolving Loan is subject to the satisfaction (or
waiver) of the following conditions precedent:
(a) no Incipient Default or Event of Default shall exist;
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(b) each such advance shall be in a minimum amount of $50,000
and integral multiples of $25,000 in excess of that amount; and
(c) Agent shall have received a Notice of Borrowing from
Borrower in the form of Exhibit 2.2.3 with respect to each requested
advance no later than 12:00 p.m., Phoenix time, at least two
Business Days in advance of the proposed Funding Date with respect
to such advance, which Funding Date shall be on a Business Day.
2.2.4 Use of Proceeds. The proceeds of the Revolving Loan shall be
used (i) to provide funds to repay the Indebtedness to be Refinanced, (ii)
to make Capital Expenditures in connection with the expansion and
improvement of the System, (iii) to pay transaction costs and (iv) for
working capital and other corporate purposes.
2.2.5 Revolving Note. The Revolving Loan shall be evidenced by the
Revolving Note.
2.2.6 Reborrowing. Subject to the conditions set forth in this
Section 2.2, Borrower from time to time may reborrow all or any portion of
the Revolving Loan which is repaid to the extent that the Principal
Balance of the Revolving Loan after giving effect to such reborrowing will
not exceed the Maximum Revolving Loan Commitment.
2.3 Interest.
2.3.1 Interest Rate. Except as provided in subsection 2.3.2, the
Principal Balance shall bear interest at the Base Rate in effect from time
to time plus the Applicable Margin. As used in this Loan Agreement, the
term "Applicable Margin" for any quarter shall mean (i) 1.50% per annum if
the Debt/Cash Flow Ratio calculated as of on the last day of the second
quarter preceding such quarter is 4.50 or greater and (ii) 1.25% per annum
if the Debt/Cash Flow Ratio calculated as of on the last day of the second
quarter preceding such quarter is less than 4.50.
2.3.2 Default Rate. During a Default Rate Period, Borrower's
Obligations shall bear interest at the Default Rate.
2.3.3 Interest Computation. Interest shall be computed on the basis
of a year consisting of 360 days and charged for the actual number of days
during the period for which interest is being charged. In computing
interest, the Funding Date shall be included and the date of payment shall
be excluded.
2.3.4 Maximum Interest. Notwithstanding any provision to the
contrary contained herein or in any other Loan Instrument, Lenders shall
not collect a rate of interest, including the Loan Fee, on any obligation
or liability due and owing by Borrower to Lenders in excess of the maximum
contract rate of interest permitted by applicable law ("Excess Interest").
All fees, charges, goods, things in action or any other sums or things of
value (other than items (a), (b) and (c) below) paid or payable
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by Borrower (collectively, the "Additional Sums"), whether pursuant to the
Notes, this Loan Agreement, the other Loan Instruments or any other
document or instrument in any way pertaining to the Loans, that, under the
laws of the State of Arizona, may be deemed to be interest with respect to
the Loans, for the purpose of any laws of the State of Arizona that may
limit the maximum amount of interest to be charged with respect to the
Loans shall be payable by Borrower and shall be deemed to be additional
interest, and for such purposes only, the agreed upon and "contracted for
rate of interest" with respect to the Loans shall be deemed to be
increased by the rate of interest resulting from the Additional Sums.
Lenders and Borrower agree that the interest laws of the State of Arizona
shall govern the relationship among them and understand and believe that
the transactions contemplated by the Loan Instruments comply with the
usury laws of the State of Arizona, but in the event of a final
adjudication to the contrary, Borrower shall be obligated to pay, nunc pro
tunc, to Lenders only such interest as then shall be permitted by the laws
of the state found to govern the contract relationship among Lenders and
Borrower. For the purpose of any laws of the State of Arizona that may
limit the maximum amount of interest to be charged with respect to a loan,
the "contracted for rate of interest" for the Loans shall consist of the
following: (a) interest calculated in accordance with the provisions of
subsection 2.3.1; (b) the late charges calculated in accordance with the
provisions of Section 2.5; (c) the Loan Fee; and (d) all Additional Sums,
if any. Borrower agrees to pay an effective "contracted for rate of
interest" which is the sum of items (a), (b), (c) and (d) above. If any
Excess Interest is provided for or determined by a court of competent
jurisdiction to have been provided for in this Loan Agreement or any other
Loan Instrument, then in such event (i) no Obligor shall be obligated to
pay such Excess Interest, (ii) any Excess Interest collected by Lenders
shall be, at Lenders' option, (A) applied to the Principal Balance or to
accrued and unpaid interest not in excess of the maximum rate permitted by
applicable law or (B) refunded to the payor thereof, (iii) the interest
rates provided for herein (collectively, including, without limitation,
the Loan Fee, the "Stated Rate") shall be automatically reduced to the
maximum rate allowed from time to time under applicable law (the "Maximum
Rate") and this Loan Agreement and the other Loan Instruments, as
applicable, shall be deemed to have been, and shall be, modified to
reflect such reduction, and (iv) neither Borrower nor any other Obligor
shall have any action against Agent or Lenders for any damages arising out
of the payment or collection of such Excess Interest; provided, however,
that if at any time thereafter the Stated Rate is less than the Maximum
Rate, Borrower shall, to the extent permitted by law, continue to pay
interest at the Maximum Rate until such time as the total interest
received by Lenders is equal to the total interest which Lenders would
have received had the Stated Rate been (but for the operation of this
provision) the interest rate payable. Thereafter, the interest rate
payable shall be the Stated Rate unless and until the Stated Rate again
exceeds the Maximum Rate, in which event the provisions contained in this
subsection 2.3.4 again shall apply.
2.4 Principal and Interest Payments.
2.4.1 Interest. Except as otherwise provided in subsections 2.7.1(b)
and 2.7.2(c), interest on the Principal Balance shall be payable quarterly
in arrears on the first Business Day of each quarter commencing with the
quarter beginning April 1, 1997.
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2.4.2 Principal.
(a) Term Loan. The Principal Balance of the Term Loan shall be
payable in consecutive quarterly installments on the first Business
Day of each quarter commencing with the quarter beginning January,
1998 as follows:
Quarter Beginning Amount of Installment
----------------- ---------------------
January, 1998 $262,500
April, 1998 $262,500
July, 1998 $262,500
October, 1998 $262,500
January, 1999 $387,500
April, 1999 $387,500
July, 1999 $387,500
October, 1999 $387,500
January, 2000 $525,000
April, 2000 $525,000
July, 2000 $525,000
October, 2000 $525,000
January, 2001 $650,000
April, 2001 $650,000
July, 2001 $650,000
October, 2001 $650,000
The remaining Principal Balance and all other sums which then are
due and payable pursuant to the terms of the Loan Instruments shall
be payable on the Maturity Date.
(b) Revolving Loan. The Principal Balance of the Revolving
Loan shall be due and payable in full on the Maturity Date.
2.5 Late Charges. If a payment of principal or interest to be made
pursuant to this Loan Agreement becomes past due for a period in excess of five
Business Days, Borrower shall pay on demand to Lenders a late charge of 2% of
the amount of such overdue payment.
2.6 Loan Fee. Borrower shall pay a loan fee to FINOVA on the Closing Date
in the amount of $1,038,462, which shall be deemed to be fully earned and
payable on the Closing Date. FINOVA shall credit the $300,000 deposit (net of
expenses) previously paid by Borrower against the Loan Fee.
2.7 Prepayments.
2.7.1 Voluntary Prepayments of the Term Loan. Borrower at any time
voluntarily may prepay in whole or in part the Principal Balance of the
Term Loan, subject to the terms and conditions of subsection 2.7.3 and the
following terms and conditions:
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(a) Notice of Prepayment; Number and Amount of Prepayments.
Not less than 20 days prior to the date upon which Borrower desires
to make any voluntary prepayment of the Principal Balance of the
Term Loan, Borrower shall deliver to Lenders notice of its intention
to prepay, which notice shall state the prepayment date and the
amount of the Principal Balance of the Term Loan to be prepaid. The
amount of any partial prepayment of the Principal Balance of the
Term Loan shall be not less than $100,000 or integral multiples
thereof. A prepayment of the Principal Balance of the Term Loan
shall not be made more frequently than once a month. If Borrower
delivers to Lenders a notice of prepayment and fails to make such
prepayment, Borrower shall reimburse Lenders on demand in the amount
of any loss, cost and/or expense incurred by Lenders as a result of
Lenders' reliance on such notice, including without limitation, any
loss, cost or expense resulting from Lenders' contractual
obligations in connection with the reinvestment of the amount
indicated in such notice of prepayment.
(b) Additional Payments; Full Prepayment. Concurrently with
any partial prepayment of the Principal Balance of the Term Loan
pursuant to this subsection 2.7.1, Borrower shall pay to Lenders
accrued and unpaid interest on the portion of the Principal Balance
which is being prepaid to the date on which Lenders are in receipt
of Good Funds, and any other sums which are due and payable pursuant
to the terms of any of the Loan Instruments. Concurrently with the
prepayment in full of the Term Loan Borrowers shall pay to Lenders
all of the other of Borrower's Obligations.
(c) Application of Partial Prepayments. Any partial prepayment
of the Principal Balance of the Term Loan pursuant to this
subsection 2.7.1 shall be applied to the installments of the
Principal Balance of the Term Loan in the inverse order of maturity.
2.7.2 Mandatory Prepayments of the Loans.
(a) Excess Cash Flow Payments. Until the Loans are paid in
full and the Revolving Loan Commitment is terminated, for each year
commencing with the year 1997 Borrower shall pay to Lenders within
120 days after the end of such year an amount equal to the lesser of
(i) 75% of the Excess Cash Flow for such year and (ii) the amount by
which the Cash Equivalents as of December 31 of such year exceeds
$750,000.
(b) Net Sale Proceeds. Until the Loans are paid in full and
the Revolving Loan Commitment is terminated, Borrower shall pay to
Lenders the amount of all Net Sale Proceeds upon receipt by Borrower
of such Net Sale Proceeds. Borrower shall not be deemed in receipt
of any Net Sale Proceeds required to be deposited in escrow to
secure customary indemnities under the documents executed in
connection with the Permitted Asset Sale giving rise to such Net
Sale Proceeds until such Net Sale Proceeds are released from escrow
to Borrower.
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(c) Application of Mandatory Prepayments. Prepayments received
by Lenders pursuant to this subsection 2.7.2 shall be applied in the
following order of priority to the payment of: (i) any and all sums
which are due and payable pursuant to the terms of the Loan
Instruments, except the Principal Balance and accrued interest
thereon, (ii) accrued and unpaid interest on the portion of the
Principal Balance being prepaid, (iii) the installments of the
Principal Balance of the Term Loan in the inverse order of maturity
and (iv) the Principal Balance of the Revolving Loan.
2.7.3 Prepayment Premium.
(a) Voluntary Prepayments of the Term Loan. Except as provided
in subsections 2.7.3(b) and 2.7.4, concurrently with any prepayment
of all or any part of the Principal Balance of the Term Loan,
Borrower shall pay to Lenders a prepayment premium equal to a
percentage of the amount of the Principal Balance prepaid,
determined in accordance with the following schedule:
Percentage of Principal
Period of Prepayment Balance Prepaid
-------------------- ---------------
First Loan Year 4.0%
Second Loan Year 3.0%
Third Loan Year 2.0%
Thereafter 0.0%
(b) Mandatory Prepayments from Net Sale Proceeds. Concurrently
with any prepayment of the Principal Balance from Net Sale Proceeds,
Borrower shall pay to Lenders a prepayment premium equal to a
percentage of the amount of the Principal Balance prepaid,
determined in accordance with the following schedule:
Percentage of Principal
Period of Prepayment Balance Prepaid
-------------------- ---------------
First Loan Year 4.0%
Second Loan Year 1.0%
Thereafter 0.0%
2.7.4 No Prepayment Premium. No prepayment premium shall be payable
with respect to prepayments (i) made pursuant to subsection 2.7.2(a), (ii)
from any refinancing of the Loans made by Lenders, which refinancing shall
be at Lenders' sole and absolute discretion or (iii) from insurance
proceeds.
2.8 Payments after Event of Default. All payments received by Lenders
during the existence of an Event of Default shall be applied in accordance with
Section 8.4.
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2.9 Method of Payment; Good Funds. All payments to be made pursuant to the
Loan Instruments by Borrower to (i) FINOVA shall be made by wire transfer of
Good Funds to the account of FINOVA at Citibank, N.A., 399 Park Avenue, New
York, New York, ABA 021000089, Credit: FINOVA Capital Corporation, Credit
Account No. 40680477 or to such other account as FINOVA shall notify Borrower,
and (ii) any other Lender shall be made by wire transfer of Good Funds to such
account as such Lender shall notify Borrower.
ARTICLE III
SECURITY
Borrower's Obligations shall be secured by a Lien upon all of the
Collateral, which at all times shall be superior and prior to all other Liens,
except Permitted Prior Liens.
ARTICLE IV
CONDITIONS OF CLOSING
The obligation of FINOVA to make the Loans shall be subject to the
satisfaction of all of the following conditions on or before the Closing Date in
a manner, form and substance satisfactory to FINOVA:
4.1 Representations and Warranties. On the Closing Date the
representations and warranties of each Obligor set forth in the Loan Instruments
to which such Obligor is a party shall be true and correct.
4.2 Confirmation. The Bankruptcy Court shall have entered the Confirmation
Order.
4.3 Minimum Operating Cash Flow of the System. Borrower shall demonstrate
to the satisfaction of FINOVA that Operating Cash Flow for the consecutive
twelve month period ending on June 30, 1996 was not less than $12,750,000.
4.4 Appraisal. FINOVA shall have received an appraisal of the System
prepared by Waller Capital Corporation indicating that the aggregate current
fair market value of the System is not less than $110,000,000, which appraisal
shall include a technical and operational review of the System satisfactory to
FINOVA.
4.5 Cash Equivalents. FINOVA shall have received evidence that Borrower
has not less than $10,000,000 of Cash Equivalents on the Closing Date after
making payment or provision for payment of all of its post-petition accounts
payable which are past the due date of such accounts payable.
4.6 Subscribers. FINOVA shall have received evidence that as of November
30, 1996 the aggregate number of Subscribers is not less than 74,750.
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4.7 Delivery of Documents. The following shall have been delivered to
FINOVA, each duly authorized and executed, where applicable, and in form and
substance satisfactory to FINOVA:
(a) the Loan Instruments;
(b) good standing certificates for Borrower from the respective
States of Texas, New Mexico, Ohio, North Dakota, Colorado, California,
Virginia, Arkansas, Louisiana, Nebraska and all other States (except those
States where the failure to qualify would not have a Material Adverse
Effect) in which the laws thereof require Borrower to be qualified to
transact business, each dated a recent date prior to the Closing Date;
(c) certified copies of (i) the Amended and Restated Articles of
Incorporation, certified by the Secretary of State of Texas as of a recent
date prior to the Closing Date; (ii) the by-laws of Borrower, certified as
of the Closing Date by the corporate secretary of Borrower, and (iii)
copies of resolutions adopted by the board of directors of Borrower
authorizing the execution and delivery by Borrower of the Loan Instruments
to which Borrower is a party and the consummation of the transactions
contemplated thereby, certified as of the Closing Date by the corporate
secretary of Borrower;
(d) signature and incumbency certificates of the officers of
Borrower executing the Loan Instruments;
(g) certified copies or executed originals of each of the following:
(1) the Plan of Reorganization and the Confirmation Order;
(2) the Subordinated Loan Instruments;
(3) the Franchise Agreements;
(4) Franchisor Consents covering not less than 95% of all
Subscribers;
(5) the Management Agreement;
(6) the Leases;
(7) the Licenses;
(8) the Operating Agreements (other than Pole Attachment
Agreements and video programming distribution agreements); and
(9) all instruments and documents evidencing Permitted Senior
Indebtedness existing as of the Closing Date;
(h) a Landlord Consent and Waiver from each Landlord under each
Lease;
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(i) the Pay-Off Letters; and
(j) such other instruments, documents, certificates, consents,
waivers and opinions as FINOVA reasonably may request.
4.8 Performance; No Default. Each Obligor and each Subordinated Lender
shall have performed and complied with all agreements and conditions contained
in the Plan of Reorganization, the Confirmation Order and the Loan Instruments
to be performed by or complied with by such Person prior to or at the Closing,
and no Event of Default or Incipient Default shall then exist or result from the
making of the Loans.
4.9 Opinions of Counsel; Direction for Delivery. FINOVA shall have
received (i) opinions dated the Closing Date from (A) Baer Marks & Upham LLP,
counsel to Borrower, (B) Cole, Raywid & Braverman, special FCC counsel for
Borrower and (C) such opinions of local counsel as FINOVA reasonably may
request, in each case addressed to FINOVA, as a Lender and as Agent, in such
form and covering such matters as FINOVA may require and (ii) copies of letters
in form and substance satisfactory to FINOVA from Borrower addressed to the
counsel described in clause (i), directing such counsel to deliver to FINOVA the
foregoing opinions.
4.10 Approval of Instruments and Security Interests. FINOVA shall have
received evidence that the approval or consent shall have been obtained from all
Governmental Bodies, including, without limitation, Franchisors, and all other
Persons whose approval or consent is required to enable Obligors to enter into
and perform their respective obligations under the Loan Instruments to which
each such Person is a party and grant to Agent the Security Interests, except
(i) no approval or consent shall be required with respect to immaterial
Operating Agreements, Pole Attachment Agreements or programming agreements and
(ii) Franchisor Consents shall not be required with respect to that portion of
the System the Subscribers to which constitute not more than five percent of all
Subscribers to the System.
4.11 Security Interests. All filings of Uniform Commercial Code financing
statements and all other filings and actions necessary to perfect and maintain
the Security Interests as first, valid and perfected Liens in the Property
covered thereby, subject only to Permitted Prior Liens, shall have been filed or
taken and FINOVA shall have received such UCC, state and federal tax Lien,
pending suit, judgment and other Lien searches as it deems necessary to confirm
the foregoing.
4.12 Environmental Audit. FINOVA shall have received an Environmental
Audit with respect to each parcel of Real Property and Leasehold Property
designated by FINOVA.
4.13 Franchises and Licenses. FINOVA shall have received evidence that (i)
Borrower is the franchisee of all Franchises and the licensee of all Licenses
necessary for the operation of the System and (ii) such Licenses and Franchises
are in full force and effect as of the Closing Date and no event has occurred
which could result in the termination, revocation or non-renewal of any such
License or Franchise.
4.14 Financial Statements, Reports and Projections. FINOVA shall have
received (i) the financial statements and projections described in Exhibit 5.7.1
and the projections
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described in Exhibit 5.7.2 and (ii) a subscriber base report in Borrower's
internally generated form as of the later of September 30, 1996 or no more than
two months prior to the Closing Date.
4.15 Material Adverse Change. No event shall have occurred since the later
of September 30, 1996 or two months prior to the Closing Date which has had or
d since the later
of September 30, 1996 or two months prior to the Closing Date which has had or
could have a Material Adverse Effect.
4.16 Use of Assets. FINOVA shall be satisfied that Borrower at all times
shall be entitled to the use and quiet enjoyment of all Property necessary for
the continued ownership and operation of the Cable Business conducted by
Borrower, including, without limitation, the use of equipment, fixtures,
Licenses, offices and means of ingress and egress thereto, and any easements or
rights-of-way necessary to reach any material equipment or other material items
necessary for the operation of such Cable Business.
4.17 Broker Fees. If the services of a broker or other agent have been
used in connection with the Loans, all fees owed to such broker or agent shall
have been paid by Borrower and FINOVA shall have received evidence of such
payment.
4.18 Insurance.
(a) Insurance. At least three Business Days prior to the Closing
Date Borrower shall have delivered to FINOVA evidence satisfactory to
FINOVA that all insurance coverage required pursuant to Section 6.6 is in
full force and effect and all premiums then due thereon have been paid in
full.
(b) Real Property. Agent shall have received an ALTA mortgagee's
policy of title insurance (ALTA Revised 1987 Form) in favor of Agent with
respect to each parcel of Real Property covered by the Mortgages, issued
by a title company and in an amount satisfactory to Agent, showing that
Borrower has good and marketable title to such parcel and insuring that
the Mortgage covering such parcel constitutes a valid Lien on such parcel,
subject only to Permitted Prior Liens. Each policy shall insure over all
survey and other general exceptions contained therein and shall include
such affirmative endorsements as may be required by Agent.
4.19 Indebtedness to be Refinanced. FINOVA shall have received evidence
that the Indebtedness to be Refinanced will be paid in full concurrently with
the Closing.
4.20 Payment of Fees and Expenses. Borrower shall have paid the Loan Fee
and all fees and expenses described in subsection 11.1.1 incurred in connection
with the Loans.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Agent and Lenders as follows:
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5.1 Existence and Power. Borrower is a corporation duly formed, validly
existing and in good standing under the laws of the State of Texas. Borrower is
in good standing under the laws of the States of New Mexico, Ohio, North Dakota,
Colorado, California, Virginia, Arkansas, Louisiana, Nebraska and each other
jurisdiction in which the failure to be in good standing could have a Material
Adverse Effect. Borrower has all requisite power and authority to own its
Property and to carry on its business as now conducted and as proposed to be
conducted following the Closing Date.
5.2 Authority. Each Obligor has full power and authority to enter into,
execute, deliver and carry out the terms of the Loan Instruments to which it is
a party and to incur the obligations provided for therein, all of which have
been approved by the Bankruptcy Court pursuant to the Plan of Reorganization and
the Confirmation Order, have been duly authorized by all proper and necessary
action and are not prohibited by the organizational instruments of such Obligor.
5.3 Borrower Capital Stock, Subsidiaries and Related Matters.
5.3.1 Borrower Capital Stock. There is set forth in Exhibit 5.3.1 a
complete description of the Borrower Capital Stock. The Borrower Capital
Stock is validly issued, fully paid and non-assessable, and has been
issued and sold in compliance with the Plan of Reorganization and all
applicable federal and state laws, rules and regulations, including,
without limitation, all so-called "Blue-Sky" laws. Except as described in
Exhibit 5.3.1, the Borrower Capital Stock is owned beneficially and of
record by the Persons in the respective amounts and percentages set forth
on Exhibit 5.3.1, free and clear of all Liens except the Security
Interests.
5.3.2 Subsidiaries. There is set forth in Exhibit 5.3.2 a complete
list of each Subsidiary. Except as set forth on Exhibit 5.3.2 none of such
Subsidiaries owns or shall hereafter own any Property or conducts or shall
hereafter conduct any business.
5.3.3 Restrictions. Borrower (i) is not a party to and has no
knowledge of any agreements restricting the transfer of the Borrower
Capital Stock, except the Loan Instruments and the Subordinated Credit
Instruments, (ii) has not issued any rights which can be convertible into
or exchangeable or exercisable for any of its capital stock, or any rights
to subscribe for or to purchase, or any options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise) of, or
any calls, commitments or claims of any character relating to, any of its
capital stock or any securities convertible into or exchangeable or
exercisable for any of its capital stock, except for the conversion of
Class C Stock to Class A Stock pursuant to the Amended and Restated
Articles of Incorporation and (iii) is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
of its capital stock or any convertible rights or options. Borrower is not
required to file, and Borrower has not filed, pursuant to the Securities
Act, a registration statement relating to any class of debt or equity
securities, except for the registration of the Class A Stock under the
Securities Exchange Act of 1934.
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5.4 Binding Agreements. This Loan Agreement and the other Loan
Instruments, when executed and delivered, will constitute the valid and legally
binding obligations of each Obligor to the extent such Obligor is a party
thereto, enforceable against such Obligor in accordance with their respective
terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect affecting the enforcement of creditors' rights generally and
(ii) equitable principles (whether or not any action to enforce such document is
brought at law or in equity).
5.5 Business and Property of Borrower.
5.5.1 Business and Property. Subject to the provisions of the
applicable Cable Statutes and Regulations, upon the Closing Borrower will
be the owner of all Property and the holder of all Leases, Licenses,
Franchises, Franchise Agreements and Operating Agreements necessary to
conduct the operations of the System in the places where it is now
conducted except to the extent that the failure to own such Property or
hold such Leases, Licenses, Franchises, Franchise Agreements or Operating
Agreements would not have a Material Adverse Effect. Borrower does not
engage or propose to engage in any business or activity other than the
Cable Business.
5.5.2 Licenses and Franchises. There is set forth in Exhibit 5.5.2 a
description of all Licenses and Franchises which have been issued or
assigned to Borrower. All of such Licenses and Franchises are, except as
disclosed in Exhibit 5.5.2, in full force and effect and have been duly
issued in the name of, or validly assigned to, Borrower, no default or
breach exists thereunder and Borrower has full power and authority
thereunder to operate the System.
5.5.3 Operating Agreements. There is set forth in Exhibit 5.5.3 a
description of all material Operating Agreements with respect to the
System. All of such Operating Agreements are, except as disclosed in
Exhibit 5.5.3, in full force and effect and no event has occurred which
could result in the cancellation or termination of any such Operating
Agreement or the imposition thereunder of any liability upon Borrower
which could have a Material Adverse Effect.
5.5.4 Facility Sites. There is set forth in Exhibit 5.5.4 the
locations of the chief executive office of Borrower and all headends,
earth stations, microwave facilities, tower installations, studios,
offices and other material Property used in the operation of the System.
5.5.5 Leases. There is set forth in Exhibit 5.5.5 a list of all
Leases. Each Lease is in full force and effect, there has been no material
default in the performance of any of its terms or conditions by any party
thereto, and no claims of default have been asserted with respect thereto.
5.5.6 Real Estate. There is set forth in Exhibit 5.5.6 a complete
and accurate address and legal description of each parcel of Real
Property. The present and contemplated use of the Leasehold Property and
the Real Property is in compliance with
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all applicable zoning ordinances and regulations and other laws and
regulations, the violation of which could have a Material Adverse Effect.
5.5.7 Operation and Maintenance of Equipment. No Person owning or
operating any equipment necessary for the operation of the System has
used, operated or maintained the same in a manner which now or hereafter
could result in the cancellation or termination of the right of Borrower
to use or make use of the same or which could result in any material
liability of Borrower for damages in connection therewith. All of the
equipment and other tangible personal property owned by Borrower on the
Closing Date is, in all material respects, in good operating condition and
repair (subject to normal wear and tear and except for cable and equipment
which in the ordinary course of business requires repair or replacement)
and has been used, operated and maintained in substantial compliance with
all applicable laws, rules and regulations.
5.5.8 Ordinances. All Ordinances applicable to Borrower's Franchises
are in full force and effect in accordance with their respective terms.
The Franchises granted or assigned to Borrower have been duly and validly
granted by the respective Franchisors in the jurisdictions in which the
portion of the System covered thereby are located and the Ordinances
applicable to such Franchises constitute the binding and enforceable
obligations of the Franchisors in accordance with their respective terms,
except to the extent pre-empted by Federal or state law.
5.5.9 Indebtedness to be Refinanced. There is set forth in Exhibit
5.5.9 a complete description of the Indebtedness to be Refinanced.
5.5.10 Subordinated Indebtedness. There is set forth in Exhibit
5.5.10 a complete description of the Subordinated Indebtedness.
5.6 Title to Property; Liens. Borrower has (i) good title to all of its
personal Property and insurable title to the Real Property, except (A) any
License or Franchise which cannot be transferred without the consent of a
Governmental Body, (B) any Operating Agreement which cannot be transferred
without the consent of the other parties thereto and (C) the portion thereof
consisting of a leasehold estate and (ii) a valid leasehold estate in each
portion of its Property which consists of a leasehold estate. Upon the Closing
all of such Property shall be free and clear of all Liens, except Permitted
Liens. Upon the proper filing with the appropriate Governmental Bodies of the
Mortgages and appropriate Uniform Commercial Code financing statements, the
applicable Loan Instruments will create valid and perfected Liens in the
Property described therein except the FCC Licenses (but including the proceeds
thereof), subject only to Permitted Prior Liens.
5.7 Projections and Financial Statements.
5.7.1 Financial Statements. Borrower has delivered to FINOVA the
financial statements described in Exhibit 5.7.1 pertaining to the
operations of Borrower. Such financial statements present fairly in all
material respects the results of operations of Borrower for the periods
covered thereby and the financial condition of Borrower as of the dates
indicated therein. All of such financial statements have been prepared in
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conformity with GAAP. To the best knowledge of Borrower there has been no
change since June 28, 1996 which has had or could have a Material Adverse
Effect. Borrower also has delivered to FINOVA a pro-forma balance sheet as
of the Closing Date. Such pro-forma balance sheet, which assumes the
consummation of the transactions contemplated by the Loan Instruments,
presents fairly in all material respects the anticipated financial
condition of Borrower as of the Closing Date.
5.7.2 Projections. Borrower has delivered to FINOVA the projections
described in Exhibit 5.7.2 of the future operations of Borrower. Such
projections represent the good faith estimates of Borrower as of March 28,
1996 of Borrower's future financial performance. Borrower is not aware of
any material changes thereto since March 28, 1996.
5.8 Litigation. There is set forth in Exhibit 5.8 a description of all
actions and suits, arbitration proceedings and claims pending or, to the best
knowledge of Borrower, threatened against Borrower or maintained by Borrower at
law or in equity or before any Governmental Body. None of the matters set forth
in such Exhibit 5.8, if adversely determined, could have a Material Adverse
Effect.
5.9 Defaults in Other Agreements; Consents; Conflicting Agreements. Except
as otherwise disclosed herein, Borrower is not in default under any agreement to
which Borrower is a party or by which Borrower or any of its Property is bound,
the effect of which default could have a Material Adverse Effect. No
authorization, consent, approval or other action by, and no notice to or filing
with, any Governmental Body or any other Person which has not already been
obtained, taken or filed, as applicable, is required (i) for the due execution,
delivery or performance by Borrower of any of the Loan Instruments to which
Borrower is a party, except for any consent required from a Governmental Body or
any other Person in connection with the foreclosure of the Security Interests or
(ii) as a condition to the validity or enforceability of any of the Loan
Instruments to which Borrower is a party or any of the transactions contemplated
thereby or the priority of the Security Interests, except for certain filings to
establish and perfect the Security Interests. No provision of any material
mortgage, indenture, contract, agreement, statute, rule, regulation, judgment,
decree or order binding on Borrower or affecting the Property of Borrower
conflicts with, requires any consent which has not already been obtained with
respect to (other than any required consents not already obtained, the lack of
which could not have a Material Adverse Effect), or would in any way prevent the
execution, delivery or performance of the terms of, any of the Loan Instruments
or affect the validity or priority of the Security Interests. The execution,
delivery or performance of the terms of the Loan Instruments will not constitute
a default under, or result in the creation or imposition of, or obligation to
create, any Lien upon the Property of Borrower pursuant to the terms of any such
mortgage, indenture, contract or agreement, other than the Loan Instruments.
5.10 Taxes. Borrower has filed all tax returns required to be filed, and
has paid, or made adequate provision for the payment of, all taxes shown to be
due and payable on such returns or in any assessments made against Borrower, and
no tax Liens have been filed and no claims are being asserted in respect of such
taxes which are required by GAAP to be reflected in the financial statements of
Borrower and are not so reflected therein. The charges, accruals and reserves on
the books of Borrower with respect to all federal, state, local and other taxes
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are considered by the management of Borrower to be adequate, and there is no
unpaid assessment which is or might be due and payable by Borrower or create a
Lien against any of Borrower's Property, except such assessments as are being
contested in good faith and by appropriate proceedings diligently conducted, and
for which adequate reserves have been set aside in accordance with GAAP. None of
the federal tax returns of Borrower are under audit.
5.11 Compliance with Applicable Laws. Borrower is not in default in
respect of any judgment, order, writ, injunction, decree or decision of any
Governmental Body, which default could have a Material Adverse Effect. Except as
otherwise provided herein, Borrower is in compliance in all material respects
with all applicable statutes and regulations, including, without limitation, the
Cable Statutes and Regulations, all Environmental Laws, ERISA, ADA and all laws
and regulations relating to unfair labor practices, equal employment opportunity
and employee safety, of all Governmental Bodies, a violation of which could have
a Material Adverse Effect. No condemnation, eminent domain or expropriation has
been commenced or, to the best knowledge of Borrower, threatened against the
Property which Borrower will own upon the Closing.
5.12 Patents, Trademarks, Franchises, Agreements. Upon the Closing
Borrower will own, possess or have the right to use all material patents,
trademarks, service marks, tradenames, copyrights, franchises and rights with
respect thereto, necessary for the conduct of the Cable Business as proposed to
be conducted by Borrower after the Closing Date, without any known conflict with
the rights of others and, in each case, free of any Liens.
5.13 FCC and Copyright Matters. Borrower (i) has duly and timely filed all
reports, statements of account and other filings which are required to be filed
by Borrower under the Cable Statutes and Regulations or any other applicable
law, rule or regulation of any Governmental Body, the non-filing of which could
have a Material Adverse Effect, (ii) is in compliance with all such laws, rules
and regulations, the noncompliance with which could have a Material Adverse
Effect and (iii) has paid all compulsory license fees required to be paid by it
under the Cable Statutes and Regulations. All information provided by or on
behalf of Borrower in any material filing with the FCC or the United States
Copyright Office was, at the time of filing, true, complete and correct in all
material respects when made, and the FCC or the United States Copyright Office,
as applicable, has been notified of any substantial or significant changes in
such information as may be required in accordance with applicable laws, rules
and regulations.
5.14 Environmental Matters. Borrower is in compliance with all applicable
Environmental Laws, except where the failure to comply would not have a Material
Adverse Effect, and no portion of the Real Property or Leasehold Property has
been used as a land fill. There currently are not any known Hazardous Materials
generated, manufactured, released, stored, buried or deposited over, beneath, in
or on (or used in the construction and/or renovation of) the Real Property or
Leasehold Property in violation of applicable Environmental Laws, which
violation could have a Material Adverse Effect.
5.15 Application of Certain Laws and Regulations. Neither Borrower nor
Affiliate of Borrower is:
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5.15.1 Investment Company Act. An "investment company," or a company
"controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
5.15.2 Holding Company Act. A "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company"
or of a "subsidiary company" of a "holding company," as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended.
5.15.3 Foreign or Enemy Status. (i) An "enemy" or an "ally of an
enemy" within the meaning of Section 2 of the Trading with the Enemy Act,
(ii) a "national" of a foreign country designated in Executive Order No.
8389, as amended, or of any "designated enemy country" as defined in
Executive Order No. 9095, as amended, of the President of the United
States of America, in each case within the meaning of such Executive
Orders, as amended, or of any regulation issued thereunder, (iii) a
"national of any designated foreign country" within the meaning of the
Foreign Assets Control Regulations or of the Cuban Assets Control
Regulations of the United States of America (Code of Federal Regulations,
Title 31, Chapter V, Part 515, Subpart B, as amended), or (iv) an alien or
a representative of any alien or foreign government within the meaning of
Section 310 of Title 47 of the United States Code.
5.15.4 Regulations as to Borrowing. Subject to any statute or
regulation which regulates the incurrence of any Indebtedness for Borrowed
Money, including, without limitation, statutes or regulations relative to
common or interstate carriers or to the sale of electricity, gas, steam,
water, telephone, telegraph or other public utility services.
5.16 Margin Regulations. None of the transactions contemplated by this
Loan Agreement or any of the other Loan Instruments, including the use of the
proceeds of the Loan, will violate or result in a violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any regulations issued pursuant
thereto, including, without limitation, Regulations G, T, U and X, and Borrower
does not own or intend to carry or purchase any "margin security" within the
meaning of such Regulation U or G.
5.17 Other Indebtedness. Upon the Closing Borrower will have no
Indebtedness for Borrowed Money, except (i) Borrower's Obligations, (ii)
Subordinated Indebtedness and (iii) Permitted Senior Indebtedness permitted to
exist as of the Closing Date pursuant to this Loan Agreement.
5.18 No Misrepresentation. Neither this Loan Agreement nor any other Loan
Instrument, certificate, information or report furnished or to be furnished by
or on behalf of Borrower to Agent or any Lender pursuant hereto, contains or
will contain a misstatement of material fact, or omits or will omit to state a
material fact required to be stated in order to make the statements contained
herein or therein, taken as a whole, not misleading in the light of the
circumstances under which such statements were made. There is no fact, other
than information known to the public generally, known to or reasonably foreseen
by Borrower after diligent inquiry, that could have a Material Adverse Effect
that has not expressly been disclosed to FINOVA in writing.
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5.19 Employee Benefit Plans.
5.19.1 No Other Plans. Neither Borrower nor any ERISA Affiliate
maintains or contributes to, or has any obligation under, any Employee
Benefit Plan other than those identified on Exhibit 5.19.1. Borrower has
provided Agent accurate and complete copies of all contracts, agreements
and documents described on Exhibit 5.19.1.
5.19.2 ERISA and Code Compliance and Liability. Borrower and each
ERISA Affiliate is in compliance with all applicable provisions of ERISA
with respect to all Employee Benefit Plans except where failure to comply
would not result in a material liability to Borrower and except for any
required amendments for which the remedial amendment period as defined in
Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan
that is intended to be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified, and each
trust related to such plan has been determined to be exempt under Section
401(a) of the Code. No material liability has been incurred by Borrower or
any ERISA Affiliate which remains unsatisfied for any taxes or penalties
with respect to any Employee Benefit Plan or any Multiemployer Plan.
5.19.3 Funding. No Pension Plan has been terminated, nor has any
accumulated funding deficiency (as defined in Section 412 of the Code)
been incurred (without regard to any waiver granted under Section 412 of
the Code), nor has any funding waiver from the Internal Revenue Service
been received or requested with respect to any Pension Plan, nor has
Borrower or any ERISA Affiliate failed to make any contributions or to pay
any amounts due and owing as required by Section 412 of the Code, Section
302 of ERISA or the terms of any Pension Plan on or before the due dates
of such contributions under Section 412 of the Code or Section 302 of
ERISA, nor has there been any event requiring any disclosure under Section
4041(c)(3)(C), 4063(a) or 4068 of ERISA with respect to any Pension Plan.
5.19.4 Prohibited Transactions and Payments. Neither Borrower nor
any ERISA Affiliate has: (i) knowingly engaged in a nonexempt "prohibited
transaction" as such term is defined in Section 406 of ERISA or Section
4975 of the Code; (ii) incurred any liability to the PBGC which remains
outstanding other than the payment of premiums and there are no premium
payments which are due and unpaid; (iii) failed to make a required
contribution or payment to a Multiemployer Plan; or (iv) failed to make a
required installment or other required payment under Section 412 of the
Code.
5.19.5 No Termination Event. No Termination Event has occurred or is
reasonably expected to occur.
5.19.6 ERISA Litigation. No material proceeding, claim, lawsuit
and/or investigation is existing or, to the best knowledge of Borrower,
threatened concerning or involving any (i) employee welfare benefit plan
(as defined in Section 3(1) of ERISA) currently maintained or contributed
to by Borrower or any ERISA Affiliate, (ii) Pension Plan or (iii)
Multiemployer Plan.
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5.20 Employee Matters.
5.20.1 Collective Bargaining Agreements; Grievances. (i) None of the
employees of Borrower is subject to any collective bargaining agreement
relating to their employment by Borrower, (ii) no petition for
certification or union election is pending with respect to the employees
of Borrower and no union or collective bargaining unit has sought such
certification or recognition with respect to the employees of Borrower and
(iii) there are no strikes, slowdowns, work stoppages, unfair labor
practice complaints, grievances, arbitration proceedings or controversies
pending or, to the best knowledge of Borrower, threatened against any
Borrower by any of Borrower's employees, other than employee grievances or
controversies arising in the ordinary course of business that could not in
the aggregate have a Material Adverse Effect.
5.20.2 Claims Relating to Employment. Neither Borrower nor, to
Borrower's best knowledge, any employee of Borrower, is subject to any
employment agreement or non-competition agreement with any former employer
or any other Person which agreement could have a Material Adverse Effect
due to (i) any information which Borrower would be prohibited from using
under the terms of such agreement or (ii) any legal considerations
relating to unfair competition, trade secrets or proprietary information.
5.21 Burdensome Obligations. After giving effect to the transactions
contemplated by the Loan Instruments Borrower will not be a party to or be bound
by any franchise, agreement, deed, lease or other instrument, or be subject to
any restriction, which is so unusual or burdensome so as to cause, in the
foreseeable future, a Material Adverse Effect.
5.22 Dwelling Units; Passes; Channel Capacity. As of the Closing Date, the
System in the aggregate passes not less than 112,740 individual dwelling units
and over 80% of the plant mileage of the System is capable of carrying at least
42 channels.
5.23 Subscribers. As of the Closing Date, Borrower in the aggregate has
not less than 74,750 Subscribers. The number of Subscribers for each "head-end"
of Borrower is set forth on Exhibit 5.23.
ARTICLE VI
AFFIRMATIVE COVENANTS
Until all of Borrower's Obligations are paid and performed in full
Borrower agrees that it will:
6.1 Legal Existence; Good Standing. Maintain its existence and its good
standing in the jurisdiction of its formation and its qualification in each
jurisdiction in which the failure so to qualify could have a Material Adverse
Effect, and in any event in each jurisdiction in which any portion of the System
is operated.
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6.2 Inspection. Permit representatives of Agent and Lenders at any time to
(i) visit its offices, (ii) examine its books and records and Accountants'
reports relating thereto, (iii) make copies or extracts therefrom, (iv) discuss
its affairs with its employees, (v) examine and inspect its Property and (vi)
meet and discuss its affairs with the Accountants, and such Accountants, as a
condition to their retention by Borrower, are hereby irrevocably authorized by
Borrower to fully discuss and disclose all such affairs with Agent and Lenders.
The representatives of Agent and each Lender shall conduct the activities
described in this Section 6.2 at reasonable times and upon reasonable notice,
provided, however, if an Event of Default or Incipient Default exists, such
activities may be conducted at any time without notice.
6.3 Financial Statements and Other Information. Maintain a standard system
of accounting in accordance with GAAP and furnish to each Lender:
6.3.1 Monthly Statements. As soon as available and in any event
within (i) 30 days after the close of each month other than the last month
of any quarter and (ii) 45 days after the close of the last month of any
quarter:
(a) a copy of the balance sheet of Borrower as of the end of
such month,
(b) statements of operations and Operating Cash Flow of
Borrower for such month and for the period from the beginning of the
then current year to the end of such month, setting forth in each
case in comparative form the corresponding figures for the
corresponding period in the preceding year, and
(c) a Subscriber Base Certificate as of the last day of such
month,
all in reasonable detail, containing such information as Lenders
reasonably may require.
6.3.2 Quarterly Certifications. The financial statements delivered
to Lenders pursuant to subsection 6.3.1 for the last month of each quarter
shall be certified by the President or Chief Financial Officer, to the
best of his knowledge, as presenting fairly in all material respects the
results of operations of Borrower for the period covered thereby and the
financial condition of Borrower as of the dates indicated therein, subject
to normal year-end adjustments.
6.3.3 Annual Statements. As soon as available and in any event
within 90 days after the close of each year:
(a) the balance sheet of Borrower as of the end of such year
and the statements of operations, cash flows, shareholders' equity
(collectively, the "Basic Financial Statements"), Operating Cash
Flow of Borrower and Excess Cash Flow for such year setting forth in
each case in comparative form the corresponding figures for the
preceding year,
(b) an opinion of the Accountants which shall accompany the
Basic Financial Statements, which opinion shall be unqualified as to
going concern and
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scope of audit, stating that (i) the examination by the Accountants
in connection with such Basic Financial Statements has been made in
accordance with generally accepted auditing standards, (ii) such
Basic Financial Statements have been prepared in conformity with
GAAP and in a manner consistent with prior periods, and (iii) such
Basic Financial Statements fairly present in all material respects
the financial position and results of operations of Borrower, and
(c) a letter from the Accountants stating that the annual
statements of Operating Cash Flow and Excess Cash Flow were prepared
in accordance with the requirements of this Loan Agreement.
6.3.4 Compliance Certificates. Each certification described in
subsection 6.3.2 and the financial statements described in subsection
6.3.3 shall be accompanied by a Compliance Certificate.
6.3.5 Accountants' Certificate. Simultaneously with the delivery of
the certified Basic Financial Statements required by subsection 6.3.3,
copies of a certificate of the Accountants stating that (i) they have
checked the computations delivered by Borrower in compliance with
subsection 6.3.3, and (ii) in making the examination necessary for their
audit of the Basic Financial Statements of Borrower for such year, nothing
came to their attention of a financial or accounting nature that caused
them to believe that (A) Borrower was not in compliance with the terms,
covenants, provisions or conditions of any of the Loan Instruments, or (B)
there shall have occurred any condition or event which would constitute an
Event of Default, or, if so, specifying in such certificate all such
instances of non-compliance and the nature and status thereof.
6.3.6 Audit Reports. Promptly upon receipt thereof, a copy of each
report, other than the reports referred to in subsection 6.3.3, including
any so-called "Management Letter" or similar report, submitted to Borrower
by the Accountants in connection with any annual, interim or special audit
made by the Accountants of the books of Borrower.
6.3.7 Business Plans. Not later than 30 days before the end of each
year, except 1996 with respect to 1997, a business plan for the following
year setting forth in reasonable detail the projected operations budget of
the System for such year and such other information as Lenders reasonably
may request, for such following year.
6.3.8 Notice of Defaults; Loss. Prompt written notice if: (i) any
Indebtedness of Borrower in excess of $50,000 is declared or shall become
due and payable prior to its declared or stated maturity, or called and
not paid when due, (ii) an event has occurred that enables the holder of
any note, or other evidence of such Indebtedness, certificate or security
evidencing any such Indebtedness of Borrower to declare such Indebtedness
due and payable prior to its stated maturity, (iii) there shall occur and
be continuing an Incipient Default or Event of Default, accompanied by a
statement setting forth what action Borrower proposes to take in respect
thereof, or (iv) any event shall occur which has or could have a Material
Adverse Effect, including the amount or the estimated amount of any loss
or depreciation or adverse effect.
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6.3.9 Notice of Suits, Adverse Events. Prompt written notice of: (i)
any citation, summons, subpoena, order to show cause or other order naming
Borrower a party to any proceeding before any Governmental Body which
could have a Material Adverse Effect and include with such notice a copy
of such citation, summons, subpoena, order to show cause or other order,
(ii) any lapse or other termination of any license, permit, franchise,
agreement or other authorization issued to Borrower by any Governmental
Body or any other Person that is material to the operation of the Cable
Business of Borrower, (iii) any refusal by any Governmental Body or any
other Person to renew or extend any such license, permit, franchise,
agreement or other authorization and (iv) any dispute between Borrower and
any Governmental Body or any other Person, which lapse, termination,
refusal or dispute referred to in clauses (ii) and (iii) above or in this
clause (iv) could have a Material Adverse Effect.
6.3.10 Reports to Shareholders, Creditors and Governmental Bodies.
(a) Promptly upon becoming available, copies of all financial
statements, reports, notices and other statements sent or made
available generally by Borrower to its shareholders, of all regular
and periodic reports and all registration statements and
prospectuses filed by Borrower with any securities exchange or with
the Securities and Exchange Commission or any Governmental Body
succeeding to any of its functions, and of all statements generally
made available by Borrower or others concerning material
developments in the business of Borrower.
(b) Promptly upon becoming available, copies of any periodic
or special reports filed by Borrower with any Governmental Body or
Person, if such reports indicate any material change in the
business, operations, affairs or condition of Borrower, or if copies
thereof are requested by Lender, and copies of any material notices
and other communications from any Governmental Body or Person which
specifically relate to Borrower.
6.3.11 ERISA Notices and Requests.
(a) With reasonable promptness, and in any event within 30
days after occurrence of any of the following, Borrower will give
notice of and/or deliver to Agent copies of: (i) the establishment
of any new Employee Benefit Plan, Pension Plan or Multiemployer
Plan; (ii) the commencement of contributions to any Employee Benefit
Plan, Pension Plan or Multiemployer Plan to which Borrower or any of
its ERISA Affiliates was not previously contributing or any increase
in the benefits of any existing Employee Benefit Plan, Pension Plan
or Multiemployer Plan; (iii) each funding waiver request filed with
respect to any Employee Benefit Plan and all communications received
or sent by Borrower or any ERISA Affiliate with respect to such
request; and (iv) the failure of Borrower or any ERISA Affiliate to
make a required installment or payment under Section 302 of ERISA or
Section 412 of the Code by the due date.
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(b) Promptly and in any event within 10 days of becoming aware
of the occurrence of or forthcoming occurrence of any (i)
Termination Event or (ii) "prohibited transaction", as such term is
defined in Section 406 of ERISA or Section 4975 of the Code, in
connection with any Pension Plan or any trust created thereunder,
Borrower will deliver to Agent a notice specifying the nature
thereof, what action Borrower has taken, is taking or proposes to
take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, the Department of Labor
or the PBGC with respect thereto.
(c) With reasonable promptness but in any event within 10 days
after the occurrence of any of the following, Borrower will deliver
to Agent copies of: (i) any favorable or unfavorable determination
letter from the Internal Revenue Service regarding the qualification
of an Employee Benefit Plan under Section 401(a) of the Code; (ii)
all notices received by Borrower or any ERISA Affiliate of the
PBGC's intent to terminate any Pension Plan or to have a trustee
appointed to administer any Pension Plan; (iii) each Schedule B
(Actuarial Information) to the annual report (Form 5500 Series)
filed by Borrower or any ERISA Affiliate with the Internal Revenue
Service with respect to each Pension Plan; and (iv) all notices
received by Borrower or any ERISA Affiliate from a Multiemployer
Plan sponsor concerning the imposition or amount of withdrawal
liability pursuant to Section 4202 of ERISA. Borrower will notify
Agent in writing within two Business Days of Borrower or any ERISA
Affiliate that has filed or intends to file a notice of intent to
terminate any Pension Plan under a distress termination within the
meaning of Section 4041(c) of ERISA.
6.3.12 Other Information.
(a) Immediate notice of any change in, or termination of, the
employment of Bruce A. Armstrong or the Chief Financial Officer, any
change in the location of any Property of Borrower which is material
to or necessary for the continued operation of Borrower's business,
any change in the name of Borrower, any sale or purchase of Property
outside the regular course of business of Borrower, and any change
in the business or financial affairs of Borrower, which change could
have a Material Adverse Effect.
(b) Notice that any competing provider of cable television
service or any MDS or MMDS operator, other than those indicated on
Exhibit 6.3.12, is operating within any area passed by the System
and is offering service to dwelling units or commercial buildings
passed by the System, promptly after Borrower becomes aware of such
fact.
(c) Promptly upon request therefor, such other information and
reports relating to the past, present or future financial condition,
operations, plans and projections of Borrower as Lenders reasonably
may request from time to time.
6.4 Reports to Governmental Bodies and Other Persons. Timely file all
material reports, statements of account, applications, documents, instruments
and information required
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to be filed pursuant to all rules, regulations or requests of any Governmental
Body or other Person having jurisdiction over the operation of the business of
Borrower, including, but not limited to, such of the Loan Instruments as are
required to be filed with any such Governmental Body or other Person pursuant to
applicable rules and regulations promulgated by such Governmental Body or other
Person, except where the failure to file will not have a Material Adverse
Effect.
6.5 Maintenance of Licenses, Franchises and Other Agreements. Deliver to
Agent (i) at least 20 days' prior written notice of any proposed material
amendment of any of its Franchises or FCC Licenses and (ii) (A) evidence of the
filing of any application for renewal of any of its FCC Licenses or Franchises
not less than the earlier of (1) 60 days prior to the expiration of such FCC
License or Franchise or (2) the last day such application may be filed in
accordance with applicable law and (B) copies of any petition to deny any such
renewal application promptly after receipt thereof by Borrower.
6.6 Insurance.
6.6.1 Maintenance of Insurance. Maintain in full force and effect at
all times such property, casualty, business interruption and other
insurance required by the insurance letter agreement between Borrower and
Agent, the form of which is attached hereto as Exhibit 6.6.1, all of which
shall be written by insurers and in amounts and forms satisfactory to
Agent and otherwise comply with the terms of such insurance letter
agreement, and deliver to Agent evidence of compliance with this
subsection 6.6.1 as Agent may require.
6.6.2 Claims and Proceeds. Borrower shall direct all insurers under
all policies of casualty and property insurance required to be maintained
by Borrower pursuant to subsection 6.6.1 to pay all proceeds payable
thereunder directly to Agent and Borrower hereby authorizes Agent to
collect such proceeds; provided that so long as no Incipient Default or
Event of Default exists and is continuing any proceeds payable thereunder
in an aggregate amount of $100,000 or less may be paid directly to
Borrower provided Borrower promptly uses such proceeds to pay for the cost
of repair or replacement of the material Collateral subject to the
applicable loss, damage, destruction or other casualty to at least equal
value and substantially the same character as prior to such loss, damage,
destruction or other casualty. Borrower irrevocably appoints Agent (and
all officers, employees or agents designated by Agent) as Borrower's true
and lawful attorney and agent in fact for the purpose of and with power to
make, settle and adjust claims under such policies of insurance, endorse
the name of Borrower on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance, and to make all
determinations and decisions with respect to such policies of insurance.
Borrower acknowledges that such appointment of Agent as its attorney and
agent in fact is a power coupled with an interest and therefore is
irrevocable. Borrower shall promptly notify Agent of any material loss,
damage, destruction or other casualty to the Collateral. Subject to the
first sentence of this subsection 6.6.1, the insurance proceeds received
on account of any loss, damage, destruction or other casualty (i) if any
Incipient Default or Event of Default exists, at the option of Lenders
shall be applied (A) as set forth in the following clause (ii) or (B) in
reduction of Borrower's Obligations in the following order
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of priority: (1) first, to the payment of any and all sums which are then
due and payable pursuant to the terms of the Loan Instruments, other than
the Principal Balance and accrued and unpaid interest thereon, (2) next,
to accrued and unpaid interest on the Principal Balance, (3) next, to the
Principal Balance of the Term Loan in the inverse order of the maturity of
the installments thereof and (4) then, to the Principal Balance of the
Revolving Loan, or (ii) if no Incipient Default or Event of Default exists
or if Lenders so elect, shall be held by Agent and applied to pay for the
cost of repair or replacement of the Collateral subject to such loss,
damage, destruction or other casualty, in which event such proceeds shall
be made available in the manner and under such conditions as Agent may
require. In the event the proceeds are to be applied to the repair or
replacement of Collateral, the Collateral shall be so repaired or replaced
as to be of at least equal value and substantially the same character as
prior to such loss, damage, destruction or other casualty.
6.7 Future Leases. Deliver to Agent, concurrently with the execution by
Borrower, as lessee, of any lease pertaining to real property, (i) a copy
thereof, (ii) at the option of Agent, either a leasehold mortgage upon or a
collateral assignment of such lease in favor of Agent, in either case in form
and substance satisfactory to Agent, and (iii) a Landlord Consent and Waiver in
form and substance satisfactory to Agent from the lessor under such lease.
6.8 Future Acquisitions of Real Property. Deliver to Agent concurrently
with the (i) execution by Borrower of any contract relating to the purchase by
Borrower of real property, an executed copy of such contract and (ii) closing of
the purchase of such real property, (A) a first mortgage or deed of trust in
favor of Agent on such real property, in form and substance satisfactory to
Agent, (B) a lender's policy of title insurance, in such form and amount and
containing such endorsements as shall be satisfactory to Agent, (C) an ALTA/ACSM
survey of such real property and (D) such other documents and assurances with
respect to such real property as Agent may require.
6.9 Environmental Matters.
6.9.1 Compliance. At all times comply with, and be responsible for,
its obligations under all Environmental Laws applicable to the Real
Property, the Leasehold Property and any other Property owned by Borrower
or used by Borrower in the operation of Borrower's business, except where
the failure to comply will not have a Material Adverse Effect. At its sole
cost and expense, Borrower shall (i) comply in all respects with (A) any
notice of any violation or administrative or judicial complaint or order
having been filed against Borrower, any portion of any Leasehold Property
or any other Property owned by Borrower or used by Borrower in the
operation of its business alleging violations of any law, ordinance and/or
regulation requiring Borrower to take any action in connection with the
release, transportation and/or clean-up of any Hazardous Materials, and
(B) any notice from any Governmental Body or any other Person alleging
that Borrower is or may be liable for costs associated with a response or
clean-up of any Hazardous Materials or any damages resulting from such
release or transportation, or (ii) diligently contest in good faith by
appropriate proceedings any demands set forth in such notices, provided
(A) reserves in an amount satisfactory to Agent to pay the costs
associated with complying with any such notice are established by
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Borrower and (B) no Lien would or will attach to the Property which is the
subject of any such notice as a result of any compliance by Borrower which
is delayed during any such contest. Promptly upon receipt of any notice
described in the foregoing clause (i), Borrower shall deliver a copy
thereof to Agent.
6.9.2 Certification. Deliver to Agent, not later than January 31 of
each year, an Environmental Compliance Certificate.
6.9.3 Environmental Audit. At the request of Agent deliver to Agent
an Environmental Audit with respect to any real property leased or
acquired by Borrower referred to in Sections 6.7 and 6.8.
6.10 Compliance with Laws. Comply with all Cable Statutes and Regulations
and all other federal, state and local laws, ordinances, requirements and
regulations and all judgments, orders, injunctions and decrees applicable to
Borrower and its operations, the failure to comply with which could have a
Material Adverse Effect.
6.11 Taxes and Claims. Pay and discharge all material taxes, assessments
and governmental charges or levies imposed upon it or upon its income or
profits, or upon any Property belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might become a
Lien (other than a Permitted Lien) upon the Property of Borrower, provided that
so long as no Lien has attached to the Property of Borrower as a result of any
of the foregoing, Borrower shall not be required by this Section 6.11 to pay any
such amount if the same is being contested diligently and in good faith by
appropriate proceedings and as to which Borrower has set aside reserves on its
books satisfactory to Agent.
6.12 Maintenance of Properties. Maintain all of its Properties necessary
in the operation of its Cable Business in good working order and condition.
6.13 Governmental Approvals. Upon the exercise by Agent and/or Lenders of
any power, right or privilege pursuant to the provisions of any of the Loan
Instruments requiring any consent, approval or authorization of any Governmental
Body, Franchisor or Pole Attachment Authority (including, without limitation,
transfers of Franchises, Licenses or Pole Attachment Agreements), promptly
execute and cause the execution of all applications, certificates, instruments
and other documents that Agent and/or Lenders may be required to obtain for such
consent, approval or authorization.
6.14 Future Franchise Agreements. Deliver to Agent, promptly after the
execution by Borrower, as franchisee, of any Franchise Agreement (i) a copy
thereof and (ii) a Franchisor Consent with respect thereto.
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ARTICLE VII
NEGATIVE COVENANTS
Until all of Borrower's Obligations are paid and performed in full,
Borrower shall not, without the prior written consent of Agent:
7.1 Borrowing. Create, incur, assume or suffer to exist any liability for
Indebtedness for Borrowed Money except (i) Borrower's Obligations, (ii) the
Subordinated Indebtedness and (iii) Permitted Senior Indebtedness.
7.2 Liens. Create, incur, assume or suffer to exist any Lien upon any of
its Property, whether now owned or hereafter acquired, except Permitted Liens.
7.3 Merger and Acquisition. Consolidate with or merge with or into any
Person, or acquire directly or indirectly all or substantially all of the
capital stock, equity interests or Property of any Person.
7.4 Contingent Liabilities. Assume, guarantee, endorse, contingently agree
to purchase, become liable in respect of any letter of credit, or otherwise
become liable upon the obligation of any Person, except liabilities arising from
the endorsement of negotiable instruments for deposit or collection, the posting
of bonds to secure performance to the extent necessary in connection with
Borrower's Cable Business and similar transactions in the ordinary course of
business.
7.5 Distributions. Make any dividends, distributions or other shareholder
expenditures with respect to the Borrower Capital Stock or apply any of its
Property to the purchase, redemption or other retirement of, or set apart any
sum for the payment of, or make any other distribution by reduction of capital
or otherwise in respect of, any of the Borrower Capital Stock.
7.6 Capital Expenditures. Make or incur any Capital Expenditures for the
period from the Closing Date through December 31, 1996 in excess of $1,000,000
or in any year after 1996 in excess of the amount set forth below opposite such
year:
Year Amount
---- ------
1997 $5,600,000
1998 $4,600,000
1999 $8,300,000
2000 $7,300,000
2001 $2,700,000;
provided that if the Capital Expenditures made or incurred by Borrower for the
years 1997 or 1998 are less than the amounts set forth above opposite such year,
Borrower may make or incur Capital Expenditures in the immediately succeeding
year in an amount not to exceed the sum of (i) the amount set forth above
opposite such succeeding year and (ii) the lesser of $1,000,000
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or the amount by which the amount set forth above opposite the year 1997 or
1998, as applicable, exceeds the Capital Expenditures made or incurred by
Borrower for the year 1997 or 1998, as applicable.
7.7 Payments of Indebtedness for Borrowed Money. Make any (i) payment in
respect of the Subordinated Indebtedness except to the extent permitted by the
Subordination Agreement or (ii) voluntary or optional prepayment of any
Indebtedness for Borrowed Money other than Borrower's Obligations.
7.8 Obligations as Lessee Under Operating Leases. Enter into any
arrangement as lessee of Property under any Operating Lease if the aggregate
rentals for all such Operating Leases during any year would exceed $350,000.
7.9 Investments, Loans. At any time purchase or otherwise acquire, hold or
invest in the capital stock of, or any other interest in, any Person, or make
any loan or advance to, or enter into any arrangement for the purpose of
providing funds or credit to, or make any other investment, whether by way of
capital contribution or otherwise, in or with any Person, including, without
limitation, any Affiliate, except (i) investments in direct obligations of, or
instruments unconditionally guaranteed by, the United States of America or in
certificates of deposit issued by a Qualified Depository, (ii) investments in
commercial or finance paper which, at the time of investment, is rated "A" or
better by Moody's Investors Service, Inc., or Standard & Poor's Ratings Group, a
Division of McGraw-Hill, Inc., respectively, or at the equivalent rate by any of
their respective successors, (iii) any interests in any money market account
maintained, at the time of investment, with a Qualified Depository, the
investments of which, at the time of investment, are restricted to the types
specified in clause (i) above, (iv) loans to employees of Borrower in the
aggregate amount not to exceed $25,000 outstanding at any time and (v)
investments in equity interests of programmers made available to Borrower by
such programmers as an inducement to carry programming of such programmers,
provided the aggregate cost of all such investments does not exceed $100,000
outstanding at any time. All investments permitted pursuant to clauses (i), (ii)
and (iii) of this Section 7.9 shall have a maturity not exceeding one year.
7.10 Fundamental Business Changes. Materially change the nature of its
business or engage in any business other than the Cable Business.
7.11 Facility Sites. Change the locations of its chief executive office or
any headends, earth stations, microwave facilities, tower installations,
studios, offices or other Property used in the operation of the System unless
(i) Agent shall have received at least 30 days' prior written notice thereof,
(ii) Borrower shall have complied with all applicable laws, rules and
regulations and shall have received all required consents and approvals from any
Governmental Body, including, without limitation, the FCC, (iii) Agent shall
have received satisfactory evidence that such change could not reasonably be
expected to materially adversely affect the operations or business prospects of
Borrower and (iv) Borrower shall have executed and delivered to Agent any
documents Agent may reasonably require in order to maintain the validity and
priority of the Security Interests.
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7.12 Sale or Transfer of Assets. Sell, lease, assign, transfer or
otherwise dispose of any Property (other than in the ordinary course of
business) except for (i) the sale or disposition of (A) Property which is not
material to or necessary for the continued operation of its business and (B)
obsolete or unusable items of equipment which promptly are replaced with new
items of equipment of like function and comparable value to the unusable items
of equipment when the same were new or not obsolete or unusable, provided such
replacement items of equipment shall become subject to the Security Interests
and (ii) Permitted Asset Sales.
7.13 Amendment of Documents. Amend, modify or waive any term or provision
of its articles of incorporation or by-laws or the Management Agreement in any
manner which adversely affects Lenders or agree to any amendment or modification
of any term or provision of the Subordinated Credit Instruments which is
prohibited by the Subordination Agreement.
7.14 Acquisition of Additional Properties. Acquire any additional Property
except such Property as is necessary to or useful in the operation of its
business, provided such acquisitions shall be subject to the conditions and
limitations set forth in this Loan Agreement.
7.15 Issuance of Equity Interests. Issue or sell, permit to be issued or
sold, or otherwise consent to the transfer of, any additional capital stock or
any interests convertible into or exercisable for any such additional capital
stock, except for the conversion of the Class C Stock to Class A Stock.
7.16 Transactions with Affiliates. Sell, lease, assign, transfer or
otherwise dispose of any Property to any Affiliate of Borrower, lease Property,
render or receive services or purchase assets from any such Affiliate, or
otherwise enter into any contractual relationship with any Affiliate of
Borrower, except that Borrower may (i) receive management services from Scott
Management under the terms of the Management Agreement and may pay to Scott
Management (A) Scott Management Fees provided that the aggregate amount of all
payments of Scott Management Fees with respect to any month does not exceed 4.5%
of the gross revenues of Borrower for such month; except that any payment of
Scott Management Fees with respect to December of any year may exceed 4.5% of
the gross revenues of Borrower for such month so long as the aggregate amount of
all payments of Scott Management Fees with respect to any year does not exceed
4.5% of the gross revenues of Borrower for such year and (B) reasonable
out-of-pocket expenses and (ii) engage in such transactions with its Affiliates
provided such transactions are in the ordinary course of business of Borrower
and are under terms no less favorable to Borrower than could be obtained from an
independent third party.
7.17 Compliance with ERISA.
(i) Engage in any Termination Event which would result in a
liability to Borrower or any ERISA Affiliate in excess of $100,000;
(ii) Cause the present value of all benefit liabilities under all
Pension Plans to exceed the current value of the assets of such Pension
Plans allocable to such benefit liabilities by more than $100,000;
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(iii) Cause any accumulated funding deficiency in excess of $100,000
(as defined in Section 302 of ERISA and Section 412 of the Code) with
respect to any Pension Plan, except to the extent waived;
(iv) Fail to make any contribution or payment to any Multiemployer
Plan which Borrower or any ERISA Affiliate may be required to make under
any agreement relating to such Multiemployer Plan, or any law pertaining
thereto which results in or is likely to result in a liability in excess
of $100,000;
(v) Engage, or permit any ERISA Affiliate to engage, in any
"prohibited transaction" as such term is defined in Section 406 of ERISA
or Section 4975 of the Code for which a civil penalty pursuant to Section
502(i) of ERISA or a tax pursuant to Section 4975 of the Code in excess of
$100,000 is imposed;
(vi) Establish any Employee Benefit Plan providing post-retirement
welfare benefits or establish or amend any Employee Benefit Plan which
establishment or amendment could result in liability to Borrower or any
ERISA Affiliate or increase the obligation of Borrower or any ERISA
Affiliate to a Multiemployer Plan which liability or increase,
individually or together with all similar liabilities and increases, is
material to Borrower or any ERISA Affiliate; or
(vii) Fail, or permit any ERISA Affiliate to fail, to establish,
maintain and operate each Employee Benefit Plan of Borrower in compliance
in all material respects with ERISA, the Code and all other applicable
laws and regulations and interpretations thereof.
7.18 Leverage Ratio. Permit the Debt/Cash Flow Ratio as of the last day of
any quarter ending as of any date set forth below to be greater than the amount
set forth opposite such date:
Date Amount
---- ------
December 31, 1996 5.00
March 31, 1997 5.00
June 30, 1997 5.00
September 30, 1997 4.75
December 31, 1997 4.75
March 31, 1998 4.75
June 30, 1998 4.75
September 30, 1998 4.50
December 31, 1998 4.50
March 31, 1999 4.50
June 30, 1999 4.50
September 30, 1999 4.25
December 31, 1999 4.25
March 31, 2000 4.25
June 30, 2000 4.25
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September 30, 2000 4.25
December 31, 2000 4.25
March 31, 2001 4.25
June 30, 2001 4.25
September 30, 2001 4.25
December 31, 2001 4.25
7.19 Fixed Charge Coverage. Permit the ratio of Operating Cash Flow for
any period set forth below to the sum for such period of all Capital
Expenditures, Debt Service with respect to Borrower's Obligations (calculated on
an accrual basis for the first four such periods) and income taxes paid (other
than income taxes attributable to extraordinary gains) to be less than the
amount set forth opposite such period:
Three Months Ended Amount
------------------ ------
March 31, 1997 1.10
Six Months Ended Amount
---------------- ------
June 30, 1997 1.10
Nine Months Ended Amount
----------------- ------
September 30, 1997 1.10
Twelve Months Ended Amount
------------------- ------
December 31, 1997 1.10
March 31, 1998 1.10
June 30, 1998 1.10
September 30, 1998 1.10
December 31, 1998 1.10
March 31, 1999 1.05
June 30, 1999 1.05
September 30, 1999 1.05
December 31, 1999 1.05
March 31, 2000 1.05
June 30, 2000 1.05
September 30, 2000 1.05
December 31, 2000 1.05
March 31, 2001 1.05
June 30, 2001 1.05
September 30, 2001 1.05
December 31, 2001 1.05
7.20 Debt Service Coverage. Permit the ratio of Operating Cash Flow for
any period set forth below to Debt Service with respect to Borrower's
Obligations (calculated on an accrual
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basis for the first four such periods) for such period to be less than the
amount set forth opposite such period:
Three Months Ended Amount
------------------ ------
March 31, 1997 1.85
Six Months Ended Amount
---------------- ------
June 30, 1997 1.85
Nine Months Ended Amount
----------------- ------
September 30, 1997 1.85
Twelve Months Ended Amount
------------------- ------
December 31, 1997 1.85
March 31, 1998 1.85
June 30, 1998 1.85
September 30, 1998 1.85
December 31, 1998 1.80
March 31, 1999 1.80
June 30, 1999 1.80
September 30, 1999 1.80
December 31, 1999 1.85
March 31, 2000 1.85
June 30, 2000 1.85
September 30, 2000 1.85
December 31, 2000 1.85
March 31, 2001 1.85
June 30, 2001 1.85
September 30, 2001 1.85
December 31, 2001 1.85
ARTICLE VIII
DEFAULT AND REMEDIES
8.1 Events of Default. The occurrence of any of the following shall
constitute an Event of Default under the Loan Instruments:
8.1.1 Default in Payment. If Borrower shall fail to pay all or any
portion of Borrower's Obligations when the same become due and payable;
provided that any failure to pay the portion of any interest payment
attributable to an increase in the Base
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Rate shall not constitute an Event of Default under the Loan Instruments
until Borrower has received three Business Days' prior notice from Lenders
of such increase.
8.1.2 Breach of Covenants.
(a) If Borrower shall fail to observe or perform any covenant
or agreement made by Borrower contained in Section 6.2, 6.6 or 6.9
or in Article VII;
(b) If Borrower shall fail to comply with its obligations
pursuant to Section 6.1 and such failure shall continue for a period
of 30 days after such failure occurs;
(c) If Borrower or any other Obligor shall fail to observe or
perform any covenant or agreement (other than those referred to in
subparagraphs (a) and (b) above or specifically addressed elsewhere
in this Section 8.1) made by such Person in any of the Loan
Instruments to which such Person is a party, and such failure shall
continue for a period of 30 days after written notice of such
failure is given by Lenders.
8.1.3 Breach of Warranty. If any representation or warranty made by
or on behalf of Borrower or any Obligor in or pursuant to any of the Loan
Instruments or in any instrument or document furnished in compliance with
the Loan Instruments shall prove to be false or misleading in any material
respect on the date as of which made.
8.1.4 Default Under Other Indebtedness for Borrowed Money. If (i)
Borrower at any time shall be in default (as principal or guarantor or
other surety) in the payment of any principal of or premium or interest on
any Indebtedness for Borrowed Money (other than Borrower's Obligations)
beyond the grace period, if any, applicable thereto and the aggregate
amount of such payments then in default beyond such grace period shall
exceed $50,000 or (ii) any default shall occur in respect of any issue of
Indebtedness for Borrowed Money of Borrower (other than Borrower's
Obligations) outstanding in a principal amount of at least $200,000, or in
respect of any agreement or instrument relating to any such issue of
Indebtedness for Borrowed Money, and such default shall continue beyond
the grace period, if any, applicable thereto.
8.1.5 Bankruptcy.
(a) If Borrower shall (i) generally not be paying its debts as
they become due, (ii) file, or consent, by answer or otherwise, to
the filing against it of a petition for relief or reorganization or
arrangement or any other petition in bankruptcy or insolvency under
the laws of any jurisdiction, (iii) make an assignment for the
benefit of creditors, (iv) consent to the appointment of a
custodian, receiver, trustee or other officer with similar powers
for Borrower, or for any substantial part of the Property of
Borrower or (v) be adjudicated insolvent.
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(b) If any Governmental Body of competent jurisdiction shall
enter an order appointing, without consent of Borrower, a custodian,
receiver, trustee or other officer with similar powers with respect
to Borrower, or with respect to any substantial part of the Property
belonging to Borrower, or if an order for relief shall be entered in
any case or proceeding for liquidation or reorganization or
otherwise to take advantage of any bankruptcy or insolvency law of
any jurisdiction, or ordering the dissolution, winding-up or
liquidation of Borrower or if any petition for any such relief shall
be filed against Borrower and such petition shall not be dismissed
or stayed within 60 days.
8.1.6 Judgments. If there shall exist a final judgment or award
against Borrower which shall have been outstanding for a period of 30 days
or more from the date of the entry thereof and shall not have been
discharged in full or stayed pending appeal, if the aggregate amount of
all such judgments and awards exceeds $100,000.
8.1.7 Impairment of Licenses; Other Agreements. If (i) any
Governmental Body shall (A) revoke, terminate, suspend or adversely modify
any License or Franchise of Borrower, the non-continuation of which could
have a Material Adverse Effect, or (B) enter a final order or decision to
suspend, revoke, terminate or adversely modify any such License or
Franchise or (ii) there shall exist any violation or default in the
performance of, or a material failure to comply with any agreement, or
condition or term of any License or Franchise, which violation, default or
failure could reasonably be expected to have a Material Adverse Effect, or
any such License or Franchise shall cease to be in full force and effect,
or (iii) any Operating Agreement shall expire or be revoked or terminated
and not replaced by a substitute acceptable to Lenders within 30 days
after the date of such expiration, revocation or termination, and such
expiration, revocation or termination and non-replacement could reasonably
be expected to have a Material Adverse Effect.
8.1.8 Collateral. If any material portion of the Collateral shall be
seized or taken by a Governmental Body or Person, or Borrower shall fail
to maintain or cause to be maintained the Security Interests and priority
of the Loan Instruments as against any Person, or the title and rights of
any Obligor to any material portion of the Collateral shall have become
the subject matter of litigation which could reasonably be expected to
result in impairment or loss of the security provided by the Loan
Instruments.
8.1.9 Interruption of Operations. If the transmitting operations of
any portion of the System affecting more than 6,000 Subscribers of
Borrower is interrupted at any time for more than 72 hours during any
period of 10 consecutive days, unless the Borrower shall be entitled to
receive with respect to such period of interruption (subject to a three
day deductible) proceeds of business interruption insurance sufficient to
assure that the per diem Operating Cash Flow of such portion of the System
during such period is at least equal to 90% of its average per diem
Operating Cash Flow for the twelve months preceding the initial date of
interruption.
8.1.10 Plans. If an event or condition specified in subsection
6.3.11 hereof shall occur or exist with respect to any Plan or
Multiemployer Plan and, as a result of such
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event or condition, together with all other such events or conditions,
Borrower or any member of an ERISA Affiliate shall incur, a liability to a
Plan or Multiemployer Plan or the PBGC (or any of them) which, in the
reasonable judgment of Lender, could reasonably be expected to have a
Material Adverse Effect.
8.1.11 Change in Management. If at any time Bruce A. Armstrong shall
die, become permanently disabled or cease, for a period of 60 days, to
devote his full business time to the operation of Borrower's business,
unless replaced by a person reasonably satisfactory to Lenders within 90
days after such death, disability or cessation.
8.2 Acceleration of Borrower's Obligations. Upon the occurrence of:
(a) any Event of Default described in clauses (ii), (iii), (iv) and
(v) of subsection 8.1.5(a) or in 8.1.5(b), the Revolving Loan Commitment
automatically shall terminate and all of Borrower's Obligations at that
time outstanding automatically shall mature and become due, and
(b) any other Event of Default, Lenders, at any time (unless such
Event of Default shall have been waived in writing or remedied), at their
option, without further notice or demand, may terminate the Revolving Loan
Commitment and declare all of Borrower's Obligations due and payable,
whereupon the Revolving Loan Commitment shall terminate and Borrower's
Obligations immediately shall mature and become due and payable,
all without presentment, demand, protest or notice (other than the declaration
referred to in clause (b) above), all of which hereby are waived.
8.3 Remedies on Default. If Borrower's Obligations have been accelerated
pursuant to Section 8.2, Lenders, at their option, may:
8.3.1 Enforcement of Security Interests. Enforce their rights and
remedies under the Loan Instruments in accordance with their respective
terms.
8.3.2 Other Remedies. Enforce any of the rights or remedies accorded
to Lenders and/or Agent at equity or law, by virtue of statute or
otherwise.
8.4 Application of Funds. Any funds received by Lenders or Agent pursuant
to the exercise of any rights accorded to Lenders and/or Agent pursuant to, or
by the operation of any of the terms of, any of the Loan Instruments, including,
without limitation, insurance proceeds, condemnation proceeds or proceeds from
the sale of Collateral, shall be applied to Borrower's Obligations in the
following order of priority:
8.4.1 Expenses. First, to the payment of (i) all reasonable fees and
expenses actually incurred, including, without limitation, court costs,
fees of appraisers, title charges, costs of maintaining and preserving the
Collateral, costs of sale, and all other costs incurred by Lenders and
Agent in exercising any rights accorded to such Persons pursuant to the
Loan Instruments or by applicable law, including, without limitation,
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reasonable attorneys' fees, and (ii) all Liens superior to the Liens of
Agent except such superior Liens subject to which any sale of the
Collateral may have been made.
8.4.2 Borrower's Obligations. Next, to the payment of the remaining
portion of Borrower's Obligations in such order as Lenders may determine.
8.4.3 Surplus. Any surplus, to the Person or Persons entitled
thereto.
8.5 Performance of Borrower's Obligations. If Borrower fails to (i)
maintain in force and pay for any insurance policy or bond which Borrower is
required to provide pursuant to any of the Loan Instruments, (ii) keep the
Collateral free from all Liens except for Permitted Liens, (iii) pay when due
all taxes, levies and assessments on or in respect of the Collateral, except as
otherwise permitted pursuant to the terms hereof, (iv) make all payments and
perform all acts on the part of Borrower to be paid or performed in the manner
required by the terms hereof and by the terms of the other Loan Instruments with
respect to any of the Collateral, including, without limitation, all expenses of
protecting, storing, warehousing, insuring, handling and maintaining the
Collateral, (v) keep fully and perform promptly any other of the obligations of
Borrower hereunder or under any of the other Loan Instruments, and (vi) keep
fully and perform promptly the obligations of Borrower with respect to any issue
of Indebtedness for Borrowed Money secured by a Permitted Prior Lien, then Agent
or Lenders may (but shall not be required to) procure and pay for such insurance
policy or bond, place such Collateral in good repair and operating condition,
pay, contest or settle such Liens or taxes or any judgments based thereon or
otherwise make good any other aforesaid failure of Borrower. Borrower shall
reimburse Agent and Lenders immediately upon demand for all reasonable sums paid
or advanced on behalf of Borrower for any such purpose, together with reasonable
and/or necessary costs and expenses (including reasonable attorneys' fees) paid
or incurred by Agent and Lenders in connection therewith and interest on all
sums advanced from the date of advancement until repaid to Agent and Lenders at
the Default Rate. All such sums advanced by Agent and Lenders, with interest
thereon, immediately upon advancement thereof, shall be deemed to be part of
Borrower's Obligations.
ARTICLE IX
ADDITIONAL LENDERS AND PARTICIPANTS
9.1 Assignment to Other Lenders.
9.1.1 Assignment. FINOVA may make one or more Loan Assignments, and
each Assignee, with the prior written consent of FINOVA (which may be
given or denied in the sole discretion of FINOVA), may make a Loan
Assignment of the rights and obligations which were assigned to such
Assignee. Each Loan Assignment shall be for not less than $5,000,000 of
the Loans. Each Person making a Loan Assignment shall give prompt written
notice thereof to Borrower.
9.1.2 Effect of Loan Assignment. Each Assignee to which FINOVA makes
a Loan Assignment, and each subsequent Assignee, to the extent of such
Loan Assignment,
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shall have the same rights, benefits and obligations under the Loan
Instruments as such Assignee would have had if such Assignee were an
original party to the Loan Instruments.
9.1.3 Substitution of Notes. Simultaneously with the delivery by any
Lender to Borrower of any Note which is the subject of a Loan Assignment
and which is marked "cancelled," Borrower shall execute and deliver to
such Lender for delivery to (i) the Assignee to which such Loan Assignment
is made, a promissory note payable to the order of such Assignee in an
amount equal to the amount assigned to such Assignee, and (ii) such Lender
making such Loan Assignment, a promissory note payable to the order of
such assigning Lender in an amount equal to the amount retained by such
Lender, each such Note to be substantially in the form of the canceled
Note.
9.1.4 Inspections. Any action which any Assignee shall desire to
undertake pursuant to Section 6.2 of the Loan Agreement shall be
coordinated by such Assignee through Agent, and Agent shall accompany each
such Assignee which desires to undertake any such action pursuant to such
Section 6.2.
9.2 Participations. Each Lender shall have the right to sell
Participations. In the event of the sale of a Participation, the obligations of
the Lender selling such a Participation shall remain unchanged, such Lender
shall remain solely responsible for the performance thereof, such Lender shall
remain the holder of any Note which previously has been delivered to Lender
pursuant to the terms of this Loan Agreement, and Borrower shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Loan Agreement. Notwithstanding the sale of
any Participation, all amounts payable by Borrower pursuant to the terms of the
Loan Instruments shall be determined as if no such Participation had been sold.
No Participant shall be entitled to require a Lender to take or omit to take any
action pursuant to the Loan Instruments except as provided in the Participation
Agreement executed by and between the Participant and such Lender.
9.3 Appointment and Function of Agent. FINOVA is hereby appointed as Agent
hereunder to act in such capacity on behalf of all Lenders under this Loan
Agreement and the other Loan Instruments. FINOVA agrees that it shall continue
to act as Agent throughout the term of the Loan. In performing its functions and
duties under this Agreement, Agent shall act solely as an agent of Lenders and
does not assume and shall not be deemed to have assumed any obligation towards
or relationship of agency or trust with or for any other Person. Notwithstanding
the appointment of FINOVA as Agent hereunder, Agent shall have the same rights
hereunder as any other Lender, and may exercise such rights as though FINOVA had
not been appointed as Agent hereunder.
9.4 Set Off and Sharing of Payments. Upon the occurrence of any Event of
Default and the acceleration of Borrower's Obligations, each Lender is
authorized by Borrower, at any time or from time to time thereafter, without
notice to Borrower or to any other Person, to set off and to appropriate and
apply any and all balances held by such Lender for the account of Borrower, and
any other Property at any time held or owing by such Lender to or for the credit
or for the account of Borrower, against and on account of any of Borrower's
Obligations which are not paid when due. Borrower agrees that (i) each Lender
may exercise its right to set off
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with respect to amounts in excess of such Lender's share of Borrower's
Obligations and may sell Participations in such excess to other Lenders and (ii)
any Lender so purchasing a Participation in the Loan made or other of Borrower's
Obligations held by other Lenders may exercise all rights of set-off, bankers'
lien, counterclaim or similar rights with respect to such Participation as fully
as if such Lender were a direct holder of the Loan and other of Borrower's
Obligations in the amount of such Participation.
9.5 Lenders' Decisions. Until a Loan Assignment is made, all Lenders'
Decisions shall be made solely by FINOVA. After a Loan Assignment is made, any
Lenders' Decisions which may be made pursuant to the Loan Instruments by Lenders
or as to which the Lenders shall have the right to consent shall be made as set
forth in the applicable Lender Addition Agreements but in any event by not less
than 51% of all Lenders nor more than 66.67% of all Lenders, except that the
unanimous consent of all Lenders shall be required to (i) increase the Revolving
Loan Commitment or the Principal Balance of the Term Loan, (ii) compromise the
Principal Balance or alter the rate of interest payable on or fees payable with
respect to the Loans, (iii) postpone any date fixed for any payment of principal
or interest on any Loan, (iv) amend or modify this Section 9.5 or (iv) release
any of the Security Interests except in connection with a Permitted Asset Sale
or other disposition permitted under Section 7.12.
ARTICLE X
CLOSING
The Closing Date shall be such date as the parties shall determine, and
the Closing shall take place on such date, provided all conditions for the
Closing as set forth in this Loan Agreement have been satisfied or otherwise
waived by FINOVA. The Closing shall take place at the office of Baer Marks &
Upham LLP, 805 Third Avenue, New York, New York, or such other place as the
parties hereto shall agree. Unless the Closing occurs on or before December 31,
1996, this Loan Agreement shall terminate and be of no further force or effect
and, except for any obligation of Borrower to FINOVA pursuant to Article XI,
none of the parties hereto shall have any further obligation to any other party.
ARTICLE XI
EXPENSES AND INDEMNITY
11.1 Attorneys' Fees and Other Fees and Expenses. Whether or not any of
the transactions contemplated by this Loan Agreement shall be consummated,
Borrower agrees to pay to Agent and Lenders on demand all expenses incurred by
Agent and Lenders in connection with the transactions contemplated hereby other
than any Loan Assignment or Participation and in connection with any amendments,
modifications or waivers (whether or not the same become effective) under or in
respect of any of the Loan Instruments, including, without limitation:
11.1.1 Fees and Expenses for Preparation of Loan Instruments. All
expenses, disbursements (including, without limitation, charges for
required mortgagee's
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title insurance, lien searches, reproduction of documents, long distance
telephone calls and overnight express carriers) and reasonable attorneys'
fees, actually incurred by Agent and Lenders in connection with the (i)
preparation and negotiation of the Loan Instruments or any amendments,
modifications or waivers thereto or any documents delivered pursuant
thereto and (ii) administration of the Loans.
11.1.2 Fees and Expenses in Enforcement of Rights or Defense of Loan
Instruments. Any expenses or other costs, including reasonable attorneys'
fees and expert witness fees, actually incurred by Agent or Lenders in
connection with the enforcement or collection against any Obligor of any
provision of any of the Loan Instruments, and in connection with or
arising out of any litigation, investigation or proceeding instituted by
any Governmental Body or any other Person with respect to any of the Loan
Instruments, whether or not suit is instituted, including, but not limited
to, such costs or expenses arising from the enforcement or collection
against any Obligor of any provision of any of the Loan Instruments in
workout or restructuring any state or federal bankruptcy or reorganization
proceeding.
11.2 Indemnity. Borrower agrees to indemnify and save Agent and Lenders
harmless of and from the following:
11.2.1 Brokerage Fees. The fees, if any, of brokers and finders
engaged by Borrower.
11.2.2 General. Any loss, cost, liability, damage or expense
(including reasonable attorneys' fees and expenses) incurred by Agent or
Lenders in investigating, preparing for, defending against, providing
evidence, producing documents or taking other action in respect of any
commenced or threatened litigation, administrative proceeding, suit
instituted by any Person or investigation under any law, including any
federal securities law, the Bankruptcy Code, any relevant state corporate
statute or any other securities law, bankruptcy law or law affecting
creditors generally of any jurisdiction, or any regulation pertaining to
any of the foregoing, or at common law or otherwise, relating, directly or
indirectly, to the transactions contemplated by or referred to in, or any
other matter related to, the Loan Instruments, whether or not Agent or any
Lender is a party to such litigation, proceeding or suit, or is subject to
such investigation.
11.2.3 Operation of Collateral; Joint Venturers. Any loss, cost,
liability, damage or expense (including reasonable attorneys' fees and
expenses) incurred in connection with the ownership, operation or
maintenance of the Collateral, the construction of Agent or any Lender and
Borrower as having the relationship of joint venturers or partners or the
determination that Agent or any Lender has acted as agent for Borrower.
11.2.4 Environmental Indemnity. Any and all claims, losses, damages,
response costs, clean-up costs and expenses suffered and/or incurred at
any time by Agent or any Lender arising out of or in any way relating to
the existence at any time of any Hazardous Materials in, on, under, at,
transported to or from, or used in the construction and/or renovation of,
any of the Real Property or Leasehold Property, or
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otherwise with respect to any Environmental Law, and/or the failure of
Borrower to perform its obligations and covenants hereunder with respect
to environmental matters, including, but not limited to: (i) claims of any
Persons for damages, penalties, response costs, clean-up costs, injunctive
or other relief, (ii) costs of removal and restoration, including fees of
reasonable attorneys and experts, and costs of reporting the existence of
Hazardous Materials to any Governmental Body, and (iii) any expenses or
obligations, including attorneys' fees and expert witness fees, incurred
at, before and after any trial or other proceeding before any Governmental
Body or appeal therefrom whether or not taxable as costs, including,
without limitation, witness fees, deposition costs, copying and telephone
charges and other expenses, all of which shall be paid by Borrower to
Agent or such Lender when incurred by Agent or such Lender.
ARTICLE XII
MISCELLANEOUS
12.1 Notices. All notices and communications under this Loan Agreement
shall be in writing and shall be (i) delivered in person, (ii) sent by telecopy,
or (iii) mailed, postage prepaid, by regular mail if a financial statement
required pursuant to subsection 6.3.1 and 6.3.3, and if other than such
financial statements either by registered or certified mail, return receipt
requested, or by overnight express carrier, addressed in each case as follows:
To Borrower: Scott Cable Communications, Inc.
Four Landmark Square, Suite 302
Stamford, Connecticut 06901
Attention: Bruce A. Armstrong
Chief Executive Officer
Telecopy No.: (203) 325-3110
Copies of all notices and
communications other than
financial statements and
Notices of Borrowing to: Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attention: Stanley E. Bloch, Esq.
Telecopy No.: (212) 702-5941
To Lender: FINOVA Capital Corporation
311 South Wacker Drive, Suite 4400
Chicago, Illinois 60606
Attention: Jeffrey S. Kilrea
Vice President
Telecopy No.: (312) 322-3530
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Copies of all notices and
communications other than
financial statements and
Notices of Borrowing to: FINOVA Capital Corporation
1850 N. Central Avenue
Phoenix, Arizona 85077
Attention: Vice President, Law
Telecopy No.: (602) 207-5036
and
Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Attention: Maurice Jacobs, Esq.
Telecopy No.: (312) 902-1061
or to any other address or telecopy number, as to any of the parties hereto, as
such party shall designate in a written notice to the other parties hereto. All
notices sent pursuant to the terms of this Section 12.1 shall be deemed received
(i) if personally delivered, then on the Business Day of delivery, (ii) if sent
by telecopy before 2:00 p.m. Phoenix time, on the day sent if a Business Day or
if such day is not a Business Day or if sent after 2:00 p.m. Phoenix time, then
on the next Business Day, (iii) if sent by overnight, express carrier, on the
next Business Day immediately following the day sent, or (iv) if sent by
registered or certified mail, on the earlier of the fifth Business Day following
the day sent or when actually received. Any notice by telecopy shall be followed
by delivery on the next Business Day by overnight, express carrier or by hand,
except that Notices of Borrowing sent by telecopy shall be followed by delivery
by first class mail.
12.2 Survival of Loan Agreement; Indemnities. All covenants, agreements,
representations and warranties made in this Loan Agreement and in the
certificates delivered pursuant hereto shall survive the making by Lender of the
Loans and the execution and delivery to Lenders of the Notes and of all other
Loan Instruments, and shall continue in full force and effect so long as any of
Borrower's Obligations remain outstanding, unperformed or unpaid.
Notwithstanding the repayment of all amounts due under the Loan Instruments, the
cancellation of the Notes and the release and/or cancellation of any and all of
the Loan Instruments or the foreclosure of any Liens on the Collateral, the
obligations of Borrower to indemnify Agent and Lenders with respect to the
expenses, damages, losses, costs and liabilities described in Section 11.2 shall
survive until all applicable statute of limitations periods with respect to
actions which may be brought against Agent or any Lender have run.
12.3 Further Assurance. From time to time, Borrower shall execute and
deliver to Agent and Lenders such additional documents as Lenders reasonably may
require to carry out the purposes of the Loan Instruments and to protect
Lenders' rights thereunder, including, without limitation, using its diligent
efforts in the event any Collateral is to be sold to secure the approval by any
Governmental Body of any application required by such Governmental Body
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in connection with such sale, and not take any action inconsistent with such
sale or the purposes of the Loan Instruments.
12.4 Taxes and Fees. Should any tax (other than taxes based upon the net
income of any Lender), recording or filing fees become payable in respect of any
of the Loan Instruments, or any amendment, modification or supplement thereof,
Borrower agrees to pay the same on demand, together with any interest or
penalties thereon attributable to any delay by Borrower in meeting any Lender's
demand, and agrees to hold Lenders harmless with respect thereto.
12.5 Severability. In the event that any provision of this Loan Agreement
is deemed to be invalid by reason of the operation of any law, including, but
not limited to, any of the rules and regulations and policies of the FCC, or by
reason of the interpretation placed thereon by any court or the FCC or any other
Governmental Body, as applicable, this Loan Agreement shall be construed as not
containing such provision and the invalidity of such provision shall not affect
the validity of any other provisions hereof, and any and all other provisions
hereof which otherwise are lawful and valid shall remain in full force and
effect.
12.6 Waiver. No delay on the part of Agent or any Lender in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, and no
single or partial exercise of any right, power or privilege hereunder shall
preclude other or further exercise thereof, or be deemed to establish a custom
or course of dealing or performance between the parties hereto, or preclude the
exercise of any other right, power or privilege.
12.7 Modification of Loan Instruments. No modification or waiver of any
provision of any of the Loan Instruments shall be effective unless the same
shall be in writing, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in the same, similar or other circumstances.
12.8 Captions. The headings in this Loan Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
12.9 Successors and Assigns. This Loan Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
12.10 Remedies Cumulative. All rights and remedies of Agent and Lenders
pursuant to this Loan Agreement, any other Loan Instruments or otherwise, shall
be cumulative and non-exclusive, and may be exercised singularly or
concurrently. Neither Agent nor any Lender shall be required to prosecute
collection, enforcement or other remedies against any Obligor before proceeding
against any other Obligor or to enforce or resort to any security, liens,
collateral or other rights of Agent or Lenders. One or more successive actions
may be brought against Borrower and/or any other Obligor, either in the same
action or in separate actions, as often as Lenders deem advisable, until all of
Borrower's Obligations are paid and performed in full.
12.11 Entire Agreement; Conflict. This Loan Agreement and the other Loan
Instruments executed prior or pursuant hereto constitute the entire agreement
among the parties
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hereto with respect to the transactions contemplated hereby or thereby and
supersede any prior agreements, whether written or oral, relating to the subject
matter hereof. In the event of a conflict between the terms and conditions set
forth herein and the terms and conditions set forth in any other Loan
Instrument, the terms and conditions set forth herein shall govern.
12.12 APPLICABLE LAW. THE LOAN INSTRUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS AND DECISIONS OF THE STATE OF NEW YORK.
12.13 JURISDICTION AND VENUE. BORROWER HEREBY AGREES THAT ALL ACTIONS OR
PROCEEDINGS INITIATED BY BORROWER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THE
LOAN INSTRUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF MARICOPA COUNTY, OR
THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA OR, IF AGENT OR ANY
LENDER INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING COURTS, ANY COURT IN
WHICH AGENT OR SUCH LENDER SHALL INITIATE SUCH ACTION, TO THE EXTENT SUCH COURT
HAS JURISDICTION. BORROWER HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY AGENT OR ANY LENDER
IN ANY OF SUCH COURTS, AND HEREBY AGREES THAT PERSONAL SERVICE OF THE SUMMONS
AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN MAY BE SERVED IN THE
MANNER PROVIDED FOR NOTICES HEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT TO
SECTION 12.1. BORROWER WAIVES ANY CLAIM THAT MARICOPA COUNTY, ARIZONA OR THE
DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK
OF VENUE. TO THE EXTENT PROVIDED BY LAW, SHOULD BORROWER, AFTER BEING SO SERVED,
FAIL TO APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED
WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE MAILING THEREOF, BORROWER
SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY THE
COURT AGAINST BORROWER AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT,
PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM FOR BORROWER SET FORTH IN THIS
SECTION 12.13 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT BY AGENT OR ANY
LENDER OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING BY AGENT OR ANY
LENDER OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION,
AND BORROWER HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY SUCH JUDGMENT OR
ACTION.
12.14 WAIVER OF RIGHT TO JURY TRIAL. AGENT, LENDERS AND BORROWER
ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE LOAN
INSTRUMENTS OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED THEREBY WOULD BE
BASED UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE
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THAT ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
12.15 TIME OF ESSENCE. TIME IS OF THE ESSENCE FOR THE PERFORMANCE BY
BORROWER OF THE OBLIGATIONS SET FORTH IN THIS LOAN AGREEMENT AND THE OTHER LOAN
INSTRUMENTS.
12.16 Estoppel Certificate. Within 15 days after Agent or any Lender
requests Borrower to do so, Borrower will execute and deliver to Agent or such
Lender a statement certifying (i) that this Loan Agreement is in full force and
effect and has not been modified except as described in such statement, (ii) the
date to which interest on the Notes has been paid, (iii) the Principal Balance,
(iv) whether or not to its knowledge an Incipient Default or Event of Default
has occurred and is continuing, and, if so, specifying in reasonable detail each
such Incipient Default or Event of Default of which it has knowledge, (v)
whether to its knowledge it has any defense, setoff or counterclaim to the
payment of the Notes in accordance with their terms, and, if so, specifying each
defense, setoff or counterclaim of which it has knowledge in reasonable detail
(including where applicable the amount thereof), and (vi) as to any other matter
reasonably requested by Agent or such Lender.
12.17 Consequential Damages. Neither Agent nor any Lender nor any agent or
attorney of Agent or such Lender shall be liable to Borrower for consequential
damages arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Borrower's Obligations.
12.18 Counterparts. This Loan Agreement may be executed by the parties
hereto in several counterparts and each such counterpart shall be deemed to be
an original, but all such counterparts shall together constitute one and the
same agreement.
12.19 No Fiduciary Relationship. No provision in this Loan Agreement or in
any other Loan Instrument, and no course of dealing among the parties hereto,
shall be deemed to create any fiduciary duty by Agent or any Lender to Borrower.
12.20 Notice of Breach by Agent and Lenders. Borrower agrees to give Agent
and each Lender written notice of (i) any action or inaction by Agent or any
Lender or any agent or attorney of Agent or such Lender in connection with the
Loan Instruments that may be actionable against Agent or such Lender or any
agent or attorney of Agent or such Lender or (ii) any defense to the payment of
Borrower's Obligations for any reason, including, but not limited to, commission
of a tort or violation of any contractual duty implied by law. Borrower agrees
that unless such notice is fully given as promptly as possible (and in any event
within 30 days) after Borrower has knowledge, or with the exercise of reasonable
diligence should have had knowledge, of any such action, inaction or defense,
Borrower shall not assert, and Borrower shall be deemed to have waived, any
claim or defense arising therefrom.
12.21 Governmental Approval. Notwithstanding anything to the contrary
contained herein or in any other Loan Instrument, no party hereto shall take any
action that would constitute or result in the transfer or assignment of any FCC
license, or other license, permit
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or authority issued by any Governmental Body, or a transfer of control over any
such license, permit or authorization, if such assignment or transfer would
require the prior approval of and/or notice to any Governmental Body, without
such party first having notified such Governmental Body of any such assignment
or transfer and, if required, obtaining the approval of such Governmental Body
therefor.
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IN WITNESS WHEREOF, this Loan Agreement has been executed and delivered by
each of the parties hereto by a duly authorized officer of each such party on
the date first set forth above.
SCOTT CABLE COMMUNICATIONS, INC.,
a Texas corporation
By: /s/ Bruce A. Armstrong
---------------------------------
Bruce A. Armstrong
Chief Executive Officer
FINOVA CAPITAL CORPORATION, a
Delaware corporation
By: /s/ Jeffrey S. Kilrea
---------------------------------
Jeffrey S. Kilrea
Vice President
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Exhibit 10.2
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement"), dated as of December 18,
1996, is among FLEET NATIONAL BANK, a national banking association (the "New
Second PIK Note Indenture Trustee"), not in its individual capacity, but as
trustee for the holders of all 15% Senior Subordinated Pay-in-Kind Debentures
Due March 18, 2002 issued pursuant to that certain Indenture dated as of
December 18, 1996 (the "New Restructured Second Secured PIK Note Indenture")
between Scott Cable Communications, Inc., as Issuer, and the New Second PIK Note
Indenture Trustee, FLEET NATIONAL BANK, a national banking association (the "New
Third PIK Note Indenture Trustee") (the New Second PIK Note Indenture Trustee
and the New Third PIK Note Indenture Trustee sometimes hereinafter are referred
to individually as a "Trustee" and collectively as "Trustees"), not in its
individual capacity, but as trustee for the holders of all 16% Junior
Subordinated Pay-in-Kind Debentures Due July 18, 2002 issued pursuant to that
certain Indenture dated as of December 18, 1996 (the "New Restructured Third
Secured PIK Note Indenture") between Scott Cable Communications, Inc., as
Issuer, and the New Third PIK Note Indenture Trustee, SCOTT CABLE
COMMUNICATIONS, INC., a Texas corporation ("Borrower"), and FINOVA CAPITAL
CORPORATION, a Delaware corporation ("FINOVA"), in its individual capacity and
as agent for all Lenders (this and all other capitalized terms used but not
elsewhere defined herein shall have the respective meanings ascribed to such
terms in Section 1 below).
R E C I T A L S
A. Borrower and FINOVA, in its individual capacity and as agent for all
Lenders, have entered into that certain Loan Agreement of even date herewith (as
the same may be amended, modified, supplemented or restated from time to time,
the "Loan Agreement") pursuant to which Lenders have agreed to make loans and
other financial accommodations to Borrower, subject to the terms and conditions
set forth in the Loan Agreement.
B. Borrower has issued the New Restructured Second Secured PIK Notes in
the initial aggregate principal amount of $49,500,000 pursuant to the terms of
the New Restructured Second Secured PIK Note Indenture.
C. Borrower has issued the New Restructured Third Secured PIK Notes in
the initial aggregate principal amount of $38,925,797 pursuant to the terms of
the New Restructured Third Secured PIK Note Indenture.
D. One of the conditions precedent to the obligations of Lenders under
the Loan Agreement is that the parties hereto shall have executed and delivered
this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. All capitalized terms used but not elsewhere defined in
this Agreement shall have the respective meanings ascribed to such terms in the
Loan Agreement as
<PAGE>
in effect on the date hereof, a copy of which is attached hereto as Exhibit A.
The following terms shall have the following meanings in this Agreement:
Proceeding shall mean any (i) judicial proceeding or other creditor
remedies initiated by Agent to collect Borrower's Obligations or foreclose
the Security Interests or (ii) insolvency, bankruptcy, receivership,
custodianship, liquidation, reorganization, assignment for the benefit of
creditors or other proceeding for the liquidation, dissolution or other
winding up of Borrower or its properties.
Senior Indebtedness shall mean, as of any given time, all of
Borrower's Obligations described in clause (i) of the definition of
Borrower's Obligations, including, without limitation (i) the Principal
Balance, (ii) all accrued and unpaid interest on the Principal Balance,
including, without limitation, all interest which accrues on the Principal
Balance during the pendency of any Proceeding, whether or not allowed in
such Proceeding, (iii) the Loan Fee and other charges, (iv) all fees,
expenses and other amounts payable by Borrower to Agent or any Lender
pursuant to Article XI of the Loan Agreement and (v) all sums advanced by
Agent or any Lender pursuant to Section 8.5 of the Loan Agreement.
2. Subordination of Subordinated Indebtedness to Senior Indebtedness and
Subordination of Subordinated Liens to Security Interests.
2.1 Subordination. The payment of any and all of the Subordinated
Indebtedness hereby expressly is subordinated to the prior payment in full
of the Senior Indebtedness and the Subordinated Liens hereby expressly are
subordinated to the Security Interests.
2.2 Restriction on Payments. Notwithstanding any provision of the
Subordinated Credit Instruments to the contrary and in addition to any
other limitations set forth herein or therein, no payment of principal,
interest, fees or any other amount due with respect to the Subordinated
Indebtedness shall be made, and no Trustee or Subordinated Creditor shall
exercise any right of set-off or recoupment with respect to any of the
Subordinated Indebtedness, until all of the Senior Indebtedness is paid in
full; except that Borrower (A) may make and each holder of a New
Restructured Second Secured PIK Note may receive regularly scheduled
accrued and unpaid interest at a rate per annum not in excess of 15% in the
form of additional new restructured secured payment-in-kind notes pursuant
to the terms of the New Restructured Second Secured PIK Notes and (B) may
make and each holder of a New Restructured Third Secured PIK Note may
receive regularly scheduled accrued and unpaid interest at a rate per annum
not in excess of 16% in the form of additional new restructured secured
payment-in-kind notes pursuant to the terms of the New Restructured Third
Secured PIK Notes.
2.3 Proceedings. In the event of any Proceeding (i) all Senior
Indebtedness first shall be paid in full in cash before any payment of or
with respect to any of the
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Subordinated Indebtedness shall be made; (ii) any payment which, but for
the terms hereof, otherwise would be payable or deliverable in respect of
any of the Subordinated Indebtedness shall be paid or delivered directly to
Agent (to be held and/or applied by Agent in accordance with the terms of
the Loan Agreement) until all Senior Indebtedness is paid in full, and each
Subordinated Creditor and Trustee irrevocably authorizes, empowers and
directs (A) all receivers, trustees, liquidators, custodians, conservators
and others having authority in the premises to effect all such payments and
deliveries and (B) Agent to demand, sue for, collect and receive every such
payment or distribution; (iii) each Subordinated Creditor and Trustee
agrees to execute and deliver to Agent or its representative all such
further instruments confirming the authorization referred to in the
foregoing clause (ii) as Agent reasonably shall request, and agrees to take
all such other actions as Agent reasonably shall request in order to enable
Agent to enforce all claims upon or in respect of the Subordinated
Indebtedness, and (iv) each Subordinated Creditor and Trustee shall
execute, verify, deliver and file any proofs of claim in respect of the
Subordinated Indebtedness requested by Agent in connection with any such
Proceeding and hereby irrevocably authorizes, empowers and appoints Agent
its agent and attorney-in-fact to (A) execute, verify, deliver and file
such proofs of claim upon the failure of such Subordinated Creditor or
Trustee to do so and (B) vote such proofs of claim in any such proceeding.
2.4 Incorrect Payments. If any payment is received by any Subordinated
Creditor or Trustee on account of any Subordinated Indebtedness before all
Senior Indebtedness is paid in full, such payment promptly shall be paid
over to Agent, or its designated representative, for application (in
accordance with the Loan Agreement) to the payment of the Senior
Indebtedness then remaining unpaid, until all of the Senior Indebtedness is
paid in full. No Subordinated Creditor or Trustee shall commingle any such
payment with any other asset of such Person and such Subordinated Creditor
or Trustee shall hold such payment in trust for the benefit of Lenders
until paid over to Agent or its designated representative.
2.5 Legends. Until the Senior Indebtedness is paid in full, each
Subordinated Credit Instrument at all times shall contain in a conspicuous
manner the following legend:
"The indebtedness evidenced hereby is subordinate in the manner and to
the extent set forth in that certain Subordination Agreement (the
"Subordination Agreement") dated as of December 18, 1996 among Scott
Cable Communications, Inc. ("Borrower"), Fleet National Bank, as
trustee, and FINOVA Capital Corporation ("FINOVA"), to the
indebtedness (including interest) owed or guaranteed by Borrower to
the holders of all of the notes issued pursuant to that certain Loan
Agreement dated as of December 18, 1996 between Borrower and FINOVA,
as such Loan Agreement has been and hereafter may be amended,
modified, supplemented or restated from time to time; and each holder
hereof, by its acceptance hereof, shall be bound by the provisions of
the Subordination Agreement."
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2.6 Amendments of Subordinated Credit Instruments. Until the Senior
Indebtedness is paid in full and notwithstanding anything contained in the
Subordinated Credit Instruments, the Loan Agreement or the other Loan
Instruments to the contrary, no Subordinated Creditor or Trustee shall
agree to any amendment or modification of, or supplement to, the
Subordinated Credit Instruments, the effect of which is to (i) increase the
amount of any of the Subordinated Indebtedness or the rate of interest with
respect to any of the Subordinated Indebtedness, (ii) shorten the maturity
date of any of the Subordinated Indebtedness, (iii) accelerate the
scheduled payments on or the required amortization of any of the
Subordinated Indebtedness or (iv) increase the fees payable under the
Subordinated Credit Instruments, if any.
2.7 Restrictions on Action. Until the Senior Indebtedness is paid in
full no Subordinated Creditor or Trustee shall take any action to collect
any of the Subordinated Indebtedness or exercise any of the remedies with
respect to any of the Subordinated Indebtedness set forth in any of the
Subordinated Credit Instruments or that otherwise may be available to such
Subordinated Creditor or Trustee, either at law or in equity, provided that
(i) in the event Borrower's Obligations are accelerated pursuant to Section
8.2 of the Loan Agreement, such Subordinated Creditor or Trustee may
accelerate the Subordinated Indebtedness, (ii) in the event of any
Proceeding not initiated by any Subordinated Creditor or Trustee, subject
to Section 2.3, such Subordinated Creditor or Trustee may participate in
such Proceeding and (iii) any Subordinated Creditor or Trustee may exercise
its rights to convert its shares of the Class C Common Stock of Borrower to
Class A Common Stock of Borrower to the extent permitted by the Amended and
Restated Articles of Incorporation of Borrower as in effect on the date
hereof.
3. Continued Effectiveness of this Agreement. The terms of this
Agreement, the subordination effected hereby, and the rights and the obligations
of each Subordinated Creditor and Trustee and Agent arising hereunder, shall not
be affected, modified or impaired in any manner or to any extent by: (i) any
amendment or modification of or supplement to the Loan Agreement, any of the
other Loan Instruments or any of the Subordinated Credit Instruments; (ii) the
validity or enforceability of any of such documents; or (iii) any exercise or
non-exercise of any right, power or remedy under or in respect of the Senior
Indebtedness or the Subordinated Indebtedness or any of the instruments or
documents referred to in clause (i) above.
4. Representations and Warranties. Each Trustee hereby represents and
warrants, for itself only, to Agent and Lenders as follows:
4.1 Authority. Each Trustee has full power and authority to enter
into, execute, deliver and carry out the terms of this Agreement and to
incur the obligations provided for herein, all of which have been duly
authorized by all proper and necessary action and are not prohibited by the
terms of the Subordinated Credit Instruments.
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4.2 Binding Agreements. This Agreement, when executed and delivered,
will constitute the valid and legally binding obligation of each
Subordinated Creditor and Trustee enforceable in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by equitable principles.
5. Cumulative Rights; No Waivers. Each and every right, remedy and power
granted to Agent hereunder shall be cumulative and in addition to any other
right, remedy or power specifically granted herein, in the Loan Agreement or the
other Loan Instruments or now or hereafter existing in equity, at law, by virtue
of statute or otherwise, and may be exercised by Agent, from time to time,
concurrently or independently and as often and in such order as Agent may deem
expedient. Any failure or delay on the part of Agent in exercising any such
right, remedy or power, or abandonment or discontinuance of steps to enforce the
same, shall not operate as a waiver thereof or affect Agent's right thereafter
to exercise the same, and any single or partial exercise of any such right,
remedy or power shall not preclude any other or further exercise thereof or the
exercise of any other right, remedy or power, and no such failure, delay,
abandonment or single or partial exercise of Agent's rights hereunder shall be
deemed to establish a custom or course of dealing or performance among the
parties hereto.
6. Modification. Any modification or waiver of any provision of this
Agreement, or any consent to any departure by any Subordinated Creditor or
Trustee therefrom, shall not be effective in any event unless the same is in
writing and signed by Agent, and then such modification, waiver or consent shall
be effective only in the specific instance and for the specific purpose given.
Any notice to or demand on any Subordinated Creditor or Trustee in any event not
specifically required of Agent hereunder shall not entitle any Subordinated
Creditor or Trustee to any other or further notice or demand in the same,
similar or other circumstances unless specifically required hereunder.
7. Additional Documents and Actions. Each Trustee at any time, and from
time to time, after the execution and delivery of this Agreement, upon the
request of Agent and at the expense of Borrower, promptly will execute and
deliver such further documents and do such further acts and things as Agent
reasonably may request in order to effect fully the purposes of this Agreement.
8. Notices. All notices and communications under this Agreement shall be
in writing and shall be (i) delivered in person or (ii) mailed, postage prepaid,
either by registered or certified mail, return receipt requested, or by
overnight express courier, addressed in each case as follows:
To New Second PIK Note
Indenture Trustee: Fleet National Bank
Corporate Trust
Administration MAOFDOSM
One Federal Street
5
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Boston, Massachusetts 02106
Attn: Mr. Robert Bice
Copy to: Shipman & Goodwin
One American Row
Hartford, Connecticut 06103
Attn: Thomas Tresselt, Esq.
To New Third PIK Note
Indenture Trustee: Fleet National Bank
Corporate Trust
Administration MAOFDOSM
One Federal Street
Boston, Massachusetts 02106
Attn: Mr. Robert Bice
Copy to: Shipman & Goodwin
One American Row
Hartford, Connecticut 06103
Attn: Thomas Tresselt, Esq.
To Borrower: Scott Cable Communications, Inc.
Four Landmark Square, Suite 302
Stamford, Connecticut 06901
Attn: Mr. Bruce A. Armstrong
Chief Executive Officer
Copy to: Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attn: Stanley E. Bloch, Esq.
To Agent and FINOVA Capital Corporation
any Lender: 311 South Wacker Drive
Suite 4400
Chicago, Illinois 60606
Attn: Assistant Vice President
Copy to: FINOVA Capital Corporation
1850 North Central Avenue
Phoenix, Arizona 85002-2209
Attn: Vice President, Law
6
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Copy to: Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Attn: Maurice Jacobs, Esq.
or to any other address, as to any of the parties hereto, as such party shall
designate in a written notice to the other parties hereto. All notices sent
pursuant to the terms of this Section 8 shall be deemed received (i) if
personally delivered, then on the Business Day of delivery, (ii) if sent by
overnight, express carrier, on the next Business Day immediately following the
day sent, or (iii) if sent by registered or certified mail, on the earlier of
the fifth Business Day following the day sent or when actually received.
9. Severability. In the event that any provision of this Agreement is
deemed to be invalid by reason of the operation of any law or by reason of the
interpretation placed thereon by any court or governmental authority, this
Agreement shall be construed as not containing such provision and the invalidity
of such provision shall not affect the validity of any other provisions hereof,
and any and all other provisions hereof which otherwise are lawful and valid
shall remain in full force and effect.
10. Successors and Assigns. This Agreement shall inure to the benefit of
the successors and assigns of FINOVA and shall be binding upon the successors
and assigns of each Subordinated Creditor, each Trustee and Borrower.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall be one and the same instrument.
12. Defines Rights of Creditors. The provisions of this Agreement are
solely for the purpose of defining the relative rights of Subordinated
Creditors, Agent and Lenders and shall not be deemed to create any rights or
priorities in favor of any other Person, including, without limitation,
Borrower. Nothing contained in this Agreement is intended to or shall (i)
impair, as among Borrower, Subordinated Creditors and Trustees, the obligation
of Borrower, which is absolute and unconditional, to pay the Subordinated
Creditors the principal of and interest on the Subordinated Indebtedness as and
when the same shall become due and payable in accordance with the terms of the
Subordinated Credit Instruments.
13. Conflict. In the event of any conflict between any term, covenant or
condition of this Agreement and any term, covenant or condition of any of the
Subordinated Credit Instruments, the provisions of this Agreement shall control
and govern. For purposes of this Section 13, to the extent that any provisions
of any of the Subordinated Credit Instruments provide rights, remedies and
benefits to Agent that exceed the rights, remedies and benefits provided to
Agent under this Agreement, such provisions of the applicable Subordinated
Credit Instruments shall be deemed to supplement (and not to conflict with) the
provisions hereof.
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14. Headings. The paragraph headings used in this Agreement are for
convenience only and shall not affect the interpretation of any of the
provisions hereof.
15. Termination. This Agreement shall terminate upon the indefeasible
payment in full of the Senior Indebtedness.
16. No Contest of Liens; Release of Collateral. Each Subordinated Creditor
and Trustee agrees that it will not at any time contest the validity,
perfection, priority or enforceability of the Liens in the Collateral granted to
Agent pursuant to the Loan Agreement and the other Loan Instruments. Any
Collateral which is subject to the Subordinated Liens shall be deemed to have
been released from all such Subordinated Liens in the event that such Collateral
is sold by Borrower with the consent of Agent, provided the net proceeds of sale
are first applied to the payment of the Senior Indebtedness. Each Subordinated
Creditor and Trustee agrees that it shall execute, deliver and file any and all
termination statements, lien releases and other agreements and instruments as
Agent deems necessary or appropriate in order to give effect to the preceding
sentence. Each Subordinated Creditor and Trustee hereby irrevocably appoints
Agent its attorney in fact for the purpose of effectuating any such execution,
deliveries and filings.
17. Subrogation. Upon the payment in full in cash of all Senior
Indebtedness, Trustees and Subordinated Creditors shall be subrogated to the
rights of Agent and Lenders under the Loan Instruments until the Subordinated
Indebtedness shall be paid in full in cash, provided that neither Trustees nor
Subordinated Creditors shall have any claim against Agent or any Lender for
impairment of the subrogation rights of Trustees or Subordinated Creditors
arising out of any act or omission of Agent or any Lender. For purposes of such
subrogation, no payments or distributions to Agent or any Lender of any cash,
property or securities to which Subordinated Creditors or Trustees would be
entitled except for the provisions of this Agreement, and no payments by
Trustees or Subordinated Creditors to Agent or any Lender required pursuant to
the terms of this Agreement, shall, as among Borrower and its creditors other
than Agent and Lenders, be deemed to be a payment or distribution by Borrower to
or on account of the Senior Indebtedness.
18. APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS AND DECISIONS OF THE STATE OF NEW YORK NOTWITHSTANDING
THAT THERE ALSO MAY BE OTHER JURISDICTIONS WHICH MAY BEAR A REASONABLE
RELATIONSHIP TO THE TRANSACTIONS CONTEMPLATED HEREBY. FOR PURPOSES OF THIS
SECTION 17, THE LOAN AGREEMENT, THE OTHER LOAN INSTRUMENTS, THE SUBORDINATED
CREDIT INSTRUMENTS AND THIS AGREEMENT SHALL BE DEEMED TO BE PERFORMED AND MADE
IN THE STATE OF NEW YORK.
19. JURISDICTION AND VENUE. BORROWER AND EACH TRUSTEE HEREBY AGREE THAT
ALL ACTIONS OR PROCEEDINGS INITIATED BY BORROWER OR ANY TRUSTEE AND ARISING
DIRECTLY OR INDIRECTLY OUT
8
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OF THIS AGREEMENT SHALL BE LITIGATED IN THE SUPERIOR COURT OF MARICOPA COUNTY,
ARIZONA OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA OR, IF
FINOVA OR LENDERS INITIATE SUCH ACTION, IN ADDITION TO THE FOREGOING COURTS, ANY
COURT IN WHICH FINOVA OR LENDERS SHALL INITIATE OR TO WHICH FINOVA OR LENDERS
SHALL REMOVE SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION. BORROWER
AND EACH TRUSTEE HEREBY EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY FINOVA OR LENDERS IN ANY
OF SUCH COURTS, AND HEREBY AGREE THAT PERSONAL SERVICE OF THE SUMMONS AND
COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN MAY BE SERVED IN THE MANNER
PROVIDED FOR NOTICES HEREIN, AND AGREE THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER OR SUCH TRUSTEE, AS THE CASE MAY BE, AT THE ADDRESS TO
WHICH NOTICES ARE TO BE SENT PURSUANT TO SECTION 8. BORROWER AND EACH TRUSTEE
WAIVE ANY CLAIM THAT MARICOPA COUNTY, ARIZONA OR THE DISTRICT OF ARIZONA IS AN
INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE. TO THE EXTENT
PROVIDED BY LAW, SHOULD BORROWER OR ANY TRUSTEE, AFTER BEING SO SERVED, FAIL TO
APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN
THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE MAILING THEREOF, SUCH PERSON
SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY THE
COURT AGAINST SUCH PERSON AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT,
PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM FOR BORROWER AND TRUSTEES SET
FORTH IN THIS SECTION 18 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY
FINOVA AND/OR LENDERS, OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE
TAKING, BY FINOVA AND/OR LENDERS, OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER
APPROPRIATE JURISDICTION, AND BORROWER AND EACH TRUSTEE HEREBY WAIVE THE RIGHT
TO COLLATERALLY ATTACK ANY SUCH JUDGMENT OR ACTION.
20. WAIVER OF RIGHT TO JURY TRIAL. FINOVA, BORROWER AND EACH TRUSTEE
ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT
OR WITH RESPECT TO THE TRANSACTIONS DESCRIBED IN OR AFFECTED HEREBY WOULD BE
BASED UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE THAT
ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
21. This Agreement is executed and delivered by each Trustee not in its
own right, but solely in the exercise of the powers conferred upon such Person
as Trustee, and no personal
9
<PAGE>
liability or personal responsibility is assumed by nor shall at any time be
asserted or enforceable against such Trustee on account of this Agreement. The
rights and indemnities provided by Borrower to the Trustees in Article VI of the
New Restructured Second Secured PIK Note Indenture and Article VI of the New
Restructured Third Secured PIK Note Indenture, as applicable, are incorporated
herein in their entirety by this reference.
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<PAGE>
IN WITNESS WHEREOF, each Trustee, Borrower and FINOVA have caused this
Agreement to be executed as of the date first above written.
FLEET NATIONAL BANK, a national
banking association, as trustee under the
New Restructured Second Secured PIK
Note Indenture
By: /s/ Robert L. Bice, II
-------------------------
Name: Robert L. Bice, II
Its: Vice President
FLEET NATIONAL BANK, a national
banking association, as trustee under the
New Restructured Third Secured PIK
Note Indenture
By: /s/ Robert L. Bice, II
-------------------------
Name: Robert L. Bice, II
Its: Vice President
SCOTT CABLE COMMUNICATIONS,
INC., a Texas corporation
By: /s/ Bruce A. Armstrong
-------------------------
Bruce A. Armstrong
Chief Executive Officer
FINOVA CAPITAL CORPORATION, a
Delaware corporation
By: /s/ Jeffrey S. Kilrea
-------------------------
Jeffrey S. Kilrea
Vice President
<PAGE>
Exhibit 10.3
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of December 18, 1996, is between SCOTT
CABLE COMMUNICATIONS, INC., a Texas corporation ("Debtor"), and FINOVA CAPITAL
CORPORATION, a Delaware corporation ("Secured Party), in its individual capacity
and as agent for all Lenders (as defined in Section 1 below).
Preliminary Statement:
A. Debtor and Secured Party have entered into a Loan Agreement of even
date herewith (as the same may be amended, modified, supplemented or restated
from time to time, the "Loan Agreement"), pursuant to which Lenders have agreed
to make loans and other financial accommodations (collectively, the "Loans") to
Debtor, subject to the terms and conditions set forth in the Loan Agreement.
B. One of the conditions precedent to Lenders' obligations under the Loan
Agreement is that Debtor shall have executed and delivered this Security
Agreement to secure the payment and performance of Borrower's Obligations.
NOW, THEREFORE, in order to induce Lenders to make the Loans, and for
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, Debtor hereby agrees as follows:
1. Definitions. All terms used herein which are defined in the New York
Uniform Commercial Code (the "Code") shall have the same meaning herein as in
the Code unless the context in which such terms are used herein indicates
otherwise. All capitalized terms used but not elsewhere defined in this Security
Agreement shall have the respective meanings ascribed to such terms in the Loan
Agreement.
2. Security Interests. In order to secure the performance and payment of
Borrower's Obligations, Debtor hereby grants to Secured Party a security
interest in all Property of Debtor, except to the extent limited below, whether
now owned or hereafter acquired, and all additions and accessions thereto,
including, without limitation, the Property described below:
2.1 Goods, Machinery, Equipment and Inventory. All of Debtor's
goods, machinery, equipment, inventory and other goods, wherever located,
and all additions and accessions thereto or replacements thereof,
including, but not limited to, all machinery, inventory and equipment of
any and every kind and description comprising, belonging to or used in
connection with the operation of the Cable Business of Debtor
(collectively, the "Tangible Collateral");
2.2 Accounts, General Intangibles. All of Debtor's accounts,
contract rights, chattel paper, instruments, investment property,
documents and general intangibles, and all additions and accessions
thereto and replacements thereof, including, but not limited
<PAGE>
to, all franchises, permits, authorizations and licenses heretofore or
hereafter granted or issued to Debtor under federal, state or local laws
(excluding, however, franchises, permits, authorizations and licenses
issued by the FCC or any other Governmental Body to the extent, and only
to the extent, it is unlawful to grant a security interest in such
franchises, permits, authorizations and licenses, but including, without
limitation, the right to receive all proceeds derived or arising from or
in connection with the assignment of such franchises, permits,
authorizations and licenses) which permit or pertain to the operation of
the Cable Business of Debtor, and all of Debtor's advertising revenue
contracts, programming distribution agreements, pole attachment
agreements, access and right of entry agreements, equipment leases, office
leases, site leases, video programming distribution agreements, supply and
distributorship agreements, non-competition agreements, employment
contracts, consulting agreements, collective bargaining agreements,
service agreements, maintenance agreements, other Operating Agreements,
income tax refunds, copyrights, patents, patent rights, trademarks, trade
names, trade styles, goodwill and going concern value, except to the
extent the grant of a security interest in any such agreement or contract
without the consent of the other party thereto would create a default
thereunder unless and until such consent shall have been obtained
(collectively, the "Intangible Collateral");
2.3 Proceeds. All proceeds (including proceeds of insurance, eminent
domain and other governmental taking and tort claims) and products of the
Property described in Sections 2.1 and 2.2 above; and
2.4 Books and Records. All of the books and records pertaining to
the Property described in Sections 2.1, 2.2 and 2.3 above.
All of the Property described above hereinafter is referred to collectively as
the "Collateral." The security interest of Secured Party in the Collateral shall
be superior and prior to all other Liens except Permitted Prior Liens.
3. Representations and Warranties. Debtor hereby represents and warrants
to Secured Party as follows:
3.1 Ownership of Collateral. Debtor is the owner of all of the
Collateral, except the portion thereof consisting of after-acquired
Property, and Debtor will be the owner of such after-acquired Property,
free from any Lien except for Permitted Liens.
3.2 Places of Business. There is listed on Exhibit A hereto the
location of the chief executive office of Debtor, all of the other places
of business of Debtor and all locations where the Tangible Collateral and
the books and records of Debtor are kept. Debtor shall not, without 30
days' prior written notice to Secured Party, change the location of (i)
its chief executive office, (ii) its books and records or (iii) except (A)
in connection with dispositions permitted by Section 7.12 of the Loan
Agreement and (B) from one location listed on Exhibit A to another
location listed on Exhibit A, any
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Tangible Collateral.
3.3 Trade or Assumed Names. All trade or assumed names under which
Debtor is doing business are listed in Exhibit B.
3.4 Financing Statements. Except for the financing statements of
Secured Party and the financing statements pertaining to the Permitted
Senior Indebtedness, no financing statement covering any Collateral or any
proceeds thereof is on file in any public office (other than financing
statements for which termination statements are being delivered to Secured
Party at Closing).
3.5 Intangible Collateral. The Intangible Collateral represents bona
fide and existing indebtedness, obligations, liabilities, rights and
privileges owed or belonging to Debtor to which, to the best of Debtor's
knowledge, there is no valid defense, set-off or counterclaim against
Debtor and in connection with which there is no default with respect to
any payment or performance on the part of Debtor, or, to the best of
Debtor's knowledge, of any other party which would have a Material Adverse
Effect.
3.6 Tangible Collateral-Personal Property. All Tangible Collateral
at all times shall be considered personal property.
4. Affirmative Covenants. Until all of Borrower's Obligations are paid and
performed in full, Debtor shall:
4.1 Taxes. Pay promptly when due all taxes, levies, assessments and
governmental charges upon and relating to any of the Property, income or
receipts of Debtor or otherwise for which Debtor is or may be liable,
except to the extent that the failure to pay any of such taxes, levies,
assessments or charges is permitted by the Loan Agreement.
4.2 Insurance. At its sole expense, keep the Collateral insured
against loss or damage by insurance policies which shall be in such form,
with such companies and in such amounts as may be satisfactory to Secured
Party and otherwise comply with the provisions of Section 6.6 of the Loan
Agreement.
4.3 Tangible Collateral.
4.3.1 Good Repair. Keep such of the Tangible Collateral as is
necessary to the operations of Borrower's Cable Business in good
working order and repair and make all necessary replacements thereof
and renewals thereto so that the value and operating efficiency
thereof at all times shall be maintained and preserved.
4.3.2 Insurance Requirements. Maintain the Tangible Collateral
at
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<PAGE>
all times in accordance with the requirements of all insurance
carriers which provide insurance with respect to such Tangible
Collateral so that such insurance shall remain in full force and
effect.
4.3.3 Certificates of Title. Upon the request of Secured
Party, promptly deliver to Secured Party all certificates of title
pertaining to the Tangible Collateral, together with such
endorsements, assignments and other agreements as Secured Party may
request in order to perfect the security interest of Secured Party
in such Tangible Collateral.
4.3.4 Use of Collateral. Use the Tangible Collateral in
compliance with all statutes, regulations, ordinances, requirements
and regulations and all judgments, orders, injunctions and decrees
applicable thereto, and all other federal, state and local laws,
except where the failure to comply would not have a Material Adverse
Effect.
4.4 Intangible Collateral.
4.4.1 Payments. Make all payments and perform all acts
necessary to maintain and preserve the Intangible Collateral,
including, without limitation, filing of documents, renewals or
other information with any Governmental Body or any other Person.
4.4.2 Delivery of Instruments. Upon the request of Secured
Party, promptly deliver to Secured Party the original executed
copies of all instruments which constitute part of the Intangible
Collateral, together with such endorsements, assignments and other
agreements as Secured Party may request in order to perfect the
security interest of Secured Party in such instruments.
4.4.3 Accurate Records. At all times keep accurate and
complete records of payment and performance by Debtor and other
Persons of their respective obligations with respect to the
Intangible Collateral and, subject to the provisions of Section 6.2
of the Loan Agreement, permit Secured Party or any of its agents to
call at Debtor's place of business without hindrance or delay to
inspect, audit, check or make extracts from the books, records,
correspondence or other data relating to the Intangible Collateral.
4.4.4 Verification of Indebtedness. Upon request of Secured
Party after the occurrence and during the continuance of an Event of
Default, permit Secured Party itself, at any time, in the name of
Secured Party or Debtor, to verify directly with the obligors the
indebtedness due Debtor on any account or other item of Intangible
Collateral.
4.4.5 Defaults, Other Claims. Immediately inform Secured Party
of any default in payment or performance by Debtor or any other
Person of any
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<PAGE>
obligation with respect to the Intangible Collateral or of claims
made by others in regard to the Intangible Collateral, if either of
which could have a Material Adverse Effect.
4.5 Collection of Proceeds. Collect the proceeds of indebtedness
owing to Debtor by any Person under any instrument or by any account
debtor with respect to any account, contract right, chattel paper or
general intangible.
4.6 Financing Statements, Further Assurances. Concurrently with the
execution of this Security Agreement, and from time to time hereafter as
requested by Secured Party, execute and deliver to Secured Party such
financing statements, continuation statements, termination statements,
amendments to any of the foregoing and other documents, in form
satisfactory to Secured Party, as Secured Party may require to perfect and
continue in effect the security interest of Secured Party granted pursuant
to this Security Agreement, to carry out the purposes of this Security
Agreement and to protect Secured Party's rights hereunder. Debtor, upon
demand, shall pay the cost of filing all such financing statements,
continuation statements, termination statements, amendments to any of the
foregoing and other documents.
5. Negative Covenants. Until all of Borrower's Obligations are paid and
performed in full, Debtor agrees that it shall not:
5.1 Sales and Transfer of Collateral. Sell, lease, assign or
otherwise dispose of any of the Collateral, except as may be permitted by
and in accordance with the provisions of Section 7.12 of the Loan
Agreement.
5.2 Modification. Materially and adversely change the terms of
payment or performance of any obligation with respect to the Intangible
Collateral without the prior written consent of Secured Party.
5.3 Installation of Tangible Collateral. Permit any of the Tangible
Collateral to be installed, affixed or attached to the real estate or
Leasehold Property of Debtor or any other Person so as to become a part
thereof or become in any sense a fixture.
5.4 Valuation of Licenses. Contest the value attributed by Secured
Party to any FCC License of Debtor in any insolvency, bankruptcy,
receivership, custodianship, liquidation, reorganization, assignment for
the benefit of creditors or other similar proceeding.
6. Protection of Collateral. In the event of any failure of Debtor to (i)
maintain in force and pay for any insurance or bond which Debtor is required to
provide pursuant to this Security Agreement or the other Loan Instruments, (ii)
keep the Tangible Collateral in good repair and operating condition, (iii) keep
the Collateral free from all Liens except for Permitted Liens, (iv) pay when due
all taxes, levies and assessments on or in respect of the Collateral, except as
permitted pursuant to the terms of Section 4.1 above, (v) make all payments and
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<PAGE>
perform all acts on the part of Debtor to be paid or performed with respect to
any of the Collateral, including, without limitation, all expenses of
protecting, storing, warehousing, insuring, handling and maintaining the
Collateral, and (vi) keep fully and perform promptly any other of the
obligations of Debtor under this Security Agreement or the other Loan
Instruments, Secured Party, at its option, may (but shall not be required to)
procure and pay for such insurance, place such Collateral in good repair and
operating condition, pay or contest or settle such Liens or taxes or any
judgments based thereon or otherwise make good any other aforesaid failure of
Debtor. Debtor shall reimburse Secured Party immediately upon demand for all
sums paid or advanced on behalf of Debtor for any such purpose, together with
all costs, expenses and reasonable attorneys' fees paid or incurred by Secured
Party in connection therewith and interest at the Default Rate on all sums so
paid or advanced from the date of such payment or advancement until repaid to
Secured Party. All such sums paid or advanced by Secured Party, with interest
thereon, immediately upon payment or advancement thereof, shall be deemed to be
part of Borrower's Obligations secured hereby.
7. Event of Default. Debtor shall be in default under this Security
Agreement upon the occurrence of an Event of Default under the Loan Agreement.
8. Remedies Upon Default. Upon the occurrence of an Event of Default:
8.1 Rights of Secured Party. Secured Party shall have all of the
rights and remedies of a secured party under the Code and all other rights
and remedies accorded to Secured Party at equity or law, including,
without limitation, the right to apply for and have a receiver appointed
by a court of competent jurisdiction to manage, protect and preserve the
Collateral, to continue operating the business of Debtor and to collect
all revenues and profits thereof. Any notice of sale or other disposition
of Collateral given not less than 10 Business Days' prior to such proposed
action shall constitute reasonable and fair notice of such action. To the
extent permitted by applicable law, Secured Party may postpone or adjourn
any such sale from time to time by announcement at the time and place of
sale stated in the notice of sale or by announcement of any adjourned
sale, without being required to give a further notice of sale. Any such
sale may be for cash or, unless prohibited by applicable law, upon such
credit or installment terms as Secured Party shall determine. To the
extent permitted by applicable law, Debtor shall be credited with the net
proceeds of such sale only when such proceeds actually are received by
Secured Party in Good Funds. Despite the consummation of any such sale,
Debtor shall remain liable for any deficiency on Borrower's Obligations
which remains outstanding following any such sale. All net proceeds
received pursuant to a sale shall be applied in the manner set forth in
Section 8.4 of the Loan Agreement.
8.2 Assembly of Collateral. Upon the request of Secured Party,
Debtor shall assemble and make the Collateral available to Secured Party
at a place designated by Secured Party.
8.3 Proceeds. Debtor shall hold all proceeds of the Collateral
collected by
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<PAGE>
Debtor in trust for Secured Party, and promptly upon receipt thereof, turn
over such proceeds to Secured Party in the exact form in which they were
received.
8.4 Other Rights. Secured Party, at its election, and without notice
to Debtor, may:
8.4.1 Terminate Right of Collection. Terminate the right of
Debtor to collect the proceeds described in Section 8.3.
8.4.2 Notification. Notify the obligors under any instruments
and the account debtors of any account, contract right, chattel
paper or general intangible to make all payments directly to Secured
Party.
8.4.3 Collection of Payments. Demand, sue for, collect or
receive, in the name of Debtor or Secured Party, any money or
Property payable or receivable on any item of Collateral.
8.4.4 Settlement. Settle, release, compromise, adjust, sue
upon or otherwise enforce any item of Collateral as Secured Party
may determine.
8.4.5 Mail of Debtor; Endorsement of Checks. For the purpose
of enforcing Secured Party's rights under this Security Agreement,
receive and open mail addressed to Debtor, and endorse notes,
checks, drafts, money orders, documents of title or other forms of
payment on behalf and in the name of Debtor.
8.5 Applications to Governmental Bodies. Debtor, at its own cost and
expense, shall take any action that Secured Party may request in order to
enable Secured Party to obtain and enjoy the full rights and benefits
granted to Secured Party hereunder, including, without limitation, all
rights necessary or desirable to obtain, use, sell or assign the Licenses
and Franchises of Debtor and the other Collateral of Debtor hereunder, and
to exercise all remedies available to Secured Party hereunder and under
applicable law. Without limiting the generality of the foregoing, at the
request of Secured Party at any time following the occurrence of any Event
of Default, Debtor, at its sole cost and expense, shall assist Secured
Party in obtaining any required approval of any Governmental Body
(including the FCC and any Franchisor) to the transfer of Debtor's
Licenses and Franchises to Secured Party or its designee or any receiver,
trustee or similar official or purchaser by preparing, signing and filing
with the appropriate Governmental Body any application or document and
taking all other actions deemed necessary or appropriate by Secured Party
(i) for consent to the assignment of any such License or Franchise
necessary or appropriate under applicable Cable Laws, (ii) for approval of
any sale, assignment or transfer of any such License or Franchise and
(iii) to enable Secured Party or its designee or any receiver, trustee or
similar official or purchaser to obtain from such Governmental Body or any
other Person any required authority necessary to operate the Cable
Business of Debtor.
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<PAGE>
8.6 Transfer of Control to Other Persons. Debtor acknowledges and
agrees that a transfer of control of the Collateral or an assignment of
Licenses or Franchises of such Debtor may be made to a receiver, trustee,
or similar official or to any purchaser of all or any part of the other
Collateral hereunder, pursuant to any court order, public or private sale,
judicial sale, foreclosure or the exercise of any other remedies available
to Secured Party hereunder or under applicable law.
All monies received by Secured Party pursuant to this Section 8 shall be applied
by Secured Party in accordance with the applicable provisions of Section 8.4 of
the Loan Agreement.
9. Power of Attorney. To effectuate the rights and remedies of Secured
Party under this Security Agreement, Debtor hereby irrevocably appoints Secured
Party its attorney-in-fact, in the name of Debtor or in the name of Secured
Party, to:
9.1 Execution of Financing Statements. Execute and file from time to
time financing statements, continuation statements, termination statements
and amendments thereto, covering the Collateral, in form satisfactory to
Secured Party.
9.2 Execution of Other Documents. Take all actions and execute all
documents referred to in Section 8.5 above to the extent permitted by law.
The power of attorney granted pursuant to this Section 9 is coupled with an
interest and shall be irrevocable until all of Borrower's Obligations shall have
been paid and performed in full.
10. Certain Agreements of Debtor.
10.1 Waiver of Notice. Debtor hereby waives notice of the acceptance
of this Security Agreement and, except as otherwise specifically provided
in Section 8.1 above or in the Loan Agreement, all other notices, demands
or protests to which Debtor otherwise might be entitled by law (and which
lawfully may be waived) with respect to this Security Agreement,
Borrower's Obligations and the Collateral.
10.2 Rights of Secured Party. Debtor agrees that Secured Party (i)
shall have no duty as to the collection or protection of the Collateral or
any income thereon subject to applicable law, (ii) may exercise the rights
and remedies of Secured Party with respect to the Collateral without
resort or regard to other security or sources for payment and (iii) shall
not be deemed to have waived any of the rights or remedies granted to
Secured Party hereunder unless such waiver shall be in writing and shall
be signed by Secured Party. Debtor and Secured Party acknowledge their
intent that, upon the occurrence of an Event of Default, Secured Party
shall receive, to the fullest extent permitted by law and governmental
policy (including, without limitation, the rules, regulations and policies
of the FCC), all rights necessary or desirable to obtain, use or sell the
Collateral, and to exercise all remedies available to Secured Party under
the Loan Instruments, the Code or other applicable law. Debtor and Secured
Party further acknowledge and agree that, in the event of changes in law
or governmental policy occurring subsequent to the date
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hereof that affect in any manner Secured Party's rights of access to, or
use or sale of, the Collateral, or the procedures necessary to enable
Secured Party to obtain such rights of access, use or sale, Secured Party
and Debtor shall amend the Loan Instruments, in such manner as Secured
Party reasonably shall request, in order to provide Secured Party such
rights to the greatest extent possible consistent with then applicable law
and governmental policy.
10.3 No Delay; Single or Partial Exercise Permitted. No delay or
omission on the part of Secured Party in exercising any rights or remedies
contained herein shall operate as a waiver of such right or remedy or of
any other right or remedy, and no single or partial exercise of any right
or remedy shall preclude any other or further exercise thereof, or the
exercise of any other right or remedy. A waiver of any right or remedy on
any one occasion shall not be construed as a bar or waiver of any right or
remedy on future occasions, and no delay, omission, waiver or single or
partial exercise of any right or remedy shall be deemed to establish a
custom or course of dealing or performance between the parties hereto.
11. Rights Cumulative. All rights and remedies of Secured Party pursuant
to this Security Agreement, the Loan Agreement or otherwise, shall be cumulative
and non-exclusive, and may be exercised singularly or concurrently.
12. Severability. In the event that any provision of this Security
Agreement is deemed to be invalid by reason of the operation of any law,
including, but not limited to, the rules, regulations and policies of the FCC,
or by reason of the interpretation placed thereon by any court, the FCC or any
other Governmental Body, this Security Agreement shall be construed as not
containing such provision and the invalidity of such provision shall not affect
the validity of any other provisions hereof, and any and all other provisions
hereof which otherwise are lawful and valid shall remain in full force and
effect.
13. Notices. All notices and communications under this Security Agreement
shall be in writing and delivered in the manner set forth in Section 12.1 of the
Loan Agreement.
14. Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of Secured Party and Debtor.
15. Captions. The headings in this Security Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
16. Counterparts. This Security Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which,
when taken together, shall be one and the same instrument.
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17. Survival of Security Agreement; Termination. All covenants,
agreements, representations and warranties made herein shall survive the
execution and delivery of the Loan Agreement and shall continue in full force
and effect until Borrower's Obligations are paid and performed in full.
18. APPLICABLE LAW. THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS AND DECISIONS OF THE STATE OF NEW YORK.
FOR PURPOSES OF THIS SECTION 18, THIS SECURITY AGREEMENT SHALL BE DEEMED TO BE
PERFORMED AND MADE IN THE STATE OF NEW YORK.
19. JURISDICTION AND VENUE. DEBTOR HEREBY AGREES THAT ALL ACTIONS OR
PROCEEDINGS INITIATED BY DEBTOR AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS
SECURITY AGREEMENT SHALL BE LITIGATED IN THE SUPERIOR COURT OF ARIZONA, MARICOPA
COUNTY DIVISION, OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA, OR, IF SECURED PARTY INITIATES SUCH ACTION, IN ADDITION TO THE
FOREGOING COURTS, ANY COURT IN WHICH SECURED PARTY SHALL INITIATE OR TO WHICH
SECURED PARTY SHALL REMOVE SUCH ACTION, TO THE EXTENT SUCH COURT HAS
JURISDICTION. DEBTOR HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN OR REMOVED BY SECURED
PARTY TO ANY OF SUCH COURTS, AND HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS
AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN, AND AGREES THAT
SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO DEBTOR AT THE ADDRESS TO WHICH NOTICES
ARE TO BE SENT PURSUANT TO SECTION 13. DEBTOR WAIVES ANY CLAIM THAT MARICOPA
COUNTY, ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN
IMPROPER FORUM BASED ON LACK OF VENUE. SHOULD DEBTOR, AFTER BEING SO SERVED,
FAIL TO APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED
WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE MAILING THEREOF, DEBTOR
SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY
SECURED PARTY AGAINST DEBTOR AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS,
COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM SET FORTH IN THIS
SECTION 19 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY SECURED PARTY, OF
ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING, BY SECURED PARTY, OF ANY
ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION AND DEBTOR
HEREBY WAIVES ANY RIGHT TO ATTACK ANY SUCH JUDGMENT OR ACTION COLLATERALLY.
20. WAIVER OF RIGHT TO JURY TRIAL. SECURED PARTY AND DEBTOR ACKNOWLEDGE
AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE
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UNDER THIS SECURITY AGREEMENT WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES
AND THEREFORE, SECURED PARTY AND DEBTOR AGREE THAT ANY COURT PROCEEDING ARISING
OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION
BY A JUDGE SITTING WITHOUT A JURY.
21. TIME OF THE ESSENCE. TIME FOR THE PERFORMANCE OF DEBTOR'S OBLIGATIONS
UNDER THIS SECURITY AGREEMENT IS OF THE ESSENCE.
22. Secured Party's Right to Specific Performance. Debtor acknowledges
that FCC authorization is integral to Secured Party's realization of the value
of all of the Collateral, that Debtor's FCC Licenses are unique assets, that
there is no adequate remedy at law for failure by Debtor to comply with the
provisions of Section 8.5 and that such failure would not be adequately
compensable in monetary damages; therefore, Debtor agrees that, in addition to
all other remedies available at law or in equity, Secured Party shall be
entitled to obtain decree(s) of specific performance entitling it to temporary
restraining order(s), preliminary injunction(s), or permanent injunction(s) to
specifically enforce and require specific performance of the provisions of
Section 8.5. Debtor agrees that notice shall be adequate for the entry of a
decree of specific performance in respect of any such matter (i) in the case of
a temporary restraining order, upon twenty-four (24) hours' prior notice of the
hearing thereof and (ii) in the case of any other proceeding, upon five (5)
days' prior notice of the hearing thereof, and hereby waives all requirements
and demands that the Secured Party give any greater notice of such hearings and
further waives all requirements and demands that the Secured Party post a bond
or other surety arrangement in connection with the issuance of such decree.
23. FCC and Franchisor Approval. Notwithstanding anything to the contrary
contained herein, no party hereto shall take any action, including, but not
limited to, the operation of Debtor's Cable Business that would constitute or
result in the transfer or assignment of any License or Franchise issued to or
held by Debtor, or a transfer of control over any such License or Franchise,
whether de jure or de facto, if such assignment or transfer would require under
then existing law the prior approval of and/or any notice to the FCC or any
Franchisor, without such party first having notified the FCC or such Franchisor
of any such assignment or transfer and, if required under then existing law,
obtaining the approval of the FCC or such Franchisor therefor, notifying the FCC
or such Franchisor of the consummation thereof and complying with all other
applicable provisions of the Cable Act. The parties hereto intend that the
powers of Secured Party hereunder, in all relevant aspects, shall be governed by
the Cable Act and all other applicable statutory requirements and rules and
regulations, including, without limitation, those of the FCC.
[remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, this Security Agreement has been executed and
delivered by each of the parties hereto by a duly authorized officer of each
such party on the date first set forth above.
SCOTT CABLE COMMUNICATIONS,
INC., a Texas corporation
By: /s/ Bruce A. Armstrong
------------------------------
Bruce A. Armstrong
Chief Executive Officer
FINOVA CAPITAL CORPORATION, a
Delaware corporation
By: /s/ Jeffrey S. Kilrea
------------------------------
Jeffrey S. Kilrea
Vice President
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Exhibit 10.4
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of December 18,
1996 is among SCOTT CABLE MANAGEMENT COMPANY, INC., a Connecticut corporation
(the "Class A Pledgor"), MEDIA/COMMUNICATIONS PARTNERS LIMITED PARTNERSHIP, a
Delaware limited partnership ("M/C Partners"), CHESTNUT STREET PARTNERS, INC., a
Massachusetts corporation ("Chestnut Street Partners"), MILK STREET PARTNERS,
INC., a Massachusetts corporation ("Milk Street Partners"), TA INVESTORS, a
Massachusetts general partnership ("TA Investors"), NORTHEAST VENTURES II, a
Connecticut general partnership ("Northeast Ventures II"), ALLSTATE INSURANCE
COMPANY, an Illinois insurance company ("Allstate") (M/C Partners, Chestnut
Street Partners, Milk Street Partners, TA Investors and Allstate sometimes
hereinafter are referred to individually as a "Class B Pledgor" and collectively
as the "Class B Pledgors"), FLEET NATIONAL BANK, a national banking association
("Trustee"), not in its individual capacity, but as trustee for the holders of
all 15% Senior Subordinated Pay-in-Kind Debentures Due March 18, 2002 issued
pursuant to that certain Indenture of even date herewith between Scott Cable
Communications, Inc., as Issuer, and Trustee (Trustee sometimes hereinafter is
referred to as the "Class C Pledgor," and the Class A Pledgor, the Class B
Pledgors and the Class C Pledgor sometimes hereinafter are referred to
individually as a "Pledgor and collectively as "Pledgors"), and FINOVA CAPITAL
CORPORATION, a Delaware corporation ("Pledgee"), in its individual capacity and
as agent for all Lenders (as defined in Section 1 below).
Preliminary Statement:
A. Scott Cable Communications, Inc., a Texas corporation ("Borrower"), and
Pledgee have entered into a Loan Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the "Loan
Agreement"), pursuant to which Lenders have agreed to make loans and other
financial accommodations (collectively, the "Loans") to Borrower, subject to the
terms and conditions set forth in the Loan Agreement.
B. Each Pledgor owns the number of shares of the issued and outstanding
capital stock of Borrower set forth opposite such Pledgor's name on Exhibit A
attached hereto and, accordingly, each Pledgor has a direct financial interest
in inducing Pledgee to make the loans.
C. One of the conditions precedent to the obligation of Lenders to make
the Loans is the execution by each Pledgor of this Pledge Agreement and the
performance by each Pledgor of its obligations hereunder.
NOW, THEREFORE, in order to induce Lenders to make the Loans, and for
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, each Pledgor and Pledgee hereby agree as follows:
<PAGE>
1. Definitions. All capitalized terms used but not elsewhere defined in
this Pledge Agreement shall have the respective meanings ascribed to such terms
in the Loan Agreement. The following terms shall have the following meanings in
this Pledge Agreement:
Collateral: the Securities and all dividends, distributions, other
amounts, additional securities of Borrower, or any successor in interest
to Borrower, and other Property to which any Pledgor or any successor in
interest to any Pledgor (with or without additional consideration) is or
becomes entitled by virtue of the ownership by such Pledgor of any of the
Securities or as the result of any corporate reorganization, merger,
consolidation, stock split, stock dividend, distribution, conversion,
preemptive right or otherwise, and the proceeds thereof.
Securities: the shares of the issued and outstanding capital stock
of Borrower described in Exhibit A hereto together with duly executed
assignments separate from certificate satisfactory to Pledgee attached
thereto.
2. Pledge of Collateral. To secure payment and performance of Borrower's
Obligations, each Pledgor hereby pledges, assigns and grants to Pledgee a
security interest in all of such Pledgor's right, title and interest in and to
(i) the Securities owned by such Pledgor and (ii) all other items of Collateral
now owned or hereafter acquired by such Pledgor.
3. Representations, Warranties and Covenants. Each Pledgor hereby
represents, warrants and covenants to Pledgee that with respect to the
Collateral pledged by such Pledgor to Pledgee on the date hereof, (i) such
Collateral represents 100% of the issued and outstanding capital stock and
warrants, options and other rights to purchase or acquire capital stock of
Borrower owned by such Pledgor, (ii) in the case of the Class C Pledgor, such
Pledgor is the legal owner of such Collateral and, in the case of the Class A
Pledgor and the Class B Pledgors, such Pledgor is the legal and beneficial,
owner of such Collateral, (iii) except for the first Lien on the Collateral
granted to Pledgee hereby, such Pledgor has not created or granted any other
Lien on the Collateral, (iv) to the best of its knowledge, no authorization,
approval or other action by, or notice to or filing with, any Governmental Body
by such Pledgor is required for the pledge by such Pledgor of such Collateral
pursuant to the terms of this Pledge Agreement, and (v) until all of Borrower's
Obligations have been paid and performed in full, such Pledgor will not create
or permit to exist any Lien upon or with respect to such Collateral, except for
the Lien thereon granted to Pledgee by this Pledge Agreement. Each Pledgor
further represents and warrants to Pledgee that the location of such Pledgor's
chief executive office and the address and telecopy number of such Pledgor for
notice purposes is set forth on Exhibit B hereto.
4. Additional Securities; Stock Splits; Stock Dividends.
4.1 Additional Securities. Each Pledgor agrees that in the event
that such Pledgor, by virtue of the ownership by such Pledgor of its
portion of the Collateral, now is, or hereafter becomes, entitled (with or
without additional consideration) to other or additional securities of
Borrower or any successor thereto as the result of any corporate
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reorganization, merger, consolidation, stock split, stock dividend,
conversion or preemptive right or otherwise, such Pledgor shall:
4.1.1 Delivery. Cause the issuer of such additional securities
to deliver to Pledgee all certificates and other documents, if any,
evidencing the ownership by such Pledgor of such additional
securities and hereby authorizes and empowers Pledgee to demand the
same from such issuer, and agrees if such certificates and other
documents are delivered to such Pledgor, to take possession thereof
in trust for Pledgee;
4.1.2 Assignments Separate From Certificate; UCC Financing
Statements. Deliver to Pledgee (i) an assignment separate from
certificate with respect to such securities, executed in blank by
such Pledgor, and (ii) such UCC financing statements executed by
such Pledgor as Pledgee reasonably may request to perfect Pledgee's
security interest in such additional securities;
4.1.3 Representations and Warranties. Deliver to Pledgee a
certificate, executed by such Pledgor and dated the date such
additional securities are issued to such Pledgor, as to the truth
and correctness on such date of the representations and warranties
set forth in Section 3 hereof; and
4.1.4 Additional Documents. Deliver to Pledgee such other
certificates, forms and other instruments as Pledgee reasonably may
request in connection with the pledge of such additional securities
to Pledgor.
4.2 Additional Collateral. Each Pledgor agrees that such additional
securities shall constitute a portion of the Collateral and be subject to
this Pledge Agreement in the same manner and to the same extent as the
Securities pledged hereby to Pledgee on the date hereof.
5. Voting Power; Distributions. Unless and until an Event of Default shall
have occurred and be continuing, Pledgee shall have delivered notice to each
Pledgor of Pledgee's intention to exercise any of its rights under Section 6.2
hereof and Borrower's Obligations have been accelerated, and thereafter until
any required consent of the FCC and/or other applicable Governmental Body is
obtained, each Pledgor shall be entitled to exercise all voting powers in all
corporate matters pertaining to the Collateral or otherwise, for any purpose not
inconsistent with, or in violation of, the provisions of any of the Loan
Instruments. Except as otherwise provided in the Loan Agreement, unless and
until all of Borrower's Obligations have been performed and paid in full, no
Pledgor shall be entitled to receive any dividends or distributions with respect
to any portion of the Collateral. If any such dividends or distributions are
received by any Pledgor in violation of the terms of this Section 5, such
dividends or distributions shall be (i) held in trust by such Pledgor on behalf
of Pledgee, (ii) turned over to Pledgee by such Pledgor immediately upon receipt
thereof and (iii) deemed to constitute a portion of the Collateral pledged by
such Pledgor to Pledgee hereunder.
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6. Default and Remedies.
6.1 Occurrence. The occurrence of an Event of Default under the Loan
Agreement shall constitute an Event of Default hereunder.
6.2 Remedies. If an Event of Default shall occur and be continuing
and Borrower's Obligations are accelerated, Pledgee, at its option and
upon notice to each Pledgor of its intention to do so, may:
6.2.1 Registration. After any required consent of the FCC
and/or any other applicable Governmental Body is obtained, cause the
Collateral to be registered in its name or in the name of its
nominee;
6.2.2 Voting Power. After any required consent of the FCC
and/or other applicable Governmental Body is obtained, exercise all
voting powers pertaining to the Collateral and otherwise act with
respect thereto as though Pledgee were the owner thereof;
6.2.3 Distributions. Receive all dividends and other
distributions of any kind whatsoever on all or any part of the
Collateral;
6.2.4 Collection; Conversion. Exercise any and all rights of
collection, conversion or exchange, and any and all other rights,
privileges, options or powers of any Pledgor pertaining or relating
to the Collateral;
6.2.5 Sale of Collateral. To the extent permitted by
applicable law and subject to any applicable state or federal
securities laws, sell, assign and deliver the whole, or from time to
time, any part of the Collateral at any broker's board or at any
private sale or at public auction, with or without demand for
performance or advertisement of the time or place of sale or
adjournment thereof or otherwise, and free from any right of
redemption (all of which hereby expressly are waived by each
Pledgor) for cash, for credit or for other property, for immediate
or future delivery, and for such price and on such terms as Pledgee
in its sole discretion may determine; and
6.2.6 Other Remedies. To the extent permitted by applicable
law exercise any other remedy specifically granted under this Pledge
Agreement or now or hereafter existing in equity, or at law, by
virtue of statute or otherwise.
With respect to the actions described in each of subsections 6.2.2 and
6.2.4 above, each Pledgor hereby irrevocably constitutes and appoints
Pledgee its proxy and attorney-in-fact with full power of substitution and
acknowledges that the constitution and appointment of such proxy and
attorney-in-fact are coupled with an interest and are irrevocable.
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6.3 Agreement to Sell Collateral. For the purposes of this Section
6, to the extent permitted by applicable law an agreement to sell all or
any part of the Collateral shall be treated as a sale thereof and Pledgee
shall be free to carry out such sale pursuant to such agreement, and no
Pledgor shall be entitled to the return of any of the same subject
thereto, notwithstanding the fact that after Pledgee shall have entered
into such an agreement, all Events of Default hereunder may have been
remedied or all of Borrower's Obligations may have been paid and/or
performed in full.
6.4 Pledgee May Bid. At any sale made pursuant to Section 6.2 above,
to the extent permitted by applicable law Pledgee may bid for and
purchase, free from any right of equity or redemption on the part of any
Pledgor (the same hereby being waived and released by each Pledgor), any
part or all of the Collateral that is offered for sale, and Pledgee, upon
compliance with the terms of sale, may hold, retain and dispose of such
Collateral without further accountability therefor.
6.5 Proceeds of Sale. The proceeds of any sale of the whole or any
part of the Collateral and any other monies at the time held by Pledgee
under the provisions of this Pledge Agreement shall be applied in
accordance with the terms of Section 8.4 of the Loan Agreement.
6.6 No Duty of Pledgee. Pledgee shall not have any duty to exercise
any of the rights, privileges, options or powers or to sell or otherwise
realize upon any of the Collateral, as hereinbefore authorized, and
Pledgee shall not be responsible for any failure to do so or delay in so
doing.
6.7 Effect of Sale. Any sale of all or any portion of the Collateral
pursuant to Section 6.2 above shall operate to divest all right, title and
interest of each Pledgor to the Collateral which is the subject of any
such sale.
6.8 Securities Act. Each Pledgor acknowledges that Pledgee may be
unable to effect a public sale of all or a part of the Collateral by
reason of certain prohibitions contained in the Securities Act, or that it
may be able to do so only after delay which might adversely affect the
value that might be realized upon the sale of the Collateral. Accordingly,
each Pledgor agrees that Pledgee, without the necessity of attempting to
cause any registration of the Collateral to be effected under the
Securities Act, may sell the Collateral or any part thereof in one or more
private sales to a restricted group of purchasers who may be required to
agree, among other things, that they are acquiring the Collateral for
their own account, for investment purposes only, and not with a view
toward the distribution or resale thereof. Each Pledgor agrees that any
such private sale may be at prices or on terms less favorable to the owner
of the Collateral sold than would be the case if such Collateral was sold
at public sale, and that any such private sale shall not be deemed not to
have been made in a commercially reasonable manner by virtue of such sale
having been a private sale.
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6.9 Applications to Governmental Bodies. Upon the occurrence and
during the continuance of an Event of Default, each Pledgor, upon the
request of Pledgee and at Borrower's sole cost and expense, shall take any
action that Pledgee reasonably may request in order to enable Pledgee to
obtain and enjoy the full rights and benefits granted to Pledgee
hereunder, including, without limitation, all rights necessary or
desirable to obtain, use, sell or assign control of the Licenses and
Franchises of Borrower and the other Collateral hereunder, and to exercise
all remedies available to Pledgee hereunder and under applicable law.
Without limiting the generality of the foregoing, at the request of
Pledgee at any time following the occurrence and during the continuance of
an Event of Default, each Pledgor, at Borrower's sole cost and expense,
shall assist Pledgee in obtaining any required approval of any
Governmental Body (including the FCC and any Franchisor) to the transfer
of control of the Licenses and Franchises of Borrower to Pledgee or any
other Person by preparing, signing and filing with the appropriate
Governmental Body any application or document and taking all other actions
deemed necessary or appropriate by Pledgee (i) for consent to the transfer
of control of any such Licenses and Franchises necessary or appropriate
under applicable Cable Laws, (ii) for approval of any sale, assignment or
transfer of control of any such Licenses and Franchises and (iii) to
enable Pledgee or its designee or any receiver, trustee or similar
official or purchaser to obtain from such Governmental Body or any other
Person any required authority necessary to operate the Cable Business of
Borrower. To the extent permitted by law, during any period in which an
Event of Default has occurred and is continuing, each Pledgor hereby
irrevocably appoints Pledgee its attorney-in-fact with full power of
substitution to execute such applications and documents and take such
actions on behalf of such Pledgor. Each Pledgor acknowledges that the
appointment of Pledgee as such attorney-in-fact is coupled with an
interest and is irrevocable until all of Borrower's Obligations are paid
and performed in full.
6.10 Transfer of Control to Other Persons. Each Pledgor acknowledges
and agrees that, upon the occurrence and during the continuance of an
Event of Default, a transfer of control of the Collateral or an assignment
of any License or Franchise of Borrower may be made to a receiver, trustee
or similar official or to any purchaser of all or any part of the
Collateral hereunder, pursuant to any court order, public or private sale,
judicial sale, foreclosure or the exercise of any other remedies available
to Pledgee hereunder or under applicable law.
6.11 Notice. Pledgee shall give not less than 10 Business Days'
prior written notice to Pledgors of any sale pursuant to this Section 6.
Each Pledgor hereby agrees that such notice is commercially reasonable.
7. Pledgee's Obligations; Custodial Agreement; Performance Rights; Pledge
Does Not Make Pledgee a Shareholder. Pledgee shall not have any duty to protect,
preserve or enforce rights against the Collateral other than a duty of
reasonable custodial care of any such Collateral in its possession, it being
understood that Pledgee shall (i) have no responsibility for (A) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
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<PAGE>
or other matters relating to the Collateral, whether or not Pledgee has or is
deemed to have knowledge of such matters, (B) taking any necessary steps to
preserve rights against any parties with respect to the Collateral or (C) making
any capital contributions or other payments on behalf of any Pledgor and (ii)
not be deemed to be a shareholder of Borrower unless Pledgee purchases or
otherwise retains the applicable portion of the Collateral in connection with a
foreclosure.
8. Termination of Pledge Agreement. Upon the payment and performance in
full of all Borrower's Obligations, Pledgee shall deliver to each Pledgor the
Collateral in its possession and this Pledge Agreement thereupon shall
terminate, and Pledgee shall execute, at Pledgors' expense, such instruments or
other documents including, without limitation, termination statements, as shall
be necessary to evidence such termination.
9. Miscellaneous.
9.1 Exercise of Rights. Each Pledgor unconditionally agrees that if
an Event of Default has occurred and is continuing, Pledgee may exercise
its rights and remedies hereunder prior to, concurrently with or
subsequent to the exercise by Pledgee of its rights and remedies against
such Pledgor or any other Person under any of the Loan Instruments, at law
or in equity, or otherwise. The obligations of each Pledgor under this
Pledge Agreement shall be absolute and unconditional and shall remain in
full force and effect without regard to, and shall not be released or
discharged or in any way affected by:
9.1.1 Amendments. Any amendment or modification of or
supplement to any of the Loan Instruments;
9.1.2 Exercise or Non-Exercise of Rights. Any exercise or
non-exercise of any right or remedy under any of the Loan
Instruments, or the granting of any postponements or extensions for
time of payment or other indulgences to such Pledgor or any other
Person, or the settlement or adjustment of any claim or the release
or discharge or substitution of any Person primarily or secondarily
liable with respect to any of the Loan Instruments;
9.1.3 Bankruptcy. The institution of any bankruptcy,
insolvency, reorganization, debt arrangement, readjustment,
composition, receivership or liquidation proceedings by or against
such Pledgor, Borrower or any other Person; or
9.1.4 Other Defenses. To the extent permitted by applicable
law, any other circumstance which otherwise might constitute a
defense to, or a discharge of, such Pledgor with respect to
Borrower's Obligations.
9.2 Rights Cumulative. Each and every right, remedy and power
granted to Pledgee hereunder shall be cumulative and in addition to any
other right, remedy or power specifically granted herein or now or
hereafter existing in equity, at law, by virtue of
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statute or otherwise and may be exercised by Pledgee, from time to time,
concurrently or independently and as often and in such order as Pledgee
may deem expedient. Any failure or delay on the part of Pledgee in
exercising any such right, remedy or power, or abandonment or
discontinuance of steps to enforce the same, shall not operate as a waiver
thereof or affect the right of Pledgee thereafter to exercise the same,
and any single or partial exercise of any such right, remedy or power
shall not preclude any other or further exercise thereof or the exercise
of any other right, remedy or power, and no such failure, delay,
abandonment or single or partial exercise of rights of Pledgee hereunder
shall be deemed to establish a custom or course of dealing or performance
among the parties hereto.
9.3 Modification. Any modification or waiver of any provision of
this Pledge Agreement, or any consent to any departure by any Pledgor
therefrom, shall not be effective in any event unless the same is in
writing and signed by Pledgee and each Pledgor and then such modification,
waiver or consent shall be effective only in the specific instance and for
the specific purpose given. Any notice to or demand on any Pledgor in any
event not specifically required of Pledgee hereunder shall not entitle
such Pledgor to any other or further notice or demand in the same, similar
or other circumstances unless specifically required hereunder.
9.4 Further Assurances. Each Pledgor agrees that at any time, and
from time to time, after the execution and delivery of this Pledge
Agreement, such Pledgor, upon the request of Pledgee and at the expense of
Borrower, promptly will execute and deliver such further documents and do
such further acts and things as Pledgee reasonably may request in order to
effect fully the purposes of this Pledge Agreement and to subject to the
security interest created hereby any Collateral intended by the provisions
hereof to be covered hereby. Each Pledgor and Pledgee acknowledge their
intent that, upon the occurrence of an Event of Default, Pledgee shall
receive, to the fullest extent permitted by law and governmental policy
(including, without limitation, the rules, regulations and policies of the
FCC), all rights necessary or desirable to obtain, use or sell the
Collateral, and to exercise all remedies available to Pledgee under the
Loan Instruments, the Uniform Commercial Code or other applicable law.
Each Pledgor and Pledgee further acknowledge and agree that, in the event
of changes in law or governmental policy occurring subsequent to the date
hereof that affect in any manner Pledgee's rights of access to, or use or
sale of, the Collateral, or the procedures necessary to enable Pledgee to
obtain such rights of access, use or sale, Pledgee and such Pledgor shall
amend this Pledge Agreement, in such manner as Pledgee reasonably shall
request, in order to provide Pledgee such rights to the greatest extent
possible consistent with then applicable law and governmental policy.
9.5 Preservation of Collateral. Each Pledgor agrees that it will
warrant, preserve, maintain and defend, at the sole cost and expense of
Borrower, the right, title and interest of Pledgee in and to the
Collateral and all right, title and interest represented thereby against
all claims, charges and demands of all Persons whomsoever.
-8-
<PAGE>
9.6 Notices. All notices and communications under this Pledge
Agreement shall be delivered and be deemed received as set forth in
Section 12.1 of the Loan Agreement, with all notices to any Pledgor to be
sent to the address or telecopy number of such Pledgor set forth on
Exhibit B hereto.
9.7 GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY THE
LAWS AND DECISIONS OF THE STATE OF NEW YORK, EXCEPT THAT WITH REGARD TO
PERFECTION AND THE EFFECT OF PERFECTION AND NONPERFECTION OF SECURITY
INTERESTS THE LAW OF THE STATE APPLICABLE UNDER THE UCC SHALL APPLY. FOR
THE PURPOSES OF THIS SECTION 9.7, THIS PLEDGE AGREEMENT SHALL BE DEEMED TO
BE PERFORMED AND MADE IN THE STATE OF NEW YORK.
9.8 Severability. In the event that any provision of this Pledge
Agreement is deemed to be invalid by reason of the operation of any law,
including, but not limited to, the rules and regulations and policies of
the FCC, or by reason of the interpretation placed thereon by any court,
the FCC or any other Governmental Body, this Pledge Agreement shall be
construed as not containing such provision and any and all other
provisions hereof which otherwise are lawful and valid shall remain in
full force and effect.
9.9 Successors and Assigns. This Pledge Agreement shall inure to the
benefit of the successors and assigns of Pledgee and shall be binding upon
the successors and assigns of each Pledgor.
9.10 Counterparts. This Pledge Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but
all of which when taken together shall be deemed to be one and the same
instrument.
10. JURISDICTION AND VENUE. EACH PLEDGOR HEREBY AGREES THAT ALL ACTIONS OR
PROCEEDINGS INITIATED BY SUCH PLEDGOR IN ANY CAPACITY AND ARISING DIRECTLY OR
INDIRECTLY OUT OF THIS PLEDGE AGREEMENT SHALL BE LITIGATED IN THE SUPERIOR COURT
OF MARICOPA COUNTY, OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA, OR, IF PLEDGEE INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING
COURTS, ANY COURT IN WHICH PLEDGEE SHALL INITIATE OR TO WHICH PLEDGEE SHALL
REMOVE SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION. EACH PLEDGOR
HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR PROCEEDING COMMENCED IN OR REMOVED BY PLEDGEE TO ANY OF SUCH COURTS,
AND HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER
PROCESS OR PAPERS ISSUED THEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO SUCH PLEDGOR AT THE ADDRESS OF SUCH PLEDGOR LISTED ON EXHIBIT B.
-9-
<PAGE>
EACH PLEDGOR WAIVES ANY CLAIM THAT MARICOPA COUNTY, ARIZONA OR THE DISTRICT OF
ARIZONA IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE.
SHOULD ANY PLEDGOR, AFTER BEING SO SERVED, FAIL TO APPEAR OR ANSWER TO ANY
SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE NUMBER OF DAYS
PRESCRIBED BY LAW AFTER THE MAILING THEREOF, SUCH PLEDGOR SHALL BE DEEMED IN
DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY PLEDGEE AGAINST SUCH
PLEDGOR AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS.
THE EXCLUSIVE CHOICE OF FORUM FOR EACH PLEDGOR SET FORTH IN THIS SECTION 10
SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY PLEDGEE, OF ANY JUDGMENT
OBTAINED IN ANY OTHER FORUM OR THE TAKING, BY PLEDGEE, OF ANY ACTION TO ENFORCE
THE SAME IN ANY OTHER APPROPRIATE JURISDICTION, AND EACH PLEDGOR HEREBY WAIVES
THE RIGHT TO COLLATERALLY ATTACK ANY SUCH JUDGMENT OR ACTION.
11. WAIVER OR RIGHT TO JURY TRIAL. PLEDGEE AND EACH PLEDGOR ACKNOWLEDGE
AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE LOAN INSTRUMENTS
OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED THEREBY WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT
ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A COURT OF COMPETENT
JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
12. Pledgee's Right to Specific Performance. Each Pledgor acknowledges
that FCC and Franchisor authorization is integral to Pledgee's realization of
the value of all of the Collateral, that the Licenses and Franchises of Borrower
are unique assets, that there is no adequate remedy at law for failure by any
Pledgor to comply with the provisions of Section 6.9 and that such failure would
not be adequately compensable in monetary damages; therefore, each Pledgor
agrees that, in addition to all other remedies available at law or in equity,
Pledgee shall be entitled to obtain decree(s) of specific performance entitling
it to temporary restraining order(s), preliminary injunction(s), or permanent
injunction(s) to specifically enforce and require specific performance of the
provisions of Section 6.9. Each Pledgor agrees that notice shall be adequate for
the entry of a decree of specific performance with respect to any such matter
(i) in the case of a temporary restraining order, upon twenty four (24) hours'
prior notice of the hearing thereof and (ii) in the case of any other
proceeding, upon three (3) days' prior notice of the hearing thereof, and hereby
waives all requirements and demands that Pledgee give any greater notice of such
hearings or post a bond or other surety arrangement in connection with the
issuance of such decree.
13. FCC and Franchisor Approval. Notwithstanding anything to the contrary
contained herein, Pledgee shall not take any action, including, but not limited
to, the operation of the business of Borrower, that would constitute or result
in the transfer or assignment of any License or Franchise issued to or held by
Borrower, or a transfer of control over any such
-10-
<PAGE>
License or Franchise, whether de jure or de facto, if such assignment or
transfer would require under then existing law the prior approval of and/or any
notice to the FCC or any Franchisor, without such party first having notified
the FCC or such Franchisor of any such assignment or transfer and, if required
under then existing law, obtaining the approval of the FCC or such Franchisor
therefor, notifying the FCC or such Franchisor of the consummation thereof and
complying with all other provisions of applicable Cable Laws. The parties hereto
intend that the powers of Pledgee hereunder, in all relevant aspects, shall be
governed by applicable Cable Laws.
14. Limitation on Pledgee's Rights. Pledgee acknowledges and agrees that
when exercising Pledgee's remedies arising under this Pledge Agreement, Pledgee
shall look solely to the Collateral for the satisfaction of Borrower's
Obligations. In no event shall Pledgee seek a personal or other judgment against
any Pledgor under this Pledge Agreement except to the extent necessary in order
to foreclose upon the Collateral or otherwise subject the Collateral to the
payment of Borrower's Obligations. No Pledgor shall have any liability under
this Pledge Agreement, personal or otherwise, for any deficiency remaining after
a sale of all or any portion of the Collateral pledged hereunder. The limitation
of liability set forth in this Section 14 shall not apply to any Pledgor to the
extent Pledgee suffers any actual loss, damage or expense as a result of:
(a) the breach by such Pledgor of any covenant to be performed by
such Pledgor under Section 4, 5, 6.9 or 9.4; or
(b) any material misrepresentation or breach of any warranty or
covenant made by such Pledgor in Section 3 of this Pledge Agreement.
[remainder of this page intentionally left blank]
-11-
<PAGE>
IN WITNESS WHEREOF, each Pledgor and Pledgee have caused this Pledge
Agreement to be executed as of the date first above written.
SCOTT CABLE MANAGEMENT COMPANY,
INC., a Connecticut corporation
By: /s/ Bruce A. Armstrong
---------------------------------
Bruce A. Armstrong
Chief Executive Officer
MEDIA/COMMUNICATIONS PARTNERS
LIMITED PARTNERSHIP, a Delaware limited
partnership
By: /s/ Richard H. Churchill
---------------------------------
Name: Richard H. Churchill
Title: ___________________
CHESTNUT STREET PARTNERS, INC., a
Massachusetts corporation
By: /s/ Richard H. Churchill
---------------------------------
Name: Richard H. Churchill
Title: ___________________
MILK STREET PARTNERS, INC., a
Massachusetts corporation
By: /s/ Richard H. Churchill
---------------------------------
Name: Richard H. Churchill
Title: __________________
-12-
<PAGE>
TA INVESTORS, a Massachusetts general
partnership
By: /s/ Richard H. Churchill
----------------------------------
Name: Richard H. Churchill
Title: ___________________
NORTHEAST VENTURES II, a Connecticut
general partnership
Northeast Ventures, L.P.
By: /s/ W. Bryan Satterlee
----------------------------------
Name: W. Bryan Satterlee
Title: General Partner
ALLSTATE INSURANCE COMPANY, an
Illinois insurance company
By: /s/ Richard Doppelt
----------------------------------
Name: Richard Doppelt
Title: Authorized Signator
FLEET NATIONAL BANK, a national banking
association
By: /s/ Robert L. Bice, II
----------------------------------
Name: Robert L. Bice, II
Title: Vice President
FINOVA CAPITAL CORPORATION, a
Delaware corporation
By: /s/ Jeffrey S. Kilrea
----------------------------------
Name: Jeffrey S. Kilrea
Title: Vice President
-13-
<PAGE>
Acknowledgment of Borrower
Borrower hereby acknowledges receipt of this Pledge Agreement and the
pledge of 100% of the issued and outstanding capital stock and warrants, options
or other rights to purchase capital stock of Borrower pursuant to the terms of
this Pledge Agreement and confirms that such pledge has been registered in its
corporate books.
SCOTT CABLE COMMUNICATIONS, INC.,
a Texas corporation
By: /s/ Bruce A. Armstrong
--------------------------------
Bruce A. Armstrong
Chief Executive Officer
-14-
<PAGE>
EXHIBIT A
Description of Securities
Number and Certificate
Pledgor Class of Shares Number
- ------- --------------- ------
Scott Cable Management Company, Inc. 1,000 Class A Common
Media/Communications Partners
Limited Partnership _____ Class B Common
Chestnut Street Partners, Inc. _____ Class B Common
Milk Street Partners, Inc. _____ Class B Common
TA Investors _____ Class B Common
Northeast Ventures II _____ Class B Common
Allstate Insurance Company _____ Class B Common
_________________________________ 75,000 Class C Common
Pledgee acknowledges receipt of the certificates representing the
Securities described on this Exhibit A.
FINOVA CAPITAL CORPORATION, a
Delaware corporation
By:___________________________________
Jeffrey S. Kilrea
Vice President
<PAGE>
EXHIBIT B
Location of Each Pledgor's Chief Executive Office and Address and Telecopy
Number for Notice Purposes
1. The location of the chief executive office and address and telecopy number
for notice purposes of Scott Cable Management Company, Inc. is:
Four Landmark Square, Suite 302
Stamford, CT 06901
Attention: Bruce A. Armstrong
Chief Executive Officer
Telecopy No: (203) 325-1110
2. The location of the chief executive office and address and telecopy number
for notice purposes of Media/Communications Partners Limited Partnership,
Chestnut Street Partners, Inc., Milk Street Partners, Inc., and TA
Investors is:
75 State Street
Suite 2500
Boston, MA 02109
Attention: Richard H. Churchill
Telecopy No: (617) 345-7201
3. The location of the chief executive office and address and telecopy number
for notice purposes of Northeast Ventures II is:
One State Street
Suite 1720
Hartford, CT 06103
Attention: W. Bryan Satterlee or Edgar O. Cheney, Jr.
Telecopy No: (860) 246-8755
4. The location of the chief executive office and address and telecopy number
for notice purposes of Allstate Insurance Company is:
3075 Sanders Road
Building G5D
Northbrook, IL 60062
Attention: Kerry Abbott, Esq.
<PAGE>
Telecopy No: (847) 402-6639
5. The location of the chief executive office and address and telecopy number
for notice purposes of Fleet National Bank is:
Fleet National Bank
Corporate Trust
Administration MAOFDOSM
One Federal Street
Boston, MA 02106
Attention: Mr. Robert Bice
Telecopy No: ( )
<PAGE>
Exhibit 10.5
SCOTT CABLE COMMUNICATIONS, INC., as Issuer
AND
FLEET NATIONAL BANK, as Trustee
------------------------
INDENTURE
Dated as of December 18, 1996
------------------------
$49,500,000
15% Senior Subordinated Pay-in-Kind Notes due March 18, 2002
<PAGE>
INDENTURE
(15% Senior Subordinated)
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture dated as of December 18, 1996
Trust Indenture Act Indenture
Section Section
- ------------------- ---------
310(a)(1).................................................... 7.10
(a)(2).................................................... 7.10
(a)(3).................................................... N.A.
(a)(4).................................................... N.A.
(a)(5).................................................... 7.10
(b)....................................................... 7.8; 7.10; 13.2
(c)....................................................... N.A.
311(a)....................................................... 7.11
(b)....................................................... 7.11
(c)....................................................... N.A.
312(a)....................................................... 2.5
(b)....................................................... 13.3
(c)....................................................... 13.3
313(a)....................................................... 7.6
(b)(1).................................................... N.A.
(b)(2).................................................... 7.6
(c)....................................................... 7.6; 13.2
(d)....................................................... 7.6
314(a)....................................................... 4.10; 13.2
(b)....................................................... N.A.
(c)(1).................................................... 7.2; 13.4
(c)(2).................................................... 7.2; 13.4
(c)(3).................................................... N.A.
(d)....................................................... N.A.
(e)....................................................... 11.5
(f)....................................................... N.A.
315(a)....................................................... 7.1(b)
(b)....................................................... 7.5; 13.2
(c)....................................................... 7.1(a)
(d)....................................................... 7.1(c)
(e)....................................................... 6.11
316(a)(last sentence)........................................ 2.9
(a)(1)(A)................................................. 6.5
2
<PAGE>
INDENTURE
(15% Senior Subordinated)
(a)(1)(B)................................................. 6.4
(a)(2).................................................... N.A.
(b)....................................................... 6.7
317(a)(1).................................................... 6.8
(a)(2).................................................... 6.9
(b)....................................................... 2.4
318(a) ...................................................... 13.1
(c)....................................................... 13.1
- ----------
N.A. means Not Applicable
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
3
<PAGE>
INDENTURE
(15% Senior Subordinated)
TABLE OF CONTENT(1)
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.............................................. 1
Section 1.2. Incorporation by Reference of TIA........................ 14
Section 1.3. Time Periods............................................. 14
Section 1.4. References............................................... 15
Section 1.5. Issuer's Knowledge....................................... 15
ARTICLE II
THE SECURITIES
Section 2.1. Form and Dating.......................................... 15
Section 2.2. Execution and Authentication............................. 15
Section 2.3. Registrar and Paying Agent............................... 17
Section 2.4. Paying Agent To Hold Assets in Trust..................... 17
Section 2.5. Securityholder Lists..................................... 18
Section 2.6. Transfer and Exchange............................... .... 18
Section 2.7. Replacement Securities................................... 18
Section 2.8. Outstanding Securities................................... 19
Section 2.9. Treasury Securities...................................... 19
Section 2.10. Cancellation............................................. 19
Section 2.11. Defaulted Interest....................................... 20
Section 2.12. CUSIP Number............................................. 20
ARTICLE III
REDEMPTION
Section 3.1. Right of Redemption and Notices to Trustee............... 20
- ----------
(1) Note: This Table of Contents, shall not, for any purpose, be deemed to be
a part of the Indenture.
i
<PAGE>
INDENTURE
(15% Senior Subordinated)
Section 3.2. Selection of Securities To Be Redeemed................... 21
Section 3.3. Notice of Redemption..................................... 21
Section 3.4. Effect of Notice of Redemption........................... 22
Section 3.5. Deposit of Redemption Price.............................. 22
Section 3.6. Securities Redeemed in Part.............................. 22
ARTICLE IV
COVENANTS
Section 4.1. Payment of Securities.................................... 23
Section 4.2. Corporate Existence. ................................... 23
Section 4.3. SEC Reports and Other Information........................ 23
Section 4.4. Future Leases............................................ 24
Section 4.5. Future Acquisitions of Real Property..................... 24
Section 4.6. Compliance with Laws..................................... 24
Section 4.7. Taxes and Claims......................................... 24
Section 4.8. Maintenance of Properties and Insurance.................. 25
Section 4.9. Mandatory Redemption on a Permitted Asset Sale........... 26
Section 4.10. Borrowing................................................ 26
Section 4.11. Liens.................................................... 26
Section 4.12. Merger and Acquisition................................... 26
Section 4.13. Contingent Liabilities................................... 26
Section 4.14. Distributions............................................ 26
Section 4.15. Payments of Indebtedness................................. 27
Section 4.16. Investments, Loans....................................... 27
Section 4.17. Fundamental Business Changes............................. 27
Section 4.18. Sale or Transfer of Assets............................... 27
Section 4.19. Acquisition of Additional Properties..................... 28
Section 4.20. Issuance of Equity Interests............................. 28
Section 4.21. Transactions with Affiliates............................. 28
Section 4.22. Compliance with ERISA.................................... 28
ARTICLE V
DEFAULT AND REMEDIES
Section 5.1. Events of Default........................................ 30
Section 5.2. Acceleration............................................. 31
Section 5.3. Other Remedies........................................... 32
ii
<PAGE>
INDENTURE
(15% Senior Subordinated)
Section 5.4. Waiver of Past Defaults.................................. 32
Section 5.5. Control by Majority...................................... 33
Section 5.6. Limitation on Suits...................................... 33
Section 5.7. Rights of Holders To Receive Payment..................... 33
Section 5.8. Collection Suit by Trustee............................... 34
Section 5.9. Trustee May File Proofs of Claim......................... 34
Section 5.10. Priorities............................................... 35
Section 5.11. Undertaking for Costs.................................... 35
ARTICLE VI
TRUSTEE
Section 6.1. Duties of Trustee........................................ 36
Section 6.2. Rights of Trustee........................................ 37
Section 6.3. Individual Rights of Trustee............................. 38
Section 6.4. Trustee's Disclaimer..................................... 38
Section 6.5. Notice of Default........................................ 38
Section 6.6. Reports By Trustee to Holders............................ 38
Section 6.7. Compensation and Indemnity............................... 39
Section 6.8. Replacement of Trustee................................... 39
Section 6.9. Successor Trustee by Merger, Etc......................... 41
Section 6.10. Eligibility; Disqualification............................ 41
Section 6.11. Co-Trustee............................................... 41
Section 6.12. Preferential Collection of Claims Against Issuer......... 42
ARTICLE VII
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 7.1. Without Consent of Holders............................... 43
Section 7.2. With Consent of Holders.................................. 44
Section 7.3. Compliance with TIA...................................... 45
Section 7.4. Revocation and Effect of Consents........................ 45
Section 7.5. Notation on or Exchange of Securities.................... 46
Section 7.6. Trustee To Sign Amendments, Etc.......................... 46
iii
<PAGE>
INDENTURE
(15% Senior Subordinated)
ARTICLE VIII
COLLATERAL AND SECURITY
Section 8.1. Collateral............................................... 46
Section 8.2. Possession and Use of Collateral......................... 47
Section 8.3. Release of Collateral.................................... 47
Section 8.4. Specified Releases of Collateral......................... 47
Section 8.5. Disposition of Collateral Without Release................ 50
Section 8.6. Purchaser Protected...................................... 51
Section 8.7. Authorization of Actions To Be Taken by Trustee
Under the Security Documents............................. 51
Section 8.8. Authorization of Receipt of Funds by Trustee Under
the Security Documents................................... 52
ARTICLE IX
MEETINGS OF SECURITYHOLDERS
Section 9.1. Purposes for Which Meetings May Be Called................ 52
Section 9.2. Manner of Calling Meetings............................... 53
Section 9.3. Call of Meetings by Issuer or Holders.................... 53
Section 9.4. Who May Attend and Vote at Meetings...................... 53
Section 9.5. Regulations May Be Made by Trustee; Conduct of the
Meeting; Voting Rights; Adjournment...................... 54
Section 9.6. Voting at the Meeting and Record To Be Kept.............. 55
Section 9.7. Exercise of Rights of Trustee or Holders May Not
Be Hindered or Delayed by Call of Meeting................ 55
ARTICLE X
SUBORDINATION
Section 10.1. Securities Subordinated to Senior Indebtedness........... 55
iv
<PAGE>
INDENTURE
(15% Senior Subordinated)
ARTICLE XI
SATISFACTION AND DISCHARGE
Section 11.1. Satisfaction and Discharge of the Indenture............. 56
Section 11.2. Conditions to Satisfaction and Discharge of
the Indenture........................................... 56
ARTICLE XII
MISCELLANEOUS
Section 12.1. TIA Controls............................................ 57
Section 12.2. Notices................................................. 57
Section 12.3. Communications by Holders with Other Holders............ 58
Section 12.4. Certificate and Opinion as to Conditions Precedent...... 58
Section 12.5. Statements Required in Certificate or Opinion........... 58
Section 12.6. Rules by Trustee, Paying Agent, Registrar............... 59
Section 12.7. Governing Law........................................... 59
Section 12.8. No Adverse Interpretation of Other Agreements........... 59
Section 12.9. No Recourse Against Others.............................. 59
Section 12.10. Successors.............................................. 60
Section 12.11. Duplicate Originals..................................... 60
Section 12.12. Severability............................................ 60
Section 12.13. Actions by Trustee...................................... 60
Section 12.14. Notes Issued In Accordance With Plan.................... 60
Section 12.15. Deposit Agreement....................................... 60
Exhibit A Form of Security
v
<PAGE>
INDENTURE
(15% Senior Subordinated)
INDENTURE dated as of December 18, 1996, between SCOTT CABLE
COMMUNICATIONS, INC., a Texas corporation ("Issuer"), and FLEET NATIONAL BANK, a
national banking association, as Trustee.
Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the 15% Senior
Subordinated Pay-in-Kind Notes due March 18, 2002:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
Accountants: Deloitte & Touche LLP or any other nationally recognized
independent certified public accounting firm selected by Issuer.
Affiliate: any Person that directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with
another Person. The term "control" means possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities or equity interests,
by contract or otherwise. For the purposes hereof Scott Management and Bruce A.
Armstrong shall be deemed to be an Affiliate of Issuer.
Agent: any Registrar, Paying Agent or co-Registrar of the Securities.
Assignment of Leases: a collateral assignment of leases executed by Issuer
in favor of Trustee.
Assignment of Management Agreement: a collateral assignment of the
Management Agreement executed by Issuer in favor of Trustee and acknowledged by
Scott Management.
Bankruptcy Court: the United States Bankruptcy Court for the District of
Delaware.
Bankruptcy Law: the United States Bankruptcy Code, Title 11 U.S. Code or
any similar federal, state or foreign law for the relief of debtors, any
successor statute thereto, and the rules, regulations and legally binding
policies promulgated thereunder, as amended and in effect from time to time.
1
<PAGE>
INDENTURE
(15% Senior Subordinated)
Board of Directors: with respect to any person, the Board of Directors of
such person or any committee of the Board of Directors of such person duly
authorized, with respect to any particular matter, to exercise the power of the
Board of Directors of such person.
Board Resolution: with respect to any person, a duly adopted resolution of
the Board of Directors of such person.
Business Day: any day other than a Saturday, Sunday or other day on which
banks in New York, New York, Boston, Massachusetts or Phoenix, Arizona are
authorized or required by law to close.
Capitalized Lease: any lease of Property, the obligations for the rental
of which are required to be capitalized in accordance with GAAP.
Cash Equivalents: the aggregate of Issuer's (i) cash on hand or in any
bank or trust company, and checks on hand and in transit, (ii) monies on deposit
in any money market account, and (iii) treasury bills, certificates of deposit,
commercial paper and readily marketable securities at current market value
having, in each instance, a maturity of not more than 180 days.
Chief Financial Officer: the chief financial officer of Issuer, who shall
be a duly elected officer of Issuer.
Class A Stock: the Class A Common Stock of Issuer.
Class B Stock: the Class B Common Stock of Issuer.
Class C Stock: the Class C Common Stock of Issuer.
Code: the Internal Revenue Code of 1986, any successor statute thereto,
and the rules, regulations and legally binding policies promulgated thereunder,
as amended and in effect from time to time.
Collateral: (i) all existing and after-acquired Property of Issuer,
including without limitation all of Issuer's existing and after-acquired
accounts, goods, equipment, inventory, fixtures, general intangibles,
instruments, chattel paper, documents, money, deposit accounts and investment
property and (ii) all proceeds of the foregoing.
2
<PAGE>
INDENTURE
(15% Senior Subordinated)
Custodian: any receiver, trustee, assignee, liquidator, sequestrator or
similar official under any Bankruptcy Law.
Default: any event which is, or after notice or passage of time or both
would be, an Event of Default.
Depositary: Fleet National Bank, a national banking association, not in
its individual capacity or in its capacity as Trustee, but solely as Depositary
under the Deposit Agreement.
Deposit Agreement: has the meaning set forth in Section 12.15 hereof.
Employee Benefit Plan: any employee benefit plan within the meaning of
Section 3(3) of ERISA which (i) is maintained for employees of Issuer or any
ERISA Affiliate or (ii) has at any time within the preceding six years been
maintained for the employees of Issuer or any ERISA Affiliate.
Environmental Laws: any and all federal, state and local laws that relate
to or impose liability or standards of conduct concerning public or occupational
health and safety or protection of the environment, as now or hereafter in
effect and as have been or hereafter may be amended or reauthorized, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous Materials
Transportation Act (42 U.S.C. 1802 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water Pollution Control
Act (33 U.S.C. ss. 1251 et seq.), the Toxic Substances Control Act (15 U.S.C.
ss. 2601 et seq.), the Clean Air Act (42 U.S.C. ss. 7901 et seq.), the National
Environmental Policy Act (42 U.S.C. ss. 4231 et seq.), the Refuse Act (33 U.S.C.
ss. 407 et seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300(f) et seq.),
the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.), and all
rules, regulations, codes, ordinances and guidance documents promulgated or
published thereunder, and the provisions of any licenses, permits, orders and
decrees issued pursuant to any of the foregoing.
ERISA: the Employee Retirement Income Security Act of 1974, and any
successor statute thereto, and the rules, regulations and legally binding
policies promulgated thereunder, as amended and in effect from time to time.
ERISA Affiliate: any Person who is a member of a group which is under
common control with Issuer, who together with Issuer is treated as a single
employer within the meaning of Section 414(b), (c) and (m) of the Code.
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INDENTURE
(15% Senior Subordinated)
Event of Default: as defined in Section 5.1.
Exchange Act: the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the SEC thereunder.
Fair Market Value with respect to any property or assets, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under pressure
or compulsion to complete the transaction.
Franchise: an authorization, or renewal thereof, whether in the form of a
franchise, permit, license, resolution, contract, certificate, agreement or
otherwise, issued by a Franchisor authorizing the construction and/or operation
of a cable system.
Franchise Agreement: any agreement pursuant to which a Franchise is
granted to a Issuer and all permitted amendments, modifications and supplements
thereto.
Franchisor: any Governmental Body empowered by federal, state or local law
to grant a Franchise.
GAAP: generally accepted accounting principles as in effect from time to
time, which shall include but shall not be limited to the official
interpretations thereof by the Financial Accounting Standards Board or any
successor thereto.
Governmental Body: any foreign, federal, state, municipal or other
government, or any department, commission, board, bureau, agency, public
authority or instrumentality thereof or any court or arbitrator.
Holder: the person in whose name a Security is registered on the
Registrar's books.
Indebtedness: all liabilities, obligations and reserves, contingent or
otherwise, which, in accordance with GAAP, would be reflected as a liability on
a balance sheet or would be required to be disclosed in a financial statement,
including, without duplication: (i) Indebtedness for Borrowed Money, (ii)
obligations secured by any Lien upon Property,(iii) guaranties, letters of
credit and other contingent obligations and (iv) liabilities in respect of
unfunded vested benefits under any Pension Plan or in respect of withdrawal
liabilities incurred under ERISA by Issuer or any ERISA Affiliate to any
Multiemployer Plan.
Indebtedness for Borrowed Money: without duplication, all Indebtedness (i)
in respect of money borrowed, (ii) evidenced by a note, debenture or other like
written obligation to pay
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INDENTURE
(15% Senior Subordinated)
money (including, without limitation, all of Issuer's Obligations set forth in
(i) thereof, Permitted Senior Indebtedness and Subordinated Indebtedness), (iii)
in respect of rent or hire of Property under Capitalized Leases or for the
deferred purchase price of Property, (iv) in respect of obligations under
conditional sales or other title retention agreements and (v) all guaranties of
any or all of the foregoing.
Indenture: this Indenture, as amended or supplemented from time to time in
accordance with the terms hereof.
Indenture Instruments:
(i) Indenture;
Securities;
(ii) Subordination Agreement (Junior) and Subordination Agreement
(Senior);
(iii) Security Instruments;
(iv) Uniform Commercial Code financing statements filed in
connection with the issuance of the Securities; and
(v) other instruments and documents as Trustee and/or Holders
reasonably may require in connection with the transactions
contemplated by this Indenture.
Interest Payment Date: the stated maturity of an installment of interest
on the Securities.
Issue Date: the date of first issuance of the Securities pursuant to this
Indenture.
Issuer: the party named as such above and shall include, unless the
context requires otherwise, any subsidiary.
Issuer Capital Stock: all of the issued and outstanding capital stock of
Issuer and all warrants, options and other rights to purchase capital stock of
the Issuer.
Issuer's Obligations: (i) any and all Indebtedness due or to become due,
now existing or hereafter arising, of Issuer to Holder pursuant to the terms of
this Indenture or any other
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INDENTURE
(15% Senior Subordinated)
Indenture Instrument and (ii) the performance of the covenants of Issuer
contained in the Indenture Instruments.
Junior Subordinated Notes: the $38,925,797 principal amount of the 16%
Junior Subordinated Pay-in-Kind Notes issued in one or more series due July 18,
2002, including any securities issued in lieu of cash interest payments thereon.
Junior Subordinated Notes Indenture: the indenture between Issuer and
Fleet National Bank, as Trustee dated as of December 18, 1996, as amended or
supplemented from time to time in accordance with the terms thereof.
Landlord: a lessor under a lease of real property.
Landlord Consent and Waiver: a landlord consent and waiver in favor of
Trustee executed by the Landlord under each Lease.
Lease: any lease of real estate under which Issuer is the lessee.
Leasehold Property: any real estate which is the subject of a Lease.
Lien: any mortgage, pledge, assignment, lien, charge, encumbrance or
security interest of any kind, or the interest of a vendor or lessor under any
conditional sale agreement, Capitalized Lease or other title retention
agreement.
Loan Agreement: the Loan Agreement, dated as of the Issue Date, by and
among the Issuer as borrower and FINOVA Capital Corporation, in its individual
capacity and as agent for all lenders thereunder, as the same may be amended,
extended, renewed, restated, supplemented or otherwise modified (in each case,
in whole or in part, and without limitation as to amount, terms, conditions,
covenants and other provisions) from time to time. The term "Loan Agreement"
shall include all related or ancillary documents, including, without limitation,
any guarantee agreements and security documents.
Management Agreement: the Management Agreement dated as of December 18,
1996 between Issuer and Scott Management.
Material Adverse Effect: (i) a material adverse effect upon the business,
operations, Property, profits or condition (financial or otherwise) of Issuer or
upon the validity, enforceability or priority of the Security Interests or (ii)
a material impairment of the ability
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INDENTURE
(15% Senior Subordinated)
of Issuer to perform its obligations under any Loan Instrument to which it is a
party or of Trustee or any Holder to enforce or collect any of Issuer's
Obligations.
Maturity Date: March 18, 2002.
Mortgages: a mortgage on each parcel of Real Property executed by Issuer
in favor of Trustee.
Multiemployer Plan: any multiemployer plan as defined pursuant to Section
3(37) of ERISA to which Issuer or any ERISA Affiliate makes, or accrues an
obligation to make, contributions, or has made, or been obligated to make,
contributions within the preceding six years.
Net Sale Proceeds: the gross proceeds payable to Issuer in connection with
any Permitted Asset Sale, less all reasonable, customary and documented costs
and expenses of such Permitted Asset Sale; provided, however, that Issuer shall
not be deemed in receipt of any Net Sales Proceeds required to be deposited in
escrow to secure customary indemnities under documents executed in connection
with the Permitted Asset Sale giving rise to such Net Sale Proceeds until such
Net Sale Proceeds are released from escrow to Issuer.
Officer: with respect to any Person, the Chairman of the Board, the
President, any Vice President, the Chief Financial Officer, the Controller, or
the Secretary of such Person.
Officers' Certificate: with respect to any person, a certificate signed by
two Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of such person and otherwise complying with the requirements of
Sections 12.4 and 12.5.
Operating Lease: any lease, other than Pole Attachment Agreements, which,
under GAAP, is not required to be capitalized.
Opinion of Counsel: a written opinion from legal counsel who is reasonably
acceptable to Trustee complying with the requirements of Sections 12.4 and 12.5.
Unless otherwise required by Trustee, the legal counsel may be an employee of or
counsel to Issuer.
Ordinances: the statutes, laws, rules, regulations, resolutions and
ordinances, as amended and in effect from time to time, pursuant to which a
Franchise may be granted.
Paying Agent: as defined in Section 2.3.
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<PAGE>
INDENTURE
(15% Senior Subordinated)
PBGC: the Pension Benefit Guaranty Corporation or any Governmental Body
succeeding to the functions thereof.
Pension Plan: any Employee Benefit Plan, other than a Multiemployer Plan,
which is subject to the provisions of Part 3 of Subtitle B of Title I of ERISA,
Title IV of ERISA, or Section 412 of the Code and which (i) is maintained for
employees of Issuer or any ERISA Affiliate, or (ii) has at any time within the
preceding six years been maintained for the employees of Issuer or any ERISA
Affiliates.
Permitted Asset Sale: any bona fide sale of any Property of Issuer in an
arm's-length transaction to a Person who is not an Affiliate of Issuer, except
to the extent permitted by Section 4.21, provided that the gross proceeds
payable to Issuer in connection therewith are (i) not less than the Fair Market
Value of such Property and (ii) payable solely in cash.
Permitted Asset Sale Purchase Date: as defined in Section 4.9.
Permitted Liens: any of the following Liens:
(i) the Security Interests;
(ii) the Permitted Senior Indebtedness Liens;
(iii) Liens for taxes or assessments and similar charges, which
either are (A) not delinquent or (B) being contested
diligently and in good faith by appropriate proceedings, and
as to which the Issuer has set aside reserves on its books;
(iv) statutory Liens, such as mechanic's, materialman's,
warehouseman's, carrier's or other like Liens, incurred in
good faith in the ordinary course of business, provided that
the underlying obligations relating to such Liens are paid in
the ordinary course of business, or are being contested
diligently and in good faith by appropriate proceedings and as
to which Issuer has set aside reserves on its books, or the
payment of which obligations are otherwise secured;
(v) zoning ordinances, easements, licenses, reservations,
provisions, covenants, conditions, waivers or restrictions on
the use of Property and other title exceptions;
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INDENTURE
(15% Senior Subordinated)
(vi) Liens in respect of judgments or awards with respect to which
no Event of Default would exist pursuant to subsection 5.1(g);
(vii) Liens to secure payment of insurance premiums (A) to be paid
in accordance with applicable laws in the ordinary course of
business relating to payment of worker's compensation, or (B)
that are required for the participation in any fund in
connection with worker's compensation, unemployment insurance,
old-age pensions or other social security programs; and
(viii) the Subordinated Liens.
Permitted Prior Liens: any of the following Liens:
(i) the Permitted Senior Indebtedness Liens;
(ii) the Permitted Liens described in clauses (iii) and (iv) of the
definition of Permitted Liens that are accorded priority to
the Security Interests by law; and
(iii) the Permitted Liens described in clauses (v) and (vii) of the
definition of Permitted Liens, subject to the limitations set
forth therein.
Permitted Senior Indebtedness: Indebtedness (i) under the Loan Agreement
issued in connection therewith and any refinancing thereof to the extent such
refinancing does not shorten the Weighted Average Life to Maturity of such
Indebtedness or (ii) incurred to purchase tangible personal property or
Indebtedness incurred to lease tangible personal property pursuant to
Capitalized Leases, provided that (x) such Indebtedness existing as of the Issue
Date shall not exceed $50,000, (y) during any Yearly Period after the Issue Date
the amount of such Indebtedness at any one time outstanding during such Yearly
Period shall not exceed $100,000, and (z) no Event of Default exists at the time
or will be caused as a result of the incurrence of any Indebtedness described in
clause (y).
Permitted Senior Indebtedness Liens: Liens that secure Permitted Senior
Indebtedness, provided that, with respect to such Indebtedness described in
clause (ii) of the definition thereof, each such Lien attaches only to the
Property purchased or leased with the proceeds of the Permitted Senior
Indebtedness incurred with respect to such Property.
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INDENTURE
(15% Senior Subordinated)
Person: any individual, firm, corporation, business enterprise, trust,
association, joint venture, partnership, Governmental Body or other entity,
whether acting in an individual, fiduciary or other capacity.
Plan of Reorganization: Debtors' Second Amended Joint Plan of
Reorganization dated October 31, 1996, as amended or modified, in Case No.
96-166 (PJW) (Jointly Administered) filed with the Bankruptcy Court.
Pole Attachment Agreement: any agreement, whether now in existence or
hereafter created, between Issuer and a municipality or public or private
utility company pursuant to which Issuer is permitted to use the utility poles,
trenches or easements of such public utility on which to string or in which to
bury the coaxial, fiber optic or other cable used to operate any portion of the
System.
Pole Attachment Authority: any Person who has entered into a Pole
Attachment Agreement with Issuer.
Property: all types of real, personal or mixed property and all types of
tangible or intangible property.
Qualified Depository: a member bank of the Federal Reserve System having a
combined capital and surplus of at least $100,000,000.
Real Property: all interests in real estate directly or indirectly owned
by Issuer other than the Leasehold Property.
Record Date: the Record Dates specified in the Securities; provided that
if any such date is not a Business Day, the Record Date shall be the first day
immediately preceding such specified day that is a Business Day.
Redemption Date: when used with respect to any Security to be redeemed,
means the date fixed for such redemption pursuant to this Indenture and the
Securities.
Redemption Price: when used with respect to any Security to be redeemed,
means the price fixed for such redemption pursuant to this Indenture and the
Securities.
Registrar: as defined in Section 2.3.
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<PAGE>
INDENTURE
(15% Senior Subordinated)
Scott Management: Scott Cable Management Company, Inc., a Connecticut
corporation.
Scott Management Fees: the management fees payable to Scott Management
pursuant to Section 5 of the Management Agreement.
SEC: the Securities and Exchange Commission.
Secondary Securities: as defined in Section 2.2.
Securities: the 15% Senior Subordinated Pay-in-Kind Notes due March 18,
2002 of Issuer, including any Secondary Securities issued in respect thereof, in
each case, issued pursuant to this Indenture, as the same may be modified or
amended from time to time and refinancings thereof, to the extent such
refinancing indebtedness is permitted to be incurred under this Indenture.
Securities Act: the Securities Act of 1933, the Exchange Act, any
successor statute thereto, and the rules, regulations and legally binding
policies of the Securities and Exchange Commission promulgated thereunder, as
amended and in effect from time to time.
Security Agreement: a security agreement executed by Issuer in favor of
Trustee.
Security Instruments: collectively, the Security Agreement, the Assignment
of Leases, the Mortgages and the Assignment of Management Agreement.
Security Interests: the Liens in the Collateral granted to Trustee
pursuant to the Security Instruments and any other document now or hereafter
executed by Issuer which purports to grant a Lien on the Property of Issuer in
favor of Trustee.
Senior Creditors: the holders of the Senior Notes.
Senior Notes: any promissory notes executed and delivered by Issuer to
evidence Indebtedness under the Loan Agreement.
Shareholders: collectively, Scott Management, Media/Communications
Partners Limited Partnership, a Delaware limited partnership, Chestnut Street
Partners, Inc., a Massachusetts corporation, Milk Street Partners, Inc., a
Massachusetts corporation, TA Investors, a Massachusetts general partnership,
Northeast Ventures II, a Connecticut general
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INDENTURE
(15% Senior Subordinated)
partnership, Allstate Insurance Company, an Illinois insurance corporation and
Fleet National Bank, as Depositary.
Subordinated Credit Instruments: the Junior Subordinated Notes Indenture,
the Junior Subordinated Notes and all other documents and instruments executed
in connection with the Indebtedness evidenced thereby.
Subordinated Creditors: the holders of the Junior Subordinated Notes.
Subordinated Indebtedness: all Indebtedness now or hereafter owed by
Issuer to the Subordinated Creditors, whether pursuant to the Subordinated
Credit Instruments or otherwise.
Subordinated Liens: the Liens in the Collateral granted by Issuer to Fleet
National Bank as trustee under the Subordinated Credit Instruments.
Subordination Agreement (Junior): a subordination agreement among Trustee,
Issuer, and the trustee of the Junior Subordinated Debenture Indenture.
Subordination Agreement (Senior): a subordination agreement among Trustee,
Issuer, the trustee of the Junior Subordinated Debenture Indenture and the
Senior Creditors.
Subsidiary: any Person in which Issuer owns or controls, directly or
indirectly, 25% or more of the securities or equity interests of such Person.
Termination Event: (i) a "Reportable Event" described in Section 4043 of
ERISA for which the thirty day notice requirement has not been waived; or (ii)
the withdrawal of Issuer or any ERISA Affiliate from a Pension Plan during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2); or (iii) the termination of a Pension Plan, the filing of a notice
of intent to terminate a Pension Plan or the treatment of a Pension Plan
amendment as a termination under Section 4041 of ERISA; or (iv) the institution
of proceedings to terminate, or the appointment of a trustee with respect to,
any Pension Plan by the PBGC; or (v) any other event or condition which would
constitute grounds under Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; or (vi) the partial or
complete withdrawal of Issuer or any ERISA Affiliate from a Multiemployer Plan;
or (vii) the imposition of a lien pursuant to Section 412 of the Code or Section
302 of ERISA; or (viii) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan under Sections 4241 or 4245
of ERISA; or (ix) any event or condition which results in the termination of a
Multiemployer Plan under
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INDENTURE
(15% Senior Subordinated)
Section 4041A of ERISA or the institution by the PBGC of proceedings to
terminate a Multiemployer Plan under Section 4042 of ERISA.
TIA: the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb),
as amended, as in effect on the date on which this Indenture is qualified under
the TIA, except as otherwise provided in Section 7.3.
Trustee: the party named as such in this Indenture until a successor
replaces it in accordance with the provisions of this Indenture and thereafter
means such successor.
Trust Officer: any officer of Trustee assigned by Trustee to administer
its corporate trust matters.
U.S. Government Obligations: direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
U.S. Legal Tender: such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment of public and
private debts.
Weighted Average Life to Maturity: when applied to any Indebtedness at any
date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (x) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (y) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding principal amount of
such Indebtedness.
Yearly Period: each fiscal year of Issuer; provided that the first Yearly
Period shall begin on the Issue Date and shall end on December 31, 1997.
Section 1.2. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in, and made a part of, this Indenture. The
following TIA terms used in this Indenture have the following meanings:
Commission: the SEC.
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INDENTURE
(15% Senior Subordinated)
indenture securities: the Securities.
indenture security holder: a Holder.
indenture to be qualified: this Indenture.
indenture trustee or institutional trustee: Trustee.
obligor on the indenture securities: Issuer or any other obligor on the
Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
Section 1.3. Time Periods.
In this Indenture and the other Indenture Instruments, in the computation
of periods of time from a specified date to a later specified date, (i) the word
"from" means "from and including," (ii) the words "to" and "until" each mean
"to, but excluding" and (iii) the words "through," "end of" and "expiration"
each mean "through and including." Unless otherwise specified, all references in
this Indenture and the other Indenture Instruments to (i) a "month" shall be
deemed to refer to a calendar month, (ii) a "quarter" shall be deemed to refer
to a calendar quarter and (iii) a "year" shall be deemed to refer to a calendar
year.
Section 1.4. References.
All references in this Indenture to "Article," "Section," "subsection,"
"subparagraph," "clause" or "Exhibit," unless otherwise indicated, shall be
deemed to refer to an Article, Section, subsection, subparagraph, clause or
Exhibit, as applicable, of this Indenture.
Section 1.5. Issuer's Knowledge.
Any statements, representations or warranties that are based upon the best
knowledge of Issuer or an officer thereof shall be deemed to have been made
after due inquiry by Issuer or an officer, as applicable, with respect to the
matter in question.
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INDENTURE
(15% Senior Subordinated)
ARTICLE II
THE SECURITIES
Section 2.1. Form and Dating.
The Securities and Trustee's certificate of authentication shall be
substantially in the form of Exhibit A. The Securities may have notations,
legends or endorsements required by law, stock exchange rule or usage. Issuer
and Trustee shall approve the form of the Securities and any notation, legend or
endorsement on them. Each Security shall be dated the date of its
authentication.
The terms and provisions contained in the Securities shall constitute, and
are hereby expressly made, a part of this Indenture and, to the extent
applicable, Issuer and Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
Section 2.2. Execution and Authentication.
An Officer or an Assistant Secretary, shall sign (either of whom shall, in
each case, have been duly authorized by all requisite corporate actions) the
Securities for Issuer by manual or facsimile signature.
If an Officer whose signature is on a Security was an Officer at the time
of such execution but no longer holds that office at the time Trustee
authenticates the Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of Trustee
manually signs the certificate of authentication on the Security. The signature
shall be conclusive evidence that the Security has been authenticated under this
Indenture.
Trustee shall authenticate Securities, excluding Secondary Securities, for
original issue in the aggregate principal amount of up to $49,500,000 upon a
written order of Issuer in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of Securities to be authenticated and the
date on which the Securities are to be authenticated. The aggregate principal
amount of Securities outstanding at any time may not exceed $49,500,000, except
for any Securities that may be issued pursuant to the immediately following
paragraph and except as provided in Section 2.7 and 2.8. Upon the written order
of
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INDENTURE
(15% Senior Subordinated)
Issuer in the form of an Officers' Certificate, Trustee shall authenticate
Securities in substitution of Securities originally issued to reflect any name
change of Issuer.
Issuer shall, on each Interest Payment Date prior to (and including) the
Interest Payment Date five years after the Issue Date, pay interest in
additional Securities ("Secondary Securities") in lieu of the payment in whole
of interest in cash on the Securities as provided in paragraph 1 of the
Securities. Issuer shall give written notice to Trustee of the amount of
interest to be paid in Secondary Securities not less than five Business Days
prior to the relevant Interest Payment Date, and Trustee or an authenticating
agent (upon written order of Issuer signed by an Officer of Issuer given not
less than five nor more than 45 days prior to such Interest Payment Date) shall
authenticate for original issue (pro rata to each Holder of any Securities of
such record date) Secondary Securities in an aggregate principal amount equal to
the amount of cash interest not paid on such Interest Payment Date, rounded to
the nearest dollar. Except as set forth in the following paragraph each issuance
of Secondary Securities in lieu of the payment of interest in cash on the
Securities shall be made pro rata with respect to the outstanding Securities,
and Issuer shall have the right to aggregate amounts of interest payable in the
form of Secondary Securities to a Holder of outstanding Securities and issue to
such Holder a single Secondary Security in payment thereof. Any Secondary
Securities may be denominated a separate series if Issuer deems it necessary to
do so in order to comply with any law or other applicable regulation or
requirement, with appropriate distinguishing designations. Notwithstanding the
forgoing and subject to the Subordination Agreement (Senior), Issuer shall have
the option to pay interest in cash (upon written order of Issuer signed by and
Officer of Issuer given not less than five or more than 45 days prior to an
Interest Payment Date).
Trustee may appoint an authenticating agent reasonably acceptable to
Issuer to authenticate Securities. Unless otherwise provided in the appointment,
an authenticating agent may authenticate Securities whenever Trustee may do so.
Each reference in this Indenture to authentication by Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with Issuer and Affiliates of Issuer.
Section 2.3. Registrar and Paying Agent.
Trustee shall maintain an office or agency in the Borough of Manhattan,
The City of New York, where (a) Securities may be presented or surrendered for
registration of transfer or for exchange ("Registrar"), (b) Securities may be
presented or surrendered for payment ("Paying Agent") and (c) notices and
demands to or upon Issuer in respect of the Securities and this Indenture may be
served. Issuer may also from time to time designate one or more other offices or
agencies where the Securities may be presented or surrendered for any or all
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INDENTURE
(15% Senior Subordinated)
such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve
Issuer of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Registrar shall keep a
register of the Securities and of their transfer and exchange. Issuer, upon
notice to Trustee, may have one or more co-Registrars and one or more additional
paying agents reasonably acceptable to Trustee. The term "Paying Agent" includes
any additional paying agent. Issuer initially appoints Trustee as Registrar and
Paying Agent until such time as Trustee has resigned or a successor has been
appointed. The Trustee's office in the City of New York, c/o First Chicago Trust
Company, 14 Wall Street, 8th Floor, New York, New York 10005, Attn: Corporate
Trust Operations, shall be the office of the Issuer referred to in the first
sentence of this Section 2.3.
Issuer shall enter into an appropriate agency agreement with any Agent not
a party to this Indenture, which agreement shall implement the provisions of
this Indenture that relate to such Agent. Issuer shall notify Trustee, in
advance, of the name and address of any such Agent. If Issuer fails to maintain
a Registrar or Paying Agent within the Borough of Manhattan, The City of New
York, Trustee shall act as such.
Section 2.4. Paying Agent To Hold Assets in Trust.
Issuer shall require each Paying Agent other than Trustee to agree in
writing that each Paying Agent shall hold in trust for the benefit of Holders or
Trustee all assets and/or Secondary Securities held by Paying Agent for the
payment of principal of, or interest on, the Securities (whether such assets
have been distributed to it by Issuer or any other obligor on the Securities),
and that it shall notify Trustee of any Default by Issuer (or any other obligor
on the Securities) in making any such payment. Issuer at any time may require a
Paying Agent to distribute all assets and/or Secondary Securities held by it to
Trustee and account for any assets disbursed and Trustee may at any time during
the continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets and/or Secondary Securities
held by it to Trustee and to account for any assets so distributed. Upon
distribution to Trustee of all assets that shall have been delivered by Issuer
to Paying Agent, Paying Agent shall have no further liability for such assets
and/or Secondary Securities.
Section 2.5. Securityholder Lists.
Trustee shall preserve in as current a form as is reasonably practicable
the most recent list available to it of the names and addresses of Holders. If
Trustee is not the Registrar, Issuer shall furnish to Trustee on or before each
Interest Payment Date and at such other
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times as Trustee may request in writing a list in such form and as of such date
as Trustee may reasonably require of the names and addresses of Holders, which
list may be conclusively relied upon by Trustee.
Section 2.6. Transfer and Exchange.
When a Security is presented to the Registrar or a co-registrar with a
request to register a transfer, the Registrar shall register the transfer as
requested if the requirements of the Registrar are met. The Registrar need not
transfer or exchange any Securities selected for redemption. Also, it need not
transfer or exchange any Securities for a period of 30 days before a selection
of Securities to be redeemed. When Securities are presented to the Registrar or
a co-registrar with a request to exchange them for an equal principal amount of
Securities of other authorized denominations, the Registrar shall make the
exchange as requested if the requirements of the Registrar are met. Issuer shall
cooperate with the Registrar in meeting its requirements. To permit transfers,
registration and exchanges, Trustee shall authenticate Securities at the
Registrar's request. No service charge shall be made for any transfer,
registration or exchange, but Issuer may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith, but
not for any exchange pursuant to Section 2.10, 3.6 or 7.5.
Section 2.7. Replacement Securities.
If a mutilated Security is surrendered to Trustee or if the Holder of a
Security claims that the Security has been lost, destroyed or wrongfully taken,
Issuer shall issue and Trustee shall authenticate a replacement Security if
Trustee's requirements are met. If required by Trustee or Issuer, such Holder
must provide an indemnity bond or other indemnity, sufficient in the judgment of
both Issuer and Trustee, to protect Issuer, Trustee or any Agent from any loss
which any of them may suffer if a Security is replaced. Issuer may charge such
Holder for its reasonable, out-of-pocket expenses in replacing a Security,
including reasonable fees and expenses of counsel. Every replacement Security
shall constitute an additional obligation of Issuer.
Section 2.8. Outstanding Securities.
Securities outstanding at any time are all the Securities that have been
authenticated by Trustee, including the Secondary Securities, except those
cancelled by it, those delivered to it for cancellation and those described in
this Section as not outstanding. A Security does not cease to be outstanding
because Issuer or any of its Affiliates holds the Security.
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If a Security is replaced pursuant to Section 2.7 (other than a mutilated
Security surrendered for replacement), it ceases to be outstanding unless
Trustee receives proof satisfactory to it that the replaced Security is held by
a bona fide purchaser. A mutilated Security ceases to be outstanding upon
surrender of such Security and replacement thereof pursuant to Section 2.7.
If on a Redemption Date or the Maturity Date Paying Agent holds U.S. Legal
Tender or U.S. Government Obligations sufficient to pay all of the principal and
interest due on the Securities payable on that date, then on and after that date
such Securities cease to be outstanding and interest on them ceases to accrue.
Section 2.9. Treasury Securities.
In determining whether the Holders of the required aggregate principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by Issuer or any of its Affiliates shall be disregarded, except
that, for the purposes of determining whether Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities that Trustee
knows or has reason to know are so owned shall be disregarded. Notwithstanding
the foregoing and except as otherwise provided by the TIA, 662/3% of Securities
not owned by Issuer or any of its Affiliates shall be sufficient to approve any
such direction, waiver or consent.
Section 2.10. Cancellation.
Issuer at any time may deliver Securities to Trustee for cancellation. The
Registrar and Paying Agent shall forward to Trustee any Securities surrendered
to them for transfer, exchange or payment. Trustee, or at the direction of
Trustee, the Registrar or Paying Agent, and no one else, shall cancel and, at
the written direction of Issuer, shall dispose of all Securities surrendered for
transfer, exchange, payment or cancellation. Subject to Section 2.7, Issuer may
not issue new Securities to replace Securities that it has paid or delivered to
Trustee for cancellation. If Issuer or any Subsidiary shall acquire any of the
Securities, such acquisition shall not operate as a redemption or satisfaction
of the Indebtedness represented by such Securities unless and until the same are
surrendered to Trustee for cancellation pursuant to this Section 2.10.
Section 2.11. Defaulted Interest.
If Issuer defaults in a payment of interest on the Securities, it shall,
unless Trustee fixes another record date pursuant to Section 5.10, pay the
defaulted interest, plus (to the
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extent lawful) any interest payable on the defaulted interest, to the persons
who are Holders on a subsequent special record date, which date shall be the
fifteenth day next preceding the date fixed by Issuer for the payment of
defaulted interest or the next succeeding Business Day if such date is not a
Business Day. At least 15 days before the subsequent special record date, Issuer
shall mail to each Holder, with a copy to Trustee, a notice that states the
subsequent special record date, the payment date and the amount of defaulted
interest, and interest payable on such defaulted interest, if any, to be paid.
Section 2.12. CUSIP Number.
Issuer in issuing the Securities may use a "CUSIP" number, and if so,
Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities.
ARTICLE III
REDEMPTION
Section 3.1. Right of Redemption and Notices to Trustee.
Redemption of Securities, as permitted by any provision of this Indenture,
shall be made in accordance with such provision and this Article III. The Issuer
shall have the right to redeem all or any part of the Securities at 100% of
principal amount of the Security being redeemed at any time and from time to
time, in each case including accrued and unpaid interest to the Redemption Date.
In the event Issuer elects to redeem Securities in accordance with this
Section 3.1 hereof or is required to redeem Securities in accordance with
Section 4.9 hereof, Issuer shall notify Trustee of the Redemption Date and the
aggregate principal amount of the Securities to be redeemed and whether it wants
Trustee to give notice of redemption to the Holders (at Issuer's expense) at
least 15 days (unless a shorter notice shall be satisfactory to Trustee) but not
more than 60 days before the Redemption Date.
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Section 3.2. Selection of Securities To Be Redeemed.
If fewer than all of the Securities are to be redeemed, Trustee shall
redeem pro-rata.
Section 3.3. Notice of Redemption.
At least 10 days but not more than 60 days before a Redemption Date,
Issuer shall mail a notice of redemption by first class mail to each Holder
whose Securities or portions thereof are to be redeemed at such Holder's
registered address, with a copy to Trustee. At Issuer's request, Trustee shall
give the notice of redemption in Issuer's name and at Issuer's expense. Each
notice for redemption shall identify the Securities or portions thereof to be
redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the name and address of Paying Agent;
(4) that Securities or portions thereof called for redemption must
be surrendered to Paying Agent to collect the Redemption Price;
(5) that, unless Issuer defaults in making the redemption payment,
interest on Securities or portions thereof called for redemption ceases to
accrue on and after the Redemption Date, and the only remaining right of
the Holders of such Securities or portions thereof is to receive payment
of the Redemption Price upon surrender to Paying Agent of the Securities
or portions thereof redeemed;
(6) if any Security is being redeemed in part, the portion of the
aggregate principal amount of such Security to be redeemed and that, after
the Redemption Date, and upon surrender of such Security, a new Security
or Securities in aggregate principal amount equal to the unredeemed
portion thereof will be issued; and
(7) if fewer than all of the Securities are to be redeemed, the
aggregate principal amount of Securities to be redeemed and the aggregate
principal amount of Securities to be outstanding after such partial
redemption.
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Section 3.4. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.3,
Securities or portions thereof called for redemption become due and payable on
the Redemption Date and at the Redemption Price, provided that if a notice of
redemption is given in contemplation of a Permitted Asset Sale and such sale
does not occur, then this Section 3.4 shall not be applicable. Upon surrender to
Trustee or Paying Agent, such Securities or portions thereof called for
redemption shall be paid at the Redemption Price.
Section 3.5. Deposit of Redemption Price.
On or before noon on the Redemption Date, Issuer shall deposit with Paying
Agent U.S. Legal Tender sufficient to pay the Redemption Price of all Securities
or portions thereof to be redeemed on that date (other than Securities or
portions thereof called for redemption on that date which have been delivered by
Issuer to Trustee for cancellation). Paying Agent shall promptly return to
Issuer any U.S. Legal Tender so deposited which is not required for that purpose
upon the written request of Issuer, except with respect to monies owed as
obligations to Trustee pursuant to Article VI.
If Issuer complies with the preceding paragraph, then, unless Issuer
defaults in the payment of such Redemption Price, interest on the Securities or
portions thereof to be redeemed will cease to accrue on and after the applicable
Redemption Date, whether or not such Securities are presented for payment.
If a Security or portion thereof is redeemed on or after a Record Date but
on or prior to the related Interest Payment Date, then any accrued and unpaid
interest shall be paid to the Person in whose name such Security was registered
at the close of business on such Record Date. If any Security or portion thereof
called for redemption shall not be so paid upon surrender for redemption because
of the failure of Issuer to comply with the first paragraph of this Section 3.5,
interest shall be paid on the unpaid principal, from the Redemption Date until
such principal is paid, and, to the extent lawful, on any interest not paid on
such unpaid principal, in each case at the rate provided in the Securities and
in Section 4.1 hereof.
Section 3.6. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part, Trustee shall
authenticate for the Holder a new Security or Securities equal in principal
amount to the unredeemed portion of the Security surrendered.
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ARTICLE IV
COVENANTS
Until all of Issuer's Obligations are paid and performed in full Issuer
agrees that it shall:
Section 4.1. Payment of Securities.
(a) Pay the principal amount of, and interest on, as the case may
be, the Securities on the dates and in the manner provided in the
Securities. An installment shall be considered paid on the date it is due
if Trustee or Paying Agent holds on that date U.S. Legal Tender and/or, to
the extent required by Section 2.2, Secondary Securities designated for
and sufficient to pay the installment.
(b) Pay interest on overdue principal (including post-petition
interest in any proceeding under any Bankruptcy Law, to the extent
allowable as a claim in any such proceeding) at the same rate borne by the
Securities and it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law, to the extent allowable as a
claim in any such proceeding) on overdue installments of interest (without
regard to any applicable grace period) at the same rate borne by the
Securities, to the extent lawful.
Section 4.2. Corporate Existence.
Issuer shall do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence in accordance with its
organizational documents and the rights (charter and statutory) of Issuer.
Section 4.3. SEC Reports and Other Information.
To the extent permitted by applicable law or regulation, whether or not
Issuer is subject to the requirements of Section 13 or 15(d) of the Exchange
Act, Issuer shall file with the SEC all quarterly and annual reports and such
other information, documents or other reports (or copies of such portions of any
of the foregoing as the SEC may by rules and regulations prescribe) required to
be filed pursuant to such provisions of the Exchange Act. Issuer shall file with
the Trustee, within five days after it files the same with the SEC, copies of
the quarterly and annual reports and the information, documents, and other
reports (or
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copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) that it is required to file with the SEC pursuant to this
Section 4.3. Issuer shall also comply with the other provisions of TIA Section
314(a). If Issuer is not permitted by applicable law or regulations to file the
aforementioned reports, Issuer (at its own expense) shall file with the Trustee
and mail, or cause the Trustee to mail, to Holders at their addresses appearing
in the register of Securities maintained by the Registrar at the time of such
mailing within five days after it would have been required to file such
information with the SEC, all information and financial statements, including
any notes thereto and with respect to annual reports, an auditors' report by an
accounting firm of established national reputation, and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
comparable to the disclosure that Issuer would have been required to include in
annual and quarterly reports, information, documents or other reports,
including, without limitation, reports on Forms 10-K, 10-Q and 8-K, if Issuer
was subject to the requirements of such Section 13 or Section 15(d) of the
Exchange Act.
Section 4.4. Future Leases.
Deliver to Trustee, concurrently with the execution by Issuer, as lessee,
of any lease pertaining to real property, either a second leasehold mortgage
upon or a collateral assignment of such lease in favor of Trustee but only to
the extent such leasehold mortgage or collateral assignment is first required by
the Senior Creditors, and is delivered to the Senior Creditors, to secure the
Senior Notes.
Section 4.5. Future Acquisitions of Real Property.
Deliver to Trustee a second mortgage or deed of trust in favor of Trustee
on any real property acquired by the Issuer after the Issue Date, but only to
the extent such mortgage or deed of trust is first required by the Senior
Creditors, and is delivered to the Senior Creditors, to secure the Senior Notes.
Section 4.6. Compliance with Laws.
Comply with all Cable Statutes and Regulations and all other federal,
state and local laws, ordinances, requirements and regulations and all
judgments, orders, injunctions and decrees applicable to Issuer and its
operations, except such as are being contested in good faith and by appropriate
proceedings and except for such non-compliances as would not have a Material
Adverse Effect.
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Section 4.7. Taxes and Claims.
Pay and discharge all material taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits, or upon any Property
belonging to it, prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a Lien (other than a Permitted
Lien) upon the Property of Issuer, provided that so long as no Lien has attached
to the Property of Issuer as a result of any of the foregoing, Issuer shall not
be required by this Section 4.7 to pay any such amount if the same is being
contested diligently and in good faith by appropriate proceedings and as to
which Issuer has set aside reserves on its books.
Section 4.8. Maintenance of Properties and Insurance.
(a) Issuer shall cause all properties used or useful to the conduct of its
business to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in its judgment may be necessary, so that the business carried on in
connection therewith may be properly and advantageously conducted at all times
unless the failure to so maintain such properties (together with all other such
failures) would not have a material adverse effect on the financial condition or
results of operations of Issuer; provided, however, that nothing in this Section
4.8 shall prevent Issuer from discontinuing the operation or maintenance of any
of such properties, or disposing of any of them, if such discontinuance or
disposal is either (i) in the ordinary course of business, or (ii) is otherwise
permitted by this Indenture.
(b) Issuer shall provide or cause to be provided insurance (including
appropriate self-insurance) against loss or damage of the kinds that, in the
reasonable, good faith opinion of Issuer, are adequate and appropriate for the
conduct of the business of Issuer in a prudent manner, with reputable insurers
or with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be either (i) consistent with past practices of Issuer or (ii)
customary, in the reasonable, good faith opinion of Issuer, for corporations
similarly situated in the industry, unless the failure to provide such insurance
(together with all other such failures) would not have a Material Adverse
Effect.
(c) Issuer shall keep proper books of record and account, in which full
and correct entries shall be made of all business and financial transactions of
Issuer and reflect on its financial statements adequate accruals and
appropriations to reserves, all in accordance with GAAP.
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(d) Nothing in this Section 4.8 shall be deemed to limit any obligations
of Issuer under any of the Security Instruments.
Section 4.9. Mandatory Redemption on a Permitted Asset Sale.
Subject to the terms of the Subordination Agreement (Senior), until the
principal amount of the Securities and all other amounts due under this
Indenture are paid in full, Issuer shall pay to the Trustee for the benefit of
Holders an amount equal to the amount of all Net Sale Proceeds from a Permitted
Asset Sale no later than thirty days after such sale (the date of such payment
to the Trustee for the benefit of Holders, the "Permitted Asset Sale Purchase
Date"). Such redemption shall be conducted in accordance with Article III
hereof.
Section 4.10. Borrowing.
Without the prior approval of 100% of the Issuer's Board of Directors, not
create, incur, assume or suffer to exist any liability for Indebtedness for
Borrowed Money except (i) Issuer's Obligations, (ii) the Subordinated
Indebtedness and (iii) Permitted Senior Indebtedness.
Section 4.11. Liens.
Without the prior approval of 100% of the Issuer's Board of Directors, not
create, incur, assume or suffer to exist any Lien upon any of its Property,
whether now owned or hereafter acquired, except Permitted Liens.
Section 4.12. Merger and Acquisition.
Without the prior approval of 100% of the Issuer's Board of Directors, not
consolidate with or merge with or into any Person, or acquire directly or
indirectly all or substantially all of the capital stock, equity interests or
Property of any Person.
Section 4.13. Contingent Liabilities.
Without the prior approval of 100% of the Issuer's Board of Directors, not
assume, guarantee, endorse, contingently agree to purchase, become liable in
respect of any letter of credit, or otherwise become liable upon the obligation
of any Person, except liabilities arising from the endorsement of negotiable
instruments for deposit or collection, the posting of bonds to secure
performance to the extent necessary in connection with Issuer's Cable Business
and similar transactions in the ordinary course of business.
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Section 4.14. Distributions.
Not make any dividends, distributions or other shareholder expenditures
with respect to the Issuer Capital Stock or apply any of its Property to the
purchase, redemption or other retirement of, or set apart any sum for the
payment of, or make any other distribution by reduction of capital or otherwise
in respect of, any of the Issuer Capital Stock.
Section 4.15. Payments of Indebtedness.
Not make any payment in cash in respect of the Subordinated Indebtedness
except to the extent permitted by the Subordination Agreement (Junior).
Section 4.16. Investments, Loans.
Not at any time purchase or otherwise acquire, hold or invest in the
capital stock of, or any other interest in, any Person, or make any loan or
advance to, or enter into any arrangement for the purpose of providing funds or
credit to, or make any other investment, whether by way of capital contribution
or otherwise, in or with any Person, including, without limitation, any
Affiliate, except (i) investments in direct obligations of, or instruments
unconditionally guaranteed by, the United States of America or in certificates
of deposit issued by a Qualified Depository, (ii) investments in commercial or
finance paper which, at the time of investment, is rated "A" or better by
Moody's Investors Service, Inc., or Standard & Poor's Ratings Group, a Division
of McGraw-Hill, Inc., respectively, or at the equivalent rate by any of their
respective successors, (iii) any interests in any money market account
maintained, at the time of investment, with a Qualified Depository, the
investments of which, at the time of investment, are restricted to the types
specified in clause (i) above, (iv) loans to employees of Issuer in the
aggregate amount not to exceed $25,000 outstanding at any time, (v) capital
stock of presently existing Subsidiaries and (vi) investments in equity
interests of programmers made available to Issuer by such programmers as an
inducement to carry programming of such programmers, provided the aggregate cost
of all such investments does not exceed $100,000 outstanding at any time. All
investments permitted pursuant to clauses (i), (ii) and (iii) of this Section
4.16 shall have a maturity not exceeding one year.
Section 4.17. Fundamental Business Changes.
Not materially change the nature of its business or engage in any business
other than the Cable Business.
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Section 4.18. Sale or Transfer of Assets.
Without the prior approval of 100% of the Issuer's Board of Directors, not
sell, lease, assign, transfer or otherwise dispose of any Property (other than
in the ordinary course of business) except for (i) the sale or disposition of
(A) Property which is not material to or necessary for the continued operation
of its business and (B) obsolete or unusable items of equipment which promptly
are replaced with new items of equipment of like function and comparable value
to the unusable items of equipment when the same were new or not obsolete or
unusable, provided such replacement items of equipment shall become subject to
the Security Interests, (ii) Permitted Asset Sales and (iii) sales of Property
upon which the Agent (as defined in the Loan Agreement) has released its
Permitted Senior Indebtedness Liens.
Section 4.19. Acquisition of Additional Properties.
Without the prior approval of 100% of the Issuer's Board of Directors, not
acquire any additional Property except such Property as is necessary to or
useful in the operation of its business, provided such acquisitions shall be
subject to the conditions and limitations set forth in this Indenture.
Section 4.20. Issuance of Equity Interests.
Not issue or sell, permit to be issued or sold, or otherwise consent to
the transfer of, any additional capital stock or any interests convertible into
or exercisable for any such additional capital stock, except for the conversion
of the Class C Stock to Class A Stock.
Section 4.21. Transactions with Affiliates.
Without the prior approval of 100% of the Issuer's Board of Directors, not
sell, lease, assign, transfer or otherwise dispose of any Property to any
Affiliate of Issuer, lease Property, render or receive services or purchase
assets from any such Affiliate, or otherwise enter into any contractual
relationship with any Affiliate of Issuer, except that Issuer may (i) receive
management services from Scott Management under the terms of the Management
Agreement and may pay to Scott Management (A) Scott Management Fees provided
that the aggregate amount of all payments of Scott Management Fees with respect
to any month does not exceed 4.5% of the gross revenues of Issuer for such
month; except that any payment of Scott Management Fees with respect to December
of any year may exceed 4.5% of the gross revenues of Issuer for such month so
long as the aggregate amount of all payments of Scott Management Fees with
respect to any year does not exceed 4.5% of the gross revenues of
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Issuer for such year and (B) reasonable out-of-pocket expenses and (ii) engage
in such transactions with its Affiliates provided such transactions are in the
ordinary course of business of Issuer and are under terms no less favorable to
Issuer than could be obtained from an independent third party.
Section 4.22. Compliance with ERISA.
(a) Not engage in any Termination Event which would result in a
liability to Issuer or any ERISA Affiliate in excess of $100,000;
(b) Not cause the present value of all benefit liabilities under all
Pension Plans to exceed the current value of the assets of such Pension
Plans allocable to such benefit liabilities by more than $100,000;
(c) Not cause any accumulated funding deficiency in excess of
$100,000 (as defined in Section 302 of ERISA and Section 412 of the Code)
with respect to any Pension Plan, except to the extent waived;
(d) Not fail to make any contribution or payment to any
Multiemployer Plan which Issuer or any ERISA Affiliate may be required to
make under any agreement relating to such Multiemployer Plan, or any law
pertaining thereto which results in or is likely to result in a liability
in excess of $100,000;
(e) Not engage, or permit any ERISA Affiliate to engage, in any
"prohibited transaction" as such term is defined in Section 406 of ERISA
or Section 4975 of the Code for which a civil penalty pursuant to Section
502(i) of ERISA or a tax pursuant to Section 4975 of the Code in excess of
$100,000 is imposed;
(f) Not establish any Employee Benefit Plan providing
post-retirement welfare benefits or establish or amend any Employee
Benefit Plan which establishment or amendment could result in liability to
Issuer or any ERISA affiliate or increase the obligation of Issuer or any
ERISA Affiliate to a Multiemployer Plan which liability or increase,
individually or together with all similar liabilities and increases, is
material to Issuer or any ERISA Affiliate; or
(g) Not fail, or permit any ERISA Affiliate to fail, to establish,
maintain and operate each Employee Benefit Plan of Issuer in compliance in
all material respects with ERISA, the Code and all other applicable laws
and regulations and interpretations thereof.
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ARTICLE V
DEFAULT AND REMEDIES
Section 5.1. Events of Default.
An "Event of Default" occurs if:
(a) Issuer defaults in the payment of interest on the Securities
when the same becomes due and payable and the default continues for a
period of 30 days;
(b) Issuer defaults in the payment of the principal of the
Securities when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(c) Issuer shall fail to observe or perform any covenant or
agreement (other than those referred to in subparagraph (a) above or (b)
or specifically addressed elsewhere in this Section 5.1) made by it in
this Indenture and such failure shall continue for a period of 30 days
after written notice of such failure is given by the Trustee;
(d) any representation or warranty made by or on behalf of Issuer in
or pursuant to any of the Indenture Instruments or in any instrument or
document furnished in compliance with the Indenture Instruments shall
prove to be false or misleading in any material respect on the date as of
which made;
(e) (i) Issuer at any time shall be in default (as principal or
guarantor or other surety) in the payment of any principal of or premium
or interest on any Indebtedness for Borrowed Money beyond the grace
period, if any, applicable thereto and the aggregate amount of such
payments then in default beyond such grace period shall exceed $100,000 or
(ii) any default shall occur in respect of any issue of Indebtedness for
Borrowed Money of Issuer outstanding in a principal amount of at least
$300,000, or in respect of any agreement or instrument relating to any
such issue of Indebtedness for Borrowed Money, and such default shall
continue beyond the grace period, if any, applicable thereto, and in each
case, such default shall continue uncured or unwaived
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for a period of 60 days after written notice thereof is given by the
Trustee or, if as a result of such default the related Indebtedness has
been accelerated;
(f) (A) Issuer shall (i) generally not be paying its debts as they
become due, (ii) file, or consent, by answer or otherwise, to the filing
against it of a petition for relief or reorganization or arrangement or
any other petition in bankruptcy or insolvency under the laws of any
jurisdiction, (iii) make an assignment for the benefit of creditors, (iv)
consent to the appointment of a custodian, receiver, trustee or other
officer with similar powers for the Issuer, or for any substantial part of
the Property of the Issuer or (v) be adjudicated insolvent;
(B) any Governmental Body of competent jurisdiction shall enter
an order appointing, without consent of Issuer, a custodian, receiver,
trustee or other officer with similar powers with respect to Issuer, or
with respect to any substantial part of the Property belonging to Issuer,
or if an order for relief shall be entered in any case or proceeding for
liquidation or reorganization or otherwise to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of Issuer or if any petition for
any such relief shall be filed against Issuer and such petition shall not
be dismissed or stayed within 60 days;
(g) there shall exist a final judgment or award against Issuer which
shall have been outstanding for a period of 30 days or more from the date
of the entry thereof and shall not have been discharged in full or stayed
pending appeal, if the aggregate amount of all such judgments and awards
exceeds $300,000;
(h) Issuer fails to comply with the terms of its articles of
incorporation or by-laws; or
(i) any material portion of the Collateral shall be seized or taken
by a Governmental Body or Person (including, but not limited to, the
Senior Creditors pursuant to the terms of the Loan Agreement), or Issuer
shall fail to maintain or cause to be maintained the Security Interests
and priority of the Indenture Instruments as against any Person, or the
title and rights of Issuer to any material portion of the Collateral shall
have become the subject matter of litigation which could reasonably be
expected to result in impairment or loss of the security provided by the
Indenture Instruments.
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Section 5.2. Acceleration.
Subject to the terms of the Subordination Agreement (Senior), if an Event
of Default (other than an Event of Default specified in Section 5.1(f)) occurs
and is continuing, Trustee may, by notice to Issuer or the Holders of at least
25% in aggregate principal amount of the Securities then outstanding may, by
written notice to Issuer and Trustee, and Trustee shall, upon the request of
such Holders, declare the aggregate principal amount of the Securities
outstanding, together with accrued but unpaid interest thereon to the date of
payment, to be due and payable and, upon any such declaration, the same shall
become and be due and payable. If an Event of Default specified in Section
5.1(f) occurs, all unpaid principal and accrued interest on the Securities then
outstanding shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of Trustee or any Holder. Upon payment
of such principal amount, interest, and premium, if any, all of Issuer's
obligations under the Securities and this Indenture, other than obligations
under Section 6.7, shall terminate. The Holders of a majority in aggregate
principal amount of the Securities then outstanding by notice to Trustee may
rescind an acceleration and its consequences if (i) all existing Events of
Default, other than the non-payment of the principal and interest on the
Securities which have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 5.4, (ii) to the extent the
payment of such interest is lawful, interest on overdue installments of interest
and overdue principal, which has become due otherwise than by such declaration
of acceleration, has been paid, and (iii) the rescission would not conflict with
any judgment or decree of a court of competent jurisdiction.
Section 5.3. Other Remedies.
If an Event of Default occurs and is continuing, Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of or interest on the Securities or to enforce the performance of any
provision of the Securities, the Security Instruments or this Indenture.
Trustee may maintain a proceeding under this Indenture, the Security
Instruments or the Securities even if it does not possess any of the Securities
or does not produce any of them in the proceeding. A delay or omission by
Trustee or any Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
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Section 5.4. Waiver of Past Defaults.
Subject to Sections 5.7 and 7.2, the Holders of at least a majority in
aggregate principal amount of the outstanding Securities by notice to Trustee
may on behalf of the Holders of all the Securities waive any past Default under
this Indenture, the Securities or any Security Instruments and its consequences,
except a Default in the payment of principal of or interest on any Security as
specified in clauses (a) and (b) of Section 5.1 or an Event of Default specified
in Section 5.1(f). When a Default or Event of Default is so waived, it shall be
deemed cured and shall cease to exist.
Section 5.5. Control by Majority.
The Holders of at least a majority in aggregate principal amount of the
outstanding Securities may direct the time, method and place of conducting any
proceeding for any remedy available to Trustee or exercising any trust or power
conferred on it under this Indenture, the Securities or the Security
Instruments. Subject to Section 6.1, however, Trustee may refuse to follow any
direction (a) that conflicts with any law or this Indenture, (b) that Trustee
determines may be unduly prejudicial to the rights of another Holder, or (c)
that may involve Trustee in personal liability; provided that Trustee may take
any other action deemed proper by Trustee which is not inconsistent with such
direction.
Section 5.6. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture, the
Securities or the Security Instruments unless:
(1) the Holder gives written notice to Trustee of a continuing Event
of Default;
(2) the Holder or Holders of at least 25% in aggregate principal
amount of the outstanding Securities make a written request to Trustee to
pursue the remedy;
(3) such Holder or Holders offer and, if requested, provide to
Trustee indemnity satisfactory to Trustee against any loss, liability or
expense to be incurred in compliance with such request;
(4) Trustee does not comply with the request within 30 days after
receipt of the request and the offer and, if requested, provision of
indemnity; and
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(5) during such 30-day period the Holder or Holders of at least 25%
in aggregate principal amount of the outstanding Securities do not give
Trustee a direction which, in the opinion of Trustee, is inconsistent with
the request.
The foregoing limitations shall not apply to a suit instituted by a Holder
for the enforcement of the payment of principal of, or interest on, any
Securities on or after the respective due dates set forth in such Securities.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holders.
Section 5.7. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of and interest on a Security, on or
after the respective due dates expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of the Holder.
Section 5.8. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified in
clause (a) or (b) of Section 5.1 occurs and is continuing, Trustee may recover
judgment in its own name and as trustee of an express trust against Issuer for
the whole amount of principal and accrued interest remaining unpaid, together
with interest on overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate per annum borne by the Securities and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of Trustee, its
agents and counsel.
Section 5.9. Trustee May File Proofs of Claim.
Trustee may file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances of
Trustee, its agents and counsel) and the Holders allowed in any judicial
proceedings (including, without limitation, a case or proceeding under any
Bankruptcy Law) relating to Issuer or any other obligor upon the Securities, any
of their respective creditors or any of their respective property and shall be
entitled and empowered to collect and receive any monies or other property
payable or
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deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceedings is hereby authorized by each Holder to make such
payments to Trustee and, in the event that Trustee shall consent to the making
of such payments directly to the Holders, to pay to Trustee any amount due to it
for the reasonable compensation, expenses, disbursements and advances of
Trustee, its agents and counsel, and any other amounts due Trustee under Section
6.7. Nothing herein contained shall be deemed to authorize Trustee to authorize
or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize Trustee to vote in respect
of the claim of any Holder in any such proceeding.
Section 5.10. Priorities.
Subject to the Subordination Agreement (Senior), if Trustee collects any
money pursuant to this Article V, it shall pay out the money in the following
order:
First: to Trustee for amounts due to it under Section 6.7 and for any
amounts due under the Security Instruments;
Second: if the Holders are forced to proceed against Issuer directly
without Trustee, to the Holders for their collection costs;
Third: to the Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and
interest, respectively; and
Fourth: to Issuer.
Trustee, upon prior notice to Issuer, may fix a record date and payment
date for any payment to the Holders pursuant to this Section 5.10.
Section 5.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against Trustee for any action taken or omitted by it
as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 5.11 does not apply to
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a suit by Trustee, a suit by a Holder pursuant to Section 5.7, or a suit by a
Holder or Holders of more than 25% in aggregate principal amount of the
outstanding Securities.
ARTICLE VI
TRUSTEE
Trustee hereby accepts the trust imposed upon it by this Indenture and
covenants and agrees to perform the same, as herein expressed.
Section 6.1. Duties of Trustee.
(a) Execute the Subordination Agreement (Senior) and the Subordination
Agreement (Junior).
(b) If a Default or an Event of Default has occurred and is continuing,
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and the Security Instruments and use the same degree of care and skill
in its exercise thereof as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.
(c) Except during the continuance of a Default or an Event of Default:
(1) Trustee need perform only those duties as are specifically set
forth in this Indenture and the Security Instruments and no covenants or
obligations shall be implied in this Indenture or the Security Instruments
that are adverse to Trustee.
(2) In the absence of bad faith on its part, Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to Trustee and conforming to the requirements of this Indenture or the
Security Instruments, as the case may be. However, Trustee shall examine
the certificates and opinions to determine whether or not they conform to
the requirements of this Indenture or the relevant Security Instrument.
(d) Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 6.1.
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(2) Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that Trustee was
negligent in ascertaining the pertinent facts.
(3) Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by
it pursuant to Section 5.5.
(e) No provision of this Indenture or any Security Instrument shall
require Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or thereunder or in
the exercise of any of its rights or powers if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(f) Every provision of this Indenture and the Security Instruments that in
any way relates to Trustee is subject to paragraphs (a), (b), (c) and (d) of
this Section 6.1.
(g) Trustee shall not be liable for interest on any assets received by it
except as Trustee may agree with Issuer. Assets held in trust by Trustee need
not be segregated from other assets except to the extent required by law.
Section 6.2. Rights of Trustee.
Subject to Section 6.1 and the provisions of Section 315 of the TIA:
(a) Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper person. Trustee need not investigate
any fact or matter stated in the document.
(b) Before Trustee acts or refrains from acting, it may consult with
counsel and may require an Officers' Certificate or an Opinion of Counsel, which
shall conform to Sections 12.4 and 12.5. Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such certificate
or opinion.
(c) Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
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(d) Trustee shall not be liable for any action that it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers other than any liabilities arising out of its own negligence.
(e) Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
notice, request, direction, consent, order, bond, debenture, or other paper or
document, but Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit.
(f) Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture or any Security Instrument at the request,
order or direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to Trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
Section 6.3. Individual Rights of Trustee.
Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with Issuer, its Subsidiaries, or
their respective Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, Trustee must
comply with Sections 6.10 and 6.12.
Section 6.4. Trustee's Disclaimer.
Trustee makes no representation as to the validity or adequacy of this
Indenture, any Security Instrument or the Securities, it shall not be
accountable for Issuer's use of the proceeds from the Securities, and it shall
not be responsible for any statement in the Securities other than Trustee's
certificate of authentication. Trustee shall not be responsible for perfecting
or maintaining the perfection of any security interest granted to it under any
Security Instrument or for filing, refiling, recording or rerecording any
document, Mortgage, notice or instrument in any public office at any time or
times and shall not be responsible for seeing to the insurance on or the payment
of any taxes with respect to any property subject to any Security Instrument.
Section 6.5. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it is
known to Trustee, Trustee shall mail to each Holder notice of the uncured
Default or Event of Default within 30 days after such Default or Event of
Default occurs. Except in the case of a Default
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or an Event of Default in payment of principal of, premium, if any, or interest
on, any Security, Trustee may withhold the notice if and so long as its board of
directors, the executive committee of its board of directors or a committee of
its directors and/or Trust Officers in good faith determines that withholding
the notice is in the interest of the Holders.
Section 6.6. Reports By Trustee to Holders.
Within 60 days after each May 1st commencing with May 1, 1998, Trustee
shall, to the extent that any of the events described in TIA Section 313(a)
occurred within the previous twelve months, but not otherwise, mail to each
Holder a brief report dated as of such January 1st that complies with TIA
Section 313(a). Trustee also shall comply with TIA Sections 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
mailed to Issuer and filed with the SEC and each stock exchange, if any, on
which the Securities are listed.
Issuer shall notify Trustee if the Securities become listed on any stock
exchange.
Section 6.7. Compensation and Indemnity.
Issuer shall pay to Trustee from time to time reasonable compensation for
its services. Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. Issuer shall reimburse Trustee
upon request for all reasonable disbursements, expenses and advances incurred or
made by it. Such expenses shall include the reasonable compensation,
disbursements and expenses of Trustee's agents and counsel.
Issuer shall indemnify Trustee for, and hold it harmless against, any loss
or liability incurred by it except for such actions to the extent caused by any
negligence or bad faith on its part, arising out of or in connection with the
administration of this trust and its rights or duties hereunder and under the
Security Instruments. Trustee shall notify Issuer promptly of any claim asserted
against Trustee for which it may seek indemnity. Issuer shall defend the claim
and Trustee shall cooperate in the defense. Trustee may have separate counsel
and Issuer shall pay the reasonable fees and expenses of such counsel; provided
that Issuer will not be required to pay such fees and expenses if it assumes
Trustee's defense and there is no conflict of interest between Issuer and
Trustee in connection with such defense as reasonably determined by Trustee.
Issuer need not pay for any settlement made without its written consent. Issuer
need not reimburse any expense or indemnify against any loss or liability to the
extent incurred by Trustee through its negligence, bad faith or willful
misconduct.
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To secure Issuer's payment obligations in this Section 6.7, Trustee shall
have a lien prior to the Securities on all assets held or collected by Trustee,
in its capacity as Trustee, except assets held in trust to pay principal of,
premium, if any, or interest on particular Securities.
When Trustee incurs expenses or renders services after an Event of Default
specified in Section 5.1(f) occurs or in connection with any case or proceeding
under any Bankruptcy Law, the expenses and the compensation for the services are
intended to constitute expenses of administration under any Bankruptcy Law.
Section 6.8. Replacement of Trustee.
Trustee may resign by so notifying Issuer. The Holders of at least a
majority in aggregate principal amount of the outstanding Securities may remove
Trustee by so notifying Issuer and Trustee and may appoint a successor Trustee
with Issuer's consent. Issuer may remove Trustee if:
(1) Trustee fails to comply with Section 6.10;
(2) Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to Trustee under any Bankruptcy Law;
(3) a custodian, receiver or other public officer takes charge of
Trustee or its property; or
(4) Trustee becomes incapable of acting.
If Trustee resigns or is removed or if a vacancy exists in the office of
Trustee for any reason, Issuer shall notify each Holder of such event and shall
promptly appoint a successor Trustee. Within one year after the successor
Trustee takes office, the Holders of a majority in aggregate principal amount of
the Securities may appoint a successor Trustee to replace the successor Trustee
appointed by Issuer.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to Issuer. Immediately after that, the retiring
Trustee shall transfer all property held by it as Trustee to the successor
Trustee, subject to the lien provided in Section 6.7, the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of Trustee under this Indenture and the
Security Instruments and Issuer shall take such action as shall be necessary so
that all
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INDENTURE
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Collateral (including all Trust Moneys and other property in the Collateral
Account) shall continue to be subject to the Lien of the Security Instruments in
favor of Trustee (or, in the case of property or assets subject to a Mortgage,
Trustee or another trustee under such Mortgage) for the benefit of the Holders
of the Securities. A successor Trustee shall mail notice of its succession to
each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, Issuer or the
Holders of at least 10% in aggregate principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If Trustee fails to comply with Section 6.10, any Holder may petition any
court of competent jurisdiction for the removal of Trustee and the appointment
of a successor Trustee.
Notwithstanding replacement of Trustee pursuant to this Section 6.8,
Issuer's obligations under Section 6.7 shall continue for the benefit of the
retiring Trustee.
Section 6.9. Successor Trustee by Merger, Etc.
If Trustee consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
resulting, surviving or transferee corporation without any further act shall, if
such resulting, surviving or transferee corporation is otherwise eligible
hereunder, be the successor Trustee.
Section 6.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Sections 310(a)(1) and 310(a)(5). Trustee shall have a combined capital
and surplus of at least $100,000,000 as set forth in its most recent published
annual report of condition. Trustee shall comply with TIA Section 310(b);
provided, however, that there shall be excluded from the operation of TIA
Section 310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of Issuer are
outstanding, if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
Section 6.11. Co-Trustee.
(a) If at any time or times it shall be necessary or prudent in
order to conform to any law of any jurisdiction in which any of the Collateral
shall be located, or Trustee shall
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be advised by counsel satisfactory to it that it is necessary or prudent in the
interest of the Holders, or the Holders of at least 25% in aggregate principal
amount of the outstanding Securities shall in writing so request Trustee and
Issuer, or Trustee shall deem it desirable for its own protection in the
performance of its duties hereunder, Trustee and Issuer shall execute and
deliver all instruments and agreements necessary or proper to constitute another
bank or trust company, or one or more persons approved by Trustee and Issuer,
either to act as co-trustee or co-trustees (each a "co-trustee") of all or any
of the Collateral, jointly with Trustee, or to act as separate trustee or
trustees of any such property. If Issuer shall not have joined in the execution
of such instruments and agreements within 10 days after Issuer receives a
written request from Trustee to do so, or if an Event of Default has occurred
and is continuing, Trustee may act under the foregoing provisions of this
Section 6.11 without the concurrence of Issuer. Issuer hereby appoints Trustee
as its agent and attorney to act for it under the foregoing provisions of this
Section 6.11 in either of such contingencies.
(b) Every separate trustee and every co-trustee, other than any
successor Trustee appointed pursuant to Section 6.08, shall, to the extent
permitted by law, be appointed and act and be such, subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon Trustee hereunder shall be conferred or imposed and exercised or
performed by Trustee and such separate trustee or separate trustees or
co-trustee or co-trustees, jointly, as shall be provided in the instrument
appointing such separate trustee or separate trustees or co-trustee or
co-trustees, except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations shall be exercised and
performed singly by such separate trustee or separate trustees or
co-trustee or co-trustees, but solely at the direction of Trustee;
(ii) no trustee or co-trustee hereunder shall be personally liable
by reason of any act or omission of any other trustee or co-trustee
hereunder; and
(iii) Issuer and Trustee, at any time by an instrument in writing
executed by them jointly, may accept the resignation of or remove any such
separate trustee or co-trustee and, in that case by an instrument in
writing executed by them jointly, may appoint a successor to such separate
trustee or co-trustee, as the case may be, anything contained herein to
the contrary notwithstanding. If Issuer shall not have joined in the
execution of any such instrument within 10 days after Issuer receives a
written request from Trustee to do so, or if an Event of Default has
occurred and is continuing,
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Trustee shall have the power to accept the resignation of or remove any
such separate trustee or co-trustee and to appoint a successor without the
concurrence of Issuer, Issuer hereby appointing Trustee its agent and
attorney to act for it in such connection in such contingency. If Trustee
shall have appointed a separate trustee or co-trustee as above provided,
Trustee may at any time, by an instrument in writing, accept the
resignation of or remove any such separate trustee or co-trustee and the
successor to any such separate trustee or co-trustee shall be appointed by
Issuer and Trustee, or by Trustee alone pursuant to this Section 6.11.
Section 6.12. Preferential Collection of Claims Against Issuer.
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE VII
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 7.1. Without Consent of Holders.
Issuer, when authorized by a Board Resolution, and Trustee, together, may
amend or supplement this Indenture, the Securities or the Security Instruments
without notice to or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency; provided that
such amendment or supplement does not adversely affect the rights of any
Holder;
(2) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Internal Revenue Code of 1986, as from time to time
amended, or in a manner such that the uncertificated Securities are
described in Section 163(f)(2)(B) of the Internal Revenue Code of 1986, as
from time to time amended;
(3) to make any other change that does not adversely affect the
rights of any Holders;
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(4) to comply with any requirements of the SEC in connection with
the qualification of this Indenture under the TIA;
(5) to give effect to the release of any Released Interests or any
other release of Collateral released in accordance with the terms of this
Indenture or the relevant Security Instrument;
(6) to evidence or effect the pledge of additional or substitute
assets or property as Collateral; or
(7) to evidence and provide for the acceptance of appointment
hereunder by a separate or successor Trustee with respect to the
Securities and to make such additions or changes as shall be necessary or
appropriate to provide for or facilitate the administration of the trusts
hereunder by more than one trustee pursuant to the requirements of Section
6.11 hereof;
provided that Issuer has delivered to Trustee an Opinion of Counsel stating that
such amendment or supplement complies with the provisions of this Section 7.1.
Section 7.2. With Consent of Holders.
Subject to Section 5.7, Issuer, when authorized by a Board Resolution, and
Trustee, together, with the written consent of the Holder or Holders of at least
a majority in aggregate principal amount of the outstanding Securities, may
amend or supplement this Indenture, the Securities or the Security Instruments,
without notice to any other Holders. Subject to Section 5.7, the Holder or
Holders of at least a majority in aggregate principal amount of the outstanding
Securities may waive future compliance by Issuer with any provision of this
Indenture, the Securities or the Security Instruments without notice to any
other Holder. Without the consent of each Holder affected, however, no
amendment, supplement or waiver, including a waiver pursuant to Section 5.4,
may:
(1) change the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver of any provision of this
Indenture, the Securities or the Security Instruments;
(2) reduce the rate or extend the time for payment of interest on
any Security;
(3) reduce the principal amount of any Security;
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(4) change the Maturity Date of any Security, or alter the
redemption provisions contained in Article III in a manner adverse to any
Holder;
(5) make any changes in the provisions concerning waivers of
Defaults or Events of Default by Holders or the rights of Holders to
recover the principal of, interest on, or redemption payment with respect
to, any Security;
(6) make any changes in Section 5.4, 5.7 or this third sentence of
this Section 7.2;
(7) make the principal of, or the interest on any Security payable
with anything or in any manner other than as provided for in this
Indenture and the Securities as in effect on the date hereof; or
(8) directly or indirectly release or terminate the Liens created by
this Indenture and the Security Instruments as to all or substantially all
of the Collateral, except as expressly permitted under this Indenture and
the Security Instruments.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, Issuer shall mail to the Holders affected thereby a notice briefly
describing the amendment, supplement or waiver. Any failure of Issuer to mail
such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture.
In connection with any amendment, supplement or waiver under this Article
VII, Issuer may, but shall not be obligated to, offer to any Holder who consents
to such amendment, supplement or waiver, or to all Holders, consideration for
such Holder's consent to such amendment, supplement or waiver.
Section 7.3. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
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Section 7.4. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent Holder
of a Security or portion of a Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security. However, any such Holder or subsequent Holder may revoke the consent
as to his Security or portion of his Security by notice to Trustee or Issuer
received before the date on which Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities have
consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver. Notwithstanding the above, nothing in this paragraph shall
impair the right of any holder under Section 316(b) of the TIA.
Issuer shall fix a record date for the purpose of determining the Holders
entitled to consent to any amendment, supplement or waiver, which record date
shall be at least 30 days prior to the first solicitation of such consent. When
a record date is fixed, then notwithstanding the last sentence of the
immediately preceding paragraph, those persons who were Holders at such record
date (or their duly designated proxies), and only those persons, shall be
entitled to revoke any consent previously given, whether or not such persons
continue to be Holders after such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Holder, unless it makes a change described in any of clauses (1) through
(8) of Section 7.2, in which case, the amendment, supplement or waiver shall
bind only each Holder of a Security who has consented to it and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security; provided that any such waiver shall not impair
or affect the right of any Holder to receive payment of principal of and
interest on a Security, on or after the respective due dates expressed in such
Security, or to bring suit for the enforcement of any such payment on or after
such respective dates without the consent of such Holder.
Section 7.5. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
Trustee may require the Holder of the Security to deliver it to Trustee. Trustee
may place an appropriate notation on the Security about the changed terms and
return it to the Holder. Alternatively, if Issuer or Trustee so determines,
Issuer in exchange for the Security shall issue and Trustee shall authenticate a
new Security that reflects the changed terms.
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Section 7.6. Trustee To Sign Amendments, Etc.
Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article VII; provided that Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver which affects
Trustee's own rights, duties or immunities under this Indenture. Trustee shall
be entitled to receive, and shall be fully protected in relying upon, an Opinion
of Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article VII is authorized or permitted by this
Indenture.
ARTICLE VIII
COLLATERAL AND SECURITY
Section 8.1. Collateral.
In order to secure the due and punctual payment of the principal of and
interest on the Securities when and as the same shall be due and payable,
whether on an Interest Payment Date, at maturity or by acceleration, redemption
or otherwise, and interest on the overdue principal of and (to the extent
permitted by law) interest, if any, on the Securities and the performance of all
other obligations of Issuer to the Holders or Trustee under this Indenture, the
Securities and any other documents contemplated hereby, as the case may be,
Issuer and Trustee have simultaneously with the execution of this Indenture
entered into the Security Instruments. Trustee and Issuer each hereby agree that
Trustee holds its interest in the Collateral in trust for the benefit of the
Holders pursuant to the terms of the Security Instruments. Notwithstanding
anything contained herein or in the Indenture Instruments to the contrary, the
Issuer shall be permitted to establish reserves and escrows pursuant to the Plan
of Reorganization and the Collateral shall not include any funds escrowed
thereby until released to Issuer.
Section 8.2. Possession and Use of Collateral.
Subject to and in accordance with the provisions of the Subordination
Agreement (Senior), this Indenture and the Security Instruments, so long as no
Event of Default shall have occurred and be continuing, Issuer shall have the
right to remain in possession and retain exclusive control of and to exercise
all rights with respect to the Collateral, to operate, manage, develop, lease,
use, consume and enjoy the Collateral, to alter or repair any Collateral
consisting of machinery or equipment so long as such alterations and repairs do
not diminish the value thereof or impair the Lien of the Security Instruments
thereon and to
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collect, receive, use, invest and dispose of the reversions, remainders,
interest, rents, lease payments, issues, profits, revenues, proceeds and other
income thereof.
Section 8.3. Release of Collateral.
(a) Trustee shall not at any time release Collateral from the Liens
created by this Indenture and the Security Instruments unless such release is
(i) in accordance with the provisions of this Indenture and the Security
Instruments and the terms of the Subordination Agreement (Senior) or (ii) of
Collateral (x) which is the subject of a Permitted Asset Sale or a sale
otherwise permitted by the terms of the Loan Agreement or (y) upon which the
Agent (as defined in the Loan Agreement) has released its Permitted Senior
Indebtedness Liens.
(b) The release of any Collateral from the Lien of the Security
Instruments shall not be deemed to impair the security under this Indenture in
contravention of the provisions hereof if and to the extent the Collateral is
released pursuant to this Indenture and the Security Instruments. To the extent
applicable, Issuer shall cause TIA Section 314(d) relating to the release of
property from the Lien of the Security Instruments and relating to the
substitution therefor of any property to be subjected to the Lien of the
Security Instruments to be complied with. Any certificate or opinion required by
TIA Section 314(d) may be made by an Officer of Issuer, except in cases where
TIA Section 314(d) requires that such certificate or opinion be made by an
independent person, which person shall be an independent engineer, appraiser or
other expert selected or approved by Trustee in the exercise of reasonable care.
Section 8.4. Specified Releases of Collateral.
(a) Satisfaction and Discharge. Issuer shall be entitled to obtain a full
release of all of the Collateral from the Liens of this Indenture and of the
Security Instruments upon compliance with the conditions precedent set forth in
Section 11.1 for satisfaction and discharge of this Indenture. Upon delivery by
Issuer to Trustee of an Officers' Certificate and an Opinion of Counsel, each to
the effect that such conditions precedent have been complied with, together with
such documentation, if any, as may be required by the TIA (including, without
limitation, Section 314(d) of the TIA) prior to the release of such Collateral
has been provided to the Trustee, Trustee shall forthwith take all necessary
action (at the request of and the expense of Issuer) to release and reconvey to
Issuer without recourse all of the Collateral, and shall deliver such Collateral
in its possession to Issuer including, without limitation, the execution and
delivery of releases and satisfactions wherever required.
(b) Dispositions of Collateral Permitted by Section 4.18. Issuer shall be
entitled to obtain a release of, and Trustee shall release, items of Collateral
(the "Released Interests")
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subject to a Permitted Asset Sale upon compliance with the conditions precedent
that Issuer shall have delivered to Trustee the following:
(i) Company Order. A written request by the Issuer requesting
release of Released Interests, such request (A) specifically describing
the proposed Released Interests, (B) stating that the consideration to be
received is at least equal to the Fair Market Value of the Released
Interests on the date the agreement of sale was entered into ("Valuation
Date"), (C) stating that either (i) the release of such Released Interests
will not materially impair the value of the remaining Collateral or
materially interfere with or impede Trustee's ability to realize the value
of the remaining Collateral and will not materially impair the maintenance
and operation of the remaining Collateral or (ii) the sale has been
approved by 100% of the Issuer's Board of Directors, (D) confirming the
sale of, or an agreement to sell, such Released Interests in a bona fide
sale to a person that is not an Affiliate of Issuer, or in the event that
such sale is to a person that is such an Affiliate, that such sale has
been approved by 100% of the Issuer's Board of Directors, (E) certifying
that such Permitted Asset Sale complies with the terms and conditions of
this Indenture and (F) in the event that there is to be a substitution of
property for the Collateral subject to the Permitted Asset Sale,
specifying the property intended to be substituted for the Collateral to
be disposed of;
(ii) Officers' Certificate. An Officers' Certificate of Issuer
certifying that (A) such sale covers only the Released Interests, (B) all
proceeds from the sale of any of the Released Interests will be deposited
and all Net Sale Proceeds from the sale of any of the Released Interests
will be applied pursuant to Section 4.9, and (C) all conditions precedent
to such release have been complied with; and
(iii) Compliance with TIA and Section 8.1. All documentation
required by the TIA (including, without limitation, Section 314(d) of the
TIA), if any, prior to the release of Collateral by Trustee, and, in the
event there is to be a substitution of property for the Collateral subject
to the Permitted Asset Sale, all documentation required by the TIA to
effect the substitution of such new Collateral and to subject such new
Collateral to the Lien of the relevant Security Instruments, and all
documents required by Section 8.1 hereof.
(iv) Opinion of Counsel. An Opinion of Counsel stating that the
documents that have been or are therewith delivered to Trustee in
connection with such release conform to the requirements of this Indenture
and that all conditions precedent herein provided for relating to such
release have been complied with.
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Upon compliance by Issuer with the conditions precedent set forth above,
Trustee shall cause to be released and reconveyed to Issuer the Released
Interest without recourse by executing a release in the form provided by Issuer.
(c) Eminent Domain, Expropriation and Other Governmental Takings. Issuer
shall be entitled to obtain a release of, and Trustee shall release, items of
Collateral taken by eminent domain or expropriation or sold pursuant to the
exercise by the United States of America or any State, municipality, province or
other governmental authority thereof of any right which it may then have to
purchase, or to designate a purchaser or to order a sale of, all or any part of
the Collateral, upon compliance with the conditions precedent that Issuer shall
have delivered to Trustee the following:
(i) Officers' Certificate. An Officers' Certificate of Issuer
certifying that (A) such Collateral has been taken by eminent domain or
expropriation and the amount of the award therefor, or that such property
has been sold pursuant to a right vested in the United States of America,
or a State, municipality, province or other governmental authority thereof
to purchase, or to designate a purchaser, or order a sale of such
Collateral and the amount of the proceeds of such sale, and (B) all
conditions precedent to such release have been complied with;
(ii) Opinion of Counsel. An Opinion of Counsel to the effect that
(A) such property has been lawfully taken by exercise of the right of
eminent domain, or has been sold pursuant to the exercise of a right
vested in the United States of America or a State, municipality, province
or other governmental authority to purchase, or to designate a purchaser
or order a sale of, such property, (B) in the case of any such taking by
eminent domain, the award for such property has become final or an appeal
therefrom is not advisable in the interests of Issuer or the Holders, (C)
the documents that have been or are therewith delivered to Trustee in
connection with such release conform to the requirements of this
Indenture, and (D) all conditions precedent herein provided relating to
such release have been complied with;
(iii) Eminent Domain or Expropriation Award. Subject to the
Subordination Agreement (Senior), cash equal to the amount of the award
for such property or the Net Sale Proceeds shall be deposited with the
Trustee and held subject to the disposition thereof pursuant to the
Subordination Agreement (Senior); and
(iv) Compliance with TIA. All documentation required by the TIA
(including, without limitation, ss. 314(d) of the TIA), if any, prior to
the release of Collateral by Trustee.
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Upon compliance by Issuer with the conditions precedent set forth above,
Trustee shall cause to be released and reconveyed to Issuer without recourse the
aforementioned items of Collateral by executing a release in the form provided
by Issuer.
Section 8.5. Disposition of Collateral Without Release.
Notwithstanding the provisions of Section 8.4, so long as no Default or
Event of Default shall have occurred and be continuing or would result
therefrom, Issuer may, without any prior release or consent by Trustee, conduct
ordinary course activities in respect of the Collateral which do not
individually or in the aggregate adversely affect the value of the Collateral,
including selling or otherwise disposing of, in any single transaction or series
of related transactions, any property subject to the Lien of this Indenture or
the Security Instruments which has become worn out or obsolete and which either
has an aggregate Fair Market Value of $100,000 per year or less or which is
replaced by property of substantially equivalent or greater value which becomes
subject to the Lien of the Security Instruments as after-acquired property;
abandoning, terminating, cancelling, releasing or making alterations in or
substitutions of any leases or contracts subject to the Lien of this Indenture
or any of the Security Instruments; surrendering or modifying any franchise,
license or permit subject to the Lien of this Indenture or any of the Security
Instruments which it may own or under which it may be operating; altering,
repairing, replacing, changing the location or position of and adding to its
structures, machinery, systems, equipment, fixtures, and appurtenances,
provided, however that no change in the location of any such Collateral subject
to the Lien of any of the Security Instruments shall be made which (1) removes
such property into a jurisdiction in which any instrument required by law to
preserve the Lien of any of the Security Instruments on such property, including
all necessary financing statements and continuation statements, has not been
recorded, registered or filed in the manner required by law to preserve the Lien
of and security interest in any of the Security Instruments on such property,
(2) does not comply with the terms of this Indenture and the Security
Instruments or (3) otherwise impairs the Lien of the Security Instruments;
demolishing, dismantling, tearing down or scrapping any Collateral or abandoning
any thereof if, in the good faith opinion of the Board of Directors of the
Company (as evidenced by a Board Resolution delivered to the Trustee if it
involves Collateral having a Fair Market Value in excess of $100,000) such
demolition, dismantling, tearing down, scrapping or abandonment is in the best
interests of the Company, will not interfere with or impede Trustee's ability to
realize the value of the remaining Collateral and will not impair the
maintenance and operation of the remaining Collateral, and the Fair Market Value
and utility of the Collateral as an entirety, and the security for the
Securities, will not thereby be otherwise impaired; granting a nonexclusive
license of any intellectual property; and abandoning intellectual property which
has become obsolete and not used in the business.
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Section 8.6. Purchaser Protected.
No purchaser or grantee of any property or rights purporting to be
released herefrom shall be bound to ascertain the authority of Trustee to
execute the release or to inquire as to the existence of any conditions herein
prescribed for the exercise of such authority.
Section 8.7. Authorization of Actions To Be Taken by Trustee Under the Security
Documents.
Subject to the provisions of the Security Instruments and the
Subordination Agreement (Senior), (a) Trustee may, in its sole discretion and
without the consent of the Holders, take all actions it deems necessary or
appropriate in order to (i) enforce any of the terms of the Security Instruments
and (ii) collect and receive any and all amounts payable in respect of the
obligations of Issuer hereunder or thereunder and (b) Trustee shall have power
to institute and to maintain such suits and proceedings as it may deem expedient
to prevent any impairment of the Collateral by any act that may be unlawful or
in violation of the Security Instruments or this Indenture, and such suits and
proceedings as Trustee may deem expedient to preserve or protect its interests
and the interests of the Holders in the Collateral (including the power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the security
interest thereunder or be prejudicial to the interests of the Holders or of
Trustee). Trustee is hereby expressly authorized to execute, deliver and perform
its obligations under the Security Instruments. Except during the continuance of
an Event of Default, Trustee shall not be required to take any action under this
indenture or the Security Instruments that involves the exercise by it of
discretion. Trustee may, however, take any such action upon the basis of, at the
election of Trustee, either an Officers' Certificate or an Opinion of Counsel,
or both, of Issuer stating the nature of the proposed action and that any such
action is appropriate, necessary or advisable under the circumstances, complies
with the Indenture and the Security Instruments and does not adversely affect
the interests of the Holders; provided that the foregoing shall not limit the
ability of Trustee to take action at its discretion in the absence of such an
Officers' Certificate or Opinion of Counsel. Except during the continuance of an
Event of Default, Trustee may refrain from taking any such action pending
receipt of such Officers' Certificate and/or Opinion of Counsel, if so requested
by it, and shall incur no liability to any person for failure to take any such
action pending receipt thereof. Trustee shall be fully protected in acting on
the basis of any such Officers' Certificate and/or Opinion of Counsel and shall
incur no liability to any person arising out of any action taken on the basis
thereof.
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Section 8.8. Authorization of Receipt of Funds by Trustee Under the Security
Documents.
Trustee is authorized to receive any funds for the benefit of Holders
distributed under the Security Instruments and, subject to the terms of the
Subordination Agreement (Senior), to apply such funds as provided in this
Indenture and the Security Instruments, and to make further distributions of
such funds to the Holders in accordance with the other provisions of this
Indenture.
ARTICLE IX
MEETINGS OF SECURITYHOLDERS
Section 9.1. Purposes for Which Meetings May Be Called.
A meeting of Holders may be called at any time and from time to time
pursuant to the provisions of this Article IX for any of the following purposes:
(a) to give any notice to Issuer or to Trustee, or to give any directions
to Trustee, or to waive or to consent to the waiving of any Default or Event of
Default hereunder and its consequences, or to take any other action authorized
to be taken by Holders pursuant to any of the provisions of Article V;
(b) to remove Trustee or appoint a successor Trustee pursuant to the
provisions of Article VI;
(c) to consent to an amendment, supplement or waiver pursuant to the
provisions of Section 7.2; or
(d) to take any other action (i) authorized to be taken by or on behalf of
the Holders of any specified aggregate principal amount of the Securities under
any other provision of this Indenture, or authorized or permitted by law or (ii)
which Trustee deems necessary or appropriate in connection with the
administration of this Indenture.
Section 9.2. Manner of Calling Meetings.
Trustee may at any time call a meeting of Holders to take any action
specified in Section 9.1, to be held at such time and at such place in New York,
New York or elsewhere
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as Trustee shall determine. Notice of every meeting of Holders, setting forth
the time and place of such meeting and in general terms the action proposed to
be taken at such meeting, shall be mailed by Trustee, first-class postage
prepaid, to Issuer and to the Holders at their last addresses as they shall
appear on the registration books of the Registrar not less than 10 nor more than
60 days prior to the date fixed for a meeting.
Any meeting of Holders shall be valid without notice if the Holders of all
Securities then outstanding are present in person or by proxy, or if notice is
waived before or after the meeting by the Holders of all Securities outstanding,
and if Issuer, any Subsidiary and Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.
Section 9.3. Call of Meetings by Issuer or Holders.
In case at any time Issuer, pursuant to a Board Resolution, or the Holders
of not less than 10% in aggregate principal amount of the Securities then
outstanding shall have requested Trustee to call a meeting of Holders to take
any action specified in Section 9.1, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and Trustee
shall not have mailed the notice of such meeting within 20 days after receipt of
such request, then Issuer or the Holders in the amount above specified may
determine the time and place in New York, New York or elsewhere for such meeting
and may call such meeting for the purpose of taking such action, by mailing or
causing to be mailed notice thereof as provided in Section 9.2, or by causing
notice thereof to be published at least once in each of two successive calendar
weeks (on any Business Day during such week) in the Wall Street Journal
(national edition) or such other newspaper or newspapers printed in the English
language, customarily published at least five days a week of a general
circulation in New York, New York, the first such publication to be not less
than 10 nor more than 60 days prior to the date fixed for the meeting.
Section 9.4. Who May Attend and Vote at Meetings.
To be entitled to vote at any meeting of Holders, a person shall (a) be a
registered Holder of one or more Securities, or (b) be a person appointed by an
instrument in writing as proxy for the registered Holder or Holders of
Securities. The only persons who shall be entitled to be present or to speak at
any meeting of Holders shall be the persons entitled to vote at such meeting and
their counsel and any representatives of Trustee and its counsel and any
representatives of Issuer and its counsel.
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Section 9.5. Regulations May Be Made by Trustee; Conduct of the Meeting; Voting
Rights; Adjournment.
Notwithstanding any other provision of this Indenture, Trustee may make
such reasonable regulations as it may deem advisable for any action by or any
meeting of Holders, in regard to proof of the holding of Securities and of the
appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, and submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think appropriate. Such regulations may fix a
record date and time for determining the Holders of record of Securities
entitled to vote at such meeting, in which case those and only those persons who
are Holders of Securities at the record date and time so fixed, or their
proxies, shall be entitled to vote at such meeting whether or not they shall be
such Holders at the time of the meeting.
Trustee shall, by an instrument in writing, appoint a temporary chairman
of the meeting, unless the meeting shall have been called by Issuer or by
Holders as provided in Section 9.3, in which case Issuer or the Holders calling
the meeting, as the case may be, shall in like manner appoint a temporary
chairman. A permanent chairman and a permanent secretary of the meeting shall be
elected by vote of the Holders of a majority in aggregate principal amount of
the Securities represented at the meeting and entitled to vote.
At any meeting each Holder or proxy shall be entitled to one vote for each
$1,000 principal amount of Securities held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Securities challenged as not outstanding and ruled by the chairman of the
meeting to be not outstanding. The chairman may adjourn any such meeting if he
is unable to determine whether any Holder or proxy shall be entitled to vote at
such meeting. The chairman of the meeting shall have no right to vote other than
by virtue of Securities held by him or instruments in writing as aforesaid duly
designating him as the proxy to vote on behalf of other Holders. Any meeting of
Holders duly called pursuant to the provisions of Section 9.2 or Section 9.3 may
be adjourned from time to time by vote of the Holders of a majority in aggregate
principal amount of the Securities represented at the meeting and entitled to
vote, and the meeting may be held as so adjourned without further notice.
Section 9.6. Voting at the Meeting and Record To Be Kept.
The vote upon any resolution submitted to any meeting of Holders shall be
by written ballots on which shall be subscribed the signatures of the Holders of
Securities or of their representatives by proxy and the principal amount of the
Securities voted by the ballot. The
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permanent chairman of the meeting shall appoint two inspectors of votes, who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record in duplicate of
the proceedings of each meeting of Holders shall be prepared by the secretary of
the meeting and there shall be attached to such record the original reports of
the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts, setting forth a copy of the
notice of the meeting and showing that such notice was mailed as provided in
Section 9.2 or published as provided in Section 9.3. The record shall be signed
and verified by the affidavits of the permanent chairman and the secretary of
the meeting and one of the duplicates shall be delivered to Issuer and the other
to Trustee to be preserved by Trustee, the latter to have attached thereto the
ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 9.7. Exercise of Rights of Trustee or Holders May Not Be Hindered or
Delayed by Call of Meeting.
Nothing contained in this Article IX shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Holders or any rights
expressly or impliedly conferred hereunder to make such call, any hindrance or
delay in the exercise of any right or rights conferred upon or reserved to
Trustee or to the Holders under any of the provisions of this Indenture or of
the Securities.
ARTICLE X
SUBORDINATION
Section 10.1. Securities Subordinated to Senior Indebtedness.
Anything herein to the contrary notwithstanding, Issuer, for itself and
its successors, and each Holder, by accepting a Security, agrees, that the
payment of the principal of and interest on and premiums, penalties, fees and
other liabilities (including, without limitation, liabilities in respect of any
indemnity, reimbursement, compensation or contribution obligations, any breach
of representation or warranty, or any rights of redemption or rescission under
this Indenture or by law or otherwise) with respect to the Securities is
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subordinated, to the extent and in the manner provided in the Subordination
Agreement (Senior).
ARTICLE XI
SATISFACTION AND DISCHARGE
Section 11.1. Satisfaction and Discharge of the Indenture.
This Indenture will be discharged and will cease to be of further effect
as to all outstanding Securities when:
(a) all Securities theretofore authenticated and delivered (except lost,
stolen or destroyed Securities which have been replaced or paid and Securities
for whose payment money has theretofore been deposited in trust and thereafter
repaid to Issuer) have been delivered to Trustee for cancellation; or
(b) (1) all Securities not theretofore delivered to Trustee for
cancellation have become due and payable by reason of the making of a notice of
redemption or otherwise and Issuer has irrevocably deposited or caused to be
deposited with Trustee as trust funds in trust for the purpose an amount
sufficient to pay and discharge the entire indebtedness on the Securities not
theretofore delivered to Trustee for cancellation for principal, premium, if
any, and accrued interest to the date of maturity or redemption;
(2) Issuer has paid all sums payable by it under this Indenture; and
(3) Issuer has delivered irrevocable instructions to Trustee to
apply the deposited money toward the payment of the Securities at maturity
or the redemption date, as the case may be.
Section 11.2. Conditions to Satisfaction and Discharge of the Indenture.
Issuer shall deliver an Officers' Certificate and an Opinion of Counsel to
Trustee stating that all conditions precedent to satisfaction and discharge have
been complied with.
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ARTICLE XII
MISCELLANEOUS
Section 12.1. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by operation of Section 3.18(c) of the TIA, the imposed
duties shall control.
Section 12.2. Notices.
Any notices or other communications required or permitted hereunder shall
be in writing, and shall be sufficiently given if made by hand delivery, by
telecopier or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to Issuer:
Scott Cable Communications, Inc.
Four Landmark Square, Suite 302
Stamford, Connecticut 06901
Attention: Bruce A. Armstrong
Chief Executive Officer
Telecopy No.: (203) 325-3110
Copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attention: Stanley E. Bloch
Telecopy No.: (212) 702-5941
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if to Trustee:
Fleet National Bank
Corporate Trust Department
One Federal Street
Boston, Massachusetts 02110
Attention: Robert L. Bice
Telecopier No.: (617) 346-5501
Each of Issuer and Trustee, by written notice to each other such person,
may designate additional or different addresses for notices to such person. Any
notice or communication to Issuer and Trustee shall be deemed to have been given
or made as of the date so delivered if personally delivered; the next business
day, if sent via a national known overnight delivery service; when receipt is
acknowledged, if telecopied; and upon receipt after mailing if sent by
registered or certified mail, postage prepaid.
Any notice or communication mailed to a Holder shall be mailed to him by
first class mail or other equivalent means at his address as it appears on the
registration books of the Registrar and shall be sufficiently given to him if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
Section 12.3. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture, the Security Instruments or
the Securities. Issuer, Trustee, the Registrar and any other person shall have
the protection of TIA Section 312(c).
Section 12.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by Issuer to Trustee to take any action
under this Indenture, Issuer shall furnish to Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
59
<PAGE>
INDENTURE
(15% Senior Subordinated)
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 12.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture, other than the Officers' Certificate
required by Section 8.4, shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of each such
person, such condition or covenant has been complied with; provided,
however, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
Section 12.6. Rules by Trustee, Paying Agent, Registrar.
Trustee may make reasonable rules for action by or at a meeting of
Holders. Paying Agent or Registrar may make reasonable rules for its functions.
Section 12.7. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF
NEW YORK. Each of the parties hereto agrees to submit to the jurisdiction of the
courts of the State of New York in any action or proceeding arising out of or
relating to this Indenture.
60
<PAGE>
INDENTURE
(15% Senior Subordinated)
Section 12.8. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of Issuer or any Subsidiary. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
Section 12.9. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such, of
Issuer shall not have any liability for any obligations of Issuer under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creations. Each Holder by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
Section 12.10. Successors.
All agreements of Issuer in this Indenture, the Security Instruments and
the Securities shall bind their respective successors. All agreements of Trustee
in this Indenture shall bind its successor.
Section 12.11. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together shall represent the same
agreement.
Section 12.12. Severability.
In case any one or more of the provisions in this Indenture or in the
Securities shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
Section 12.13. Actions by Trustee.
Notwithstanding anything contained herein or in any Security Instrument to
the contrary, Trustee shall have no obligation to foreclosure of any lien or to
take any similar remedial undertaking with respect to any real property that
comprises the Collateral unless and until Trustee shall be satisfied, in its
sole discretion, with the indemnities provided herein
61
<PAGE>
INDENTURE
(15% Senior Subordinated)
and/or any Security Instrument with respect to any and/or all liabilities
Trustee may incur with respect to taking any such action.
Section 12.14. Notes Issued In Accordance With Plan.
The Notes are the New Restructured Second Secured PIK Notes referred to in
the Debtors' Second Amended Disclosure Statement and Second Amended Joint Plan
of Reorganization dated October 31, 1996 and filed by the Issuer with the United
States Bankruptcy Court for the District of Delaware, and the Notes are issued
in accordance therewith.
Section 12.15. Deposit Agreement.
Upon issuance, the Notes are intended to be held by Fleet National Bank,
as Depositary pursuant to the Deposit Agreement of even date herewith by and
among the Issuer and the Depositary. Reference is hereby made to such agreement
for the terms and conditions of such holdings and the rights and remedies of the
parties thereto in connection therewith.
62
<PAGE>
INDENTURE
(15% Senior Subordinated)
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first written above.
SCOTT CABLE COMMUNICATIONS, INC.
By: /s/ Bruce A. Armstrong
------------------------------------
Name: Bruce A. Armstrong
Title: President
FLEET NATIONAL BANK
as Trustee
By: /s/ Robert L. Bice
------------------------------------
Name: Robert L. Bice
Title: Vice President
63
<PAGE>
INDENTURE
(15% Senior Subordinated)
EXHIBIT A
The indebtedness evidenced hereby is subordinate in the manner and to the extent
set forth in that certain Subordination Agreement (the "Subordination Agreement
(Senior)") dated as of December 18, 1996 Scott Cable Communications, Inc.
("Issuer"), Fleet National Bank, as Trustee under the 15% Senior Subordinated
Pay-in-Kind Notes Indenture, Fleet National Bank, as Trustee under the 16%
Junior Subordinated Pay-in-Kind Note Indenture, and FINOVA Capital Corporation
("FINOVA"), to the indebtedness (including interest) owed by Issuer to the
holders of all of the notes issued pursuant to that certain Loan Agreement dated
as of December 18, 1996 between Issuer and FINOVA, as such Loan Agreement has
been and hereafter may be amended, modified, supplemented or restated from time
to time; and each holder hereof, by its acceptance hereof, shall be bound by the
provisions of the Subordination Agreement (Senior).
SCOTT CABLE COMMUNICATIONS, INC.
15% Senior Subordinated Pay-in-Kind Notes
due March 18, 2002
No. $
Scott Cable Communications, Inc., a Texas corporation ("Issuer," which term
includes any successor entity), for value received promises to pay to
_____________________ or registered assigns, the principal sum of dollars, on
March 18, 2002.
Interest payment dates: June 18 and December 18 commencing June 18, 1997.
Record dates: May 18 and November 18.
Reference is made to the further provisions of this security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
A-1
<PAGE>
INDENTURE
(15% Senior Subordinated)
IN WITNESS WHEREOF, Issuer has caused this Security to be signed manually
or by facsimile by its duly authorized officers.
Dated: December 18, 1996
SCOTT CABLE COMMUNICATIONS, INC.
By: ____________________________________
Name: Bruce A. Armstrong
Title: President
A-2
<PAGE>
INDENTURE
(15% Senior Subordinated)
This is one of the Securities described in the within-mentioned Indenture.
Dated: December 18, 1996
FLEET NATIONAL BANK
as Trustee
_________________________________________
By:
Title:
A-3
<PAGE>
INDENTURE
(15% Senior Subordinated)
SCOTT CABLE COMMUNICATIONS, INC.
15% Senior Subordinated Pay-in-Kind Debenture
due March 18, 2002
1. Interest.
Scott Cable Communications, Inc., a Texas corporation ("Issuer"), promises
to pay interest on the principal amount of this Security at the rate per annum
shown above. Issuer shall issue additional Securities ("Secondary Securities")
in payment of any and all of the interest due on any Interest Payment Date or,
at the option of the Issuer, such interest may be made in cash. Each issuance of
Secondary Securities for the payment of interest on the Securities shall be made
pro rata with respect to the outstanding Securities. Any such Secondary
Securities shall be governed by the Indenture and shall be subject to the same
terms (including the maturity date and the rate of interest from time to time
payable thereon) as this Security (except, as the case may be, with respect to
the title, issuance date and aggregate principal amount). The term Securities
shall include the Secondary Securities that may be issued under the Indenture.
Issuer will pay interest semi-annually in arrears on June 18 and December
18 of each year (the "Interest Payment Date"), commencing June 18, 1997.
Interest on this Security will accrue from the date of issuance or from the most
recent date to which interest has been paid. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
Issuer shall pay interest on overdue principal and interest on overdue
installments of interest, to the extent lawful, at the rate per annum borne by
the Securities.
2. Method of Payment.
Issuer shall pay interest on the Securities to the persons who are the
registered Holders at the close of business on the Record Date immediately
preceding the Interest Payment Date even if the Securities are cancelled on
registration of transfer or registration of exchange after such Record Date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. Issuer shall pay principal and interest in money of the United States
that at the time of payment is legal tender for payment of public and private
debts ("U.S. Legal Tender") (or, pursuant to Paragraph 1 hereof, in Secondary
Securities). However, Issuer may pay principal and interest by its check payable
in such U.S. Legal Tender or by wire transfer of federal funds (or, pursuant to
Paragraph 1 hereof, in Secondary Securities). Issuer may
A-4
<PAGE>
INDENTURE
(15% Senior Subordinated)
deliver any such interest payment to Paying Agent or to a Holder at the Holder's
registered address.
3. Paying Agent and Registrar.
Initially, FLEET NATIONAL BANK (the "Trustee"), will act as Paying Agent
and Registrar. Issuer may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders. Issuer or any Subsidiary may, subject to certain
exceptions, act as Paying Agent, Registrar or co-Registrar.
4. Indenture.
Issuer issued the Securities under an Indenture, dated as of December 18,
1996 (the "Indenture"), between Issuer and Trustee. This Security is one of a
duly authorized issue of Securities of Issuer designated as its 15% Senior
Subordinated Pay-in-Kind Notes due 2002. Capitalized terms herein are used as
defined in the Indenture unless otherwise defined herein. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such
time as the Indenture is qualified under the TIA, and thereafter as in effect on
the date on which the Indenture is qualified under the TIA. Notwithstanding
anything to the contrary herein, the Securities are subject to all such terms,
and Holders of Securities are referred to the Indenture and said Act for a
statement of them. The Securities are secured obligations of Issuer limited in
aggregate principal amount to $49,500,000, except for Secondary Securities and
except as otherwise provided in the Indenture.
5. Redemption.
The Securities may be redeemed in accordance with Article III and Section
4.9 of the Indenture.
6. Notice of Redemption.
Notice of redemption will be mailed at least 10 days but not more than 60
days before the Redemption Date to each Holder of Securities to be redeemed at
such Holder's registered address.
Except as set forth in the Indenture, from and after any Redemption Date,
if monies for the redemption of the Securities called for redemption shall have
been deposited with
A-5
<PAGE>
INDENTURE
(15% Senior Subordinated)
Paying Agent for redemption on such Redemption Date, then, unless Issuer
defaults in the payment of such Redemption Price, the Securities called for
redemption will cease to bear interest and the only right of the Holders of such
Securities will be to receive payment of the Redemption Price.
7. Limitation on Disposition of Assets.
Under certain circumstances Issuer is required to apply the net proceeds
from Permitted Asset Sales to the repayment of Indebtedness of Issuer.
8. Subordination.
The Securities are subordinated in right of payment, in the manner and to
the extent set forth in the Indenture and the Subordination Agreement (Senior),
to the prior payment in full of Senior Indebtedness of Issuer whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. Each Holder, by accepting a Security, agrees to such
subordination and authorizes Trustee to give it effect.
9. Denominations; Transfer; Exchange.
The Securities are in registered form and without coupons. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption. No service
charge shall be made for any transfer, registration or exchange, but Issuer may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith, but not for any exchange pursuant to
Section 2.10 or 3.6 of the Indenture.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
11. Unclaimed Money.
A-6
<PAGE>
INDENTURE
(15% Senior Subordinated)
If money for the payment of principal or interest remains unclaimed for
one year, Trustee and Paying Agents will pay the money back to Issuer at its
request. After that, all liability of Trustee and such Paying Agents with
respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity.
If Issuer at any time deposits with Trustee U.S. Legal Tender or U.S.
Government Obligations sufficient to pay the principal of and interest on the
Securities to redemption or maturity and complies with the other provisions of
the Indenture relating thereto, Issuer will be discharged from certain
provisions of the Indenture and the Securities (including the financial
covenants, but excluding its obligation to pay the principal of and interest on
the Securities).
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount, as the case may be, of the Securities then outstanding. Without notice
to or consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Securities to, among other things, cure any ambiguity, defect
or inconsistency, provide for uncertificated Securities in addition to or in
place of certificated Securities, comply with Article Five of the Indenture or
comply with any requirements of the SEC in connection with the qualification of
the Indenture under the TIA, or make any other change that does not adversely
affect the rights of any Holder of a Security.
14. Successors.
When a successor assumes all the obligations of its predecessor under the
Securities and the Indenture, the predecessor will be released from those
obligations.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing, Trustee or the Holders of
at least 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable in the manner, at the time and
with the effect provided in the Indenture. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. Trustee is
not obligated to enforce the Indenture or the Securities unless it has
A-7
<PAGE>
INDENTURE
(15% Senior Subordinated)
received indemnity satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Securities then outstanding to direct Trustee in its exercise of
any trust or power. Trustee may withhold from Holders of Securities notice of
any continuing Default or Event of Default (except a Default in payment of
principal or interest) if it determines that withholding notice is in their
interest.
16. Trustee Dealings with Issuer.
Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Securities and may otherwise deal with Issuer,
its Subsidiaries or their respective Affiliates as if it were not Trustee.
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
Issuer shall have any liability for any obligation of Issuer under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
18. Authentication.
This Security shall not be valid until Trustee or authenticating agent
manually signs the certificate of authentication on this Security.
19. Governing Law.
The Laws of the State of New York shall govern this Security and the
Indenture.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Security
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
21. CUSIP Numbers.
A-8
<PAGE>
INDENTURE
(15% Senior Subordinated)
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, Issuer will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Indenture.
Each Holder, by accepting a Security, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.
Issuer will furnish to any Holder of a Security upon written request and
without charge a copy of the Indenture. Requests may be made to:
John Flanagan
Chief Financial Officer
Scott Cable Communications, Inc.
Four Landmark Square, Suite 302
Stamford, Connecticut 06901
23. Certain Information Obligations.
To the extent permitted by applicable law or regulation, whether or not
Issuer is subject to the requirements of Section 13 or 15(d) of the Exchange
Act, Issuer shall file with the SEC all quarterly and annual reports and such
other information, documents or other reports (or copies of such portions of any
of the foregoing as the SEC may by rules and regulations prescribe) required to
be filed pursuant to such provisions of the Exchange Act. Issuer shall file with
Trustee copies of the quarterly and annual reports and the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) that it is required to file
with the SEC pursuant to the Indenture. At any time when Issuer is not permitted
by applicable law or regulations to file the aforementioned reports, Issuer
shall furnish Trustee and the Holders with the information that Issuer would
have had to provide to the SEC if Issuer had been subject to Section 13 or 15(d)
of the Exchange Act.
24. Issuer Indebtedness.
A-9
<PAGE>
INDENTURE
(15% Senior Subordinated)
Each Holder acknowledges that Issuer is the sole obligor of the Securities
and no Subsidiary of Issuer is a co-obligor or a guarantor of the Securities.
A-10
<PAGE>
INDENTURE
(15% Senior Subordinated)
{FORM OF ASSIGNMENT}
I or we assign this Security to
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
_________________________________________
and irrevocably appoint _______________________ agent to transfer this Security
on the books of Issuer. The agent may substitute another to act for him.
Dated: Signed:
_________________________________________________________________
(Sign exactly as your name appears on the front of this Security)
Signature Guarantee: ____________________________________________
A-11
<PAGE>
Exhibit 10.6
================================================================================
SCOTT CABLE COMMUNICATIONS, INC.,
as Issuer,
FLEET NATIONAL BANK,
as Depositary
and
FLEET NATIONAL BANK, AS TRUSTEE FOR HOLDERS OF
15% SENIOR SUBORDINATED PAY-IN-KIND NOTES DUE MARCH 18, 2002
OF
SCOTT CABLE COMMUNICATIONS, INC.
-------------
DEPOSIT AGREEMENT
Dated as of December 18, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
1.1 ................................................................... - 1 -
ARTICLE II
Deposit of Securities; Deposit Account
2.1 Deposit of Securities.............................................. - 4 -
2.2 Documents Accompanying Deposit..................................... - 4 -
2.3 Deposit Account.................................................... - 4 -
2.4 Representations and Warranties of Holders.......................... - 4 -
2.5 Representations and Warranties of the Issuer....................... - 5 -
ARTICLE III
Depositary Receipts
3.1 Issuance of Receipts............................................... - 5 -
3.2 Effect of Acceptance of Receipt.................................... - 5 -
3.3 Form of Receipts; Denominations; Execution......................... - 6 -
3.4 Numbering and Registration of Receipts............................. - 7 -
3.5 Combinations and Split-Ups of Receipts............................. - 7 -
3.6 Lost Receipts...................................................... - 7 -
3.7 Limitations on Execution and Delivery, Transfer,
Surrender and Exchange of Receipts................................. - 7 -
3.8 Cancellation and Return or Destruction of
Surrendered Receipts............................................... - 8 -
3.9 Supply of Certificates and Receipts................................ - 8 -
3.10 Filing Proofs, Certificates and Other
Information........................................................ - 8 -
3.11 Refusal of Deposit, Transfer, Etc.................................. - 8 -
3.12 Registrar; Transfer Agent.......................................... - 9 -
ARTICLE IV
Transfer of Receipts
4.1 Transferability.................................................... - 9 -
4.2 Registration of Transfer of Receipts............................... - 10 -
4.3 Effect of Execution of Transfer Application by
Transferee........................................................ - 10 -
4.4 Filing Notice of Transfers with Issuer............................ - 10 -
ARTICLE V
Pledge of Stock
5.1 Pledge of Stock................................................... - 11 -
<PAGE>
ARTICLE VI
Duties of Depositary
6.1 Reports........................................................... - 11 -
6.2 Lists of Receipt Holders.......................................... - 11 -
6.3 Maintenance of Offices, Agencies and Transfer
Books by Depositary............................................... - 12 -
6.4 Other Obligations................................................. - 12 -
6.5 Depositary's Agents............................................... - 12 -
6.6 Duties of Depositary.............................................. - 12 -
6.7 Rights of Trustee................................................. - 14 -
ARTICLE VII
Information; Distributions; Voting Rights
7.1 Duty to Furnish and Transmit Certain
Information....................................................... - 15 -
7.2 Distributions..................................................... - 15 -
7.3 Voting............................................................ - 16 -
7.4 Indenture......................................................... - 16 -
7.5 Termination....................................................... - 16 -
ARTICLE VIII
Status and Other Activity of Depositary;
Force Majeure; Immunities; Indemnification
8.1 Depositary Not a Trustee, Issuer, Etc............................. - 17 -
8.2 Other Activity of Depositary...................................... - 17 -
8.3 Force Majeure..................................................... - 17 -
8.4 Immunities........................................................ - 18 -
8.5 Indemnification................................................... - 19 -
8.6 Tax Matters....................................................... - 19 -
8.7 Depositary Not Responsible For Validity of a
Deposited Instrument.............................................. - 19 -
ARTICLE IX
Charges; Fees; Expenses
9.1 In General........................................................ - 20 -
9.2 Responsibility for Expenses and Charges........................... - 20 -
9.3 Governmental Charges.............................................. - 20 -
9.4 Special Charges................................................... - 20 -
9.5 Notice Requirement................................................ - 20 -
ARTICLE X
Resignation; Amendment
10.1 Resignation and Removal of Depositary;
Appointment of Successor Depositary............................... - 21 -
10.2 Amendment......................................................... - 22 -
<PAGE>
ARTICLE XI
General Provisions
11.1 Counterparts...................................................... - 22 -
11.2 Exclusive Benefit of Parties...................................... - 22 -
11.3 Invalidity of Provisions.......................................... - 23 -
11.4 Notices........................................................... - 23 -
11.5 Holders of Receipts to Be Parties................................. - 24 -
11.6 Pronouns and Plurals.............................................. - 24 -
11.7 Governing Law..................................................... - 24 -
11.8 Captions.......................................................... - 24 -
Form of Depositary Receipt........................................... Exhibit A
<PAGE>
DEPOSIT AGREEMENT
This Agreement, made and entered into as of December 18, 1996, between and
among SCOTT CABLE COMMUNICATIONS, INC., a Texas corporation (the "Issuer"),
FLEET NATIONAL BANK, a national banking association, not in its individual
capacity, but solely as Depositary, and FLEET NATIONAL BANK, not in its
individual capacity but solely as trustee for holders of 15% senior subordinated
pay-in-kind notes due March 18, 2002 of the Issuer,
W I T N E S S E T H:
WHEREAS, the Issuer's Seconded Amended Joint Plan of Reorganization, as
modified, filed with the United Sates Bankruptcy Court for the District of
Delaware (the "Plan of Reorganization") contemplates that the parties hereto
execute and deliver this Agreement;
WHEREAS, as required by the Plan of Reorganization, the Issuer has issued
its Class C Common Stock for deposit hereunder for the benefit of the Holders of
the Depositary Receipts;
WHEREAS, in accordance with the Plan of Reorganization, Fleet National
Bank, as trustee, and the Issuer are parties to that certain Indenture dated as
of the date hereof (the "Indenture") pursuant to which the Issuer shall issue
its senior subordinated pay-in-kind notes due March 18, 2002 in the principal
amount of $49,500,000 (the "Notes") for deposit hereunder for the benefit of the
Holders of the Depositary Receipts; and
NOW, THEREFORE, in consideration of the premises and the promises
hereinafter contained, it is agreed by and among the parties hereto as follows:
ARTICLE I
Definitions
1.1 The following definitions shall, unless otherwise clearly indicated,
apply to the terms used in this Agreement:
"Agreement" means this Deposit Agreement, as it may be amended or
supplemented from time to time.
"Business Day" means each Monday through Friday of each week, except that
a legal holiday recognized as such by the Government of the United States, the
Commonwealth of
<PAGE>
Massachusetts or of the State of New York shall not be regarded as a business
day.
"Class C Common Stock" has the meaning specified in the recitals, and
shall include any rights associated therewith in accordance with the Issuers
organizational documents.
"Commission" means the Securities and Exchange Commission or any
commission, agency or other governmental body succeeding to the powers of such
commission.
"Indenture" is defined in the recitals hereof.
"Issuer" means Scott Cable Communications, Inc., a Texas Corporation
having its principal office at Four Landmark Square, Suite 302, Stamford,
Connecticut 06901.
"Corporate Office" means the corporate trust office of the Depositary,
which at the date of this Agreement is at Corporate Trust Department, One
Federal Street, Boston, Massachusetts 02110.
"Deposit Account" means the account or accounts established by the
Depositary pursuant to Section 2.3.
"Depositary" means Fleet National Bank, a national banking association, or
any successor to it as Depositary under this Agreement.
"Depositary Receipt" or "Receipt" means a depositary receipt, the text of
which is attached hereto as Exhibit A, evidencing ownership of one or more
Depositary Units signed on behalf of the Depositary by the manual signature of a
duly authorized employee of the Depositary, or a facsimile signature of the
Depositary if such receipts are countersigned by a duly authorized employee of
the appointed Registrar.
"Depositary Unit" means the interest of a Holder representing such
fractional part of the interest of all Holders in the Securities that have been
deposited with the Depositary pursuant to this Agreement.
"Depositary's Agent" means an agent appointed by the Depositary as
provided and for the purposes specified in Section 6.5.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Finova" is defined in Section 5.1.
- 2 -
<PAGE>
"Holder" means the Person in whose name such Securities are issued, and in
whose name such Securities are registered on the books of the Issuer or the
Trustee, as applicable, as of the close of business on a particular Business
Day.
"National Securities Exchange" means the American Stock Exchange, the New
York Stock Exchange and the Pacific Stock Exchange.
"Notes" has the meanings specified in the Recitals, and shall include any
additional Notes issued as payment of interest in accordance with the Indenture.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"Pledge Agreement" is defined in Section 5.1.
"Pledged Stock" is defined in Section 5.1.
"Record Date" means the date established by the Issuer for determining (a)
the identity of Holders entitled to notice of or to vote at any meeting of
Stockholders of the Issuer or entitled to vote by ballot or give consent to
Issuer action in writing without a meeting or entitled to exercise rights in
respect of any other lawful action of Stockholders of the Issuer or (b) the
identity of Record Holders of Depositary Receipts entitled to receive any report
or distribution.
"Record Holder" means the Person in whose name the Depositary Receipt
evidencing such Depositary Unit is issued, and in whose name such Depositary
Units are registered on the books of the Depositary, Registrar or Transfer
Agent, as applicable, as of the close of business on a particular Business Day;
"holder" as applied to a Depositary Receipt means, if the Receipt is not
endorsed, the record holder in possession thereof or, if it is endorsed to any
Person, such Person in possession thereof or, if it is endorsed in blank, the
bearer thereof.
"Registrar" means the Depositary or any bank, trust company or other
corporation which is appointed to register Depositary Receipts, as provided in
Section 3.12.
"Securities" means each Note and share of Class C Common Stock.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
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"Transfer Agent" means the Depositary or any bank, trust company or other
Person appointed by the Issuer or the Depositary to act as transfer agent for
Depositary Units as provided in Section 3.12.
"Transfer Application" means an application and agreement for transfer of
Depositary Units in the form set forth on the back of the form of Depositary
Receipt or in a form substantially to the same effect in a separate instrument
by which a transferee requests to transfer its interest in Depositary Units, and
agrees to be bound by the terms and conditions of this Agreement.
ARTICLE II
Deposit of Securities; Deposit Account
2.1 Deposit of Securities. Subject to the terms and conditions of this
Agreement, including, without limitation Section 5.1, all Securities of each
Holder shall be deposited in the Deposit Account established by the Depositary
under this Agreement and a Depositary Receipt or Receipts shall be promptly
issued. Subject to Section 8.1 hereof, the Depository shall be the record holder
of each Security and to further the purposes of the Plan of Reorganization,
shall be deemed to have legal title thereto.
2.2 Documents Accompanying Deposit. A deposit of Securities shall be made
by delivering to the Depositary at its Corporate Office the instruments,
documents and agreements evidencing such Securities. Each Holder presenting
Securities for deposit shall file such information and execute such
certifications as the Depositary may request under the circumstances.
2.3 Deposit Account. The Depositary shall establish, at its Corporate
Office, an account in a form and in a manner satisfactory to the Depositary and
the Issuer, in which deposited Securities will be held.
2.4 Representations and Warranties of Holders. Each Holder depositing
Securities under this Agreement shall be deemed thereby to represent and warrant
that (a) such Holder is, or is duly authorized to be acting for, a Holder, and
(b) such Holder is the owner thereof or duly authorized by the owner thereof to
make the deposit. The Depositary shall not be liable to any Person for any
expense or damage incurred as a result of any breach by a Holder of these
representations and warranties, which shall survive the deposit of Securities
and the issuance of Depositary Receipts.
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2.5 Representations and Warranties of the Issuer. The Issuer represents
and warrants that (a) upon issuance, each Security will be validly issued, fully
paid and nonassessable, (b) any Depositary Receipt issued by the Depositary or
any Transfer Agent, if duly issued in the manner provided in this Agreement,
will be fully paid and nonassessable, and (c) the Issuer will not at any time
deposit or cause to be deposited any Securities, unless such securities were
issued pursuant to an effective registration statement under the Securities Act
or in a transaction not requiring registration under the Securities Act. The
Depositary shall not be liable to any Person for any expense or damage incurred
as a result of any breach by the Issuer of these representations and warranties,
which shall survive the deposit of the Securities and the issuance of Depositary
Receipts.
ARTICLE III
Depositary Receipts
3.1 Issuance of Receipts. (a) At the direction and instruction of the
Issuer and upon the deposit of the Securities of a Holder, accompanied by
documents as provided in Section 2.2, and upon payment of any tax or other
governmental charge in respect of the deposit or of the transfer of such
Securities, and payment of any fee of the Depositary provided for in Article X,
the Depositary shall issue to the Holder thereof one or more Depositary Receipts
for the Securities so deposited, in percentages and amounts as provided to the
Depositary by the Issuer, but in no event for percentages less than three
decimal points, and shall deliver such Receipt or Receipts to the Holder or,
subject to the requirements of Section 3.1(b), to a Person designated by him.
One Depositary Receipt shall be issued in a denomination evidencing all of the
Securities so deposited by such Holder unless the Holder elects to have Receipts
issued in smaller denominations, subject to Section 3.3(b).
(b) If a Holder wishes to have any of its Securities registered in
the name of, and the Depositary Receipt therefor issued to, another Person
designated by it, the transaction shall be treated as a transfer and shall be
governed by the provisions of Article IV, and the Holder and such Person shall
comply with such requirements as the Issuer or the Depositary may impose,
including the requirement that such Person execute a Transfer Application.
3.2 Effect of Acceptance of Receipt. By acceptance of a Depositary
Receipt, a Holder becomes a party to this Agreement, thereby assenting to all of
its provisions, and
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becomes bound by the terms and conditions of this Agreement and such Receipt.
The effect of acceptance of a Depositary Receipt upon a Person designated by the
Holder pursuant to Section 3.1(b) shall be as set forth in Section 4.3 in
respect of a transferee.
3.3 Form of Receipts; Denominations; Execution. (a) Depositary Receipts
shall be substantially in the form of Exhibit A to this Agreement, with
appropriate insertions, modifications and omissions as provided by the Issuer.
(b) Depositary Receipts may be issued in denominations as a
percentage (but in no event for less than thousandths of one percent) of the
number of Securities at the written direction and instruction of the Issuer.
(c) At the direction and instruction of the Issuer, Depositary
Receipts may be endorsed with, or have incorporated in the text thereof, such
legends or recitals or changes not inconsistent with the provisions of this
Agreement as may be required to comply with the provisions of this Agreement,
the certificate of incorporation or by-laws of the Issuer, any applicable law or
any regulation, or with the rules and regulations of any securities exchange
upon which the Securities or Receipts are or may be listed, or to conform with
any usage with respect thereto, or to indicate any special limitation or
restriction to which any particular Receipt may be subject, or as may for any
other reason be required. The Issuer may authorize the exchange of Depositary
Receipts for other Depositary Receipts printed and engraved in such other manner
as it shall determine.
(d) Each Depositary Receipt shall be signed on behalf of the
Depositary by the manual signature of a duly authorized employee of the
Depositary; provided that such signature may be a facsimile if a Registrar has
been appointed and the Receipt is countersigned by the manual signature of a
duly authorized employee of the Registrar. No Depositary Receipt shall be
entitled to any benefits under this Agreement or be valid or obligatory for any
purpose, unless it has been signed by such a manual signature or facsimile
signature countersigned by such manual signature. Depositary Receipts bearing
the facsimile signature of a Person who was at any time duly authorized to sign
Depositary Receipts on behalf of the Depositary shall bind the Depositary,
notwithstanding that such Person has ceased to be an employee prior to signature
by the Registrar and delivery of such Depositary Receipts or was not an employee
at the date of issuance of such Depositary Receipts or of the execution of this
Agreement.
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3.4 Numbering and Registration of Receipts. (a) Depositary Receipts issued
by the Depositary shall be numbered consecutively. The Record Holder of each
numbered Receipt shall be registered on the books of the Depositary and any
Registrar or Transfer Agent in a manner permitting identification, by Persons
authorized to have access to the books of all Record Holders and their Receipts
and the Depositary Units evidenced thereby.
(b) In addition, the Depositary shall keep records to accurately
prepare such lists as the Issuer may reasonably request from time to time,
including the lists referred to in Sections 4.5 and 6.5 hereof.
3.5 Combinations and Split-Ups of Receipts. At the direction and
instruction of the Issuer and upon surrender of a Depositary Receipt or Receipts
for split-up or combination at the Corporate Office or at any other office the
Depositary may designate for such purpose, and subject to the terms and
conditions of this Agreement, the Depositary shall execute and deliver a new
Receipt or Receipts bearing a previously unassigned number, in authorized
denominations evidencing the same aggregate number of Depositary Units as the
number evidenced by the Receipt or Receipts surrendered. Upon the written
request of the Issuer, the Depositary shall execute and deliver new Depositary
Receipts bearing previously unassigned numbers in authorized denominations and
take such other appropriate action as may be necessary in the event the
outstanding Securities shall be divided into a greater number of Securities or
the outstanding Securities shall be combined into a smaller number of
Securities.
3.6 Lost Receipts. If any Depositary Receipt is mutilated, destroyed, lost
or stolen, the Depositary shall execute and deliver a Receipt bearing a
previously unassigned number of like form and tenor in exchange and substitution
for the mutilated, destroyed, lost or stolen Receipt; provided that the
Depositary shall require the Record Holder of the Receipt to file with the
Depositary, in a form and manner satisfactory to the Depositary, an affidavit
regarding the mutilation, destruction, loss or theft, and of his ownership of
the Receipt, and to furnish to the Depositary reasonable indemnification
(including posting indemnity bond for the benefit of the Depositary and the
Issuer) satisfactory to the Depositary and the Issuer.
3.7 Limitations on Execution and Delivery, Transfer, Surrender and
Exchange of Receipts. As a condition precedent to the execution and delivery,
transfer, split-up, combination, surrender or exchange of any Depositary
Receipt,
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the Depositary, any Transfer Agent or any Depositary's Agent may require (a)
payment of a sum sufficient for reimbursement of any tax or other governmental
charge with respect thereto (including any such tax or charge with respect to
Securities being deposited) or an affidavit of an authorized officer of the
Issuer or other appropriate person satisfactory to the Depositary and the Issuer
that no such tax or other governmental charge is due and owing with respect
thereto, (b) production of proof satisfactory to it as to the identity and
genuineness of any signature or as to the due authorization of the action and
(c) compliance with such reasonable regulations consistent with the provisions
of this Agreement as the Depositary may establish.
3.8 Cancellation and Return or Destruction of Surrendered Receipts. All
Depositary Receipts surrendered to the Depositary or any Depositary's Agent
shall be cancelled. At the direction of the Issuer, the Depositary shall either
return the cancelled Depositary Receipts to the Issuer or shall destroy the
cancelled Depositary Receipts and deliver a certificate of destruction to the
Issuer.
3.9 Supply of Certificates and Receipts. The Issuer shall deliver to the
Depositary from time to time such quantities of Depositary Receipts as the
Depositary may request to enable the Depositary to perform its obligations under
this Agreement.
3.10 Filing Proofs, Certificates and Other Information. Any Person
presenting Securities for deposit or any Record Holder of a Depositary Receipt
may be required from time to time to file information, to execute such
certificates, and to make such representations and warranties as the Depositary
may request in order to carry out the purposes of this Agreement. The Depositary
may withhold the delivery, exchange or registration of transfer of any
Depositary Receipt or any distribution in respect thereof until such proof or
other information is filed or such certificates are executed or such
representations and warranties are made.
3.11 Refusal of Deposit, Transfer, Etc. (a) The deposit of Securities or
the delivery of Depositary Receipts may be suspended, or the transfer or
registration of a Receipt may be refused, or the registration of transfer,
surrender or exchange of outstanding Receipts may be suspended (i) during any
period when any register of owners of Depositary Units is closed, or (ii) if
such action is deemed necessary or advisable, by the Depositary, any of the
Depositary's Agents or the Issuer at any time or from time to time because of
any requirement of law or of any securities exchange upon which
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the Depositary Units or Receipts are or may be listed, government or
governmental body or commission, or under any provision of this Agreement.
(b) The Issuer may give written instructions to the Depositary to
place an appropriate legend on any Depositary Receipts in accordance with
Section 3.3(c) hereof. The Issuer may deliver a stop transfer order to the
Depositary in writing, specifying the name of the Record Holder thereof and the
number of Depositary Units or Securities so restricted. The Depositary may rely
upon such legend or stop transfer order until instructed in writing by the
Issuer to remove such legend or lift such stop transfer order.
3.12 Registrar; Transfer Agent. (a) The Issuer may, and (i) at the request
of the Depositary, or (ii) to the extent required by any law, regulation or rule
or regulation of any securities exchange on which any Depositary Units or
Receipts are listed shall, appoint a Registrar and a Transfer Agent and one or
more Co-Registrars and Co-Transfer Agents for such Depositary Units and
Receipts.
(b) A Registrar or Transfer Agent may be removed and a substitute
appointed by the Issuer.
(c) The Depositary shall, at the written request and instruction of
the Issuer, arrange for such facilities for the delivery, transfer, surrender
and exchange of Depositary Receipts as may be required by law, regulation or
rule or regulation of any securities exchange upon which the Depositary Units or
Receipts are listed.
ARTICLE IV
Transfer of Receipts
4.1 Transferability. The Depositary Receipts are investment securities and
are transferable according to the laws governing transfers of investment
securities. A Record Holder of a Depositary Receipt shall only have the
authority to convey to a purchaser or other transferee who does not execute a
Transfer Application, however, the right to negotiate such Depositary Receipt to
a purchaser or other transferee. A transferee, by acceptance of a Depositary
Receipt, (i) becomes a party to this Agreement, thereby assenting to all of its
provisions, (ii) becomes bound by the terms and conditions of this Agreement and
the Receipt and (iii) agrees that his or its transferor's duty to provide
transferee with any requisite which may be necessary to obtain registration of
the transfer of the security shall exclude any
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duty of transferor with respect to the requirement of the delivery of an
executed Transfer Application. It is a condition of the Receipt, and every
successive holder thereof by accepting transfer or holding the Receipt consents
and agrees, that until a Receipt has been transferred on the books of the
Depositary or a Transfer Agent as provided in Section 4.2, the Depositary, any
Transfer Agent and the Issuer, notwithstanding any notice to the contrary and
notwithstanding any notation or other writing on the Depositary Receipt, may
treat the Record Holder thereof at such time as the absolute owner thereof for
all purposes.
4.2 Registration of Transfer of Receipts. Subject to the terms and
conditions of this Agreement, the Depositary or any Registrar or Transfer Agent,
as applicable, shall transfer on its books, from time to time, Depositary Units
upon surrender of the Depositary Receipt or Receipts evidencing the Depositary
Units by the Record Holder, in person or by duly authorized attorney, properly
endorsed or accompanied by a properly executed instrument of transfer and
accompanied by a properly executed Transfer Application at the Corporate Office
or at any other office as the Depositary may designate for the purpose, and
thereupon the Depositary shall issue or cause to be issued a new Depositary
Receipt or Receipts evidencing the same aggregate number of Depositary Units as
those evidenced by the Receipt or Receipts surrendered, and deliver the new
Receipt or Receipts to or upon the order of the Person or Persons entitled
thereto. Upon any transfer of fewer than all of the Depositary Units evidenced
by a Depositary Receipt, the Depositary shall issue or cause to be issued to the
Record Holder of such Depositary Receipt a new Depositary Receipt evidencing the
number of Depositary Units not being transferred.
4.3 Effect of Execution of Transfer Application by Transferee. The
Depositary shall not register the transfer of Depositary Units unless the
transferee has delivered a properly executed Transfer Application as required by
Section 4.2. A transferee who has completed and delivered a properly executed
Transfer Application shall be deemed (i) to have agreed to be bound by the terms
and conditions of this Agreement and the Depositary Receipt, and (ii) to have
represented and warranted that such transferee has authority to enter into the
this Agreement. Any such transfer shall be effective at and from the close of
business on the Business Day on which a properly executed Transfer Application
is received by the Transfer Agent.
4.4 Filing Notice of Transfers with Issuer. As promptly as practicable
after the last Business Day of each month, the
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Depositary shall cause to be prepared, as of the close of business on that day,
a list, in such form as may be requested by the Issuer, of registration of
transfers of Depositary Receipts registered by the Depositary or any Registrar
or Transfer Agent, as applicable, since the last business day of the preceding
month (hereinafter called "transfer record") and shall furnish the transfer
record to the Issuer.
ARTICLE V
Pledge of Stock
5.1 Pledge of Stock. The parties hereto acknowledge and agree that each
share of the Class C Common Stock of the Issuer intended to be deposited by the
Holders and held by the Depositary hereunder (the "Pledged Stock") has been
pledged by the Holders to Finova Capital Corporation ("Finova") pursuant to that
certain Pledge Agreement dated as of the date hereof (the "Pledge Agreement") by
and among the Issuer, each of the other shareholders of the Issuer, the
Depositary in its capacity hereunder and Finova. Subject to the terms and
conditions of this Agreement, the Depositary is hereby expressly authorized by
each of the Holders to execute and deliver each document, instrument and
agreement required to be delivered thereby in its capacity of Class C Pledgor
under the Pledge Agreement, including, without limitation, the delivery of each
and every stock certificate representing shares in the Pledged Stock, and to
take all such actions required to be taken thereby in accordance with the terms
and conditions of the Pledge Agreement.
ARTICLE VI
Duties of Depositary
6.1 Reports. The Depositary shall make available for inspection by Record
Holders of Depositary Receipts at its Corporate Office, and at such other places
as it may from time to time deem advisable, during normal business hours and
shall, upon the written request of the Issuer, furnish to the Commission any
report, financial statement or communication received from the Issuer that is
both (i) received by the Depositary in its capacity as depositary and (ii) made
generally available to the owners of Securities or Depositary Units or the
Record Holders of Depositary Receipts.
6.2 Lists of Receipt Holders. As promptly as practicable upon written
request by the Issuer, the Depositary shall furnish to the Issuer a list, as of
the date requested by the Issuer, of the names and addresses of all Record
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Holders of Depositary Receipts and the number of Depositary Units evidenced by
their Receipts, respectively. A Record Holder of Depositary Receipts whose
ownership of Securities aggregates one percent or more of the outstanding
Securities shall have the right, upon notifying the Depositary of a proper
purpose (in the sole determination of the Issuer) related to such Record
Holder's interest in the Issuer, to have furnished to them at such Record
Holder's expense a copy of the names and addresses of all Record Holders of
Depositary Receipts and the number of Depositary Units evidenced by their
Receipts as of the date specified in the written request therefor.
6.3 Maintenance of Offices, Agencies and Transfer Books by Depositary. (a)
The Depositary shall maintain as its Corporate Office and at such other office
or offices as it may designate, or as may be reasonably required by any National
Securities Exchange on which the Depositary Units or Receipts are or may be
listed, facilities for the execution and delivery, transfer, surrender and
exchange of Depositary Receipts.
(b) The Depositary shall keep books at its Corporate Office for the
transfer of Depositary Receipts. The books shall be open at all reasonable times
for inspection by the Record Holders of Depositary Receipts, provided that such
inspection shall not be for the purpose (in the sole determination of the
Issuer) of communicating with holders of Receipts in the interest of a business
or object other than the business of the Issuer or a matter related to this
Agreement or the Receipts.
6.4 Other Obligations. In performing the services set forth in this
Agreement, the Depositary shall comply with any additional requirements that may
be reasonably imposed upon it by virtue of its being deemed a transfer agent for
Depositary Receipts by any National Securities Exchange on which Depositary
Units or Receipts are listed for trading.
6.5 Depositary's Agents. The Depositary may from time to time, with the
prior written consent of the Issuer, appoint agents that may include the Issuer
and its affiliates for the purposes of this Agreement and vary or terminate the
appointment of such agents.
6.6 Duties of Depositary.
(a) Depository need perform only those duties as are specifically
set forth in the Agreement and no covenants
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or obligations shall be implied in this Agreement that are adverse to
Depositary.
(b) In the absence of bad faith on its part, Depositary may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to
Depositary and confirming to the requirements of this Agreement. However,
Depositary shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Agreement.
(c) Depositary may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own will full
misconduct, except that:
(1) Depositary shall not be liable for any error of judgment
made in good faith by a Trust Officer (as defined in the Indenture), unless it
is proved that Depositary was negligent in ascertaining the pertinent facts.
(2) Depositary shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction received
by it pursuant to Section 7.3.
(d) No provision of this Agreement shall require Depositary to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or thereunder or in the exercise of
any of its rights or powers if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(e) Every provision of this Agreement that in any way relates to
Depositary is subject to paragraphs (a), and (c) of this Section 6.6.
(f) Depositary shall not be liable for interest on any assets
received by it except as Depositary may agree with Issuer. Assets held in trust
by Depositary need not be segregated from other assets except to the extent
required by law.
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6.7 Rights of Trustee.
Subject to Section 6.6:
(a) Depositary may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. Depositary need not
investigate any fact or matter stated in the document.
(b) Before Depositary acts or refrains from acting, it may consult
with counsel and may require an Officer's Certificate, as defined in the
Indenture, or an Opinion of Counsel, as defined in the Indenture, which shall
conform to Sections 12.4 and 12.5 of the Indenture. Depository shall not be
liable for any action it takes or omits to take in good faith in reliance on
such certificate or opinion.
(c) Depositary may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) Depositary shall not be liable for any action that it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers other than any liabilities arising out of its own negligence.
(e) Depositary shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, notice, request, direction, consent, order, bond, debenture, or other
paper or documents, but Depositary, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.
(f) Depositary shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the request, order or
direction of any of the Record Holders pursuant to the provisions of this
Agreement, unless such Record Holders shall have offered to Depositary
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby.
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ARTICLE VII
Information; Distributions; Voting Rights
7.1 Duty to Furnish and Transmit Certain Information. The Issuer is
required by the Indenture to furnish to Holders certain reports and notices. If
the Issuer elects to have the Depositary deliver such reports or notices, the
Issuer shall furnish to the Depositary a sufficient quantity of each such report
or notice for transmittal to the Record Holders of Depositary Receipts. Upon
receipt of any such report or notice from the Issuer that is to be sent to
Record Holders of Depositary Receipts, the Depositary shall mail such report or
notice within ten (10) Business Days to the Record Holders of Depositary
Receipts as of the close of business on the last Business Day of the month
preceding the month in which such report or notice is received by the Depositary
or as of such other date as the Issuer may specify.
7.2 Distributions. (a) To facilitate any distributions of Secondary
Securities (as such term is defined in the Indenture) made by the Issuer to
Holders, the Depositary shall, at the Issuer's request, furnish or cause to be
furnished to the Issuer as promptly as practicable a list of the Record Holders
of Depositary Receipts and the number of Depositary Units held by each as
recorded on the books of the Depositary as of the close of business on the last
Business Day of the month preceding the month in which such request is made or
as of such other time or such other Business Day as the Issuer may specify as
the Record Date. A holder of a Depositary Receipt who is not a Record Holder
thereof shall not be entitled to receive distributions made by the Issuer.
(b) The Issuer may request the Depositary to act as paying agent
with respect to a cash or other distribution by the Issuer. A request to serve
in such capacity shall be made by the Issuer by giving notice of a proposed
distribution and the calculation of the amount of the proposed distribution to
be allocated to each Depositary Unit to the Depositary at least fifteen (15)
Business Days before the distribution is to be made. If cash is to be
distributed, the Issuer shall deposit with the Depositary, before the date on
which the distribution is to be made, funds sufficient to pay the distribution
to the Record Holders of Depositary Receipts as of the Record Date. Such deposit
shall be accompanied by the Issuer's calculation of the distribution to which
each Record Holder would be entitled, upon which calculation the Depositary
shall be entitled to rely. On the date set by the Issuer for the distribution,
the Depositary shall distribute
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the funds received from the Issuer to the Record Holders of Depositary Receipts
as of the Record Date. Such distributions shall be made to Persons who are
Record Holders as of the Record Date set for the particular distribution,
notwithstanding the length of time any such Record Holder has held any
Depositary Receipt.
7.3 Voting. Upon receipt from the Issuer of notice of any meeting at which
Record Holders of Depositary Receipts are entitled to vote or of which they are
entitled to notice, the Depositary shall, at the request of the Issuer, mail to
each Record Holder of Depositary Receipts, as of the Record Date specified in
the notice of meeting, a copy of the notice. The Issuer shall furnish sufficient
copies of the foregoing notice. Whether or not a Record Holder is entitled to
vote on any matter concerning the Issuer shall be governed by the terms of the
Indenture, the certificate of incorporation of the Issuer and applicable law.
The Depositary shall have no obligation to vote, or any liability for refraining
from voting, any security unless and until it has received written instructions
from the Holder of the Securities to be so voted that the Depositary should vote
or refrain therefrom.
7.4 Indenture. Notwithstanding anything herein to the contrary, so long as
the Depositary is also the Trustee under the Indenture, any information to be
delivered to the Record Holders of the Depositary Receipts, any distributions to
be made with respect to the Depositary Receipts, or votes to be taken by the
Record Holders thereof, shall be made in accordance with the terms of the
Indenture and in the event of any conflict between the terms hereof and the
Indenture, the terms of the Indenture shall control.
7.5 Termination.
(a) This Agreement shall terminate upon the earlier of (i) the
complete repayment of all of the Issuer's Obligations (as such term is defined
in the Indenture), (ii) the acceleration of the Issuer's Obligations pursuant to
the terms of the Indenture, and (iii) the foreclosure of the lien of FINOVA
pursuant to the Pledge Agreement (as such term is defined in the Loan
Agreement).
(b) Upon termination of this Agreement, the Depositary shall cause
the Securities then subject to this Agreement to be reissued in the name and in
the appropriate amounts to each Record Holder.
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ARTICLE VIII
Status and Other Activity of Depositary;
Force Majeure; Immunities; Indemnification
8.1 Depositary Not a Trustee, Issuer, Etc. Except as set forth in Section
2.1, neither the Depositary nor any Depositary's Agent shall have any title to
Securities deposited under this Agreement. The Depositary shall have no right or
power to sell, invest in, mortgage or borrow against any Securities deposited
under this Agreement. Neither the Depositary nor any Depositary's Agent shall
have any right by virtue of this Agreement to vote in, receive distributions of
(except as provided in Section 7.2), or have any interest in the Issuer. Neither
the Depositary nor any Depositary's Agent shall be liable for any assessments by
the Issuer. It is intended that neither the Depositary nor any Depositary's
Agent shall be deemed to be an "issuer" of securities under the Federal
securities laws or applicable state securities laws, it being expressly
understood and agreed that the Depositary and the Depositary's Agents are acting
only in a ministerial capacity as depositary for Securities.
8.2 Other Activity of Depositary. Notwithstanding Section 9.1 of this
Agreement, the Depositary and any Depositary's Agent in their respective
individual capacities and in other capacities may own and deal in, and act as
registrar or transfer agent for, any class of securities of the Issuer,
including Securities, Depositary Receipts and Depositary Units.
8.3 Force Majeure. Neither the Depositary nor any Depositary's Agent nor
the Issuer (or its shareholders, directors or officers) shall incur any
liability to any holder of a Depositary Receipt if by reason of any provision of
any present or future law or any regulation under any present or future law of
the United States of America or of any other governmental authority, or by
reason of any act of God or war or other circumstance beyond its control or in
the case of the Depositary or the Depositary's Agent, the Depositary, any
Depositary's Agent, or the Issuer (or its shareholders, directors or officers)
is prevented or forbidden from doing or performing any act or thing required by
the terms of this Agreement to be done or performed; nor shall the Depositary,
any Depositary's Agent, or the Issuer (or its shareholders, directors or
officers) incur any liability to any holder of a Depositary Receipt by reason of
any nonperformance or delay caused as aforesaid in performance of any act or
thing required by the terms of this Agreement to be done or
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performed, or by reason of any exercise of, or failure to exercise, any
discretion provided for in this Agreement.
8.4 Immunities. (a) Neither the Depositary (or any of its employees,
officers, directors or agents) nor any Depositary's Agent nor the Issuer (or its
shareholders, directors, officers, employees or agents) assumes any obligation
or shall be subject to any liability under this Agreement to holders of the
Depositary Receipts other than that each of them agrees to use its best judgment
and good faith in the performance of such duties as are expressly set forth in
this Agreement.
(b) Neither the Depositary (or any of its employees, officers,
directors or agents) nor any Depositary's Agent nor the Issuer (or its
shareholders, directors, officers, employees or agents) shall be under any
obligation to appear in, prosecute or defend any action, suit or other
proceeding in respect of Securities, Depositary Units or Depositary Receipts
that in its opinion may involve it in expense or liability unless indemnity, in
addition to that provided by Section 8.5, satisfactory to it against all expense
and liability has been furnished.
(c) Neither the Depositary (or any of its employees, officers,
directors or agents) nor any Depositary's Agent nor the Issuer (or its
shareholders, directors, officers, employees or agents) shall be liable for any
action or nonaction by it in reasonable reliance upon the advice of or
information from legal counsel, accountants, any Person presenting Securities
for deposit, any holder of a Depositary Receipt, or any other Person believed by
it to be competent to give such advice or information. The Depositary (or any of
its employees, officers, directors or agents), any Depositary's Agent, and the
Issuer (or its shareholders, directors, officers, employees or agents) may rely
and shall be protected in acting upon any written notice, request, direction or
other document believed by it to be genuine and to have been signed or presented
by the proper Person or Persons.
(d) Neither the Depositary (or any of its officers, directors,
employees or agents) nor any Depositary's Agent shall be under any obligation to
institute any action, suit, or legal proceeding or to take any other action
likely to involve expense unless the Issuer shall furnish the Depositary or the
Depositary's Agent with reasonable security for any costs and expenses which may
be incurred; but this provision shall not affect the power of the Depositary or
of the
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<PAGE>
Depositary's Agent to take action as it may consider proper whether with or
without any security.
(e) The Depositary and the Depositary's Agent are each hereby
authorized and directed to (1) accept any instructions with respect to the
application of duties hereunder from an officer of the Issuer and to (2) apply
to such officers for advice or instruction in connection with its duties, and
shall not be liable for any action taken by it in good faith in accordance with
the instruction of such officers or taken in good faith in accordance with a
statement of any such officer of the Issuer with respect to any fact or matter
established by such statement.
8.5 Indemnification. The Issuer shall indemnify the Depositary and any
Depositary's Agents (other than agents affiliated with the Issuer) against, and
hold each of them harmless from, all claims, liabilities, losses, damages,
judgments, fines, settlements, costs and expenses (including all legal costs and
expenses relating thereto, including reasonable attorneys' fees) that may arise
out of (a) the acceptance by the Depositary or the Depositary's Agents of its
duties under this Agreement and (b) acts performed or omitted in respect of the
Agreement (1) by the Depositary or any Depositary's Agents (other than agents
affiliated with the Issuer) except for any liability due to negligence, bad
faith or intentional misconduct of the Depositary or any Depositary's Agent or
(2) by the Issuer or any of its agents.
8.6 Tax Matters. The Depositary shall have no duties, obligations or
liabilities with respect to (a) allocation of federal tax benefits related to
federal tax matters respecting the Issuer and Holders or (b) any income or other
tax reporting obligations imposed upon the Issuer or any Holder thereof by the
Internal Revenue Service or any other federal, state or local taxing authority.
8.7 Depositary Not Responsible For Validity of a Deposited Instrument. The
Depositary assumes no responsibility for the correctness of the description
prepared by the Issuer summarizing certain provisions of the Deposit Agreement
which appears in the Depositary Receipts. Notwithstanding any other provision
herein or set forth in the Depositary Receipts, the Depositary makes no
warranties or representations as to the validity, genuineness or sufficiency of
any stock certificates or other instruments representing any of the Securities
at any time deposited with the Depositary hereunder or of the Securities
evidenced thereby, as to the validity or sufficiency of this Agreement, as to
the value or condition of the Securities, as to any right, title
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or interest of the Holders as to any right, title or interest of the Record
Holders of the Depositary Receipts to the Securities. The Depositary shall not
be accountable for the use or application by the Issuer of Depositary Receipts
or proceeds of either thereof.
ARTICLE IX
Charges; Fees; Expenses
9.1 In General. The charges, fees or reimbursement for services provided
hereunder are set forth in a separate agreement of the Depositary and the
Issuer.
9.2 Responsibility for Expenses and Charges. The Issuer shall be
responsible for payment of all charges, fees and reasonable expenses of
Depositary, including reasonable fees and expenses of its counsel, other than
such as are expressly provided by this Agreement to be paid by Holders or by
holders and transferees of the Depositary Receipts.
9.3 Governmental Charges. If any tax or other governmental charge becomes
payable with respect to the Securities, or a Depositary Receipt or a Depositary
Unit evidenced thereby, or with respect to deposit, transfer of any of the
foregoing, such tax or governmental charge shall be payable by the holder of the
Receipt or the transferee in the case of a transfer. Transfer of a Depositary
Receipt may be refused until such payment is made, and any cash or other
distribution may be withheld and be applied to payment of such tax or other
governmental charge, the holder or the transferee remaining liable for any
deficiency. In the event the Depositary is required to pay any such charge or
expense, the Issuer shall reimburse the Depositary for payment thereof upon the
request of the Depositary.
9.4 Special Charges. If at the election of an owner of Depositary Units or
the holder or transferee of a Depositary Receipt, any delivery or communication
from the Depositary is by telegram or telex or similar record telecommunication
mode, or the Depositary incurs any charge or expense for which it is not
otherwise liable under this Agreement, the owner, holder or transferee, as the
case may be, shall be liable for such charge or expense. In the event the
Depositary is required to pay any such charge or expense, the Issuer shall
reimburse the Depositary for payment thereof upon the request of the Depositary.
9.5 Notice Requirement. The Depositary shall give notice of the imposition
of any charge or fee, other than the
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charges described in Sections 9.3 and 9.4, upon holders or transferees of
Depositary Receipts, or any change therein, to any securities exchange upon
which Depositary Units or Receipts are listed or, in the absence of such
listing, by publication in a newspaper of general circulation in the Borough of
Manhattan, New York, New York, and shall also give notice thereof in writing to
all Record Holders of Receipts. The imposition of or a change in any such charge
or fee shall not become effective until ninety (90) days after the date of such
notice, unless it becomes effective in the form of an amendment pursuant to
Section 10.2.
ARTICLE X
Resignation; Amendment
10.1 Resignation and Removal of Depositary; Appointment of Successor
Depositary. (a) The Depositary may at any time resign as Depositary under this
Agreement by written notice of its election to do so delivered to the Issuer,
such resignation to take effect thirty (30) days after the date of such
notification or upon the earlier appointment of a successor Depositary and its
acceptance of such appointment as hereinafter provided.
(b) If the Depositary resigns, the Issuer shall, within thirty (30)
days after the delivery of the notice of resignation, appoint a successor
Depositary, which shall be a bank or trust company having a combined capital and
surplus of at least $50,000,000. If within thirty (30) days after the delivery
of the notice of resignation of the Depositary, no successor Depositary has been
appointed, the Issuer shall act as the Depositary until such time as the Issuer
appoints a successor Depositary. Any successor Depositary shall execute and
deliver to its predecessor and to the Issuer an instrument in writing accepting
its appointment, and thereupon such successor Depositary, without any further
act or deed, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor. The predecessor, upon payment of all sums due it
and upon the written request of the Issuer, shall execute and deliver an
instrument transferring to the successor Depositary all rights and powers of the
predecessor under this Agreement, shall duly transfer all Securities on deposit
to the successor Depositary, and shall deliver to the successor Depositary a
list of the Record Holders of all outstanding Depositary Receipts. Any successor
Depositary shall promptly mail notice of its appointment to the Record Holders
of Depositary Receipts.
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(c) Any corporation into or with which the Depositary may be merged
or consolidated shall be the successor of the Depositary without the execution
or filing of any document or any further act.
10.2 Amendment. (a) Any provision of this Agreement, including the form of
Depositary Receipt, and the Transfer Application therefor, may at any time and
from time to time be amended only by a written agreement among the Issuer, each
Record Holder and the Depositary.
(b) Upon the Issuer's request or as may be required by the rules or
regulations of any securities exchange upon which any Depositary Units or
Receipts are listed, the Depositary shall, at the request and the expense of the
Issuer, give notice of any material amendment of this Agreement to each
securities exchange upon which Depositary Units or Receipts are listed or, in
the absence of such listing, by publication in newspapers of general circulation
in the Borough of Manhattan, New York, New York, and shall also give notice
thereof in writing to all Record Holders of Depositary Receipts. In the
discretion of the Depositary, the text or substance of any amendment may be
incorporated in the Depositary Receipts issued after its adoption.
(c) Every Record Holder of a Depositary Receipt at the time any
amendment of this Agreement becomes effective shall be deemed, by continuing to
hold the Receipt, to consent and agree to the amendment and to be bound by this
Agreement as amended thereby.
(d) Notwithstanding anything herein to the contrary, no amendment to
this Agreement shall override or supersede the terms and provisions of the
Indenture.
ARTICLE XI
General Provisions
11.1 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument. Copies of this Agreement shall be filed
with the Depositary and Depositary's Agents and shall be open to inspection
during business hours at the Corporate Office by any Record Holder of a
Depositary Receipt.
11.2 Exclusive Benefit of Parties. This Agreement is for the exclusive
benefit of the parties hereto, and their
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respective successors, and shall not be deemed to give any legal or equitable
right, remedy or claim to any other person.
11.3 Invalidity of Provisions. If any provision of this Agreement or of
the Depositary Receipts is or becomes invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein or therein shall not be effected thereby.
11.4 Notices. (a) Any notice to be given any of the following parties to
this Agreement shall be deemed to have been duly given if personally delivered
or sent by mail or by telegram or telex confirmed by letter, addressed to the
party in the manner and at the address shown below, or at such address as the
party has specified in a notice given in accordance with this Section.
To the Issuer:
Scott Cable Communications, Inc.
Four Landmark Square, Suite 302
Stamford, Connecticut 06901
Attention: Bruce A. Armstrong
To the Depositary:
Fleet National Bank
Corporate Trust Department
One Federal Street
Boston, Massachusetts 02110
Attention: Corporate Trust Administration
(b) Any notice to be given to any Record Holder of a Depositary
Receipt shall be deemed to have been duly given if personally delivered or sent
by mail or by telegram or telex confirmed by letter, addressed to him at his
address as it appears on the books of the Depositary, or if he has filed with
the Depositary a written request that notices intended for him be mailed to some
other address, at the address designated in such request.
(c) Delivery of a notice sent by mail or by telegraph or telex shall
be deemed to be effected at the time when a duly addressed letter containing the
same (or a confirmation thereof in the case of a telegram or telex message) is
deposited, postage prepaid, in a post office letter box. The Depositary or the
Issuer may, however, act upon any telegram or telex message received by it from
either of the others or from any holder of a Depositary Receipt.
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11.5 Holders of Receipts to Be Parties. The holders of Depositary Receipts
from time to time shall be parties to this Agreement and shall be bound by all
of the terms and conditions hereof and of the Receipts by acceptance thereof.
11.6 Pronouns and Plurals. Whenever the context may require, any pronoun
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa.
11.7 Governing Law. This Agreement and the rights, duties, obligations and
immunities of the Depositary under this Agreement or in respect of the
Depositary Receipts, shall be governed by and construed in accordance with the
laws of the State of New York.
11.8 Captions. The headings of articles and sections in this Agreement and
the form of Depositary Receipt set forth in Exhibit A hereto have been inserted
for convenience only and are not to be regarded as a part of this Agreement or
of any Receipt or to have any bearing upon the meaning or interpretation of any
provision contained herein or in the Receipt. Unless otherwise specified,
references contained herein to Subsections, Sections or Articles shall be deemed
to apply to Subsections, Sections or Articles of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above set forth.
SCOTT CABLE COMMUNICATIONS, INC.
By: /s/ Bruce A. Armstrong
---------------------------------
Name: Bruce A. Armstrong
Title: Chief Executive Officer
FLEET NATIONAL BANK, as Depositary
By: /s/ Robert L. Bice, II
---------------------------------
Name: Robert L. Bice, II
Title: Vice President
FLEET NATIONAL BANK, not in its
individual capacity, but solely as
Trustee under the Indenture
By: /s/ Robert L. Bice, II
---------------------------------
Name: Robert L. Bice, II
Title: Vice President
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<PAGE>
EXHIBIT A
TRANSFER OF FULL RIGHTS OF OWNERSHIP OF DEPOSITARY UNITS REPRESENTED BY
THIS RECEIPT MAY ONLY BE MADE TO PERSONS WHO EXECUTE A TRANSFER APPLICATION. SEE
PARAGRAPHS 3 AND 7 HEREOF AND THE TRANSFER APPLICATION ON THE REVERSE SIDE.
THE CLASS C COMMON STOCK OF SCOTT CABLE COMMUNICATIONS, INC. ("ISSUER"),
AN UNDIVIDED INTEREST IN WHICH IS REPRESENTED BY THIS RECEIPT, IS SUBJECT TO A
LIEN IN FAVOR OF FINOVA CAPITAL CORPORATION ("FINOVA")PURSUANT TO A PLEDGE
AGREEMENT DATED AS OF DECEMBER 18,1996 BY AND AMONG FINOVA, ISSUER AND CERTAIN
SHAREHOLDERS THEREOF. IN THE EVENT THAT FINOVA FORECLOSES ON SUCH LIEN, THE
DEPOSIT AGREEMENT PURSUANT TO WHICH THIS RECEIPT IS ISSUED SHALL TERMINATE AND
THE CLASS C COMMON STOCK SHALL NO LONGER BE SUBJECT THERETO OR HERETO.
DEPOSITARY RECEIPT
for
SECURITIES
issued by
SCOTT CABLE COMMUNICATIONS, INC.
(a Texas corporation)
This Receipt is Transferable in New York, New York,
Hartford, Connecticut or Boston, Massachusetts
No.
1. FLEET NATIONAL BANK, a national banking association, as Depositary
("Depositary"), hereby certifies that
____________________________________________________________ is the registered
owner of _______________________________________________ Depositary Units, which
represent a undivided _____________________ percent (____ %) interest in each of
(i) all of the issued and outstanding shares of class C common stock of Scott
Cable communications, Inc., a Texas corporation (the "Issuer"), and (ii) the
Notes issued in an aggregate principal amount of $49,500,000, and any additional
notes issued as payment of interest thereon, pursuant to the Indenture dated as
of December 18, 1996 between the Issuer and Fleet National Bank, as Trustee,
that have been deposited under the Deposit Agreement hereinafter identified.
<PAGE>
2. Receipts, Deposit Agreement. Depositary Receipts ("Receipts"), of which
this Receipt is one, are issued upon the terms and conditions set forth in a
Deposit Agreement dated as of December 18, 1996, as may be amended from time to
time in accordance with its terms ("Deposit Agreement"), between and among the
Issuer, and the Depositary, and each Holder (as defined therein). The Deposit
Agreement, copies of which are on file at the Depositary's Corporate Office,
sets forth the rights of holders of Receipts, each of whom becomes a party to
the Deposit Agreement by acceptance of a Receipt, and the rights and duties of
the Depositary in respect of the Depositary Units and all other property and
cash from time to time held under the Deposit Agreement. The statements made on
the face and the reverse of this Receipt prepared by the Issuer are summaries of
certain provisions of the Deposit Agreement and are subject to the detailed
provisions thereof, to which reference is hereby made.
3. Transfers, Split-Ups, Combinations. This Receipt is transferable on the
books of the Depositary or a transfer agent upon surrender of this Receipt by
the holder hereof, in person or by duly authorized attorney, to the Depositary
or a transfer agent at the Depositary's Corporate Office, or at such other
office or offices as the Depositary may designate, properly endorsed, or
accompanied by an instrument of transfer properly executed by the transferor and
accompanied by a Transfer Application in a form acceptable to the Depositary
("Transfer Application") properly executed by a transferee and upon such
transfer the Depositary or the transfer agent shall, directly or through an
agent, issue and deliver a Receipt to or upon the order of the Person entitled
thereto. This Receipt may be split into other Receipts, or combined with other
Receipts into one Receipt, evidencing the same aggregate number of Depositary
Units as the Receipt or Receipts surrendered.
4. Conditions to Signing and Delivery, Transfer, Etc. of Receipts. Before
the execution and delivery, transfer, split-up, combination, surrender or
exchange of this Receipt, the Depositary, any transfer agent or any of the
Depositary's Agents may require (a) payment of a sum sufficient for
reimbursement of any tax or other governmental charge with respect thereto
(including any such tax or charge with respect to Securities being deposited),
(b) production of proof satisfactory to it as to the identity and genuineness of
any signature or as to the due authorization of the action, and (c) compliance
with such regulations, if any, as it may establish pursuant to the Deposit
Agreement. Any Person presenting Securities for deposit or any holder of this
Receipt may be required to file such information and to execute such
certificates as the Depositary may request.
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5. Suspension of Delivery, Transfer, Etc. The deposit of Securities or the
delivery of this Receipt against Depositary Units, may be suspended or the
registration of transfer, surrender or exchange of this Receipt may be refused
during any period when any register of owners of Depositary units is closed or
when such action is deemed necessary or advisable by the Depositary, any of the
Depositary's Agents or the Issuer at any time or from time to time because of
any requirement of law or of any securities exchange upon which Depositary Units
or this Receipt may be listed, government or governmental body or commission, or
under any provision of the Deposit Agreement.
6. Effect of Acceptance and Transfer of Receipts. A record holder of this
Receipt shall only have the authority to convey to a purchaser or other
transferee who does not execute and deliver a Transfer Application the right to
negotiate this Receipt to a purchaser or other transferee. By acceptance of this
Receipt, the transferee becomes a party to the Deposit Agreement, bound by the
terms and conditions of the Deposit Agreement and the Receipt and agrees that
his or its transferor's duty to provide the transferee with any requisite
documents which may be necessary to obtain registration of the transfer of the
security shall exclude any duty of the transferor with respect to the
requirement of the delivery of an executed Transfer Application.
7. Requirements of Execution. The holder of this Receipt shall not be
entitled to any benefits under the Deposit Agreement and this Receipt shall not
be valid or obligatory for any purpose unless the Receipt has been signed by and
on behalf of the Depositary by the manual signature of a duly authorized
employee; provided that such signature may be a facsimile if a Registrar has
been appointed and this Receipt is countersigned by the manual signature of a
duly authorized employee of the Registrar.
Dated: _______ FLEET NATIONAL BANK, as
Depositary, Transfer Agent and Registrar
By: _______________________________________
Authorized Signature
FURTHER CONDITIONS AND AGREEMENTS FORMING PART OF
THIS RECEIPT APPEAR ON THE REVERSE SIDE
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REVERSE SIDE
Further Conditions and Agreements
Forming Part of this Receipt
8. Payment of Taxes or Other Governmental Charges. If any tax or other
governmental charge becomes payable with respect to this Receipt or with respect
to Depositary Units evidenced by the Receipt, such tax (including transfer
taxes, if any) or governmental charge shall be payable by the holder of this
Receipt. Transfer of this Receipt may be refused until such payment is made, and
any distribution may be withheld and be applied to payment of such tax or other
governmental charge, the holder of this Receipt remaining liable for any
deficiency.
9. Warranties by Holder. Every Person depositing Securities under the
Deposit Agreement shall be deemed thereby to represent and warrant that such
Person is, or is duly authorized to be acting for, a Holder as defined in the
Deposit Agreement and that the Person making such deposit is the owner thereof
or duly authorized by the owner thereof so to do.
10. Amendment. Any provision of the Deposit Agreement or of the form of
Receipt or Transfer Application may at any time be amended only by agreement
among the Issuer, each Record Holder and the Depositary. The holder of this
Receipt at the time any amendment so becomes effective shall be deemed, by
continuing to hold this Receipt, to consent and agree to the amendment, and to
be bound by the Deposit Agreement as amended thereby.
11. Charges of Depositary. The Issuer will pay all charges of the
Depositary, except for taxes and other governmental charges as are expressly
provided in the Deposit Agreement to be at the expense of Persons depositing
Securities.
12. Title to Receipts. This Receipt (and the Depositary Units evidenced by
this Receipt), when properly endorsed, or accompanied by an instrument of
transfer properly executed by the transferor and accompanied by a Transfer
Application properly executed by a transferee, is transferable in accordance
with the laws governing transfers of investment securities; provided, however,
that as a condition of this Receipt, and every successive holder hereof by
accepting transfer or holding this Receipt consents and agrees, that until this
Receipt is transferred on the books of the Depositary or any transfer agent, the
Depositary, any transfer agent and the Issuer may, notwithstanding any notice to
the contrary and notwithstanding any notation or other writing on this Receipt,
treat the Record Holder hereof at such time as the absolute owner hereof for all
purposes.
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<PAGE>
13. Distributions. Whenever the Depositary receives from the Issuer any
cash distributable to Record Holders of Depositary Units, the Depositary will,
subject to the provisions of the Deposit Agreement, make such distribution to
the Record Holders of Receipts on the record date fixed by the Issuer for
purposes of such distribution in proportion to the number of Depositary Units
registered in such Record Holders' names; provided, however, that the amounts
distributed may be reduced by any amount required to be withheld by the Issuer
or the Depositary on account of taxes.
14. Reports. The Depositary will make available for inspection by Record
Holders of Receipts at its Corporate Office and at such other office or offices
as it may deem advisable, any report, financial statement, or communication
received from the Issuer that is both (a) received by the Depositary in its
capacity as the depositary of Securities and (b) made generally available to the
Record Holders of Depositary Units. The Depositary will also send to Record
Holders of Receipts copies of reports, financial statements and communications
to the extent provided in the Deposit Agreement when furnished by the Issuer.
15. Transfer Books. The Depositary will keep books for the transfer of
Receipts, which at all reasonable times will be open for inspection by the
Record Holders of Receipts provided that such inspection shall not be for the
purpose of communicating with Record Holders of Receipts in the interest of a
business or object other than the business of the Issuer or a matter related to
the Deposit Agreement or the Receipts.
16. Liability of Depositary, Depositary's Agents or the Issuer. Neither
the Depositary nor any agent of the Depositary nor the Issuer shall incur any
liability to any holder of any Receipt if, by reason of any provision of any
present or future law of any governmental authority or, in the case of the
Depositary or any agent of the Depositary, or by reason of any act of God or war
or other circumstance beyond its control, the Depositary, any agent of the
Depositary or the Issuer is prevented or forbidden from doing or performing any
act or thing required by the terms of the Deposit Agreement to be done or
performed; nor shall the Depositary, any agent of the Depositary or the Issuer
incur any liability to any holder of a Receipt by reason of any non-performance
or delay, caused as aforesaid, in performance of any act or thing required by
the terms of the Deposit Agreement to be done or performed, or by reason of any
exercise of, or failure to exercise, any discretion provided in the Deposit
Agreement.
17. Immunities of Depositary, Depositary's Agents and Issuer. Neither the
Depositary nor any agent of the Depositary nor the Issuer (a) assumes any
obligation or shall be subject to any liability under the Deposit Agreement to
holders of the Receipts
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<PAGE>
other than that each of them agrees to use its best judgment and good faith in
the performance of such duties as are specifically set forth in the Deposit
Agreement, or (b) will be under any obligation to appear in, prosecute or defend
any action, suit or other proceeding in respect to Securities, Depositary Units
or Receipts that in its opinion may involve it in expense or liability, unless
indemnity satisfactory to it against all expense and liability be furnished as
often as may be required, or (c) will be liable for any action or non-action by
it in reasonable reliance upon the advice of or information from legal counsel,
accountants, any Person presenting Securities for deposit, any holder of a
Receipt, or any other Person believed by it reasonably and in good faith to be
competent to give such advice or information. The Depositary, any Depositary's
Agent, and the Issuer may rely and shall be protected in acting upon any written
notice, request, direction or other document reasonably believed by it to be
genuine and to have been signed or presented by the proper Person or Persons.
18. Indemnification. The Issuer will indemnify the Depositary and its
agents (other than agents of the Issuer) against, and hold them harmless from,
all claims, liabilities, losses, damages, judgments, fines, settlements, costs
and expenses (including all legal costs and expenses relating thereto, including
reasonable attorneys fees) that may arise out of (a) the acceptance by the
Depositary or any of its agents of its duties under the Deposit Agreement and
(b) acts performed or omitted in respect of the Deposit Agreement (i) by the
Depositary or any of its agents (other than agents affiliated with the Issuer),
except for any liability arising out of negligence, bad faith or intentional
misconduct of the Depositary or any of its agents or (ii) by the Issuer or any
of its agents.
19. Resignation of Depositary. The Depositary may at any time resign by
written notice of its election to do so delivered to the Issuer, such
resignation to take effect 30 days after the date of such notification or upon
the earlier appointment of a successor Depositary and its acceptance of such
appointment, as provided in the Deposit Agreement.
20. Governing Law. The Deposit Agreement and the rights, duties,
obligations and immunities of the Depositary hereunder shall be governed by and
construed in accordance with the laws of the State of New York without regard to
that State's principles of conflicts of law.
21. Defined Terms. Any term not expressly defined herein shall have the
meaning ascribed to it in the Deposit Agreement.
- 6 -
<PAGE>
DEPOSITARY NOT RESPONSIBLE FOR VALIDITY OF ANY DEPOSITED INSTRUMENT. The
Depositary assumes no responsibility for the correctness of the foregoing
descriptions prepared by the Issuer summarizing certain provisions of the
Deposit Agreement and makes no warranties or representations as to the validity,
genuineness or sufficiency of any certificate or other instrument deposited with
the Depositary or of the Securities evidenced thereby, as to the value or
condition of such Securities, as to any right, title or interest of the record
holders of the such instruments to the Securities or as to any right, title or
interest of the record holders of the Depositary Receipts to the Securities.
The following abbreviations, when used in the inscription on the face of
this Receipt, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN
ACT-- _______ Custodian ______
(Cust) (Minor)
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of under Uniform Gifts to
survivorship and not as tenants in common Minors Act ______
(State)
Additional abbreviations may also be used, though not in the above list.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
___________________________________
_________________________________________ _______________________________
Please insert Social Security or other Please print or
identifying number of Transferee typewrite name and
address of Transferee
__________________________________________ Depositary Units represented by the
within Receipt, and irrevocably constitutes and appoints
__________________________________ attorney, to transfer the same on the books
of the within-named Depositary, with full power of substitution in the premises.
Dated: __________________________________ Signature ___________________________
Signature Guaranteed
_________________________________________
- 7 -
<PAGE>
Note: The signature to any endorsement hereon must correspond with the
name as written upon the face of the Receipt, in every particular, without
alteration or enlargement or any change whatever. If the endorsement is executed
by an attorney, executor, administrator, trustee or guardian, the person
executing the endorsement must give his full title in such capacity, and proper
evidence of authority to act in such capacity, if not on file with the
Depositary, must be forwarded with this Receipt. The signature must be
guaranteed by an authorized employee of a bank, trust company or member of a
National Securities Exchange.
- 8 -
<PAGE>
No assignment of the Depositary Units evidenced by a Depositary Receipt
will be registered on the books of the Depositary or of Scott Cable
Communications, Inc., a Texas corporation unless an Application for Transfer of
Depositary Units has been executed and delivered by an assignee on the form of
application set forth below. An assignor of a Depositary Receipt shall have no
duty to an assignee with respect to the requirement of the assignee to deliver
an executed transfer application in order for an assignee to obtain registration
of transfer of the Depositary Receipt.
APPLICATION FOR TRANSFER OF DEPOSITARY UNITS
The undersigned ("Applicant") hereby applies for transfer to the name of
the Applicant of the Depositary Units evidenced by a Depositary Receipt.
The Applicant (i) agrees to be bound by the terms and conditions of the
Deposit Agreement and the Depositary Receipt, and (ii) represents and warrants
that the Applicant has all right, power and authority necessary to enter into
the Deposit Agreement.
Date: _________________________________ ______________________________________
Signature
_______________________________________ ______________________________________
Social Security or other Residence Address
identifying number
_______________________________________
Purchase Price
(including commissions, if any)
Type of Entity (check one):
_____________Individual ___________Issuer __________Corporation
_____________Trust ___________________ Other (specify): ________________________
If the Applicant is a broker, dealer, bank, trust company, clearing
corporation, other nominee holder or an agent of any of the foregoing, and is
holding for the account of any other person, this application should be
completed by an officer thereof, or, in the case of a broker or dealer, by a
registered representative who is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc.,
or, in the case of any other nominee holder, a person performing a
- 9 -
<PAGE>
similar function. If the Applicant is a broker, dealer, bank, trust company,
clearing corporation, other nominee holder or an agent of any of the foregoing,
the above certification as to any person for whom the Applicant will hold the
Depositary Unit shall be made to the best of the Applicant's knowledge.
- 10 -
<PAGE>
Exhibit 10.7
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement"), dated as of December 18,
1996, is among FLEET NATIONAL BANK, a national banking association (the "Second
Trustee"), not in its individual capacity, but as trustee for the holders of all
15% Senior Subordinated Pay-in-Kind Notes Due March 18, 2002, issued pursuant to
that certain Indenture dated as of December 18, 1996 between Scott Cable
Communications, Inc., as Issuer, and the Second Trustee (the "New Restructured
Second Secured PIK Note Indenture"), FLEET NATIONAL BANK, a national banking
association (the "Third Trustee"), not in its individual capacity, but as
trustee for the holders of all 16% Junior Subordinated Pay-in-Kind Notes Due
July 18, 2002 issued pursuant to that certain Indenture dated as of December 18,
1996 between Scott Cable Communications, Inc., as Issuer, and the Third Trustee
(the "New Restructured Third Secured PIK Note Indenture"), and SCOTT CABLE
COMMUNICATIONS, INC., a Texas corporation ("Issuer"). All capitalized terms used
but not elsewhere defined herein shall have the respective meanings ascribed to
such terms in Section 1 below.
R E C I T A L S
B. Issuer has issued the New Restructured Second Secured PIK Notes in the
initial aggregate principal amount of $49,500,000 pursuant to the terms of the
New Restructured Second Secured PIK Note Indenture.
C. Issuer has issued the New Restructured Third Secured PIK Notes in the
initial aggregate principal amount of $38,925,797 pursuant to the terms of the
New Restructured Third Secured PIK Note Indenture.
D. One of the conditions precedent to the obligations of Lenders under
the Loan Agreement is that the parties hereto shall have executed and delivered
this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. All capitalized terms used but not elsewhere defined in
this Agreement shall have the respective meanings ascribed to such terms in the
New Restructured Second Secured PIK Note Indenture. The following terms shall
have the following meanings in this Agreement:
Proceeding shall mean any (i) judicial proceeding or other creditor
remedies initiated by Second Trustee to collect Issuer's Obligations or
foreclose the Security Interests or (ii) insolvency, bankruptcy,
receivership, custodianship, liquidation, reorganization, assignment for
the benefit of creditors or other proceeding for the liquidation,
dissolution or other winding up of Issuer or its properties.
<PAGE>
SUBORDINATION AGREEMENT
(Junior)
Senior Indebtedness shall mean, as of any given time, all of Issuer's
Obligations.
2. Subordination of Subordinated Indebtedness to Senior Indebtedness and
Subordination of Subordinated Liens to Security Interests.
2.1 Subordination. The payment of any and all of the Subordinated
Indebtedness hereby expressly is subordinated to the prior payment in full
of the Senior Indebtedness and the Subordinated Liens hereby expressly are
subordinated to the Security Interests.
2.2 Restriction on Payments. Notwithstanding any provision of the
Subordinated Credit Instruments to the contrary and in addition to any
other limitations set forth herein or therein, no payment of principal,
interest, fees or any other amount due with respect to the Subordinated
Indebtedness shall be made, and neither Third Trustee nor any Subordinated
Creditor shall exercise any right of set-off or recoupment with respect to
any of the Subordinated Indebtedness, until all of the Senior Indebtedness
is paid in full; except that Issuer may make and each holder of a New
Restructured Third Secured PIK Note may receive regularly scheduled accrued
and unpaid interest at a rate per annum not in excess of 16% in the form of
additional new restructured secured payment-in-kind notes pursuant to the
terms of the New Restructured Third Secured PIK Notes.
2.3 Proceedings. In the event of any Proceeding (i) all Senior
Indebtedness first shall be paid in full in cash before any payment of or
with respect to any of the Subordinated Indebtedness shall be made; (ii)
any payment which, but for the terms hereof, otherwise would be payable or
deliverable in respect of any of the Subordinated Indebtedness shall be
paid or delivered directly to Second Trustee (to be held and/or applied by
Second Trustee in accordance with the terms of the New Restructured Second
Secured PIK Indenture) until all Senior Indebtedness is paid in full, and
each Subordinated Creditor and Third Trustee irrevocably authorizes,
empowers and directs (A) all receivers, trustees, liquidators, custodians,
conservators and others having authority in the premises to effect all such
payments and deliveries and (B) Second Trustee to demand, sue for, collect
and receive every such payment or distribution; (iii) each Subordinated
Creditor and Third Trustee agrees to execute and deliver to Second Trustee
or its representative all such further instruments confirming the
authorization referred to in the foregoing clause (ii) as Second Trustee
reasonably shall request, and agrees to take all such other actions as
Second Trustee reasonably shall request in order to enable Second Trustee
to enforce all claims upon or in respect of the Subordinated Indebtedness,
and (iv) each Subordinated Creditor and Third Trustee shall execute,
verify, deliver and file any proofs of claim in respect
2
<PAGE>
SUBORDINATION AGREEMENT
(Junior)
of the Subordinated Indebtedness requested by Second Trustee in connection
with any such Proceeding and hereby irrevocably authorizes, empowers and
appoints Second Trustee its agent and attorney-in-fact to (A) execute,
verify, deliver and file such proofs of claim upon the failure of such
Subordinated Creditor or Third Trustee to do so and (B) vote such proofs of
claim in any such proceeding.
2.4 Incorrect Payments. If any payment is received by any Subordinated
Creditor or Third Trustee on account of any Subordinated Indebtedness
before all Senior Indebtedness is paid in full, such payment promptly shall
be paid over to Second Trustee, or its designated representative, for
application (in accordance with the Loan Agreement) to the payment of the
Senior Indebtedness then remaining unpaid, until all of the Senior
Indebtedness is paid in full. No Subordinated Creditor or Third Trustee
shall commingle any such payment with any other asset of such Person and
such Subordinated Creditor or Third Trustee shall hold such payment in
trust for the benefit of Lenders until paid over to Second Trustee or its
designated representative.
2.5 Legends. Until the Senior Indebtedness is paid in full, each
Subordinated Credit Instrument at all times shall contain in a conspicuous
manner the following legend:
"The indebtedness evidenced hereby is subordinate in the manner and to
the extent set forth in that certain Subordination Agreement (the
"Subordination Agreement") dated as of December 18, 1996 among Scott
Cable Communications, Inc. ("Issuer"), Fleet National Bank, as
trustee, and Fleet National Bank, as trustee."
2.6 Amendments of Subordinated Credit Instruments. Until the Senior
Indebtedness is paid in full and notwithstanding anything contained in the
Subordinated Credit Instruments to the contrary, no Subordinated Creditor
or Third Trustee shall agree to any amendment or modification of, or
supplement to, the Subordinated Credit Instruments, the effect of which is
to (i) increase the amount of any of the Subordinated Indebtedness or the
rate of interest with respect to any of the Subordinated Indebtedness, (ii)
shorten the maturity date of any of the Subordinated Indebtedness, (iii)
accelerate the scheduled payments on or the required amortization of any of
the Subordinated Indebtedness or (iv) increase the fees payable under the
Subordinated Credit Instruments, if any.
2.7 Restrictions on Action. Until the Senior Indebtedness is paid in
full no Subordinated Creditor or Third Trustee shall take any action to
collect any of the Subordinated Indebtedness or exercise any of the
remedies with respect to any of the
3
<PAGE>
SUBORDINATION AGREEMENT
(Junior)
Subordinated Indebtedness set forth in any of the Subordinated Credit
Instruments or that otherwise may be available to such Subordinated
Creditor or Third Trustee, either at law or in equity, provided that (i) in
the event Issuer's Obligations are accelerated pursuant to Section 5.2 of
the New Restructured Second Secured PIK Note Indenture, such Subordinated
Creditor or Third Trustee may accelerate the Subordinated Indebtedness, and
(ii) in the event of any Proceeding not initiated by any Subordinated
Creditor or Third Trustee, subject to Section 2.3, such Subordinated
Creditor or Third Trustee may participate in such Proceeding .
3. Continued Effectiveness of this Agreement. The terms of this
Agreement, the subordination effected hereby, and the rights and the obligations
of each Subordinated Creditor and Third Trustee and Second Trustee arising
hereunder, shall not be affected, modified or impaired in any manner or to any
extent by: (i) any amendment or modification of or supplement to any of the
Subordinated Credit Instruments; (ii) the validity or enforceability of any of
such documents; or (iii) any exercise or non-exercise of any right, power or
remedy under or in respect of the Senior Indebtedness or the Subordinated
Indebtedness or any of the instruments or documents referred to in clause (i)
above.
4. Cumulative Rights; No Waivers. Each and every right, remedy and power
granted to Second Trustee hereunder shall be cumulative and in addition to any
other right, remedy or power specifically granted herein, in the New
Restructured Second Secured PIK Note Indenture or the Security Instruments or
now or hereafter existing in equity, at law, by virtue of statute or otherwise,
and may be exercised by Second Trustee, from time to time, concurrently or
independently and as often and in such order as Second Trustee may deem
expedient. Any failure or delay on the part of Second Trustee in exercising any
such right, remedy or power, or abandonment or discontinuance of steps to
enforce the same, shall not operate as a waiver thereof or affect Second
Trustee's right thereafter to exercise the same, and any single or partial
exercise of any such right, remedy or power shall not preclude any other or
further exercise thereof or the exercise of any other right, remedy or power,
and no such failure, delay, abandonment or single or partial exercise of Second
Trustee's rights hereunder shall be deemed to establish a custom or course of
dealing or performance among the parties hereto.
5. Modification. Any modification or waiver of any provision of this
Agreement, or any consent to any departure by any Subordinated Creditor or Third
Trustee therefrom, shall not be effective in any event unless the same is in
writing and signed by Second Trustee, and then such modification, waiver or
consent shall be effective only in the specific instance and for the specific
purpose given. Any notice to or demand on any Subordinated Creditor or Third
Trustee in any event not specifically required of Second Trustee hereunder shall
not entitle any Subordinated Creditor or Third Trustee to any other or further
notice or demand in the same, similar or other circumstances unless specifically
required hereunder.
4
<PAGE>
SUBORDINATION AGREEMENT
(Junior)
6. Additional Documents and Actions. Third Trustee at any time, and from
time to time, after the execution and delivery of this Agreement, upon the
request of Second Trustee and at the expense of Issuer, promptly will execute
and deliver such further documents and do such further acts and things as Second
Trustee reasonably may request in order to effect fully the purposes of this
Agreement.
7. Notices. All notices and communications under this Agreement shall be
in writing and shall be (i) delivered in person or (ii) mailed, postage prepaid,
either by registered or certified mail, return receipt requested, or by
overnight express courier, addressed in each case as follows:
To Second Trustee Fleet Bank
and Corporate Trust Administration
To Third Trustee: Administration MAOFDOSM
One Federal Street
Boston, Massachusetts 02106
Attn: Mr. Robert Bice
Copy to: Shipman & Goodwin
One American Row
Hartford, Connecticut 06103
Attn: Thomas Tresselt, Esq.
Copy to: Foley Hoag & Eliot
One Post Office Square
Boston, Massachusetts 02109
Attn: Arnold M. Zaff, Esquire
To Issuer: Scott Cable Communications, Inc.
Four Landmark Square, Suite 302
Stamford, Connecticut 06901
Attn: Mr. Bruce A. Armstrong
Chief Executive Officer
Copy to: Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attn: Stanley E. Bloch, Esq.
5
<PAGE>
SUBORDINATION AGREEMENT
(Junior)
and copy to: Foley Hoag & Eliot
One Post Office Square
Boston, Massachusetts 02109
Attn: Arnold M. Zaff, Esquire
or to any other address, as to any of the parties hereto, as such party shall
designate in a written notice to the other parties hereto. All notices sent
pursuant to the terms of this Section 7 shall be deemed received (i) if
personally delivered, then on the Business Day of delivery, (ii) if sent by
overnight, express carrier, on the next Business Day immediately following the
day sent, or (iii) if sent by registered or certified mail, on the earlier of
the fifth Business Day following the day sent or when actually received.
8. Severability. In the event that any provision of this Agreement is
deemed to be invalid by reason of the operation of any law or by reason of the
interpretation placed thereon by any court or governmental authority, this
Agreement shall be construed as not containing such provision and the invalidity
of such provision shall not affect the validity of any other provisions hereof,
and any and all other provisions hereof which otherwise are lawful and valid
shall remain in full force and effect.
9. Successors and Assigns. This Agreement shall inure to the benefit of
the successors and assigns of Second Trustee and shall be binding upon the
successors and assigns of each Subordinated Creditor, Third Trustee and Issuer.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall be one and the same instrument.
12. Defines Rights of Creditors. The provisions of this Agreement are
solely for the purpose of defining the relative rights of Subordinated
Creditors, Second Trustee and Third Trustee shall not be deemed to create any
rights or priorities in favor of any other Person, including, without
limitation, Issuer. Nothing contained in this Agreement is intended to or shall
impair, as among Issuer, Subordinated Creditors and Third Trustee, the
obligation of Issuer, which is absolute and unconditional, to pay the
Subordinated Creditors the principal of and interest on the Subordinated
Indebtedness as and when the same shall become due and payable in accordance
with the terms of the Subordinated Credit Instruments.
13. Conflict. In the event of any conflict between any term, covenant or
condition of this Agreement and any term, covenant or condition of any of the
Subordinated Credit Instruments, the provisions of this Agreement shall control
and govern. For purposes of this Section 13, to the extent that any provisions
of any of the Subordinated Credit Instruments
6
<PAGE>
SUBORDINATION AGREEMENT
(Junior)
provide rights, remedies and benefits to Second Trustee that exceed the rights,
remedies and benefits provided to Second Trustee under this Agreement, such
provisions of the applicable Subordinated Credit Instruments shall be deemed to
supplement (and not to conflict with) the provisions hereof.
14. Headings. The paragraph headings used in this Agreement are for
convenience only and shall not affect the interpretation of any of the
provisions hereof.
15. Termination. This Agreement shall terminate upon the indefeasible
payment in full of the Senior Indebtedness.
16. No Contest of Liens; Release of Collateral. Each Subordinated Creditor
and Third Trustee agrees that it will not at any time contest the validity,
perfection, priority or enforceability of the Liens in the Collateral granted to
Second Trustee pursuant to the New Restructured Second PIK Note Indenture and
the other Security Instruments. Any Collateral which is subject to the
Subordinated Liens shall be deemed to have been released from all such
Subordinated Liens in the event that such Collateral is sold by Issuer with the
consent of Second Trustee, provided the net proceeds of sale are first applied
to the payment of the Senior Indebtedness. Each Subordinated Creditor and Third
Trustee agrees that it shall execute, deliver and file any and all termination
statements, lien releases and other agreements and instruments as Second Trustee
deems necessary or appropriate in order to give effect to the preceding
sentence. Each Subordinated Creditor and Third Trustee hereby irrevocably
appoints Second Trustee its attorney in fact for the purpose of effectuating any
such execution, deliveries and filings.
17. Subrogation. Upon the payment in full in cash of all Senior
Indebtedness, Third Trustee and Subordinated Creditors shall be subrogated to
the rights of Second Trustee and Lenders under the Loan Instruments until the
Subordinated Indebtedness shall be paid in full in cash, provided that neither
Third Trustee nor Subordinated Creditors shall have any claim against Second
Trustee or any Lender for impairment of the subrogation rights of Third Trustee
or Subordinated Creditors arising out of any act or omission of Second Trustee
or any Lender. For purposes of such subrogation, no payments or distributions to
Second Trustee or any Lender of any cash, property or securities to which
Subordinated Creditors or Third Trustee would be entitled except for the
provisions of this Agreement, and no payments by Third Trustee or Subordinated
Creditors to Second Trustee or any Lender required pursuant to the terms of this
Agreement, shall, as among Issuer and its creditors other than Second Trustee
and Lenders, be deemed to be a payment or distribution by Issuer to or on
account of the Senior Indebtedness.
18. APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS AND DECISIONS OF THE
7
<PAGE>
SUBORDINATION AGREEMENT
(Junior)
STATE OF NEW YORK NOTWITHSTANDING THAT THERE ALSO MAY BE OTHER JURISDICTIONS
WHICH MAY BEAR A REASONABLE RELATIONSHIP TO THE TRANSACTIONS CONTEMPLATED
HEREBY. FOR PURPOSES OF THIS SECTION 17, THE NEW RESTRUCTURED SECOND SECURED PIK
NOTE AGREEMENT, THE OTHER INDENTURE INSTRUMENTS, THE SUBORDINATED CREDIT
INSTRUMENTS AND THIS AGREEMENT SHALL BE DEEMED TO BE PERFORMED AND MADE IN THE
STATE OF NEW YORK.
19. JURISDICTION AND VENUE. ISSUER AND EACH TRUSTEE HEREBY AGREE THAT ALL
ACTIONS OR PROCEEDINGS INITIATED BY ISSUER OR ANY TRUSTEE AND ARISING DIRECTLY
OR INDIRECTLY OUT OF THIS AGREEMENT SHALL BE LITIGATED IN THE SUPREME COURT OF
NEW YORK, NEW YORK OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK OR, IF SECOND TRUSTEE OR ANY HOLDER INITIATES SUCH ACTION, IN
ADDITION TO THE FOREGOING COURTS, ANY COURT IN WHICH SECOND TRUSTEE OR HOLDERS
SHALL INITIATE OR TO WHICH SECOND TRUSTEE OR HOLDERS SHALL REMOVE SUCH ACTION,
TO THE EXTENT SUCH COURT HAS JURISDICTION. ISSUER AND EACH TRUSTEE HEREBY
EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
PROCEEDING COMMENCED BY FINOVA OR LENDERS IN ANY OF SUCH COURTS, AND HEREBY
AGREE THAT PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR
PAPERS ISSUED THEREIN MAY BE SERVED IN THE MANNER PROVIDED FOR NOTICES HEREIN,
AND AGREE THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER PROCESS OR PAPERS
MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO ISSUER OR SUCH TRUSTEE,
AS THE CASE MAY BE, AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT TO
SECTION 8. ISSUER AND EACH TRUSTEE WAIVE ANY CLAIM THAT NEW YORK COUNTY, NEW
YORK OR THE SOUTHERN DISTRICT OF NEW YORK IS AN INCONVENIENT FORUM OR AN
IMPROPER FORUM BASED ON LACK OF VENUE. TO THE EXTENT PROVIDED BY LAW, SHOULD
ISSUER OR ANY TRUSTEE, AFTER BEING SO SERVED, FAIL TO APPEAR OR ANSWER TO ANY
SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE NUMBER OF DAYS
PRESCRIBED BY LAW AFTER THE MAILING THEREOF, SUCH PERSON SHALL BE DEEMED IN
DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY THE COURT AGAINST SUCH
PERSON AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS.
THE EXCLUSIVE CHOICE OF FORUM FOR ISSUER AND TRUSTEES SET FORTH IN THIS SECTION
18 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY SECOND TRUSTEE AND/OR
HOLDERS, OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING, BY SECOND
TRUSTEE AND/OR HOLDERS, OF ANY ACTION TO ENFORCE THE SAME
8
<PAGE>
SUBORDINATION AGREEMENT
(Junior)
IN ANY OTHER APPROPRIATE JURISDICTION, AND ISSUER AND EACH TRUSTEE HEREBY WAIVE
THE RIGHT TO COLLATERALLY ATTACK ANY SUCH JUDGMENT OR ACTION.
20. WAIVER OF RIGHT TO JURY TRIAL. SECOND TRUSTEE, ISSUER AND EACH TRUSTEE
ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT
OR WITH RESPECT TO THE TRANSACTIONS DESCRIBED IN OR AFFECTED HEREBY WOULD BE
BASED UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE THAT
ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
21. This Agreement is executed and delivered by Second Trustee and Third
Trustee not in its own right, but solely in the exercise of the powers conferred
upon such Person as or Second Trustee or Third Trustee, and that no personal
liability or personal responsibility is assumed by nor shall at any time be
asserted or enforceable against such Second Trustee or Third Trustee on account
of this Agreement.
[remainder of this page intentionally left blank]
9
<PAGE>
SUBORDINATION AGREEMENT
(Junior)
IN WITNESS WHEREOF, each Trustee and Issuer have caused this Agreement to
be executed as of the date first above written.
FLEET NATIONAL BANK, a National
Banking Association, not in its individual
capacity, but solely as Trustee under the
New Restructured Second Secured PIK
Note Indenture
By: /s/ Robert L. Bice, II
-----------------------------
Name: Robert L. Bice, II
Its: Vice President
FLEET NATIONAL BANK, a National
Banking Association, not in its individual
capacity, but solely as Trustee under the
New Restructured Third Secured PIK Note
Indenture
By: /s/ Robert L. Bice, II
-----------------------------
Name: Robert L. Bice, II
Its: Vice President
SCOTT CABLE COMMUNICATIONS,
INC., a Texas corporation
By: /s/ Bruce A. Armstrong
-----------------------------
Name: Bruce A. Armstrong
Its: Chief Executive Officer
10
<PAGE>
Exhibit 10.8
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of December 18, 1996, is between SCOTT
CABLE COMMUNICATIONS, INC., a Texas corporation ("Debtor"), and FLEET NATIONAL
BANK, a National Banking Association ("Secured Party"), not in its individual
capacity, but solely as Trustee for the holders (the "Holders") of all 15%
Senior Subordinated Pay-in-Kind Notes due March 18, 2002 issued pursuant to the
Indenture (as defined below).
Preliminary Statement:
A. Debtor and Secured Party have entered into an Indenture of even date
herewith (as the same may be amended, modified, supplemented or restated from
time to time, the "Indenture"), pursuant to which Debtor has agreed to issue
securities to Holders, subject to the terms and conditions set forth in the
Indenture.
B. One of the conditions precedent to Secured Party's obligations under
the Indenture is that Debtor shall have executed and delivered this Security
Agreement to secure the performance of Issuer's Obligations thereunder.
NOW, THEREFORE, in order to induce Trustee to perform its obligations
under the Indenture, and for other good and valuable consideration, the receipt
and sufficiency of which hereby are acknowledged, Debtor hereby agrees as
follows:
1. Definitions. All terms used herein which are defined in the New York
Uniform Commercial Code (the "Code") shall have the same meaning herein as in
the Code unless the context in which such terms are used herein indicates
otherwise. All capitalized terms used but not elsewhere defined in this Security
Agreement shall have the respective meanings ascribed to such terms in the
Indenture.
2. Security Interests. In order to secure the performance and payment of
Issuer's Obligations, Debtor hereby grants to Secured Party a security interest
in all Property of Debtor, except to the extent limited below, whether now owned
or hereafter acquired, and all additions and accessions thereto, including,
without limitation, the Property described below:
2.1 Goods, Machinery, Equipment and Inventory. All of Debtor's
goods, machinery, equipment, inventory and other goods, wherever located,
and all additions and accessions thereto or replacements thereof,
including, but not limited to, all machinery, inventory and equipment of
any and every kind and description comprising, belonging to or used in
connection with the operation of the Cable Business of Debtor
(collectively, the "Tangible Collateral");
<PAGE>
SECURITY AGREEMENT
2.2 Accounts, General Intangibles. All of Debtor's accounts,
contract rights, chattel paper, instruments, investment property,
documents and general intangibles, and all additions and accessions
thereto and replacements thereof, including, but not limited to, all
franchises, permits, authorizations and licenses heretofore or hereafter
granted or issued to Debtor under federal, state or local laws (excluding,
however, franchises, permits, authorizations and licenses issued by the
FCC or any other Governmental Body to the extent, and only to the extent,
it is unlawful to grant a security interest in such franchises, permits,
authorizations and licenses, but including, without limitation, the right
to receive all proceeds derived or arising from or in connection with the
assignment of such franchises, permits, authorizations and licenses) which
permit or pertain to the operation of the Cable Business of Debtor, and
all of Debtor's advertising revenue contracts, programming distribution
agreements, pole attachment agreements, access and right of entry
agreements, equipment leases, office leases, site leases, video
programming distribution agreements, supply and distributorship
agreements, non-competition agreements, employment contracts, consulting
agreements, collective bargaining agreements, service agreements,
maintenance agreements, other Operating Agreements, income tax refunds,
copyrights, patents, patent rights, trademarks, trade names, trade styles,
goodwill and going concern value, except to the extent the grant of a
security interest in any such agreement or contract without the consent of
the other party thereto would create a default thereunder in which event,
such agreement or contract shall not be included unless and until such
consent shall have been obtained (collectively, the "Intangible
Collateral");
2.3 Proceeds. All proceeds (including proceeds of insurance, eminent
domain and other governmental taking and tort claims) and products of the
Property described in Sections 2.1 and 2.2 above; and
2.4 Books and Records. All of the books and records pertaining to
the Property described in Sections 2.1, 2.2 and 2.3 above.
All of the Property described above hereinafter is referred to collectively as
the "Collateral." The security interest of Secured Party in the Collateral shall
be superior and prior to all other Liens except Permitted Prior Liens.
3. Representations and Warranties. Debtor hereby represents and warrants
to Secured Party as follows:
3.1 Ownership of Collateral. Debtor is the owner of all of the
Collateral, except the portion thereof consisting of after-acquired
Property, and Debtor will be the owner of such after-acquired Property,
free from any Lien except for Permitted Liens.
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<PAGE>
SECURITY AGREEMENT
3.2 Places of Business. There is listed on Exhibit A hereto the
location of the chief executive office of Debtor, all of the other places
of business of Debtor and all locations where the Tangible Collateral and
the books and records of Debtor are kept. Debtor shall not, without 30
days' prior written notice to Secured Party, change the location of (i)
its chief executive office, (ii) its books and records or (iii) except (A)
in connection with dispositions permitted by Section 4.18 of the Indenture
and (B) from one location listed on Exhibit A to another location listed
on Exhibit A, any Tangible Collateral.
3.3 Trade or Assumed Names. All trade or assumed names under which
Debtor is doing business are listed in Exhibit B.
3.4 Financing Statements. Except for the financing statements of
Secured Party and the financing statements pertaining to the Permitted
Senior Indebtedness, no financing statement covering any Collateral or any
proceeds thereof is on file in any public office (other than financing
statements for which termination statements are being delivered to Secured
Party at Closing).
3.5 Intangible Collateral. The Intangible Collateral represents bona
fide and existing indebtedness, obligations, liabilities, rights and
privileges owed or belonging to Debtor to which, to the best of Debtor's
knowledge, there is no valid defense, set-off or counterclaim against
Debtor and in connection with which there is no default with respect to
any payment or performance on the part of Debtor, or, to the best of
Debtor's knowledge, of any other party which would have a Material Adverse
Effect.
3.6 Tangible Collateral-Personal Property. All Tangible Collateral
at all times shall be considered personal property.
4. Affirmative Covenants. Until all of Issuer's Obligations are paid and
performed in full, Debtor shall:
4.1 Taxes. Pay promptly when due all taxes, levies, assessments and
governmental charges upon and relating to any of the Property, income or
receipts of Debtor or otherwise for which Debtor is or may be liable,
except to the extent that the failure to pay any of such taxes, levies,
assessments or charges is permitted by the Indenture.
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<PAGE>
SECURITY AGREEMENT
4.2 Insurance. At its sole expense, keep the Collateral insured
against loss or damage by insurance policies which shall be in such form,
with such companies and in such amounts as may be satisfactory to Secured
Party and otherwise comply with the provisions of Section 4.8 of the
Indenture.
4.3 Tangible Collateral.
4.3.1 Good Repair. Keep such of the Tangible Collateral as is
necessary to the operations of Debtor's Cable Business in good
working order and repair and make all necessary replacements thereof
and renewals thereto so that the value and operating efficiency
thereof at all times shall be maintained and preserved.
4.3.2 Insurance Requirements. Maintain the Tangible Collateral
at all times in accordance with the requirements of all insurance
carriers which provide insurance with respect to such Tangible
Collateral so that such insurance shall remain in full force and
effect.
4.3.3 Certificates of Title. Upon the request of Secured
Party, promptly deliver to Secured Party all certificates of title
pertaining to the Tangible Collateral, together with such
endorsements, assignments and other agreements as Secured Party may
request in order to perfect the security interest of Secured Party
in such Tangible Collateral.
4.3.4 Use of Collateral. Use the Tangible Collateral in
compliance with all statutes, regulations, ordinances, requirements
and regulations and all judgments, orders, injunctions and decrees
applicable thereto, and all other federal, state and local laws,
except where the failure to comply would not have a Material Adverse
Effect.
4.4 Intangible Collateral.
4.4.1 Payments. Make all payments and perform all acts
necessary to maintain and preserve the Intangible Collateral,
including, without limitation, filing of documents, renewals or
other information with any Governmental Body or any other Person.
4.4.2 Delivery of Instruments. Upon the request of Secured
Party, promptly deliver to Secured Party the original executed
copies of all instruments which constitute part of the Intangible
Collateral, together with such endorsements, assignments and other
agreements as Secured Party may
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<PAGE>
SECURITY AGREEMENT
request in order to perfect the security interest of Secured Party
in such instruments.
4.4.3 Accurate Records. At all times keep accurate and
complete records of payment and performance by Debtor and other
Persons of their respective obligations with respect to the
Intangible Collateral and permit Secured Party or any of its agents
to call at Debtor's place of business without hindrance or delay to
inspect, audit, check or make extracts from the books, records,
correspondence or other data relating to the Intangible Collateral
at reasonable times and upon reasonable notice, provided, however,
if an Event of Default exists, such activities may be conducted at
any time without notice.
4.4.4 Verification of Indebtedness. Upon request of Secured
Party after the occurrence and during the continuance of an Event of
Default, permit Secured Party itself, at any time, in the name of
Secured Party or Debtor, to verify directly with the obligors the
indebtedness due Debtor on any account or other item of Intangible
Collateral.
4.4.5 Defaults, Other Claims. Immediately inform Secured Party
of any default in payment or performance by Debtor or any other
Person of any obligation with respect to the Intangible Collateral
or of claims made by others in regard to the Intangible Collateral,
if either of which could have a Material Adverse Effect.
4.5 Collection of Proceeds. Collect the proceeds of indebtedness
owing to Debtor by any Person under any instrument or by any account
debtor with respect to any account, contract right, chattel paper or
general intangible.
4.6 Financing Statements, Further Assurances. Concurrently with the
execution of this Security Agreement, and from time to time hereafter as
requested by Secured Party, at the direction of the Holders, execute and
deliver to Secured Party such financing statements, continuation
statements, termination statements, amendments to any of the foregoing and
other documents, in form satisfactory to Secured Party, as Secured Party
may require to perfect and continue in effect the security interest of
Secured Party granted pursuant to this Security Agreement, to carry out
the purposes of this Security Agreement and to protect Secured Party's
rights hereunder. Debtor, upon demand, shall pay the cost of filing all
such financing statements, continuation statements, termination
statements, amendments to any of the foregoing and other documents.
5. Negative Covenants. Until all of Issuer's Obligations are paid and
performed in full, Debtor agrees that it shall not:
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<PAGE>
SECURITY AGREEMENT
5.1 Sales and Transfer of Collateral. Sell, lease, assign or
otherwise dispose of any of the Collateral, except as may be permitted by
and in accordance with the provisions of Section 4.18 of the Indenture.
5.2 Installation of Tangible Collateral. Permit any of the Tangible
Collateral to be installed, affixed or attached to the real estate or
Leasehold Property of Debtor or any other Person so as to become a part
thereof or become in any sense a fixture.
5.3 Valuation of Licenses. Contest the value attributed by Secured
Party to any FCC License of Debtor in any insolvency, bankruptcy,
receivership, custodianship, liquidation, reorganization, assignment for
the benefit of creditors or other similar proceeding.
6. Protection of Collateral. In the event of any failure of Debtor to (i)
maintain in force and pay for any insurance or bond which Debtor is required to
provide pursuant to this Security Agreement or the other Indenture Instruments,
(ii) keep the Tangible Collateral in good repair and operating condition, (iii)
keep the Collateral free from all Liens except for Permitted Liens, (iv) pay
when due all taxes, levies and assessments on or in respect of the Collateral,
except as permitted pursuant to the terms of Section 4.1 above, (v) make all
payments and perform all acts on the part of Debtor to be paid or performed with
respect to any of the Collateral, including, without limitation, all expenses of
protecting, storing, warehousing, insuring, handling and maintaining the
Collateral, and (vi) keep fully and perform promptly any other of the
obligations of Debtor under this Security Agreement or the other Indenture
Instruments, Secured Party, at its option, may (but shall not be required to)
procure and pay for such insurance, place such Collateral in good repair and
operating condition, pay or contest or settle such Liens or taxes or any
judgments based thereon or otherwise make good any other aforesaid failure of
Debtor, provided it gives Debtor prompt notice of such action. Debtor shall
reimburse Secured Party immediately upon demand for all sums paid or advanced on
behalf of Debtor for any such purpose, together with all costs, expenses and
reasonable attorneys' fees paid or incurred by Secured Party in connection
therewith and interest on all sums so paid or advanced from the date of such
payment or advancement until repaid to Secured Party. All such sums paid or
advanced by Secured Party, with interest thereon, immediately upon payment or
advancement thereof, shall be deemed to be part of Issuer's Obligations secured
hereby.
7. Event of Default. Debtor shall be in default under this Security
Agreement upon the occurrence of an Event of Default under the Indenture.
8. Remedies Upon Default. Upon the occurrence of an Event of Default:
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<PAGE>
SECURITY AGREEMENT
8.1 Rights of Secured Party. Secured Party shall have all of the
rights and remedies of a secured party under the Code and all other rights
and remedies accorded to Secured Party at equity or law, including,
without limitation, the right to apply for and have a receiver appointed
by a court of competent jurisdiction to manage, protect and preserve the
Collateral, to continue operating the business of Debtor and to collect
all revenues and profits thereof. Any notice of sale or other disposition
of Collateral given not less than 10 Business Days' prior to such proposed
action shall constitute reasonable and fair notice of such action. To the
extent permitted by applicable law, Secured Party may postpone or adjourn
any such sale from time to time by announcement at the time and place of
sale stated in the notice of sale or by announcement of any adjourned
sale, without being required to give a further notice of sale. Any such
sale may be for cash or, unless prohibited by applicable law, upon such
credit or installment terms as Secured Party shall determine. To the
extent permitted by applicable law, Debtor shall be credited with the net
proceeds of such sale only when such proceeds actually are received by
Secured Party. Despite the consummation of any such sale, Debtor shall
remain liable for any deficiency on Issuer's Obligations which remains
outstanding following any such sale. All net proceeds received pursuant to
a sale shall be applied in the manner set forth in Section 5.10 of the
Indenture.
8.2 Assembly of Collateral. Upon the request of Secured Party,
Debtor shall assemble and make the Collateral available to Secured Party
at a place designated by Secured Party.
8.3 Proceeds. Debtor shall hold all proceeds of the Collateral
collected by Debtor in trust for Secured Party, and promptly upon receipt
thereof, turn over such proceeds to Secured Party in the exact form in
which they were received.
8.4 Other Rights. Secured Party, at its election, and without notice
to Debtor, may:
8.4.1 Terminate Right of Collection. Terminate the right of
Debtor to collect the proceeds described in Section 8.3.
8.4.2 Notification. Notify the obligors under any instruments
and the account debtors of any account, contract right, chattel
paper or general intangible to make all payments directly to Secured
Party.
8.4.3 Collection of Payments. Demand, sue for, collect or
receive, in the name of Debtor or Secured Party, any money or
Property payable or receivable on any item of Collateral.
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<PAGE>
SECURITY AGREEMENT
8.4.4 Settlement. Settle, release, compromise, adjust, sue
upon or otherwise enforce any item of Collateral as Secured Party
may determine.
8.4.5 Mail of Debtor; Endorsement of Checks. For the purpose
of enforcing Secured Party's rights under this Security Agreement,
receive and open mail addressed to Debtor, and endorse notes,
checks, drafts, money orders, documents of title or other forms of
payment on behalf and in the name of Debtor.
8.5 Applications to Governmental Bodies. Debtor, at its own cost and
expense, shall take any action that Secured Party may request in order to
enable Secured Party to obtain and enjoy the full rights and benefits
granted to Secured Party hereunder, including, without limitation, all
rights necessary or desirable to obtain, use, sell or assign the Licenses
and Franchises of Debtor and the other Collateral of Debtor hereunder, and
to exercise all remedies available to Secured Party hereunder and under
applicable law. Without limiting the generality of the foregoing, at the
request of Secured Party at any time following the occurrence of any Event
of Default, Debtor, at its sole cost and expense, shall assist Secured
Party in obtaining any required approval of any Governmental Body
(including the FCC and any Franchisor) to the transfer of Debtor's
Licenses and Franchises to Secured Party or its designee or any receiver,
trustee or similar official or purchaser by preparing, signing and filing
with the appropriate Governmental Body any application or document and
taking all other actions deemed necessary or appropriate by Secured Party
(i) for consent to the assignment of any such License or Franchise
necessary or appropriate under applicable Cable Laws, (ii) for approval of
any sale, assignment or transfer of any such License or Franchise and
(iii) to enable Secured Party or its designee or any receiver, trustee or
similar official or purchaser to obtain from such Governmental Body or any
other Person any required authority necessary to operate the Cable
Business of Debtor.
8.6 Transfer of Control to Other Persons. Debtor acknowledges and
agrees that a transfer of control of the Collateral or an assignment of
Licenses or Franchises of such Debtor may be made to a receiver, trustee,
or similar official or to any purchaser of all or any part of the other
Collateral hereunder, pursuant to any court order, public or private sale,
judicial sale, foreclosure or the exercise of any other remedies available
to Secured Party hereunder or under applicable law.
All monies received by Secured Party pursuant to this Section 8 shall be applied
by Secured Party in accordance with the applicable provisions of Section 5.10 of
the Indenture.
9. Power of Attorney. To effectuate the rights and remedies of Secured
Party under this Security Agreement, Debtor hereby irrevocably appoints Secured
Party its attorney-in-fact, in the name of Debtor or in the name of Secured
Party, to:
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<PAGE>
SECURITY AGREEMENT
9.1 Execution of Financing Statements. Execute and file from time to
time financing statements, continuation statements, termination statements
and amendments thereto, covering the Collateral, in form satisfactory to
Secured Party.
9.2 Execution of Other Documents. Take all actions and execute all
documents referred to in Section 8.5 above to the extent permitted by law.
The power of attorney granted pursuant to this Section 9 is coupled with an
interest and shall be irrevocable until all of Issuer's Obligations shall have
been paid and performed in full.
10. Certain Agreements of Debtor.
10.1 Waiver of Notice. Debtor hereby waives notice of the acceptance
of this Security Agreement and, except as otherwise specifically provided
in Section 8.1 above or in the Indenture, all other notices, demands or
protests to which Debtor otherwise might be entitled by law (and which
lawfully may be waived) with respect to this Security Agreement, Issuer's
Obligations and the Collateral.
10.2 Rights of Secured Party. Debtor agrees that Secured Party (i)
shall have no duty as to the collection or protection of the Collateral or
any income thereon, except as provided by applicable law, (ii) may
exercise the rights and remedies of Secured Party with respect to the
Collateral without resort or regard to other security or sources for
payment and (iii) shall not be deemed to have waived any of the rights or
remedies granted to Secured Party hereunder unless such waiver shall be in
writing and shall be signed by Secured Party. Debtor and Secured Party
acknowledge their intent that, upon the occurrence of an Event of Default,
Secured Party shall receive, to the fullest extent permitted by law and
governmental policy (including, without limitation, the rules, regulations
and policies of the FCC), all rights necessary or desirable to obtain, use
or sell the Collateral, and to exercise all remedies available to Secured
Party under the Indenture Instruments, the Code or other applicable law.
Debtor and Secured Party further acknowledge and agree that, in the event
of changes in law or governmental policy occurring subsequent to the date
hereof that affect in any manner Secured Party's rights of access to, or
use or sale of, the Collateral, or the procedures necessary to enable
Secured Party to obtain such rights of access, use or sale, Secured Party
and Debtor shall amend the Indenture Instruments, in such manner as
Secured Party reasonably shall request, in order to provide Secured Party
such rights to the greatest extent possible consistent with then
applicable law and governmental policy.
10.3 No Delay; Single or Partial Exercise Permitted. No delay or
omission on the part of Secured Party in exercising any rights or remedies
contained herein shall operate as a waiver of such right or remedy or of
any other right or remedy, and no single or partial exercise of any right
or remedy shall preclude any
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<PAGE>
SECURITY AGREEMENT
other or further exercise thereof, or the exercise of any other right or
remedy. A waiver of any right or remedy on any one occasion shall not be
construed as a bar or waiver of any right or remedy on future occasions,
and no delay, omission, waiver or single or partial exercise of any right
or remedy shall be deemed to establish a custom or course of dealing or
performance between the parties hereto.
11. Rights Cumulative. All rights and remedies of Secured Party pursuant
to this Security Agreement, the Indenture or otherwise, shall be cumulative and
non-exclusive, and may be exercised singularly or concurrently.
12. Severability. In the event that any provision of this Security
Agreement is deemed to be invalid by reason of the operation of any law,
including, but not limited to, the rules, regulations and policies of the FCC,
or by reason of the interpretation placed thereon by any court, the FCC or any
other Governmental Body, this Security Agreement shall be construed as not
containing such provision and the invalidity of such provision shall not affect
the validity of any other provisions hereof, and any and all other provisions
hereof which otherwise are lawful and valid shall remain in full force and
effect.
13. Notices. All notices and communications under this Security Agreement
shall be in writing and delivered in the manner set forth in Section 12.2 of the
Indenture.
14. Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of Secured Party and Debtor.
15. Captions. The headings in this Security Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
16. Counterparts. This Security Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which,
when taken together, shall be one and the same instrument.
17. Survival of Security Agreement; Termination. All covenants,
agreements, representations and warranties made herein shall survive the
execution and delivery of the Indenture and shall continue in full force and
effect until Issuer's Obligations are paid and performed in full.
18. APPLICABLE LAW. THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS AND DECISIONS OF THE STATE OF NEW YORK.
FOR PURPOSES OF THIS SECTION 18, THIS SECURITY AGREEMENT SHALL BE DEEMED TO BE
PERFORMED AND MADE IN THE STATE OF NEW YORK.
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<PAGE>
SECURITY AGREEMENT
19. JURISDICTION AND VENUE. DEBTOR HEREBY AGREES THAT ALL ACTIONS OR
PROCEEDINGS INITIATED BY DEBTOR AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS
SECURITY AGREEMENT SHALL BE LITIGATED IN THE SUPREME COURT, NEW YORK COUNTY
DIVISION, OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, OR, IF SECURED PARTY INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING
COURTS, ANY COURT IN WHICH SECURED PARTY SHALL INITIATE OR TO WHICH SECURED
PARTY SHALL REMOVE SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION.
DEBTOR HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR PROCEEDING COMMENCED IN OR REMOVED BY SECURED PARTY TO ANY OF SUCH
COURTS, AND HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR
OTHER PROCESS OR PAPERS ISSUED THEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS
AND COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO DEBTOR AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT
TO SECTION 13. DEBTOR WAIVES ANY CLAIM THAT NEW YORK COUNTY, OR THE SOUTHERN
DISTRICT OF NEW YORK IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK
OF VENUE. SHOULD DEBTOR, AFTER BEING SO SERVED, FAIL TO APPEAR OR ANSWER TO ANY
SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE NUMBER OF DAYS
PRESCRIBED BY LAW AFTER THE MAILING THEREOF, DEBTOR SHALL BE DEEMED IN DEFAULT
AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY SECURED PARTY AGAINST DEBTOR AS
DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE
EXCLUSIVE CHOICE OF FORUM SET FORTH IN THIS SECTION 19 SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT, BY SECURED PARTY, OF ANY JUDGMENT OBTAINED IN ANY
OTHER FORUM OR THE TAKING, BY SECURED PARTY, OF ANY ACTION TO ENFORCE THE SAME
IN ANY OTHER APPROPRIATE JURISDICTION AND DEBTOR HEREBY WAIVES ANY RIGHT TO
ATTACK ANY SUCH JUDGMENT OR ACTION COLLATERALLY.
20. WAIVER OF RIGHT TO JURY TRIAL. SECURED PARTY AND DEBTOR ACKNOWLEDGE
AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS SECURITY AGREEMENT
WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND THEREFORE, SECURED PARTY
AND DEBTOR AGREE THAT ANY COURT PROCEEDING ARISING OUT OF ANY SUCH CONTROVERSY
WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A
JURY.
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<PAGE>
SECURITY AGREEMENT
21. TIME OF THE ESSENCE. TIME FOR THE PERFORMANCE OF ISSUER'S OBLIGATIONS
UNDER THIS SECURITY AGREEMENT IS OF THE ESSENCE.
22. Secured Party's Right to Specific Performance. Debtor acknowledges
that FCC authorization is integral to Secured Party's realization of the value
of all of the Collateral, that Debtor's FCC Licenses are unique assets, that
there is no adequate remedy at law for failure by Debtor to comply with the
provisions of Section 8.5 and that such failure would not be adequately
compensable in monetary damages; therefore, Debtor agrees that, in addition to
all other remedies available at law or in equity, Secured Party shall be
entitled to obtain decree(s) of specific performance entitling it to temporary
restraining order(s), preliminary injunction(s), or permanent injunction(s) to
specifically enforce and require specific performance of the provisions of
Section 8.5. Debtor agrees that notice shall be adequate for the entry of a
decree of specific performance in respect of any such matter (i) in the case of
a temporary restraining order, upon twenty-four (24) hours' prior notice of the
hearing thereof and (ii) in the case of any other proceeding, upon five (5)
days' prior notice of the hearing thereof, and hereby waives all requirements
and demands that the Secured Party give any greater notice of such hearings and
further waives all requirements and demands that the Secured Party post a bond
or other surety arrangement in connection with the issuance of such decree.
23. FCC and Franchisor Approval. Notwithstanding anything to the contrary
contained herein, no party hereto shall take any action, including, but not
limited to, the operation of Debtor's Cable Business that would constitute or
result in the transfer or assignment of any License or Franchise issued to or
held by Debtor, or a transfer of control over any such License or Franchise,
whether de jure or de facto, if such assignment or transfer would require under
then existing law the prior approval of and/or any notice to the FCC or any
Franchisor, without such party first having notified the FCC or such Franchisor
of any such assignment or transfer and, if required under then existing law,
obtaining the approval of the FCC or such Franchisor therefor, notifying the FCC
or such Franchisor of the consummation thereof and complying with all other
applicable provisions of the Cable Act. The parties hereto intend that the
powers of Secured Party hereunder, in all relevant aspects, shall be governed by
the Cable Act and all other applicable statutory requirements and rules and
regulations, including, without limitation, those of the FCC.
24. Subordination. The security interests, rights and remedies granted to
Secured Party herein are subject and subordinate to those granted to the
holder(s) of the Permitted Liens, as more particularly set forth in the
Subordination Agreement (Senior) of even date herewith.
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<PAGE>
SECURITY AGREEMENT
IN WITNESS WHEREOF, this Security Agreement has been executed and
delivered by each of the parties hereto by a duly authorized officer of each
such party on the date first set forth above.
SCOTT CABLE COMMUNICATIONS,
INC., a Texas corporation
By: /s/ Bruce A. Armstrong
--------------------------------------
Bruce A. Armstrong
Chief Executive Officer
FLEET NATIONAL BANK, a National
Banking Association, not in its individual
capacity, but solely in its capacity as
Trustee
By: /s/ Robert L. Bice, II
--------------------------------------
Name: Robert L. Bice, II
Title: Vice President
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<PAGE>
Exhibit 10.9
SCOTT CABLE COMMUNICATIONS, INC., as Issuer
AND
FLEET NATIONAL BANK, as Trustee
------------------------
INDENTURE
Dated as of December 18, 1996
------------------------
$38,925,797
16% Junior Subordinated Pay-in-Kind Notes due July 18, 2002
<PAGE>
INDENTURE
(16% Junior Subordinated)
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture dated as of December 18, 1996
Trust Indenture Act Indenture
Section Section
- ------------------ ---------
310 (a)(1)............................................... 7.10
(a)(2)............................................... 7.10
(a)(3)............................................... N.A.
(a)(4)............................................... N.A.
(a)(5)............................................... 7.10
(b).................................................. 7.8; 7.10; 13.2
(c).................................................. N.A.
311 (a) ................................................. 7.11
(b).................................................. 7.11
(c).................................................. N.A.
312 (a).................................................. 2.5
(b).................................................. 13.3
(c).................................................. 13.3
313 (a).................................................. 7.6
(b)(1)............................................... N.A.
(b)(2)............................................... 7.6
(c).................................................. 7.6; 13.2
(d).................................................. 7.6
314 (a).................................................. 4.10; 13.2
(b).................................................. N.A.
(c)(1)............................................... 7.2; 13.4
(c)(2)............................................... 7.2; 13.4
(c)(3)............................................... N.A.
(d).................................................. N.A.
(e).................................................. 11.5
(f).................................................. N.A.
315 (a).................................................. 7.1(b)
(b).................................................. 7.5; 13.2
(c).................................................. 7.1(a)
(d).................................................. 7.1(c)
(e).................................................. 6.11
316 (a)(last sentence)................................... 2.9
(a)(1)(A)............................................ 6.5
(a)(1)(B)............................................ 6.4
(a)(2)............................................... N.A.
(b).................................................. 6.7
317 (a)(1)............................................... 6.8
(a)(2)............................................... 6.9
(b).................................................. 2.4
2
<PAGE>
INDENTURE
(16% Junior Subordinated)
318 (a).................................................. 13.1
(c).................................................. 13.1
- ----------
N.A. means Not Applicable
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
3
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INDENTURE
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions............................................ 1
Section 1.2. Incorporation by Reference of TIA...................... 14
Section 1.3. Time Periods........................................... 15
Section 1.4. References............................................. 15
Section 1.5. Issuer's Knowledge..................................... 15
ARTICLE II
THE SECURITIES
Section 2.1. Form and Dating........................................ 15
Section 2.2. Execution and Authentication........................... 16
Section 2.3. Registrar and Paying Agent............................. 17
Section 2.4. Paying Agent To Hold Assets in Trust................... 18
Section 2.5. Securityholder Lists................................... 18
Section 2.6. Transfer and Exchange.................................. 18
Section 2.7. Replacement Securities................................. 19
Section 2.8. Outstanding Securities................................. 19
Section 2.9. Treasury Securities.................................... 20
Section 2.10. Cancellation........................................... 20
Section 2.11. Defaulted Interest..................................... 20
Section 2.12. CUSIP Number........................................... 20
ARTICLE III
REDEMPTION
Section 3.1. Right of Redemption and Notices to Trustee............. 21
Section 3.2. Selection of Securities To Be Redeemed................. 21
Section 3.3. Notice of Redemption................................... 21
Section 3.4. Effect of Notice of Redemption......................... 22
Section 3.5. Deposit of Redemption Price............................ 22
Section 3.6. Securities Redeemed in Part............................ 23
- --------
Note: This Table of Contents, shall not, for any purpose, be deemed to be a part
of the Indenture.
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ARTICLE IV
COVENANTS
Section 4.1. Payment of Securities.................................. 23
Section 4.2. Corporate Existence.................................... 24
Section 4.3. SEC Reports and Other Information...................... 24
Section 4.4. Future Leases.......................................... 24
Section 4.5. Future Acquisitions of Real Property................... 24
Section 4.6. Compliance with Laws................................... 25
Section 4.7. Taxes and Claims....................................... 25
Section 4.8. Maintenance of Properties and Insurance................ 25
Section 4.9. Mandatory Redemption on a Permitted Asset Sale......... 26
Section 4.10. Borrowing.............................................. 26
Section 4.11. Liens.................................................. 26
Section 4.12. Merger and Acquisition................................. 26
Section 4.13. Contingent Liabilities................................. 27
Section 4.14. Distributions.......................................... 27
............................................................... 27
Section 4.15. Investments, Loans..................................... 27
Section 4.16. Fundamental Business Changes........................... 27
Section 4.17. Sale or Transfer of Assets............................. 28
Section 4.18. Acquisition of Additional Properties................... 28
Section 4.19. Issuance of Equity Interests........................... 28
Section 4.20. Transactions with Affiliates........................... 28
Section 4.21. Compliance with ERISA.................................. 29
ARTICLE V
DEFAULT AND REMEDIES
Section 5.1. Events of Default...................................... 30
Section 5.2. Acceleration........................................... 31
Section 5.3. Other Remedies......................................... 32
Section 5.4. Waiver of Past Defaults................................ 32
Section 5.5. Control by Majority.................................... 33
Section 5.6. Limitation on Suits.................................... 33
Section 5.7. Rights of Holders To Receive Payment................... 33
Section 5.8. Collection Suit by Trustee............................. 34
Section 5.9. Trustee May File Proofs of Claim....................... 34
Section 5.10. Priorities............................................. 35
Section 5.11. Undertaking for Costs.................................. 35
ARTICLE VI
TRUSTEE
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Section 6.1. Duties of Trustee...................................... 36
Section 6.2. Rights of Trustee...................................... 37
Section 6.3. Individual Rights of Trustee........................... 38
Section 6.4. Trustee's Disclaimer................................... 38
Section 6.5. Notice of Default...................................... 38
Section 6.6. Reports By Trustee to Holders.......................... 38
Section 6.7. Compensation and Indemnity............................. 39
Section 6.8. Replacement of Trustee................................. 39
Section 6.9. Successor Trustee by Merger, Etc....................... 41
Section 6.10. Eligibility; Disqualification.......................... 41
Section 6.11. Co-Trustee............................................. 41
Section 6.12. Preferential Collection of Claims Against Issuer....... 42
ARTICLE VII
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 7.1. Without Consent of Holders............................. 43
Section 7.2. With Consent of Holders................................ 44
Section 7.3. Compliance with TIA.................................... 45
Section 7.4. Revocation and Effect of Consents...................... 45
Section 7.5. Notation on or Exchange of Securities.................. 46
Section 7.6. Trustee To Sign Amendments, Etc........................ 46
ARTICLE VIII
COLLATERAL AND SECURITY
Section 8.1. Collateral............................................. 46
Section 8.2. Possession and Use of Collateral....................... 47
Section 8.3. Release of Collateral.................................. 47
Section 8.4. Specified Releases of Collateral....................... 47
Section 8.5. Disposition of Collateral Without Release.............. 50
Section 8.6. Purchaser Protected.................................... 51
Section 8.7. Authorization of Actions To Be Taken by Trustee
Under the Security Documents........................... 51
Section 8.8. Authorization of Receipt of Funds by Trustee
Under the Security Documents........................... 52
ARTICLE IX
MEETINGS OF SECURITYHOLDERS
Section 9.1. Purposes for Which Meetings May Be Called.............. 52
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Section 9.2. Manner of Calling Meetings.............................. 53
Section 9.3. Call of Meetings by Issuer or Holders................... 53
Section 9.4. Who May Attend and Vote at Meetings..................... 54
Section 9.5. Regulations May Be Made by Trustee; Conduct of
the Meeting; Voting Rights; Adjournment................. 54
Section 9.6. Voting at the Meeting and Record To Be Kept............. 55
Section 9.7. Exercise of Rights of Trustee or Holders May
Not Be Hindered or Delayed by Call of Meeting........... 55
ARTICLE X
SUBORDINATION
Section 10.1. Securities Subordinated to Senior Indebtedness......... 56
ARTICLE XI
SATISFACTION AND DISCHARGE
Section 11.1. Satisfaction and Discharge of the Indenture............ 56
Section 11.2. Conditions to Satisfaction and Discharge of the
Indenture.............................................. 57
ARTICLE XII
MISCELLANEOUS
Section 12.1. TIA Controls......................................... 57
Section 12.2. Notices.............................................. 57
Section 12.3. Communications by Holders with Other Holders......... 58
Section 12.4. Certificate and Opinion as to Conditions Precedent... 59
Section 12.5. Statements Required in Certificate or Opinion........ 59
Section 12.6. Rules by Trustee, Paying Agent, Registrar............ 59
Section 12.7. Governing Law........................................ 60
Section 12.8. No Adverse Interpretation of Other Agreements........ 60
Section 12.9. No Recourse Against Others........................... 60
Section 12.10. Successors........................................... 60
Section 12.11. Duplicate Originals.................................. 60
Section 12.12. Severability......................................... 60
Section 12.13. Actions by Trustee................................... 61
Section 12.14. Notes Issued In Accordance With Plan................. 61
Exhibit A Form of Series A Security
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Exhibit B Form of Series B Security
Exhibit C Form of Series C Security
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INDENTURE
(16% Junior Subordinated)
INDENTURE dated as of December 18, 1996, between SCOTT CABLE
COMMUNICATIONS, INC., a Texas corporation ("Issuer"), and FLEET NATIONAL BANK, a
national banking association, as Trustee.
Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the 16% Junior
Subordinated Pay-in-Kind Notes due July 18, 2002:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
Accountants: Deloitte & Touche LLP or any other nationally recognized
independent certified public accounting firm selected by Issuer.
Affiliate: any Person that directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with
another Person. The term "control" means possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities or equity interests,
by contract or otherwise. For the purposes hereof Scott Management and Bruce A.
Armstrong shall be deemed to be an Affiliate of Issuer.
Agent: any Registrar, Paying Agent or co-Registrar of the Securities.
Assignment of Leases: a collateral assignment of leases executed by Issuer
in favor of Trustee.
Assignment of Management Agreement: a collateral assignment of the
Management Agreement executed by Issuer in favor of Trustee and acknowledged by
Scott Management.
Bankruptcy Court: the United States Bankruptcy Court for the District of
Delaware.
Bankruptcy Law: the United States Bankruptcy Code, Title 11 U.S. Code or
any similar federal, state or foreign law for the relief of debtors, any
successor statute thereto, and the rules, regulations and legally binding
policies promulgated thereunder, as amended and in effect from time to time.
Board of Directors: with respect to any person, the Board of Directors of
such person or any committee of the Board of Directors of such person duly
authorized, with respect to any particular matter, to exercise the power of the
Board of Directors of such person.
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INDENTURE
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Board Resolution: with respect to any person, a duly adopted resolution of
the Board of Directors of such person.
Business Day: any day other than a Saturday, Sunday or other day on which
banks in New York, New York, Boston, Massachusetts or Phoenix, Arizona are
authorized or required by law to close.
Capitalized Lease: any lease of Property, the obligations for the rental
of which are required to be capitalized in accordance with GAAP.
Cash Equivalents: the aggregate of Issuer's (i) cash on hand or in any
bank or trust company, and checks on hand and in transit, (ii) monies on deposit
in any money market account, and (iii) treasury bills, certificates of deposit,
commercial paper and readily marketable securities at current market value
having, in each instance, a maturity of not more than 180 days.
Chief Financial Officer: the chief financial officer of Issuer, who shall
be a duly elected officer of Issuer.
Class A Stock: the Class A Common Stock of Issuer.
Class B Stock: the Class B Common Stock of Issuer.
Class C Stock: the Class C Common Stock of Issuer.
Code: the Internal Revenue Code of 1986, any successor statute thereto,
and the rules, regulations and legally binding policies promulgated thereunder,
as amended and in effect from time to time.
Collateral: (i) all existing and after-acquired Property of Issuer,
including without limitation all of Issuer's existing and after-acquired
accounts, goods, equipment, inventory, fixtures, general intangibles,
instruments, chattel paper, documents, money, deposit accounts and investment
property and (ii) all proceeds of the foregoing.
Custodian: any receiver, trustee, assignee, liquidator, sequestrator or
similar official under any Bankruptcy Law.
Default: any event which is, or after notice or passage of time or both
would be, an Event of Default.
Employee Benefit Plan: any employee benefit plan within the meaning of
Section 3(3) of ERISA which (i) is maintained for employees of Issuer or any
ERISA Affiliate or (ii) has at any time within the preceding six years been
maintained for the employees of Issuer or any ERISA Affiliate.
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INDENTURE
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Environmental Laws: any and all federal, state and local laws that relate
to or impose liability or standards of conduct concerning public or occupational
health and safety or protection of the environment, as now or hereafter in
effect and as have been or hereafter may be amended or reauthorized, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. ss.9601 et seq.), the Hazardous Materials
Transportation Act (42 U.S.C. ss.1802 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. ss.6901 et seq.), the Federal Water Pollution Control
Act (33 U.S.C. ss.1251 et seq.), the Toxic Substances Control Act (15 U.S.C.
ss.2601 et seq.), the Clean Air Act (42 U.S.C. ss.7901 et seq.), the National
Environmental Policy Act (42 U.S.C. ss.4231 et seq.), the Refuse Act (33 U.S.C.
ss.407 et seq.), the Safe Drinking Water Act (42 U.S.C. ss.300(f) et seq.), the
Occupational Safety and Health Act (29 U.S.C. ss.651 et seq.), and all rules,
regulations, codes, ordinances and guidance documents promulgated or published
thereunder, and the provisions of any licenses, permits, orders and decrees
issued pursuant to any of the foregoing.
ERISA: the Employee Retirement Income Security Act of 1974, and any
successor statute thereto, and the rules, regulations and legally binding
policies promulgated thereunder, as amended and in effect from time to time.
ERISA Affiliate: any Person who is a member of a group which is under
common control with Issuer, who together with Issuer is treated as a single
employer within the meaning of Section 414(b), (c) and (m) of the Code.
Event of Default: as defined in Section 5.1.
Exchange Act: the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the SEC thereunder.
Fair Market Value with respect to any property or assets, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under pressure
or compulsion to complete the transaction.
Franchise: an authorization, or renewal thereof, whether in the form of a
franchise, permit, license, resolution, contract, certificate, agreement or
otherwise, issued by a Franchisor authorizing the construction and/or operation
of a cable system.
Franchise Agreement: any agreement pursuant to which a Franchise is
granted to a Issuer and all permitted amendments, modifications and supplements
thereto.
Franchisor: any Governmental Body empowered by federal, state or local law
to grant a Franchise.
GAAP: generally accepted accounting principles as in effect from time to
time, which shall include but shall not be limited to the official
interpretations thereof by the Financial Accounting Standards Board or any
successor thereto.
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INDENTURE
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Governmental Body: any foreign, federal, state, municipal or other
government, or any department, commission, board, bureau, agency, public
authority or instrumentality thereof or any court or arbitrator.
Holder: the person in whose name a Security is registered on the
Registrar's books.
Indebtedness: all liabilities, obligations and reserves, contingent or
otherwise, which, in accordance with GAAP, would be reflected as a liability on
a balance sheet or would be required to be disclosed in a financial statement,
including, without duplication: (i) Indebtedness for Borrowed Money, (ii)
obligations secured by any Lien upon Property,(iii) guaranties, letters of
credit and other contingent obligations and (iv) liabilities in respect of
unfunded vested benefits under any Pension Plan or in respect of withdrawal
liabilities incurred under ERISA by Issuer or any ERISA Affiliate to any
Multiemployer Plan.
Indebtedness for Borrowed Money: without duplication, all Indebtedness (i)
in respect of money borrowed, (ii) evidenced by a note, debenture or other like
written obligation to pay money (including, without limitation, all of Issuer's
Obligations set forth in (i) thereof, Permitted Senior Indebtedness and
Subordinated Indebtedness), (iii) in respect of rent or hire of Property under
Capitalized Leases or for the deferred purchase price of Property, (iv) in
respect of obligations under conditional sales or other title retention
agreements and (v) all guaranties of any or all of the foregoing.
Indenture: this Indenture, as amended or supplemented from time to time in
accordance with the terms hereof.
Indenture Instruments:
(i) Indenture; Securities;
(ii) Subordination Agreement (Junior) and Subordination Agreement
(Senior); (iii) Security Instruments;
(iv) Uniform Commercial Code financing statements filed in
connection with the issuance of the Securities; and
(v) other instruments and documents as Trustee and/or Holders
reasonably may require in connection with the transactions
contemplated by this Indenture.
Interest Payment Date: the stated maturity of an installment of interest
on the Securities.
Issue Date: the date of first issuance of the Securities pursuant to this
Indenture.
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Issuer: the party named as such above and shall include, unless the
context requires otherwise, any subsidiary.
Issuer Capital Stock: all of the issued and outstanding capital stock of
Issuer and all warrants, options and other rights to purchase capital stock of
the Issuer.
Issuer's Obligations: (i) any and all Indebtedness due or to become due,
now existing or hereafter arising, of Issuer to Holder pursuant to the terms of
this Indenture or any other Indenture Instrument and (ii) the performance of the
covenants of Issuer contained in the Indenture Instruments.
Landlord: a lessor under a lease of real property.
Landlord Consent and Waiver: a landlord consent and waiver in favor of
Trustee executed by the Landlord under each Lease.
Lease: any lease of real estate under which Issuer is the lessee.
Leasehold Property: any real estate which is the subject of a Lease.
Lien: any mortgage, pledge, assignment, lien, charge, encumbrance or
security interest of any kind, or the interest of a vendor or lessor under any
conditional sale agreement, Capitalized Lease or other title retention
agreement.
Loan Agreement: the Loan Agreement, dated as of the Issue Date, by and
among the Issuer as borrower and FINOVA Capital Corporation, in its individual
capacity and as agent for all lenders thereunder, as the same may be amended,
extended, renewed, restated, supplemented or otherwise modified (in each case,
in whole or in part, and without limitation as to amount, terms, conditions,
covenants and other provisions) from time to time. The term "Loan Agreement"
shall include all related or ancillary documents, including, without limitation,
any guarantee agreements and security documents.
Management Agreement: the Management Agreement dated as of December 18,
1996 between Issuer and Scott Management.
Material Adverse Effect: (i) a material adverse effect upon the business,
operations, Property, profits or condition (financial or otherwise) of Issuer or
upon the validity, enforceability or priority of the Security Interests or (ii)
a material impairment of the ability of Issuer to perform its obligations under
any Loan Instrument to which it is a party or of Trustee or any Holder to
enforce or collect any of Issuer's Obligations.
Maturity Date: July 18, 2002.
Mortgages: a mortgage on each parcel of Real Property executed by Issuer
in favor of Trustee.
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INDENTURE
(16% Junior Subordinated)
Multiemployer Plan: any multiemployer plan as defined pursuant to Section
3(37) of ERISA to which Issuer or any ERISA Affiliate makes, or accrues an
obligation to make, contributions, or has made, or been obligated to make,
contributions within the preceding six years.
Net Sale Proceeds: the gross proceeds payable to Issuer in connection with
any Permitted Asset Sale, less all reasonable, customary and documented costs
and expenses of such Permitted Asset Sale; provided, however, that Issuer shall
not be deemed in receipt of any Net Sales Proceeds required to be deposited in
escrow to secure customary indemnities under documents executed in connection
with the Permitted Asset Sale giving rise to such Net Sale Proceeds until such
Net Sale Proceeds are released from escrow to Issuer.
Officer: with respect to any Person, the Chairman of the Board, the
President, any Vice President, the Chief Financial Officer, the Controller, or
the Secretary of such Person.
Officers' Certificate: with respect to any person, a certificate signed by
two Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of such person and otherwise complying with the requirements of
Sections 12.4 and 12.5.
Operating Lease: any lease, other than Pole Attachment Agreements, which,
under GAAP, is not required to be capitalized.
Opinion of Counsel: a written opinion from legal counsel who is reasonably
acceptable to Trustee complying with the requirements of Sections 12.4 and 12.5.
Unless otherwise required by Trustee, the legal counsel may be an employee of or
counsel to Issuer.
Ordinances: the statutes, laws, rules, regulations, resolutions and
ordinances, as amended and in effect from time to time, pursuant to which a
Franchise may be granted.
Paying Agent: as defined in Section 2.3.
PBGC: the Pension Benefit Guaranty Corporation or any Governmental Body
succeeding to the functions thereof.
Pension Plan: any Employee Benefit Plan, other than a Multiemployer Plan,
which is subject to the provisions of Part 3 of Subtitle B of Title I of ERISA,
Title IV of ERISA, or Section 412 of the Code and which (i) is maintained for
employees of Issuer or any ERISA Affiliate, or (ii) has at any time within the
preceding six years been maintained for the employees of Issuer or any ERISA
Affiliates.
Permitted Asset Sale: any bona fide sale of any Property of Issuer in an
arm's-length transaction to a Person who is not an Affiliate of Issuer, except
to the extent permitted by Section 4.20, provided that the gross proceeds
payable to Issuer in connection therewith are (i) not less than the Fair Market
Value of such Property and (ii) payable solely in cash.
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Permitted Asset Sale Purchase Date: as defined in Section 4.9.
Permitted Liens: any of the following Liens:
(i) the Security Interests;
(ii) the Permitted Senior Indebtedness Liens;
(iii) Liens for taxes or assessments and similar charges, which
either are (A) not delinquent or (B) being contested
diligently and in good faith by appropriate proceedings, and
as to which the Issuer has set aside reserves on its books;
(iv) statutory Liens, such as mechanic's, materialman's,
warehouseman's, carrier's or other like Liens, incurred in
good faith in the ordinary course of business, provided that
the underlying obligations relating to such Liens are paid in
the ordinary course of business, or are being contested
diligently and in good faith by appropriate proceedings and as
to which Issuer has set aside reserves on its books, or the
payment of which obligations are otherwise secured;
(v) zoning ordinances, easements, licenses, reservations,
provisions, covenants, conditions, waivers or restrictions on
the use of Property and other title exceptions;
(vi) Liens in respect of judgments or awards with respect to which
no Event of Default would exist pursuant to subsection 5.1(g);
and
(vii) Liens to secure payment of insurance premiums (A) to be paid
in accordance with applicable laws in the ordinary course of
business relating to payment of worker's compensation, or (B)
that are required for the participation in any fund in
connection with worker's compensation, unemployment insurance,
old-age pensions or other social security program.
Permitted Prior Liens: any of the following Liens:
(i) the Permitted Senior Indebtedness Liens;
(ii) the Permitted Liens described in clauses (iii) and (iv) of the
definition of Permitted Liens that are accorded priority to
the Security Interests by law; and
(iii) the Permitted Liens described in clauses (v) and (vii) of the
definition of Permitted Liens, subject to the limitations set
forth therein.
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INDENTURE
(16% Junior Subordinated)
Permitted Senior Indebtedness: Indebtedness (i) under the Loan Agreement
issued in connection therewith and any refinancing thereof to the extent such
refinancing does not shorten the Weighted Average Life to Maturity of such
Indebtedness (ii) under the Senior Subordinated Notes, (iii) incurred to
purchase tangible personal property or Indebtedness incurred to lease tangible
personal property pursuant to Capitalized Leases, provided that (x) such
Indebtedness existing as of the Issue Date shall not exceed $50,000, (y) during
any Yearly Period after the Issue Date the amount of such Indebtedness at any
one time outstanding during such Yearly Period shall not exceed $100,000, and
(z) no Event of Default exists at the time or will be caused as a result of the
incurrence of any Indebtedness described in clause (y).
Permitted Senior Indebtedness Liens: Liens that secure Permitted Senior
Indebtedness, provided that, with respect to such Indebtedness described in
clause (iii) of the definition thereof, each such Lien attaches only to the
Property purchased or leased with the proceeds of the Permitted Senior
Indebtedness incurred with respect to such Property.
Person: any individual, firm, corporation, business enterprise, trust,
association, joint venture, partnership, Governmental Body or other entity,
whether acting in an individual, fiduciary or other capacity.
Plan of Reorganization: Debtors' Second Amended Joint Plan of
Reorganization dated October 31, 1996, as amended or modified, in Case No.
96-166 (PJW) (Jointly Administered) filed with the Bankruptcy Court.
Pole Attachment Agreement: any agreement, whether now in existence or
hereafter created, between Issuer and a municipality or public or private
utility company pursuant to which Issuer is permitted to use the utility poles,
trenches or easements of such public utility on which to string or in which to
bury the coaxial, fiber optic or other cable used to operate any portion of the
System.
Pole Attachment Authority: any Person who has entered into a Pole
Attachment Agreement with Issuer.
Property: all types of real, personal or mixed property and all types of
tangible or intangible property.
Qualified Depository: a member bank of the Federal Reserve System having a
combined capital and surplus of at least $100,000,000.
Real Property: all interests in real estate directly or indirectly owned
by Issuer other than the Leasehold Property.
Record Date: the Record Dates specified in the Securities; provided that
if any such date is not a Business Day, the Record Date shall be the first day
immediately preceding such specified day that is a Business Day.
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INDENTURE
(16% Junior Subordinated)
Redemption Date: when used with respect to any Security to be redeemed,
means the date fixed for such redemption pursuant to this Indenture and the
Securities.
Redemption Price: when used with respect to any Security to be redeemed,
means the price fixed for such redemption pursuant to this Indenture and the
Securities.
Registrar: as defined in Section 2.3.
Scott Management: Scott Cable Management Company, Inc., a Connecticut
corporation.
Scott Management Fees: the management fees payable to Scott Management
pursuant to Section 5 of the Management Agreement.
SEC: the Securities and Exchange Commission.
Secondary Securities: as defined in Section 2.2.
Securities: each of the Series A and Series B 16% Junior Subordinated
Pay-in-Kind Notes due July 18, 2002 of Issuer, and any Secondary Securities
issued in respect thereof, in each case, issued pursuant to this Indenture, as
the same may be modified or amended from time to time and refinancings thereof,
to the extent such refinancing indebtedness is permitted to be incurred under
this Indenture.
Securities Act: the Securities Act of 1933, the Exchange Act, any
successor statute thereto, and the rules, regulations and legally binding
policies of the Securities and Exchange Commission promulgated thereunder, as
amended and in effect from time to time.
Security Agreement: a security agreement executed by Issuer in favor of
Trustee.
Security Instruments: collectively, the Security Agreement, the Assignment
of Leases, the Mortgages and the Assignment of Management Agreement.
Security Interests: the Liens in the Collateral granted to Trustee
pursuant to the Security Instruments and any other document now or hereafter
executed by Issuer which purports to grant a Lien on the Property of Issuer in
favor of Trustee.
Senior Creditors: the holders of the Senior Notes and the Senior
Subordinated Notes.
Senior Notes: any promissory notes executed and delivered by issuer to
evidence indebtedness under the Loan Agreement.
Senior Subordinated Notes: the $49,500,000 principal amount of the 15%
Senior Subordinated Pay-in-Kind Notes due March 18, 2002, including any
securities issued in lieu of cash interest payments thereon.
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INDENTURE
(16% Junior Subordinated)
Senior Subordinated Notes Indenture: the indenture between Issuer and
[Trustee for Senior Sub Debt] dated as of December 18, 1996, as amended and
supplemented from time to time in accordance with the terms hereof.
Shareholders: collectively, Scott Management, Media/Communications
Partners Limited Partnership, a Delaware limited partnership, Chestnut Street
Partners, Inc., a Massachusetts corporation, Milk Street Partners, Inc., a
Massachusetts corporation, TA Investors, a Massachusetts general partnership,
Northeast Ventures II, a Connecticut general partnership, Allstate Insurance
Company, an Illinois insurance corporation and Fleet National Bank, as
Depositary.
Subordinated Credit Instruments: the Junior Subordinated Notes Indenture,
the Junior Subordinated Notes and all other documents and instruments executed
in connection with the Indebtedness evidenced thereby.
Subordinated Creditors: the holders of the Junior Subordinated Notes.
Subordinated Indebtedness: all Indebtedness now or hereafter owed by
Issuer to the Subordinated Creditors, whether pursuant to the Subordinated
Credit Instruments or otherwise.
Subordination Agreement (Junior): a subordination agreement among Trustee,
Issuer and the trustee of the Senior Subordinated Note Indenture on behalf of
the holder of the Senior Subordinated Notes.
Subordination Agreement (Senior): a subordination agreement among Trustee,
Issuer, the trustee of the Senior Subordinated Note Indenture, and the holders
of the Senior Notes.
Subsidiary: any Person in which Issuer owns or controls, directly or
indirectly, 25% or more of the securities or equity interests of such Person.
Termination Event: (i) a "Reportable Event" described in Section 4043 of
ERISA for which the thirty day notice requirement has not been waived; or (ii)
the withdrawal of Issuer or any ERISA Affiliate from a Pension Plan during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2); or (iii) the termination of a Pension Plan, the filing of a notice
of intent to terminate a Pension Plan or the treatment of a Pension Plan
amendment as a termination under Section 4041 of ERISA; or (iv) the institution
of proceedings to terminate, or the appointment of a trustee with respect to,
any Pension Plan by the PBGC; or (v) any other event or condition which would
constitute grounds under Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; or (vi) the partial or
complete withdrawal of Issuer or any ERISA Affiliate from a Multiemployer Plan;
or (vii) the imposition of a lien pursuant to Section 412 of the Code or Section
302 of ERISA; or (viii) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan under Sections 4241 or 4245
of ERISA; or (ix) any event or condition which results in the termination of a
Multiemployer Plan under
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<PAGE>
INDENTURE
(16% Junior Subordinated)
Section 4041A of ERISA or the institution by the PBGC of proceedings to
terminate a Multiemployer Plan under Section 4042 of ERISA.
TIA: the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb),
as amended, as in effect on the date on which this Indenture is qualified under
the TIA, except as otherwise provided in Section 7.3.
"Total Available Amount" means the total amount available for payment as
principal on the Series A and Series B 16% Junior Subordinated Pay-in-Kind Notes
due July 18, 2002 of Issuer, on the Maturity Date or such earlier date upon
which payment of principal hereon is due and payable as a result of a redemption
in accordance with Article III, a Permitted Asset Sale or an Event of Default
pursuant to the terms of the Indenture, after payment of all Permitted Senior
Indebtedness, but not to exceed the Total Face Amount.
Total Directors Fees: the aggregate of all fees paid to the Board of
Directors of Issuer appointed by the holders of Class C Stock, including
directors appointed by such holders upon the conversion of Class C Stock to
Class A Stock, as directors fees through and including the date the calculation
is being made.
Total Face Amount: $38,925,797.
Total Series A Principal Amount: the sum of (a) 85% of the Total Available
Amount and (b) Total Directors Fees.
Total Series B Principal Amount: the difference of (a) Total Available
Amount and (b) Total Series A Principal Amount.
Trustee: the party named as such in this Indenture until a successor
replaces it in accordance with the provisions of this Indenture and thereafter
means such successor.
Trust Officer: any officer of Trustee assigned by Trustee to administer
its corporate trust matters.
U.S. Government Obligations: direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
U.S. Legal Tender: such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment of public and
private debts.
Weighted Average Life to Maturity: when applied to any Indebtedness at any
date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (x) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (y) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date
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INDENTURE
(16% Junior Subordinated)
and the making of such payment, by (ii) the then outstanding principal amount of
such Indebtedness.
Yearly Period: each fiscal year of Issuer; provided that the first Yearly
Period shall begin on the Issue Date and shall end on December 31, 1997.
Section 1.2. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in, and made a part of, this Indenture. The
following TIA terms used in this Indenture have the following meanings:
Commission: the SEC.
indenture securities: the Securities.
indenture security holder: a Holder.
indenture to be qualified: this Indenture.
indenture trustee or institutional trustee: Trustee.
obligor on the indenture securities: Issuer or any other obligor on the
Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
Section 1.3. Time Periods.
In this Indenture and the other Indenture Instruments, in the computation
of periods of time from a specified date to a later specified date, (i) the word
"from" means "from and including," (ii) the words "to" and "until" each mean
"to, but excluding" and (iii) the words "through," "end of" and "expiration"
each mean "through and including." Unless otherwise specified, all references in
this Indenture and the other Indenture Instruments to (i) a "month" shall be
deemed to refer to a calendar month, (ii) a "quarter" shall be deemed to refer
to a calendar quarter and (iii) a "year" shall be deemed to refer to a calendar
year.
Section 1.4. References.
All references in this Indenture to "Article," "Section," "subsection,"
"subparagraph," "clause" or "Exhibit," unless otherwise indicated, shall be
deemed to refer to an Article, Section, subsection, subparagraph, clause or
Exhibit, as applicable, of this Indenture.
Section 1.5. Issuer's Knowledge.
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INDENTURE
(16% Junior Subordinated)
Any statements, representations or warranties that are based upon the best
knowledge of Issuer or an officer thereof shall be deemed to have been made
after due inquiry by Issuer or an officer, as applicable, with respect to the
matter in question.
ARTICLE II
THE SECURITIES
Section 2.1. Form and Dating.
The Securities and Trustee's certificate of authentication shall be
substantially in the form of Exhibit A with respect to the Series A Securities,
in the form of Exhibit B with respect to the Series B Securities, and in the
form of Exhibit C with respect to the Secondary Securities. The Securities may
have notations, legends or endorsements required by law, stock exchange rule or
usage. Issuer and Trustee shall approve the form of the Securities and any
notation, legend or endorsement on them. Each Security shall be dated the date
of its authentication.
Each Security issued shall be identical in every respect, except as to
principal amount, and except further that on the Maturity Date or such earlier
date as when payment of principal is due, each Series A Security shall be
entitled to its pro rata share of Total Series A Principal Amount, each Series B
shall be entitled to its pro rata share to Total Series B Principal Amount and
each Secondary Security shall be entitled to the amount stated on its face as
principal.
The terms and provisions contained in the Securities shall constitute, and
are hereby expressly made, a part of this Indenture and, to the extent
applicable, Issuer and Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
Section 2.2. Execution and Authentication.
An Officer or an Assistant Secretary, shall sign (either of whom shall, in
each case, have been duly authorized by all requisite corporate actions) the
Securities for Issuer by manual or facsimile signature.
If an Officer whose signature is on a Security was an Officer at the time
of such execution but no longer holds that office at the time Trustee
authenticates the Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of Trustee
manually signs the certificate of authentication on the Security. The signature
shall be conclusive evidence that the Security has been authenticated under this
Indenture.
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INDENTURE
(16% Junior Subordinated)
Trustee shall authenticate Securities, excluding Secondary Securities, for
original issue in the aggregate principal amount of up to $38,925,797 upon a
written order of Issuer in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of Securities to be authenticated and the
date on which the Securities are to be authenticated. The aggregate principal
amount of Securities outstanding at any time may not exceed $38,925,797, except
for any Securities that may be issued pursuant to the immediately following
paragraph and except as provided in Section 2.7 and 2.8. Upon the written order
of Issuer in the form of an Officers' Certificate, Trustee shall authenticate
Securities in substitution of Securities originally issued to reflect any name
change of Issuer.
Issuer shall, on each Interest Payment Date prior to (and including) the
Interest Payment Date five years and six months after the Issue Date, pay
interest in additional Securities ("Secondary Securities") in lieu of the
payment in whole of interest in cash on the Securities as provided in paragraph
1 of the Securities. Issuer shall give written notice to Trustee of the amount
of interest to be paid in Secondary Securities not less than five Business Days
prior to the relevant Interest Payment Date, and Trustee or an authenticating
agent (upon written order of Issuer signed by an Officer of Issuer given not
less than five nor more than 45 days prior to such Interest Payment Date) shall
authenticate for original issue (pro rata to each Holder of any Securities of
such record date) Secondary Securities in an aggregate principal amount equal to
the amount of cash interest not paid on such Interest Payment Date, rounded to
the nearest dollar. Except as set forth in the following paragraph each issuance
of Secondary Securities in lieu of the payment of interest in cash on the
Securities shall be made pro rata with respect to the outstanding Securities,
and Issuer shall have the right to aggregate amounts of interest payable in the
form of Secondary Securities to a Holder of outstanding Securities and issue to
such Holder a single Secondary Security in payment thereof. Any Secondary
Securities may be denominated a separate series if Issuer deems it necessary to
do so in order to comply with any law or other applicable regulation or
requirement, with appropriate distinguishing designations. Notwithstanding the
forgoing and subject to the Subordination Agreement (Senior) and the
Subordination Agreement (Junior), Issuer shall have the option to pay interest
in cash (upon written order of Issuer signed by and Officer of Issuer given not
less than five or more than 45 days prior to an Interest Payment Date).
Trustee may appoint an authenticating agent reasonably acceptable to
Issuer to authenticate Securities. Unless otherwise provided in the appointment,
an authenticating agent may authenticate Securities whenever Trustee may do so.
Each reference in this Indenture to authentication by Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with Issuer and Affiliates of Issuer.
Section 2.3. Registrar and Paying Agent.
The Issuer shall maintain an office or agency in the Borough of Manhattan,
The City of New York, where (a) Securities may be presented or surrendered for
registration of transfer or for exchange ("Registrar"), (b) Securities may be
presented or surrendered for payment ("Paying Agent") and (c) notices and
demands to or upon Issuer in respect of the Securities
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INDENTURE
(16% Junior Subordinated)
and this Indenture may be served. Issuer may also from time to time designate
one or more other offices or agencies where the Securities may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve Issuer of its obligation to maintain an office or agency in
the Borough of Manhattan, The City of New York, for such purposes. The Registrar
shall keep a register of the Securities and of their transfer and exchange.
Issuer, upon notice to Trustee, may have one or more co-Registrars and one or
more additional paying agents reasonably acceptable to Trustee. The term "Paying
Agent" includes any additional paying agent. Issuer initially appoints Trustee
as Registrar and Paying Agent until such time as Trustee has resigned or a
successor has been appointed. The Trustee's office in the City of New York, c/o
First Chicago Trust Company, 14 Wall Street, 8th Floor, New York, New York
10005, Attn: Corporate Trust Operations, shall be the office of the Issuer
referred to in the first sentence of this Section 2.3.
Issuer shall enter into an appropriate agency agreement with any Agent not
a party to this Indenture, which agreement shall implement the provisions of
this Indenture that relate to such Agent. Issuer shall notify Trustee, in
advance, of the name and address of any such Agent. If Issuer fails to maintain
a Registrar or Paying Agent within the Borough of Manhattan, The City of New
York, Trustee shall act as such.
Section 2.4. Paying Agent To Hold Assets in Trust.
Issuer shall require each Paying Agent other than Trustee to agree in
writing that each Paying Agent shall hold in trust for the benefit of Holders or
Trustee all assets and/or Secondary Securities held by Paying Agent for the
payment of principal of, or interest on, the Securities (whether such assets
have been distributed to it by Issuer or any other obligor on the Securities),
and that it shall notify Trustee of any Default by Issuer (or any other obligor
on the Securities) in making any such payment. Issuer at any time may require a
Paying Agent to distribute all assets and/or Secondary Securities held by it to
Trustee and account for any assets disbursed and Trustee may at any time during
the continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets and/or Secondary Securities
held by it to Trustee and to account for any assets so distributed. Upon
distribution to Trustee of all assets that shall have been delivered by Issuer
to Paying Agent, Paying Agent shall have no further liability for such assets
and/or Secondary Securities.
Section 2.5. Securityholder Lists.
Trustee shall preserve in as current a form as is reasonably practicable
the most recent list available to it of the names and addresses of Holders. If
Trustee is not the Registrar, Issuer shall furnish to Trustee on or before each
Interest Payment Date and at such other times as Trustee may request in writing
a list in such form and as of such date as Trustee may reasonably require of the
names and addresses of Holders, which list may be conclusively relied upon by
Trustee.
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INDENTURE
(16% Junior Subordinated)
Section 2.6. Transfer and Exchange.
When a Security is presented to the Registrar or a co-registrar with a
request to register a transfer, the Registrar shall register the transfer as
requested if the requirements of the Registrar are met. The Registrar need not
transfer or exchange any Securities selected for redemption. Also, it need not
transfer or exchange any Securities for a period of 30 days before a selection
of Securities to be redeemed. When Securities are presented to the Registrar or
a co-registrar with a request to exchange them for an equal principal amount of
Securities of other authorized denominations, the Registrar shall make the
exchange as requested if the requirements of the Registrar are met. Issuer shall
cooperate with the Registrar in meeting its requirements. To permit transfers,
registration and exchanges, Trustee shall authenticate Securities at the
Registrar's request. No service charge shall be made for any transfer,
registration or exchange, but Issuer may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith, but
not for any exchange pursuant to Section 2.10, 3.6 or 7.5.
Section 2.7. Replacement Securities.
If a mutilated Security is surrendered to Trustee or if the Holder of a
Security claims that the Security has been lost, destroyed or wrongfully taken,
Issuer shall issue and Trustee shall authenticate a replacement Security if
Trustee's requirements are met. If required by Trustee or Issuer, such Holder
must provide an indemnity bond or other indemnity, sufficient in the judgment of
both Issuer and Trustee, to protect Issuer, Trustee or any Agent from any loss
which any of them may suffer if a Security is replaced. Issuer may charge such
Holder for its reasonable, out-of-pocket expenses in replacing a Security,
including reasonable fees and expenses of counsel. Every replacement Security
shall constitute an additional obligation of Issuer.
Section 2.8. Outstanding Securities.
Securities outstanding at any time are all the Securities that have been
authenticated by Trustee, including the Secondary Securities, except those
cancelled by it, those delivered to it for cancellation and those described in
this Section as not outstanding. A Security does not cease to be outstanding
because Issuer or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.7 (other than a mutilated
Security surrendered for replacement), it ceases to be outstanding unless
Trustee receives proof satisfactory to it that the replaced Security is held by
a bona fide purchaser. A mutilated Security ceases to be outstanding upon
surrender of such Security and replacement thereof pursuant to Section 2.7.
If on a Redemption Date or the Maturity Date Paying Agent holds U.S. Legal
Tender or U.S. Government Obligations sufficient to pay all of the principal and
interest due on the Securities payable on that date, then on and after that date
such Securities cease to be outstanding and interest on them ceases to accrue.
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INDENTURE
(16% Junior Subordinated)
Section 2.9. Treasury Securities.
In determining whether the Holders of the required aggregate principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by Issuer or any of its Affiliates shall be disregarded, except
that, for the purposes of determining whether Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities that Trustee
knows or has reason to know are so owned shall be disregarded. Notwithstanding
the foregoing and except as otherwise provided by the TIA, 662/3% of Securities
not owned by Issuer or any of its Affiliates shall be sufficient to approve any
such direction, waiver or consent.
Section 2.10. Cancellation.
Issuer at any time may deliver Securities to Trustee for cancellation. The
Registrar and Paying Agent shall forward to Trustee any Securities surrendered
to them for transfer, exchange or payment. Trustee, or at the direction of
Trustee, the Registrar or Paying Agent, and no one else, shall cancel and, at
the written direction of Issuer, shall dispose of all Securities surrendered for
transfer, exchange, payment or cancellation. Subject to Section 2.7, Issuer may
not issue new Securities to replace Securities that it has paid or delivered to
Trustee for cancellation. If Issuer or any Subsidiary shall acquire any of the
Securities, such acquisition shall not operate as a redemption or satisfaction
of the Indebtedness represented by such Securities unless and until the same are
surrendered to Trustee for cancellation pursuant to this Section 2.10.
Section 2.11. Defaulted Interest.
If Issuer defaults in a payment of interest on the Securities, it shall,
unless Trustee fixes another record date pursuant to Section 5.10, pay the
defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest, to the persons who are Holders on a subsequent special
record date, which date shall be the fifteenth day next preceding the date fixed
by Issuer for the payment of defaulted interest or the next succeeding Business
Day if such date is not a Business Day. At least 15 days before the subsequent
special record date, Issuer shall mail to each Holder, with a copy to Trustee, a
notice that states the subsequent special record date, the payment date and the
amount of defaulted interest, and interest payable on such defaulted interest,
if any, to be paid.
Section 2.12. CUSIP Number.
Issuer in issuing the Securities may use a "CUSIP" number, and if so,
Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities.
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INDENTURE
(16% Junior Subordinated)
ARTICLE III
REDEMPTION
Section 3.1. Right of Redemption and Notices to Trustee.
Redemption of Securities, as permitted by any provision of this Indenture,
shall be made in accordance with such provision and this Article III. The Issuer
shall have the right to redeem all or any part of the Securities at 100% of
principal amount of the Security being redeemed at any time and from time to
time, in each case including accrued and unpaid interest to the Redemption Date.
In the event Issuer elects to redeem Securities in accordance with this
Section 3.1 hereof or is required to redeem Securities in accordance with
Section 4.9 hereof, Issuer shall notify Trustee of the Redemption Date and the
aggregate principal amount of the Securities to be redeemed and whether it wants
Trustee to give notice of redemption to the Holders (at Issuer's expense) at
least 10 days but not more than 60 days before the Redemption Date.
Section 3.2. Selection of Securities To Be Redeemed.
If fewer than all of the Securities are to be redeemed, Trustee shall
redeem pro rata.
Section 3.3. Notice of Redemption.
At least 10 days but not more than 60 days before a Redemption Date,
Issuer shall mail a notice of redemption by first class mail to each Holder
whose Securities or portions thereof are to be redeemed at such Holder's
registered address, with a copy to Trustee. At Issuer's request, Trustee shall
give the notice of redemption in Issuer's name and at Issuer's expense. Each
notice for redemption shall identify the Securities or portions thereof to be
redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the name and address of Paying Agent;
(4) that Securities or portions thereof called for redemption must
be surrendered to Paying Agent to collect the Redemption Price;
(5) that, unless Issuer defaults in making the redemption payment,
interest on Securities or portions thereof called for redemption ceases to
accrue on and after the Redemption Date, and the only remaining right of
the Holders of such Securities or portions thereof is to receive payment
of the Redemption Price upon surrender to Paying Agent of the Securities
or portions thereof redeemed;
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INDENTURE
(16% Junior Subordinated)
(6) if any Security is being redeemed in part, the portion of the
aggregate principal amount of such Security to be redeemed and that, after
the Redemption Date, and upon surrender of such Security, a new Security
or Securities in aggregate principal amount equal to the unredeemed
portion thereof will be issued; and
(7) if fewer than all of the Securities are to be redeemed, the
aggregate principal amount of Securities to be redeemed and the aggregate
principal amount of Securities to be outstanding after such partial
redemption.
Section 3.4. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.3,
Securities or portions thereof called for redemption become due and payable on
the Redemption Date and at the Redemption Price, provided that if a notice of
redemption is given in contemplation of a Permitted Asset Sale and such sale
does not occur, then this Section 3.4 shall not be applicable. Upon surrender to
Trustee or Paying Agent, such Securities or portions thereof called for
redemption shall be paid at the Redemption Price.
Section 3.5. Deposit of Redemption Price.
On or before 2:00 p.m. on the Redemption Date, Issuer shall deposit with
Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price of all
Securities or portions thereof to be redeemed on that date (other than
Securities or portions thereof called for redemption on that date which have
been delivered by Issuer to Trustee for cancellation). Paying Agent shall
promptly return to Issuer any U.S. Legal Tender so deposited which is not
required for that purpose upon the written request of Issuer, except with
respect to monies owed as obligations to Trustee pursuant to Article VI.
If Issuer complies with the preceding paragraph, then, unless Issuer
defaults in the payment of such Redemption Price, interest on the Securities or
portions thereof to be redeemed will cease to accrue on and after the applicable
Redemption Date, whether or not such Securities are presented for payment.
If a Security or portion thereof is redeemed on or after a Record Date but
on or prior to the related Interest Payment Date, then any accrued and unpaid
interest shall be paid to the Person in whose name such Security was registered
at the close of business on such Record Date. If any Security or portion thereof
called for redemption shall not be so paid upon surrender for redemption because
of the failure of Issuer to comply with the first paragraph of this Section 3.5,
interest shall be paid on the unpaid principal, from the Redemption Date until
such principal is paid, and, to the extent lawful, on any interest not paid on
such unpaid principal, in each case at the rate provided in the Securities and
in Section 4.1 hereof.
Section 3.6. Securities Redeemed in Part.
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INDENTURE
(16% Junior Subordinated)
Upon surrender of a Security that is to be redeemed in part, Trustee shall
authenticate for the Holder a new Security or Securities equal in principal
amount to the unredeemed portion of the Security surrendered.
ARTICLE IV
COVENANTS
Until all of Issuer's Obligations are paid and performed in full Issuer
agrees that it shall:
Section 4.1. Payment of Securities.
(a) Pay the principal amount of, and interest on, as the case may
be, the Securities on the dates and in the manner provided in the
Securities. An installment shall be considered paid on the date it is due
if Trustee or Paying Agent holds on that date U.S. Legal Tender and/or, to
the extent required by Section 2.2, Secondary Securities designated for
and sufficient to pay the installment.
(b) Pay interest on overdue principal (including post-petition
interest in any proceeding under any Bankruptcy Law, to the extent
allowable as a claim in any such proceeding) at the same rate borne by the
Securities and it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law, to the extent allowable as a
claim in any such proceeding) on overdue installments of interest (without
regard to any applicable grace period) at the same rate borne by the
Securities, to the extent lawful.
Section 4.2. Corporate Existence.
Issuer shall do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence in accordance with its
organizational documents and the rights (charter and statutory) of Issuer.
Section 4.3. SEC Reports and Other Information.
To the extent permitted by applicable law or regulation, whether or not
Issuer is subject to the requirements of Section 13 or 15(d) of the Exchange
Act, Issuer shall file with the SEC all quarterly and annual reports and such
other information, documents or other reports (or copies of such portions of any
of the foregoing as the SEC may by rules and regulations prescribe) required to
be filed pursuant to such provisions of the Exchange Act. Issuer shall file with
the Trustee, within five days after it files the same with the SEC, copies of
the quarterly and annual reports and the information, documents, and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) that it is required to file with the SEC
pursuant to this Section 4.3. Issuer shall
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INDENTURE
(16% Junior Subordinated)
also comply with the other provisions of TIA Section 314(a). If Issuer is not
permitted by applicable law or regulations to file the aforementioned reports,
Issuer (at its own expense) shall file with the Trustee and mail, or cause the
Trustee to mail, to Holders at their addresses appearing in the register of
Securities maintained by the Registrar at the time of such mailing within five
days after it would have been required to file such information with the SEC,
all information and financial statements, including any notes thereto and with
respect to annual reports, an auditors' report by an accounting firm of
established national reputation, and a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," comparable to the disclosure
that Issuer would have been required to include in annual and quarterly reports,
information, documents or other reports, including, without limitation, reports
on Forms 10-K, 10-Q and 8-K, if Issuer was subject to the requirements of such
Section 13 or Section 15(d) of the Exchange Act.
Section 4.4. Future Leases.
Deliver to Trustee, concurrently with the execution by Issuer, as lessee,
of any lease pertaining to real property, either a third leasehold mortgage upon
or a collateral assignment of such lease in favor of Trustee but only to the
extent such leasehold mortgage or collateral assignment is first required by the
Senior Creditors, and is delivered to the Senior Creditors, to secure the Senior
Notes.
Section 4.5. Future Acquisitions of Real Property.
Deliver to Trustee a third mortgage or deed of trust in favor of Trustee
on any real property acquired by the Issuer after the Issue Date, but only to
the extent such mortgage or deed of trust is first required by the Senior
Creditors, and is delivered to the Senior Creditors, to secure the Senior Notes.
Section 4.6. Compliance with Laws.
Comply with all Cable Statutes and Regulations and all other federal,
state and local laws, ordinances, requirements and regulations and all
judgments, orders, injunctions and decrees applicable to Issuer and its
operations, except such as are being contested in good faith and by appropriate
proceedings and except for such non-compliances as would not have a Material
Adverse Effect.
Section 4.7. Taxes and Claims.
Pay and discharge all material taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits, or upon any Property
belonging to it, prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a Lien (other than a Permitted
Lien) upon the Property of Issuer, provided that so long as no Lien has attached
to the Property of Issuer as a result of any of the foregoing, Issuer shall not
be required by this Section 4.7 to pay any such amount if the same is being
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INDENTURE
(16% Junior Subordinated)
contested diligently and in good faith by appropriate proceedings and as to
which Issuer has set aside reserves on its books.
Section 4.8. Maintenance of Properties and Insurance.
(a) Issuer shall cause all properties used or useful to the conduct of its
business to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in its judgment may be necessary, so that the business carried on in
connection therewith may be properly and advantageously conducted at all times
unless the failure to so maintain such properties (together with all other such
failures) would not have a material adverse effect on the financial condition or
results of operations of Issuer; provided, however, that nothing in this Section
4.8 shall prevent Issuer from discontinuing the operation or maintenance of any
of such properties, or disposing of any of them, if such discontinuance or
disposal is either (i) in the ordinary course of business, or (ii) is otherwise
permitted by this Indenture.
(b) Issuer shall provide or cause to be provided insurance (including
appropriate self-insurance) against loss or damage of the kinds that, in the
reasonable, good faith opinion of Issuer, are adequate and appropriate for the
conduct of the business of Issuer in a prudent manner, with reputable insurers
or with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be either (i) consistent with past practices of Issuer or (ii)
customary, in the reasonable, good faith opinion of Issuer, for corporations
similarly situated in the industry, unless the failure to provide such insurance
(together with all other such failures) would not have a Material Adverse
Effect.
(c) Issuer shall keep proper books of record and account, in which full
and correct entries shall be made of all business and financial transactions of
Issuer and reflect on its financial statements adequate accruals and
appropriations to reserves, all in accordance with GAAP.
(d) Nothing in this Section 4.8 shall be deemed to limit any obligations
of Issuer under any of the Security Instruments.
Section 4.9. Mandatory Redemption on a Permitted Asset Sale.
Subject to the terms of the Subordination Agreement (Senior) and the
Subordination Agreement (Junior) until the principal amount of the Securities
and all other amounts due under this Indenture are paid in full, Issuer shall
pay to the Trustee for the benefit of Holders an amount equal to the amount of
all Net Sale Proceeds from a Permitted Asset Sale upon receipt, but no later
than thirty days after such sale (the date of such payment to the Trustee for
the benefit of Holders, the "Permitted Asset Sale Purchase Date"). Such
redemption shall be conducted in accordance with Article III hereof.
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Section 4.10. Borrowing.
Without the prior approval of 100% of the Issuer's Board of Directors, not
create, incur, assume or suffer to exist any liability for Indebtedness for
Borrowed Money except (i) the Subordinated Indebtedness and (ii) Permitted
Senior Indebtedness.
Section 4.11. Liens.
Without the prior approval of 100% of the Issuer's Board of Directors, not
create, incur, assume or suffer to exist any Lien upon any of its Property,
whether now owned or hereafter acquired, except Permitted Liens.
Section 4.12. Merger and Acquisition.
Without the prior approval of 100% of the Issuer's Board of Directors, not
consolidate with or merge with or into any Person, or acquire directly or
indirectly all or substantially all of the capital stock, equity interests or
Property of any Person.
Section 4.13. Contingent Liabilities.
Without the prior approval of 100% of the Issuer's Board of Directors, not
assume, guarantee, endorse, contingently agree to purchase, become liable in
respect of any letter of credit, or otherwise become liable upon the obligation
of any Person, except liabilities arising from the endorsement of negotiable
instruments for deposit or collection, the posting of bonds to secure
performance to the extent necessary in connection with Issuer's Cable Business
and similar transactions in the ordinary course of business.
Section 4.14. Distributions.
Not make any dividends, distributions or other shareholder expenditures
with respect to the Issuer Capital Stock or apply any of its Property to the
purchase, redemption or other retirement of, or set apart any sum for the
payment of, or make any other distribution by reduction of capital or otherwise
in respect of, any of the Issuer Capital Stock.
Section 4.15. Investments, Loans.
Not at any time purchase or otherwise acquire, hold or invest in the
capital stock of, or any other interest in, any Person, or make any loan or
advance to, or enter into any arrangement for the purpose of providing funds or
credit to, or make any other investment, whether by way of capital contribution
or otherwise, in or with any Person, including, without limitation, any
Affiliate, except (i) investments in direct obligations of, or instruments
unconditionally guaranteed by, the United States of America or in certificates
of deposit issued by a Qualified Depository, (ii) investments in commercial or
finance paper which, at the time of investment, is rated "A" or better by
Moody's Investors Service, Inc., or Standard & Poor's Ratings Group, a Division
of McGraw-Hill, Inc., respectively, or at the equivalent
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rate by any of their respective successors, (iii) any interests in any money
market account maintained, at the time of investment, with a Qualified
Depository, the investments of which, at the time of investment, are restricted
to the types specified in clause (i) above, (iv) loans to employees of Issuer in
the aggregate amount not to exceed $25,000 outstanding at any time, (v) capital
stock of presently existing Subsidiaries and (vi) investments in equity
interests of programmers made available to Issuer by such programmers as an
inducement to carry programming of such programmers, provided the aggregate cost
of all such investments does not exceed $100,000 outstanding at any time. All
investments permitted pursuant to clauses (i), (ii) and (iii) of this Section
4.15 shall have a maturity not exceeding one year.
Section 4.16. Fundamental Business Changes.
Not materially change the nature of its business or engage in any business
other than the Cable Business.
Section 4.17. Sale or Transfer of Assets.
Without the prior approval of 100% of the Issuer's Board of Directors, not
sell, lease, assign, transfer or otherwise dispose of any Property (other than
in the ordinary course of business) except for (i) the sale or disposition of
(A) Property which is not material to or necessary for the continued operation
of its business and (B) obsolete or unusable items of equipment which promptly
are replaced with new items of equipment of like function and comparable value
to the unusable items of equipment when the same were new or not obsolete or
unusable, provided such replacement items of equipment shall become subject to
the Security Interests, (ii) Permitted Asset Sales and (iii) sales of Property
upon which the Agent (as defined in the Loan Agreement) has released its
Permitted Senior Indebtedness Liens.
Section 4.18. Acquisition of Additional Properties.
Without the prior approval of 100% of the Issuer's Board of Directors, not
acquire any additional Property except such Property as is necessary to or
useful in the operation of its business, provided such acquisitions shall be
subject to the conditions and limitations set forth in this Indenture.
Section 4.19. Issuance of Equity Interests.
Not issue or sell, permit to be issued or sold, or otherwise consent to
the transfer of, any additional capital stock or any interests convertible into
or exercisable for any such additional capital stock, except for the conversion
of the Class C Stock to Class A Stock.
Section 4.20. Transactions with Affiliates.
Without the prior approval of 100% of the Issuer's Board of
Directors, not sell, lease, assign, transfer or otherwise dispose of any
Property to any Affiliate of Issuer, lease
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Property, render or receive services or purchase assets from any such Affiliate,
or otherwise enter into any contractual relationship with any Affiliate of
Issuer, except that Issuer may (i) receive management services from Scott
Management under the terms of the Management Agreement and may pay to Scott
Management (A) Scott Management Fees provided that the aggregate amount of all
payments of Scott Management Fees with respect to any month does not exceed 4.5%
of the gross revenues of Issuer for such month; except that any payment of Scott
Management Fees with respect to December of any year may exceed 4.5% of the
gross revenues of Issuer for such month so long as the aggregate amount of all
payments of Scott Management Fees with respect to any year does not exceed 4.5%
of the gross revenues of Issuer for such year and (B) reasonable out-of-pocket
expenses and (ii) engage in such transactions with its Affiliates provided such
transactions are in the ordinary course of business of Issuer and are under
terms no less favorable to Issuer than could be obtained from an independent
third party.
Section 4.21. Compliance with ERISA.
(a) Not engage in any Termination Event which would result in a
liability to Issuer or any ERISA Affiliate in excess of $100,000;
(b) Not cause the present value of all benefit liabilities under all
Pension Plans to exceed the current value of the assets of such Pension
Plans allocable to such benefit liabilities by more than $100,000;
(c) Not cause any accumulated funding deficiency in excess of
$100,000 (as defined in Section 302 of ERISA and Section 412 of the Code)
with respect to any Pension Plan, except to the extent waived;
(d) Not fail to make any contribution or payment to any
Multiemployer Plan which Issuer or any ERISA Affiliate may be required to
make under any agreement relating to such Multiemployer Plan, or any law
pertaining thereto which results in or is likely to result in a liability
in excess of $100,000;
(e) Not engage, or permit any ERISA Affiliate to engage, in any
"prohibited transaction" as such term is defined in Section 406 of ERISA
or Section 4975 of the Code for which a civil penalty pursuant to Section
502(i) of ERISA or a tax pursuant to Section 4975 of the Code in excess of
$100,000 is imposed;
(f) Not establish any Employee Benefit Plan providing
post-retirement welfare benefits or establish or amend any Employee
Benefit Plan which establishment or amendment could result in liability to
Issuer or any ERISA affiliate or increase the obligation of Issuer or any
ERISA Affiliate to a Multiemployer Plan which liability or increase,
individually or together with all similar liabilities and increases, is
material to Issuer or any ERISA Affiliate; or
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(g) Not fail, or permit any ERISA Affiliate to fail, to establish,
maintain and operate each Employee Benefit Plan of Issuer in compliance in
all material respects with ERISA, the Code and all other applicable laws
and regulations and interpretations thereof.
ARTICLE V
DEFAULT AND REMEDIES
Section 5.1. Events of Default.
An "Event of Default" occurs if:
(a) Issuer defaults in the payment of interest on the Securities
when the same becomes due and payable and the default continues for a
period of 30 days;
(b) Issuer defaults in the payment of the principal of the
Securities when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(c) Issuer shall fail to observe or perform any covenant or
agreement (other than those referred to in subparagraph (a) above or (b)
or specifically addressed elsewhere in this Section 5.1) made by it in
this Indenture and such failure shall continue for a period of 30 days
after written notice of such failure is given by the Trustee;
(d) any representation or warranty made by or on behalf of Issuer in
or pursuant to any of the Indenture Instruments or in any instrument or
document furnished in compliance with the Indenture Instruments shall
prove to be false or misleading in any material respect on the date as of
which made;
(e) (i) Issuer at any time shall be in default (as principal or
guarantor or other surety) in the payment of any principal of or premium
or interest on any Indebtedness for Borrowed Money beyond the grace
period, if any, applicable thereto and the aggregate amount of such
payments then in default beyond such grace period shall exceed $100,000 or
(ii) any default shall occur in respect of any issue of Indebtedness for
Borrowed Money of Issuer outstanding in a principal amount of at least
$300,000, or in respect of any agreement or instrument relating to any
such issue of Indebtedness for Borrowed Money, and such default shall
continue beyond the grace period, if any, applicable thereto, and in each
case, such default shall continue uncured or unwaived for a period of 60
days after written notice thereof is given by the Trustee or, if as a
result of such default the related Indebtedness has been accelerated;
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(f) (A) Issuer shall (i) generally not be paying its debts as they
become due, (ii) file, or consent, by answer or otherwise, to the filing
against it of a petition for relief or reorganization or arrangement or
any other petition in bankruptcy or insolvency under the laws of any
jurisdiction, (iii) make an assignment for the benefit of creditors, (iv)
consent to the appointment of a custodian, receiver, trustee or other
officer with similar powers for the Issuer, or for any substantial part of
the Property of the Issuer or (v) be adjudicated insolvent;
(B) any Governmental Body of competent jurisdiction shall
enter an order appointing, without consent of Issuer, a custodian,
receiver, trustee or other officer with similar powers with respect to
Issuer, or with respect to any substantial part of the Property belonging
to Issuer, or if an order for relief shall be entered in any case or
proceeding for liquidation or reorganization or otherwise to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of Issuer or if any
petition for any such relief shall be filed against Issuer and such
petition shall not be dismissed or stayed within 60 days;
(g) there shall exist a final judgment or award against Issuer which
shall have been outstanding for a period of 30 days or more from the date
of the entry thereof and shall not have been discharged in full or stayed
pending appeal, if the aggregate amount of all such judgments and awards
exceeds $300,000;
(h) Issuer fails to comply with the terms of its articles of
incorporation or by- laws; or
(i) any material portion of the Collateral shall be seized or taken
by a Governmental Body or Person (including, but not limited to, the
Senior Creditors pursuant to the terms of the Loan Agreement), or Issuer
shall fail to maintain or cause to be maintained the Security Interests
and priority of the Indenture Instruments as against any Person, or the
title and rights of Issuer to any material portion of the Collateral shall
have become the subject matter of litigation which could reasonably be
expected to result in impairment or loss of the security provided by the
Indenture Instruments.
Section 5.2. Acceleration.
Subject to the terms of the Subordination Agreement (Senior) and the
Subordination Agreement (Junior) if an Event of Default (other than an Event of
Default specified in Section 5.1(f)) occurs and is continuing, Trustee may, by
notice to Issuer or the Holders of at least 25% in aggregate principal amount of
the Securities then outstanding may, by written notice to Issuer and Trustee,
and Trustee shall, upon the request of such Holders, declare the aggregate
principal amount of the Securities outstanding, together with accrued but unpaid
interest thereon to the date of payment, to be due and payable and, upon any
such declaration, the same shall become and be due and payable. If an Event of
Default specified in Section 5.1(f) occurs, all unpaid principal and accrued
interest on the Securities then outstanding shall
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ipso facto become and be immediately due and payable without any declaration or
other act on the part of Trustee or any Holder. Upon payment of such principal
amount, interest, and premium, if any, all of Issuer's obligations under the
Securities and this Indenture, other than obligations under Section 6.7, shall
terminate. The Holders of a majority in aggregate principal amount of the
Securities then outstanding by notice to Trustee may rescind an acceleration and
its consequences if (i) all existing Events of Default, other than the
non-payment of the principal and interest on the Securities which have become
due solely by such declaration of acceleration, have been cured or waived as
provided in Section 5.4, (ii) to the extent the payment of such interest is
lawful, interest on overdue installments of interest and overdue principal,
which has become due otherwise than by such declaration of acceleration, has
been paid, and (iii) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction.
Section 5.3. Other Remedies.
If an Event of Default occurs and is continuing, Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of or interest on the Securities or to enforce the performance of any
provision of the Securities, the Security Instruments or this Indenture.
Trustee may maintain a proceeding under this Indenture, the Security
Instruments or the Securities even if it does not possess any of the Securities
or does not produce any of them in the proceeding. A delay or omission by
Trustee or any Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
Section 5.4. Waiver of Past Defaults.
Subject to Sections 5.7 and 7.2, the Holders of at least a majority in
aggregate principal amount of the outstanding Securities by notice to Trustee
may on behalf of the Holders of all the Securities waive any past Default under
this Indenture, the Securities or any Security Instruments and its consequences,
except a Default in the payment of principal of or interest on any Security as
specified in clauses (a) and (b) of Section 5.1 or an Event of Default specified
in Section 5.1(f). When a Default or Event of Default is so waived, it shall be
deemed cured and shall cease to exist.
Section 5.5. Control by Majority.
The Holders of at least a majority in aggregate principal amount of the
outstanding Securities may direct the time, method and place of conducting any
proceeding for any remedy available to Trustee or exercising any trust or power
conferred on it under this Indenture, the Securities or the Security
Instruments. Subject to Section 6.1, however, Trustee may refuse to follow any
direction (a) that conflicts with any law or this Indenture, or (b) that
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may involve Trustee in personal liability; provided that Trustee may take any
other action deemed proper by Trustee which is not inconsistent with such
direction.
Section 5.6. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture, the
Securities or the Security Instruments unless:
(1) the Holder gives written notice to Trustee of a continuing Event
of Default;
(2) the Holder or Holders of at least 25% in aggregate principal
amount of the outstanding Securities make a written request to Trustee to
pursue the remedy;
(3) such Holder or Holders offer and, if requested, provide to
Trustee indemnity satisfactory to Trustee against any loss, liability or
expense to be incurred in compliance with such request;
(4) Trustee does not comply with the request within 30 days after
receipt of the request and the offer and, if requested, provision of
indemnity; and
(5) during such 30-day period the Holder or Holders of at least 25%
in aggregate principal amount of the outstanding Securities do not give
Trustee a direction which, in the opinion of Trustee, is inconsistent with
the request.
The foregoing limitations shall not apply to a suit instituted by a Holder
for the enforcement of the payment of principal of, or interest on, any
Securities on or after the respective due dates set forth in such Securities.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holders.
Section 5.7. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of and interest on a Security, on or
after the respective due dates expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of the Holder.
Section 5.8. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified in
clause (a) or (b) of Section 5.1 occurs and is continuing, Trustee may recover
judgment in its own name and as trustee of an express trust against Issuer for
the whole amount of principal and accrued
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interest remaining unpaid, together with interest on overdue principal and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the
Securities and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of Trustee, its agents and counsel.
Section 5.9. Trustee May File Proofs of Claim.
Trustee may file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances of
Trustee, its agents and counsel) and the Holders allowed in any judicial
proceedings (including, without limitation, a case or proceeding under any
Bankruptcy Law) relating to Issuer or any other obligor upon the Securities, any
of their respective creditors or any of their respective property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each Holder
to make such payments to Trustee and, in the event that Trustee shall consent to
the making of such payments directly to the Holders, to pay to Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of Trustee, its agents and counsel, and any other amounts due Trustee
under Section 6.7. Nothing herein contained shall be deemed to authorize Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize Trustee to vote
in respect of the claim of any Holder in any such proceeding.
Section 5.10. Priorities.
Subject to the Subordination Agreement (Senior) and the Subordination
Agreement (Junior), if Trustee collects any money pursuant to this Article V, it
shall pay out the money in the following order:
First: to Trustee for amounts due to it under Section 6.7 and for any
amounts due under the Security Instruments;
Second: if the Holders are forced to proceed against Issuer directly
without Trustee, to the Holders for their collection costs;
Third: to the Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and
interest, respectively; and
Fourth: to Issuer.
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Trustee, upon prior notice to Issuer, may fix a record date and payment
date for any payment to the Holders pursuant to this Section 5.10.
Section 5.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against Trustee for any action taken or omitted by it
as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 5.11 does not apply to a suit by Trustee, a suit by a Holder
pursuant to Section 5.7, or a suit by a Holder or Holders of more than 25% in
aggregate principal amount of the outstanding Securities.
ARTICLE VI
TRUSTEE
Trustee hereby accepts the trust imposed upon it by this Indenture and
covenants and agrees to perform the same, as herein expressed.
Section 6.1. Duties of Trustee.
(a) Execute the Subordination Agreement (Senior) and the Subordination
Agreement (Junior).
(b) If a Default or an Event of Default has occurred and is continuing,
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and the Security Instruments and use the same degree of care and skill
in its exercise thereof as a prudent person could exercise or use under the
circumstances in the conduct of his own affairs.
(c) Except during the continuance of a Default or an Event of Default:
(1) Trustee need perform only those duties as are specifically set
forth in this Indenture and the Security Instruments and no covenants or
obligations shall be implied in this Indenture or the Security Instruments
that are adverse to Trustee.
(2) In the absence of bad faith on its part, Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to Trustee and conforming to the requirements of this Indenture or the
Security Instruments, as the case may be. However, Trustee shall examine
the certificates and opinions to determine whether or not they conform to
the requirements of this Indenture or the relevant Security Instrument as
to form.
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(d) Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 6.1.
(2) Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that Trustee was
negligent in ascertaining the pertinent facts.
(3) Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by
it pursuant to Section 5.5.
(e) No provision of this Indenture or any Security Instrument shall
require Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or thereunder or in
the exercise of any of its rights or powers if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(f) Every provision of this Indenture and the Security Instruments that in
any way relates to Trustee is subject to paragraphs (a), (b), (c) and (d) of
this Section 6.1.
(g) Trustee shall not be liable for interest on any assets received by it
except as Trustee may agree with Issuer. Assets held in trust by Trustee need
not be segregated from other assets except to the extent required by law.
Section 6.2. Rights of Trustee.
Subject to Section 6.1 and the provisions of Section 315 of the TIA:
(a) Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper person. Trustee need not investigate
any fact or matter stated in the document.
(b) Before Trustee acts or refrains from acting, it may consult with
counsel and may require an Officers' Certificate or an Opinion of Counsel, which
shall conform to Sections 12.4 and 12.5. Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such certificate
or opinion.
(c) Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
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(d) Trustee shall not be liable for any action that it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers other than any liabilities arising out of its own negligence.
(e) Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
notice, request, direction, consent, order, bond, debenture, or other paper or
document, but Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit.
(f) Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture or any Security Instrument at the request,
order or direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to Trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
Section 6.3. Individual Rights of Trustee.
Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with Issuer, its Subsidiaries, or
their respective Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, Trustee must
comply with Sections 6.10 and 6.12.
Section 6.4. Trustee's Disclaimer.
Trustee makes no representation as to the validity or adequacy of this
Indenture, any Security Instrument or the Securities, it shall not be
accountable for Issuer's use of the proceeds from the Securities, and it shall
not be responsible for any statement in the Securities other than Trustee's
certificate of authentication. Trustee shall not be responsible for perfecting
or maintaining the perfection of any security interest granted to it under any
Security Instrument or for filing, refiling, recording or rerecording any
document, Mortgage, notice or instrument in any public office at any time or
times and shall not be responsible for seeing to the insurance on or the payment
of any taxes with respect to any property subject to any Security Instrument.
Section 6.5. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it is
known to Trustee, Trustee shall mail to each Holder notice of the uncured
Default or Event of Default within 30 days after such Default or Event of
Default occurs. Except in the case of a Default or an Event of Default in
payment of principal of, premium, if any, or interest on, any Security, Trustee
may withhold the notice if and so long as its board of directors, the executive
committee of its board of directors or a committee of its directors and/or Trust
Officers in good faith determines that withholding the notice is in the interest
of the Holders.
Section 6.6. Reports By Trustee to Holders.
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Within 60 days after each May 1st commencing with May 1, 1998, Trustee
shall, to the extent that any of the events described in TIA Section 313(a)
occurred within the previous twelve months, but not otherwise, mail to each
Holder a brief report dated as of such January 1st that complies with TIA
Section 313(a). Trustee also shall comply with TIA Sections 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
mailed to Issuer and filed with the SEC and each stock exchange, if any, on
which the Securities are listed.
Issuer shall notify Trustee if the Securities become listed on any stock
exchange.
Section 6.7. Compensation and Indemnity.
Issuer shall pay to Trustee from time to time reasonable compensation for
its services. Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. Issuer shall reimburse Trustee
upon request for all reasonable disbursements, expenses and advances incurred or
made by it. Such expenses shall include the reasonable compensation,
disbursements and expenses of Trustee's agents and counsel.
Issuer shall indemnify Trustee for, and hold it harmless against, any loss
or liability incurred by it, except for such actions to the extent caused by any
negligence or bad faith on its part, arising out of or in connection with the
administration of this trust and its rights or duties hereunder and under the
Security Instruments. Trustee shall notify Issuer promptly of any claim asserted
against Trustee for which it may seek indemnity. Issuer shall defend the claim
and Trustee shall cooperate in the defense. Trustee may have separate counsel
and Issuer shall pay the reasonable fees and expenses of such counsel; provided
that Issuer will not be required to pay such fees and expenses if it assumes
Trustee's defense and there is no conflict of interest between Issuer and
Trustee in connection with such defense as reasonably determined by Trustee.
Issuer need not pay for any settlement made without its written consent. Issuer
need not reimburse any expense or indemnify against any loss or liability to the
extent incurred by Trustee through its negligence, bad faith or willful
misconduct.
To secure Issuer's payment obligations in this Section 6.7, Trustee shall
have a lien prior to the Securities on all assets held or collected by Trustee,
in its capacity as Trustee, except assets held in trust to pay principal of,
premium, if any, or interest on particular Securities.
When Trustee incurs expenses or renders services after an Event of Default
specified in Section 5.1(f) occurs or in connection with any case or proceeding
under any Bankruptcy Law, the expenses and the compensation for the services are
intended to constitute expenses of administration under any Bankruptcy Law.
Section 6.8. Replacement of Trustee.
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Trustee may resign by so notifying Issuer. The Holders of at least a
majority in aggregate principal amount of the outstanding Securities may remove
Trustee by so notifying Issuer and Trustee and may appoint a successor Trustee
with Issuer's consent. Issuer may remove Trustee if:
(1) Trustee fails to comply with Section 6.10;
(2) Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to Trustee under any Bankruptcy Law;
(3) a custodian, receiver or other public officer takes charge of
Trustee or its property; or
(4) Trustee becomes incapable of acting.
If Trustee resigns or is removed or if a vacancy exists in the office of
Trustee for any reason, Issuer shall notify each Holder of such event and shall
promptly appoint a successor Trustee. Within one year after the successor
Trustee takes office, the Holders of a majority in aggregate principal amount of
the Securities may appoint a successor Trustee to replace the successor Trustee
appointed by Issuer.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to Issuer. Immediately after that, the retiring
Trustee shall transfer all property held by it as Trustee to the successor
Trustee, subject to the lien provided in Section 6.7, the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of Trustee under this Indenture and the
Security Instruments and Issuer shall take such action as shall be necessary so
that all Collateral (including all Trust Moneys and other property in the
Collateral Account) shall continue to be subject to the Lien of the Security
Instruments in favor of Trustee (or, in the case of property or assets subject
to a Mortgage, Trustee or another trustee under such Mortgage) for the benefit
of the Holders of the Securities. A successor Trustee shall mail notice of its
succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, Issuer or the
Holders of at least 10% in aggregate principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If Trustee fails to comply with Section 6.10, any Holder may petition any
court of competent jurisdiction for the removal of Trustee and the appointment
of a successor Trustee.
Notwithstanding replacement of Trustee pursuant to this Section 6.8,
Issuer's obligations under Section 6.7 shall continue for the benefit of the
retiring Trustee.
Section 6.9. Successor Trustee by Merger, Etc.
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INDENTURE
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If Trustee consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
resulting, surviving or transferee corporation without any further act shall, if
such resulting, surviving or transferee corporation is otherwise eligible
hereunder, be the successor Trustee.
Section 6.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Sections 310(a)(1) and 310(a)(5). Trustee shall have a combined capital
and surplus of at least $100,000,000 as set forth in its most recent published
annual report of condition. Trustee shall comply with TIA Section 310(b);
provided, however, that there shall be excluded from the operation of TIA
Section 310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of Issuer are
outstanding, if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
Section 6.11. Co-Trustee.
(a) If at any time or times it shall be necessary or prudent in
order to conform to any law of any jurisdiction in which any of the Collateral
shall be located, or Trustee shall be advised by counsel satisfactory to it that
it is necessary or prudent in the interest of the Holders, or the Holders of at
least 25% in aggregate principal amount of the outstanding Securities shall in
writing so request Trustee and Issuer, or Trustee shall deem it desirable for
its own protection in the performance of its duties hereunder, Trustee and
Issuer shall execute and deliver all instruments and agreements necessary or
proper to constitute another bank or trust company, or one or more persons
approved by Trustee and Issuer, either to act as co-trustee or co-trustees (each
a "co-trustee") of all or any of the Collateral, jointly with Trustee, or to act
as separate trustee or trustees of any such property. If Issuer shall not have
joined in the execution of such instruments and agreements within 10 days after
Issuer receives a written request from Trustee to do so, or if an Event of
Default has occurred and is continuing, Trustee may act under the foregoing
provisions of this Section 6.11 without the concurrence of Issuer. Issuer hereby
appoints Trustee as its agent and attorney to act for it under the foregoing
provisions of this Section 6.11 in either of such contingencies.
(b) Every separate trustee and every co-trustee, other than any
successor Trustee appointed pursuant to Section 6.08, shall, to the extent
permitted by law, be appointed and act and be such, subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon Trustee hereunder shall be conferred or imposed and exercised or
performed by Trustee and such separate trustee or separate trustees or
co-trustee or co-trustees, jointly, as shall be provided in the instrument
appointing such separate trustee or separate trustees or co-trustee or
co-trustees, except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights,
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powers, duties and obligations shall be exercised and performed singly by
such separate trustee or separate trustees or co-trustee or co-trustees,
but solely at the direction of Trustee;
(ii) no trustee or co-trustee hereunder shall be personally liable
by reason of any act or omission of any other trustee or co-trustee
hereunder; and
(iii) Issuer and Trustee, at any time by an instrument in writing
executed by them jointly, may accept the resignation of or remove any such
separate trustee or co-trustee and, in that case by an instrument in
writing executed by them jointly, may appoint a successor to such separate
trustee or co-trustee, as the case may be, anything contained herein to
the contrary notwithstanding. If Issuer shall not have joined in the
execution of any such instrument within 10 days after Issuer receives a
written request from Trustee to do so, or if an Event of Default has
occurred and is continuing, Trustee shall have the power to accept the
resignation of or remove any such separate trustee or co-trustee and to
appoint a successor without the concurrence of Issuer, Issuer hereby
appointing Trustee its agent and attorney to act for it in such connection
in such contingency. If Trustee shall have appointed a separate trustee or
co-trustee as above provided, Trustee may at any time, by an instrument in
writing, accept the resignation of or remove any such separate trustee or
co-trustee and the successor to any such separate trustee or co-trustee
shall be appointed by Issuer and Trustee, or by Trustee alone pursuant to
this Section 6.11.
Section 6.12. Preferential Collection of Claims Against Issuer.
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE VII
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 7.1. Without Consent of Holders.
Issuer, when authorized by a Board Resolution, and Trustee, together, may
amend or supplement this Indenture, the Securities or the Security Instruments
without notice to or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency; provided that
such amendment or supplement does not adversely affect the rights of any
Holder;
(2) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued
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INDENTURE
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in registered form for purposes of Section 163(f) of the Internal Revenue
Code of 1986, as from time to time amended, or in a manner such that the
uncertificated Securities are described in Section 163(f)(2)(B) of the
Internal Revenue Code of 1986, as from time to time amended;
(3) to make any other change that does not adversely affect the
rights of any Holders;
(4) to comply with any requirements of the SEC in connection with
the qualification of this Indenture under the TIA;
(5) to give effect to the release of any Released Interests or any
other release of Collateral released in accordance with the terms of this
Indenture or the relevant Security Instrument;
(6) to evidence or effect the pledge of additional or substitute
assets or property as Collateral; or
(7) to evidence and provide for the acceptance of appointment
hereunder by a separate or successor Trustee with respect to the
Securities and to make such additions or changes as shall be necessary or
appropriate to provide for or facilitate the administration of the trusts
hereunder by more than one trustee pursuant to the requirements of Section
6.11 hereof;
provided that Issuer has delivered to Trustee an Opinion of Counsel stating that
such amendment or supplement complies with the provisions of this Section 7.1.
Section 7.2. With Consent of Holders.
Subject to Section 5.7, Issuer, when authorized by a Board Resolution, and
Trustee, together, with the written consent of the Holder or Holders of at least
a majority in aggregate principal amount of the outstanding Securities, may
amend or supplement this Indenture, the Securities or the Security Instruments,
without notice to any other Holders. Subject to Section 5.7, the Holder or
Holders of at least a majority in aggregate principal amount of the outstanding
Securities may waive future compliance by Issuer with any provision of this
Indenture, the Securities or the Security Instruments without notice to any
other Holder. Without the consent of each Holder affected, however, no
amendment, supplement or waiver, including a waiver pursuant to Section 5.4,
may:
(1) change the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver of any provision of this
Indenture, the Securities or the Security Instruments;
(2) reduce the rate or extend the time for payment of interest on
any Security;
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(3) reduce the principal amount of any Security;
(4) change the Maturity Date of any Security, or alter the
redemption provisions contained in Article III in a manner adverse to any
Holder;
(5) make any changes in the provisions concerning waivers of
Defaults or Events of Default by Holders or the rights of Holders to
recover the principal of, interest on, or redemption payment with respect
to, any Security;
(6) make any changes in Section 5.4, 5.7 or this third sentence of
this Section 7.2;
(7) make the principal of, or the interest on any Security payable
with anything or in any manner other than as provided for in this
Indenture and the Securities as in effect on the date hereof; or
(8) directly or indirectly release or terminate the Liens created by
this Indenture and the Security Instruments as to all or substantially all
of the Collateral, except as expressly permitted under this Indenture and
the Security Instruments.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, Issuer shall mail to the Holders affected thereby a notice briefly
describing the amendment, supplement or waiver. Any failure of Issuer to mail
such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture.
In connection with any amendment, supplement or waiver under this Article
VII, Issuer may, but shall not be obligated to, offer to any Holder who consents
to such amendment, supplement or waiver, or to all Holders, consideration for
such Holder's consent to such amendment, supplement or waiver.
Section 7.3. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
Section 7.4. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent Holder
of a Security or portion of a Security that evidences the same debt as the
consenting Holder's Security, even if
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notation of the consent is not made on any Security. However, any such Holder or
subsequent Holder may revoke the consent as to his Security or portion of his
Security by notice to Trustee or Issuer received before the date on which
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Securities have consented (and not theretofore
revoked such consent) to the amendment, supplement or waiver. Notwithstanding
the above, nothing in this paragraph shall impair the right of any holder under
Section 316(b) of the TIA.
Issuer shall fix a record date for the purpose of determining the Holders
entitled to consent to any amendment, supplement or waiver, which record date
shall be at least 30 days prior to the first solicitation of such consent. When
a record date is fixed, then notwithstanding the last sentence of the
immediately preceding paragraph, those persons who were Holders at such record
date (or their duly designated proxies), and only those persons, shall be
entitled to revoke any consent previously given, whether or not such persons
continue to be Holders after such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Holder, unless it makes a change described in any of clauses (1) through
(8) of Section 7.2, in which case, the amendment, supplement or waiver shall
bind only each Holder of a Security who has consented to it and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security; provided that any such waiver shall not impair
or affect the right of any Holder to receive payment of principal of and
interest on a Security, on or after the respective due dates expressed in such
Security, or to bring suit for the enforcement of any such payment on or after
such respective dates without the consent of such Holder.
Section 7.5. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
Trustee may require the Holder of the Security to deliver it to Trustee. Trustee
may place an appropriate notation on the Security about the changed terms and
return it to the Holder. Alternatively, if Issuer or Trustee so determines,
Issuer in exchange for the Security shall issue and Trustee shall authenticate a
new Security that reflects the changed terms.
Section 7.6. Trustee To Sign Amendments, Etc.
Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article VII; provided that Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver which affects
Trustee's own rights, duties or immunities under this Indenture. Trustee shall
be entitled to receive, and shall be fully protected in relying upon, an Opinion
of Counsel and Officer's Certificate from the Issuer, each stating that the
execution of any amendment, supplement or waiver authorized pursuant to this
Article VII is authorized or permitted by this Indenture.
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ARTICLE VIII
COLLATERAL AND SECURITY
Section 8.1. Collateral.
In order to secure the due and punctual payment of the principal of and
interest on the Securities when and as the same shall be due and payable,
whether on an Interest Payment Date, at maturity or by acceleration, redemption
or otherwise, and interest on the overdue principal of and (to the extent
permitted by law) interest, if any, on the Securities and the performance of all
other obligations of Issuer to the Holders or Trustee under this Indenture, the
Securities and any other documents contemplated hereby, as the case may be,
Issuer and Trustee have simultaneously with the execution of this Indenture
entered into the Security Instruments. Trustee and Issuer each hereby agree that
Trustee holds its interest in the Collateral in trust for the benefit of the
Holders pursuant to the terms of the Security Instruments. Notwithstanding
anything contained herein or in the Indenture Instruments to the contrary, the
Issuer shall be permitted to establish reserves and escrows pursuant to the Plan
of Reorganization and the Collateral shall not include any funds escrowed
thereby until released to Issuer.
Section 8.2. Possession and Use of Collateral.
Subject to and in accordance with the provisions of the Subordination
Agreement (Senior), this Indenture and the Security Instruments, so long as no
Event of Default shall have occurred and be continuing, Issuer shall have the
right to remain in possession and retain exclusive control of and to exercise
all rights with respect to the Collateral, to operate, manage, develop, lease,
use, consume and enjoy the Collateral, to alter or repair any Collateral
consisting of machinery or equipment so long as such alterations and repairs do
not diminish the value thereof or impair the Lien of the Security Instruments
thereon and to collect, receive, use, invest and dispose of the reversions,
remainders, interest, rents, lease payments, issues, profits, revenues, proceeds
and other income thereof.
Section 8.3. Release of Collateral.
(a) Trustee shall not at any time release Collateral from the Liens
created by this Indenture and the Security Instruments unless such release is
(i) in accordance with the provisions of this Indenture and the Security
Instruments, the terms of the Subordination Agreement (Senior) and the
Subordination Agreement (Junior) or (ii) of Collateral (x) which is the subject
of a Permitted Asset Sale or a sale otherwise permitted by the terms of the Loan
Agreement or (y) upon which the Agent (as defined in the Loan Agreement) has
released its Permitted Senior Indebtedness Liens.
(b) The release of any Collateral from the Lien of the Security
Instruments shall not be deemed to impair the security under this Indenture in
contravention of the provisions hereof if and to the extent the Collateral is
released pursuant to this Indenture and the Security Instruments. To the extent
applicable, Issuer shall cause TIA Section 314(d) relating to the
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release of property from the Lien of the Security Instruments and relating to
the substitution therefor of any property to be subjected to the Lien of the
Security Instruments to be complied with. Any certificate or opinion required by
TIA Section 314(d) may be made by an Officer of Issuer, except in cases where
TIA Section 314(d) requires that such certificate or opinion be made by an
independent person, which person shall be an independent engineer, appraiser or
other expert selected or approved by Trustee in the exercise of reasonable care.
Section 8.4. Specified Releases of Collateral.
(a) Satisfaction and Discharge. Issuer shall be entitled to obtain a full
release of all of the Collateral from the Liens of this Indenture and of the
Security Instruments upon compliance with the conditions precedent set forth in
Section 11.1 for satisfaction and discharge of this Indenture. Upon delivery by
Issuer to Trustee of an Officers' Certificate and an Opinion of Counsel, each to
the effect that such conditions precedent have been complied with, and that such
documentation, if any, as may be required by the TIA (including, without
limitation, Section 314(d) of the TIA) prior to the release of such Collateral
has been provided to the Trustee, Trustee shall forthwith take all necessary
action (at the request of and the expense of Issuer) to release and reconvey to
Issuer without recourse all of the Collateral, and shall deliver such Collateral
in its possession to Issuer including, without limitation, the execution and
delivery of releases and satisfactions wherever required.
(b) Dispositions of Collateral Permitted by Section 4.17. Issuer shall be
entitled to obtain a release of, and Trustee shall release, items of Collateral
(the "Released Interests") subject to a Permitted Asset Sale upon compliance
with the conditions precedent that Issuer shall have delivered to Trustee the
following:
(i) Company Order. A written request by the Issuer requesting
release of Released Interests, such request (A) specifically describing
the proposed Released Interests, (B) stating that the consideration to be
received is at least equal to the Fair Market Value of the Released
Interests on the date the agreement of sale is entered into ("Valuation
Date"), (C) stating that either (i) the release of such Released Interests
will not materially impair the value of the remaining Collateral or
materially interfere with or impede Trustee's ability to realize the value
of the remaining Collateral and will not materially impair the maintenance
and operation of the remaining Collateral, or (ii) the sale has been
approved by 100% of the Issuer's Board of Directors, (D) confirming the
sale of, or an agreement to sell, such Released Interests in a bona fide
sale to a person that is not an Affiliate of Issuer, or in the event that
such sale is to a person that is such an Affiliate, that such sale has
been approved by 100% of the Issuer's Board of Directors, (E) certifying
that such Permitted Asset Sale complies with the terms and conditions of
this Indenture and (F) in the event that there is to be a substitution of
property for the Collateral subject to the Permitted Asset Sale,
specifying the property intended to be substituted for the Collateral to
be disposed of;
(ii) Officers' Certificate. An Officers' Certificate of Issuer
certifying that (A) such sale covers only the Released Interests, (B) all
proceeds from the sale of any
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INDENTURE
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of the Released Interests will be deposited and all Net Sale Proceeds from
the sale of any of the Released Interests will be applied pursuant to
Section 4.9, and (C) all conditions precedent to such release have been
complied with; and
(iii) Compliance with TIA and Section 8.1. All documentation
required by the TIA (including, without limitation, Section 314(d) of the
TIA), if any, prior to the release of Collateral by Trustee, and, in the
event there is to be a substitution of property for the Collateral subject
to the Permitted Asset Sale, all documentation required by the TIA to
effect the substitution of such new Collateral and to subject such new
Collateral to the Lien of the relevant Security Instruments, and all
documents required by Section 8.1 hereof.
(iv) Opinion of Counsel. An Opinion of Counsel stating that the
documents that have been or are therewith delivered to Trustee in
connection with such release conform to the requirements of this Indenture
and the TIA and that all conditions precedent herein provided for relating
to such release have been complied with.
Upon compliance by Issuer with the conditions precedent set forth above,
Trustee shall cause to be released and reconveyed to Issuer the Released
Interest without recourse by executing a release in the form provided by Issuer.
(c) Eminent Domain, Expropriation and Other Governmental Takings. Issuer
shall be entitled to obtain a release of, and Trustee shall release, items of
Collateral taken by eminent domain or expropriation or sold pursuant to the
exercise by the United States of America or any State, municipality, province or
other governmental authority thereof of any right which it may then have to
purchase, or to designate a purchaser or to order a sale of, all or any part of
the Collateral, upon compliance with the conditions precedent that Issuer shall
have delivered to Trustee the following:
(i) Officers' Certificate. An Officers' Certificate of Issuer
certifying that (A) such Collateral has been taken by eminent domain or
expropriation and the amount of the award therefor, or that such property
has been sold pursuant to a right vested in the United States of America,
or a State, municipality, province or other governmental authority thereof
to purchase, or to designate a purchaser, or order a sale of such
Collateral and the amount of the proceeds of such sale, and (B) all
conditions precedent to such release have been complied with;
(ii) Opinion of Counsel. An Opinion of Counsel to the effect that
(A) such property has been lawfully taken by exercise of the right of
eminent domain, or has been sold pursuant to the exercise of a right
vested in the United States of America or a State, municipality, province
or other governmental authority to purchase, or to designate a purchaser
or order a sale of, such property, (B) in the case of any such taking by
eminent domain, the award for such property has become final or an appeal
therefrom is not advisable in the interests of Issuer or the Holders, (C)
the documents that have been or are therewith delivered to Trustee in
connection with such release
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INDENTURE
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conform to the requirements of this Indenture, and (D) all conditions
precedent herein provided relating to such release have been complied
with;
(iii) Eminent Domain or Expropriation Award. Subject to the
Subordination Agreement (Senior) and Subordination Agreement (Junior),
cash equal to the amount of the award for such property or the Net Sale
Proceeds, shall be deposited with Trustee and held subject to the
disposition thereof pursuant to the Subordination Agreement (Senior) and
Subordination Agreement (Junior); and
(iv) Compliance with TIA. All documentation required by the TIA
(including, without limitation, 2/3314(d) of the TIA), if any, prior to
the release of Collateral by Trustee.
Upon compliance by Issuer with the conditions precedent set forth above,
Trustee shall cause to be released and reconveyed to Issuer without recourse the
aforementioned items of Collateral by executing a release in the form provided
by Issuer.
Section 8.5. Disposition of Collateral Without Release.
Notwithstanding the provisions of Section 8.4, so long as no Default or
Event of Default shall have occurred and be continuing or would result
therefrom, Issuer may, without any prior release or consent by Trustee, conduct
ordinary course activities in respect of the Collateral which do not
individually or in the aggregate adversely affect the value of the Collateral,
including selling or otherwise disposing of, in any single transaction or series
of related transactions, any property subject to the Lien of this Indenture or
the Security Instruments which has become worn out or obsolete and which either
has an aggregate Fair Market Value of $100,000 per year or less or which is
replaced by property of substantially equivalent or greater value which becomes
subject to the Lien of the Security Instruments as after-acquired property;
abandoning, terminating, cancelling, releasing or making alterations in or
substitutions of any leases or contracts subject to the Lien of this Indenture
or any of the Security Instruments; surrendering or modifying any franchise,
license or permit subject to the Lien of this Indenture or any of the Security
Instruments which it may own or under which it may be operating; altering,
repairing, replacing, changing the location or position of and adding to its
structures, machinery, systems, equipment, fixtures, and appurtenances,
provided, however that no change in the location of any such Collateral subject
to the Lien of any of the Security Instruments shall be made which (1) removes
such property into a jurisdiction in which any instrument required by law to
preserve the Lien of any of the Security Instruments on such property, including
all necessary financing statements and continuation statements, has not been
recorded, registered or filed in the manner required by law to preserve the Lien
of and security interest in any of the Security Instruments on such property,
(2) does not comply with the terms of this Indenture and the Security
Instruments or (3) otherwise impairs the Lien of the Security Instruments;
demolishing, dismantling,
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tearing down or scrapping any Collateral or abandoning any thereof if, in the
good faith opinion of the Board of Directors of the Company (as evidenced by a
Board Resolution delivered to the Trustee if it involves Collateral having a
Fair Market Value in excess of $100,000) such demolition, dismantling, tearing
down, scrapping or abandonment is in the best interests of the Company, will not
interfere with or impede Trustee's ability to realize the value of the remaining
Collateral and will not impair the maintenance and operation of the remaining
Collateral, and the Fair Market Value and utility of the Collateral as an
entirety, and the security for the Securities, will not thereby be otherwise
impaired; granting a nonexclusive license of any intellectual property; and
abandoning intellectual property which has become obsolete and not used in the
business.
Section 8.6. Purchaser Protected.
No purchaser or grantee of any property or rights purporting to be
released herefrom shall be bound to ascertain the authority of Trustee to
execute the release or to inquire as to the existence of any conditions herein
prescribed for the exercise of such authority.
Section 8.7. Authorization of Actions To Be Taken by Trustee Under the Security
Documents.
Subject to the provisions of the Security Instruments and the
Subordination Agreement (Senior) and Subordination Agreement (Junior), (a)
Trustee may, in its sole discretion and without the consent of the
Holders, take all actions it deems necessary or appropriate in order to
(i) enforce any of the terms of the Security Instruments and (ii) collect
and receive any and all amounts payable in respect of the obligations of
Issuer hereunder or thereunder and (b) Trustee shall have power to
institute and to maintain such suits and proceedings as it may deem
expedient to prevent any impairment of the Collateral by any act that may
be unlawful or in violation of the Security Instruments or this Indenture,
and such suits and proceedings as Trustee may deem expedient to preserve
or protect its interests and the interests of the Holders in the
Collateral (including the power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any
legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance
with, such enactment, rule or order would impair the security interest
thereunder or be prejudicial to the interests of the Holders or of
Trustee). Trustee is hereby expressly authorized to execute, deliver and
perform its obligations under the Security Instruments. Except during the
continuance of an Event of Default, Trustee shall not be required to take
any action under this Indenture or the Security Instruments that involves
the exercise by it of discretion. Trustee may, however, take any such
action upon the basis of, at the election of Trustee, either an Officers'
Certificate or an Opinion of Counsel, or both, of Issuer stating the
nature of the proposed action and that any such action is appropriate,
necessary or advisable under the circumstances, complies with the
Indenture and the Security Instruments and does not adversely affect the
interests of the Holders; provided that the foregoing shall not limit the
ability of Trustee to take action at its discretion in the absence of such
an Officers' Certificate or Opinion of Counsel. Except during the
continuance of an Event of Default, Trustee may refrain from taking any
such action pending receipt of such Officers' Certificate and/or Opinion
of Counsel, if so requested by it, and shall
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incur no liability to any person for failure to take any such action
pending receipt thereof. Trustee shall be fully protected in acting on the
basis of any such Officers' Certificate and/or Opinion of Counsel and
shall incur no liability to any person arising out of any action taken on
the basis thereof.
Section 8.8. Authorization of Receipt of Funds by Trustee Under the Security
Documents.
Trustee is authorized to receive any funds for the benefit of Holders
distributed under the Security Instruments and, subject to the terms of the
Subordination Agreement (Senior) and Subordination Agreement (Junior), to apply
such funds as provided in this Indenture and the Security Instruments, and to
make further distributions of such funds to the Holders in accordance with the
other provisions of this Indenture.
ARTICLE IX
MEETINGS OF SECURITYHOLDERS
Section 9.1. Purposes for Which Meetings May Be Called.
A meeting of Holders may be called at any time and from time to time
pursuant to the provisions of this Article IX for any of the following purposes:
(a) to give any notice to Issuer or to Trustee, or to give any directions
to Trustee, or to waive or to consent to the waiving of any Default or Event of
Default hereunder and its consequences, or to take any other action authorized
to be taken by Holders pursuant to any of the provisions of Article V;
(b) to remove Trustee or appoint a successor Trustee pursuant to the
provisions of Article VI;
(c) to consent to an amendment, supplement or waiver pursuant to the
provisions of Section 7.2; or
(d) to take any other action (i) authorized to be taken by or on behalf of
the Holders of any specified aggregate principal amount of the Securities under
any other provision of this Indenture, or authorized or permitted by law or (ii)
which Trustee deems necessary or appropriate in connection with the
administration of this Indenture.
Section 9.2. Manner of Calling Meetings.
Trustee may at any time call a meeting of Holders to take any action
specified in Section 9.1, to be held at such time and at such place in New York,
New York or elsewhere as Trustee shall determine. Notice of every meeting of
Holders, setting forth the time and place of such meeting and in general terms
the action proposed to be taken at such meeting,
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shall be mailed by Trustee, first-class postage prepaid, to Issuer and to the
Holders at their last addresses as they shall appear on the registration books
of the Registrar not less than 10 nor more than 60 days prior to the date fixed
for a meeting.
Any meeting of Holders shall be valid without notice if the Holders of all
Securities then outstanding are present in person or by proxy, or if notice is
waived before or after the meeting by the Holders of all Securities outstanding,
and if Issuer, any Subsidiary and Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.
Section 9.3. Call of Meetings by Issuer or Holders.
In case at any time Issuer, pursuant to a Board Resolution, or the Holders
of not less than 10% in aggregate principal amount of the Securities then
outstanding shall have requested Trustee to call a meeting of Holders to take
any action specified in Section 9.1, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and Trustee
shall not have mailed the notice of such meeting within 20 days after receipt of
such request, then Issuer or the Holders in the amount above specified may
determine the time and place in New York, New York or elsewhere for such meeting
and may call such meeting for the purpose of taking such action, by mailing or
causing to be mailed notice thereof as provided in Section 9.2, or by causing
notice thereof to be published at least once in each of two successive calendar
weeks (on any Business Day during such week) in the Wall Street Journal
(national edition) or such other newspaper or newspapers printed in the English
language, customarily published at least five days a week of a general
circulation in New York, New York, the first such publication to be not less
than 10 nor more than 60 days prior to the date fixed for the meeting.
Section 9.4. Who May Attend and Vote at Meetings.
To be entitled to vote at any meeting of Holders, a person shall (a) be a
registered Holder of one or more Securities, or (b) be a person appointed by an
instrument in writing as proxy for the registered Holder or Holders of
Securities. The only persons who shall be entitled to be present or to speak at
any meeting of Holders shall be the persons entitled to vote at such meeting and
their counsel and any representatives of Trustee and its counsel and any
representatives of Issuer and its counsel.
Section 9.5. Regulations May Be Made by Trustee; Conduct of the Meeting; Voting
Rights; Adjournment.
Notwithstanding any other provision of this Indenture, Trustee may make
such reasonable regulations as it may deem advisable for any action by or any
meeting of Holders, in regard to proof of the holding of Securities and of the
appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, and submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think appropriate. Such regulations may fix
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a record date and time for determining the Holders of record of Securities
entitled to vote at such meeting, in which case those and only those persons who
are Holders of Securities at the record date and time so fixed, or their
proxies, shall be entitled to vote at such meeting whether or not they shall be
such Holders at the time of the meeting.
Trustee shall, by an instrument in writing, appoint a temporary chairman
of the meeting, unless the meeting shall have been called by Issuer or by
Holders as provided in Section 9.3, in which case Issuer or the Holders calling
the meeting, as the case may be, shall in like manner appoint a temporary
chairman. A permanent chairman and a permanent secretary of the meeting shall be
elected by vote of the Holders of a majority in aggregate principal amount of
the Securities represented at the meeting and entitled to vote.
At any meeting each Holder or proxy shall be entitled to one vote for each
$1,000 principal amount of Securities held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Securities challenged as not outstanding and ruled by the chairman of the
meeting to be not outstanding. The chairman may adjourn any such meeting if he
is unable to determine whether any Holder or proxy shall be entitled to vote at
such meeting. The chairman of the meeting shall have no right to vote other than
by virtue of Securities held by him or instruments in writing as aforesaid duly
designating him as the proxy to vote on behalf of other Holders. Any meeting of
Holders duly called pursuant to the provisions of Section 9.2 or Section 9.3 may
be adjourned from time to time by vote of the Holders of a majority in aggregate
principal amount of the Securities represented at the meeting and entitled to
vote, and the meeting may be held as so adjourned without further notice.
Section 9.6. Voting at the Meeting and Record To Be Kept.
The vote upon any resolution submitted to any meeting of Holders shall be
by written ballots on which shall be subscribed the signatures of the Holders of
Securities or of their representatives by proxy and the principal amount of the
Securities voted by the ballot. The permanent chairman of the meeting shall
appoint two inspectors of votes, who shall count all votes cast at the meeting
for or against any resolution and who shall make and file with the secretary of
the meeting their verified written reports in duplicate of all votes cast at the
meeting. A record in duplicate of the proceedings of each meeting of Holders
shall be prepared by the secretary of the meeting and there shall be attached to
such record the original reports of the inspectors of votes on any vote by
ballot taken thereat and affidavits by one or more persons having knowledge of
the facts, setting forth a copy of the notice of the meeting and showing that
such notice was mailed as provided in Section 9.2 or published as provided in
Section 9.3. The record shall be signed and verified by the affidavits of the
permanent chairman and the secretary of the meeting and one of the duplicates
shall be delivered to Issuer and the other to Trustee to be preserved by
Trustee, the latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
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Section 9.7. Exercise of Rights of Trustee or Holders May Not Be Hindered or
Delayed by Call of Meeting.
Nothing contained in this Article IX shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Holders or any rights
expressly or impliedly conferred hereunder to make such call, any hindrance or
delay in the exercise of any right or rights conferred upon or reserved to
Trustee or to the Holders under any of the provisions of this Indenture or of
the Securities.
ARTICLE X
SUBORDINATION
Section 10.1. Securities Subordinated to Senior Indebtedness.
Anything herein to the contrary notwithstanding, Issuer, for itself and
its successors, and each Holder, by accepting a Security, agrees, that the
payment of the principal of and interest on and premiums, penalties, fees and
other liabilities (including, without limitation, liabilities in respect of any
indemnity, reimbursement, compensation or contribution obligations, any breach
of representation or warranty, or any rights of redemption or rescission under
this Indenture or by law or otherwise) with respect to the Securities is
subordinated, to the extent and in the manner provided in the Subordination
Agreement (Senior) and the Subordination Agreement (Junior).
ARTICLE XI
SATISFACTION AND DISCHARGE
Section 11.1. Satisfaction and Discharge of the Indenture.
This Indenture will be discharged and will cease to be of further effect
as to all outstanding Securities when:
(a) all Securities theretofore authenticated and delivered (except lost,
stolen or destroyed Securities which have been replaced or paid and Securities
for whose payment money has theretofore been deposited in trust and thereafter
repaid to Issuer) have been delivered to Trustee for cancellation; or
(b) (1) all Securities not theretofore delivered to Trustee for
cancellation have become due and payable by reason of the making of a notice of
redemption or otherwise and Issuer has irrevocably deposited or caused to be
deposited with Trustee as trust funds in trust for the purpose an amount
sufficient to pay and discharge the entire indebtedness on the
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Securities not theretofore delivered to Trustee for cancellation for principal,
premium, if any, and accrued interest to the date of maturity or redemption;
(2) Issuer has paid all sums payable by it under this Indenture; and
(3) Issuer has delivered irrevocable instructions to Trustee to
apply the deposited money toward the payment of the Securities at maturity
or the redemption date, as the case may be.
Section 11.2. Conditions to Satisfaction and Discharge of the Indenture.
Issuer shall deliver an Officers' Certificate and an Opinion of Counsel to
Trustee stating that all conditions precedent to satisfaction and discharge have
been complied with.
ARTICLE XII
MISCELLANEOUS
Section 12.1. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by operation of Section 3.18(c) of the TIA, the imposed
duties shall control.
Section 12.2. Notices.
Any notices or other communications required or permitted hereunder shall
be in writing, and shall be sufficiently given if made by hand delivery, by
telecopier or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to Issuer:
Scott Cable Communications, Inc.
Four Landmark Square, Suite 302
Stamford, Connecticut 06901
Attention: Bruce A. Armstrong
Chief Executive Officer
Telecopy No.: (203) 325-3110
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Copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attention: Stanley E. Bloch
Telecopy No.: (212) 702-5941
if to Trustee:
Fleet National Bank
Corporate Trust Department
One Federal Street
Boston, Massachusetts 02110
Attn: Robert L. Bice
Telecopier No.: (617) 346-5501
Attention: Corporate Trust Administration
Each of Issuer and Trustee, by written notice to each other such person,
may designate additional or different addresses for notices to such person. Any
notice or communication to Issuer and Trustee shall be deemed to have been given
or made as of the date so delivered if personally delivered; the next business
day, if sent via a national known overnight delivery service; when receipt is
acknowledged, if telecopied; and upon receipt after mailing if sent by
registered or certified mail, postage prepaid.
Any notice or communication mailed to a Holder shall be mailed to him by
first class mail or other equivalent means at his address as it appears on the
registration books of the Registrar and shall be sufficiently given to him if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
Section 12.3. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture, the Security Instruments or
the Securities. Issuer, Trustee, the Registrar and any other person shall have
the protection of TIA Section 312(c).
Section 12.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by Issuer to Trustee to take any action
under this Indenture, Issuer shall furnish to Trustee:
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(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 12.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture, other than the Officers' Certificate
required by Section 8.4, shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of each such
person, such condition or covenant has been complied with; provided,
however, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
Section 12.6. Rules by Trustee, Paying Agent, Registrar.
Trustee may make reasonable rules for action by or at a meeting of
Holders. Paying Agent or Registrar may make reasonable rules for its functions.
Section 12.7. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK. Each of the parties hereto agrees to
submit to the jurisdiction of the courts of the State of New York in any action
or proceeding arising out of or relating to this Indenture.
Section 12.8. No Adverse Interpretation of Other Agreements.
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INDENTURE
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This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of Issuer or any Subsidiary. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
Section 12.9. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such, of
Issuer shall not have any liability for any obligations of Issuer under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creations. Each Holder by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
Section 12.10. Successors.
All agreements of Issuer in this Indenture, the Security Instruments and
the Securities shall bind their respective successors. All agreements of Trustee
in this Indenture shall bind its successor.
Section 12.11. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together shall represent the same
agreement.
Section 12.12. Severability.
In case any one or more of the provisions in this Indenture or in the
Securities shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
Section 12.13. Actions by Trustee.
Notwithstanding anything contained herein or in any Security Instrument to
the contrary, Trustee shall have no obligation to foreclosure of any lien or to
take any similar remedial undertaking with respect to any real property that
comprises the Collateral unless and until Trustee shall be satisfied, in its
sole discretion, with the indemnities provided herein and/or any Security
Instrument with respect to any and/or all liabilities Trustee may incur with
respect to taking any such action.
Section 12.14. Notes Issued In Accordance With Plan.
The Notes are the New Restructured Third Secured PIK Notes referred to in
the Debtors' Second Amended Disclosure Statement and Second Amended Joint Plan
of Reorganization dated October 31, 1996 and filed by the Issuer with the United
States
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Bankruptcy Court for the District of Delaware, and the Notes are issued
in accordance therewith.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first written above.
Dated: December 18, 1996
SCOTT CABLE COMMUNICATIONS, INC.
By: /s/ Bruce A. Armstrong
------------------------------------
Name: Bruce A. Armstrong
Title: President
FLEET NATIONAL BANK
as Trustee
By: /s/ Robert L. Bice
------------------------------------
Name: Robert L. Bice
Title: Vice-President
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(16% Junior Subordinated)
The indebtedness evidenced hereby is subordinate in the manner and to the extent
set forth in that certain Subordination Agreement (the "Subordination Agreement
(Senior)") dated as of December 18, 1996 by and among Scott Cable
Communications, Inc. ("Issuer"), Fleet National Bank, as Trustee under the 15%
Senior Subordinated Pay-in-Kind Notes Indenture, Fleet National Bank, as Trustee
under the 16% Junior Subordinated Pay-in-Kind Note Indenture, and FINOVA Capital
Corporation ("FINOVA"), to the indebtedness (including interest) owed by Issuer
to the holders of all of the notes issued pursuant to that certain Loan
Agreement dated as of December 18, 1996 between Issuer and FINOVA, as such Loan
Agreement has been and hereafter may be amended, modified, supplemented or
restated from time to time; and each holder hereof, by its acceptance hereof,
shall be bound by the provisions of the Subordination Agreement (Senior) and the
Subordination Agreement (Junior).
SCOTT CABLE COMMUNICATIONS, INC.
16% Junior Subordinated Pay-in-Kind Notes
due July 18, 2002
SERIES A
No. $
Scott Cable Communications, Inc., a Texas corporation ("Issuer," which term
includes any successor entity), for value received promises to pay to
_____________________ or registered assigns, the principal sum of dollars, on
July 18, 2002.
Interest payment dates: June 18 and December 18 commencing June 18, 1997.
Record dates: May 18 and November 18.
Reference is made to the further provisions of this security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
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INDENTURE
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IN WITNESS WHEREOF, Issuer has caused this Security to be signed manually
or by facsimile by its duly authorized officers.
Dated: December 18, 1996
SCOTT CABLE COMMUNICATIONS, INC.
By:_____________________________________
Name: Bruce A. Armstrong
Title: President
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This is one of the Securities described in the within-mentioned Indenture.
Dated: December 18, 1996
FLEET NATIONAL BANK
as Trustee
______________________________
By:
Title:
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(16% Junior Subordinated)
SCOTT CABLE COMMUNICATIONS, INC.
16% Junior Subordinated Pay-in-Kind Note
due July 18, 2002
SERIES A
1. Interest.
Scott Cable Communications, Inc., a Texas corporation ("Issuer"), promises
to pay interest on the principal amount of this Security at the rate per annum
shown above. Issuer shall issue additional Securities in the form of Exhibit C
to the Indenture ("Secondary Securities") in payment of any and all of the
interest due on any Interest Payment Date occurring on or prior to the Maturity
Date or, at the option of the Issuer, such interest may be made in cash. Each
issuance of Secondary Securities for the payment of interest on the Securities
shall be made pro rata with respect to the outstanding Securities. Any such
Secondary Securities shall be governed by the Indenture and shall be subject to
the same terms (including the maturity date and the rate of interest from time
to time payable thereon) as this Security (except, as the case may be, with
respect to the title, issuance date and aggregate principal amount). The term
Securities shall include the Secondary Securities that may be issued under the
Indenture.
Issuer will pay interest semi-annually in arrears on June 18 and December
18 of each year (the "Interest Payment Date"), commencing June 18, 1997.
Interest on this Security will accrue from the date of issuance or from the most
recent date to which interest has been paid. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
Issuer shall pay interest on overdue principal and interest on overdue
installments of interest, to the extent lawful, at the rate per annum borne by
the Securities.
On the Maturity Date, or such earlier date upon which payment of principal
hereon is due and payable as a result of an Event of Default pursuant to the
terms of the Indenture, each Series A Security shall be entitled to its pro rata
share of Total Series A Principal Amount (as hereinafter defined).
For purposes of this Series A Security, the following definitions shall
apply:
"Total Available Amount" means the total amount available for payment as
principal on the Series A and Series B 16% Junior Subordinated Pay-in-Kind Notes
due July 18, 2002 of Issuer, on the Maturity Date or such earlier date upon
which payment of principal hereon is due and payable as a result of a redemption
in accordance with Article III, a Permitted Asset Sale or an Event of Default
pursuant to the terms of the Indenture, after payment of all Permitted Senior
Indebtedness, but not to exceed the Total Face Amount. "Total Directors Fees"
means the aggregate of all fees paid to the Board of Directors of Issuer
appointed by the holders of Class C Stock, including directors appointed by such
holders upon
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INDENTURE
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the conversion of Class C Stock to Class A Stock, as directors fees through and
including the date the calculation is being made.
"Total Face Amount" means $38,925,797.
"Total Series A Principal Amount" means the sum of (a) 85% of the Total
Available Amount and (b) Total Directors Fees.
2. Method of Payment.
Issuer shall pay interest on the Securities to the persons who are the
registered Holders at the close of business on the Record Date immediately
preceding the Interest Payment Date even if the Securities are cancelled on
registration of transfer or registration of exchange after such Record Date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. Issuer shall pay principal and interest in money of the United States
that at the time of payment is legal tender for payment of public and private
debts ("U.S. Legal Tender") (or, pursuant to Paragraph 1 hereof, in Secondary
Securities). However, Issuer may pay principal and interest by its check payable
in such U.S. Legal Tender or by wire transfer of federal funds (or, pursuant to
Paragraph 1 hereof, in Secondary Securities). Issuer may deliver any such
interest payment to Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent and Registrar.
Initially, Fleet National Bank (the "Trustee"), will act as Paying Agent
and Registrar. Issuer may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders. Issuer or any Subsidiary may, subject to certain
exceptions, act as Paying Agent, Registrar or co-Registrar.
4. Indenture.
Issuer issued the Securities under an Indenture, dated as of December 18,
1996 (the "Indenture"), between Issuer and Trustee. This Security is one of a
duly authorized issue of Securities of Issuer designated as its 16% Junior
Subordinated Pay-in-Kind Notes due 2002. Capitalized terms herein are used as
defined in the Indenture unless otherwise defined herein. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such
time as the Indenture is qualified under the TIA, and thereafter as in effect on
the date on which the Indenture is qualified under the TIA. Notwithstanding
anything to the contrary herein, the Securities are subject to all such terms,
and Holders of Securities are referred to the Indenture and said Act for a
statement of them. The Securities are secured obligations of Issuer limited in
aggregate principal amount to $38,925,797, except for Secondary Securities and
except as otherwise provided in the Indenture.
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5. Redemption.
The Securities may be redeemed in accordance with Article III and Section
4.9 of the Indenture.
6. Notice of Redemption.
Notice of redemption will be mailed at least 10 days but not more than 60
days before the Redemption Date to each Holder of Securities to be redeemed at
such Holder's registered address.
Except as set forth in the Indenture, from and after any Redemption Date,
if monies for the redemption of the Securities called for redemption shall have
been deposited with Paying Agent for redemption on such Redemption Date, then,
unless Issuer defaults in the payment of such Redemption Price, the Securities
called for redemption will cease to bear interest and the only right of the
Holders of such Securities will be to receive payment of the Redemption Price.
7. Limitation on Disposition of Assets.
Under certain circumstances Issuer is required to apply the net proceeds
from Permitted Asset Sales to the repayment of Indebtedness of Issuer.
8. Subordination.
The Securities are subordinated in right of payment, in the manner and to
the extent set forth in the Indenture, the Subordination Agreement (Senior) and
the Subordination Agreement (Junior) to the prior payment in full of Senior
Indebtedness of Issuer whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed or guaranteed. Each Holder, by accepting a
Security, agrees to such subordination and authorizes Trustee to give it effect.
9. Denominations; Transfer; Exchange.
The Securities are in registered form and without coupons. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption. No service
charge shall be made for any transfer, registration or exchange, but Issuer may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith, but not for any exchange pursuant to
Section 2.10 or 3.6 of the Indenture.
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10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
11. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed for
one year, Trustee and Paying Agents will pay the money back to Issuer at its
request. After that, all liability of Trustee and such Paying Agents with
respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity.
If Issuer at any time deposits with Trustee U.S. Legal Tender or U.S.
Government Obligations sufficient to pay the principal of and interest on the
Securities to redemption or maturity and complies with the other provisions of
the Indenture relating thereto, Issuer will be discharged from certain
provisions of the Indenture and the Securities (including the financial
covenants, but excluding its obligation to pay the principal of and interest on
the Securities).
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount, as the case may be, of the Securities then outstanding. Without notice
to or consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Securities to, among other things, cure any ambiguity, defect
or inconsistency, provide for uncertificated Securities in addition to or in
place of certificated Securities, comply with Article Five of the Indenture or
comply with any requirements of the SEC in connection with the qualification of
the Indenture under the TIA, or make any other change that does not adversely
affect the rights of any Holder of a Security.
14. Successors.
When a successor assumes all the obligations of its predecessor under the
Securities and the Indenture, the predecessor will be released from those
obligations.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing, Trustee or the Holders of
at least 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable in the manner, at the time and
with the effect provided in the Indenture. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. Trustee is
not obligated to enforce the Indenture or the Securities unless it has
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received indemnity satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Securities then outstanding to direct Trustee in its exercise of
any trust or power. Trustee may withhold from Holders of Securities notice of
any continuing Default or Event of Default (except a Default in payment of
principal or interest) if it determines that withholding notice is in their
interest.
16. Trustee Dealings with Issuer.
Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Securities and may otherwise deal with Issuer,
its Subsidiaries or their respective Affiliates as if it were not Trustee.
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
Issuer shall have any liability for any obligation of Issuer under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
18. Authentication.
This Security shall not be valid until Trustee or authenticating agent
manually signs the certificate of authentication on this Security.
19. Governing Law.
The Laws of the State of New York shall govern this Security and the
Indenture.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Security
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, Issuer will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Indenture.
A-8
<PAGE>
INDENTURE
(16% Junior Subordinated)
Each Holder, by accepting a Security, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.
Issuer will furnish to any Holder of a Security upon written request and
without charge a copy of the Indenture. Requests may be made to:
John Flanagan
Chief Financial Officer
Scott Cable Communications, Inc.
Four Landmark Square, Suite 302
Stamford, Connecticut 96091
23. Certain Information Obligations.
To the extent permitted by applicable law or regulation, whether or not
Issuer is subject to the requirements of Section 13 or 15(d) of the Exchange
Act, Issuer shall file with the SEC all quarterly and annual reports and such
other information, documents or other reports (or copies of such portions of any
of the foregoing as the SEC may by rules and regulations prescribe) required to
be filed pursuant to such provisions of the Exchange Act. Issuer shall file with
Trustee copies of the quarterly and annual reports and the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) that it is required to file
with the SEC pursuant to the Indenture. At any time when Issuer is not permitted
by applicable law or regulations to file the aforementioned reports, Issuer
shall furnish Trustee and the Holders with the information that Issuer would
have had to provide to the SEC if Issuer had been subject to Section 13 or 15(d)
of the Exchange Act.
24. Issuer Indebtedness.
Each Holder acknowledges that Issuer is the sole obligor of the Securities
and no Subsidiary of Issuer is a co-obligor or a guarantor of the Securities.
A-9
<PAGE>
INDENTURE
(16% Junior Subordinated)
{FORM OF ASSIGNMENT}
I or we assign this Security to
- -_______________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
_________________________________________
and irrevocably appoint _______________________ agent to transfer this Security
on the books of Issuer. The agent may substitute another to act for him.
Dated: Signed:
________________________________________________________________________________
(Sign exactly as your name appears on the front of this Security)
Signature Guarantee: ____________________________________________
A-10
<PAGE>
INDENTURE
(16% Junior Subordinated)
EXHIBIT B
The indebtedness evidenced hereby is subordinate in the manner and to the extent
set forth in that certain Subordination Agreement (the "Subordination Agreement
(Senior)") dated as of December 18, 1996 by and among Scott Cable
Communications, Inc. ("Issuer"), Fleet National Bank, as Trustee under the 15%
Senior Subordinated Pay-in-Kind Notes Indenture, Fleet National Bank, as Trustee
under the 16% Junior Subordinated Pay-in-Kind Note Indenture, and FINOVA Capital
Corporation ("FINOVA"), to the indebtedness (including interest) owed by Issuer
to the holders of all of the notes issued pursuant to that certain Loan
Agreement dated as of December 18, 1996 between Issuer and FINOVA, as such Loan
Agreement has been and hereafter may be amended, modified, supplemented or
restated from time to time; and each holder hereof, by its acceptance hereof,
shall be bound by the provisions of the Subordination Agreement (Senior) and the
Subordination Agreement (Junior).
SCOTT CABLE COMMUNICATIONS, INC.
16% Junior Subordinated Pay-in-Kind Notes
due July 18, 2002
SERIES B
No. $
Scott Cable Communications, Inc., a Texas corporation ("Issuer," which term
includes any successor entity), for value received promises to pay to
_____________________ or registered assigns, the principal sum of dollars, on
July 18, 2002.
Interest payment dates: June 18 and December 18 commencing June 18, 1997.
Record dates: May 18 and November 18.
Reference is made to the further provisions of this security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
B-1
<PAGE>
INDENTURE
(16% Junior Subordinated)
IN WITNESS WHEREOF, Issuer has caused this Security to be signed manually
or by facsimile by its duly authorized officers.
Dated: December 18, 1996
SCOTT CABLE COMMUNICATIONS, INC.
By:
_______________________________________
Name:
Title:
B-2
<PAGE>
INDENTURE
(16% Junior Subordinated)
This is one of the Securities described in the within-mentioned Indenture.
Dated: December 18, 1996
FLEET NATIONAL BANK
as Trustee
______________________________
By:
Title:
B-3
<PAGE>
INDENTURE
(16% Junior Subordinated)
SCOTT CABLE COMMUNICATIONS, INC.
16% Junior Subordinated Pay-in-Kind Note
due July 18, 2002
SERIES B
1. Interest.
Scott Cable Communications, Inc., a Texas corporation ("Issuer"), promises
to pay interest on the principal amount of this Security at the rate per annum
shown above. Issuer shall issue additional Securities in the form of Exhibit C
to the Indenture ("Secondary Securities") in payment of any and all of the
interest due on any Interest Payment Date occurring on or prior to the Maturity
Date or, at the option of the Issuer, such interest may be made in cash. Each
issuance of Secondary Securities for the payment of interest on the Securities
shall be made pro rata with respect to the outstanding Securities. Any such
Secondary Securities shall be governed by the Indenture and shall be subject to
the same terms (including the maturity date and the rate of interest from time
to time payable thereon) as this Security (except, as the case may be, with
respect to the title, issuance date and aggregate principal amount). The term
Securities shall include the Secondary Securities that may be issued under the
Indenture.
Issuer will pay interest semi-annually in arrears on June 18 and December
of each year (the "Interest Payment Date"), commencing June 18, 1997. Interest
on this Security will accrue from the date of issuance or from the most recent
date to which interest has been paid. Interest will be computed on the basis of
a 360-day year of twelve 30-day months.
Issuer shall pay interest on overdue principal and interest on overdue
installments of interest, to the extent lawful, at the rate per annum borne by
the Securities.
On the Maturity Date, or such earlier date upon which payment of principal
hereon is due and payable as a result of an Event of Default pursuant to the
terms of the Indenture, each Series B Security shall be entitled to its pro rata
share of Total Series B Principal Amount (as hereinafter defined).
For purposes of this Series B Security, the following definitions shall
apply:
"Total Available Amount" means the total amount available for payment as
principal on the Series A and Series B 16% Junior Subordinated Pay-in-Kind Notes
due July 18, 2002 of Issuer, on the Maturity Date or such earlier date upon
which payment of principal hereon is due and payable as a result of a redemption
in accordance with Article III, a Permitted Asset Sale or an Event of Default
pursuant to the terms of the Indenture, after payment of all Permitted Senior
Indebtedness, but not to exceed the Total Face Amount. "Total Directors Fees"
means the aggregate of all fees paid to the Board of Directors of Issuer
appointed by the holders of Class C Stock, including directors appointed by such
holders upon
B-4
<PAGE>
INDENTURE
(16% Junior Subordinated)
the conversion of Class C Stock to Class A Stock, as directors fees through and
including the date the calculation is being made.
"Total Face Amount" means $38,925,797.
"Total Series A Principal Amount" means the sum of (a) 85% of the Total
Available Amount and (b) Total Directors Fees.
"Total Series B Principal Amount" means the difference of (a) Total Available
Amount and (b) Total Series A Principal Amount.
2. Method of Payment.
Issuer shall pay interest on the Securities to the persons who are the
registered Holders at the close of business on the Record Date immediately
preceding the Interest Payment Date even if the Securities are cancelled on
registration of transfer or registration of exchange after such Record Date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. Issuer shall pay principal and interest in money of the United States
that at the time of payment is legal tender for payment of public and private
debts ("U.S. Legal Tender") (or, pursuant to Paragraph 1 hereof, in Secondary
Securities). However, Issuer may pay principal and interest by its check payable
in such U.S. Legal Tender or by wire transfer of federal funds (or, pursuant to
Paragraph 1 hereof, in Secondary Securities). Issuer may deliver any such
interest payment to Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent and Registrar.
Initially, FLEET NATIONAL BANK (the "Trustee"), will act as Paying Agent
and Registrar. Issuer may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders. Issuer or any Subsidiary may, subject to certain
exceptions, act as Paying Agent, Registrar or co-Registrar.
4. Indenture.
Issuer issued the Securities under an Indenture, dated as of December 18,
1996 (the "Indenture"), between Issuer and Trustee. This Security is one of a
duly authorized issue of Securities of Issuer designated as its 16% Junior
Subordinated Pay-in-Kind Notes due 2002. Capitalized terms herein are used as
defined in the Indenture unless otherwise defined herein. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such
time as the Indenture is qualified under the TIA, and thereafter as in effect on
the date on which the Indenture is qualified under the TIA. Notwithstanding
anything to the contrary herein, the Securities are subject to all such terms,
and Holders of Securities are referred to the Indenture and said Act for a
statement of them. The Securities are secured obligations of Issuer limited
B-5
<PAGE>
INDENTURE
(16% Junior Subordinated)
in aggregate principal amount to $38,925,797, except for Secondary Securities
and except as otherwise provided in the Indenture.
5. Redemption.
The Securities may be redeemed in accordance with Article III and Section
4.9 of the Indenture.
6. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to be redeemed at
such Holder's registered address.
Except as set forth in the Indenture, from and after any Redemption Date,
if monies for the redemption of the Securities called for redemption shall have
been deposited with Paying Agent for redemption on such Redemption Date, then,
unless Issuer defaults in the payment of such Redemption Price, the Securities
called for redemption will cease to bear interest and the only right of the
Holders of such Securities will be to receive payment of the Redemption Price.
7. Limitation on Disposition of Assets.
Under certain circumstances Issuer is required to apply the net proceeds
from Permitted Asset Sales to the repayment of Indebtedness of Issuer.
8. Subordination.
The Securities are subordinated in right of payment, in the manner and to
the extent set forth in the Indenture, the Subordination Agreement (Senior) and
the Subordination Agreement (Junior) to the prior payment in full of Senior
Indebtedness of Issuer whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed or guaranteed. Each Holder, by accepting a
Security, agrees to such subordination and authorizes Trustee to give it effect.
9. Denominations; Transfer; Exchange.
The Securities are in registered form and without coupons. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption. No service
charge shall be made for any transfer, registration or exchange, but Issuer may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in
B-6
<PAGE>
INDENTURE
(16% Junior Subordinated)
connection therewith, but not for any exchange pursuant to Section 2.10 or 3.6
of the Indenture.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
11. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed for
one year, Trustee and Paying Agents will pay the money back to Issuer at its
request. After that, all liability of Trustee and such Paying Agents with
respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity.
If Issuer at any time deposits with Trustee U.S. Legal Tender or U.S.
Government Obligations sufficient to pay the principal of and interest on the
Securities to redemption or maturity and complies with the other provisions of
the Indenture relating thereto, Issuer will be discharged from certain
provisions of the Indenture and the Securities (including the financial
covenants, but excluding its obligation to pay the principal of and interest on
the Securities).
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount, as the case may be, of the Securities then outstanding. Without notice
to or consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Securities to, among other things, cure any ambiguity, defect
or inconsistency, provide for uncertificated Securities in addition to or in
place of certificated Securities, comply with Article Five of the Indenture or
comply with any requirements of the SEC in connection with the qualification of
the Indenture under the TIA, or make any other change that does not adversely
affect the rights of any Holder of a Security.
14. Successors.
When a successor assumes all the obligations of its predecessor under the
Securities and the Indenture, the predecessor will be released from those
obligations.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing, Trustee or the Holders of
at least 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable in the manner, at the time and
with the effect provided in the Indenture.
B-7
<PAGE>
INDENTURE
(16% Junior Subordinated)
Holders of Securities may not enforce the Indenture or the Securities except as
provided in the Indenture. Trustee is not obligated to enforce the Indenture or
the Securities unless it has received indemnity satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Securities then outstanding to
direct Trustee in its exercise of any trust or power. Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in their interest.
16. Trustee Dealings with Issuer.
Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Securities and may otherwise deal with Issuer,
its Subsidiaries or their respective Affiliates as if it were not Trustee.
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
Issuer shall have any liability for any obligation of Issuer under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
18. Authentication.
This Security shall not be valid until Trustee or authenticating agent
manually signs the certificate of authentication on this Security.
19. Governing Law.
The Laws of the State of New York shall govern this Security and the
Indenture.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Security
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, Issuer will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as
B-8
<PAGE>
INDENTURE
(16% Junior Subordinated)
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
22. Indenture.
Each Holder, by accepting a Security, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.
Issuer will furnish to any Holder of a Security upon written request and
without charge a copy of the Indenture. Requests may be made to:
John Flanagan
Chief Financial Officer
Scott Cable Communications, Inc.
Four Landmark Square, Suite 302
Stamford, Connecticut 96091
23. Certain Information Obligations.
To the extent permitted by applicable law or regulation, whether or not
Issuer is subject to the requirements of Section 13 or 15(d) of the Exchange
Act, Issuer shall file with the SEC all quarterly and annual reports and such
other information, documents or other reports (or copies of such portions of any
of the foregoing as the SEC may by rules and regulations prescribe) required to
be filed pursuant to such provisions of the Exchange Act. Issuer shall file with
Trustee copies of the quarterly and annual reports and the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) that it is required to file
with the SEC pursuant to the Indenture. At any time when Issuer is not permitted
by applicable law or regulations to file the aforementioned reports, Issuer
shall furnish Trustee and the Holders with the information that Issuer would
have had to provide to the SEC if Issuer had been subject to Section 13 or 15(d)
of the Exchange Act.
24. Issuer Indebtedness.
Each Holder acknowledges that Issuer is the sole obligor of the Securities
and no Subsidiary of Issuer is a co-obligor or a guarantor of the Securities.
B-9
<PAGE>
INDENTURE
(16% Junior Subordinated)
{FORM OF ASSIGNMENT}
I or we assign this Security to
- -_______________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
_________________________________________
and irrevocably appoint _______________________ agent to transfer this Security
on the books of Issuer. The agent may substitute another to act for him.
Dated: Signed:
________________________________________________________________________________
(Sign exactly as your name appears on the front of this Security)
Signature Guarantee: ____________________________________________
B-10
<PAGE>
INDENTURE
(16% Junior Subordinated)
EXHIBIT C
The indebtedness evidenced hereby is subordinate in the manner and to the extent
set forth in that certain Subordination Agreement (the "Subordination Agreement
(Senior)") dated as of December 18, 1996 by and among Scott Cable
Communications, Inc. ("Issuer"), Fleet National Bank, as Trustee under the 15%
Senior Subordinated Pay-in-Kind Notes Indenture, Fleet National Bank, as Trustee
under the 16% Junior Subordinated Pay-in-Kind Note Indenture, and FINOVA Capital
Corporation ("FINOVA"), to the indebtedness (including interest) owed by Issuer
to the holders of all of the notes issued pursuant to that certain Loan
Agreement dated as of December 18, 1996 between Issuer and FINOVA, as such Loan
Agreement has been and hereafter may be amended, modified, supplemented or
restated from time to time; and each holder hereof, by its acceptance hereof,
shall be bound by the provisions of the Subordination Agreement (Senior) and the
Subordination Agreement (Junior).
SCOTT CABLE COMMUNICATIONS, INC.
16% Junior Subordinated Pay-in-Kind Notes
due July 18, 2002
SECONDARY SECURITIES
No. $
Scott Cable Communications, Inc., a Texas corporation ("Issuer," which term
includes any successor entity), for value received promises to pay to
_____________________ or registered assigns, the principal sum of
__________dollars, on July 18, 2002.
Interest payment dates: June 18 and December 18 commencing June 18, 1997.
Record dates: May 18 and November 18.
Reference is made to the further provisions of this security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
C-1
<PAGE>
INDENTURE
(16% Junior Subordinated)
IN WITNESS WHEREOF, Issuer has caused this Security to be signed manually
or by facsimile by its duly authorized officers.
Dated: December 18, 1996
SCOTT CABLE COMMUNICATIONS, INC.
By:____________________________________
Name:
Title:
C-2
<PAGE>
INDENTURE
(16% Junior Subordinated)
This is one of the Securities described in the within-mentioned Indenture.
Dated: December 18, 1996
FLEET NATIONAL BANK
as Trustee
______________________________
By:
Title:
C-3
<PAGE>
INDENTURE
(16% Junior Subordinated)
SCOTT CABLE COMMUNICATIONS, INC.
16% Junior Subordinated Pay-in-Kind Note
due July 18, 2002
SECONDARY SECURITIES
1. Interest.
Scott Cable Communications, Inc., a Texas corporation ("Issuer"), promises
to pay interest on the principal amount of this Security at the rate per annum
shown above. Issuer shall issue additional Securities in the form of Exhibit C
to the Indenture ("Secondary Securities") in payment of any and all of the
interest due on any Interest Payment Date occurring on or prior to the Maturity
Date or, at the option of the Issuer, such interest may be made in cash. Each
issuance of Secondary Securities for the payment of interest on the Securities
shall be made pro rata with respect to the outstanding Securities. Any such
Secondary Securities shall be governed by the Indenture and shall be subject to
the same terms (including the maturity date and the rate of interest from time
to time payable thereon) as this Security (except, as the case may be, with
respect to the title, issuance date and aggregate principal amount). The term
Securities shall include the Secondary Securities that may be issued under the
Indenture.
Issuer will pay interest semi-annually in arrears on June 18 and December
18 of each year (the "Interest Payment Date"), commencing June 18, 1997.
Interest on this Security will accrue from the date of issuance or from the most
recent date to which interest has been paid. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
Issuer shall pay interest on overdue principal and interest on overdue
installments of interest, to the extent lawful, at the rate per annum borne by
the Securities.
2. Method of Payment.
Issuer shall pay interest on the Securities to the persons who are the
registered Holders at the close of business on the Record Date immediately
preceding the Interest Payment Date even if the Securities are cancelled on
registration of transfer or registration of exchange after such Record Date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. Issuer shall pay principal and interest in money of the United States
that at the time of payment is legal tender for payment of public and private
debts ("U.S. Legal Tender") (or, pursuant to Paragraph 1 hereof, in Secondary
Securities). However, Issuer may pay principal and interest by its check payable
in such U.S. Legal Tender or by wire transfer of federal funds (or, pursuant to
Paragraph 1 hereof, in Secondary Securities). Issuer may deliver any such
interest payment to Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent and Registrar.
C-4
<PAGE>
INDENTURE
(16% Junior Subordinated)
Initially, FLEET NATIONAL BANK (the "Trustee"), will act as Paying Agent
and Registrar. Issuer may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders. Issuer or any Subsidiary may, subject to certain
exceptions, act as Paying Agent, Registrar or co-Registrar.
4. Indenture.
Issuer issued the Securities under an Indenture, dated as of December 18,
1996 (the "Indenture"), between Issuer and Trustee. This Security is one of a
duly authorized issue of Securities of Issuer designated as its 16% Junior
Subordinated Pay-in-Kind Notes due 2002. Capitalized terms herein are used as
defined in the Indenture unless otherwise defined herein. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such
time as the Indenture is qualified under the TIA, and thereafter as in effect on
the date on which the Indenture is qualified under the TIA. Notwithstanding
anything to the contrary herein, the Securities are subject to all such terms,
and Holders of Securities are referred to the Indenture and said Act for a
statement of them. The Securities are secured obligations of Issuer limited in
aggregate principal amount to $38,925,797, except for Secondary Securities and
except as otherwise provided in the Indenture.
5. Redemption.
The Securities may be redeemed in accordance with Article III and Section
4.9 of the Indenture.
6. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to be redeemed at
such Holder's registered address.
Except as set forth in the Indenture, from and after any Redemption Date,
if monies for the redemption of the Securities called for redemption shall have
been deposited with Paying Agent for redemption on such Redemption Date, then,
unless Issuer defaults in the payment of such Redemption Price, the Securities
called for redemption will cease to bear interest and the only right of the
Holders of such Securities will be to receive payment of the Redemption Price.
7. Limitation on Disposition of Assets.
Under certain circumstances Issuer is required to apply the net proceeds
from Permitted Asset Sales to the repayment of Indebtedness of Issuer.
8. Subordination.
C-5
<PAGE>
INDENTURE
(16% Junior Subordinated)
The Securities are subordinated in right of payment, in the manner and to
the extent set forth in the Indenture, the Subordination Agreement (Senior) and
the Subordination Agreement (Junior) to the prior payment in full of Senior
Indebtedness of Issuer whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed or guaranteed. Each Holder, by accepting a
Security, agrees to such subordination and authorizes Trustee to give it effect.
9. Denominations; Transfer; Exchange.
The Securities are in registered form and without coupons. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption. No service
charge shall be made for any transfer, registration or exchange, but Issuer may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith, but not for any exchange pursuant to
Section 2.10 or 3.6 of the Indenture.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
11. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed for
one year, Trustee and Paying Agents will pay the money back to Issuer at its
request. After that, all liability of Trustee and such Paying Agents with
respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity.
If Issuer at any time deposits with Trustee U.S. Legal Tender or U.S.
Government Obligations sufficient to pay the principal of and interest on the
Securities to redemption or maturity and complies with the other provisions of
the Indenture relating thereto, Issuer will be discharged from certain
provisions of the Indenture and the Securities (including the financial
covenants, but excluding its obligation to pay the principal of and interest on
the Securities).
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a
C-6
<PAGE>
INDENTURE
(16% Junior Subordinated)
majority in aggregate principal amount, as the case may be, of the Securities
then outstanding. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Securities to, among other
things, cure any ambiguity, defect or inconsistency, provide for uncertificated
Securities in addition to or in place of certificated Securities, comply with
Article Five of the Indenture or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not adversely affect the rights of any Holder of a
Security.
14. Successors.
When a successor assumes all the obligations of its predecessor under the
Securities and the Indenture, the predecessor will be released from those
obligations.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing, Trustee or the Holders of
at least 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable in the manner, at the time and
with the effect provided in the Indenture. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. Trustee is
not obligated to enforce the Indenture or the Securities unless it has received
indemnity satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Securities then outstanding to direct Trustee in its exercise of
any trust or power. Trustee may withhold from Holders of Securities notice of
any continuing Default or Event of Default (except a Default in payment of
principal or interest) if it determines that withholding notice is in their
interest.
16. Trustee Dealings with Issuer.
Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Securities and may otherwise deal with Issuer,
its Subsidiaries or their respective Affiliates as if it were not Trustee.
C-7
<PAGE>
INDENTURE
(16% Junior Subordinated)
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
Issuer shall have any liability for any obligation of Issuer under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
18. Authentication.
This Security shall not be valid until Trustee or authenticating agent
manually signs the certificate of authentication on this Security.
19. Governing Law.
The Laws of the State of New York shall govern this Security and the
Indenture.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Security
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, Issuer will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Indenture.
Each Holder, by accepting a Security, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.
Issuer will furnish to any Holder of a Security upon written request and
without charge a copy of the Indenture. Requests may be made to:
John Flanagan
Chief Financial Officer
Scott Cable Communications, Inc.
Four Landmark Square, Suite 302
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<PAGE>
INDENTURE
(16% Junior Subordinated)
Stamford, Connecticut 96091
23. Certain Information Obligations.
To the extent permitted by applicable law or regulation, whether or not
Issuer is subject to the requirements of Section 13 or 15(d) of the Exchange
Act, Issuer shall file with the SEC all quarterly and annual reports and such
other information, documents or other reports (or copies of such portions of any
of the foregoing as the SEC may by rules and regulations prescribe) required to
be filed pursuant to such provisions of the Exchange Act. Issuer shall file with
Trustee copies of the quarterly and annual reports and the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) that it is required to file
with the SEC pursuant to the Indenture. At any time when Issuer is not permitted
by applicable law or regulations to file the aforementioned reports, Issuer
shall furnish Trustee and the Holders with the information that Issuer would
have had to provide to the SEC if Issuer had been subject to Section 13 or 15(d)
of the Exchange Act.
24. Issuer Indebtedness.
Each Holder acknowledges that Issuer is the sole obligor of the Securities
and no Subsidiary of Issuer is a co-obligor or a guarantor of the Securities.
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<PAGE>
INDENTURE
(16% Junior Subordinated)
{FORM OF ASSIGNMENT}
I or we assign this Security to
- -_______________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
_________________________________________
and irrevocably appoint _______________________ agent to transfer this Security
on the books of Issuer. The agent may substitute another to act for him.
Dated: Signed:
________________________________________________________________________________
(Sign exactly as your name appears on the front of this Security)
Signature Guarantee: ____________________________________________
C-10
<PAGE>
Exhibit 10.10
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of December 18, 1996, is between SCOTT
CABLE COMMUNICATIONS, INC., a Texas corporation ("Debtor"), and FLEET NATIONAL
BANK, a National Banking Association ("Secured Party"), not in its individual
capacity, but solely as Trustee for the holders (the "Holders") of all 16%
Junior Subordinated Pay-in-Kind Notes due July 18, 2002 issued pursuant to the
Indenture (as defined below).
Preliminary Statement:
A. Debtor and Secured Party have entered into an Indenture of even date
herewith (as the same may be amended, modified, supplemented or restated from
time to time, the "Indenture"), pursuant to which Debtor has agreed to issue
securities to Holders, subject to the terms and conditions set forth in the
Indenture.
B. One of the conditions precedent to Secured Party's obligations under
the Indenture is that Debtor shall have executed and delivered this Security
Agreement to secure the performance of Issuer's Obligations thereunder.
NOW, THEREFORE, in order to induce Trustee to perform its obligations
under the Indenture, and for other good and valuable consideration, the receipt
and sufficiency of which hereby are acknowledged, Debtor hereby agrees as
follows:
1. Definitions. All terms used herein which are defined in the New York
Uniform Commercial Code (the "Code") shall have the same meaning herein as in
the Code unless the context in which such terms are used herein indicates
otherwise. All capitalized terms used but not elsewhere defined in this Security
Agreement shall have the respective meanings ascribed to such terms in the
Indenture.
2. Security Interests. In order to secure the performance and payment of
Issuer's Obligations, Debtor hereby grants to Secured Party a security interest
in all Property of Debtor, except to the extent limited below, whether now owned
or hereafter acquired, and all additions and accessions thereto, including,
without limitation, the Property described below:
2.1 Goods, Machinery, Equipment and Inventory. All of Debtor's
goods, machinery, equipment, inventory and other goods, wherever located,
and all additions and accessions thereto or replacements thereof,
including, but not limited to, all machinery, inventory and equipment of
any and every kind and description comprising, belonging to or used in
connection with the operation of the Cable Business of Debtor
(collectively, the "Tangible Collateral");
<PAGE>
SECURITY AGREEMENT
2.2 Accounts, General Intangibles. All of Debtor's accounts,
contract rights, chattel paper, instruments, investment property,
documents and general intangibles, and all additions and accessions
thereto and replacements thereof, including, but not limited to, all
franchises, permits, authorizations and licenses heretofore or hereafter
granted or issued to Debtor under federal, state or local laws (excluding,
however, franchises, permits, authorizations and licenses issued by the
FCC or any other Governmental Body to the extent, and only to the extent,
it is unlawful to grant a security interest in such franchises, permits,
authorizations and licenses, but including, without limitation, the right
to receive all proceeds derived or arising from or in connection with the
assignment of such franchises, permits, authorizations and licenses) which
permit or pertain to the operation of the Cable Business of Debtor, and
all of Debtor's advertising revenue contracts, programming distribution
agreements, pole attachment agreements, access and right of entry
agreements, equipment leases, office leases, site leases, video
programming distribution agreements, supply and distributorship
agreements, non-competition agreements, employment contracts, consulting
agreements, collective bargaining agreements, service agreements,
maintenance agreements, other Operating Agreements, income tax refunds,
copyrights, patents, patent rights, trademarks, trade names, trade styles,
goodwill and going concern value, except to the extent the grant of a
security interest in any such agreement or contract without the consent of
the other party thereto would create a default thereunder in which event,
such agreement or contract shall not be included unless and until such
consent shall have been obtained (collectively, the "Intangible
Collateral");
2.3 Proceeds. All proceeds (including proceeds of insurance, eminent
domain and other governmental taking and tort claims) and products of the
Property described in Sections 2.1 and 2.2 above; and
2.4 Books and Records. All of the books and records pertaining to
the Property described in Sections 2.1, 2.2 and 2.3 above.
All of the Property described above hereinafter is referred to collectively as
the "Collateral." The security interest of Secured Party in the Collateral shall
be superior and prior to all other Liens except Permitted Prior Liens.
3. Representations and Warranties. Debtor hereby represents and warrants
to Secured Party as follows:
3.1 Ownership of Collateral. Debtor is the owner of all of the
Collateral, except the portion thereof consisting of after-acquired
Property, and Debtor will be the owner of such after-acquired Property,
free from any Lien except for Permitted Liens.
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<PAGE>
SECURITY AGREEMENT
3.2 Places of Business. There is listed on Exhibit A hereto the
location of the chief executive office of Debtor, all of the other places
of business of Debtor and all locations where the Tangible Collateral and
the books and records of Debtor are kept. Debtor shall not, without 30
days' prior written notice to Secured Party, change the location of (i)
its chief executive office, (ii) its books and records or (iii) except (A)
in connection with dispositions permitted by Section 4.18 of the Indenture
and (B) from one location listed on Exhibit A to another location listed
on Exhibit A, any Tangible Collateral.
3.3 Trade or Assumed Names. All trade or assumed names under which
Debtor is doing business are listed in Exhibit B.
3.4 Financing Statements. Except for the financing statements of
Secured Party and the financing statements pertaining to the Permitted
Senior Indebtedness, no financing statement covering any Collateral or any
proceeds thereof is on file in any public office (other than financing
statements for which termination statements are being delivered to Secured
Party at Closing).
3.5 Intangible Collateral. The Intangible Collateral represents bona
fide and existing indebtedness, obligations, liabilities, rights and
privileges owed or belonging to Debtor to which, to the best of Debtor's
knowledge, there is no valid defense, set-off or counterclaim against
Debtor and in connection with which there is no default with respect to
any payment or performance on the part of Debtor, or, to the best of
Debtor's knowledge, of any other party which would have a Material Adverse
Effect.
3.6 Tangible Collateral-Personal Property. All Tangible Collateral
at all times shall be considered personal property.
4. Affirmative Covenants. Until all of Issuer's Obligations are paid and
performed in full, Debtor shall:
4.1 Taxes. Pay promptly when due all taxes, levies, assessments and
governmental charges upon and relating to any of the Property, income or
receipts of Debtor or otherwise for which Debtor is or may be liable,
except to the extent that the failure to pay any of such taxes, levies,
assessments or charges is permitted by the Indenture.
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<PAGE>
SECURITY AGREEMENT
4.2 Insurance. At its sole expense, keep the Collateral insured
against loss or damage by insurance policies which shall be in such form,
with such companies and in such amounts as may be satisfactory to Secured
Party and otherwise comply with the provisions of Section 4.8 of the
Indenture.
4.3 Tangible Collateral.
4.3.1 Good Repair. Keep such of the Tangible Collateral as is
necessary to the operations of Debtor's Cable Business in good
working order and repair and make all necessary replacements thereof
and renewals thereto so that the value and operating efficiency
thereof at all times shall be maintained and preserved.
4.3.2 Insurance Requirements. Maintain the Tangible Collateral
at all times in accordance with the requirements of all insurance
carriers which provide insurance with respect to such Tangible
Collateral so that such insurance shall remain in full force and
effect.
4.3.3 Certificates of Title. Upon the request of Secured
Party, promptly deliver to Secured Party all certificates of title
pertaining to the Tangible Collateral, together with such
endorsements, assignments and other agreements as Secured Party may
request in order to perfect the security interest of Secured Party
in such Tangible Collateral.
4.3.4 Use of Collateral. Use the Tangible Collateral in
compliance with all statutes, regulations, ordinances, requirements
and regulations and all judgments, orders, injunctions and decrees
applicable thereto, and all other federal, state and local laws,
except where the failure to comply would not have a Material Adverse
Effect.
4.4 Intangible Collateral.
4.4.1 Payments. Make all payments and perform all acts
necessary to maintain and preserve the Intangible Collateral,
including, without limitation, filing of documents, renewals or
other information with any Governmental Body or any other Person.
4.4.2 Delivery of Instruments. Upon the request of Secured
Party, promptly deliver to Secured Party the original executed
copies of all instruments which constitute part of the Intangible
Collateral, together with such endorsements, assignments and other
agreements as Secured Party may
-4-
<PAGE>
SECURITY AGREEMENT
request in order to perfect the security interest of Secured Party
in such instruments.
4.4.3 Accurate Records. At all times keep accurate and
complete records of payment and performance by Debtor and other
Persons of their respective obligations with respect to the
Intangible Collateral and permit Secured Party or any of its agents
to call at Debtor's place of business without hindrance or delay to
inspect, audit, check or make extracts from the books, records,
correspondence or other data relating to the Intangible Collateral
at reasonable times and upon reasonable notice, provided, however,
if an Event of Default exists, such activities may be conducted at
any time without notice.
4.4.4 Verification of Indebtedness. Upon request of Secured
Party after the occurrence and during the continuance of an Event of
Default, permit Secured Party itself, at any time, in the name of
Secured Party or Debtor, to verify directly with the obligors the
indebtedness due Debtor on any account or other item of Intangible
Collateral.
4.4.5 Defaults, Other Claims. Immediately inform Secured Party
of any default in payment or performance by Debtor or any other
Person of any obligation with respect to the Intangible Collateral
or of claims made by others in regard to the Intangible Collateral,
if either of which could have a Material Adverse Effect.
4.5 Collection of Proceeds. Collect the proceeds of indebtedness
owing to Debtor by any Person under any instrument or by any account
debtor with respect to any account, contract right, chattel paper or
general intangible.
4.6 Financing Statements, Further Assurances. Concurrently with the
execution of this Security Agreement, and from time to time hereafter as
requested by Secured Party, at the direction of the Holders, execute and
deliver to Secured Party such financing statements, continuation
statements, termination statements, amendments to any of the foregoing and
other documents, in form satisfactory to Secured Party, as Secured Party
may require to perfect and continue in effect the security interest of
Secured Party granted pursuant to this Security Agreement, to carry out
the purposes of this Security Agreement and to protect Secured Party's
rights hereunder. Debtor, upon demand, shall pay the cost of filing all
such financing statements, continuation statements, termination
statements, amendments to any of the foregoing and other documents.
5. Negative Covenants. Until all of Issuer's Obligations are paid and
performed in full, Debtor agrees that it shall not:
-5-
<PAGE>
SECURITY AGREEMENT
5.1 Sales and Transfer of Collateral. Sell, lease, assign or
otherwise dispose of any of the Collateral, except as may be permitted by
and in accordance with the provisions of Section 4.18 of the Indenture.
5.2 Installation of Tangible Collateral. Permit any of the Tangible
Collateral to be installed, affixed or attached to the real estate or
Leasehold Property of Debtor or any other Person so as to become a part
thereof or become in any sense a fixture.
5.3 Valuation of Licenses. Contest the value attributed by Secured
Party to any FCC License of Debtor in any insolvency, bankruptcy,
receivership, custodianship, liquidation, reorganization, assignment for
the benefit of creditors or other similar proceeding.
6. Protection of Collateral. In the event of any failure of Debtor to (i)
maintain in force and pay for any insurance or bond which Debtor is required to
provide pursuant to this Security Agreement or the other Indenture Instruments,
(ii) keep the Tangible Collateral in good repair and operating condition, (iii)
keep the Collateral free from all Liens except for Permitted Liens, (iv) pay
when due all taxes, levies and assessments on or in respect of the Collateral,
except as permitted pursuant to the terms of Section 4.1 above, (v) make all
payments and perform all acts on the part of Debtor to be paid or performed with
respect to any of the Collateral, including, without limitation, all expenses of
protecting, storing, warehousing, insuring, handling and maintaining the
Collateral, and (vi) keep fully and perform promptly any other of the
obligations of Debtor under this Security Agreement or the other Indenture
Instruments, Secured Party, at its option, may (but shall not be required to)
procure and pay for such insurance, place such Collateral in good repair and
operating condition, pay or contest or settle such Liens or taxes or any
judgments based thereon or otherwise make good any other aforesaid failure of
Debtor, provided it gives Debtor prompt notice of such action. Debtor shall
reimburse Secured Party immediately upon demand for all sums paid or advanced on
behalf of Debtor for any such purpose, together with all costs, expenses and
reasonable attorneys' fees paid or incurred by Secured Party in connection
therewith and interest on all sums so paid or advanced from the date of such
payment or advancement until repaid to Secured Party. All such sums paid or
advanced by Secured Party, with interest thereon, immediately upon payment or
advancement thereof, shall be deemed to be part of Issuer's Obligations secured
hereby.
7. Event of Default. Debtor shall be in default under this Security
Agreement upon the occurrence of an Event of Default under the Indenture.
8. Remedies Upon Default. Upon the occurrence of an Event of Default:
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<PAGE>
SECURITY AGREEMENT
8.1 Rights of Secured Party. Secured Party shall have all of the
rights and remedies of a secured party under the Code and all other rights
and remedies accorded to Secured Party at equity or law, including,
without limitation, the right to apply for and have a receiver appointed
by a court of competent jurisdiction to manage, protect and preserve the
Collateral, to continue operating the business of Debtor and to collect
all revenues and profits thereof. Any notice of sale or other disposition
of Collateral given not less than 10 Business Days' prior to such proposed
action shall constitute reasonable and fair notice of such action. To the
extent permitted by applicable law, Secured Party may postpone or adjourn
any such sale from time to time by announcement at the time and place of
sale stated in the notice of sale or by announcement of any adjourned
sale, without being required to give a further notice of sale. Any such
sale may be for cash or, unless prohibited by applicable law, upon such
credit or installment terms as Secured Party shall determine. To the
extent permitted by applicable law, Debtor shall be credited with the net
proceeds of such sale only when such proceeds actually are received by
Secured Party. Despite the consummation of any such sale, Debtor shall
remain liable for any deficiency on Issuer's Obligations which remains
outstanding following any such sale. All net proceeds received pursuant to
a sale shall be applied in the manner set forth in Section 5.10 of the
Indenture.
8.2 Assembly of Collateral. Upon the request of Secured Party,
Debtor shall assemble and make the Collateral available to Secured Party
at a place designated by Secured Party.
8.3 Proceeds. Debtor shall hold all proceeds of the Collateral
collected by Debtor in trust for Secured Party, and promptly upon receipt
thereof, turn over such proceeds to Secured Party in the exact form in
which they were received.
8.4 Other Rights. Secured Party, at its election, and without notice
to Debtor, may:
8.4.1 Terminate Right of Collection. Terminate the right of
Debtor to collect the proceeds described in Section 8.3.
8.4.2 Notification. Notify the obligors under any instruments
and the account debtors of any account, contract right, chattel
paper or general intangible to make all payments directly to Secured
Party.
8.4.3 Collection of Payments. Demand, sue for, collect or
receive, in the name of Debtor or Secured Party, any money or
Property payable or receivable on any item of Collateral.
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<PAGE>
SECURITY AGREEMENT
8.4.4 Settlement. Settle, release, compromise, adjust, sue
upon or otherwise enforce any item of Collateral as Secured Party
may determine.
8.4.5 Mail of Debtor; Endorsement of Checks. For the purpose
of enforcing Secured Party's rights under this Security Agreement,
receive and open mail addressed to Debtor, and endorse notes,
checks, drafts, money orders, documents of title or other forms of
payment on behalf and in the name of Debtor.
8.5 Applications to Governmental Bodies. Debtor, at its own cost and
expense, shall take any action that Secured Party may request in order to
enable Secured Party to obtain and enjoy the full rights and benefits
granted to Secured Party hereunder, including, without limitation, all
rights necessary or desirable to obtain, use, sell or assign the Licenses
and Franchises of Debtor and the other Collateral of Debtor hereunder, and
to exercise all remedies available to Secured Party hereunder and under
applicable law. Without limiting the generality of the foregoing, at the
request of Secured Party at any time following the occurrence of any Event
of Default, Debtor, at its sole cost and expense, shall assist Secured
Party in obtaining any required approval of any Governmental Body
(including the FCC and any Franchisor) to the transfer of Debtor's
Licenses and Franchises to Secured Party or its designee or any receiver,
trustee or similar official or purchaser by preparing, signing and filing
with the appropriate Governmental Body any application or document and
taking all other actions deemed necessary or appropriate by Secured Party
(i) for consent to the assignment of any such License or Franchise
necessary or appropriate under applicable Cable Laws, (ii) for approval of
any sale, assignment or transfer of any such License or Franchise and
(iii) to enable Secured Party or its designee or any receiver, trustee or
similar official or purchaser to obtain from such Governmental Body or any
other Person any required authority necessary to operate the Cable
Business of Debtor.
8.6 Transfer of Control to Other Persons. Debtor acknowledges and
agrees that a transfer of control of the Collateral or an assignment of
Licenses or Franchises of such Debtor may be made to a receiver, trustee,
or similar official or to any purchaser of all or any part of the other
Collateral hereunder, pursuant to any court order, public or private sale,
judicial sale, foreclosure or the exercise of any other remedies available
to Secured Party hereunder or under applicable law.
All monies received by Secured Party pursuant to this Section 8 shall be applied
by Secured Party in accordance with the applicable provisions of Section 5.10 of
the Indenture.
9. Power of Attorney. To effectuate the rights and remedies of Secured
Party under this Security Agreement, Debtor hereby irrevocably appoints Secured
Party its attorney-in-fact, in the name of Debtor or in the name of Secured
Party, to:
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<PAGE>
SECURITY AGREEMENT
9.1 Execution of Financing Statements. Execute and file from time to
time financing statements, continuation statements, termination statements
and amendments thereto, covering the Collateral, in form satisfactory to
Secured Party.
9.2 Execution of Other Documents. Take all actions and execute all
documents referred to in Section 8.5 above to the extent permitted by law.
The power of attorney granted pursuant to this Section 9 is coupled with an
interest and shall be irrevocable until all of Issuer's Obligations shall have
been paid and performed in full.
10. Certain Agreements of Debtor.
10.1 Waiver of Notice. Debtor hereby waives notice of the acceptance
of this Security Agreement and, except as otherwise specifically provided
in Section 8.1 above or in the Indenture, all other notices, demands or
protests to which Debtor otherwise might be entitled by law (and which
lawfully may be waived) with respect to this Security Agreement, Issuer's
Obligations and the Collateral.
10.2 Rights of Secured Party. Debtor agrees that Secured Party (i)
shall have no duty as to the collection or protection of the Collateral or
any income thereon, except as provided by applicable law, (ii) may
exercise the rights and remedies of Secured Party with respect to the
Collateral without resort or regard to other security or sources for
payment and (iii) shall not be deemed to have waived any of the rights or
remedies granted to Secured Party hereunder unless such waiver shall be in
writing and shall be signed by Secured Party. Debtor and Secured Party
acknowledge their intent that, upon the occurrence of an Event of Default,
Secured Party shall receive, to the fullest extent permitted by law and
governmental policy (including, without limitation, the rules, regulations
and policies of the FCC), all rights necessary or desirable to obtain, use
or sell the Collateral, and to exercise all remedies available to Secured
Party under the Indenture Instruments, the Code or other applicable law.
Debtor and Secured Party further acknowledge and agree that, in the event
of changes in law or governmental policy occurring subsequent to the date
hereof that affect in any manner Secured Party's rights of access to, or
use or sale of, the Collateral, or the procedures necessary to enable
Secured Party to obtain such rights of access, use or sale, Secured Party
and Debtor shall amend the Indenture Instruments, in such manner as
Secured Party reasonably shall request, in order to provide Secured Party
such rights to the greatest extent possible consistent with then
applicable law and governmental policy.
10.3 No Delay; Single or Partial Exercise Permitted. No delay or
omission on the part of Secured Party in exercising any rights or remedies
contained herein shall operate as a waiver of such right or remedy or of
any other right or remedy, and no single or partial exercise of any right
or remedy shall preclude any
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<PAGE>
SECURITY AGREEMENT
other or further exercise thereof, or the exercise of any other right or
remedy. A waiver of any right or remedy on any one occasion shall not be
construed as a bar or waiver of any right or remedy on future occasions,
and no delay, omission, waiver or single or partial exercise of any right
or remedy shall be deemed to establish a custom or course of dealing or
performance between the parties hereto.
11. Rights Cumulative. All rights and remedies of Secured Party pursuant
to this Security Agreement, the Indenture or otherwise, shall be cumulative and
non-exclusive, and may be exercised singularly or concurrently.
12. Severability. In the event that any provision of this Security
Agreement is deemed to be invalid by reason of the operation of any law,
including, but not limited to, the rules, regulations and policies of the FCC,
or by reason of the interpretation placed thereon by any court, the FCC or any
other Governmental Body, this Security Agreement shall be construed as not
containing such provision and the invalidity of such provision shall not affect
the validity of any other provisions hereof, and any and all other provisions
hereof which otherwise are lawful and valid shall remain in full force and
effect.
13. Notices. All notices and communications under this Security Agreement
shall be in writing and delivered in the manner set forth in Section 12.2 of the
Indenture.
14. Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of Secured Party and Debtor.
15. Captions. The headings in this Security Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
16. Counterparts. This Security Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which,
when taken together, shall be one and the same instrument.
17. Survival of Security Agreement; Termination. All covenants,
agreements, representations and warranties made herein shall survive the
execution and delivery of the Indenture and shall continue in full force and
effect until Issuer's Obligations are paid and performed in full.
18. APPLICABLE LAW. THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS AND DECISIONS OF THE STATE OF NEW YORK.
FOR PURPOSES OF THIS SECTION 18, THIS SECURITY AGREEMENT SHALL BE DEEMED TO BE
PERFORMED AND MADE IN THE STATE OF NEW YORK.
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<PAGE>
SECURITY AGREEMENT
19. JURISDICTION AND VENUE. DEBTOR HEREBY AGREES THAT ALL ACTIONS OR
PROCEEDINGS INITIATED BY DEBTOR AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS
SECURITY AGREEMENT SHALL BE LITIGATED IN THE SUPREME COURT, NEW YORK COUNTY
DIVISION, OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, OR, IF SECURED PARTY INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING
COURTS, ANY COURT IN WHICH SECURED PARTY SHALL INITIATE OR TO WHICH SECURED
PARTY SHALL REMOVE SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION.
DEBTOR HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR PROCEEDING COMMENCED IN OR REMOVED BY SECURED PARTY TO ANY OF SUCH
COURTS, AND HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR
OTHER PROCESS OR PAPERS ISSUED THEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS
AND COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO DEBTOR AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT
TO SECTION 13. DEBTOR WAIVES ANY CLAIM THAT NEW YORK COUNTY, OR THE SOUTHERN
DISTRICT OF NEW YORK IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK
OF VENUE. SHOULD DEBTOR, AFTER BEING SO SERVED, FAIL TO APPEAR OR ANSWER TO ANY
SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE NUMBER OF DAYS
PRESCRIBED BY LAW AFTER THE MAILING THEREOF, DEBTOR SHALL BE DEEMED IN DEFAULT
AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY SECURED PARTY AGAINST DEBTOR AS
DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE
EXCLUSIVE CHOICE OF FORUM SET FORTH IN THIS SECTION 19 SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT, BY SECURED PARTY, OF ANY JUDGMENT OBTAINED IN ANY
OTHER FORUM OR THE TAKING, BY SECURED PARTY, OF ANY ACTION TO ENFORCE THE SAME
IN ANY OTHER APPROPRIATE JURISDICTION AND DEBTOR HEREBY WAIVES ANY RIGHT TO
ATTACK ANY SUCH JUDGMENT OR ACTION COLLATERALLY.
20. WAIVER OF RIGHT TO JURY TRIAL. SECURED PARTY AND DEBTOR ACKNOWLEDGE
AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS SECURITY AGREEMENT
WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND THEREFORE, SECURED PARTY
AND DEBTOR AGREE THAT ANY COURT PROCEEDING ARISING OUT OF ANY SUCH CONTROVERSY
WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A
JURY.
-11-
<PAGE>
SECURITY AGREEMENT
21. TIME OF THE ESSENCE. TIME FOR THE PERFORMANCE OF ISSUER'S OBLIGATIONS
UNDER THIS SECURITY AGREEMENT IS OF THE ESSENCE.
22. Secured Party's Right to Specific Performance. Debtor acknowledges
that FCC authorization is integral to Secured Party's realization of the value
of all of the Collateral, that Debtor's FCC Licenses are unique assets, that
there is no adequate remedy at law for failure by Debtor to comply with the
provisions of Section 8.5 and that such failure would not be adequately
compensable in monetary damages; therefore, Debtor agrees that, in addition to
all other remedies available at law or in equity, Secured Party shall be
entitled to obtain decree(s) of specific performance entitling it to temporary
restraining order(s), preliminary injunction(s), or permanent injunction(s) to
specifically enforce and require specific performance of the provisions of
Section 8.5. Debtor agrees that notice shall be adequate for the entry of a
decree of specific performance in respect of any such matter (i) in the case of
a temporary restraining order, upon twenty-four (24) hours' prior notice of the
hearing thereof and (ii) in the case of any other proceeding, upon five (5)
days' prior notice of the hearing thereof, and hereby waives all requirements
and demands that the Secured Party give any greater notice of such hearings and
further waives all requirements and demands that the Secured Party post a bond
or other surety arrangement in connection with the issuance of such decree.
23. FCC and Franchisor Approval. Notwithstanding anything to the contrary
contained herein, no party hereto shall take any action, including, but not
limited to, the operation of Debtor's Cable Business that would constitute or
result in the transfer or assignment of any License or Franchise issued to or
held by Debtor, or a transfer of control over any such License or Franchise,
whether de jure or de facto, if such assignment or transfer would require under
then existing law the prior approval of and/or any notice to the FCC or any
Franchisor, without such party first having notified the FCC or such Franchisor
of any such assignment or transfer and, if required under then existing law,
obtaining the approval of the FCC or such Franchisor therefor, notifying the FCC
or such Franchisor of the consummation thereof and complying with all other
applicable provisions of the Cable Act. The parties hereto intend that the
powers of Secured Party hereunder, in all relevant aspects, shall be governed by
the Cable Act and all other applicable statutory requirements and rules and
regulations, including, without limitation, those of the FCC.
24. Subordination. The security interests, rights and remedies granted to
Secured Party herein are subject and subordinate to those granted to the holders
of the Permitted Liens, as more particularly set forth in the Subordination
Agreement (Senior) and the Subordination Agreement (Junior) of even date
herewith.
-12-
<PAGE>
SECURITY AGREEMENT
IN WITNESS WHEREOF, this Security Agreement has been executed and
delivered by each of the parties hereto by a duly authorized officer of each
such party on the date first set forth above.
SCOTT CABLE COMMUNICATIONS,
INC., a Texas corporation
By: /s/ Bruce A. Armstrong
--------------------------------------
Bruce A. Armstrong
Chief Executive Officer
FLEET NATIONAL BANK, a National
Banking Association, not in its individual
capacity, but solely in its capacity as
Trustee
By: /s/ Robert L. Bice, II
--------------------------------------
Name: Robert L. Bice, II
Title: Vice President
-13-
<PAGE>
Exhibit 10.11
NEW MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT (the "Agreement") dated December 18, 1996, between
Scott Cable Communications, Inc. ("Owner") and Scott Cable Management Company,
Inc. (the "Manager").
W I T N E S S E T H:
WHEREAS, Owner filed a Voluntary Petition for Relief under Chapter 11 of
the Bankruptcy Code on February 14, 1996 with the Clerk of the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"); and
WHEREAS, Owner is the proponent of the Debtors' Second Amended Joint Plan
of Reorganization, dated October 31, 1996 (the "Plan") which was filed with the
Bankruptcy Court on November 1, 1996; and
WHEREAS, the Plan provides, inter alia, that Owner and the Manager will
enter into a New Management Agreement with respect to the operation of the
Owner's CATV systems (the "Systems"); and
WHEREAS, this Agreement is the New Management Agreement referred to in the
Plan; and
WHEREAS, capitalized terms which are not defined in this Agreement but
which are defined in the Plan are used herein as defined in the Plan;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the following meanings:
"Additional Management Fee"--As defined in Paragraph 5(a) hereof.
"CATV Franchise"--An authorization, or renewal thereof, whether in the
form of a franchise, permit, license, resolution, contract, certificate,
agreement or otherwise issued by a local governmental authority authorizing the
construction and/or operation of a CATV System in the community under the
jurisdiction of such local governmental authority.
<PAGE>
"CATV System"--A system of transmitting television and other
communications and electrical signals which ultimately reach Subscribers through
cable or electronic media.
"Class C Directors"--The directors elected by the holders of the New Class
C Common Stock.
"Event of Default"--As defined in Paragraph 6 hereof.
"Gross Revenues"--All revenues (computed in accordance with generally
accepted accounting principles), whether recurring or non-recurring, derived
from the ownership and operation of the Systems, including without limitation,
installation fees, service charges, pay television, advertising and leased
channel revenue, but excluding proceeds from any sale of the Systems' assets
(other than sales in the ordinary course of business to customers of the
Systems), insurance claims (other than proceeds from claims resulting from
business interruption insurance), condemnation awards and proceeds from
refinancings of indebtedness related to the Systems.
"Management Fee"--As defined in Paragraph 5(a) hereof.
"Monthly Financial Report"-- A report setting forth the Operating Cash
Flow for the period from the beginning of the then current calendar year to the
end of such calendar month comparing such results with the budgeted operating
cash flow for the comparable period, which report shall contain a certification
on behalf of the Manager by the Chief Financial Officer or Chief Operating
Officer of the Manager stating that such report fairly presents, consistently
from month to month, the information set forth from the books and records of
Owner.
"Monthly Management Fee Statement"-- A report, substantially in the Form
of Exhibit "1" annexed hereto, setting forth the Gross Revenues for the
preceding calendar month, the Management Fee due thereon and the Additional
Management Fee, which report shall contain a certification on behalf of the
manager by the Chief Financial Officer or Chief Operating Officer of the Manager
stating that such report fairly presents, consistently from month to month, the
information set forth therein from the books and records of Owner.
"Old Management Agreement"--The Management Agreement entered into as of
the 20th day of January, 1988, originally between Simmons Cable TV Management,
Inc., Scott Cable Communications, Inc., Crossett Cable TV, Inc., Cable TV of La
Salle, Inc., Cable TV of Andrews, Inc., Cable TV of New Mexico, Inc., Cable TV
of Central Louisiana, Inc., Cable TV of North Dakota, Inc., Cable TV of
Oklahoma, Inc., Cable TV of Winnsboro, Inc., Hollis Cablevision, Inc., Stratford
Cablevision, Inc., Quanah Cablevision, Inc., Chadron Cablevision, Inc., Hugoton
Cablevision, Inc., Gordon Cablevision, Inc., Cable TV of Virginia, Inc., Cable
TV of Lake Tahoe, Inc., Cable TV of Fordyce, Inc., Cable TV of Alta Loma, Inc.,
Cable TV of King City/Greenfield, Inc., Cable Pay Services, Inc., Canadian
Cablevision, Inc., Scott & Associates, Inc., More Group-South, Inc., Cable TV
Properties, Inc., Montgomery County CATV, Inc., Television Access, Inc., Cable
TV of Vernon-Sulligent, Inc., Bexar County
2
<PAGE>
Cablevision, Inc., Bexar County Cable, Inc., Coastal Plains Cablevision, Inc.
and Simmons Communications - U.S., Inc., Simmons Communications of Texas, Inc.,
Simmons Communications - Central, Inc., Simmons Communications - East, Inc.,
Simmons Communications - West, Inc., Simmons Communications - South, Inc., as
such agreement has been amended, pursuant to which the Manager presently manages
the Systems.
"Operating Cash Flow"--As defined in the Post Confirmation Credit Facility
plus management fees deducted in computing net income for the period.
"Projected Operating Cash Flow"-- $16,056,926, $17,367,131 and $18,821,897
for the respective 1997, 1998 and 1999 calendar year which amounts shall be
adjusted to reflect the sale of any System, which adjustment shall be approved
by the Class C Directors, which approval shall not be unreasonably withheld.
"Subscriber"--As defined in the Post Confirmation Credit Facility.
"Systems"--As defined in the introductory clauses hereof.
"Termination Date"--As defined in Paragraph 7 hereof.
"Termination Notice"--As defined in Paragraph 7 hereof.
"Trust Account"--An interest-bearing account held by Baer Marks & Upham
LLP.
2. Retention of Manager. The Owner hereby retains the Manager, and the
Manager hereby agrees to serve, on the terms and conditions hereinafter set
forth, as the manager, supervisor and operator of all of the Systems owned by
the Owner.
3. Duties of Manager. The Manager shall make all decisions and supervise
all actions with respect to the operation and management of the Systems,
provided, however, that nothing contained herein shall authorize the Manager to
make any decision or take any action with respect to the Systems if such
decision or action is an Extraordinary Decision or if such action requires the
consent of the Class C Directors.
4. Reimbursement of Expenses of System.
(a) The actions taken by the Manager pursuant to the provisions of
Paragraph 2 hereof shall be taken as agent of the Owner and all obligations or
expenses incurred hereunder shall be for the account of and at the expense of
the Owner. Without in any way limiting the generality of the foregoing, the
personnel hired on behalf of the Owner pursuant to Paragraph 3 hereof, shall be
employees of the Owner, and not the Manager, and the compensation for the
services of such employees shall be considered an operating expense of the
Owner.
3
<PAGE>
(b) All payments to be made by the Manager hereunder shall be made
from such funds as are available in the operating account of the Owner, or as
may be provided by the Owner, and the Manager shall not be obligated to make any
advance to or for the account of the Owner, except from funds held or provided
as aforesaid.
(c) The Owner shall reimburse the Manager for all out-of-pocket
expenses arising out of the performance of its duties hereunder, provided,
however, that the Manager shall not be reimbursed for such expenses to the
extent they exceed $300,000 per year, unless such additional expense
reimbursement has been approved by the Owner and the Class C Directors.
Reimbursement of out-of-pocket expenses shall be made within ten (10) days of
receipt by the Owner of an invoice accompanied by documentation evidencing such
expense by the Manager. It is agreed that the provisions of this Paragraph 4(c)
shall not be applicable to reimbursement of those out of pocket expenses
specifically permitted by Paragraph 10 hereof.
5. Compensation of Manager.
(a) As compensation for its services hereunder, the Owner shall pay
the Manager (i) with respect to the year ended December 31, 1996, the management
fee provided in the Old Management Agreement when, and in the manner provided
therein, and (ii) with respect to the period from and after January 1, 1997 a
fee (the "Management Fee") equal to four and one-quarter (4 1/4%) percent of the
Gross Revenues. In addition to the Management Fee with respect to the period
from and after January 1, 1997, the Manager may be entitled to receive, subject
to the conditions set forth below, an additional fee equal to one-quarter of one
percent (1/4%) of Gross Revenues (the "Additional Management Fee").
(b) The Management Fee shall be paid on a monthly basis within ten
(10) days after receipt by the Owner of a Monthly Management Fee Statement.
Concurrently with the payment of the Management Fee, the Additional Management
Fee shall be deposited into the Trust Account.
(c) If at the end of each calendar year, the Operating Cash Flow for
that calendar year equals or exceeds ninety (90%) percent of Projected Operating
Cash Flow for that calendar year, the Additional Management Fee for that
calendar year held in the Trust Account, plus any interest earned thereon, shall
be paid to the Manager within thirty (30) days after the Owner's receipt of the
Monthly Management Fee Statement and the Monthly Financial Report for the month
of December.
(d) If at the end of each calendar year, the Operating Cash Flow for
that calendar year is less than ninety (90%) percent of Projected Operating Cash
Flow for that calendar year, but is equal to or greater than eighty (80%)
percent of Projected Operating Cash Flow for that calendar year, the Additional
Management Fee for that calendar year, plus any interest earned thereon, shall
remain in the Trust Account.
4
<PAGE>
(e) If at the end of each calendar year, the Operating Cash Flow for
that calendar year is less than eighty (80%) percent of Projected Operating Cash
Flow, the Additional Management Fee for that calendar year held in the Trust
Account, plus any interest earned thereon, shall be paid to the Owner within
thirty (30) days after the Owner's receipt of the Monthly Management Fee
Statement and Monthly Financial Report for the month of December.
(f) Sixty (60) days after the termination of this Agreement, any
money held in the Trust Account shall be paid to the Owner, unless the New
Restructured Second Secured PIK Notes have been paid in full, in which case any
money held in the Trust Account shall be paid to the Manager.
6. Events of Default. The occurrence of any of the following events shall
constitute an Event of Default under this Agreement:
(a) The acceleration of the indebtedness of the Owner under the Post
Confirmation Credit Facility;
(b) The breach of any of the negative covenants set forth in
Paragraph 10 hereof;
(c) If Owner (i) loses, fails to keep in force, suffers the
termination or revocation of, terminates, or forfeits any CATV Franchise or (ii)
suffers, as a result of conduct of the Owner, a materially adverse amendment to
or suspension of material rights under any CATV Franchise, but only if (x) all
such terminated, revoked, forfeited, amended or suspended CATV Franchises
account in the aggregate for at least 3% of the total number of Subscribers of
the Systems or (y) more than five (5) CATV Franchises are so terminated,
revoked, or forfeited at any time after the date hereof;
(d) If the Operating Cash Flow for any calendar year is less than
seventy-seven and one-half (77 1/2%) percent of Projected Operating Cash Flow
for that year;
(e) The gross negligence or willful misconduct of the Manager, if
such gross negligence or willful misconduct has or could have a material adverse
effect on the Owner or the business or operation of the Systems; or
(f) If Bruce A. Armstrong ceases to be the President and Chief
Executive Officer of the Manager or ceases to be in charge of the day-to-day
operations of the Manager provided, however, that if Bruce A. Armstrong ceases
to be the President and Chief Executive Officer of the Manager or ceases to be
in charge of the day-to-day operations of the Manager because of Bruce A.
Armstrong's death or disability, it shall not be an Event of Default if a
replacement reasonably satisfactory to the Class C Directors is designated
within sixty (60) days of the date of the event which would otherwise cause the
Event of Default under this Paragraph 6(f).
5
<PAGE>
7. Effect of Event of Default
Upon the occurrence of an Event of Default, this Agreement may be
terminated by the Owner by giving written notice (the "Termination Notice") to
the Manager no less than fifteen (15) days prior to the date of termination of
this Agreement. Any Termination Notice shall specify in reasonable detail the
facts surrounding the occurrence of the Event of Default and shall specify the
date on which this Agreement shall terminate (the "Termination Date"). At any
time prior to the Termination Date, the Owner may rescind the Notice of
Termination or postpone the Termination Date by written notice to the Manager.
8. Term of Agreement.
(a) This Agreement shall commence on the date hereof, simultaneously
with the termination of the Old Management Agreement and shall terminate on
December 31, 1999 (unless terminated earlier in accordance with the provisions
hereof) and shall automatically terminate upon the sale of all of the Systems.
(b) Upon termination of this Agreement the Owner shall have no
further obligation or liability to the Manager other than the Owner's liability
for any unpaid expenses of the Manager described in Paragraph 4 hereof and/or
any compensation due or owing under Paragraph 5 hereof through the date of
termination.
(c) In order to insure an orderly transition, the Manager shall
cooperate with any successor manager of the Systems chosen by the Owner. Without
in way limiting the generality of the foregoing, the Manager shall deliver all
of the Owner's property in its possession, custody or control to the successor
manager and shall provide the successor manager with copies of any of the
Manager's records relating to the Systems which the successor manager may
reasonably request.
9. Deposit of Class A Common Stock. If this Agreement is terminated as a
result of an Event of Default, or if a Transaction Event does not occur prior to
January 1, 2000, the Manager shall deposit, for no additional consideration, its
Class A Common Stock with the Depositary established by the Deposit Agreement
entered into as of December 18, 1996 between and among Owner, Fleet National
Bank and the holders of Depositary Receipts, and all of the Manager's ownership
interest in the Owner shall terminate.
10. Negative Covenants. The Manager covenants and agrees that neither it,
nor any of its affiliates (i) shall manage or own a CATV System or similar
system in any of the service areas covered by any of the Systems which would
compete with any such System for subscribers; (ii) will cause any of the
employees, officers or directors of the Manager or any of its affiliates to be
hired as employees of the Owner except that employees, officers and directors of
the Manager may be hired to fill vacant positions at the Systems if such
individual resigns as an employee, officer and/or director of the Manager and is
compensated at a rate appropriate for that position; or (iii) will seek to have
the salary or other compensation of any of the
6
<PAGE>
employees, officers or directors of the Manager or any of its affiliates
reimbursed as an out-of-pocket expense of the Manager, except for the salaries
and directly related fringe benefits of employees of Manager or any of its
affiliates performing the following services:
(i) preparation and review of, and assistance with governmental
audits of, Owner tax related filings, including, but not limited to: (a) sales
and use tax returns; (b) federal and state income tax returns; (c) property tax
returns; (d) state franchise tax returns; and (e) annual state registration
filings;
(ii) legal services for the benefit of Owner including, but not
limited to: (a) preparation and review of legal documents; (b) oversight of
activities of legal firms representing Owner; and (c) provision of legal advice;
(iii) provision of data processing services to Owner including, but
not limited to: (a) operation and maintenance of computerized general ledger,
accounts payable, and financial reporting system; and (b) maintenance of network
operating system and computers thereon.
11. Transactions between Owner and Manager. Notwithstanding anything to
the contrary contained herein, in addition to the management services required
to be provided pursuant to the terms hereof, the Manager shall have the right to
sell and/or provide goods and services to the Owner provided that (i) the terms
thereof are no less favorable to the Owner than could be obtained from
non-related persons dealing on an arm's-length basis and (ii) the costs of such
goods and services are provided at the Manager's cost.
12. Actions of Owner Limited. The Manager hereby acknowledges that it is
aware that certain actions of the Owner with respect to this Agreement,
including, without limitation, the Owner's decisions with respect to what action
should be taken upon the occurrence of an Event of Default are subject to the
Special Provisions.
13. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and shall not be modified, waived or amended or
voluntarily terminated except by a written instrument signed by the Manager and
the Owner, provided the Owner's Class C Directors consent to the execution by
the Owner of such written instrument.
14. Notices. All notices, requests, or other communications hereunder
shall be in writing and shall be deemed to have been duly given when received by
hand, facsimile (followed by a copy sent first class postage prepaid) or
certified or registered mail, return receipt requested, with first class postage
prepaid to the parties, as their names and addresses appear below, or to such
other address of which written notice shall have been given provided that any
routine communication or routine report from the Manager to the Owner as well as
copies thereof to parties identified below may be sent by first class postage
prepaid mail:
7
<PAGE>
To the Owner:
Four Landmark Square
Suite 302
Stamford, Connecticut 06901
Attention: Mr. Bruce A. Armstrong
with copies to:
Both of the Class C Directors at the address indicated in the
records of Owner
To the Manager:
Four Landmark Square
Suite 302
Stamford, Connecticut 06901
Attention: Mr. Bruce A. Armstrong
with a copy to:
Stanley E. Bloch, Esq.
Baer Marks & Upham LLP
805 Third Avenue
New York, NY 10022-7513
15. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the respective representatives, successors and assigns of the
parties hereto, provided, however, that the Manager shall not assign or transfer
any of its obligations or rights under this Agreement.
16. Indemnity. The Owner hereby agrees to indemnify the Manager from any
and all loss, liability, cost and expense incurred by the Manager in connection
with or arising from the performance by it of its obligations hereunder except
to the extent that such loss, liability, cost or expense results from the gross
negligence or willful misconduct of the Manager.
17. Counterparts. This Agreement may be executed by the parties hereto in
one or more counterparts each of which shall be deemed an original and all of
which, taken together, shall be deemed to constitute one and the same
instrument.
18. Construction. The paragraph headings used in this Agreement are for
convenience only and shall not be deemed to constitute a part hereof. Use of a
singular or plural term shall be deemed to include the plural or singular if the
context requires. Any term defined in the Bankruptcy Code, which are not
otherwise defined herein or in the Plan, is used herein as
8
<PAGE>
defined in the Bankruptcy Code. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New York.
19. Notices to Owner. Manager agrees to send to Owner copies of all
reports sent to FINOVA and all non-routine notices received from FINOVA. Manager
also agrees to send to Owner (i) the Monthly Financial Report within forty-five
(45) days after the end of each calendar month, and (ii) such periodic
operating, financial and other reports as it may require, which reports shall be
initially in the form of Exhibit "2" annexed hereto and shall contain a
certification on behalf of the Manager by the Chief Financial Officer or Chief
Operating Officer of the Manager stating that such report fairly presents,
consistently from month to month, the information set forth from the books and
records of Owner.
20. Termination of Old Management Agreement. The Old Management Agreement
is hereby terminated, at no cost to the Owner, simultaneously with the
commencement of this Agreement.
21. Consent to Jurisdiction. The parties hereto irrevocably consent that
any legal action or proceeding arising out of or in any manner relating to this
Agreement, may be brought in the Supreme Court of the State of New York, County
of New York or in the United States District Court for the Southern District of
New York. By the execution and delivery of this Agreement, the parties hereto
expressly and irrevocably consent and submit to the personal jurisdiction of any
of such courts in any such action or proceeding and further irrevocably consent
to the service of any complaint, summons, notice or other process relating to
any such action or proceeding by delivery thereof to it by hand or by mail in
the manner provided for in Paragraph 14 hereof. The parties hereto hereby
expressly and irrevocably waive any claim or defense in any such action or
proceeding based on any alleged lack of personal jurisdiction, improper venue or
forum non conveniens or any similar basis.
22. Waiver of Trial by Jury. The parties hereto waive trial by jury in any
litigation in any court with respect to, in connection with, or arising out of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this agreement as of the day
and year first above written.
SCOTT CABLE COMMUNICATIONS, INC.
By: /s/ Bruce A. Armstrong
-----------------------------------
Bruce A. Armstrong
SCOTT CABLE MANAGEMENT COMPANY, INC.
By: /s/ Bruce A. Armstrong
-----------------------------------
Bruce A. Armstrong
9
<PAGE>
EXHIBIT "1"
FORM OF MONTHLY MANAGEMENT FEE STATEMENT
This statement covers the month of ___________________
Actual Budgeted
Gross Gross
Revenues Revenues
--------- --------
Radford
Bellefontaine Group
Montgomery Group
Alamogordo Group
Dickinson
Marksville Group
Chadron Group
Cortez
Tahoe (Myers)
Unallocated (if any)
--------- --------
Company Total
========= --------
Fee Breakdown:
Management Fee - 4.25%
(to be paid to Manager)
Additional Management Fee - 0.25%
(to be paid into Trust
Account)
---------
Total Fees
=========
I, [Name of Certifying Officer], the [Chief Financial Officer/Chief Operating
Officer] of Scott Cable Management Company, Inc., do hereby certify that the
information set forth in this Monthly Management Fee Statement fairly presents,
consistently from month to month, the information set forth in the books and
records of Scott Cable Communications, Inc.
SCOTT CABLE MANAGEMENT COMPANY, INC.
By_________________________________
[Name of Certifying Officer]
<PAGE>
SCOTT CABLE COMMUNICATIONS
Income Statement (YTD to Budgets)
For the Period Ending __________
<TABLE>
<CAPTION>
- ------------Current Period------------ ----------------- YTD -----------------
Annual
Actual Budget Variance Actual Budget Variance Budget
------ ------ -------- ------ ------ -------- ------
------ ------ -------- ------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Expenses
Income from Operation
Other Income
Interest Income
Dividend Income
Management Fees
Refinancing/Bankruptcy Costs
Gain/Loss on Disposal of Assets
------ ------ -------- ------ ------ -------- ------
Other Income
Other Expenses
Deferred Interest Expense
Interest Expense
------ ------ -------- ------ ------ -------- ------
Other Expenses
Depreciation and Amortization
Depreciation
Amortization
------ ------ -------- ------ ------ -------- ------
Depreciation and Amortization
Tax Expense
Federal Income Tax
State Income Tax
------ ------ -------- ------ ------ -------- ------
Tax Expense
------ ------ -------- ------ ------ -------- ------
Net Income (Loss)
</TABLE>
I, [Name of Certifying Officer], the [Chief Financial Officer/Chief Operating
Officer] of Scott Cable Management Company, Inc., do hereby certify that the
information set forth in this Monthly Management Fee Statement fairly presents,
consistently from month to month, the information set forth in the books and
records of Scott Cable Communications, Inc.
SCOTT CABLE MANAGEMENT COMPANY, INC.
By_________________________________
[Name of Certifying Officer]
<PAGE>
EXHIBIT 2
SCOTT CABLE COMMUNICATIONS
Income Statement (YTD Budgets)
For the Period Ending _________
<TABLE>
<CAPTION>
- ----------Current Period-------- -----------YTD--------------
Annual
Actual Budget Variance Actual Budget Variance Budget
------ ------ -------- ------ ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Direct Operating Expense
Technical Salaries
Incentive Compensation
Capitalized Labor
Overtime Premium
Contract Labor
Employee Training
Uniforms
Plant Maintenance
Converter Recovery
Converter Repair
Vehicle Expense - Gas
Vehicle Expense - Leases
Vehicle Expense - Repairs
Vehicle Insurance
Travel and Hotel
Utilities
Microwave Charges
Pay TV Guides
General Insurance
Basic & Tier Program Costs
A La Carte Tier Costs
Pay Per View Expense
Premium Program Cost - HBO
Premium Program Cost - Showtime
Premium Program Cost - TMC
Premium Program Cost - Max
Premium Program Cost - Disney
Premium DMX
Premium Regional Sports
Premium Program Cost - Encore
Premium Program Cost - Sega
Premium Program Cost - DC Radio
Warehouse and Shop Rent
Equipment Rent
Pole Rent
Tower Site Easement Rent
Copyright Fees
Franchise Tax
Ad Valorem Tax
Other Taxes and Licenses
Capitalized Overhead
Miscellaneous Expense
------ ------ -------- ------ ------ -------- ---------
Direct Operating Expense
</TABLE>
<PAGE>
SCOTT CABLE COMMUNICATIONS
Income Statement (YTD to Budgets)
For the Period Ending __________
<TABLE>
<CAPTION>
- --------Current Period------- -----------YTD--------------
Annual
Actual Budget Variance Actual Budget Variance Budget
------ ------ -------- ------ ----- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
G & A Expenses
Administrative Salaries
Incentive Compensation
Overtime Premium
Contract Labor
Subscriber Billing Service
Lock Box Fees
FICA Tax Expense
Unemployment Taxes
Other Payroll Taxes
401k Matching Funds
Group Insurance
Workers Compensation
Office Expense
Postage
Tuition Reimbursement
Meals and Entertainment
Travel and Hotel
Recruitment Expenses
Relocation Expenses
Occupancy
Telephone and Telegraph
Bank Service Charges
Charitable Contributions
Other Contributions, Dues, Subscriptions
Office Rent
CDBC Computer Service Fee
Audit/Other Professional Fees
Collection Fees
Corporate Allocation
Reg Mgmt Expense
Bad Debt Expense
Miscellaneous Expense
------ ------ -------- ------ ----- -------- ------
G & A Expenses
Local Origination
Local Origination Wages
Overtime Premium
Contract Services
Repairs and Maintenance
Travel and Related L/O
Meals and Entertainment
Production Supplies
Ad Production Costs
Communishare
Miscellaneous Expense
------ ------ -------- ------ ----- -------- ------
------ ------ -------- ------ ----- -------- ------
Local Origination
</TABLE>
<PAGE>
SCOTT CABLE COMMUNICATIONS
Income Statement (YTD to Budgets)
For the Period Ending __________
<TABLE>
<CAPTION>
- -------Current Period-------- -----------YTD-------------
Annual
Actual Budget Variance Actual Budget Variance Budget
------ ------ -------- ------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Marketing Expenses
Salaries
Bonus
Direct Sales Commission
Office Incentive
Telemarketing
Overtime Premium
FICA Tax Expense
Unemployment Taxes
Group Insurance
Workers Compensation
Contract Marketing
Direct Mail
Promotional Material
Bill Stuffers
Newspaper Advertising
Radio Advertising
Collateral Materials
Postage
Travel and Hotel
Premiums
Public Relations
Miscellaneous Expense
------ ------ -------- ------ ------ -------- ------
Marketing Expenses
Advertising Sales Expense
Salaries
Commissions
Overtime
Contract Services
FICA Expense
Unemployment Taxes
Group Insurance
Workers Compensation
Vehicle Expense
Agency Commissions
Bad Debt Expense
Miscellaneous Operating Expense
Printing Costs
Travel and Hotel
Meals and Entertainment
------ ------ -------- ------ ------ -------- ------
Advertising Sales Expense
------ ------ -------- ------ ------ -------- ------
</TABLE>
<PAGE>
SCOTT CABLE COMMUNICATIONS
Income Statement (YTD to Budgets)
For the Period Ending __________
<TABLE>
<CAPTION>
- -------Current Period-------- -----------YTD-------------
Annual
Actual Budget Variance Actual Budget Variance Budget
------ ------ -------- ------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue
Basic Cable Service
Tier Service Fee
Tier II Revenue
A La Carte Revenue
Pay Per View - Movies
Pay Per View - Events
Package and Premium Fees
Connection Charges
Converter Rental Revenue
Advertising Revenue
Production Revenue
FM/AO Other Revenue
Late Fees
Pict Classified Revenue
Rental Revenue
Bulk Billing - Basic
Franchise Fee Pass Thru
Home Shopping Revenue
Other Revenue
------ ------ -------- ------ ------ -------- ------
Revenue
</TABLE>
<PAGE>
Exhibit 10.12
ESCROW AGREEMENT
This agreement (the "Agreement"), dated November 15, 1995, by and between
Scott Cable Communications, Inc. (the "Company") and Baer Marks & Upham LLP, as
escrow agent (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, Article VIII of the Company's restated articles of incorporation
("Article VIII") provides for the indemnification by the Company of the
Company's present, future and former officers and directors in accordance with
the terms thereof; and
WHEREAS, in order to better assure persons who served as an officer and/or
director of the Company at any time from and after January 1, 1993
(individually, an "Executive" and, collectively, the "Executives") of the
benefit to them from the indemnification provided under Article VIII and to
induce the Executives who presently serve in any such position to continue to
serve in their capacities as such and to induce persons to serve as Executives
in the future, the Company has agreed to create an indemnification fund for the
payment of any claims giving rise to indemnification by the Company of any of
the Executives under Article VIII and Article 2.02-1 of the Texas Business
Corporation Act (the "Texas Act") in the amount of $500,000 (the
"Indemnification Fund") to be placed and held in escrow and distributed
therefrom in accordance with the terms hereof.
NOW, THEREFORE, in consideration of ten dollars ($10) and other good and
valuable consideration, the sufficiency of which is acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
1. Establishment of Escrow. (a) On the date hereof, the Company has
deposited with the Escrow Agent the Indemnification Fund in immediately
available funds (the "Escrow Fund"). The Escrow Agent agrees to hold the Escrow
Fund subject to, and in accordance with, the terms and provisions of this
Agreement.
(b) Annexed hereto as Schedule 1 is a list of the Executives who
have served in such capacity up to the date hereof and are entitled to
indemnification under Article VIII and the Texas Act and in accordance with the
terms of this Agreement.
(c) The Company shall make such additional deposits of immediately
available funds with the Escrow Agent as may be required from time to time
during the Indemnification Period (as hereinafter defined) to replenish the
Escrow Fund so that the amount thereof during the Indemnification Period shall
not be less than $200,000
<PAGE>
(the "Minimum Required Funds"). Such additional deposits shall be made within
ten (10) days from the receipt of a written notice from the Escrow Agent that
the amount of the Escrow Fund shall have declined below the Minimum Required
Funds (a copy of which notice shall be concurrently delivered to the Executives
serving in such capacity on the date hereof at their addresses set forth on
Schedule 1 as well as those who serve in any such position after such date).
Upon such deposits, such additional amounts shall be deemed deposited as part of
the Escrow Fund and shall be held and distributed in accordance with this
Agreement. In the event the Company shall have not deposited such additional
amounts with the Escrow Agent as required under this paragraph 1(c), the Escrow
Agent shall promptly notify such Executives in writing to that effect.
Notwithstanding the foregoing, this Agreement shall not terminate and, the
Escrow Agent shall continue to serve in his capacity as such, unless and until
this Agreement is terminated in accordance with paragraph 3(b) hereof.
(d) The Escrow Agent shall hold the Escrow Fund in its escrow
account and shall keep an accurate record of all transactions with respect
thereto.
2. Investment. (a) The Escrow Agent shall promptly invest and reinvest the
Escrow Fund in interest-bearing accounts maintained at Chemical Bank or a
comparable bank in New York City. Except as otherwise provided herein, the
Escrow Agent shall not be responsible for any loss arising out of or resulting
from any such investment.
(b) Any interest or other income received on such investments (net
of any expenses of such investments) shall be paid by the Escrow Agent to the
Company on a monthly basis.
3. Delivery. (a) An Executive who was or is threatened to be made a named
defendant or respondent in a Proceeding (as hereinafter defined), at any time
from the date hereof until November 15, 2000 (the "Indemnification Period"),
shall promptly thereafter submit a written notice of claim for indemnification
("Notice of Claim") to the Escrow Agent (a copy of which Notice of Claim shall
be concurrently delivered by the Executive to the Company). Such Notice of Claim
shall state in reasonably specific terms the basis of the claim and a good faith
estimate of the amount of such claim together with a request that the Escrow
Agent reimburse Expenses (as hereinafter defined) incurred by Executive in
connection with the defense of the claim. In addition, such Notice of Claim
shall include (i) an assertion by the Executive that he has acted in good faith
and reasonably believed that his conduct was in the Company's best interest and
in the case of any criminal proceeding, that he had no reasonable cause to
believe his conduct was unlawful (the "Required Standard of Conduct") and (ii)
an unlimited general undertaking by or on behalf of the Executive to reimburse
the Company for all funds advanced for legal fees if it is ultimately determined
by order of a court of competent jurisdiction, which has become final by appeal
or lapse of time, that (Y) the Executive has not met the Required Standard of
Conduct or (Z) the Executive has been found liable for willful or intentional
misconduct in the performance of his duty to the Company and, as a result, is
not entitled to such
-2-
<PAGE>
indemnification. The Notice of Claim shall be accompanied by appropriate
supporting documents (including copies of all relevant filings with any court
served upon the Executive). The Company shall have the right to assume the
defense of the claim, including employment of counsel and the payment of all
Expenses related thereto. Upon request by the Company accompanied by a statement
or invoice of counsel employed by the Company, the Escrow Agent shall reimburse
the Company for Expenses incurred by it. If within ten (10) days of the receipt
of the Notice of Claim by the Company, the Escrow Agent shall not have received
a written notice from the Company (which notice shall be concurrently delivered
by the Company to the Executive) that the Company has elected to assume the
defense of such claim, the Escrow Agent shall reimburse the Executive for
Expenses incurred by him after the date of the Notice of Claim (as evidenced by
a statement or invoice from counsel to Executive) for defense against such
claim. In the event that (i) an order or judgment of a court of competent
jurisdiction shall have been subsequently issued against the Executive in
connection with the Proceeding (a "Court Judgment") (other than a Court Judgment
which shall have become final by appeal or lapse of time, and which shall have
involved the finding or admission of willful or intentional misconduct of the
Executive in the performance of his duty to the Company, in which event the
Executive shall not be entitled to any indemnification under Article VIII or the
Texas Act) or (ii) a Settlement (as hereinafter defined) shall have been
accepted by the Executive in connection with the Proceeding, then, within ten
(10) days of the receipt of a copy thereof by the Escrow Agent (together with
documentary evidence of the date on which a copy of such Court Judgment or
Settlement, as the case may be, has been delivered to the Company), the Escrow
Agent shall pay the amount required for the satisfaction of any such Court
Judgment or Settlement, as the case may be. As used herein, the term
"Proceeding" shall mean (i) any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, any appeal
in such an action, suit or proceeding and any inquiry or investigation that
could lead to such action, suit or proceeding, in each case, in which the
Executive was or is threatened to be made a party by reason of being or having
been such an Executive (whether or not an Executive at the time such costs or
expenses are incurred or may by incurred by or imposed upon the Executive), or
(ii) any Settlement. "Settlement" shall mean any settlement in connection with
the Proceeding to which the Company shall have consented in writing, provided
that such Settlement does not involve the finding or admission of willful or
intentional misconduct of the Executive in the performance of his duty to the
Company. "Expenses" shall mean all reasonable costs and expenses, including
reasonable attorneys' fees and court costs incurred by the Executive in
connection with the Proceeding.
(b) Upon the expiration of the Indemnification Period, the Escrow
Agent shall (after deducting all payments and reimbursements to which it is
entitled pursuant to paragraph 5 hereof, and which shall not have been withdrawn
by the Escrow Agent from the Escrow Fund prior to the expiration of the
Indemnification Period in accordance with paragraph 5 hereof), deliver the
amount of the then unclaimed Escrow Fund to the Company, provided that if there
is then pending a Notice of Claim, the Escrow Agent shall not distribute the
Escrow Fund until a Judgment or Settlement regarding the matter described
-3-
<PAGE>
in the Notice of Claim is obtained unless within one year from receipt by the
Escrow Agent of the Notice of Claim, the Executive delivering the same shall not
have delivered to the Escrow Agent evidence of the initiation of a suit with
respect thereto (in which case the Escrow Agent shall distribute the Escrow Fund
upon the expiration of such one year period). This Agreement shall terminate
upon the delivery of the unclaimed Escrow Fund in accordance with the provisions
hereof.
4. Rights, Duties and Responsibilities of Escrow Agent. It is understood
and agreed that the duties of the Escrow Agent are purely ministerial in nature,
and that:
(a) The Escrow Agent shall be entitled to rely upon the accuracy,
act in reliance upon the contents, and assume the genuineness, of any notice,
instruction, certificate, signature or document that is delivered to the Escrow
Agent pursuant to this Agreement without the necessity of the Escrow Agent
verifying its truth or accuracy.
(b) In the event that the Escrow Agent shall be uncertain as to its
duties or rights under this Agreement or shall receive instructions with respect
to the Escrow Fund which, in its reasonable determination, are in conflict with
either other instructions received by it or with any provision of this
Agreement, the Escrow Agent shall be entitled to deposit the Escrow Fund with
the clerk of a court of competent jurisdiction in a proceeding to which all
parties in interest are joined. Upon the deposit by the Escrow Agent of the
Escrow Fund with such clerk, the Escrow Agent shall be relieved of all further
obligations and released from all obligations and responsibilities under this
Agreement.
(c) The Escrow Agent shall not be liable for any error of judgment
or any action taken or omitted under this Agreement, except in the case of its
willful misconduct. The Escrow Agent shall be entitled to consult with counsel
of its own choosing (which may be the law firm of Baer Marks & Upham LLP), and
shall not be liable for any action taken, suffered or omitted by it in
accordance with the advice of such counsel. The Escrow Agent may rely, without
liability, upon the contents of any order or judgment of any court served upon
it.
5. Fees. The Escrow Agent shall not charge any fee for its services under
this Agreement. The Company agrees to pay, or to reimburse the Escrow Agent,
promptly following written demand and accounting therefor, for all expenses
incurred by it in connection with this Agreement, including, but not limited to,
reasonable attorneys' fees and expenses. If, within thirty (30) days of the
delivery of any such written demand to the Company the Escrow Agent shall not
have been paid or reimbursed for such expenses, the Escrow Agent shall be
entitled to withdraw such expenses from the Escrow Fund.
6. Indemnification. The Company agrees to indemnify and hold harmless the
Escrow Agent from and against any liabilities, losses, damages or expenses
(including, but not limited to, reasonable attorneys' fees and expenses and
court costs), which the Escrow Agent may suffer or incur as a result of any
claim, action or proceeding asserted or
-4-
<PAGE>
brought against the Escrow Agent by any third party arising out of this
Agreement, unless such claim, action or proceeding arises out of the willful
misconduct of the Escrow Agent. The Escrow Agent shall not be under any
obligation to institute suit or defend any claim, action or proceeding by reason
of its serving as Escrow Agent or having custody of the Escrow Fund unless and
until the expenses of any such claim, action or proceeding are advanced to it by
the Company, provided, however, that in the event the Escrow Agent elects to
institute suit or defend any such claim, action or proceeding, and the Company
shall not have advanced the expenses requested therefor promptly after the
receipt of written demand thereof, the Escrow Agent shall be entitled to
withdraw such amounts from the Escrow Fund.
7. Removal or Resignation. So long as Bruce A. Armstrong shall be serving
as President of the Company, the Company shall be permitted to remove the Escrow
Agent and to appoint a successor in accordance with this paragraph 7. The Escrow
Agent may resign from its duties and obligations hereunder by giving the Company
at least 5 days' written notice, specifying the date when such resignation shall
take effect. Prior to the effective date of such resignation, the Company shall
appoint a successor Escrow Agent to assume the duties and obligations of, and to
be substituted for, the Escrow Agent. Upon the appointment of a successor Escrow
Agent, the Escrow Agent shall deliver the Escrow Fund (or assign its rights to
the Escrow Fund) to its successor, and the Escrow Agent shall then be relieved
and released of and from its duties and obligations under this Agreement, except
to execute such documents and take such further actions as may be reasonably
required to effect the termination and transfer of its obligations and
responsibilities under this Agreement.
8. Notices. All notices and other communications required or permitted
under this Agreement shall be deemed given if delivered personally or by prepaid
overnight courier (in each case, against receipt) or mailed by registered or
certified mail, return receipt requested, as follows:
(i) If to the Company:
Scott Cable Communications, Inc.
4 Landmark Square, Suite 302
Stamford, CT 06901
Telecopier: (203) 325-3110
Attention: Bruce A. Armstrong, President and CEO
(ii) If to the Escrow Agent:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Telecopier: (212) 702-5941
Attention: Stanley E. Bloch, Esq.
-5-
<PAGE>
(iii) If to any Executive, listed on Schedule 1 at the
addresses set forth on Schedule 1
or to such other address as any party may hereafter designate in writing in the
manner provided in this Section 8. All such notices and other communications
shall be effective when received.
9. Miscellaneous. (a) This Agreement constitutes the entire agreement
between the parties relating to its subject matter and merges and supersedes and
terminates all prior written and oral agreements between the parties. This
Agreement may not be changed in any respect except by writing duly executed by
the Company, at least four of the Executives presently serving and any other
Executive (if not one of said four) who has delivered an unsatisfied Notice of
Claim, provided that in no event shall the obligations of the Escrow Agent
hereunder be modified without its written consent.
(b) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, without regard to conflict of laws
principles applied in the State of New York.
(c) This Agreement shall be binding upon and shall inure to the
benefit of the parties and to their respective successors and assigns. This
Agreement shall inure to the benefit of the Executives, their heirs and
successors and each of them.
(d) The headings of the paragraphs of this Agreement are for
convenience of reference only, are not part of this Agreement and shall not be
used in its interpretation.
(e) No provision of this Agreement that is held to be unenforceable
by a court of competent jurisdiction shall in any way invalidate any other
provision of this Agreement, all of which shall remain in full force and effect.
(f) The failure of any party at any time to require performance by
any other party of a provision of this Agreement or to resort to a remedy at law
or in equity or otherwise, shall in no way affect the right of such party to
require full performance or to resort to such remedy at any time thereafter nor
shall a waiver by any party of the breach of any provision of this Agreement be
taken or held to be a waiver of any subsequent breach of such provision unless
expressly so stated in writing. No waiver of any of the provisions of this
Agreement shall be effective unless in writing signed by the party to be
charged.
(g) The Escrow Agent is counsel for the Company, and one of the
Executives is a partner of the Escrow Agent. The Escrow Agent may continue to
serve as counsel to the Company and may represent the Company in connection with
any claim, action or proceedings involving the Company and any of the Executives
in connection with
-6-
<PAGE>
this Agreement, and neither anything contained herein, the execution or delivery
hereof by the Escrow Agent, nor the performance by the Escrow Agent of its
duties hereunder, shall in any way affect or require termination of such
relationships with the Company.
(h) For tax reporting purposes, all income earned with respect to
the Escrow Fund shall be attributed to the Company. The federal tax
identification number of the Company is 75-1766202.
SCOTT CABLE COMMUNICATIONS, INC.
By: /s/ Bruce A. Armstrong
------------------------------------
Bruce A. Armstrong
President, Chief Executive Officer
and a Director
ESCROW AGENT:
BAER MARKS & UPHAM LLP
By: /s/ Stanley E. Bloch
------------------------------------
-7-
<PAGE>
SCHEDULE 1
* Bruce A. Armstrong * Steven C. Fox
34 Hickory Hill Road 5 Norman Road
Wilton, Connecticut 06897 Stamford, Connecticut 06906
* H. Arthur Bellows, Jr. Barry A. Fromberg
15 Upper Cross Road 5401 Kinross Drive
Greenwich, Connecticut 06831 Plano, Texas 75093
Stanley E. Bloch * J. Paul Morbeck
340 East 64th Street 3814 Hillside Trail
New York, New York 10021 Grapevine, Texas 76051
* Jerold S. Earl * Day L. Patterson
62 Elaine Drive 575 Sixth Avenue, #7-B
Monroe, Connecticut 06468 New York, New York 10011
* John M. Flanagan, Jr. Steven J. Simmons
144 Fernwood Drive 66 Winding Lane
Old Tappen, New Jersey 07675 Greenwich, Connecticut 06831
- ---------- * Michael R. Steed
* Serving on the date hereof 4100 Roseway Street
Monroe, Connecticut 06468
S1-1
<PAGE>
EXHIBIT 10.13
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of December 18, 1996 ("Escrow Agreement"),
is by and among CIG & CO. ("CIG"), METROPOLITAN LIFE INSURANCE COMPANY (as
successor by merger to New England Mutual Life Insurance Company) ("MetLife"),
SCOTT CABLE COMMUNICATIONS, INC. (the "Company"), and FIRST UNION BANK OF
CONNECTICUT, a national banking association, as Escrow Agent hereunder ("Escrow
Agent").
BACKGROUND
A. The Company, together with its stockholders (collectively, the
"Debtors"), filed voluntary petitions for reorganization under chapter 11 of the
United States Bankruptcy Code (the "Bankruptcy Code") on February 14, 1996 (the
"Petition Date"). On the date hereof, the Debtors' Second Amended Joint Plan
of Reorganization dated October 31, 1996 (as amended and modified, the "Plan")
has become effective and today is the Effective Date (as defined in the Plan).
B. CIG is the holder of $6,153,332.18 aggregate outstanding principal
amount of Series A Senior Secured Notes of the Company due 1995 and
$4,425,673.92 aggregate outstanding principal amount of Series D Senior Secured
Notes of the Company due 1995 (collectively, the "CIG Notes"), which were issued
pursuant to the Amended and Restated Note Agreement dated as of June 30, 1993
between CIG and the Company. MetLife is the holder of $3,918,959.92 aggregate
outstanding principal amount of Series A Senior Secured Notes of the Company due
1995 and $1,836,466.11 aggregate outstanding principal amount of Series C Senior
Secured Notes of the Company due 1995 (collectively, the "MetLife Notes", and
collectively with the CIG Notes, the "Notes"), which were issued pursuant to the
Amended and Restated Note Agreement dated as of June 30, 1993 between MetLife
and the Company.
C. Pursuant to the Plan, on the Effective Date, the Company is paying to
CIG and MetLife in immediately available funds the aggregate outstanding
principal balance of the CIG Notes and the MetLife Notes, respectively, all
accrued but unpaid interest thereon through the Petition Date, all accrued but
unpaid interest on such Notes from the Petition Date through the Effective Date
at the respective pre-default interest rates provided for in such Notes, and all
reasonable fees and expenses incurred by CIG and MetLife through the Effective
Date.
D. The CIG Notes and the MetLife Notes all provide that overdue amounts
shall bear interest at a rate equal to 2% above the interest rate otherwise
in effect (the "2% Differential"). Each of CIG and MetLife timely filed a
Proof of Claim with the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") that included
<PAGE>
claims for the 2% Differential on the outstanding principal balance of
their respective Notes, all of which Notes matured on November 15, 1995. The
Company disputes the payment of the 2% Differential accrued from and after the
Petition Date. The Court has not yet determined whether the 2% Differential
for each of CIG and MetLife is an allowed claim against the Company under the
Bankruptcy Code and has therefore ruled and directed in connection with the
confirmation of the Plan that a segregated escrow account be established and
held by the Escrow Agent, on the terms set forth herein, (i) for CIG in the
aggregate amount of $251,550, and (ii) for MetLife in the aggregate amount of
$135,450.
E. Escrow Agent has agreed to accept, hold, and disburse the funds
deposited with it and the earnings thereon in accordance with the terms of this
Escrow Agreement.
F. Each of CIG and MetLife (each a "Noteholder" and collectively, the
"Noteholders") and the Company have each appointed their respective
Representatives (as defined below) to represent them for all purposes in
connection with the funds to be deposited with Escrow Agent and this Escrow
Agreement.
G. In order to establish the escrow of funds and to effect the direction
of the Bankruptcy Court with respect to the 2% Differential, the parties hereto
have entered into this Escrow Agreement.
STATEMENT OF AGREEMENT
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, for
themselves, their successors and assigns, hereby agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings when
used herein:
"Allowed Amount" shall mean the amount determined by the Bankruptcy Court
or another court of competent jurisdiction by a final, non-appealable order to
be due and owing by the Company to such Noteholder with respect to such
Noteholder's 2% Differential Claim (other than with respect to reasonable fees
and expenses). Escrow Agent shall have no liability or responsibility to
question or determine the accuracy or reasonableness of any Allowed Amount.
"CIG Escrow Funds" shall mean the funds which were transferred into the
Escrow Account pursuant to SECTION 3.a., plus any interest and other income
thereon, less amounts disbursed from such funds in accordance with this Escrow
Agreement.
"CIG Portion" shall mean the portion of the Escrow Account consisting of
the CIG Escrow Funds.
2
<PAGE>
"CIG Representative" shall mean James R. Kuzemchak or any other person
designated in a writing signed by CIG and delivered to Escrow Agent, the Company
Representative and the other Noteholders Representatives in accordance with the
notice provisions of this Escrow Agreement, to act as CIG's representative under
this Escrow Agreement.
"Company's Certificate of Non-Allowed Claim and Direction" shall mean a
certificate signed by the Company's Representative (a) certifying that the
Bankruptcy Court or another court of competent jurisdiction has ruled or
determined by a final, non-appealable order, that the Noteholder referred to
therein is not entitled to payment of such Noteholder's 2% Differential Claim
(other than with respect to reasonable fees and expenses), and attached to which
is a copy of such final, non-appealable order, certified by an appropriate
court official, setting forth such ruling or determination, and (b) directing
the Escrow Agent to disburse to the Company the amount of such Noteholder's
Escrow Funds less such Noteholder's Fee Amount.
"Company Representative" shall mean Bruce Armstrong or any other person
designated in a writing signed by the Company and delivered to Escrow Agent and
the Noteholders Representatives in accordance with the notice provisions of this
Escrow Agreement, to act as its representative under this Escrow Agreement.
"Escrow Account" shall mean the segregated escrow account established and
held by the Escrow Agent under this Escrow Agreement to fund payment, out of
their respective Escrow Funds, of each Noteholder's Allowed Amount and
reasonable fees and expenses.
"Escrow Period" shall mean the period commencing on the date hereof and
ending on December 18, 1999.
"Joint Written Direction" shall mean a written direction executed by a
Noteholder's Representative and the Company's Representative and directing
Escrow Agent to disburse all or a portion of such Noteholder's Escrow Funds.
"MetLife Escrow Funds" shall mean the funds which were transferred into the
Escrow Account pursuant to SECTION 3.b., plus any interest and other income
thereon, less amounts disbursed from such funds in accordance with this Escrow
Agreement.
"MetLife Portion" shall mean the portion of the Escrow Account consisting
of the MetLife Escrow Funds.
"MetLife Representative" shall mean Jacqueline D. Jenkins or any other
person designated in a writing signed by MetLife and delivered to Escrow Agent,
the Company Representative and the other Noteholders Representatives in
accordance with the notice provisions of this Escrow Agreement, to act as
MetLife's representative under this Escrow Agreement.
3
<PAGE>
"Noteholder's Certificate of Allowed Amount and Direction" shall mean a
certificate signed by a Noteholder's Representative (a) certifying that the
Bankruptcy Court or another court of competent jurisdiction has ruled or
determined by a final, non-appealable order, that the Noteholder referred to
therein is entitled to payment of the Allowed Amount set forth therein, and
attached to which is a copy of such final, non-appealable order, certified by an
appropriate court official, and (b) directing the Escrow Agent (i) to disburse
to such Noteholder the Allowed Amount from such Noteholder's Escrow Funds, and
(ii) to disburse to the Company the balance of such Noteholder's Escrow Funds
less such Noteholder's Fee Amount.
"Noteholder's Certificate of Allowed Fee Amount and Direction" shall mean a
certificate signed by a Noteholder's Representative (a) certifying either (i)
that such Noteholder has submitted to the Company a statement for the reasonable
fees and expenses incurred by such Noteholder in connection with such
Noteholder's 2% Differential Claim and that the Company has not, within ten days
after delivery of such statement, contested in writing the reasonableness of
such fees and expenses or (ii) that the Bankruptcy Court or another court of
competent jurisdiction has ruled or determined by a final, non-appealable order,
that such Noteholder is entitled to payment of the reasonable fees and expenses
set forth in such order, and attached to which is a copy of such final,
non-appealable order, certified by an appropriate court official, and
(b) directing the Escrow Agent to disburse to such Noteholder the amount of such
statement or the amount set forth in such order, as the case may be, provided
that the amount allowed with respect to fees and expenses of such Noteholder
shall not exceed such Noteholder's Fee Amount, with the balance of such
Noteholder's Escrow Funds, if any, to be disbursed to the Company after payment
of any other amounts being disbursed from such Noteholder's Escrow Funds.
"Noteholder's Certificate of Undisputed Amount and Direction" shall mean a
certificate signed by a Noteholder's Representative (a) certifying that the
Company has not, on or before the ninetieth day after the date hereof as
provided in the Plan, filed with the Bankruptcy Court an objection to such
Noteholder's 2% Differential Claim, and (b) directing the Escrow Agent (i) to
disburse from such Noteholder's Escrow Funds to such Noteholder the amount of
such Noteholder's Undisputed Amount, and (ii) to disburse to the Company the
balance of such Noteholder's Escrow Funds less such Noteholder's Fee Amount.
"Noteholder's 2% Differential Claim" shall mean the claim by a Noteholder
for (i) payment of the 2% Differential accrued on the outstanding principal
balance of such Noteholders' Notes from and after the Petition Date though the
Effective Date, (ii) interest thereon from the date hereof, and (iii) the
reasonable fees and expenses of such Noteholder incurred in connection with its
claim for the 2% Differential.
"Noteholders' Escrow Funds" shall mean the CIG Escrow Funds and the MetLife
Escrow Funds.
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"Noteholder's Fee Amount" shall mean $16,250 in the case of CIG and $8,750
in the case of MetLife.
"Noteholders' Representatives" shall mean the CIG Representative and the
MetLife Representative.
"Removal Written Direction" shall mean a written direction executed by all
Representatives and directing that the Escrow Agent be removed in accordance
with SECTION 7 hereof.
"Representatives" shall mean the Noteholders Representatives and the
Company Representative.
"Undisputed Amount" shall mean a Noteholder's 2% Differential Claim, plus
interest on such Noteholder's 2% Differential Claim from the date hereof through
the date of payment of such Noteholder's 2% Differential Claim, at the
applicable default interest rates under such Noteholder's Notes. Escrow Agent
shall have no liability or responsibility to question or determine the accuracy
or reasonableness of any Undisputed Amount.
2. APPOINTMENT OF AND ACCEPTANCE BY ESCROW AGENT. CIG, MetLife, the
Company and the Representatives hereby appoint Escrow Agent to serve as escrow
agent hereunder. Escrow Agent hereby accepts such appointment and, upon receipt
by wire transfer of the Escrow Funds in accordance with SECTION 3 below, agrees
to hold, invest and disburse the Escrow Funds in accordance with this Escrow
Agreement. The Company represents and warrants to and covenants with the
Noteholders and the Escrow Agent that the Escrow Funds are not subject to any
lien, claim, encumbrance or security interest, or filed or to be filed financing
statement, including without limitation any lien or security interest in favor
of FINOVA Capital Corporation. It is hereby agreed that the Escrowed Funds
shall not constitute property of the Company or the Noteholders unless and until
disbursed to such entity in accordance with this Escrow Agreement.
3. CREATION OF ESCROW ACCOUNT AND ESCROW FUNDS.
a. On the date hereof, the Company will transfer the sum of $251,550 to
Escrow Agent, by wire transfer of immediately available funds, to the following
account to fund the CIG Portion of the Escrow Account:
First Union National Bank
Charlotte, North Carolina
ABA # 053000219
Credit to: Trust Ops Ledger #465946
FFC: Scott Cable #9572830602
Attn: Lynne Thompson
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b. On the date hereof, the Company will transfer the sum of $135,450 to
Escrow Agent, by wire transfer of immediately available funds, to the following
account to fund the MetLife Portion of the Escrow Account:
First Union National Bank
Charlotte, North Carolina
ABA # 053000219
Credit to: Trust Ops Ledger #465946
FFC: Scott Cable #9572830602
Attn: Lynne Thompson
4. DISBURSEMENTS OF ESCROW FUNDS.
a. NOTEHOLDER'S CERTIFICATE OF UNDISPUTED AMOUNT AND DIRECTION.
Escrow Agent shall disburse a Noteholder's Escrow Funds, at any
time and from time to time, on the fifteenth day after receipt of
and in accordance with a Noteholder's Certificate of Undisputed
Amount and Direction from such Noteholder's Representative.
b. NOTEHOLDER'S CERTIFICATE OF ALLOWED AMOUNT AND DIRECTION. Escrow
Agent shall disburse a Noteholder's Escrow Funds, at any time and
from time to time, on the fifteenth day after receipt of and in
accordance with a Noteholder's Certificate of Allowed Amount and
Direction from such Noteholder's Representative.
c. NOTEHOLDER'S CERTIFICATE OF ALLOWED FEE AMOUNT AND DIRECTION.
Escrow Agent shall disburse a Noteholder's Escrow Funds, at any
time and from time to time, on the fifteenth day after receipt of
and in accordance with a Noteholder's Certificate of Allowed Fee
Amount and Direction.
d. COMPANY'S CERTIFICATE OF NON-ALLOWED CLAIM AND DIRECTION. Escrow
Agent shall disburse a Noteholder's Escrow Funds, at any time and
from time to time, on the fifteenth day after receipt of and in
accordance with a Company's Certificate of Non-Allowed Claim and
Direction with respect to such Noteholder.
e. JOINT WRITTEN DIRECTION. Escrow Agent shall disburse a
Noteholder's Escrow Funds, at any time and from time to time,
upon receipt of and in accordance with a Joint Written Direction
of such Noteholder's Representative and the Company's
Representative.
f. EXPIRATION OF ESCROW PERIOD. Upon the expiration of the Escrow
Period, Escrow Agent shall distribute to each Noteholder all such
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Noteholder's Escrow Funds, as promptly as practicable, without
any instruction or direction from any Representative.
Any Noteholder's Certificate of Undisputed Amount and Direction,
Noteholder's Certificate of Allowed Amount and Direction, Noteholder's
Certificate of Allowed Fee Amount and Direction, or Company's Certificate of
Non-Allowed Claim and Direction shall be delivered to all Representatives
concurrently with its delivery to the Escrow Agent.
All disbursements of funds from the Escrow Funds shall be subject to the
claims of Escrow Agent and the Indemnified Parties (as defined below) pursuant
to SECTION 9 below.
5. DISBURSEMENT INTO COURT. If, at any time, there shall exist any
dispute between the Noteholders and the Company or the Representatives with
respect to the holding or disposition of any portion of the Escrow Funds or any
other obligations of Escrow Agent hereunder, or if at any time Escrow Agent is
unable to determine, to Escrow Agent's sole satisfaction, the proper disposition
of any portion of the Escrow Funds or Escrow Agent's proper actions with respect
to its obligations hereunder, or if the Representatives have not within 30 days
of the furnishing by Escrow Agent of a notice of resignation pursuant to
SECTION 7 hereof, appointed a successor Escrow Agent to act hereunder, then
Escrow Agent may, in its sole discretion, take either or both of the following
actions:
a. suspend the performance of any of its obligations (including
without limitation any disbursement obligations) under this Escrow
Agreement until such dispute or uncertainty shall be resolved to the sole
satisfaction of Escrow Agent or until a successor Escrow Agent shall have
been appointed (as the case may be); PROVIDED, HOWEVER, that Escrow Agent
shall continue to invest the Escrow Funds in accordance with SECTION 6
hereof; and/or
b. petition (by means of an interpleader action or any other
appropriate method) the Bankruptcy Court or any other court of competent
jurisdiction for instructions with respect to such dispute or uncertainty,
and to the extent required by law, pay into such court for holding and
disposition in accordance with the instructions of such court, all funds
held by it in the Escrow Funds, after deduction and payment to Escrow Agent
of all fees and expenses (including court costs and attorneys' fees)
payable to, incurred by, or expected to be incurred by Escrow Agent in
connection with the performance of its duties and the exercise of its
rights hereunder.
Escrow Agent shall have no liability to the Noteholders, the Company, their
respective shareholders or any other person with respect to any such suspension
of performance or disbursement into court, specifically including any liability
or claimed liability that may arise, or be alleged to have arisen, out of or as
a result of any delay in the disbursement of
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funds held in the Escrow Funds or any delay in or with respect to any other
action required or requested of Escrow Agent.
6. INVESTMENT OF FUNDS. Escrow Agent shall invest and reinvest the funds
held in a Noteholder's Escrow Funds as the Company's Representative shall direct
(subject to applicable minimum investments) in writing from time to time;
PROVIDED, HOWEVER, that no investment or reinvestment may be made except in the
following:
a. direct obligations of the United States of America or obligations
the principal of and the interest on which are unconditionally guaranteed
by the United States of America;
b. negotiable certificates of deposit issued by any bank, bank and
trust company, or national banking association (including Escrow Agent and
its affiliates), which certificates of deposit are insured by the Federal
Deposit Insurance Corporation; or
c. any money market fund substantially all of which is invested in
the foregoing investment categories, including any money market fund
managed by Escrow Agent and any of its affiliates.
If Escrow Agent has not received a written direction from the Company's
Representative at any time that an investment decision must be made, Escrow
Agent shall invest the Escrow Funds, or such portion thereof as to which no
written direction has been received, in investments described in clause (c)
above. Each of the foregoing investments shall be made in the name of Escrow
Agent. No investment shall be made in any instrument or security that has a
remaining maturity of greater than six (6) months. Notwithstanding anything to
the contrary contained herein, Escrow Agent may, without notice to the
Representatives, sell or liquidate any of the foregoing investments at any time
if the proceeds thereof are required for any release of funds permitted or
required hereunder, and Escrow Agent shall not be liable or responsible for any
loss, cost or penalty resulting from any such sale or liquidation. With respect
to any funds received by Escrow Agent for deposit into the Escrow Funds or any
written direction received by Escrow Agent with respect to investment of any
funds in the Escrow Funds after ten o'clock, a.m., Charlotte, North Carolina,
time, Escrow Agent shall not be required to invest such funds or to effect such
investment instruction until the next day upon which banks in Charlotte, North
Carolina are open for business.
7. RESIGNATION AND REMOVAL OF ESCROW AGENT. Escrow Agent may resign from
the performance of its duties hereunder at any time by giving ten (10) days'
prior written notice to the Representatives or may be removed, with or without
cause, by the Representatives, acting jointly by furnishing a Removal Written
Direction to Escrow Agent, at any time by the giving of ten (10) days' prior
written notice to Escrow Agent. Such resignation or removal shall take effect
upon the appointment of a successor Escrow Agent
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<PAGE>
as provided hereinbelow. Upon any such notice of resignation or removal, the
Representatives jointly shall appoint a successor Escrow Agent hereunder,
which shall be a commercial bank, trust company or other financial
institution with a combined capital and surplus in excess of $10,000,000.
Upon the acceptance in writing of any appointment as Escrow Agent hereunder
by a successor Escrow Agent, such successor Escrow Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Escrow Agent, and the retiring Escrow Agent shall be
discharged from its duties and obligations under this Escrow Agreement, but
shall not be discharged from any liability for actions taken as Escrow Agent
hereunder prior to such succession. After any retiring Escrow Agent's
resignation or removal, the provisions of this Escrow Agreement shall inure
to its benefit as to any actions taken or omitted to be taken by it while it
was Escrow Agent under this Escrow Agreement. The retiring Escrow Agent
shall transmit all records pertaining to the Escrow Funds and shall pay all
funds held by it in the Escrow Funds to the successor Escrow Agent, after
making copies of such records as the retiring Escrow Agent deems advisable
and after deduction and payment of the retiring Escrow Agent of all fees and
expenses (including court costs and attorneys' fees) payable to, incurred by
or expected to be incurred by the retiring Escrow Agent in connection with
the performance of its duties and the exercise of its rights hereunder.
8. LIABILITY OF ESCROW AGENT.
a. Escrow Agent shall have no liability or obligation with respect
to the Escrow Funds except for Escrow Agent's willful misconduct or gross
negligence. Escrow Agent's sole responsibility shall be for the safekeeping,
investment, and disbursement of the Escrow Funds in accordance with the terms of
this Escrow Agreement. Escrow Agent shall have no implied duties or obligations
and shall not be charged with knowledge or notice of any fact or circumstance
not specifically set forth herein. Escrow Agent may rely upon any instrument,
not only as to its due execution, validity and effectiveness, but also as to the
truth and accuracy of any information contained therein, which Escrow Agent
shall in good faith believe to be genuine, to have been signed or presented by
the person or parties purporting to sign the same and to conform to the
provisions of this Escrow Agreement. In no event shall Escrow Agent be liable
for incidental, indirect, special, consequential or punitive damages. Escrow
Agent shall not be obligated to take any legal action or commence any proceeding
in connection with the Escrow Funds, any account in which Escrow Funds are
deposited, or this Escrow Agreement, or to appear in, prosecute or defend any
such legal action or proceeding. Escrow Agent may consult legal counsel
selected by it in the event of any dispute or question as to the construction of
any of the provisions hereof or of any other agreement or of its duties
hereunder, or relating to any dispute involving any party hereto, and shall
incur no liability and shall be fully indemnified from any liability whatsoever
in acting in accordance with the opinion or instruction of such counsel. The
Company shall promptly pay, upon demand, the reasonable fees and expenses of any
such counsel.
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b. The Escrow Agent is authorized, in its sole discretion, to
comply with orders issued or process entered by any court with respect to the
Escrow Funds, without determination by the Escrow Agent of such court's
jurisdiction in the matter. If any portion of the Escrow Funds is at any
time attached, garnished or levied upon under any court order, or in case the
payment, assignment, transfer, conveyance or delivery of any such property
shall be stayed or enjoined by any court order, or in case any order,
judgment or decree shall be made or entered by any court affecting such
property or any part thereof, then and in any such event, the Escrow Agent is
authorized, in its sole discretion, to rely upon and comply with any such
order, writ, judgment or decree which it is advised by legal counsel selected
by it is binding upon it without the need for appeal or other action; and if
the Escrow Agent complies with any such order, writ, judgment or decree, it
shall not be liable to any of the parties hereto or to any other person or
entity by reason of such compliance even though such order, writ, judgment or
decree may be subsequently reversed, modified, annulled, set aside or vacated.
9. INDEMNIFICATION OF ESCROW AGENT. From and at all times after the date
of this Escrow Agreement, the Company shall, to the fullest extent permitted by
law and to the extent provided herein, indemnify and hold harmless Escrow Agent
and each director, officer, employee, attorney, agent and affiliate of Escrow
Agent (collectively, the "Indemnified Parties") against any and all actions,
claims (whether or not valid), losses, damages, liabilities, costs and expenses
of any kind or nature whatsoever (including without limitation reasonable
attorneys' fees, costs and expenses) incurred by or asserted against any of the
Indemnified Parties from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or in any way relating to any
claim, demand, suit, action or proceeding (including any inquiry or
investigation) by any person, including without limitation the Company, whether
threatened or initiated, asserting a claim for any legal or equitable remedy
against any person under any statute or regulation, including, but not limited
to, any federal or state securities laws, or under any common law or equitable
cause or otherwise, arising from or in connection with the negotiation,
preparation, execution, performance or failure of performance of this Escrow
Agreement or any transactions contemplated herein, whether or not any such
Indemnified Party is a party to any such action, proceeding, suit or the target
of any such inquiry or investigation; PROVIDED, HOWEVER, that no Indemnified
Party shall have the right to be indemnified hereunder for any liability finally
determined by a court of competent jurisdiction, subject to no further appeal,
to have resulted solely from the negligence or willful misconduct of such
Indemnified Party. If any such action or claim shall be brought or asserted
against any Indemnified Party, such Indemnified Party shall promptly notify the
Company in writing, and the Company shall assume the defense thereof, including
the employment of counsel and the payment of all expenses. Such Indemnified
Party shall, in its sole discretion, have the right to employ separate counsel
(who may be selected by such Indemnified Party in its sole discretion) in any
such action and to participate in the defense thereof, and the fees and expenses
of such counsel shall be paid by such Indemnified Party, except that the Company
shall be required to pay such fees and expenses if (a) the Company agrees to pay
such fees and expenses, or (b) the Company shall fail to assume the
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defense of such action or proceeding or shall fail, in the sole discretion of
such Indemnified Party, to employ counsel satisfactory to the Indemnified
Party in any such action or proceeding, (c) the Company is the plaintiff in
any such action or proceeding or (d) the named or potential parties to any
such action or proceeding (including any potentially impleaded parties)
include both Indemnified Party and the Company, and Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to
the Company. The Company shall be liable to pay fees and expenses of counsel
pursuant to the preceding sentence. All such fees and expenses payable by
the Company pursuant to the foregoing sentence shall be paid from time to
time as incurred, both in advance of and after the final disposition of such
action or claim. All of the foregoing losses, damages, costs and expenses of
the Indemnified Parties shall be payable by the Company upon demand by such
Indemnified Party. The obligations of the Company under this SECTION 9 shall
survive any termination of this Escrow Agreement and the resignation or
removal of Escrow Agent shall be independent of any obligation of the Escrow
Agent.
The parties agree that neither the payment by the Company of any claim by
Escrow Agent for indemnification hereunder nor the disbursement of any amounts
to Escrow Agent from the Escrow Funds in respect of a claim by Escrow Agent for
indemnification shall impair, limit, modify, or affect, as between the Company
and the Noteholders the respective rights and obligations of the Company, on the
one hand, and the Noteholders, on the other hand, in respect of the Noteholders'
Claims.
10. FEES AND EXPENSES OF ESCROW AGENT. the Company shall compensate
Escrow Agent for its services hereunder in an amount equal to $750 per annum,
the fee for the first year having been paid by the Company in advance on the
date hereof, and, in addition, shall reimburse Escrow Agent for all of its
reasonable out-of-pocket expenses, including attorneys' fees, travel expenses,
telephone and facsimile transmission costs, postage (including express mail and
overnight delivery charges), copying charges and the like. All of the
compensation and reimbursement obligations set forth in this SECTION 10 shall be
payable by the Company upon demand by Escrow Agent. The obligations of the
Company under this SECTION 10 shall survive any termination of this Escrow
Agreement and the resignation or removal of Escrow Agent.
Escrow Agent is authorized to, and may, disburse to itself from the Escrow
Funds, from time to time, the amount of any compensation and reimbursement of
out-of-pocket expenses due and payable hereunder, to the extent the Company has
failed to pay the same, after written demand therefor (including any amount to
which Escrow Agent or any Indemnified Party is entitled to seek indemnification
pursuant to SECTION 9 hereof.) Escrow Agent shall notify the Representatives of
any disbursement from the Escrow Funds to itself or any Indemnified Party in
respect of any compensation or reimbursement hereunder and shall furnish to the
Representatives copies of all related invoices and other statements. The
Company, the Noteholders and the Representatives hereby grant to Escrow Agent
and the Indemnified Parties a security interest in and lien upon the Escrow
Funds and all funds
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therein to secure all obligations hereunder to Escrow Agent and the
Indemnified Parties, and Escrow Agent and Indemnified Parties shall have the
right to offset the amount of any compensation or reimbursement due any of
them hereunder (including any claim for indemnification pursuant to SECTION 9
hereof) against the Escrow Funds. If for any reason funds in the Escrow
Funds are insufficient to cover such compensation and reimbursement, the
Company shall promptly pay such amounts to Escrow Agent or any Indemnified
Party upon receipt of an itemized invoice.
11. REPRESENTATIONS AND WARRANTIES.
a. Each Noteholder makes the following representations and
warranties to Escrow Agent:
(i) Such Noteholder has full power and authority to execute and
deliver this Escrow Agreement and to perform its obligations
hereunder;
(ii) This Escrow Agreement has been duly approved by all
necessary corporate or other action of such Noteholder including
any necessary shareholder approval, has been executed by duly
authorized officers or agents of such Noteholder, and constitutes
a valid and binding agreement of such Noteholder, enforceable in
accordance with its terms.
(iii) The execution, delivery, and performance by such
Noteholder of this Escrow Agreement will not violate, conflict
with, or cause a default under the organizational documents of
such Noteholder, any applicable law or regulation, any court
order or administrative ruling or decree to which such Noteholder
is a party or any of its property is subject.
(iv) The applicable person named in the definition of such
"Noteholder's Representative" has been duly appointed to act as
the Representative of such Noteholder hereunder and has full
power and authority to execute, deliver, and perform this Escrow
Agreement, to execute and deliver any Certificate of Allowed
Amount and Direction, Joint Written Direction or Removal Written
Direction, to amend, modify or waive any provision of this
Agreement and to take any and all other actions as such
Noteholder's Representative under this Agreement, all without
further consent or direction from, or notice to, such Noteholder
or any other party.
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(v) No party other than the parties hereto have, or shall have,
any lien, claim or security interest in the Escrow Funds or any
part thereof.
(vi) All of the representations and warranties of such Noteholder
contained herein are true and complete as of the date hereof and
will be true and complete at the time of any disbursement from
such Noteholder's Escrow Funds.
b. The Company makes the following representations and warranties to
Escrow Agent:
(i) The Company has full power and authority to execute and
deliver this Escrow Agreement and to perform its obligations
hereunder;
(ii) This Escrow Agreement has been duly approved by all
necessary corporate action of the Company, including any
necessary shareholder approval, has been executed by duly
authorized officers of the Company, and constitutes a valid and
binding agreement of the Company, enforceable in accordance with
its terms.
(iii) The execution, delivery, and performance by the Company
of this Escrow Agreement will not violate, conflict with, or
cause a default under the charter or bylaws of the Company, any
applicable law or regulation, any court order or administrative
ruling or decree to which the Company is a party or any of its
property is subject, or any agreement, contract, indenture, or
other binding arrangement to which the Company is a party or any
of its property is subject.
(iv) Bruce Armstrong has been duly appointed to act as the
Representative of the Company hereunder and has full power and
authority to execute, deliver, and perform this Escrow Agreement,
to execute and deliver any Company Certification of Non-Allowed
Claim and Direction, Joint Written Direction or Removal Written
Direction, to amend, modify or waive any provision of this
Agreement and to take any and all other actions as the Company's
Representative under this Agreement, all without further consent
or direction from, or notice to, the Company or any other party.
(v) No party other than the parties hereto have, or shall have,
any lien, claim or security interest in the Escrow Funds or any
part thereof. No financing statement under the Uniform
Commercial Code is or will be on file in any jurisdiction naming
the Company as Debtor
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and claiming a security interest in or describing (whether
specifically or generally) the Escrow Funds or any part thereof.
(vi) All of the representations and warranties of the Company
contained herein are true and complete as of the date hereof and
will be true and complete at the time of any disbursement form
the Escrow Funds.
12. CONSENT TO JURISDICTION AND VENUE. In the event that any party hereto
commences a lawsuit or other proceeding relating to or arising from this
Agreement, the parties hereto agree that the Bankruptcy Court shall have
exclusive jurisdiction over any such proceeding. The parties hereto waive any
objection to such venue. The parties hereto consent to and agree to submit to
the jurisdiction of the Bankruptcy Court specified herein and agree to accept
service or process to vest personal jurisdiction over them in any of these
courts.
13. NOTICE. All notices and other communications hereunder shall be in
writing and shall be deemed to have been validly served, given or delivered five
(5) days after deposit in the United States mails, by certified mail with return
receipt requested and postage prepaid, when delivered personally, one (1) day
after delivery to any overnight courier, or when transmitted by facsimile
transmission facilities, and addressed to the party to be notified as follows:
If to Company at: Scott Cable Communications, Inc.
c/o American Cable Entertainment
Four Landmark Square
Suite 302
Stamford, Connecticut 06901
ATTENTION: Bruce Armstrong, President
Facsimile Number: (203) 325-3110
If to the CIG
Representative at: James R. Kuzemchak
Managing Director
Private Securities (S-307)
CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, CT 06152-2307
Facsimile Number: (860) 726-7203
If to the MetLife
Representative at: Jacqueline D. Jenkins
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Vice President
Metropolitan Life Insurance Company
334 Madison Avenue
Convent Station, NJ 07961
Facsimile Number: (201) 254-3055
If to the Escrow
Agent at: First Union Bank of Connecticut, as Escrow Agent
Corporate Trust Administration
10 State House Square, 2nd floor
Hartford, CT 06103-3698
ATTENTION: W. Jeffrey Kramer
Facsimile Number: (860) 247-1356
or to such other address as each party may designate for itself by like notice.
14. AMENDMENT OR WAIVER. This Escrow Agreement may be changed, waived,
discharged or terminated only by a writing signed by the Representatives and
Escrow Agent. No delay or omission by any party in exercising any right with
respect hereto shall operate as a waiver. A waiver on any one occasion shall
not be construed as a bar to, or waiver of, any right or remedy on any future
occasion.
15. SEVERABILITY. To the extent any provision of this Escrow Agreement 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
Escrow Agreement.
16. GOVERNING LAW. This Escrow Agreement shall be construed and
interpreted in accordance with the internal laws of the State of New York
without giving effect to the conflict of laws principles thereof.
17. ENTIRE AGREEMENT. This Escrow Agreement constitutes the entire
agreement between the parties relating to the holding, investment and
disbursement of the Escrow Funds and sets forth in their entirety the
obligations and duties of Escrow Agent with respect to the Escrow Funds.
18. BINDING EFFECT. All of the terms of this Escrow Agreement, as amended
from time to time, shall be binding upon, inure to the benefit of and be
enforceable by the respective heirs, successors and assigns of the Company, the
Noteholders, the Representatives and Escrow Agent.
19. EXECUTION IN COUNTERPARTS. This Escrow Agreement and any Joint
Written Direction or Removal Direction may be executed in two or more
counterparts, which when so executed shall constitute one and the same agreement
or direction.
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20. TERMINATION. Upon the first to occur of the disbursement of all
amounts in the Escrow Funds pursuant to this Agreement or the disbursement of
all amounts in the Escrow Funds into court pursuant to SECTION 5 hereof, this
Escrow Agreement shall terminate and Escrow Agent shall have no further
obligation or liability whatsoever with respect to this Escrow Agreement or the
Escrow Funds.
21. DEALINGS. The Escrow Agent and any stockholder, director, officer
or employee of the Escrow Agent may buy, sell and deal in any of the
securities of the Company or any Noteholder and become pecuniarily interested
in any transaction in which the Company or any Noteholder may be interested,
and contract and lend money to the Company or any Noteholder and otherwise
act as fully and freely as though it were not Escrow Agent under this
Agreement. Nothing herein shall preclude the Escrow Agent from acting in any
other capacity for the Company or any Noteholder or for any other entity.
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IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be executed under seal as of the date first above written.
WITNESS: SCOTT CABLE COMMUNICATIONS, INC.
/s/LEWIS ELDRIDGE By: /s/BRUCE A. ARMSTRONG
- -------------------------------- -----------------------------
Bruce A. Armstrong, President
WITNESS: CIG & CO.
/s/BEVERLY B. JENSEN By: /s/JAMES R. KUZEMCHAK
- -------------------------------- ------------------------------
James R. Kuzemchak, Partner
WITNESS: METROPOLITAN LIFE INSURANCE COMPANY
/s/DAVID FELDMAN By: /s/JACQUELINE D. JENKINS
- -------------------------------- ------------------------------
Jacqueline D. Jenkins
Vice President
FIRST UNION BANK OF CONNECTICUT,
AS ESCROW AGENT
By: /s/W. JEFFREY KRAMER
------------------------------
W. Jeffrey Kramer
Vice President
<PAGE>
Exhibit 21.1
Subsidiaries of the Company
Jurisdiction of
Subsidiaries Organization
- ------------ ------------
Cable Pay Services, Inc. Texas
Cable TV of Andrews, Inc. Texas
Cable T.V. of Central Louisiana, Inc. Texas
Cable TV of La Salle, Inc. Texas
Cable T.V. of Winnsboro, Inc. Texas
Canadian Cablevision Inc. Texas
Costal Plains Cablevision Inc. Texas
Montgomery County CATV Inc. Texas
Television Access, Inc. Texas
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<PAGE>
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<S> <C> <C>
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<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 DEC-31-1995
<CASH> 10,680 6,965
<SECURITIES> 0 0
<RECEIVABLES> 834 556
<ALLOWANCES> (97) (104)
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<PP&E> 40,264 36,893
<DEPRECIATION> (23,785) (21,300)
<TOTAL-ASSETS> 54,440 52,498
<CURRENT-LIABILITIES> 0 0
<BONDS> 151,305 150,656
0 0
0 0
<COMMON> 1 1
<OTHER-SE> (111,573) (107,718)
<TOTAL-LIABILITY-AND-EQUITY> 54,440 52,498
<SALES> 0 0
<TOTAL-REVENUES> 22,140 28,088
<CGS> 7,644 9,441
<TOTAL-COSTS> 17,925 24,602
<OTHER-EXPENSES> 1,965 262
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 6,110 16,838
<INCOME-PRETAX> (3,856) (7,915)
<INCOME-TAX> (1) 764
<INCOME-CONTINUING> (3,855) (8,679)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,855) (8,679)
<EPS-PRIMARY> 0 0
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