<PAGE> 1
FORM 10-K.--ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 34-29354 eff. 7-1-91.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 1995
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the transition period from to
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Commission file number 0-16065
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NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
STATE OF WASHINGTON 91-1302403
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3600 WASHINGTON MUTUAL TOWER
1201 THIRD AVENUE, SEATTLE, WASHINGTON 98101
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (206) 621-1351
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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(NONE) (NONE)
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
DOCUMENTS INCORPORATED BY REFERENCE
(Partially Incorporated into Part IV)
(1) Form 8-A Registration Statement filed July 24, 1987.
(2) Form 10-K Annual Reports for fiscal years ended December 31,
1986, December 31, 1988, December 31, 1990, December 31, 1991,
and December 31, 1992, respectively.
(3) Form 8-K dated September 29, 1994.
(4) Form 10-Q Quarterly Report for period ended September 30,
1995.
This filing contains pages. Exhibits Index appears on page . Financial
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Statements/Schedules Index appears on page .
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<PAGE> 2
PART I
ITEM 1. BUSINESS
Northland Cable Properties Five Limited Partnership (the "Partnership")
is a Washington limited partnership consisting of two general partners (the
"General Partners") and approximately 995 limited partners as of December 31,
1995. Northland Communications Corporation, a Washington corporation, is the
Managing General Partner of the Partnership (referred to herein as "Northland"
or the "Managing General Partner"). FN Equities Joint Venture, a California
general partnership, is the Administrative General Partner of the Partnership
(the "Administrative General Partner").
Northland was formed in March 1981 and is principally involved in the
ownership and management of cable television systems. Northland currently
manages the operations and is the General Partner for cable television systems
owned by 6 limited partnerships. Northland is also the parent company of
Northland Cable Properties, Inc. which was formed in February 1995 and is
principally involved in direct ownership of cable television systems. Northland
is a subsidiary of Northland Telecommunications Corporation ("NTC"). Other
subsidiaries of NTC include:
NORTHLAND CABLE TELEVISION, INC. - formed in October 1985 and
principally involved in the direct ownership of cable television
systems. Owner of Northland Cable News, Inc.
NORTHLAND CABLE NEWS, INC. - formed in May 1994 and
principally involved in the production and development of
local programming.
NORTHLAND CABLE SERVICES CORPORATION - formed in August 1993 as the
holding company for the following entities:
CABLE TELEVISION BILLING, INC. - formed in June 1987 and
principally involved in the development and production of
computer software used in connection with the billing and
financial recordkeeping for cable systems owned or managed by
Northland or Northland Cable Television, Inc.
NORTHLAND INVESTMENT CORPORATION - formed in 1988 and
principally involved in the underwriting of Northland
sponsored limited partnership securities offerings.
CABLE AD-CONCEPTS, INC. - formed in November 1993 and
principally involved in the production and development of
video commercial advertisements.
NORTHLAND MEDIA, INC. - formed in April 1995 as the holding company for
the following entity:
STATESBORO MEDIA, INC. - formed in April 1995 and principally
involved in acquiring and operating an AM radio station
serving the community of Statesboro, GA and surrounding areas.
The Partnership was formed on August 19, 1985 and began operations in
1985 with the acquisition of a cable television system serving several
communities and contiguous areas surrounding Cedar Creek, Texas (the "Cedar
Creek System"). In 1986, the Partnership purchased cable television systems
located in Lamesa, Texas and surrounding areas (the "Lamesa System"), and in
western North Carolina (the "Forest City System"). In September 1994 the
Partnership purchased a cable television system in Corsicana, Texas (the
"Corsicana System"). In December 1995, the Partnership acquired cable television
systems serving communities in the Ellenboro, Bostic, Gilkey and Harris, North
Carolina areas (the "Phoenix Systems")(collectively herein referred to as the
"Systems"). As of December 31, 1995, the total number of basic subscribers
served by the Systems was 23,242, and the Partnership's penetration rate (basic
subscribers as a percentage of homes passed) was
<PAGE> 3
approximately 60% as compared to an industry average of approximately 64%, as
reported by PAUL KAGAN ASSOCIATES, INC.
In August 1994, the Partnership formed Corsicana Media, Inc. (Corsicana
Media), a Washington corporation and wholly owned subsidiary, for the purpose of
acquiring and operating an AM radio station serving the community of Corsicana,
Texas and surrounding areas. On January 16, 1995, Corsicana Media acquired the
operating assets of KAN-D Land, Inc.
The Partnership has 25 non-exclusive franchises to operate the Systems.
These franchises, which will expire at various dates through 2014, have been
granted by county, city and other local governmental authorities in the areas in
which the Systems operate. Annual franchise fees are paid to the granting
governmental authorities. These fees vary between 2% and 5% of the respective
gross revenues of the Systems in the communities. The franchises may be
terminated for failure to comply with their respective conditions.
The Partnership serves the communities and surrounding areas of Lamesa,
Cedar Creek and Corsicana, Texas, as well as Forest City, North Carolina. The
following is a description of the areas:
Lamesa, TX: Lamesa is the county seat of Dawson County, Texas. Its
economy is largely based on agriculture and livestock. Total cultivated acreage
in Dawson County is estimated at over 500,000 acres, with cotton being the
principal crop. Certain information regarding the Lamesa, TX system as of
December 31, 1995 is as follows:
<TABLE>
<S> <C>
Basic Subscribers 3,405
Tier Subscribers 1,394
Premium Subscribers 945
Estimated Homes Passed 4,000
</TABLE>
Cedar Creek, TX: The eight communities served by the Cedar Creek System
are scattered around Cedar Creek Lake, a man-made reservoir created in 1967 to
provide water to Fort Worth, Texas. The 33,750-acre lake is a recreation
attraction and provides residents and weekenders with opportunities for fishing,
camping, boating and other water sports. Although tourism is the primary growth
industry, many residents commute to Dallas on a daily basis. Certain information
regarding the Cedar Creek, TX system as of December 31, 1995 is as follows:
<TABLE>
<S> <C>
Basic Subscribers 4,081
Tier Subscribers 971
Premium Subscribers 1,237
Estimated Homes Passed 15,000
</TABLE>
Forest City, NC: The communities served by the Forest City System are
all located in Rutherford County, North Carolina, in the industrial Piedmont
section of North Carolina and the Blue Ridge Mountains. In the midst of the
county lies Forest City, atop a hill, with the smaller surrounding communities
served by the Forest City System located within close proximity. Rutherford
County is in an area generally referred to as the "Thermal Belt" region. This
region is known for its year-round moderate climate. Initially, this climate
created ideal conditions for a prosperous agricultural economy, which remains a
strong contributor to the local economy. More recently, the area has been
enjoying growth in industrial development. Certain information regarding the
Forest City, NC system as of December 31, 1995 is as follows:
<TABLE>
<S> <C>
Basic Subscribers 9,773
Tier Subscribers 6,368
Premium Subscribers 3,691
Estimated Homes Passed 11,000
</TABLE>
Corsicana, TX: The Corsicana system serves the community of and
contiguous areas surrounding Corsicana, Texas located in north central Texas on
I-45 between Dallas (53 miles) and Houston (187 miles). Founded in 1848, the
city flourished with the expansion of railroads, discovery of oil in 1894 and
subsequent oil booms. Corsicana was the site of the first oil refinery in
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Texas, built by Magnolia Oil in 1897. From those beginnings came Mobil Oil whose
parent company was Magnolia. Texaco Oil also traces its beginnings to Corsicana.
Today, Corsicana is the host city for Texas' newest and largest recreational
area, Richland Chambers Lake. The city also encompasses the 117-acre main campus
of Navarro College, which contains a population of approximately 3,000 students.
Certain information regarding the Corsicana, TX system as of December 31, 1995
is as follows:
<TABLE>
<S> <C>
Basic Subscribers 5,983
Premium Subscribers 2,634
Estimated Homes Passed 8,800
</TABLE>
The Partnership had 34 employees as of December 31, 1995. Management of
these systems is handled through offices located in the towns of Gun Barrel City
(Cedar Creek), Lamesa and Corsicana, Texas and Forest City, North Carolina.
Pursuant to the Agreement of Limited Partnership, the Partnership reimburses the
Managing General Partner for time spent by the Managing General Partner's
accounting staff on Partnership accounting and bookkeeping matters. (See Item
13(a) below.)
The Partnership's cable television business is not considered seasonal.
The business of the Partnership is not dependent upon a single customer or a few
customers, the loss of any one or more of which would have a material adverse
effect on its business. No customer accounts for 10% or more of revenues. No
material portion of the Partnership's business is subject to renegotiation of
profits or termination of contracts or subcontracts at the election of any
governmental unit, except that franchise agreements may be terminated or
modified by the franchising authorities as noted above. During the last year,
the Partnership did not engage in any research and development activities.
Partnership revenues are derived primarily from monthly payments
received from cable television subscribers. Subscribers are divided into three
categories: basic subscribers, tier subscribers and premium subscribers. "Basic
subscribers" are households that subscribe to the basic level of service, which
generally provides access to the three major television networks (ABC, NBC and
CBS), a few independent local stations, PBS (the Public Broadcasting System) and
certain satellite programming services, such as ESPN, CNN or The Discovery
Channel. "Tier subscribers" are households that subscribe to an additional level
of certain programming services, such as Cartoon Network, CNBC or American Movie
Classics. "Premium subscribers" are households that subscribe to one or more
"pay channels" in addition to the basic service. These pay channels include such
services as Showtime, Home Box Office, Cinemax, Disney or The Movie Channel.
COMPETITION
Due to factors such as the non-exclusivity of the Partnership's
franchises, recent regulatory changes and Congressional action, the rapid pace
of technological developments, and the adverse publicity received by the cable
industry regarding the lack of competition, there is a substantial likelihood
that the Partnership's systems will be subject to a greater degree of
competition in the future.
Other Entertainment Alternatives The Partnership's systems compete with
other communications and entertainment media, including conventional
over-the-air television broadcasting stations. 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
over-the-air television broadcasts. In some of the areas served by the
Partnership's systems, several of the broadcast television channels can be
adequately 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 available off-air.
<PAGE> 5
Cable television systems also are susceptible to competition from other
video programming delivery systems (discussed below), from other forms of home
entertainment such as video cassette recorders, and, in varying degrees, from
sources of entertainment in the communities served, including motion picture
theaters, live theater and sporting events.
Overbuilds Recent federal legislation and court decisions have
increased the likelihood that incumbent cable operators will face instances of
"overbuilding". Overbuilding occurs when a cable operator who is not affiliated
with the incumbent franchise holder applies for and receives a second franchise
from the local franchising authority and constructs a cable system in direct
competition with that of the incumbent. None of the Partnership's franchises
provide for exclusivity. Overbuilding typically occurs where the overbuilder
believes it can attract a profitable share of the incumbent operator's customer
base. Overbuilding also may occur if the local franchising authority authorizes
construction of a governmentally owned and operated cable system. However,
Management believes that given the current regulatory environment related to
cable rates, the attractiveness of overbuilding may have been diminished.
Wireless Services A variety of services, often generically referred to
as "wireless" cable, distribute video programming via omnidirectional low-power
microwave signals from a stationary transmitter to customers at fixed locations.
For many years such services faced governmental restrictions on the types of
programming they could distribute and were generally prevented, by regulatory
and technological reasons, from distributing the quantity of programming
distributed by cable operators. Wireless operators also faced difficulty in
obtaining access to certain programming produced by vendors affiliated with the
cable industry.
In recent years, the Federal Communications Commission (the "FCC") has
adopted policies for authorizing new technologies and providing a more favorable
regulatory environment for certain existing wireless technologies. Such policies
have the potential to create additional competition for cable television
systems. The FCC recently amended its regulations to enable multi-channel,
multi-point distribution services ("MMDS"), to compete more effectively with
cable television systems by making available additional channels to the MMDS
industry.
On December 10, 1992, the FCC commenced a rulemaking in which a new
wireless multichannel video service is proposed to be created. The proposed new
service is called the Local Multichannel Distribution Service ("LMDS") and will
operate in the 27.5 - 29.5 MHz frequency band. LMDS providers, as the FCC
currently proposes, would have no restrictions on the kinds of service that may
be offered. No major technological advances which would adversely affect the
Partnership's business have been made during 1995.
There can be no assurance, however, that future competition brought
about by MMDS, LMDS and other wireless technologies will not have a material
adverse effect on Partnership operations. As noted below, the recent
Congressional legislation, among other things, is designed to make programming
that is currently available to the cable television industry available to other
technologies to foster the growth of alternative video programming delivery
services.
Satellite Delivered Services Additional competition exists from private
cable television systems serving condominiums, apartment complexes and other
private residential developments. The operators of these private systems,
generally referred to as Satellite Master Antenna Television ("SMATV")
providers, often enter into exclusive agreements with apartment building owners
or homeowner's associations that preclude operators of franchised cable
television systems from serving residents of such private complexes. Due to the
widespread availability of reasonably priced satellite signal reception dishes
or earth stations, SMATV systems now can offer both improved reception of local
televisions station and many of the same satellite-delivered programming
services that are offered by franchised cable television systems. Moreover,
SMATV systems generally are free of the regulatory burdens imposed on franchised
cable television systems. Although a number of states and some
<PAGE> 6
municipalities have enacted laws and ordinances to afford operators of
franchised cable television systems access to private complexes, several of such
laws and ordinances have been challenged successfully in the courts, and others
are under attack. Because the Partnership generally has been able to enter into
access agreements with owners of private complexes, in Management's opinion,
successful challenges to access statutes would not have a material adverse
effect on the operations of the Partnership.
Reasonably priced earth stations designed for private home use now
enable individual households to receive many of the satellite-delivered
programming services formerly available only to cable television subscribers.
Many satellite programmers now encode their signals in order to allow reception
only by means of authorized decoding equipment.
Direct broadcast satellite ("DBS") service consists of satellite
services that focus on delivering programming services directly to homes using
high-power signals transmitted by satellites to receiving facilities located on
the premises of subscribers. With an antenna as small as 18 inches, a DBS
customer can receive a hundred or more programming signals. Several companies
are preparing to have high-powered DBS systems in place by the middle of this
decade, and two, DirecTv, an affiliate of Hughes Communications, United States
Satellite Broadcasting Co., an affiliate of Hubbard Broadcasting and Primestar,
owned by a consortium of cable television operators, have launched their
systems. It is expected that these DBS operators will use video compression
technology to increase the channel capacity of their systems to provide a
package of movies, broadcast stations and other programming services competitive
with those of cable television systems.
Using a national base of subscribers, it is possible that DBS companies
may be able to offer new and highly specialized services which may not be
available to the cable television industry, but as channel capacity and
penetration of cable television systems increase, the cable industry is expected
to have the ability to offer additional services as well. Because DBS systems
deliver their services using satellite technology, they may not be able to
provide services that are of local interest to their subscribers, and may not be
able to maintain a local presence, which is considered a significant advantage
in developing and maintaining subscriber support. The extent to which DBS
systems will be competitive with the services provided by cable television
systems will depend, among other things, on the ability of DBS operators to
finance substantial start-up costs and to create their own programming or to
obtain access to existing programming. Recent federal legislation 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.
During 1995, the Partnership did not experience any significant
subscriber loss to DBS. There can be no assurance, however, that future
competition brought about by DBS will not have a material adverse impact on
Partnership operations.
Telephone Companies Federal law, FCC regulations and the 1982 federal
court consent decree (the "Modified Final Judgment") that settled the 1974
antitrust suit against AT&T all limit in various ways the provision of video
programming and other information services by telephone companies. Federal law
codifies FCC cross-ownership regulations which, among other things, prohibit
local telephone exchange companies including the seven Regional Bell Operating
Companies ("RBOCs"), from providing video programming directly to subscribers
within their local exchange service areas, except in rural areas or by specific
waiver of FCC rules. These statutory provisions and corresponding FCC
regulations are of particular competitive importance because these telephone
companies already own much of the plant necessary for cable television
operations, such as poles, underground conduits, associated rights-of-way and
connections to the home.
In July 1991, the U.S. District Court responsible for the Modified
Final Judgment lifted the prohibition on the provision of information services
by the RBOCs. As a result, the RBOCs were allowed to acquire or construct cable
television systems outside of their own service areas. Another federal court
<PAGE> 7
held that the cable/telco cross-ownership prohibitions unconstitutionally
abridge the First Amendment rights of the RBOCs and other telephone companies.
Several RBOCs have entered into agreements to purchase cable television systems
outside their service areas. Management believes that such purchases of existing
cable television systems do not represent a significant competitive threat to
the Partnership
In July 1992, the FCC voted to authorize additional competition to
cable television by video programmers using broadband common carrier facilities
constructed by telephone companies. The FCC allowed telephone companies to take
ownership interests of up to 5% in such programmers. Several telephone companies
have sought approval from the FCC to build such "video dialtone" systems and
several experimental systems have been approved by the FCC. No such systems were
proposed in a community in which the Partnership holds a cable franchise.
Recent Federal laws have significantly changed the restrictions on
telephone companies with respect to their ability to own and operate video
programming delivery systems within their own service areas. See "Regulation -
The 1996 Act."
There can be no assurance that future competition brought on by
telephone company participation in the cable television industry will not have a
material adverse effect on the Partnership's operations.
REGULATION
The Partnership's business is subject to intensive regulation at the
federal and local levels, and to a lesser degree, at the state level. The FCC,
the principal federal regulatory agency with jurisdiction over cable television,
is responsible for implementing federal policies such as rate regulation, cable
system relations with other communications media, cross-ownership, signal
carriage, equal employment opportunity and technical performance. Provisions of
regulatory events that have impacted the Partnership's operations are summarized
below.
The 1992 Cable Act. On October 5, 1992, Congress enacted the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act"), which significantly increased regulation of the cable television
industry. The 1992 Cable Act became generally effective on December 4, 1992,
although certain provisions became effective at later dates. The 1992 Cable Act
represents a significant change in the regulatory framework under which cable
television systems operate and has had and likely will continue to have a
significant impact on the cable industry and the Partnership's business.
Since the Cable Communications Policy Act of 1984 (the "1984 Cable
Act") became effective, and prior to the enactment of the 1992 Cable Act, rates
for cable services were unregulated for substantially all of the Partnership's
systems. Effective September 1, 1993, rate regulation was instituted for certain
cable television services and equipment in communities that are not subject to
"effective competition" as defined in the legislation. Effective competition is
defined by this law to exist only where (i) fewer than 30 percent of the
households in the franchise area subscribe to the cable service of a cable
system; (ii) there are at least two unaffiliated multichannel video programming
distributors serving the franchise area meeting certain penetration criteria; or
(iii) a multichannel video programming distributor is available to 50 percent of
the homes in the franchise area and is operated by the franchising authority.
Virtually all cable television systems in the United States, including all of
the Partnership's systems, are not subject to effective competition under this
definition and therefore are subject to rate regulation for basic service by
local franchising authority officials under the oversight of the FCC and subject
to rate regulation for their remaining programming services (other than those
offered for a per-channel or per-program charge) by the FCC.
<PAGE> 8
The 1992 Cable Act requires each cable system to establish a basic
service tier consisting, at a minimum, of all local broadcast signals and all
non-satellite delivered distant broadcast signals which the system wishes to
carry, and all public, educational and governmental access programming. On April
1, 1993, the FCC adopted its initial regulations governing rates for the basic
service tier. Under the regulations adopted by the FCC on April 1, 1993, local
franchising authorities, after meeting certain requirements, can require cable
operators to reduce the rates for the basic service tier by up to 10 percent
from the rates in effect on September 30, 1992, if those rates exceed a
per-channel benchmark established by the FCC. Local franchising authorities also
are empowered to regulate the rates charged for installation and lease of the
equipment used by subscribers to receive the basic service tier and the
installation and monthly use of connections for additional television sets. The
FCC's regulations require franchising authorities to regulate these rates on the
basis of actual cost standards developed by the FCC.
A local franchising authority seeking to regulate basic service rates
must certify to the FCC that, among other things, it has adopted regulations
consistent with the FCC's rate regulation guidelines and criteria. If a local
franchising authority's certification is deficient or subsequently is revoked,
then the FCC is required to regulate the cable operator's basic service rates
until the local franchising authority is properly certified or until such time
as effective competition exists within the cable system's franchise area.
Under the initial regulations adopted by the FCC on April 1, 1993, the
FCC, in response to complaints by a subscriber, franchising authority or other
governmental entity, required cable operators to reduce the rates for tiers of
service other than the basic service tier ("CPST's") by up to 10 percent from
the rates in effect on September 30, 1992, if those rates were determined to
exceed a per-channel benchmark established by the FCC. In response to
complaints, the FCC also regulates, on the basis of actual cost, the rates for
equipment used only to receive these higher service tiers.
Only the FCC may regulate CPST's. Neither the FCC nor a local
franchising authority has jurisdiction over a cable system's rates for
programming provided on a per-channel or per-program basis.
As part of the implementation of the new regulations, the FCC froze all
rates in effect on April 5, 1993 until May 15, 1994, except rates for premium
and pay-per-view programming services and equipment. On February 22, 1994, the
FCC adopted rules that modify, among other things, the FCC's benchmark system
for determining the maximum rates for regulated services on cable systems not
subject to effective competition. In addition to adopting new, lower benchmark
levels, the FCC's regulations (i) allow local franchising authorities to require
cable operators to reduce the rate for the basic service tier by up to 17
percent from the rates in effect on September 30, 1992 if those rates exceed the
new per-channel benchmarks by that amount, and (ii) allow the FCC, in response
to a complaint, to require cable operators to reduce the rates for CPST's by up
to 17 percent from the rates in effect on September 30, 1992 if those rates
exceed the new per-channel benchmarks by that amount.
In late 1994, the FCC revised its regulations governing the manner in which
cable operators may charge subscribers for new cable programming services. The
FCC instituted a three-year flat fee mark-up plan for charges relating to new
channels of cable programming services in addition to the present formula for
calculating the permissible rate for new services. Commencing January 1, 1995,
operators may charge for new channels of cable programming services added after
May 14, 1994 at a rate of up to 20 cents per channel, but may not make
adjustments to monthly rates totaling more than $1.20 plus an additional 30
cents for programming license fees per subscriber over the first two years of
the three-year period for these new services. Cable operators may charge an
additional 20 cents in the third year only for channels added in that year plus
the costs for the programming. Cable operators electing to use the 20 cents per
channel adjustment may not also take a 7.5% mark-up on programming cost
increases, which is permitted under the FCC's current rate regulations. The FCC
indicated that it would request further comment on whether cable
<PAGE> 9
operators should continue to receive the 7.5% mark-up on increases in license
fees on existing programming services.
Additionally, the FCC will permit cable operators to offer New Product
Tiers ("NPT") at rates which they elect so long as, among other conditions,
other channels that are subject to rate regulation are priced in conformity with
applicable regulations and cable operators do not remove programming services
from existing service tiers and offer them on the NPT.
Under the 1992 Cable Act, cable systems may not require subscribers to
purchase any service tier other than the basic tier as a condition of access to
video programming offered on a per-channel or per-program basis. Cable systems
are allowed a 10-year phase-in period to the extent necessary to implement the
required technology to facilitate such access. The FCC may grant extensions of
the 10-year time period, if deemed necessary.
The 1992 Cable Act also provides that the consent of most television
stations (except satellite-delivered television stations that were provided to
the cable television industry as of May 1, 1991, and noncommercial stations)
would be required before a cable system could retransmit their signals.
Alternatively, a television station could elect to exercise must-carry rights.
Must-carry rights entitle a local broadcast station to demand carriage on a
cable system, and a system generally is required to devote up to one-third of
its channel capacity for the carriage of local stations. Litigation challenging
the constitutionality of the mandatory broadcast signal carriage requirements of
the 1992 Cable Act is currently pending before the United States Supreme Court.
The must-carry rules will remain in effect during the pendency of the
proceedings before the United States Supreme Court. If must-carry requirements
withstand judicial review, the requirements may cause displacement of more
attractive programming. If retransmission consent requirements withstand
judicial review and broadcast stations require significant monetary payments for
cable system carriage of their signals, the cost of such signal carriage may
adversely affect the Partnership's operations.
In addition, the 1992 Cable Act (i) requires cable programmers under
certain circumstances to offer their programming to present and future
competitors of cable television such as multichannel multipoint distribution
services ("MMDS"), satellite master antenna systems ("SMATV") and direct
broadcast satellite system operators; (ii) prohibits new exclusive contracts
with program suppliers without FCC approval; (iii) bars municipalities from
granting exclusive franchises and from unreasonably refusing to grant additional
competitive franchises; (iv) permits municipal authorities to operate a cable
system without a franchise; (v) regulates the ownership by cable operators of
other media such as MMDS and SMATV; (vi) bars, subject to several stated
exceptions, cable operators from selling or transferring ownership in a cable
system for a three-year period following the acquisition or initial construction
of the system; and (vii) prohibits a cable operator from charging a customer for
any service or equipment that the subscriber has not affirmatively requested.
In response to the 1992 Cable Act, the FCC has imposed or will impose
new regulations in the areas of customer service, technical standards,
compatibility with other consumer electronic equipment such as "cable ready"
television sets and video cassette recorders, equal employment opportunity,
privacy, rates for leased access channels, obscene or indecent programming,
limits on national cable system ownership concentration, standards for limiting
the number of channels that a cable television system operator could program
with programming services controlled by such operator and disposition of a
customer's home wiring.
The 1992 Cable Act and subsequent FCC rulings have generally increased
the administrative and operational expenses of cable television systems as a
result of additional regulatory oversight by the FCC and local franchise
authorities. There have been several lawsuits filed by cable operators and
programmers in federal court challenging various aspects of the 1992 Cable Act.
The litigation concerning the must-carry rules is described above. Appeals also
have been filed in connection with litigation resulting from the
<PAGE> 10
FCC's rate regulation rulemaking decisions. The Partnership cannot determine at
this time the outcome of pending FCC rulemakings, the litigation described
herein, or the impact of any adverse judicial or administrative decisions on the
Partnership's systems or business.
Other Regulatory Developments In November 1991, the FCC released a
Report and Order in which it concluded, among other things, that the 1984 Cable
Act and the FCC's regulatory cross-ownership restrictions do not prohibit
interexchange carriers (i.e., long distance telephone companies) from acquiring
cable television systems or entering into joint ventures with cable operators in
areas where such interexchange carriers provide their long distance telephone
services. The FCC also concluded that a local exchange carrier (i.e., the local
telephone company) that provides a common carrier-based system to distribute
video programming to subscribers and a third party programmer using such common
carrier services are not required by federal law to obtain a cable television
franchise from the local franchising authority in order to provide such video
programming services to the public. The FCC's decision described in the
preceding sentence has been appealed and these appeals are currently pending.
In 1989, the FCC issued new syndicated exclusivity and network
non-duplication rules which enable local television broadcasters to compel cable
television operators to delete certain programming on distant broadcast signals.
Those rules took effect January 1, 1990. Under the rules, all television
broadcasters, including independent stations, can compel cable television
operators to delete syndicated programming from distant signals if the local
broadcaster negotiated exclusive rights to such programming. Local network
affiliates may insist that a cable television operator delete a network
broadcast on a distant signal. The rules made certain distant signals a less
attractive source of programming for the Partnership's systems, since much of
such distant signals' programming may have to be deleted.
The FCC currently regulates the rates and conditions imposed by public
utilities for use of their poles, unless, under the Federal Pole Attachments
Act, state public service commissions are able to demonstrate that they regulate
the cable television pole attachment rates. In the absence of state regulation,
the FCC administers pole attachment rates through the use of a formula which it
has devised. The validity of this FCC function was upheld by the United States
Supreme Court.
THE 1996 ACT
On February 8, 1996, the Telecommunications Act of 1996 (the "1996
Act") was enacted which dramatically changed federal telecommunications laws and
the future competitiveness of the industry. Many of the changes called for by
the 1996 Act will not take effect until the FCC issues new regulations which, in
some cases, may not be completed for a few years. Because of this, the full
impact of the 1996 Act on the Partnership's operations cannot be determined at
this time. A summary of the provisions impacting the cable television industry,
more specifically those impacting the Partnership's operations, follows:
CPST Rate Regulation FCC regulation of rates for CPST's has been
eliminated for small cable systems served by small companies. Small cable
systems are those having 50,000 or fewer subscribers served by companies with
fewer than one percent of national cable subscribers (approximately 600,000).
All of the Partnership's cable systems qualify as small cable systems. Basic
tier rates remain subject to regulation by the local franchising authority under
most circumstances until effective competition exists. The 1996 Act expands the
definition of effective competition to include the offering of video programming
services directly to subscribers in a franchised area by the local exchange
carrier, its affiliates, or any multichannel video programming distributor which
uses the facilities of the local exchange carrier. No penetration criteria
exists that triggers the presence of effective competition under these
circumstances.
<PAGE> 11
Telephone Companies The 1996 Act allows telephone companies to offer
video programming directly to customers in their service areas immediately upon
enactment. They may provide video programming as a cable operator fully subject
to the 1996 Act, or a radio-based multichannel programming distributor not
subject to any provisions of the 1996 Act or through non-franchised "open video
systems" offering non-discriminatory capacity to unaffiliated programmers,
subject to selected provisions of the 1996 Act. Although management's opinion is
that the probability of competition from telcos in rural areas is unlikely in
the near future, there are no assurances such competition will not materialize.
The 1996 Act encompasses various other aspects of providing cable
television service including prices for equipment, discounting of rates to
multiple dwelling units, lifting of anti-trafficking restrictions,
cable-telephone cross ownership provisions, pole attachment rate formulas, rate
uniformity, program access, scrambling and censoring of PEG and leased access
channels.
Copyright Cable television systems are subject to federal copyright
licensing, covering carriage of television broadcast signals. In exchange for
paying a percentage of their revenues to a federal copyright royalty pool, cable
television operators obtain a compulsory license to retransmit copyrighted
materials from broadcast signals. Existing Copyright Office regulations require
that compulsory copyright payments be calculated on the basis of revenue derived
from any service tier containing broadcast retransmission. Although the FCC has
no formal jurisdiction over this area, it has recommended to Congress to
eliminate the compulsory copyright scheme altogether. The Copyright Office has
similarly recommended such a repeal. Without the compulsory license, cable
television operators would need to negotiate rights from the copyright owners
for each program carried on each broadcast station in each cable system's
channel lineup. Such negotiated agreements could increase the cost to cable
television operators of carrying broadcast signals. Thus, given the uncertain
but possible adoption of this type of copyright legislation, the nature or
amount of the Partnership's future payments for broadcast signal carriage cannot
be predicted at this time.
Local Regulation Cable television systems are generally operated
pursuant to franchises, permits or licenses issued by a municipality or other
local government entity. Each franchise generally contains provisions governing
fees to be paid to the franchising authority, sale or transfer of the franchise,
territory of the franchise, design and technical performance of the system, use
and occupancy of public streets and number and types of cable television
services provided. Franchises are usually issued for fixed terms and must
periodically be renewed. There can be no assurance that the franchises for the
Partnership's systems will be renewed as they expire, although the Partnership
believes that its cable systems generally have been operated in a manner that
satisfies the standards of the 1984 Cable Act, as amended by the 1992 Cable Act,
for franchise renewal. In the event the franchises are renewed, the Partnership
cannot predict the impact of any new or different conditions that might be
imposed by the franchising authorities in connection with such renewals.
Summary The foregoing does not purport to be a summary of all present
and proposed federal, state and local regulations and legislation relating to
the cable television industry. Other existing federal legislation and
regulations, copyright licensing and, in many jurisdictions, state and local
franchise requirements are currently the subject of a variety of judicial
proceedings, legislative hearings and administrative and legislative proposals
which could change, in varying degrees, the manner in which cable television
systems operate. Neither the outcome of these proceedings nor their impact upon
the cable television industry or the Partnership can be predicted at this time.
The Partnership expects to adapt its business to adjust to the changes
that may be required under any scenario of regulation. At this time, the
Partnership cannot assess the effects, if any, that present regulation may
<PAGE> 12
have on the Partnership's operations and potential appreciation of its Systems.
There can be no assurance, however, that the final form of regulation will not
have a material adverse impact on partnership operations.
ITEM 2. PROPERTIES
The Partnership's cable television system offices are located in and
around Gun Barrel City (Cedar Creek), Lamesa and Corsicana, Texas and Forest
City, North Carolina. The principal physical properties of the Systems consist
of system components (including antennas, coaxial cable, electronic
amplification and distribution equipment), motor vehicles, miscellaneous
hardware, spare parts and real property, including land and buildings. The
Partnership's cable plant passed approximately 38,800 homes as of December 31,
1995. Management believes that the Partnership's plant passes all areas which
are currently economically feasible to service. Future line extensions depend
upon the density of homes in the area as well as available capital resources for
the construction of new plant. (See Part II. Item 7. Liquidity and Capital
Resources.)
In August 1994, the Partnership formed Corsicana Media, Inc. (Corsicana
Media), a wholly owned subsidiary, for the purpose of acquiring and operating an
AM radio station serving the community of Corsicana, Texas and surrounding
areas. The Corsicana system purchase was contingent upon the acquisition of the
radio station. On January 16, 1995 Corsicana Media acquired the operating assets
of KAN-D Land, Inc. for a total price of $500,000. Of the total purchase price,
$450,000 was paid at closing and $50,000 was paid in October 1995, net of any
purchase price adjustments, under the terms of an unsecured, subordinated,
non-interest bearing, hold-back note. The acquisition was financed through an
equity contribution made by the Partnership of $450,000 from cash on hand as of
December 31, 1994.
On December 20, 1995, the Partnership acquired the assets of the cable
television systems in and around the communities of Ellenboro, Bostic, Gilkey
and Harris, all in the state of North Carolina. The purchase prices for these
systems was $4,223,000 of which $4,129,000 was paid at the closing date and the
balance of $104,000 will be paid April 20, 1996, net of any purchase price
adjustments, under the terms of an unsecured, subordinated, non-interest bearing
hold-back note.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
<PAGE> 13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) There is no established public trading market for the
Partnership's units of limited partnership interest.
(b) The approximate number of equity holders as of December 31,
1995, is as follows:
<TABLE>
<S> <C>
Limited Partners: 995
General Partners: 2
</TABLE>
(c) During 1995, the Partnership made cash distributions of
$147,390 to the limited partners and $1,488 to the Managing General Partner. The
limited partners have received in the aggregate in the form of cash
distributions $5,576,859 on total initial contributions of $7,500,000 as of
December 31, 1995. As of December 31, 1995, the Partnership had repurchased
$130,500 of limited partnership units ($500 per unit). Future distributions
depend upon results of operations, leverage ratios and compliance with financial
covenants required by the Partnership's lender, but are expected to remain at
their current level (see Item 7 below).
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
SUMMARY OF OPERATIONS:
<S> <C> <C> <C> <C> <C>
Revenue $7,897,009 $5,598,494 $4,724,194 $4,192,847 $3,840,308
Operating income 525,779 713,552 876,579 755,807 490,902
Loss on disposal of
plant (14,795) 0 0 (188,545) (490,367)
Net income (loss) (989,380) (37,786) 314,706 (69,680) (876,646)
Net income (loss) per
limited partner unit
(weighted average) (66) (3) 21 (5) (58)
Cumulative tax losses
per limited partner
unit (494) (456) (480) (540) (589)
</TABLE>
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Total assets $17,951,250 $15,099,388 $ 6,270,667 $ 6,930,346 $ 7,535,219
Notes payable 21,660,989 17,745,642 9,083,146 9,898,301 10,208,030
Total liabilities 22,631,152 18,641,032 9,591,252 10,399,329 10,738,886
General partners'
deficit (148,727) (137,346) (137,475) (137,124) (135,021)
Limited partners'
deficit (4,531,175) (3,404,298) (3,185,110) (3,331,859) (3,068,646)
Distributions per
limited partner unit 10 10 10 10 10
Cumulative distribu-
tions per limited
partner unit 373 363 353 343 333
</TABLE>
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1995 AND 1994
Total revenue for the year ended December 31, 1995 reached $7,897,009,
representing an increase of approximately 41% over 1994 revenue. This increase
stems primarily from a full year of operations for the Corsicana, TX cable
television system which was acquired in September of 1994, the acquisition of
Corsicana Media and significant increases in advertising revenues. Of the 1995
revenue, $5,265,987 (67%) is derived from subscription to basic service,
$866,870 (11%) from subscription to premium services, $609,905 (8%) from tier
service subscriptions, $308,263 (4%) from advertising, $174,263 (2%) from
installation charges, $168,839 (2%) from service maintenance revenue and
$502,882 (6%) from other sources.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Basic Rate $20.85 $20.15 $19.90 $19.20 $18.11
Tier Rate 5.35 3.80 3.25 2.20 4.51
HBO Rate 11.30 10.75 10.75 9.65 9.65
Cinemax Rate 7.00 7.15 7.35 7.50 7.50
Showtime Rate 10.95 10.50 10.50 8.50 8.50
Movie Channel Rate 9.00 8.50 8.50 8.50 8.50
Disney Rate 7.75 7.50 7.50 7.50 7.50
Additional
Outlet Rate ----- ---- ---- 3.56 3.56
Service Contract
Rate 2.90 3.10 3.15 ----- -----
</TABLE>
Operating expenses totaled $754,573 for 1995, representing an increase
of approximately 35% over 1994. This is due to the addition of employees from
the purchases of the Corsicana, TX system and Corsicana Media. In addition,
increases in salary and benefit costs for all employees contributed to higher
operating costs. Salary and benefit costs are the major components of operating
expenses. Employee wages are reviewed annually, and in most cases increased
based on cost of living adjustments and other factors. Therefore, Management
expects the trend of increases in operating expenses to continue.
General and administrative expenses totaled $2,028,131 for 1995,
representing an increase of approximately 39% over 1994. Approximately 33% of
the increase is attributable to expenses associated with the Corsicana, TX
system and Corsicana Media. The remaining increase is due to increases in
revenue based expenses (e.g. copyright fees, franchise fees and management
fees). Significant administrative expenses are based on Partnership revenues.
Therefore, as the Partnership's revenues increase, the trend of increased
administrative expenses is expected to continue.
Programming expenses totaled $2,044,429 for 1995, representing an
increase of 72% over 1994. Approximately 50% of the increase is attributable to
expenses associated with the Corsicana, TX system and Corsicana Media.
Approximately 12% of the increase relates to advertising expenses. The remaining
increase is the result of higher costs charged by various program suppliers, and
additional salary and benefit costs related to local programming support.
Programming expenses mainly consist of payments made to the suppliers of various
cable programming services. As these costs are based on the number of
subscribers served, future subscriber increases will cause the trend of
programming expense increases to continue. In addition, rate increases from
program suppliers, as well as new fees due to launch of additional channels,
will contribute to the trend of increased programming costs.
Depreciation and amortization expense increased from $1,675,502 in 1994
to $2,544,097 in 1995 (approximately 52%). This is mainly due to depreciation
<PAGE> 15
and amortization on plant, equipment and intangible assets acquired with the
purchases of the Corsicana and Phoenix systems and Corsicana Media as well as
depreciation on assets placed into service during 1995.
Interest expense increased from $761,186 in 1994 to $1,505,965 in 1995
(approximately 98%). The Partnership's average debt balance increased from
approximately $13,240,000 in 1994 to $19,477,652 in 1995, mainly due to
increased borrowing to finance the acquisition of the Corsicana and Phoenix
systems. In addition, the Partnership's effective interest rate increased from
approximately 5.75% in 1994 to approximately 7.73% in 1995.
1994 AND 1993
Total revenue reached $5,598,494 for the year ended December 31, 1994,
representing an increase of approximately 19% over 1993 revenue. This increase
is primarily due to the acquisition of the Corsicana, TX system in September
1994. The Partnership experienced a 9% increase in revenue exclusive of the
activity for the Corsicana, TX system which is attributable to an approximate 4%
increase in basic subscribers and significant increases in advertising and
service maintenance revenue, offset by a decrease in additional outlet income.
Of the 1994 revenue, $3,933,428 (71%) is derived from subscriptions to basic
service, $613,821 (11%) from subscriptions to premium services, $403,218 (7%)
from subscriptions to tier services, $132,218 (2%) from installation charges,
$168,660 (3%) from service maintenance revenue and $347,149 (6%) from other
sources.
Operating expenses totaled $557,281 for 1994, representing an increase
of approximately 10% over 1993. This is due to the addition of employees from
the purchase of the system in Corsicana, TX, and increases in salary and benefit
costs for all employees. The increase in operating expenses was offset by an
insurance reimbursement for costs related to the 1993 snow storm damage in the
Forest City, NC System.
General and administrative expenses totaled $1,464,107 for 1994,
representing an increase of approximately 19% over 1993. Approximately one-half
of the increase is attributable to expenses associated with the Corsicana, TX
system. The remaining increase is due to increases in revenue based expenses
(e.g. copyright fees, franchise fees and management fees).
Programming expenses totaled $1,188,052 for 1994, representing an
increase of approximately 51% over 1993. Approximately 35% of the increase is
mainly due to the additional subscribers in the Corsicana, TX system, the
remaining increase is the result of higher costs charged by various program
suppliers, and additional salary and benefit costs related to local programming
and advertising support. Programming expenses mainly consist of payments made to
the suppliers of various cable programming services.
Depreciation and amortization expense increased from $1,321,890 in 1993
to $1,675,502 in 1994 (approximately 27%). This is mainly due to depreciation
and amortization on plant, equipment and intangible assets acquired with the
purchase of the Corsicana, TX system and depreciation on assets placed into
service during 1994.
Interest expense increased from $571,683 in 1993 to $761,186 in 1994
(approximately 33%). The Partnership's average debt balance increased from
approximately $9,488,000 in 1993 to approximately $13,240,000 in 1994, mainly
due to increased borrowing to finance the acquisition of the Corsicana, TX
system. In addition the Partnership's effective interest rate decreased from
approximately 6.02% in 1993 to approximately 5.75% in 1994.
EFFECTS OF REGULATION
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Act"). The 1992 Act and
subsequent revisions and rulemakings substantially re-regulated the cable
<PAGE> 16
television industry. The regulatory aspects of the 1992 Act included giving the
local franchising authorities and the FCC the ability to regulate rates for
basic services, equipment charges and additional cable programming service tiers
("CPST's") when certain conditions were met. All of the Partnership's cable
systems were potentially subject to rate regulation. The most significant impact
of rate regulation was the inability to raise rates for regulated services as
costs of operation rose during an FCC imposed rate freeze from April 5, 1993 to
May 15, 1994. This has contributed to operating margins before depreciation and
amortization declining from 48% for the twelve months ended December 31, 1993 to
46% for the same period in 1994.
On February 8, 1996, the Telecommunications Act of 1996 (the 1996 Act)
became law. The 1996 Act will eliminate all rate controls on CPST's of small
cable systems, defined by the 1996 Act as systems serving fewer than 50,000
subscribers owned by operators serving fewer than 1% of all subscribers in the
United States (approximately 600,000 subscribers). All of the Partnership's
cable systems qualify as small cable systems. Many of the changes called for by
the 1996 Act will not take effect until the FCC issues new regulations, a
process that could take from several months to a few years depending on the
complexity of the required changes and the statutory time limits. Because of
this the full impact of the 1996 Act on the Partnership's operations cannot be
determined at this time.
As of the date of this filing, no local franchising authorities have
elected to certify.
LIQUIDITY AND CAPITAL RESOURCES
During 1995, the Partnership's primary source of liquidity was cash
flow from operations and borrowings under its credit facility. The Partnership
generates cash on a monthly basis through the monthly billing of subscribers for
cable services. Losses from uncollectible accounts have not been material.
During 1995, cash generated from monthly billings was sufficient to meet the
Partnership's needs for working capital, capital expenditures (excluding
acquisitions) and debt service. Management's projections for 1996 show that the
cash generated from monthly subscriber billings should be sufficient to meet the
Partnership's working capital needs, as well as meeting the debt service
obligations of its bank loan.
On November 17, 1995 the Partnership refinanced its senior debt with
its existing lending institution to finance the acquisition of the Phoenix
systems serving the communities of Ellenboro, Bostic, Gilkey and Harris, NC. The
new credit facility provides for a maximum outstanding balance of $23,000,000.
The term loan matures March 31, 2001 and includes graduated quarterly principal
payments.
As of the date of this filing, the Partnership's term loan balance was
$21,556,554. Certain fixed rate agreements in effect as of September 30, 1995
expired during the fourth quarter of 1995, and the Partnership entered into new
fixed rate agreements. As of the date of this filing, interest rates on the
credit facility were as follows: $16,625,000 fixed at 7.995% under the terms of
a self-amortizing interest rate swap agreement with the Partnership's lender
expiring December 8, 1997 and $4,700,000 fixed at 7.945% under the terms of an
interest rate swap with the Partnership's lender expiring January 13, 1997. The
balance of $231,554 bears interest at the prime rate plus 1 3/8% (currently
9.875%). The above rates include a margin paid to the lender based on overall
leverage and may increase or decrease as the Partnership's overall leverage
fluctuates.
At December 31, 1995, the Partnership was required under the terms of
its credit agreement to maintain certain financial ratios including a Maximum
Leverage Ratio of 6.25 to 1 and an Interest Coverage Ratio of 1.75 to 1. At
<PAGE> 17
December 31, 1995, the Partnership was in compliance with all covenants of its
loan agreement.
ECONOMIC CONDITIONS
Historically, the effects of inflation have been considered in
determining to what extent rates will be increased for various services
provided. It is expected that the future rate of inflation will continue to be a
significant variable in determining rates charged for services provided, subject
to the provisions of the 1996 Act. Because of the deregulatory nature of the
1996 Act, the Partnership does not expect the future rate of inflation to have a
material adverse impact on operations.
CAPITAL EXPENDITURES
During 1995, the Partnership incurred approximately $530,000 (excluding
Phoenix Systems and Corsicana Media acquisitions on capital expenditures. These
expenditures included commercial insertion equipment and channel launches in the
Cedar Creek, TX and Forest City, NC systems, purchase of land and construction
of a tower in the Lamesa, TX system, vehicle replacement in Forest City, NC, new
billing system and launch of Northland Cable News in Corsicana, TX system.
Management estimates that the Partnership will spend approximately
$685,000 on capital expenditures during 1996. These expenditures include
continuation of a system upgrade to 330 MHz in the Cedar Creek, TX system, a
fiber interconnection in the Forest City, NC system, a tier launch in the
Corsicana, TX system and vehicle replacements in various systems.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited financial statements of the Partnership for the years ended
December 31, 1995, 1994 and 1993 are included as a part of this filing (see Item
14(a)(1) below).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
<PAGE> 18
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or officers. The Managing General
Partner of the Partnership is Northland Communications Corporation, a Washington
corporation; the Administrative General Partner of the Partnership is FN
Equities Joint Venture, a California general partnership.
Certain information regarding the officers and directors of Northland
is set forth below.
JOHN S. WHETZELL (AGE 54). Mr. Whetzell is the founder of Northland
Communications Corporation and has been President since its inception and a
Director since March 1982. Mr. Whetzell became Chairman of the Board of
Directors in December 1984. He also serves as President and Chairman of the
Board of Northland Telecommunications Corporation, Northland Cable Television,
Inc., Northland Cable Services Corporation, Cable Ad-Concepts, Inc., Cable
Television Billing, Inc. and Northland Cable News, Inc. He has been involved
with the cable television industry for over 21 years and currently serves as a
director on the board of the Cable Antenna Television Association, a national
cable television association. Between March 1979 and February 1982 he was in
charge of the Ernst & Whinney national cable television consulting services. Mr.
Whetzell first became involved in the cable television industry when he served
as the Chief Economist of the Cable Television Bureau of the Federal
Communications Commission (FCC) from May 1974 to February 1979. He provided
economic studies which support the deregulation of cable television both in
federal and state arenas. He participated in the formulation of accounting
standards for the industry and assisted the FCC in negotiating and developing
the pole attachment rate formula for cable television. His undergraduate degree
is in economics from George Washington University, and he has an MBA degree from
New York University.
JOHN E. IVERSON (AGE 59). Mr. Iverson is the Assistant Secretary of
Northland Communications Corporation and has served on the Board of Directors
since December 1984. He also serves on the Board of Directors of Northland
Telecommunications Corporation, Northland Cable Television, Inc., Northland
Cable Services Corporation, Cable Ad-Concepts, Inc. and Cable Television
Billing, Inc., Northland Investment Corporation and Northland Cable News, Inc.
He is currently a partner in the law firm of Ryan, Swanson & Cleveland,
Northland's general counsel. He is a member of the Washington State Bar
Association and American Bar Association and has been practicing law for more
than 33 years. Mr. Iverson is the past president and a current Trustee of the
Pacific Northwest Ballet Association. Mr. Iverson has a Juris Doctor degree from
the University of Washington.
ARLEN I. PRENTICE (AGE 58). Since July 1985, Mr. Prentice has served on
the Board of Directors of Northland Telecommunications Corporation, and he
served on the Board of Directors of Northland Communications Corporation between
March 1982 and July 1985. Since 1969, Mr. Prentice has been Chairman and Chief
Executive Officer of Kibble & Prentice, a diversified financial services firm.
Kibble & Prentice has four divisions, which include Estate Planning and Business
Insurance, Financial Planning and Investments, Employee Benefit Services, and
Property and Casualty Insurance. Mr. Prentice is a Chartered Life Underwriter,
Chartered Financial Consultant, past President of the Million Dollar Round Table
and a registered representative of Investment Management and Research. Mr.
Prentice has a Bachelor of Arts degree from the University of Washington.
<PAGE> 19
MILTON A. BARRETT, JR. (AGE 61). Since April 1986, Mr. Barrett has served on
the Board of Directors of NTC. In 1995, he retired from the Weyerhaeuser Company
after thirty-four years of service. At the time of his retirement, Mr. Barrett
was a Vice President of Sales and Marketing as well as chairman of
Weyerhaeuser's business ethics committee. Mr. Barrett is a graduate of Princeton
University magna cum laude and of the Harvard University Graduate School of
Business Administration.
RICHARD I. CLARK (AGE 38). Mr. Clark has served as Vice President of
Northland since March 1982. He has served on the Board of Directors of both
Northland Communications Corporation and Northland Telecommunications
Corporation since July 1985. He also serves as Vice President and Director of
Northland Cable Services Corporation, Cable Ad-Concepts, Inc., Cable Television
Billing, Inc., and Northland Cable News, Inc. Mr. Clark was elected Treasurer in
April 1987, prior to which he served as Secretary from March 1982. He also
serves as a registered principal, President and director of Northland Investment
Corporation. Mr. Clark was an original incorporator of Northland and is
responsible for the administration and investor relations activities of
Northland, including financial planning and corporate development. From July
1979 to February 1982, Mr. Clark was employed by Ernst & Whinney in the area of
providing cable television consultation services and has been involved with the
cable television industry for nearly 17 years. He has directed cable television
feasibility studies and on-site market surveys. Mr. Clark has assisted in the
design and maintenance of financial and budget computer programs, and he has
prepared documents for major cable television companies in franchising and
budgeting projects though the application of these programs. In 1979, Mr. Clark
graduated cum laude from Pacific Lutheran University with a Bachelor of Arts
degree in accounting.
ARTHUR H. MAZZOLA (AGE 73). Mr. Mazzola was elected to the Board of
Directors of Northland Telecommunications Corporation in April 1987. From 1985
to 1990, he was Senior Vice President of Benjamin Franklin Leasing Company,
Inc., an equipment lease financing company. Currently, Mr. Mazzola is serving as
Business Development Coordinator at Bank of California. Prior to his association
with Benjamin Franklin Leasing Company, Mr. Mazzola served as President of
Federal Capital Corporation and Trans Pacific Lease Co., Inc. Both of these
companies also engaged exclusively in equipment lease financing. Mr. Mazzola is
a past Board Chairman and current Trustee of the Pacific Northwest Ballet
Association and current Board Member of the Dante Alighieri Society. Mr. Mazzola
attended Boston University School of Business in 1943 where he studied
economics.
TRAVIS H. KEELER (AGE 55). Mr. Keeler was elected to the Board of
Directors of Northland Telecommunications Corporation in April 1987. Since May
1985, he has served as President of Overall Laundry Services, Inc., an
industrial laundry and garment rental firm. Mr. Keeler received a Bachelor of
Arts degree from the University of Washington in 1962.
JAMES E. HANLON (AGE 62). Since June 1985, Mr. Hanlon has been a
Divisional Vice President for Northland's Tyler, Texas regional office and is
currently responsible for the management of systems serving approximately 92,900
basic subscribers in Texas, Alabama and Mississippi. He also serves as Vice
President for Northland Cable News, Inc. Prior to his association with
Northland, he served as Chief Executive of M.C.T. Communications, a cable
television company, from 1981 to June 1985. His responsibilities included
supervision of the franchise, construction and operation of a cable television
system located near Tyler, Texas. From 1979 to 1981, Mr. Hanlon was President of
the CATV Division of Buford Television, Inc., and from 1973 to 1979, he served
as President and General Manager of Suffolk Cablevision in Suffolk County, New
York. Mr. Hanlon has also served as Vice President and Corporate Controller of
Viacom International, Inc. and Division Controller of New York
<PAGE> 20
Yankees, Inc. Mr. Hanlon has a Bachelor of Science degree in Business
Administration from St. Johns University.
JAMES A. PENNEY (AGE 41). Mr. Penney is Vice President and General
Counsel for Northland. He has served as Vice President and General Counsel for
Northland Telecommunications Corporation, Northland Communications Corporation,
Northland Cable Television, Inc. and Northland Cable News, Inc. since September
1985 and was elected Secretary in April 1987. He also serves as Vice President
and General Counsel for Northland Cable Services Corporation, Cable Ad-Concepts,
Inc. and Cable Television Billing, Inc. He is responsible for advising all
Northland systems with regard to legal and regulatory matters, and also is
involved in the acquisition and financing of new cable systems. From 1983 until
1985 he was associated with the law firm of Ryan, Swanson & Cleveland,
Northland's general counsel. Mr. Penney holds a Bachelor of Arts Degree from the
University of Florida and a Juris Doctor from The College of William and Mary,
where he was a member of The William and Mary Law Review.
GARY S. JONES (AGE 38). Mr. Jones is Vice President of Northland. Mr.
Jones joined Northland in March 1986 as Controller and has been Vice President
of Northland Telecommunications Corporation, Northland Communications
Corporation and Northland Cable Television, Inc. since October 1986. He also
serves as Vice President for Northland Cable Services Corporation, Cable
Ad-Concepts, Inc., Cable Television Billing, Inc. and Northland Cable News, Inc.
Mr. Jones is responsible for cash management, financial reporting and banking
relations for Northland and is involved in the acquisition and financing of new
cable systems. Prior to joining Northland, Mr. Jones was employed as a Certified
Public Accountant with Laventhol & Horwath from 1980 to 1986. Mr. Jones received
his Bachelor of Arts degree in Business Administration with a major in
accounting from the University of Washington in 1979.
RICHARD J. DYSTE (AGE 50). Mr. Dyste has served as Vice
President-Technical Services of Northland Telecommunications Corporation,
Northland Communications Corporation and Northland Cable Television, Inc. since
April 1987. He also serves as Vice President for Cable Ad-Concepts, Inc. and
Northland Cable News, Inc. He is currently responsible for the management of
systems serving approximately 48,600 basic subscribers in California, Idaho,
Oregon and Washington. Mr. Dyste is the past president and a current member of
the Mount Rainier Chapter of the Society of Cable Television Engineers, Inc. Mr.
Dyste joined Northland in 1986 as an engineer and served as Operations
Consultant to Northland Communications Corporation from August 1986 until April
1987. From 1977 to 1985, Mr. Dyste owned and operated Bainbridge TV Cable. Mr.
Dyste is a graduate of Washington Technology Institute.
H. LEE JOHNSON (AGE 52). Mr. Johnson has served as Divisional Vice
President for Northland's Statesboro, Georgia regional office since March 1994.
Mr. Johnson is responsible for the management of systems serving over 50,400
subscribers located in South Carolina, North Carolina, Georgia and Mississippi.
He also serves as Vice President for Northland Cable News, Inc. Mr. Johnson has
been employed in the cable industry for nearly 27 years. Mr. Johnson has
attended and received certificates of completion from numerous industry training
seminars including courses sponsored by Jerrold Electronics, Scientific Atlanta,
and the Society of Cable Television Engineers. Mr. Johnson also received a
certificate of completion from CATA in public relations.
Certain information regarding the officers and directors of FN Equities
Joint Venture is set forth below:
MILES Z. GORDON (AGE 48). Mr. Gordon, President and Chief Executive
Officer of Financial Network Investment Corporation (FNIC), has a comprehensive
background in both the securities industry and securities law
<PAGE> 21
and regulation. In 1972, he joined the Los Angeles office of the Securities and
Exchange Commission (SEC), and in 1974 he was appointed Branch Chief of the
Investment Company and Investment Advisors Examination Division. Mr. Gordon left
the SEC in 1978 to practice law. Within one year, he accepted a position as Vice
President of a major national securities broker/dealer firm headquartered in
Long Beach, California. He subsequently accepted the presidency of this firm in
early 1980. In 1983, he helped form and became President and Chief Executive
Officer of FNIC. This leading firm is now one of the largest independent
broker/dealers in the United States. A graduate of Michigan State University
(and current board member of the Visitors for the College of Social Science for
MSU), Mr. Gordon received his Juris Doctorate from the University of California
at Los Angeles School of Law. He presently serves as Chairman of the Securities
Industry Association Independent Contractor Firms Committee. Mr. Gordon was also
Chairman and a member of the NASD District Business Conduct Committee and a
former member of the NASD Board of Governors. He is past president of the
California Syndication Forum and has also served on several committees for the
Securities Industry Association. Mr. Gordon has appeared on television and radio
programs, been featured in numerous magazine and newspaper articles as an
industry spokesperson, and is a frequent speaker at many industry seminars and
conventions.
JOHN S. SIMMERS (AGE 45). Mr. Simmers, Executive Vice President and
Chief Operating Officer of Financial Network Investment Corporation (FNIC), has
an extensive background in the securities industry. He began his career as a
reporter for Dunn and Bradstreet, then joined the National Association of
Securities Dealers (NASD) in 1974. Knowledgeable in all aspects of broker/dealer
regulations, operations, and products, Mr. Simmers was responsible for reviewing
the activities of member firms in twelve states. Mr. Simmers left the NASD seven
years later to accept a position as Vice President of the securities
broker/dealer, retail, wholesale and investment advisory subsidiaries of a
publicly held investment company headquartered in Long Beach, California. He
left this firm in 1983 to help form and become Executive Vice President and
Chief Operating Officer of FNIC. This full service broker/dealer firm has
offices located across the United States. Mr. Simmers is a graduate of Ohio
State University. He served on the Board of Directors of the California
Association of Independent Broker/Dealers and was a member of the Real Estate
Securities and Syndication Institute, the NASD District Business Conduct
Committee (District 2 South), and the International Association for Financial
Planning Due Diligence Steering Committee, which was organized to work toward
improving the quality and consistency of due diligence in the securities
industry. Mr. Simmers currently serves as a member of the NASD Direct
Participation Programs Committee, and has spoken at numerous seminars and
conventions.
HARRY M. KITTER (AGE 40). Mr. Kitter has served as Controller for
Financial Network Investment Corporation since 1983. Prior to this association
from 1981 to 1983 he was employed as the Los Angeles Internal Audit Manager at
the Pacific Stock Exchange. From 1978 to 1981, he was Senior Accountant at
Arthur Young & Co., C.P.A. He holds an MBA from the University of Pittsburgh and
a bachelor's degree in economics from Lafayette College, Easton, Pennsylvania.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership does not have executive officers. However, compensation
was paid to the Managing General Partner during 1995 as indicated in Note 3 of
the Notes to Financial Statements--December 31, 1995 (see Items 13(a) and
14(a)(1) below).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<PAGE> 22
(a) CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Security ownership of
management as of December 31, 1995 is as follows:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS
<S> <C> <C> <C>
General Partner's Northland Communications (See Note A) (See Note A)
Interest Corporation
1201 Third Avenue
Suite 3600
Seattle, Washington 98101
General Partner's FN Equities Joint Venture (See Note B) (See Note B)
Interest 2780 Skypark Dr.
Suite 300
Torrance, California 90505
</TABLE>
Note A: Northland has a 1% interest in the Partnership, which increases
to 20% interest in the Partnership at such time as the limited partners have
received 100% of their aggregate cash contributions. Northland also owns eight
units of limited partnership interest. The natural person who exercises voting
and/or investment control over these interests is John S. Whetzell.
Note B: FN Equities Joint Venture has no interest (0%) in the
Partnership until such time as the limited partners have received 100% of their
aggregate cash contributions, at which time FN Equities Joint Venture will have
a 5% interest in the Partnership. The natural person who exercises voting and/or
investment control over these interests is John S. Simmers.
(b) CHANGES IN CONTROL. Northland has pledged its ownership interest as
Managing General Partner of the Partnership to its lender as collateral pursuant
to the terms of the term loan agreement between Northland and its lender.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) TRANSACTIONS WITH MANAGEMENT AND OTHERS. The Managing General
Partner receives a management fee equal to 6% of the gross revenues of the
Partnership, not including revenues from any sale or refinancing of the
Partnership's Systems. The Managing General Partner also receives reimbursement
of normal operating and general and administrative expenses incurred on behalf
of the Partnership.
Cable Television Billing, Inc. ("CTB"), an affiliate of Northland,
provides software installation and billing services to certain of the
Partnership's Systems.
Northland Cable News, Inc. ("NCN"), an affiliate of Northland, provides
programming to the Partnership's systems.
Cable Ad-Concepts, Inc. ("CAC"), an affiliate of Northland, provides
the production and development of video commercial advertisements and
advertising sales support.
See Note 3 of the Notes to Financial Statements--December 31, 1995 for
disclosures regarding transactions with the General Partners or affiliates.
The following schedule summarizes these transactions:
<PAGE> 23
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Partnership management fees $453,521 $335,910 $283,452
Operating expense reimbursements 406,603 281,914 231,682
Software installation and
billing service fees to CTB 50,302 35,593 33,991
Programming fees to NCN 165,281 53,296 ------
Reimbursements to CAC for
services 37,602 19,538 ------
Amounts due to General Partner
and affiliates at year end 190,853 96,579 8,829
</TABLE>
Management believes that all of the above transactions are on terms as
favorable to the Partnership as could be obtained from unaffiliated parties for
comparable goods or services.
As disclosed in the Partnership's Prospectus (which has been
incorporated by reference), certain conflicts of interest may arise between the
Partnership and the General Partners and their affiliates. Certain conflicts may
arise due to the allocation of management time, services and functions between
the Partnership and existing and future partnerships as well as other business
ventures. The General Partners have sought to minimize these conflicts by
allocating costs between systems on a reasonable basis. Each limited partner may
have access to the books and non-confidential records of the Partnership. A
review of the books will allow a limited partner to assess the reasonableness of
these allocations. The Agreement of Limited Partnership provides for any limited
partner owning 10% or more of the Partnership units to call a special meeting of
the Limited Partners, by giving written notice to the General Partners
specifying in general terms the subjects to be considered. In the event of a
dispute between the General Partners and Limited Partners which cannot be
otherwise resolved, the Agreement of Limited Partnership provides steps for the
removal of a General Partner by Limited Partners.
(b) CERTAIN BUSINESS RELATIONSHIPS. John E. Iverson, a
Director and Assistant Secretary of the Managing General Partner, is a partner
of the law firm of Ryan, Swanson & Cleveland, which has rendered and is expected
to continue to render legal services to the Managing General Partner and the
Partnership.
(c) INDEBTEDNESS OF MANAGEMENT. None.
<PAGE> 24
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) DOCUMENTS FILED AS A PART OF THIS REPORT:
<TABLE>
<CAPTION>
SEQUENTIALLY NUMBERED
PAGE
<S> <C>
(1) ...................................................... FINANCIAL STATEMENTS:
Auditors' Report ................................ ____
Balance Sheets--December 31, 1995 and 1994 ...... ____
Statements of Operations for the years
ended December 31, 1995, 1994 and 1993 .......... ____
Statements of Changes in Partners'
Deficit for the years ended December 31,
1995, 1994 and 1993 ............................. ____
Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993 .......... ____
Notes to Financial Statements--December 31,
1995 ............................................ ____
</TABLE>
(2) EXHIBITS:
<TABLE>
<S> <C>
4.1 Amended and Restated Certificate and Agreement of Limited Partnership Dated
December 30, 1985(1)
4.2 Amendment to Certificate and Agreement of Limited Partnership Dated April 11,
1986(2)
4.3 Amendment to Agreement of Limited Partnership dated January 8, 1991(4)
4.4 Amendment to Agreement of Limited Partnership dated February 19, 1992
10.1 Gun Barrel City Franchise(2)
10.2 Kerens Franchise(2)
10.3 Kemp Franchise(2)
10.4 Malakoff Franchise(2)
10.5 Mabank Franchise(2)
10.6 Seven Points Franchise(2)
10.7 Trinidad Franchise(2)
10.8 Tool City Franchise(2)
</TABLE>
<PAGE> 25
<TABLE>
<S> <C>
10.9 Lamesa Franchise(2)
10.10 Alexander Mills Franchise(2)
10.11 Forest City Franchise(5)
10.12 Rutherfordton Franchise(5)
10.13 Spindale Franchise(5)
10.14 Rutherford County Franchise(2)
10.15 Star Harbor Franchise(2)
10.16 Enchanted Oaks Franchise(3)
10.17 Caney City Franchise(3)
10.18 Log Cabin Franchise(3)
10.19 Payne Springs Franchise(3)
10.20 Management Agreement dated as of September 30, 1985(2)
10.21 Management Agreement dated as of March 1, 1986(2)
10.22 Revolving Credit and Term Loan Agreement with Provident National Bank dated as
of January 8, 1991(4)
10.23 Modification Agreement dated as of January 24, 1992(6)
10.24 Purchase agreement with Corsicana Cable Television Company dated July 11, 1994(7)
10.25 Amended and Restated Term Loan Agreement with Provident National Bank dated
September 29, 1994(7)
10.26 Franchise Agreement with City of Corsicana,
TX - Assignment and Assumption Agreement
dated August 16, 1994(8)
10.27 Asset Purchase Agreement between Northland Cable Properties Five Limited
Partnership and PCI One, Incorporated(9)
10.28 Asset Purchase Agreement between Northland Cable Properties Five Limited
Partnership and Phoenix Cable Income Fund(9)
</TABLE>
(1) Incorporated by reference from the Partnership's
Form 8-A Registration Statement filed July 24, 1987.
(2) Incorporated by reference from the Partnership's
Form 10-K Annual Report for the fiscal year ended
December 31, 1986.
(3) Incorporated by reference from the Partnership's
Form 10-K Annual Report for the fiscal year ended
December 31, 1988.
(4) Incorporated by reference from the Partnership's
Form 10-K Annual Report for the fiscal year ended
December 31, 1990.
<PAGE> 26
(5) Incorporated by reference from the Partnership's
Form 10-K Annual Report for the fiscal year ended
December 31, 1991.
(6) Incorporated by reference from the Partnership's
Form 10-K Annual Report for the fiscal year ended
December 31, 1992.
(7) Incorporated by reference from the Partnership's Form
8-K dated September 29, 1994.
(8) Incorporated by reference from the Partnership's Form
10-K Annual Report for the fiscal year ended December
3,1 994.
(9) Incorporated by reference from the Partnership's Form
10-Q Quarterly Report for the period ended September
30, 1995.
(b) REPORTS ON FORM 8-K. No Partnership reports on Form 8-K have been
filed for the fourth quarter of the fiscal year ended December 31, 1995.
<PAGE> 27
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
By: NORTHLAND COMMUNICATIONS CORPORATION
(Managing General Partner)
By /s/ John S. Whetzell Date: 3-28-96
--------------------------- -------------------
John S. Whetzell, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES CAPACITIES DATE
---------- ---------- ----
<S> <C> <C>
/s/ John S. Whetzell Chief executive officer, principal 3-28-96
- ------------------------ financial officer, and principal ---------
John S. Whetzell accounting officer of registrant;
chief executive officer, principal
financial officer and chairman of the
board of directors of Northland
Communications Corporation
/s/ Richard I. Clark Director of Northland Communications 3-28-96
- ------------------------- Corporation ---------
Richard I. Clark
/s/ John E. Iverson Director of Northland Communications 3-28-96
- ------------------------- Corporation ---------
John E. Iverson
/s/ Gary S. Jones Vice President and principal accounting 3-28-96
- ------------------------- officer of Northland Communications ---------
Gary S. Jones Corporation
</TABLE>
<PAGE> 28
EXHIBITS INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ------- ---------------------------------------------------- ------------
<S> <C> <C>
27.0 Financial Data Schedule
10.29 Credit Agreement between Northland Cable Properties
Five Limited Partnership and First Union National
Bank of North Carolina dated November 17, 1995
</TABLE>
<PAGE> 29
NORTHLAND CABLE PROPERTIES FIVE
LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
TOGETHER WITH AUDITORS' REPORT
<PAGE> 30
[ARTHUR ANDERSEN LETTERHEAD]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Northland Cable Properties Five Limited Partnership and Subsidiary:
We have audited the accompanying consolidated balance sheets of Northland Cable
Properties Five Limited Partnership and subsidiary (a Washington limited
partnership) as of December 31, 1995 and 1994, and the related consolidated
statements of operations, changes in partners' deficit and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Northland Cable Properties Five
Limited Partnership and subsidiary 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.
Arthur Andersen LLP
Seattle, Washington,
February 27, 1996
<PAGE> 31
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS -- DECEMBER 31, 1995 AND 1994
ASSETS
------
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
CASH $ 241,713 $ 1,152,286
ACCOUNTS RECEIVABLE 411,862 174,822
PREPAID EXPENSES 81,309 68,280
INVESTMENT IN CABLE TELEVISION
PROPERTIES:
Property and equipment, at cost 22,225,781 17,496,018
Less--accumulated depreciation (11,562,201) (9,850,804)
------------ -----------
10,663,580 7,645,214
Franchise agreements (net of
accumulated amortization of
$818,074 in 1995 and
$229,070 in 1994) 5,326,026 5,661,187
Organization costs and other
intangibles (net of accumulated
amortization of $757,047 in 1995
and $656,880 in 1994) 1,226,760 397,599
------------ -----------
Total investment in cable
television properties 17,216,366 13,704,000
------------ -----------
Total assets $ 17,951,250 $15,099,388
============ ===========
</TABLE>
LIABILITIES AND PARTNERS' DEFICIT
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
LIABILITIES:
Accounts payable and accrued
expenses $ 574,311 $ 606,604
Due to General Partner and
affiliates 190,853 96,579
Deposits 26,761 23,105
Subscriber prepayments 178,238 169,102
Notes payable 21,660,989 17,745,642
----------- -----------
Total liabilities 22,631,152 18,641,032
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' DEFICIT:
General partners-
Contributed capital, net (55,331) (53,843)
Accumulated deficit (93,396) (83,503)
----------- -----------
(148,727) (137,346)
----------- -----------
Limited partners-
Contributed capital, net -
14,739 units in 1995 and
1994 667,021 814,411
Accumulated deficit (5,198,196) (4,218,709)
----------- -----------
(4,531,175) (3,404,298)
----------- -----------
Total liabilities and
partners' deficit $17,951,250 $15,099,388
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE> 32
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- ----------
<S> <C> <C> <C>
REVENUE $ 7,897,009 $5,598,494 $4,724,194
----------- ---------- ----------
EXPENSES:
Operating (including $34,057, $34,442
and $21,556 paid to affiliates in
1995, 1994 and 1993, respectively) 754,573 557,281 507,488
General and administrative (including
$806,840, $570,349 and $489,823 paid
to affiliates in 1995, 1994 and
1993, respectively) 2,028,131 1,464,107 1,232,623
Programming (including $203,025,
$80,905 and $14,429 paid to
affiliates in 1995, 1994 and 1993,
respectively) 2,044,429 1,188,052 785,614
Depreciation and amortization 2,544,097 1,675,502 1,321,890
----------- ---------- ----------
7,371,230 4,884,942 3,847,615
----------- ---------- ----------
Operating income 525,779 713,552 876,579
OTHER INCOME (EXPENSE):
Interest income and other 5,601 9,848 9,810
Interest expense (1,505,965) (761,186) (571,683)
Loss on disposal of assets (14,795) - -
----------- ---------- ----------
Net income (loss) $ (989,380) $ (37,786) $ 314,706
=========== ========== ==========
ALLOCATION OF NET INCOME (LOSS):
General partners $ (9,893) $ (378) $ 3,147
=========== ========== ==========
Limited partners $ (979,487) $ (37,408) $ 311,559
=========== ========== ==========
NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $ (66) $ (3) $ 21
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE> 33
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
--------- ----------- -----------
<S> <C> <C> <C>
BALANCE, December 31, 1992 $(137,124) $(3,331,859) $(3,468,983)
Repurchase of limited partnership
units - (16,500) (16,500)
Cash distributions to partners
($10.00 per limited partnership
unit) (1,498) (148,310) (149,808)
Net income 3,147 311,559 314,706
--------- ----------- -----------
BALANCE, December 31, 1993 (135,475) (3,185,110) (3,320,585)
Repurchase of limited partnership
units - (34,000) (34,000)
Cash distributions to partners
($10.00 per limited partnership
unit) (1,493) (147,780) (149,273)
Net loss (378) (37,408) (37,786)
--------- ----------- -----------
BALANCE, December 31, 1994 (137,346) (3,404,298) (3,541,644)
Cash distributions to partners
($10.00 per limited partnership
unit) (1,488) (147,390) (148,878)
Net loss (9,893) (979,487) (989,380)
--------- ----------- -----------
BALANCE, December 31, 1995 $(148,727) $(4,531,175) $(4,679,902)
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE> 34
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP AND SUBSIDIARY
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 income (loss) $ (989,380) $ (37,786) $ 314,706
Adjustments to reconcile net income (loss) to
net cash provided by operating activities-
Depreciation and amortization 2,544,097 1,675,502 1,321,890
Loss on disposal of assets 14,795 - -
Increase in operating assets:
Accounts receivable (237,040) (75,753) (2,457)
Prepaid expenses (13,029) (10,450) (4,081)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses (32,293) 219,383 50,027
Due to General Partner and affiliates 94,274 87,750 (19,128)
Deposits (4,294) 6,460 (1,365)
Subscriber prepayments (35,463) 73,691 (22,456)
------------ ----------- ----------
Net cash provided by operating activities 1,341,667 1,938,797 1,637,136
------------ ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of cable systems and related radio station (5,278,375) (8,499,270) -
Purchase of property and equipment, net (530,340) (747,056) (636,387)
Hold-back note payable 104,000 - -
------------ ----------- ----------
Net cash used in investing activities (5,704,715) (9,246,326) (636,387)
------------ ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 21,931,554 17,625,000 -
Principal payments on notes payable (17,773,780) (9,309,396) (815,155)
Distributions to partners (148,878) (149,273) (149,808)
Repurchase of limited partnership units - (34,000) (16,500)
Loan fees (556,421) (133,078) -
------------ ----------- ----------
Net cash provided by (used in)
financing activities 3,452,475 7,999,253 (981,463)
------------ ----------- ----------
(DECREASE) INCREASE IN CASH (910,573) 691,724 19,286
CASH, beginning of year 1,152,286 460,562 441,276
------------ ----------- ----------
CASH, end of year $ 241,713 $ 1,152,286 $ 460,562
============ =========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 1,663,654 $ 663,563 $ 584,956
============ =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 35
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION AND PARTNERS' INTERESTS:
Formation and Business
Northland Cable Properties Five Limited Partnership and subsidiary (the
Partnership), a Washington limited partnership, was formed on August 19, 1985.
The Partnership was formed to acquire, develop and operate cable television
systems. The Partnership began operations by acquiring a cable television system
serving several communities and contiguous areas surrounding Cedar Creek, Texas.
During 1986, the Partnership acquired three additional cable television systems,
which serve the Forest City, North Carolina and Lamesa and Star Harbor, Texas
areas. In September 1994, the Partnership acquired a cable television system
serving the Corsicana, Texas, area. In December 1995, the Partnership acquired
cable television systems serving several communities in the Ellenboro, Bostic,
Gilkey and Harris, North Carolina areas. The Partnership has 25 nonexclusive
franchises to operate the cable television systems for periods which will expire
at various dates through the year 2014.
In August 1994, the Partnership formed Corsicana Media, Inc. (Corsicana Media),
a Washington corporation and a wholly owned subsidiary, for the purpose of
acquiring and operating an AM radio station serving the community of Corsicana,
Texas and surrounding areas. On January 16, 1995, Corsicana Media acquired the
operating assets of KAN-D Land, Inc. for a total price of $500,000. For purposes
of the Partnership's financial statement presentation, the activities of
Corsicana Media have been consolidated and all intercompany transactions have
been eliminated.
Northland Communications Corporation is the Managing General Partner (the
General Partner) of the Partnership. Certain affiliates of the Partnership also
own and operate other cable television systems. In addition, the General Partner
manages cable television systems for other limited partnerships for which it is
General Partner.
FN Equities Joint Venture, a California joint venture, is the Administrative
General Partner of the Partnership.
Contributed Capital, Commissions and Offering Costs
The capitalization of the Partnership is set forth in the accompanying
statements of changes in partners' deficit. No limited partner is obligated to
make any additional contribution to partnership capital.
The general partners purchased their 1% interest in the Partnership by
contributing $1,000 to partnership capital.
<PAGE> 36
-2-
Pursuant to the Partnership Agreement, brokerage fees paid to an affiliate of
the Administrative General Partner and other offering costs paid to the General
Partner of $787,500 and $139,651, respectively, were recorded as a reduction of
limited partners' capital.
Organization Costs
Organization costs include reimbursements of $25,823 to the General Partner for
costs incurred on the Partnership's behalf and fees of $487,500 as compensation
for selecting and arranging for the purchase of the cable television systems.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Depreciation
Depreciation of property and equipment is provided using the straight-line
method over the following estimated service lives:
<TABLE>
<S> <C>
Buildings 20 years
Distribution plant 10 years
Other equipment and leasehold improvements 5-10 years
</TABLE>
Allocation of Cost of Purchased Cable Television Systems
The Partnership allocated the total contract purchase price of cable television
systems acquired as follows: first, to the estimated fair value of net tangible
assets acquired; then, to the franchise and other determinable intangible costs;
and then any excess would have been allocated to goodwill.
Intangible Assets
Costs assigned to franchise agreements, organization costs and other intangibles
are being amortized using the straight-line method over the following estimated
useful lives:
<TABLE>
<S> <C>
Franchise agreements 10 years
Organization costs and other intangibles 5-8 years
</TABLE>
Revenue Recognition
The Partnership recognizes revenue in the month service is provided to customers
and accounts for advance payments on services to be rendered as subscriber
prepayments.
Estimates Used in Financial Statement Presentation
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE> 37
-3-
Reclassifications
Certain reclassifications have been made to conform prior years' data with the
current year presentation.
3. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES:
Management Fees
The General Partner receives a fee for managing the Partnership equal to 6% of
the gross revenues of the Partnership, excluding revenues from the sale of cable
television systems or franchises. The amount of management fees charged by the
General Partner was $453,521, $335,910 and $283,452 for 1995, 1994 and 1993,
respectively.
Income Allocation
As defined in the limited partnership agreement, the general partners are
allocated 1% and the limited partners are allocated 99% of partnership net
income, net losses, deductions and credits from operations until such time as
the limited partners receive aggregate cash distributions equal to their
aggregate capital contributions. Thereafter, the general partners will be
allocated 25% and the limited partners will be allocated 75% of partnership net
income, net losses, deductions and credits from operations. Cash distributions
from operations will be allocated in accordance with the net income and net loss
percentages then in effect. Prior to the general partners receiving cash
distributions from operations for any year, the limited partners must receive
cash distributions in an amount equal to 50% of the limited partners' allocable
share of taxable net income for such year. Any distributions other than from
cash flow, such as from the sale or refinancing of a system or upon dissolution
of the Partnership, will be determined according to the Partnership Agreement.
The limited partners' total initial contributions to capital were $7,500,000
($500 per limited partnership unit). As of December 31, 1995, $5,576,859 ($372
per limited partnership unit) has been distributed to the limited partners and
the Partnership has repurchased $130,500 of limited partnership units ($500 per
unit).
Reimbursements
The General Partner provides certain centralized services to the Partnership and
other affiliated entities. As set forth in the Partnership Agreement, the
Partnership reimburses the General Partner for the cost of those services
provided by the General Partner to the Partnership. These services include
engineering, marketing, management services, accounting, bookkeeping, legal,
copying, office rent and computer services.
The amounts billed to the Partnership for these services are based on the
General Partner's cost. The cost of certain services is charged directly to the
Partnership, based upon actual time spent by employees of the General Partner.
The cost of other services is allocated to the Partnership, and other affiliated
entities, based upon their relative size, revenue and other factors. Amounts
charged to the Partnership by the General Partner for these services were
$406,603, $281,914 and $231,682 for the years ended December 31, 1995, 1994 and
1993, respectively.
<PAGE> 38
-4-
In 1995, 1994 and 1993, the Partnership paid billing service fees to an
affiliate, amounting to $50,302, $35,593 and $33,991, respectively.
In July 1994, the Partnership began paying monthly program license fees to
Northland Cable News, Inc. (NCN), an affiliate of the General Partner, for the
rights to distribute programming developed and produced by NCN. Total license
fees paid to NCN during 1995 and 1994 were $165,281 and $53,296, respectively.
Cable Ad Concepts, Inc. (CAC), an affiliate of the General Partner, was formed
in 1993 and began operations in 1994. CAC was organized to assist in the
development of local advertising markets and management and training of local
sales staffs. CAC billed the Partnership $37,602 and $19,538 in 1995 and 1994,
respectively, for these services.
Due to General Partner and Affiliates
The liability to the General Partner and affiliates consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
-------- --------
<S> <C> <C>
Management fees $ 1,569 $ 39,187
Reimbursable operating costs 42,431 35,479
Due to affiliates, net 146,853 21,913
-------- --------
$190,853 $ 96,579
======== ========
</TABLE>
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1995 1994
----------- -----------
<S> <C> <C>
Land and buildings $ 561,199 $ 485,265
Distribution plant 20,351,459 15,903,700
Other equipment 1,297,110 1,095,684
Leasehold improvements 16,013 10,013
Construction in progress - 1,356
----------- -----------
22,225,781 17,496,018
Less--accumulated depreciation 11,562,201 9,850,804
----------- -----------
$10,663,580 $ 7,645,214
=========== ===========
</TABLE>
Replacements, renewals and improvements are capitalized. Maintenance and repairs
are charged to expense as incurred.
<PAGE> 39
-5-
5. NOTES PAYABLE:
Notes payable consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1995 1994
----------- -----------
<S> <C> <C>
Revolving credit and term loan agreement,
collateralized by a first lien position on all
present and future assets of the Partnership
Interest rates vary based on certain financial
covenants; currently 8.00% (weighted average)
Graduated principal payments plus interest are
due quarterly until maturity on March 31, 2001
The Partnership has a revolving credit facility
with its creditor allowing for borrowings not to
exceed $2,500,000 until maturity of the term loan
agreement. At December 31, 1995, the Partnership
had $1,056,554 outstanding on its revolving
credit facility $21,556,554 $ -
Unsecured, subordinated, non-interest bearing
hold-back notes due to seller, payable May 16,
1996, net of seller receivable 95,337 -
Termloan, repaid in 1995, collateralized by a
first lien position on all present and future
assets of the Partnership. Interest rates varied
based on certain financial covenants - 17,398,750
Unsecured, subordinated, non-interest bearing, hold-
back note due to seller - 346,892
Other 9,098 -
----------- -----------
$21,660,989 $17,745,642
=========== ===========
</TABLE>
Annual maturities of notes payable after December 31, 1995 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 854,435
1997 1,050,000
1998 1,500,000
1999 2,000,000
2000 2,650,000
Thereafter 13,606,554
-----------
$21,660,989
===========
</TABLE>
<PAGE> 40
-6-
Under the revolving credit and term loan agreement, the Partnership has agreed
to restrictive covenants which require the maintenance of certain ratios,
including a Fixed Charge Ratio of 1.15 to 1, an Interest Coverage Ratio of 1.75
to 1 and a Maximum Leverage Ratio of 6.25 to 1, among other restrictions. The
General Partner submits quarterly debt compliance reports to the Partnership's
creditor under this agreement.
The Partnership has entered into an interest rate swap agreement to reduce the
impact of changes in interest rates. Interest rate swap transactions generally
involve the exchange of fixed and floating interest payment obligations without
the exchange of the underlying principal amounts. At December 31, 1995, the
Partnership had one interest rate swap agreement, having a notional principal
amount of $16,625,000, outstanding with its bank. This agreement effectively
changes the Partnership's interest rate exposure to a fixed rate of 5.37%, plus
an applicable margin based on certain financial covenants (the margin at
December 31, 1995, was 2.63%). The interest rate swap agreement expires in
December 1997. At December 31, 1995, the Partnership would have been required to
pay approximately $37,300 to settle this agreement, based on the fair value
estimated by the counterparty.
The counterparty to the Partnership's interest rate swap agreements is the
Partnership's creditor. The Partnership is exposed to credit risk to the extent
of nonperformance by this counterparty; however, management believes the risk of
incurring losses due to credit risk is remote. The notional amount of the
instruments discussed above reflected the extent of involvement in the
instruments but did not represent the Partnership's exposure to market risk.
Considerable judgment is required to develop the estimates of fair value; thus,
the estimates provided above are not necessarily indicative of the amounts that
could be realized in a current market exchange.
6. INCOME TAXES:
Income taxes have not been recorded in the accompanying financial statements
because they are obligations of the partners. The federal and state income tax
returns of the Partnership are prepared and filed by the General Partner.
The tax returns, the qualification of the Partnership as such for tax purposes
and the amount of distributable partnership income or loss are subject to
examination by federal and state taxing authorities. If such examinations result
in changes with respect to the Partnership's qualification or in changes with
respect to the income or loss, the tax liability of the partners would likely be
changed accordingly.
Taxable income (loss) to the limited partners was approximately $(566,000),
$349,000 and $883,000 for each of the three years in the period ended December
31, 1995, and is different from that reported in the consolidated statements of
operations due to the difference in depreciation expense allowed for tax
purposes and that amount recognized under generally accepted accounting
principles. There were no other significant differences between taxable income
(loss) and the net income (loss) reported in the consolidated statements of
operations.
<PAGE> 41
-7-
In general, under current federal income tax laws, a limited partner's allocated
share of tax losses from a partnership is allowed as a deduction on his
individual income tax returns only to the extent of the partner's adjusted basis
in his partnership interest at the end of the tax year. Any excess losses over
adjusted basis may be carried forward to future tax years and are allowed as a
deduction to the extent the partner has an increase in his adjusted basis in the
Partnership through either an allocation of partnership income or additional
capital contributions to the Partnership.
In addition, the current tax law does not allow a taxpayer to use losses from a
business activity in which he does not materially participate (a "passive
activity," e.g., a limited partner in a limited partnership) to offset income
such as salary, active business income, dividends, interest, royalties and
capital gains. However, such losses can be used to offset income from other
passive activities. In addition, disallowed losses can be carried forward
indefinitely to offset future income from passive activities. Disallowed losses
can be used in full when the taxpayer recognizes gain or loss upon the
disposition of his entire interest in the passive activity.
7. COMMITMENTS AND CONTINGENCIES:
Lease Arrangements
The Partnership leases certain tower sites, office facilities and pole
attachments under leases accounted for as operating leases. Rental expense
included in operations amounts to $165,872, $116,151 and $105,876 in 1995, 1994
and 1993, respectively. Minimum lease payments to the end of the lease terms are
as follows:
<TABLE>
<S> <C>
1996 $ 31,287
1997 31,107
1998 31,080
1999 28,380
2000 4,180
Thereafter 17,755
--------
$143,789
========
</TABLE>
Effects of Regulation
On October 5, 1992, Congress enacted the Cable Television Consumer Protection
and Competition Act of 1992 (the 1992 Act). On April 1, 1993, the Federal
Communications Commission (FCC) adopted rules implementing rate regulation and
certain other provisions of the 1992 Act, which became effective September 1,
1993. On February 22, 1994, the FCC adopted further rate regulation rules
requiring additional reductions, which became effective May 15, 1994, and
revised the benchmarks and formulas used to calculate such rates. Also in
February, the FCC's initial rules governing cost-of-service showings were
adopted with an effective date of May 15, 1994. Cable operators may pursue
cost-of-service showings to justify charging rates for regulated services in
excess of those established by the FCC in its benchmark regulatory scheme.
<PAGE> 42
-8-
On May 5, 1995, the FCC announced the adoption of a simplified set of rate
regulation rules applicable to small cable systems, defined as a system serving
15,000 or fewer subscribers, owned by small companies, defined as a company
serving 400,000 or fewer subscribers. Under the FCC's definition, the
Partnership is a small company and each of the Partnership's cable systems are
small systems. Maximum permitted rates under these revised rules are dependent
on several factors including the number of regulated channels offered, the net
asset basis of plant and equipment used to deliver regulated services, the
number of subscribers served and a reasonable rate of return. It is management's
opinion that, in all material respects, the rates in effect in the Partnership's
cable systems are within the maximum allowable rates permitted under the FCC's
small cable system rules.
On February 8, 1996, the Telecommunications Act of 1996 (the 1996 Act) became
law. The 1996 Act will eliminate all rate controls on cable programming service
tiers of small cable systems, defined by the 1996 Act as systems serving fewer
than 50,000 subscribers owned by operators serving fewer than 1% of all
subscribers in the United States (approximately 600,000 subscribers). All of the
Partnership's cable systems qualify as small cable systems. Many of the changes
called for by the 1996 Act will not take effect until the FCC issues new
regulations, a process that could take from several months to a few years
depending on the complexity of the required changes and the statutory time
limits. Because of this, the full impact of the 1996 Act on the Partnership's
operations cannot be determined at this time.
8. CABLE TELEVISION SYSTEM ACQUISITION:
In September 1994, the Partnership completed its purchase of certain operating
assets and franchises of cable television systems owned by Corsicana Cable
Television (CCT). These systems currently serve the community of Corsicana,
Texas and surrounding areas. The total purchase price was $8,800,000. At the
time of closing, the Partnership paid $8,370,000 to CCT. The remaining purchase
price was in the form of an unsecured, subordinated, non-interest bearing
hold-back note payable due June 30, 1995. During 1995, the Partnership paid
approximately $319,000 to CCT to satisfy the unsecured, subordinated,
non-interest bearing hold-back note payable. The amount paid was net of certain
purchase price adjustments.
On December 20, 1995, the Partnership acquired substantially all operating
assets and franchise rights of the cable television systems in or around the
communities of Ellenboro, Bostic, Gilkey and Harris, in the state of North
Carolina (the Phoenix system) for a total purchase price of $4,233,000. The
cable television systems represent approximately 2,400 basic subscribers and
were owned by Phoenix Cable Income Fund and PCI One Incorporated. Of the total
purchase price, $4,129,000 was paid at the closing date and the balance of
$104,000 will be paid 120 days after the closing date, net of any purchase price
adjustments.
<PAGE> 43
-9-
Pro forma operating results (unaudited) of the Partnership for December 31,
1995, assuming the acquisition of the Phoenix system had been made at the
beginning of the year, follow (unaudited):
<TABLE>
<S> <C>
Revenue $ 8,681,000
===========
Net loss $(1,841,617)
===========
Net loss per limited partnership unit $ (124)
===========
</TABLE>
<PAGE> 44
================================================================================
CREDIT AGREEMENT
DATED AS OF NOVEMBER 17, 1995
BY AND AMONG
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
AS BORROWER,
THE LENDERS REFERRED TO HEREIN,
AND
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
AS AGENT
================================================================================
<PAGE> 45
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS .................................................... 1
SECTION 1.1. Definitions ........................................ 1
SECTION 1.2. General ............................................ 15
SECTION 1.3. Other Definitions and Provisions ................... 15
ARTICLE II REVOLVING CREDIT FACILITY ..................................... 16
SECTION 2.1. Revolving Credit Loans ............................. 16
SECTION 2.2. Procedure for Advance of Revolving Credit
Loans ................................. 16
SECTION 2.3. Repayment of Revolving Credit Loans ................ 17
SECTION 2.4. Revolving Credit Notes ............................. 18
SECTION 2.5. Permanent Reduction of the Revolving
Credit Commitment ..................... 18
SECTION 2.6. Termination of Revolving Credit Facility ........... 19
SECTION 2.7. Use of Proceeds .................................... 19
SECTION 2.8. Security ........................................... 19
ARTICLE III TERM LOAN FACILITY ........................................... 19
SECTION 3.1. Term Loans ......................................... 19
SECTION 3.2. Procedure for Advance of Term Loans ................ 19
SECTION 3.3. Repayment of Term Loan ............................. 20
SECTION 3.4. Optional Prepayments of Term Loans ................. 21
SECTION 3.5. Mandatory Prepayments of Term Loans ................ 21
SECTION 3.6. Term Notes ......................................... 21
SECTION 3.7. Security ........................................... 22
ARTICLE IV GENERAL LOAN PROVISIONS ....................................... 22
SECTION 4.1. Interest ........................................... 22
SECTION 4.2. Notice and Manner of Conversion or
Continuation of Loans ................. 24
SECTION 4.3. Commitment, Facility, and Agency Fees .............. 25
SECTION 4.4. Manner of Payment .................................. 25
SECTION 4.5. Crediting of Payments and Proceeds ................. 26
SECTION 4.6. Nature of Obligations of Lenders
Regarding Extensions of Credit;
Assumption by Agent ................... 26
SECTION 4.7. Changed Circumstances .............................. 27
SECTION 4.8. Indemnity .......................................... 29
SECTION 4.9. Taxes .............................................. 29
ARTICLE V CLOSING; CONDITIONS OF CLOSING AND BORROWING ................... 31
SECTION 5.1. Closing ............................................ 31
SECTION 5.2. Conditions to Closing and Initial Loans ............ 32
SECTION 5.3. Conditions to Phoenix Purchase ..................... 36
SECTION 5.4. Conditions to All Loans ............................ 36
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BORROWER .................... 37
SECTION 6.1. Representations and Warranties ..................... 37
</TABLE>
i
<PAGE> 46
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 6.2. Survival of Representations and
Warranties, Etc ....................... 46
ARTICLE VII FINANCIAL INFORMATION AND NOTICES ............................ 46
SECTION 7.1. Financial Statements and Projections ............... 47
SECTION 7.2. Officer's Compliance Certificate ................... 48
SECTION 7.3. Accountants' Certificate ........................... 48
SECTION 7.4. Other Reports ...................................... 48
SECTION 7.5. Notice of Litigation and Other Matters ............. 49
ARTICLE VIII AFFIRMATIVE COVENANTS ....................................... 50
SECTION 8.1. Preservation of Existence and Related
Matters ............................... 50
SECTION 8.2. Maintenance of Property ............................ 50
SECTION 8.3. Insurance .......................................... 51
SECTION 8.4. Accounting Methods and Financial Records ........... 51
SECTION 8.5. Payment and Performance of Obligations ............. 51
SECTION 8.6. Compliance With Laws and Approvals ................. 52
SECTION 8.7. Environmental Laws ................................. 52
SECTION 8.8. Compliance with ERISA .............................. 52
SECTION 8.9. Compliance With Agreements ......................... 52
SECTION 8.10. Conduct of Business ............................... 53
SECTION 8.11. Visits and Inspections ............................ 53
SECTION 8.12. Interest Rate Protection .......................... 53
SECTION 8.13. Additional Collateral ............................. 53
SECTION 8.14. Further Assurances ................................ 54
ARTICLE IX FINANCIAL COVENANTS ........................................... 54
SECTION 9.1. Maximum Leverage Ratio ............................. 54
SECTION 9.2. Interest Coverage Ratio ............................ 55
SECTION 9.3. Fixed Charge Coverage Ratio ........................ 55
ARTICLE X NEGATIVE COVENANTS ............................................. 55
SECTION 10.1. Limitations on Debt ............................... 55
SECTION 10.2. Limitations on Contingent Obligations ............. 56
SECTION 10.3. Limitations on Liens .............................. 56
SECTION 10.4. Limitations on Loans, Advances,
Investments and Acquisitions .......... 57
SECTION 10.5. Limitations on Mergers and Liquidation ............ 58
SECTION 10.6. Limitations on Sale of Assets ..................... 58
SECTION 10.7. Limitations on Distributions;
Organizational Structure .............. 58
SECTION 10.8. Limitations on Exchange and Issuance of
Equity ................................ 59
SECTION 10.9. Transactions with Affiliates ...................... 59
SECTION 10.10. Certain Accounting Changes ....................... 59
SECTION 10.11. Restrictive Agreements ........................... 59
SECTION 10.12. Management Fees .................................. 59
SECTION 10.13. Amendments; Payments and Prepayments of
Subordinated Debt ..................... 60
SECTION 11.1. Events of Default ................................. 60
</TABLE>
ii
<PAGE> 47
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 11.2. Remedies .......................................... 63
SECTION 11.3. Rights and Remedies Cumulative; Non-
Waiver; etc ........................... 64
SECTION 11.4. Consents .......................................... 64
ARTICLE XII THE AGENT .................................................... 64
SECTION 12.1. Appointment ....................................... 64
SECTION 12.2. Delegation of Duties .............................. 65
SECTION 12.3. Exculpatory Provisions ............................ 65
SECTION 12.4. Reliance by Agent ................................. 65
SECTION 12.5. Notice of Default ................................. 66
SECTION 12.6. Non-Reliance on the Agent and Other
Lenders ............................... 66
SECTION 12.7. Indemnification ................................... 67
SECTION 12.8. The Agent in Its Individual Capacity .............. 67
SECTION 12.9. Resignation of Agent; Successor Agents ............ 67
ARTICLE XIII MISCELLANEOUS ............................................... 68
SECTION 13.1. Notices ........................................... 68
SECTION 13.2. Expenses .......................................... 69
SECTION 13.3. Set-off ........................................... 69
SECTION 13.4. Governing Law ..................................... 70
SECTION 13.5. Consent to Jurisdiction ........................... 70
SECTION 13.6. Waiver of Jury Trial; Binding
Arbitration ........................... 70
SECTION 13.7. Reversal of Payments .............................. 71
SECTION 13.8. Injunctive Relief ................................. 71
SECTION 13.9. Accounting Matters ................................ 71
SECTION 13.10. Successors and Assigns; Participations ........... 72
SECTION 13.11. Amendments, Waivers and Consents ................. 75
SECTION 13.12. Performance of Borrower's Duties ................. 76
SECTION 13.13. Indemnification .................................. 76
SECTION 13.14. All Powers Coupled with Interest ................. 76
SECTION 13.15. Survival of Indemnities .......................... 76
SECTION 13.16. Titles and Captions .............................. 76
SECTION 13.17. Severability of Provisions ....................... 76
SECTION 13.18. Counterparts ..................................... 77
SECTION 13.19. Term of Agreement ................................ 77
SECTION 13.20. Adjustments ...................................... 77
SECTION 13.21. Inconsistencies with Other Documents;
Independent Effect of Covenants ....... 77
</TABLE>
iii
<PAGE> 48
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Term Note
Exhibit C-I - Form of Notice of Revolving Credit Loan
Borrowing
Exhibit C-II - Form of Notice of Term Loan Borrowing
Exhibit D - Form of Notice of Conversion/Continua-
tion
Exhibit E - Form of Officer's Compliance Certificate
Exhibit F - Form of Assignment and Acceptance
Exhibit G-1 - Form of Borrower Security Agreement
Exhibit G-2 - Form of Subsidiary Security Agreement
Exhibit H - Form of Stock Pledge Agreement
Exhibit I - Form of Guaranty Agreement
Exhibit J - Form of Subordination Agreement
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule 1 - Lenders and Commitments
Schedule 6.1(a) - Jurisdictions of Organization and Quali-
fication to Do Business as Foreign Cor-
poration
Schedule 6.1(b) - Subsidiaries of the Borrower and
Capitalization of the Borrower and
Subsidiaries
Schedule 6.1(d) - Governmental Approvals
Schedule 6.1(j) - ERISA Plans
Schedule 6.1(m) - Material Contracts
Schedule 6.1(n) - Employment, Non-Compete, Investment and
Shareholder Agreements
Schedule 6.1(o) - Compliance with Employment Laws
Schedule 6.1(p) - Trade/Customer Relations
Schedule 6.1(v) - Liens
Schedule 6.1(w) - Debt and Contingent Obligations
Schedule 6.1(x) - Litigation
Schedule 6.1(y) - FCC Licenses
Schedule 10.4 - Loans, Advances and Investments
</TABLE>
iv
<PAGE> 1
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of the 17th day of November, 1995 by and
among NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP, a limited partnership
organized under the laws of the State of Washington (the Borrower"), the Lenders
who are or may become a party to this Agreement (collectively, the "Lenders"),
and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association,
as Agent for the Lenders.
STATEMENT OF PURPOSE
The Borrower has requested and the Lenders have agreed to extend
certain credit facilities to the Borrower on the terms and conditions of this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The following terms when used in
this Agreement shall have the meanings assigned to them below:
"Acquisition Date" means the date on which the sellers satisfy their
obligations under the Asset Purchase Agreements and the Phoenix Purchase is
closed in accordance with the terms thereof, which date shall in no event be
later than January 31, 1996.
"Administrative General Partner" means FN Equities Joint Venture, a
joint venture organized under the laws of the State of California whose sole
partners are FN Equities, Inc. and John S. Simmers, in its capacity as
Administrative General Partner under the Partnership Agreement.
"Affiliate" means, with respect to the Borrower and its Subsidiaries,
any other Person (other than a Subsidiary) which directly or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Borrower or any of its Subsidiaries. The term "control" means
(a) the power to vote ten percent (10%) or more of the securities or other
equity interests of a Person having ordinary voting power, or (b) the
possession, directly or indirectly, of any other power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
<PAGE> 2
"Agent" means First Union in its capacity as agent hereunder, and any
successor thereto appointed pursuant to Section 12.9.
"Agent's Office" means the office of the Agent specified in or
determined in accordance with the provisions of Section 13.1.
"Agreement" means this Credit Agreement, as amended or modified from
time to time.
"Annual Operating Cash Flow" means, at any date of determination,
Operating Cash Flow for the period of four consecutive fiscal quarters ending on
or immediately prior to such date of determination.
"Annualized Operating Cash Flow" means, at any date of determination,
Operating Cash Flow for the fiscal quarter ending on or immediately prior to
such date of determination, times four.
"Applicable Law" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of all Governmental Authorities and all
orders and decrees of all courts and arbitrators.
"Applicable Margin" shall have the meaning assigned thereto in
Section 4.1(c).
"Assignment and Acceptance" shall have the meaning assigned
thereto in Section 13.10.
"Asset Purchase Agreements" means collectively the Asset Purchase
Agreement by and between Northland Cable Properties Five Limited Partnership, as
buyer, and Phoenix Cable Income Fund, as seller, dated August 15, 1995 and the
Asset Purchase Agreement by and between Northland Cable Properties Five Limited
Partnership, as buyer, and PCI One Incorporated, as seller, dated August 15,
1995, each as amended in accordance with the terms hereof.
"Base Rate" means, at any time, the higher of (a) the Prime Rate or (b)
the Federal Funds Rate as determined by the Agent plus 1/2 of 1%.
"Base Rate Loan" means any Loan bearing interest at a rate determined
with reference to the Base Rate as provided in Section 4.1(a) hereof.
"Borrower" means Northland Cable Properties Five Limited Partnership,
in its capacity as borrower hereunder.
"Borrower Management Agreement" means the Amended and Restated
Management Agreement by and between Northland Cable Properties Five Limited
Partnership and Northland Communication Corporation dated September 29, 1994, as
amended in accordance with the terms hereof.
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<PAGE> 3
"Borrower Security Agreement" means the Security Agreement of even date
executed by the Borrower, as debtor, in favor of the Agent for the benefit of
the Agent and the Lenders in the form of Exhibit G-1 attached hereto, as
amended, modified or supplemented.
"Business Day" means (a) for all purposes other than as set forth in
clause (b) below, any day other than a Saturday, Sunday or legal holiday on
which banks in Charlotte, North Carolina and New York, New York, are open for
the conduct of their commercial banking business, and (b) with respect to all
notices and determinations in connection with, and payments of principal and
interest on, any LIBOR Rate Loan, any day that is a Business Day described in
clause (a) and that is also a day for trading by and between banks in U.S.
Dollar deposits in the London interbank market.
"CATV Franchise" means, collectively with respect to the Borrower and
its Subsidiaries, (a) any franchise, license, permit, agreement or easement
granted by any political jurisdiction or unit or other local, state or federal
franchising authority pursuant to which a Person has the right or license to
operate a CATV System and (b) any law, regulation, ordinance, agreement or other
instrument or document setting forth all or any part of the terms of any
franchise, license, permit, agreement or easement described in clause (a) of
this definition.
"CATV System" means any cable distribution system owned or acquired by
the Borrower or any of its Subsidiaries which receives audio, video, digital,
other broadcast signals or information or telecommunications by cable, optical,
antennae, microwave or satellite transmission and which amplifies and transmits
such signals to Persons who receive such signals.
"Capital Asset" means, with respect to the Borrower and its
Subsidiaries, any asset that would, in accordance with GAAP, be required to be
classified and accounted for as a capital asset on a Consolidated balance sheet
of the Borrower and its Subsidiaries.
"Capital Expenditures" means, with respect to the Borrower and its
Subsidiaries for such period, the aggregate cost of all Capital Assets acquired
by the Borrower and its Subsidiaries during such period (excluding the Phoenix
Purchase), determined in accordance with GAAP.
"Capital Lease" means, with respect to the Borrower and its
Subsidiaries, any lease of any property that would, in accordance with GAAP, be
required to be classified and accounted for as a capital lease on a Consolidated
balance sheet of the Borrower and its Subsidiaries.
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<PAGE> 4
"Closing Date" means the date of this Agreement or such later Business
Day upon which each condition described in Article V shall be satisfied or
waived in all respects in a manner acceptable to the Agent.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended or supplemented from time to time.
"Collateral" means all the assets, property and interests in property
of the Borrower or any Subsidiary, whether now owned or hereafter acquired, that
shall, from time to time, secure the Obligations including without limitation
the collateral described in the Security Documents and any property or interest
provided in addition to or in substitution for any of the foregoing.
"Commitment" means the collective reference to the total amount of the
(a) Revolving Credit Commitment and (b) Term Loan Commitment.
"Commitment Percentage" means, as to the respective Commitment of any
Lender at any time, the ratio of (a) the amount of the Commitment of such Lender
to (b) all such Commitments of all Lenders.
"Consolidated" means, with reference to financial statements or
financial statement items of the Borrower and its Subsidiaries, such statements
or items on a consolidated basis in accordance with applicable principles of
consolidation under GAAP.
"Contingent Obligations" means, with respect to the Borrower and its
Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement condition or otherwise) or (b) entered into for the
purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, that the term Contingent
Obligation shall not include endorsements for collection or deposit in the
ordinary course of business.
"Corsicana" means Corsicana Media, Inc., a corporation organized under
the laws of the State of Washington.
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<PAGE> 5
"Corsicana Management Agreement" means the Management Agreement by and
between Corsicana and Northland Communication Corporation dated January 16,
1995, as amended in accordance with the terms hereof.
"Debt" means, with respect to the Borrower and its Subsidiaries at any
date, the sum of the following calculated in accordance with GAAP and without
duplication: (a) all liabilities, obligations and indebtedness for borrowed
money including but not limited to obligations evidenced by bonds, debentures,
notes or other similar instruments of any such Person, (b) all obligations to
pay the deferred purchase price of property or services of any such Person,
except trade payables arising in the ordinary course of business not more than
ninety (90) days past due and in an aggregate amount less than $1,000,000, (c)
all obligations of any such Person as lessee under Capital Leases, (d) all Debt
of any other Person secured by a Lien on any asset of any such Person, (e) all
Contingent Obligations of any such Person, (f) all obligations, contingent or
otherwise, of any such Person relative to the face amount of letters of credit,
whether or not drawn, including without limitation any banker's acceptances
issued for the account of any such Person and (g) all net obligations incurred
by any such Person pursuant to Hedging Agreements.
"Default" means any of the events specified in Section 11.1 which with
the passage of time, the giving of notice or any other condition, would
constitute an Event of Default.
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful
currency of the United States.
"Eligible Assignee" means, with respect to any assignment of the
rights, interest and obligations of a Lender hereunder, a Person that is at the
time of such assignment (a) a commercial bank organized under the laws of the
United States or any state thereof, having total capital and surplus in excess
of $500,000,000, (b) a finance company, insurance company or other financial
institution which in the ordinary course of business extends credit of the type
extended hereunder and that has total assets in excess of $1,000,000,000, (c)
already a Lender hereunder (whether as an original party to this Agreement or as
the assignee of another Lender), (d) the successor (whether by transfer of
assets, merger or otherwise) to all or substantially all of the commercial
lending business of the assigning Lender or (e) any other Person that has been
approved in writing as an Eligible Assignee by the Borrower and the Agent.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of the
Borrower or any ERISA Affiliate or (b) has at any time within the preceding six
years been maintained for the employees of the Borrower or any current or former
ERISA Affiliate.
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<PAGE> 6
"Environmental Laws" means any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, each as amended or modified from time to
time.
"ERISA Affiliate" means any Person who together with the Borrower is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"Event of Default" means any of the events specified in Section 11.1,
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"Excess Cash Flow" means for any Fiscal Year, the following calculated
without duplication for such period in accordance with GAAP: (a) Annual
Operating Cash Flow of the Borrower and its Subsidiaries for such period less
(b) Fixed Charges for such period.
"Existing Facility" means the Amended and Restated Term Loan Agreement
between Northland Cable Properties Five Limited Partnership, as borrower, and
PNC Bank, National Association, as lender.
"FCC" means the Federal Communications Commission or any
successor Governmental Authority.
"FCC License" means any license, permit, consent, certificate of
compliance, approval, waiver or authorization granted or issued by the FCC.
"Federal Funds Rate" means, for any day, a fluctuating interest rate
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published at 11:00 a.m. (Charlotte time) for such day (or, if
such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
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<PAGE> 7
"First Union" means First Union National Bank of North Carolina, a
national banking association, and its successors.
"Fiscal Year" means the fiscal year of the Borrower and its
Subsidiaries ending on December 31.
"Fixed Charges" means, with respect to the Borrower and its
Subsidiaries, for any period, the following without duplication, each calculated
for such period in accordance with GAAP: (a) all principal payments or similar
amounts required to be paid with respect to Total Debt during such period
(excluding optional prepayments for such period pursuant to Sections 2.3 and 3.4
and mandatory prepayments for such period pursuant to Sections 2.5(b) and 3.5)
plus (b) Interest Expense paid or payable in cash by the Borrower and its
Subsidiaries during such period plus (c) all Capital Expenditures made by the
Borrower and its Subsidiaries during such period.
"GAAP" means generally accepted accounting principles, as recognized by
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Borrower and its Subsidiaries throughout the period indicated and
consistent with the prior financial practice of the Borrower and its
Subsidiaries.
"General Partners" means the collective reference to the Administrative
General Partner and the Managing General Partner.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities, including, without limitation, all FCC Licenses and
CATV Franchises.
"Governmental Authority" means any nation, province, state or political
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing, including
without limitation the FCC.
"Guarantors" means the collective reference to Corsicana and any other
Subsidiary party to the Guaranty Agreement as a guarantor.
"Guaranty Agreement" means the Guaranty Agreement dated as of the date
hereof executed by Corsicana in favor of the Agent for the benefit of the Agent
and the Lenders in the form of Exhibit I, as amended, modified or supplemented.
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<PAGE> 8
"Hazardous Materials" means any substances or materials (a) which are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, (b) which are
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise harmful to human health or the environment and are or
become regulated by any Governmental Authority, (c) the presence of which
require investigation or remediation under any Environmental Law or common law,
(d) the discharge or emission or release of which requires a permit or license
under any Environmental Law or other Governmental Approval, (e) which are deemed
to constitute a nuisance, a trespass or pose a health or safety hazard to
persons or neighboring properties, (f) which are materials consisting of
underground or aboveground storage tanks, whether empty, filled or partially
filled with any substance described in clauses (a) through (g) hereof, or (g)
which contain, without limitation, asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas.
"Hedging Agreement" means any agreement with respect to an interest
rate swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of the Borrower under this Agreement, and any
confirming letter executed pursuant to such agreement, all as amended or
modified.
"Interest Expense" means, with respect to the Borrower and its
Subsidiaries for any period, total interest expense thereof (including without
limitation, interest expense attributable to Capital Leases) and, to the extent
not included therein, fees and other charges payable with respect to all Debt
(including fees and charges payable with respect to Hedging Agreements and
similar investments but excluding the facility and structuring fees paid in
connection with closing of the Loans), all determined on a Consolidated basis
for such period in accordance with GAAP.
"Interest Period" shall have the meaning assigned thereto in
Section 4.1(b).
"Lender" means each Person executing this Agreement as a Lender set
forth on the signature pages hereto and each Person that hereafter becomes a
party to this Agreement as a Lender pursuant to Section 13.10.
"Lending Office" means, with respect to any Lender, the office of such
Lender maintaining such Lender's Commitment Percentage of the Loans.
"Leverage Ratio" shall have the meaning assigned thereto in
Section 9.1.
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<PAGE> 9
"LIBOR" means the rate of interest determined on the basis of the rate
for deposits in Dollars for a period equal to the applicable Interest Period
commencing on the first day of such Interest Period appearing on Telerate Page
3750 as of 11:00 a.m. (London time) two (2) Business Days prior to the first day
of the applicable Interest Period. If, for any reason, such rate is not
available, then "LIBOR" shall be determined by the Agent to be the arithmetic
average (rounded upward, if necessary, to the nearest one-sixteenth of one
percent (1/16%) of the rate per annum at which deposits in Dollars would be
offered by first class banks in the London interbank market to the Agent (or the
Agent's London branch) at approximately 11:00 a.m. (London time) two (2)
Business Days prior to the first day of the applicable Interest Period for a
period equal to such Interest Period and in an amount substantially equal to the
amount of the applicable Loan.
"LIBOR Rate" means (a) LIBOR divided by (b) one (1) minus the
Reserve Percentage.
"LIBOR Rate Loan" means any Loan bearing interest at a rate determined
with reference to the LIBOR Rate as provided in Section 4.1(a) hereof.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"Loan" means any Revolving Credit Loan and any Term Loan made to the
Borrower pursuant to Articles II and III, and all such Loans collectively as the
context requires.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Security Agreements, the Stock Pledge Agreement, the Guaranty Agreement, the
Subordination Agreements, any Hedging Agreement with a Lender, any lockbox or
cash management agreements with a Lender and each other document, instrument and
agreement executed and delivered by the Borrower, in connection with this
Agreement or otherwise referred to herein or contemplated hereby, all as amended
or modified.
"Management Agreements" means the collective reference to the
Borrower Management Agreement and Corsicana Management Agreement.
"Management Fees" means all fees or charges (including any interest
thereon) and other amounts payable to the Managing General Partner pursuant to
the Management Agreements.
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<PAGE> 10
"Managing General Partner" means Northland Communications Corporation,
a corporation organized under the laws of the State of Washington, in its
capacity as Managing General Partner of the Borrower under the Partnership
Agreement.
"Material Adverse Effect" means, with respect to the Borrower or any of
its Subsidiaries, a material adverse effect on the properties, business,
prospects, operations or condition (financial or otherwise) of any such Person
or the ability of any such Person to perform its obligations under the Loan
Documents to which it is a party.
"Material Contract" means (a) any contract, agreement or other
instrument, written or oral, of the Borrower or any of its Subsidiaries
involving monetary liability of or to any such Person in an amount in excess of
$250,000 or (b) any other contract, agreement or instrument, written or oral, of
the Borrower or any of its Subsidiaries, the failure to comply with which could
reasonably be expected to have a Material Adverse Effect.
"Maximum Rate" shall have the meaning assigned thereto in
Section 4.1(f).
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or
is accruing an obligation to make, contributions within the preceding six years.
"Net Income" means, with respect to the Borrower and its Subsidiaries
for any period, the Consolidated net income (or loss) thereof for such period
determined in accordance with GAAP; provided, that there shall be excluded from
net income (or loss): the income (or loss) of any Person (other than
Subsidiaries of the Borrower) in which the Borrower has an ownership interest.
"Net Proceeds" shall have the meaning assigned thereto in
Section 3.5(a).
"Notes" means the Revolving Credit Notes or the Term Notes, or any
combination thereof, made by the Borrower payable to the order of each of the
Lenders, any amendments and modifications thereto, any substitutes therefor, and
any replacements, restatements, renewals or extensions thereof, in whole or in
part; "Note" means any of such Notes.
"Notice of Borrowing" shall have the meaning assigned thereto
in Section 2.2(a).
"Notice of Conversion/Continuation" shall have the meaning
assigned thereto in Section 4.2.
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<PAGE> 11
"Obligations" means, in each case, whether now in existence or
hereafter arising: (a) the principal of and interest on (including interest
accruing after the filing of any bankruptcy or similar petition) the Loans, (b)
all payment and other obligations owing by the Borrower to any Lender under any
Hedging Agreement and (c) all other fees and commissions (including attorney's
fees), charges, indebtedness, loans, liabilities, financial accommodations,
obligations, covenants and duties owing by the Borrower to the Lenders or to the
Agent, of every kind, nature and description, direct or indirect, absolute or
contingent, due or to become due, liquidated or unliquidated, and whether or not
evidenced by any note, in each case under or in respect of this Agreement, any
Note or any of the other Loan Documents.
"Officer's Compliance Certificate" shall have the meaning assigned
thereto in Section 7.2.
"Operating Cash Flow" means, with respect to the Borrower and its
Subsidiaries for any period, the following, each calculated on a Consolidated
basis for such period without duplication in accordance with GAAP: (a) Net
Income, plus (b) to the extent deducted in determining Net Income (i) income and
franchise taxes, (ii) Interest Expense, (iii) amortization and depreciation and
other similar non-cash charges and (iv) accrued but unpaid Management Fees less
(c) the sum of (i) interest income, (ii) non-cash, non-operating income and
(iii) any items of gain (or plus any non-cash items of loss) which were included
in determining Net Income and were not realized in the ordinary course of
business. In the case of any permitted acquisition or sale by the Borrower or
any Subsidiary during any period of calculation, the definition of Operating
Cash Flow shall be adjusted to give effect to such acquisition or sale, as if
such acquisition or sale occurred on the first day of the period.
"Other Taxes" shall have the meaning assigned thereto in
Section 4.9(b).
"Partnership Agreement" means the Restated Certificate and Agreement of
Limited Partnership of the Borrower dated December 30, 1985, as amended,
modified or supplemented in accordance with the terms hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor agency.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and which (a) is maintained for employees of the
Borrower or any ERISA Affiliates or (b) has at any time within the preceding six
years been maintained for the employees of the Borrower or any of its current or
former ERISA Affiliates.
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<PAGE> 12
"Person" means an individual, corporation, partnership, association,
trust, business trust, joint venture, limited liability company, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group thereof specifically
listed
herein.
"Phoenix Purchase" means the acquisition on the Acquisition Date by the
Borrower of cable assets (including approximately 2,400 subscribers) in
Ellenboro, Gilkey and Harris North Carolina from Phoenix Cable Income Fund and
PCI One Incorporated pursuant to the terms of the Asset Purchase Agreements.
"Pole Agreement" means any pole attachment agreement or underground
conduit use agreement entered into in connection with the operation of any CATV
System.
"Prime Rate" means, at any time, the rate of interest per annum
publicly announced from time to time by the Agent as its prime rate. Each change
in the Prime Rate shall be effective as of the opening of business on the day
such change in the Prime Rate occurs. The parties hereto acknowledge that the
rate announced publicly by the Agent as its Prime Rate is an index or base rate
and shall not necessarily be its lowest rate charged to its customers or other
banks.
"Register" shall have the meaning assigned thereto in Section
13.10(d).
"Required Lenders" means, at any date, any combination of Lenders
holding at least sixty-six and two-thirds percent (66-2/3%) of the aggregate
outstanding principal amount of the Loans or, if no Loans are at the time
outstanding, any combination of Lenders whose Commitment Percentages aggregate
at least sixty-six and two-thirds percent (66-2/3%).
"Reserve Percentage" means the maximum daily arithmetic reserve
requirement imposed by the Board of Governors of the Federal Reserve System (or
any successor) under Regulation D on Eurocurrency liabilities (as defined in
Regulation D) for the applicable Interest Period as of the first day of such
Interest Period, but subject to any changes in such reserve requirement becoming
effective during the Interest Period. For purposes of calculating the Reserve
Percentage, the reserve requirement shall be as set forth in Regulation D
without benefit of credit for prorations, exemptions or offsets under Regulation
D, and further without regard to whether or not any Lender elects to actually
fund any Loan or portion thereof with Eurocurrency liabilities.
"Revolving Credit Commitment" means (a) as to any Lender, the
obligation of such Lender to make Revolving Credit Loans to the account of the
Borrower hereunder in an aggregate principal amount
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<PAGE> 13
at any time outstanding not to exceed the amount set forth opposite such
Lender's name on Schedule 1 hereof, as such amount may be reduced or modified at
any time or from time to time pursuant to Sections 2.5 and 13.10 and (b) as to
all Lenders, the aggregate commitment of all Lenders to make Revolving Credit
Loans, as such amount may be reduced at any time or from time to time pursuant
to Section 2.5. The Revolving Credit Commitment of all Lenders on the
Acquisition Date shall be Two Million Five Hundred Thousand Dollars
($2,500,000).
"Revolving Credit Facility" means the revolving credit facility
established pursuant to Article II hereof.
"Revolving Credit Loans" means the revolving credit loans to be made to
the Borrower pursuant to Section 2.1.
"Revolving Credit Notes" means the separate Revolving Credit Notes made
by the Borrower payable to the order of each of the Lenders, substantially in
the form of Exhibit A hereto, evidencing the Debt incurred by the Borrower
pursuant to the Revolving Credit Facility, and any amendments, modifications and
supplements thereto, any substitutes therefor, and any replacements,
restatements, renewals or extension thereof, in whole or in part.
"Revolving Credit Termination Date" means the earliest of the dates
referred to in Section 2.6.
"Security Agreements" means the collective reference to the Borrower
Security Agreement and the Subsidiary Security Agreement.
"Security Documents" means the collective reference to the Security
Agreements, the Stock Pledge Agreement, the Subordination Agreements, the
Guaranty Agreement and each other agreement or writing pursuant to which the
Borrower pledges or grants a security interest in the Collateral or other
collateral securing the Obligations or such Person guaranties the payment and/or
performance of the Obligations.
"Solvent" means, as to any Person on a particular date, that such
Person (a) has capital sufficient to carry on its business and transactions and
all business and transactions in which it is about to engage and is able to pay
its debts as they mature, (b) owns property having a present fair saleable value
on a going concern basis, greater than the amount required to pay its probable
liabilities (including contingencies), and (c) does not believe that it will
incur debts or liabilities beyond its ability to pay such debts or liabilities
as they mature.
"Stock Pledge Agreement" means the Pledge Agreement of even date
executed by the Borrower, as debtor, in favor of the Agent for the benefit of
the Agent and Lenders, in the form of Exhibit H, as amended, modified or
supplemented.
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<PAGE> 14
"Subordination Agreements" means collectively the subordination
provisions substantially in the form of Exhibit J hereto included in the
promissory notes executed by Northland Cable Properties Five Limited Partnership
pursuant to Section 3.1.2. of
the Asset Purchase Agreements.
"Subordinated Debt" means all Debt subordinated in right and time of
payment and on other terms satisfactory to the Required Lenders, including
without limitation the Debt subordinated pursuant to the terms of the
Subordination Agreements.
"Subsidiary" means, as to any Person, any corporation, partnership or
other entity of which more than fifty percent (50%) of the outstanding capital
stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity is at the time, directly or indirectly, owned by or
the management is otherwise controlled by such Person (irrespective of whether,
at the time, capital stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency). Unless otherwise qualified, references to "Subsidiary" or
"Subsidiaries" herein shall refer to those of the Borrower.
"Subsidiary Security Agreement" means the Security Agreement of even
date executed by Corsicana, as debtor, in favor of the Agent for the benefit of
the Agent and Lenders, in the form of Exhibit G-2 hereto, as amended, modified
or supplemented.
"Taxes" shall have the meaning assigned thereto in Section 4.9(a).
"Term Loans" means each of the term loans to be made to the Borrower
pursuant to Section 3.1.
"Term Loan Commitment" means (a) as to any Lender, the obligation of
such Lender to make the Term Loans to the account of the Borrower hereunder in
an aggregate principal amount not to exceed the amount set forth opposite such
Lender's name on the signature pages hereof, as such amount may be reduced or
modified at any time or from time to time pursuant to Section 13.10 and (b) as
to all Lenders, the aggregate commitment of all Lenders to make Term Loans. The
Term Loan Commitment of all Lenders as of the Closing Date shall be Twenty
Million Five Hundred Thousand Dollars ($20,500,000).
"Term Loan Facility" means the term loan facility established pursuant
to Article III hereof.
"Term Loan Maturity Date" means March 31, 2001.
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<PAGE> 15
"Term Notes" means the Term Notes made by the Borrower payable to the
order of each of the Lenders, substantially in the form of Exhibit B hereto,
evidencing the Debt incurred by the Borrower pursuant to the Term Loan Facility,
and any amendments, modifications and supplements thereto, any substitutes
therefor, and any replacements, restatements, renewals or extensions thereof, in
whole or in part.
"Termination Event" means: (a) a "Reportable Event" described in
Section 4043 of ERISA; or (b) the withdrawal of the 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) of ERISA; or (c) 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 (d) the institution of proceedings to terminate, or the appointment of
a trustee with respect to, any Pension Plan by the PBGC; or (e) 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 (f) the partial or complete withdrawal of the Borrower or any ERISA
Affiliate from a Multiemployer Plan; or (g) the imposition of a Lien pursuant to
Section 412 of the Code or Section 302 of ERISA; or (h) any event or condition
which results in the reorganization or insolvency of a Multiemployer Plan under
Sections 4241 or 4245 of ERISA; or (i) any event or condition which results in
the termination of a Multiemployer Plan under Section 4041A of ERISA or the
institution by PBGC of proceedings to terminate a Multiemployer Plan under
Section 4042 of ERISA.
"Total Debt" means, with respect to the Borrower and its Subsidiaries
at any date of determination and without duplication, all Debt thereof on a
Consolidated basis.
"Wholly-Owned" means, with respect to a Subsidiary, a Subsidiary all of
the shares of capital stock or other ownership interests of which are, directly
or indirectly, owned or controlled by the Borrower and/or one or more of its
Wholly-Owned Subsidiaries.
SECTION 1.2. General. All terms of an accounting nature not
specifically defined herein shall have the meaning assigned thereto by GAAP.
Unless otherwise specified, a reference in this Agreement to a particular
section, subsection, Schedule or Exhibit is a reference to that section,
subsection, Schedule or Exhibit of this Agreement. Wherever from the context it
appears appropriate, each term stated in either the singular or plural shall
include the singular and plural, and pronouns stated in the masculine, feminine
or neuter gender shall include the masculine, the feminine and the neuter. Any
reference herein to "Charlotte time" shall refer to the applicable time of day
in Charlotte, North Carolina.
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<PAGE> 16
SECTION 1.3. Other Definitions and Provisions.
(a) Use of Capitalized Terms. Unless otherwise defined therein, all
capitalized terms defined in this Agreement shall have the defined meanings when
used in this Agreement, the Notes and the other Loan Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement.
(b) Miscellaneous. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
ARTICLE II
REVOLVING CREDIT FACILITY
SECTION 2.1. Revolving Credit Loans. Subject to the terms and
conditions of this Agreement, each Lender severally agrees to make Revolving
Credit Loans to the Borrower from time to time from the Acquisition Date through
the Revolving Credit Termination Date as requested by the Borrower in accordance
with the terms of Section 2.2; provided, that (a) the aggregate principal amount
of all outstanding Revolving Credit Loans (after giving effect to any amount
requested) shall not exceed the Revolving Credit Commitment and (b) the
principal amount of outstanding Revolving Credit Loans from any Lender to the
Borrower shall not at any time exceed such Lender's Revolving Credit Commitment.
Each Revolving Credit Loan by a Lender shall be in a principal amount equal to
such Lender's Commitment Percentage of the aggregate principal amount of
Revolving Credit Loans requested on such occasion. Subject to the terms and
conditions hereof, the Borrower may borrow, repay and reborrow Revolving Credit
Loans hereunder until the Revolving Credit Termination Date.
SECTION 2.2. Procedure for Advance of Revolving Credit Loans.
(a) Requests for Borrowing. The Borrower shall give the Agent
irrevocable prior written notice (or telephonic notice confirmed by written
notice) in the form attached hereto as Exhibit C-I (a "Notice of Borrowing") not
later than 11:00 a.m. (Charlotte time) (i) on the same Business Day as each Base
Rate Loan and (ii) at least three (3) Business Days before each LIBOR Rate Loan,
of its intention to borrow, specifying (A) the date of such borrowing, which
shall be a Business Day, (B) the amount of such borrowing, which shall be with
respect to LIBOR Rate Loans in an aggregate principal amount of $250,000 or a
whole multiple of $100,000 in excess thereof and with respect to Base Rate Loans
in an aggregate principal amount of $250,000 or a whole multiple of $100,000 in
excess thereof, (C) whether the Revolving Credit Loans are to be LIBOR Rate
Loans or Base Rate Loans (provided that LIBOR Rate Loans
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<PAGE> 17
shall not be available until three (3) Business Days after the Acquisition
Date), and (D) in the case of a LIBOR Rate Loan, the duration of the Interest
Period applicable thereto. Notices received after 11:00 a.m. (Charlotte time)
shall be deemed received on the next Business Day. The Agent shall promptly
notify the Lenders of each Notice of Borrowing.
(b) Disbursement of Loans. Not later than 1:00 p.m. (Charlotte time) on
the proposed borrowing date, each Lender will make available to the Agent, for
the account of the Borrower, at the office of the Agent in funds immediately
available to the Agent, such Lender's Commitment Percentage of the Revolving
Credit Loans to be made on such borrowing date. The Borrower hereby irrevocably
authorizes the Agent to disburse the proceeds of each borrowing requested
pursuant to this Section 2.2 in immediately available funds by crediting such
proceeds to a deposit account of the Borrower maintained with the Agent or by
wire transfer to such account as may be requested by the Borrower by prior
written notice to the Agent. Subject to Section 4.6 hereof, the Agent shall not
be obligated to disburse the proceeds of any Revolving Credit Loan requested
pursuant to this Section 2.2 to the extent that any Lender has not made
available to the Agent its Commitment Percentage of such Loan.
SECTION 2.3. Repayment of Revolving Credit Loans.
(a) Repayment on Revolving Credit Termination Date. The Borrower shall
repay the outstanding principal amount of all Revolving Credit Loans in full,
together with all accrued but unpaid interest thereon, on the Revolving Credit
Termination Date.
(b) Mandatory Repayment of Excess Revolving Credit Loans. If at any
time the outstanding principal amount of all Revolving Credit Loans exceeds the
Revolving Credit Commitment, the Borrower shall repay immediately upon notice
from the Agent, by payment to the Agent for the account of the Lenders, the
Revolving Credit Loans in an amount equal to such excess. Each such repayment
shall be accompanied by accrued interest on the amount repaid and any amount
required to be paid pursuant to Section 4.8 hereof.
(c) Optional Repayments. The Borrower may at any time and from time to
time repay the Revolving Credit Loans, in whole or in part, upon at least three
(3) Business Days' irrevocable notice to the Agent with respect to LIBOR Rate
Loans and one (1) Business Day irrevocable notice with respect to Base Rate
Loans, specifying the date and amount of repayment and whether the repayment is
of LIBOR Rate Loans or Base Rate Loans or a combination thereof, and, if of a
combination thereof, the amount allocable to each. Upon receipt of such notice,
the Agent shall promptly notify each Lender. If any such notice is given, the
amount specified in such notice shall be due and payable on the date set forth
in such notice. Partial repayments shall be in an aggregate amount of $250,000
or a whole
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<PAGE> 18
multiple of $100,000 in excess thereof with respect to LIBOR Rate Loans and
$250,000 or a whole multiple of $100,000 in excess thereof with respect to Base
Rate Loans.
(d) Limitation on Repayment of LIBOR Rate Loans. The Borrower may not
repay any LIBOR Rate Loan on any day other than on the last day of the Interest
Period applicable thereto unless such repayment is accompanied by any amount
required to be paid pursuant to Section 4.8 hereof.
SECTION 2.4. Revolving Credit Notes. Each Lender's Revolving Credit
Loans and the obligation of the Borrower to repay such Revolving Credit Loans
shall be evidenced by a Revolving Credit Note executed by the Borrower payable
to the order of such Lender representing the Borrower's obligation to pay such
Lender's Revolving Credit Commitment or, if less, the aggregate unpaid principal
amount of all Revolving Credit Loans made and to be made by such Lender to the
Borrower hereunder, plus interest on such principal amounts and all other fees,
charges and other amounts due thereon. Each Revolving Credit Note shall be dated
the date hereof and shall bear interest on the unpaid principal amount thereof
at the applicable interest rate per annum specified in Section 4.1.
SECTION 2.5. Permanent Reduction of the Revolving Credit Commitment.
(a) The Borrower shall have the right at any time and from time to
time, upon at least five (5) Business Days prior written notice to the Agent, to
permanently reduce, in whole at any time or in part from time to time, without
premium or penalty, the Revolving Credit Commitment of the Lenders in an
aggregate principal amount of not less than $250,000 or any whole multiple of
$100,000 in excess thereof.
(b) If at any time proceeds ("Excess Proceeds") remain after the
prepayment of Term Loans pursuant to Section 3.5, the Revolving Credit
Commitment shall be permanently reduced by an amount equal to the amount of such
Excess Proceeds.
(c) Each permanent reduction permitted or required pursuant to this
Section 2.5 shall be accompanied by a payment of principal sufficient to reduce
the aggregate outstanding Revolving Credit Loans of the Lenders after such
reduction to the Revolving Credit Commitment as so reduced and by payment of
accrued interest as of the date of any such payment on the amount of such repaid
principal. Any reduction of the Revolving Credit Commitment to zero shall be
accompanied by payment of all outstanding Obligations and termination of the
Revolving Credit Commitment and the Revolving Credit Facility. If the reduction
of the Revolving Credit Commitment requires the repayment of any LIBOR Rate
Loan, such reduction may be made only on the last day of the then current
Interest Period applicable thereto unless such repayment is
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<PAGE> 19
accompanied by any amount required to be paid pursuant to Section
4.8 hereof.
SECTION 2.6. Termination of Revolving Credit Facility. The Revolving
Credit Facility shall terminate on the earliest of (a) March 31, 2001, (b) the
date of permanent reduction of the Revolving Credit Commitment to zero pursuant
to Section 2.5 or (c) the date of termination by the Agent on behalf of the
Lenders pursuant to Section 11.2(a).
SECTION 2.7. Use of Proceeds. The Borrower shall use the proceeds of
the Revolving Credit Loans (a) to finance the Phoenix Purchase and the
acquisition of other Capital Assets and (b) for working capital and general
business requirements of the Borrower and its Subsidiaries.
SECTION 2.8. Security. The Obligations of the Borrower under
the Revolving Credit Facility shall be secured as provided in the
Security Documents.
ARTICLE III
TERM LOAN FACILITY
SECTION 3.1. Term Loans and Use of Proceeds. Subject to the terms and
conditions of this Agreement, each Lender severally agrees to make two Term
Loans to the Borrower. Each Lender severally agrees (a) to make the initial Term
Loan to the Borrower on the Closing Date to refinance and pay in full the
Existing Facility and pay certain fees and expenses incurred in connection with
the transactions contemplated hereby and (b) to make a second Term Loan to the
Borrower on the Acquisition Date to finance the Phoenix Purchase and certain
fees and expenses incurred in connection therewith. Each Term Loan shall be
funded by each Lender in a principal amount equal to such Lender's Commitment
Percentage of the total principal amount of the Term Loan requested on the
Closing Date or Acquisition Date, as applicable, and the aggregate amount of the
Term Loans shall be in a principal amount equal to such Lender's Term Loan
Commitment.
SECTION 3.2. Procedure for Advance of Term Loans. The Borrower shall
give the Agent a Notice of Borrowing in the form attached hereto as Exhibit C-II
prior to 11:00 a.m. (Charlotte time) on the Closing Date or the Acquisition
Date, as applicable, requesting that the Lenders make the Term Loans as a Base
Rate Loan on such date. To the extent any conversion of the applicable interest
rate is effected pursuant to Section 4.3, each borrowing of a Base Rate Loan
shall be in an aggregate principal amount of at least $250,000 or any integral
multiple of $100,000 in excess thereof and each borrowing of a LIBOR Rate Loan
shall be in an aggregate principal amount of $250,000 or any integral multiple
of
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<PAGE> 20
$100,000 in excess thereof. Upon receipt of such Notice of Borrowing from the
Borrower, the Agent shall promptly notify each Lender thereof. Not later than
1:00 p.m. (Charlotte time) on the Closing Date or the Acquisition Date, as
applicable, each Lender will make available to the Agent for the account of the
Borrower, at the office of the Agent in funds immediately available to the
Agent, the amount of such Lender's Term Loan to be made on such date. The
Borrower hereby irrevocably authorize the Agent to disburse the proceeds of each
of the Term Loans in immediately available funds by wire transfer to such Person
or Persons as may be designated by the Borrower.
SECTION 3.3. Repayment of Term Loans. The Borrower shall repay the
aggregate outstanding principal amount of the Term Loans in consecutive
quarterly installments on the last day of each March, June, September, and
December commencing December 31, 1995, based upon the following amortization
schedule:
<TABLE>
<CAPTION>
Payment Date Principal Installment
------------ ---------------------
<S> <C>
December 31, 1995 $ 375,000
March 31, 1996 187,500
June 30, 1996 187,500
September 30, 1996 187,500
December 31, 1996 187,500
March 31, 1997 262,500
June 30, 1997 262,500
September 30, 1997 262,500
December 31, 1997 262,500
March 31, 1998 375,000
June 30, 1998 375,000
September 30, 1998 375,000
December 31, 1998 375,000
March 31, 1999 500,000
June 30, 1999 500,000
September 30, 1999 500,000
December 31, 1999 500,000
March 31, 2000 662,500
June 30, 2000 662,500
September 30, 2000 662,500
December 31, 2000 662,500
March 31, 2001 12,175,000
Total Principal
Installments $20,500,000
</TABLE>
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<PAGE> 21
If not sooner paid, the Term Loans shall be paid in full, together with accrued
interest thereon, on the Term Loan Maturity Date.
SECTION 3.4. Optional Prepayments of Term Loans. The Borrower shall
have the right at any time and from time to time, upon at least five (5)
Business Days prior written notice to the Agent, to prepay the Term Loans in
whole or in part without premium or penalty except as provided below. Each
optional prepayment of the Term Loans hereunder shall be in an aggregate
principal amount of at least $250,000 or any whole multiple of $100,000 in
excess thereof, shall be applied pro rata to the outstanding principal
installments of the Term Loans and shall be accompanied by accrued interest on
the amount prepaid through the date of prepayment and by any payment required
under Section 4.8 hereof.
SECTION 3.5. Mandatory Prepayments of Term Loans.
(a) Debt and Equity Proceeds. The Borrower shall make mandatory
principal prepayments on the Term Loans in amounts equal to fifty percent (50%)
of the aggregate Net Proceeds, as defined below, from any incurrence of Debt or
offering of debt or equity securities by the Borrower or any of its
Subsidiaries. Such prepayment shall be made within one (1) Business Day after
the date of consummation of any such transaction. As used herein, "Net Proceeds"
means the gross proceeds received by the Borrower or any Subsidiary from any
such transaction net of the reasonable costs thereof (including any underwriting
commissions attributable thereto).
(b) Insurance Proceeds. The Borrower shall make mandatory principal
prepayments on the Term Loans in amounts equal to one hundred percent (100%) of
the proceeds of any payment under any casualty insurance policy not applied
within one hundred and twenty (120) days of receipt thereof toward the repair or
replacement of the related assets covered thereby.
(c) Excess Cash Flow. The Borrower shall make annual mandatory
principal prepayments on the Term Loans in amounts equal to fifty percent (50%)
of the Excess Cash Flow, if any, of the Borrower and its Subsidiaries for each
annual period ending on December 31 commencing with the annual period ending
December 31, 1996. Annual Excess Cash Flow prepayments shall be due and payable
on the date occurring one hundred and twenty days (120) after the close of each
such annual period.
(d) Manner of Payment. Each mandatory prepayment under Section 3.5
shall be applied to the outstanding principal balance of the Term Loans in the
inverse order of maturity thereof. Each such prepayment shall be accompanied by
accrued interest on the amount prepaid and by any payment required under Section
4.8 hereof.
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<PAGE> 22
SECTION 3.6. Term Notes. Each Lender's Term Loans and the obligation of
the Borrower to repay such Term Loans shall be evidenced by Term Notes in the
form attached hereto as Exhibit B, payable to the order of such Lender
representing the Borrower's obligation to pay such Lender's outstanding portion
of its Term Loan Commitment in accordance with the terms hereof. Each Term Note
shall bear interest on the unpaid principal amount thereof at the applicable
interest rate per annum specified in Section 4.1.
SECTION 3.7. Security. The Obligations of the Borrower under
the Term Loan Facility shall be secured as provided in the Security
Documents.
ARTICLE IV
GENERAL LOAN PROVISIONS
SECTION 4.1. Interest.
(a) Interest Rate Options. Subject to the provisions of this Section
4.1, at the election of the Borrower, the principal balance of any Loan shall
bear interest at either the Base Rate or the LIBOR Rate plus, in each case, the
Applicable Margin as set forth below. The Borrower shall select the rate of
interest and Interest Period, if any, applicable to any Loan at the time a
Notice of Borrowing is given pursuant to Sections 2.2 and 3.2, or at the time a
Notice of Conversion/ Continuation is given pursuant to Section 4.2. Each Loan
bearing interest based on the Base Rate shall be a "Base Rate Loan", and each
Loan bearing interest based on the LIBOR Rate shall be a "LIBOR Rate Loan". Any
Loan as to which the Borrower has not duly specified an interest rate as
provided herein shall be deemed a Base Rate Loan.
(b) Interest Periods. In connection with each LIBOR Rate Loan, the
Borrower, by giving notice at the times described in Section 4.1(a), shall elect
an interest period (each, an "Interest Period") to be applicable to such Loan,
which Interest Period shall be a period of one (1), two (2), three (3), six (6),
or if agreed to by each Lender, twelve (12) months; provided that:
(i) the Interest Period shall commence on the date of
advance of or conversion to any LIBOR Rate Loan and, in the case of immediately
successive Interest Periods, each successive Interest Period shall commence on
the date on which the immediately preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a
day that is not a Business Day, such Interest Period shall expire on the
immediately succeeding Business Day; provided, that if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the month
after which no further
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<PAGE> 23
Business Day occurs in such month, such Interest Period shall expire on the
immediately preceding Business Day;
(iii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of the calendar month at the end of such
Interest Period;
(iv) no Interest Period shall extend beyond the
Revolving Credit Termination Date or the Term Loan Maturity Date, as applicable,
and no Interest Period shall be selected by the Borrower which would result in
the repayment of any LIBOR Rate Loan prior to the end of an Interest Period; and
(v) there shall be no more than four (4) Interest
Periods in effect at any time.
(c) Applicable Margin. The Applicable Margin provided for in Section
4.1(a) with respect to the Loans (the "Applicable Margin") shall (i) on the
Closing Date equal the percentages set forth in the certificate delivered
pursuant to Section 5.2(e) and (ii) for each fiscal quarter thereafter be
determined by reference to the Leverage Ratio as of the end of the fiscal
quarter immediately preceding the delivery of the applicable Officer's
Compliance Certificate as follows:
<TABLE>
<CAPTION>
Applicable Margin Per Annum
Leverage Ratio Base Rate + LIBOR Rate +
-------------- ----------------------------
<S> <C> <C>
Equal to or greater than 1.375% 2.625%
4.40 to 1.0
Equal to or greater than 1.125% 2.375%
3.40 to 1.0 but less than
4.40 to 1.0
Less than 3.40 to 1.0 0.875% 2.125%
</TABLE>
Adjustments, if any, in the Applicable Margin shall be made by the Agent upon
receipt by the Agent of quarterly financial statements for the Borrower and its
Subsidiaries and the accompanying Officer's Compliance Certificate setting forth
the Leverage Ratio of the Borrower and its Subsidiaries as of the most recent
fiscal quarter end. Subject to Section 4.1(d), in the event the Borrower fails
to deliver such financial statements and certificate within the time required by
Sections 7.1 and 7.2 hereof, the Applicable Margin shall be the highest
Applicable Margin set forth above until the delivery of such financial
statements and certificate.
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<PAGE> 24
(d) Default Rate. Upon the occurrence and during the continuance of an
Event of Default, (i) the Borrower shall no longer have the option to request
LIBOR Rate Loans, (ii) all outstanding LIBOR Rate Loans shall bear interest at a
rate per annum two percent (2%) in excess of the rate then applicable to LIBOR
Rate Loans until the end of the applicable Interest Period and thereafter at a
rate equal to two percent (2%) in excess of the rate then applicable to Base
Rate Loans, and (iii) all outstanding Base Rate Loans shall bear interest at a
rate per annum equal to two percent (2%) in excess of the rate then applicable
to Base Rate Loans (in each such case plus the Applicable Margin). Interest
shall continue to accrue on the Notes after the filing by or against the
Borrower of any petition seeking any relief in bankruptcy or under any act or
law pertaining to insolvency or debtor relief, whether state, federal or
foreign.
(e) Interest Payment and Computation. Interest on each Base Rate Loan
shall be payable in arrears on the last Business Day of each fiscal quarter
commencing December 29, 1995, and interest on each LIBOR Rate Loan shall be
payable on the last day of each Interest Period applicable thereto, and if such
Interest Period extends over three (3) months, at the end of each three (3)
month interval during such Interest Period. All interest rates, fees and
commissions provided hereunder shall be computed on the basis of a 360-day year
and assessed for the actual number of days elapsed, except that interest with
respect to each Base Rate Loan and the commitment fee referenced in Section
4.3(a) shall be computed on the basis of a 365-day year.
(f) Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under any of the Notes
exceed the highest rate permissible under any Applicable Law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that the Lenders have contracted for,
charged or received interest hereunder in excess of the highest applicable rate,
the rate in effect hereunder shall automatically be reduced to the maximum rate
permitted by Applicable Law and the Lenders shall at the Agent's option promptly
refund to the Borrower any interest received by Lenders in excess of the maximum
lawful rate or shall apply such excess to the principal balance of the
Obligations. It is the intent hereof that the Borrower not pay or contract to
pay, and that neither the Agent nor any Lender charge, receive or contract to
receive, directly or indirectly in any manner whatsoever, interest in excess of
the maximum non-usurious rate that may be paid by the Borrower under Applicable
Law.
SECTION 4.2. Notice and Manner of Conversion or Continuation of Loans.
Provided that no Event of Default has occurred and is then continuing, the
Borrower shall have the option to (a) convert at any time following the third
Business Day after the Closing Date or the Acquisition Date, as applicable, all
or any portion of their
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<PAGE> 25
outstanding Base Rate Loans that are Term Loans in a principal amount equal to
$250,000 or any whole multiple of $100,000 in excess thereof into one or more
LIBOR Rate Loans that are Term Loans, (b) convert at any time all or any portion
of their outstanding Base Rate Loans that are Revolving Credit Loans in a
principal amount equal to $250,000 or any whole multiple of $100,000 in excess
thereof into one or more LIBOR Rate Loans that are Revolving Credit Loans, and
(c) upon the expiration of any Interest Period, convert all or any part of their
outstanding LIBOR Rate Loans into Base Rate Loans in a principal amount equal to
$250,000 or a whole multiple of $100,000 in excess thereof or to continue such
LIBOR Rate Loans as LIBOR Rate Loans. Whenever the Borrower desires to convert
or continue Loans as provided above, the Borrower shall give the Agent
irrevocable prior written notice in the form attached as Exhibit D (a "Notice of
Conversion/Continuation") not later than 11:00 a.m. (Charlotte time) three (3)
Business Days before the day on which a proposed conversion or continuation of
such Loan is to be effective specifying (i) the Loans to be converted or
continued, and, in the case of a LIBOR Rate Loan to be converted or continued,
the last day of the Interest Period therefor, (ii) the effective date of such
conversion or continuation (which shall be a Business Day), (iii) the principal
amount of such Loans to be converted or continued, and (iv) the Interest Period
to be applicable to such converted or continued LIBOR Rate Loan. The Agent shall
promptly notify the Lenders of such Notice of Conversion/Continuation.
SECTION 4.3. Commitment, Facility, and Agency Fees.
(a) Commitment Fee. Commencing on the Closing Date, the Borrower shall
pay to the Agent, for the account of the Lenders, a non-refundable commitment
fee at a rate per annum equal to 1/2 of 1% on the average daily unused portion
of the Revolving Credit Commitment and Term Loan Commitment. The commitment fee
shall be payable in arrears on the last Business Day of each fiscal quarter
during the term of this Agreement commencing December 29, 1995, and on the
Termination Date. Such commitment fee shall be distributed by the Agent to the
Lenders pro rata in accordance with the Lenders' respective Commitment
Percentages.
(b) Agent's Fee. In order to compensate the Agent for administering the
Loans and its other obligations hereunder, the Borrower agrees to pay to the
Agent an annual fee commencing on the Closing Date and each anniversary thereof
in accordance with the fee letter agreement referred to in Section 5.2(e)(iii).
SECTION 4.4. Manner of Payment. Each payment (including repayments
described in Articles II and III) by the Borrower on account of the principal of
or interest on the Loans or of any fee or other amounts payable to the Lenders
under this Agreement or any Note shall be made not later than 1:00 p.m.
(Charlotte time) on the date specified for payment under this Agreement to the
Agent for
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<PAGE> 26
the account of the Lenders pro rata in accordance with their respective
Commitment Percentages at the Agent's Office, in Dollars, in immediately
available funds and shall be made without any set-off, counterclaim or deduction
whatsoever. Any payment received after such time but before 2:00 p.m. (Charlotte
time) on such day shall be deemed a payment on such date for the purposes of
Section 11.1, but for all other purposes shall be deemed to have been made on
the next succeeding Business Day. Any payment received after 2:00 p.m.
(Charlotte time) shall be deemed to have been made on the next succeeding
Business Day for all purposes. Upon receipt by the Agent of each such payment
the Agent shall credit each Lender's account with its pro rata share of such
payment in accordance with such Lender's Commitment Percentage and shall wire
advice of the amount of such credit to each Lender. Each payment to the Agent of
Agent's fees or expenses shall be made for the account of the Agent. Subject to
Section 4.1(b)(ii), if any payment under this Agreement or any Note shall be
specified to be made upon a day which is not a Business Day, it shall be made on
the next succeeding day which is a Business Day and such extension of time shall
in such case be included in computing any interest if payable along with such
payment.
SECTION 4.5. Crediting of Payments and Proceeds. In the event that the
Borrower shall fail to pay any of the Obligations when due and the Obligations
have been accelerated pursuant to Section 11.2, all payments received by the
Lenders upon the Notes and the other Obligations and all net proceeds from the
enforcement of the Obligations shall be applied first to all expenses then due
and payable by the Borrower hereunder, then to all indemnity obligations then
due and payable by the Borrower hereunder, then to all Agent's fees then due and
payable, then to all commitment and other fees and commissions then due and
payable, then to accrued and unpaid interest on the Notes and any termination
payments due in respect of a Hedging Agreement with any Lender (pro rata in
accordance with all such amounts due) and then to the principal amount of the
Notes.
SECTION 4.6. Nature of Obligations of Lenders Regarding Extensions of
Credit; Assumption by Agent. The obligations of the Lenders under this Agreement
to make the Loans are several and are not joint or joint and several. Unless the
Agent shall have received notice from a Lender prior to a proposed borrowing
date that such Lender will not make available to the Agent such Lender's ratable
portion of the amount to be borrowed on such date (which notice shall not
release such Lender of its obligations hereunder), the Agent may assume that
such Lender has made such portion available to the Agent on the proposed
borrowing date in accordance with Sections 2.2(b) and 3.2, and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If such amount is made available to the Agent on a date
after such borrowing date, such Lender shall pay to the Agent on demand an
amount, until paid, equal to the product of
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(a) the amount of such Lender's Commitment Percentage of such borrowing, times
(b) the daily average Federal Funds Rate during such period as determined by the
Agent, times (c) a fraction the numerator of which is the number of days that
elapse from and including such borrowing date to the date on which such Lender's
Commitment Percentage of such borrowing shall have become immediately available
to the Agent and the denominator of which is 360. A certificate of the Agent
with respect to any amounts owing under this Section shall be conclusive, absent
manifest error. If such Lender's Commitment Percentage of such borrowing is not
made available to the Agent by such Lender within three (3) Business Days of
such borrowing date, the Agent shall be entitled to recover such amount made
available by the Agent with interest thereon at the rate per annum applicable to
Base Rate Loans hereunder, on demand, from the Borrower. The failure of any
Lender to make its Commitment Percentage of any Loan available shall not relieve
it or any other Lender of its obligation, if any, hereunder to make its
Commitment Percentage of such Loan available on such borrowing date, but no
Lender shall be responsible for the failure of any other Lender to make its
Commitment Percentage of such Loan available on the borrowing date.
SECTION 4.7. Changed Circumstances.
(a) Circumstances Affecting LIBOR Rate Availability. If, with respect
to any Interest Period, the Agent or any Lender (after consultation with Agent)
shall determine that, by reason of circumstances affecting the foreign exchange
and interbank markets generally, deposits in eurodollars, in the applicable
amounts are not being offered to the Agent or such Lender for such Interest
Period, then the Agent shall forthwith give notice thereof to the Borrower.
Thereafter, until the Agent notifies the Borrower that such circumstances no
longer exist (which notification shall be given within thirty (30) days after
the Agent obtains actual knowledge that such circumstances no longer exist), the
obligation of the Lenders to make LIBOR Rate Loans, and the right of the
Borrower to convert any Loan to or continue any Loan as a LIBOR Rate Loan, shall
be suspended, and the Borrower shall repay in full (or cause to be repaid in
full) the then outstanding principal amount of each such LIBOR Rate Loan,
together with accrued interest thereon, on the last day of the then current
Interest Period applicable to such LIBOR Rate Loan or convert the then
outstanding principal amount of each such LIBOR Rate Loan to a Base Rate Loan as
of the last day of such Interest Period.
(b) Laws Affecting LIBOR Rate Availability. If, after the date hereof,
the introduction of, or any change in, any Applicable Law or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or any of their respective Lending
Offices) with any request or directive (whether or not having the
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force of law) of any such Authority, central bank or comparable agency, shall
make it unlawful or impossible for any of the Lenders (or any of their
respective Lending Offices) to honor its obligations hereunder to make or
maintain any LIBOR Rate Loan, such Lender shall promptly give notice (and, if
available, a copy) thereof to the Agent and the Agent shall promptly give notice
(and such copy, if applicable) to the Borrower and the other Lenders.
Thereafter, until Agent notifies the Borrower that such circumstances no longer
exist (which notification shall be given within thirty (30) days after the Agent
obtains actual knowledge that such circumstances no longer exist), (i) the
obligations of the Lenders to make LIBOR Rate Loans and the right of the
Borrower to convert any Loan or continue any Loan as a LIBOR Rate Loan shall be
suspended and thereafter the Borrower may select only Base Rate Loans hereunder,
and (ii) if any of the Lenders may not lawfully continue to maintain a LIBOR
Rate Loan to the end of the then current Interest Period applicable thereto as a
LIBOR Rate Loan, the applicable LIBOR Rate Loan shall immediately be converted
to a Base Rate Loan for the remainder of such Interest Period.
(c) Increased Costs. If, after the date hereof, the introduction of, or
any change in, any Applicable Law, or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any of the
Lenders (or any of their respective Lending Offices) with any request or
directive (whether or not having the force of law) of such Authority, central
bank or comparable agency:
(i) shall subject any of the Lenders (or any of their
respective Lending Offices) to any tax, duty or other charge with respect to any
LIBOR Rate Loan or any Note, or shall change the basis of taxation of payments
to any of the Lenders (or any of their respective Lending Offices) of the
principal of or interest on any LIBOR Rate Loan or any Note, or any other
amounts due under this Agreement in respect thereof (except for changes in the
rate of tax on the overall net income of any of the Lenders or any of their
respective Lending Offices imposed by the jurisdiction in which such Lender is
organized or is or should be qualified to do business or such Lending Office is
located); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of the
Federal Reserve System), special deposit, insurance or capital or similar
requirement against assets of, deposits with or for the account of, or credit
extended by any of the Lenders (or any of their respective Lending Offices) or
shall impose on any of the Lenders (or any of their respective Lending Offices)
or the foreign exchange and interbank markets any other condition affecting any
LIBOR Rate Loan or any Note;
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and the result of any of the foregoing is to increase the costs to any of the
Lenders of maintaining any LIBOR Rate Loan or to reduce the yield or amount of
any sum received or receivable by any of the Lenders under this Agreement or
under the Notes in respect of a LIBOR Rate Loan, then such Lender shall promptly
notify the Agent, and the Agent shall promptly notify the Borrower of such fact
and demand compensation therefor and, within fifteen (15) days after such notice
by Agent, the Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender or Lenders for such increased cost or
reduction. The Agent will promptly notify the Borrower of any event of which it
has knowledge which will entitle such Lender to compensation pursuant to this
Section 4.7(c); provided, that the Agent shall incur no liability whatsoever to
the Lenders or the Borrower in the event it fails to do so. A certificate of the
Agent setting forth the basis for determining such additional amount or amounts
necessary to compensate such Lender or Lenders shall be conclusively presumed to
be correct save for manifest error. Any Lender claiming compensation under this
Section 4.7(c) shall notify the Borrower of any event occurring after the
Closing Date entitling such Lender to such compensation as promptly as
practicable (including, if available, a copy of the applicable request or
directive relating to such compensation); provided that if such Lender fails to
give such notice to the Agent within forty-five (45) days after it obtains
actual knowledge of such an event, such Lender shall, with respect to such
compensation in respect of any costs resulting from such event, only be entitled
to payment under this Section 4.7(c) for costs incurred from and after the date
forty-five (45) days prior to the date that such Lender does give such notice.
SECTION 4.8. Indemnity. The Borrower hereby indemnifies each of the
Lenders against any loss or expense which may arise or be attributable to each
Lender's obtaining, liquidating or employing deposits or other funds acquired to
effect, fund or maintain the Loans (a) as a consequence of any failure by the
Borrower to make any payment when due of any amount due hereunder in connection
with a LIBOR Rate Loan, (b) due to any failure of the Borrower to borrow on a
date specified therefor in a Notice of Borrowing or Notice of
Continuation/Conversion or (c) due to any payment, prepayment or conversion of
any LIBOR Rate Loan on a date other than the last day of the Interest Period
therefor. Each Lender's calculations of any such loss or expense shall be
furnished to the Borrower and shall be conclusive, absent manifest error.
SECTION 4.9. Taxes.
(a) Payments Free and Clear. Any and all payments by the Borrower
hereunder or under the Notes shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholding, and all liabilities with respect thereto excluding, (i)
in the case of each Lender and the Agent, income and franchise taxes imposed by
the
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jurisdiction under the laws of which such Lender or Agent (as the case may be)
is organized or is or should be qualified to do business or any political
subdivision thereof and (ii) in the case of each Lender, income and franchise
taxes imposed by the jurisdiction of such Lender's Lending Office or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder or under any Note, (A) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 4.9) such Lender or Agent (as the case may be) receives an amount
equal to the amount such party would have received had no such deductions been
made, (B) the Borrower shall make such deductions, (C) the Borrower shall pay
the full amount deducted to the relevant taxing authority or other authority in
accordance with Applicable Law, and (D) the Borrower shall deliver to the Agent
evidence of such payment to the relevant taxing authority or other authority in
the manner provided in Section 4.9(d).
(b) Stamp and Other Taxes. In addition, the Borrower shall pay any
present or future stamp, registration, recordation or documentary taxes or any
other similar fees or charges or excise or property taxes (other than excise and
property taxes to which any Agent or Lender would have been subject in the
absence of this Agreement and the provision for security in connection with the
execution of this Agreement), levies of the United States or any state or
political subdivision thereof or any applicable foreign jurisdiction which arise
from any payment made hereunder or from the execution, delivery or registration
of, or otherwise with respect to, this Agreement, the Loans, the other Loan
Documents, or the perfection of any rights or security interest in respect
thereto (hereinafter referred to as "Other Taxes").
(c) Indemnity. The Borrower shall indemnify each Lender and the Agent
for the full amount of Taxes and Other Taxes (including, without limitation, any
Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this
Section 4.9) paid by such Lender or the Agent (as the case may be) and any
liability (including penalties, interest and expenses, unless such penalties,
interest or expenses arise solely as the result of late payment or willful
negligence by the applicable Lender or Agent) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Such indemnification shall be made within thirty (30) days from the
date such Lender or the Agent (as the case may be) makes written demand
therefor.
(d) Evidence of Payment. Within thirty (30) days after the
date of any payment of Taxes or Other Taxes, the Borrower shall
furnish to the Agent, at its address referred to in Section 13.1,
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the original or a certified copy of a receipt evidencing payment thereof or
other evidence of payment satisfactory to the Agent.
(e) Delivery of Tax Forms. Each Lender organized under the laws of a
jurisdiction other than the United States or any state thereof shall deliver to
the Borrower, with a copy to the Agent, on the Closing Date or concurrently with
the delivery of the relevant Assignment and Acceptance, as applicable, (i) two
United States Internal Revenue Service Forms 4224 or Forms 1001, as applicable
(or successor forms) properly completed and certifying in each case that such
Lender is entitled to a complete exemption from withholding or deduction for or
on account of any United States federal income taxes, and (ii) an Internal
Revenue Service Form W-8 or W-9 or successor applicable form, as the case may
be, to establish an exemption from United States backup withholding taxes. Each
such Lender further agrees to deliver to the Borrower, with a copy to the Agent,
a Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms or manner
of certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Borrower,
certifying in the case of a Form 1001 or 4224 that such Lender is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes (unless in any such case an event (including
without limitation any change in treaty, law or regulation) has occurred prior
to the date on which any such delivery would otherwise be required which renders
such forms inapplicable or the exemption to which such forms relate unavailable
and such Lender notifies the Borrower and the Agent that it is not entitled to
receive payments without deduction or withholding of United States federal
income taxes) and, in the case of a Form W-8 or W-9, establishing an exemption
from United States backup withholding tax.
(f) Survival. The agreements and obligations of the Borrower contained
in this Section 4.9 shall survive for one year after the payment in full of the
Obligations and the termination of the Commitments.
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1. Closing. The closing shall take place at the offices of
Kennedy Covington Lobdell & Hickman, 100 North Tryon Street, Suite 4200,
Charlotte, North Carolina 28202 at 10:00 a.m. on November 17, 1995 or on such
other date as the parties hereto shall mutually agree.
SECTION 5.2. Conditions to Closing and Initial Loans. The obligation of
the Lenders to close this Agreement and to make the
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Loans on the Closing Date is subject to the satisfaction of each of the
following conditions:
(a) Executed Loan Documents. The following Loan Documents,
in form and substance satisfactory to the Agent and each Lender:
(i) this Agreement;
(ii) the Notes;
(iii) the Borrower Security Agreement;
(iv) the Subsidiary Security Agreement;
(v) the Stock Pledge Agreement; and
(vi) the Guaranty Agreement
shall have been duly authorized, executed and delivered by the Borrower or
Guarantor, as applicable, shall be in full force and effect and no default shall
exist thereunder, and the Borrower shall have delivered original counterparts
thereof to the Agent.
(b) Collateral.
(i) Filings and Recordings. All filings and recordations that
are necessary to perfect the security interests of the Lenders in the Collateral
described in the Security Documents shall have been forwarded for filing in all
appropriate locations and the Agent shall have received evidence satisfactory to
the Agent that once filed such security interests will constitute valid and
perfected first priority Liens therein.
(ii) Collateral. The Agent shall have received original stock
certificates evidencing the capital stock pledged pursuant to the Stock Pledge
Agreement, together with appropriate undated stock power duly executed in blank
by the registered owner thereof.
(iii) Lien Search. The Borrower shall have delivered the
results of a Lien search of all filings made against the Borrower and Guarantor
under the Uniform Commercial Code as in effect in any state in which any of
their assets are located, indicating among other things that their assets are
free and clear of any Lien except for the Liens permitted by Section 10.3.
(iv) Insurance. The Agent shall have received certificates of
insurance, evidence of payment of all insurance premiums, and, if requested by
the Agent, copies (certified by the Borrower) of insurance policies in the form
required under Section 8.3 and the Security Documents and otherwise in form and
substance reasonably satisfactory to the Agent.
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(c) Closing Certificates; etc.
(i) Officer's Certificate. The Agent shall have received a
certificate from the chief executive or chief financial officer (or other
officer reasonably acceptable to the Agent) of the Managing General Partner, in
form and substance satisfactory to the Agent, to the effect that all
representations and warranties of the Borrower contained in this Agreement and
the other Loan Documents are true, correct and complete; that the Borrower is
not in violation of any of the covenants contained in this Agreement and the
other Loan Documents; that, after giving effect to the transactions contemplated
by this Agreement, no Default or Event of Default has occurred and is
continuing; and that the Borrower has satisfied each of the closing conditions
to be satisfied by it.
(ii) Closing Certificate of Borrower. The Agent shall have
received a certificate of the secretary or assistant secretary of the Managing
General Partner certifying on behalf of the Borrower that attached thereto is a
true and complete copy of the certificate of limited partnership of the Borrower
and all amendments thereto, certified as of a recent date by the appropriate
Governmental Authority in its jurisdiction of formation; that attached thereto
is a true and complete copy of the Partnership Agreement of the Borrower as in
effect on the date of such certification; that attached thereto is a true and
complete copy of resolutions duly adopted by the Board of Directors of the
Managing General Partner, authorizing on behalf of the Borrower the borrowings
contemplated hereunder and the execution, delivery and performance of this
Agreement and the other Loan Documents; and as to the incumbency and genuineness
of the signature of each officer of the Managing General Partner executing Loan
Documents to which the Borrower is a party.
(iii) Closing Certificate of Managing General Partner. The Agent
shall have received a certificate of the secretary or assistant secretary of the
Managing General Partner certifying that attached thereto is a true and complete
copy of the certificate and articles of incorporation of the Managing General
Partner and all amendments thereto, certified as of a recent date by the
appropriate Governmental Authority in its jurisdiction of formation; and that
attached thereto is a true and complete copy of the by-laws of the Managing
General Partner as in effect on the date of such certification.
(iv) Closing Certificate of Guarantor. The Agent shall have
received a certificate of the secretary or assistant secretary of the Guarantor
certifying that attached thereto is a true and complete copy of the certificate
and articles of incorporation of the Guarantor and all amendments thereto,
certified as of a recent date by the appropriate Governmental Authority in its
jurisdiction of incorporation; that attached thereto is a true and complete copy
of the by-laws of the Guarantor as in effect on the date of such
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certification; that attached thereto is a true and complete copy of resolutions
duly adopted by the Board of Directors of the Guarantor, authorizing the
execution, delivery and performance of the Loan Documents to which it is a
party; and as to the incumbency and genuineness of the signature of each officer
of the Guarantor executing such Loan Documents.
(v) Certificates of Good Standing. The Agent shall have received
certificates as of a recent date of the good standing of the Borrower and
Guarantor under the laws of their respective jurisdiction of organization and
such other jurisdictions requested by the Agent and, if not covered by such good
standing certificates, a certificate of the relevant taxing authorities of such
jurisdictions certifying that the Borrower and Guarantor have filed required tax
returns and owes no delinquent taxes.
(vi) Opinions of Counsel. The Agent shall have received favorable
opinions of counsel to the Borrower and Guarantor addressed to the Agent and
Lenders (A) with respect to the Borrower and Guarantor, the Loan Documents, the
Collateral and such other matters as the Lenders shall request and (B) with
respect to FCC and other regulatory matters, each in form and substance
reasonably satisfactory to the Agent.
(vii) Tax Forms. The Agent shall have received copies from each
Lender of the United States Internal Revenue Service forms required by Section
4.9(e) hereof.
(d) Consents; No Adverse Change.
(i) Governmental and Third Party Approvals. Other than as set
forth on Schedule 6.1(d), all necessary approvals, authorizations and consents,
if any be required, of any Person and of all Governmental Authorities and courts
having jurisdiction with respect to the transactions contemplated by the Loan
Documents shall have been obtained.
(ii) Permits and Licenses. All material permits and licenses,
including permits and licenses required under Applicable Laws, necessary to the
conduct of business by the Borrower and its Subsidiaries, including without
limitation all FCC Licenses, shall have been obtained.
(iii) No Injunction, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain
substantial damages in respect of, or which is related to or arises out of this
Agreement or the other Loan Documents or the consummation of the transactions
contemplated hereby or thereby, or which, in the Agent's discretion, would make
it inadvisable to
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consummate the transactions contemplated by this Agreement and such
other Loan Documents.
(iv) No Material Adverse Change. There shall not have occurred any
material adverse change in the business, condition (financial or otherwise)
operations, prospects or properties of the Borrower and its Subsidiaries, or any
event, condition or state of facts that will or could be reasonably expected to
have a Material Adverse Effect.
(v) No Event of Default. No Default or Event of Default shall have
occurred and be continuing.
(e) Financial Matters.
(i) Financial Statements. The Agent shall have received recent
annual and interim financial statements of the Borrower and its Subsidiaries and
other financial information, all in form and substance reasonably satisfactory
to the Agent and the Lenders.
(ii) Financial Condition Certificate. The Borrower shall have
delivered to the Agent a certificate, in form and substance satisfactory to the
Agent, and certified as accurate in all material respects by the chief executive
officer or chief financial officer of the Borrower(or other officer reasonably
acceptable to the Agent), that (A) attached thereto are calculations reasonably
acceptable to the Agent evidencing compliance on a pro forma basis with the
covenants contained in Article IX hereof and Section 11(a)(2) of the Partnership
Agreement, (B) the financial projections previously delivered to the Agent are
based on reasonable and good faith estimates and assumptions of senior
management or the Managing General Partner of the financial condition and
operations of the Borrower and its Subsidiaries for the period covered thereby
and (C) attached thereto is a calculation of the Applicable Margin in accordance
with Section 4.1(c) as of the Closing Date.
(iii) Payment at Closing; Fee Letters. There shall have been paid
by the Borrower to the Agents and the Lenders the fees set forth in Section 4.3
and the fees set forth in the fee letter agreement between First Union and the
Borrower dated September 29, 1995, and any other accrued and unpaid fees or
commissions due hereunder (including, without limitation, legal fees and
expenses), and to any other Person such amount as may be due thereto in
connection with the transactions contemplated hereby, including all taxes, fees
and other charges in connection with the execution, delivery, recording, filing
and registration of any of the Loan Documents.
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(f) Miscellaneous.
(i) Notice of Borrowing. The Agent shall have received the
Notices of Borrowing in accordance with Sections 2.2(a) and 3.2 and written
instructions from the Borrower to the Agent directing the payment of the
proceeds of Loans made under this Agreement that are to be utilized to retire
the Existing Facility.
(ii) Proceedings and Documents. All opinions, certificates and
other instruments and all proceedings in connection with the transactions
contemplated by this Agreement shall be reasonably satisfactory in form and
substance to the Agent and the Lenders. The Agent and the Lenders shall have
received copies of all other material instruments and other evidence as the
Agent and the Lenders may reasonably request, in form and substance reasonably
satisfactory to the Agent and the Lenders, with respect to the transactions
contemplated by this Agreement.
(iii) Due Diligence and Other Documents. The Borrower shall have
delivered to the Agent such other documents, certificates and opinions as the
Agent may reasonably request.
SECTION 5.3. Conditions to Phoenix Purchase. The obligations of the
Lenders to make the Term Loan referred to in Section 3.1(b) funding the Phoenix
Purchase are subject to (a) receipt by the Agent of the Subordination Agreements
and any additional closing documents consistent with Section 5.2 that are
reasonably requested by the Agent or Lenders in connection with the Phoenix
Purchase, (b) evidence reasonably satisfactory to the Agent of receipt by each
applicable party of all Governmental Approvals and other consents required under
the terms of the Asset Purchase Agreements and satisfaction of the other closing
conditions set forth therein and (c) receipt by the Agent of originally executed
opinions of counsel delivered pursuant to the Asset Purchase Agreements in form
and substance reasonably satisfactory thereto (on which opinions the Agent and
Lenders shall be expressly entitled to rely).
SECTION 5.4. Conditions to All Loans. The obligations of the
Lenders to make any Loan is subject to the satisfaction of the
following conditions precedent on the relevant borrowing date, as
applicable:
(a) Continuation of Representations and Warranties. The representations
and warranties made by the Borrower contained in Article VI shall be true and
correct on and as of such borrowing or issuance date with the same effect as if
made on and as of such date.
(b) No Existing Default. No Default or Event of Default shall have
occurred and be continuing hereunder on the borrowing date with respect to such
Loan or after giving effect to the Loans to be made on such date.
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(c) Additional Documents. The Agent shall have received each additional
document, endorsement, instrument, legal opinion or item of information
reasonably requested by it, including, without limitation, a copy of all
Governmental Approvals required in connection with the financing of any
acquisition permitted by Section 10.4(c).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BORROWER
SECTION 6.1. Representations and Warranties. To induce the Agent and
each Lender to enter into this Agreement and to make the Loans, the Borrower
hereby represents and warrants to the Agent and the Lenders that:
(a) Organization; Power; Qualification. The Borrower and its
Subsidiaries are duly organized, validly existing and, to the extent applicable,
in good standing under the laws of the jurisdiction of their incorporation or
formation, have the power and authority to own their respective properties and
to carry on its respective businesses as now being and hereafter proposed to be
conducted and are duly qualified and authorized to do business in each
jurisdiction in which the character of their respective properties or the nature
of their respective businesses requires such qualification and authorization.
The jurisdictions in which the Borrower and its Subsidiaries are organized and
qualified to do business are described on Schedule 6.1(a).
(b) Ownership. Each Subsidiary of the Borrower is listed on Schedule
6.1(b). The capitalization of the Borrower consists of the number of partnership
interests, authorized, issued and outstanding, of such classes and series as
described on Schedule 6.1(b). All outstanding partnership interests have been
duly authorized and validly issued and are fully paid and nonassessable. The
partners of the Borrower and the equity owners of its Subsidiaries and the
number of partnership or other equity interests owned by each are described on
Schedule 6.1(b). There are no outstanding warrants, subscriptions, options,
securities, instruments or other rights of any type or nature whatsoever, which
are convertible into, exchangeable for or otherwise provide for or permit the
issuance of partnership or other equity interest in the Borrower or its
Subsidiaries, except as described on Schedule 6.1(b).
(c) Authorization of Agreement, Notes, Loan Documents and Borrowing.
Each of the Borrower and its Subsidiaries have the right, power and authority
and have taken all necessary partnership, corporate and other action to
authorize the execution, delivery and performance of this Agreement, the Notes
and each of the other Loan Documents to which it is a party in accordance with
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their respective terms and the Managing General Partner has the right, power and
authority and has taken all necessary action to authorize on behalf of the
Borrower the execution, delivery and performance of the Loan Documents to which
the Borrower is a party. This Agreement, the Notes, and each of the other Loan
Documents have been duly executed and delivered by the duly authorized officers
of the Borrower (or Managing General Partner on its behalf) and each of its
Subsidiaries party thereto, and each such document constitutes the legal, valid
and binding obligation of the applicable Borrower and/or Subsidiary party
thereto, enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
state or federal debtor relief laws from time to time in effect which affect the
enforcement of creditors' rights in general and the availability of equitable
remedies.
(d) Compliance of Agreement, Notes, Loan Documents and Borrowing with
Laws, Etc. The execution, delivery and performance by each of the Borrower and
its Subsidiaries of the Loan Documents to which it is a party, the borrowings
hereunder and the transactions contemplated hereby and thereby do not and will
not, by the passage of time, the giving of notice or otherwise, (i) except as
set forth on Schedule 6.1(d) hereto, require any Governmental Approval or
violate any Applicable Law relating to the Borrower or any of its Subsidiaries;
(ii) conflict with, result in a breach of or constitute a default under the
articles of incorporation, bylaws, partnership agreement or other organizational
documents of the Borrower or any of its Subsidiaries or, except as set forth on
Schedule 6.1(d), any Material Contract to which the Borrower is a party or by
which any of their respective properties may be bound or any Governmental
Approval relating to the Borrower or any of its Subsidiaries; or (iii) result in
or require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by the Borrower or any of its
Subsidiaries other than Liens arising under the Loan Documents.
(e) Compliance with Law; Governmental Approvals. The Borrower and its
Subsidiaries (i) have all material Governmental Approvals required by any
Applicable Law for them to conduct their respective businesses, each of which is
in full force and effect, is final and not subject to review on appeal and is
not the subject of any pending or, to the best of the Borrower's knowledge
threatened attack by direct or collateral proceeding; and (ii) is in material
compliance with each Governmental Approval applicable to it and in material
compliance with all other Applicable Laws relating to it or any of its
respective properties.
(f) Tax Returns and Payments. The Borrower and its Subsidiaries
have duly filed or caused to be filed all federal, state, local and other tax
returns required by Applicable Law to be filed, and have paid, or made adequate
provision for the payment
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of, all federal, state, local and other taxes, assessments and governmental
charges or levies upon it and its respective property, income, profits and
assets which are due and payable. No Governmental Authority has asserted any
Lien or other claim against the Borrower or any of its Subsidiaries with respect
to material unpaid taxes which has not been discharged or resolved or is not
being contested in good faith. The charges, accruals and reserves on the books
of the Borrower and its Subsidiaries in respect of federal, state, local and
other taxes for all Fiscal Years and portions thereof since the organization of
the Borrower and its Subsidiaries are in the judgment of the Borrower adequate,
and the Borrower does not anticipate any additional material taxes or
assessments for any of such years.
(g) Copyright Matters. The Borrower and its Subsidiaries have recorded
or deposited with and paid to the United States Copyright Office, and the
Register of Copyrights all notices, statements of account, royalty fees and
other documents and instruments required under the United States Copyright Act,
and neither the Borrower nor any Subsidiary thereof is liable to any Person for
copyright infringement under the United States Copyright Act as a result of its
business operations. To the best of the Borrower's knowledge, neither the
Borrower nor any Subsidiary thereof has been threatened with litigation with
respect to any such rights.
(h) Franchises, Licenses, Patents and Trademarks. The Borrower and its
Subsidiaries own or possess rights to use all material franchises (including
without limitation all CATV Franchises), licenses, patents, patent rights or
licenses, patent applications, trademarks, trademark rights, trade names, trade
name rights, copyrights and rights with respect to the foregoing which are
required to conduct its business. No event has occurred which permits, or after
notice or lapse of time or both would permit, the revocation or termination of
any such rights (excluding expiration in accordance with the terms thereof). To
the Borrower's best knowledge, neither the Borrower nor any Subsidiary thereof
has been threatened with litigation with respect to any such rights.
(i) Environmental Matters.
(i) To the Borrower's best knowledge, the properties of the
Borrower and its Subsidiaries do not contain, and have not previously contained,
any Hazardous Materials in amounts or concentrations which (A) constitute or
constituted a violation of, or (B) could give rise to liability under,
applicable Environmental Laws;
(ii) Such properties and all operations conducted in connection
therewith are in material compliance, and have been in material compliance, with
all applicable Environmental Laws, and there is no contamination at, under or on
such properties or such
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operations in violations of applicable Environmental laws or which could
interfere with the continued operation of such properties or impair the fair
saleable value thereof;
(iii) Neither the Borrower nor any Subsidiary thereof has received
any notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of their properties or the operations
conducted in connection therewith, nor does the Borrower or any Subsidiary
thereof have knowledge or reason to believe that any such notice will be
received or is being threatened;
(iv) Hazardous Materials have not been transported or disposed of
from the properties of the Borrower and its Subsidiaries in violation of, or in
a manner or to a location which could give rise to liability under,
Environmental Laws, nor have any Hazardous Materials been generated, treated,
stored or disposed of at, on or under any of such properties in violation of, or
in a manner that could give rise to liability under, any applicable
Environmental Laws;
(v) No judicial proceedings or governmental or administrative
action is pending, or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which either the Borrower or any Subsidiary thereof is or
will be named as a party with respect to such properties or operations conducted
in connection therewith, nor are there any consent decrees or other decrees,
consent orders, administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental Law with respect to
such properties or such operations; and
(vi) There has been no release, or to the best of the Borrower's
knowledge, the threat of release, of Hazardous Materials at or from such
properties, in violation of or in amounts or in a manner that could give rise to
liability under Environmental Laws.
(j) ERISA.
(i) Neither the Borrower nor any ERISA Affiliate maintain or
contribute to, or have any obligation under, any Employee Benefit Plans other
than those identified on Schedule 6.1(j). If requested by the Agent, the
Borrower shall provide the Agent accurate and complete copies of all contracts,
agreements and documents described on Schedule 6.1(j);
(ii) The Borrower and each ERISA Affiliate are in compliance with
all applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to all Employee Benefit Plans except for
any required amendments for which the remedial amendment period as defined in
Section
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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 501(a) of the Code. No
liability has been incurred by the Borrower or any ERISA Affiliate which remains
unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan
or any Multiemployer Plan;
(iii) 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 have the 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 prior to 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) or 4063(a) of ERISA with respect to any Pension
Plan;
(iv) Neither the Borrower nor any ERISA Affiliate has: (A) engaged
in a nonexempt prohibited transaction described in Section 406 of the ERISA or
Section 4975 of the Code; (B) 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; (C) failed to make a required contribution or payment
to a Multiemployer Plan; or (D) failed to make a required installment or other
required payment under Section 412 of the Code;
(v) No Termination Event has occurred or is reasonably expected to
occur; and
(vi) No proceeding, claim, lawsuit and/or investigation is existing
or, to the best knowledge of the Borrower after due inquiry, threatened
concerning or involving any (A) employee welfare benefit plan (as defined in
Section 3(1) of ERISA) currently maintained or contributed to by the Borrower or
any ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan.
(k) Margin Stock. Neither the Borrower nor any Subsidiary thereof is
engaged principally or as one of its respective activities in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" (as each such term is defined or used in Regulations G and U of the Board
of Governors of the Federal Reserve System). No part of the proceeds of any of
the Loans will be used for purchasing or carrying margin stock or for any
purpose which violates, or which would be inconsistent with, the provisions of
Regulation G, T, U or X of such Board of Governors.
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(l) Government Regulation. Neither the Borrower nor any Subsidiary
thereof is an "investment company" or a company "controlled" by an "investment
company" (as each such term is defined or used in the Investment Company Act of
1940, as amended) and neither the Borrower nor any of its Subsidiaries is, or
will be, subject to regulation under the Public Utility Holding Company Act of
1935 or the Interstate Commerce Act, each as amended, or any other Applicable
Law which materially limits its ability to incur or consummate the transactions
contemplated hereby.
(m) Material Contracts. Schedule 6.1(m) sets forth a complete and
accurate list of all Material Contracts of the Borrower and its Subsidiaries in
effect as of the Closing Date and which are not listed on any other Schedule
hereto. Except as set forth on Schedule 6.1(m), the Borrower and its
Subsidiaries party thereto have performed all of their material obligations
under such Material Contracts and, to the best knowledge of the Borrower, each
party thereto is in material compliance with each such Material Contract, and
each such Material Contract is, and after giving effect to the consummation of
the transactions contemplated by the Loan Documents will be, in full force and
effect in accordance with the terms thereof and there are no defaults by the
Borrower, any of its Subsidiaries or, to the Borrower's best knowledge, by any
other party under any such Material Contract. The Borrower and its Subsidiaries
have delivered to the Agent a true and complete copy of each Material Contract
required to be listed on Schedule 6.1(m).
(n) Employment, Non-Compete, Investment and Shareholder Agreements.
Schedule 6.1(n) sets forth a complete and accurate list, as of the Closing Date,
of (i) all employment agreements and executive compensation arrangements to
which the Borrower is a party which provide for aggregate compensation to any
Person (assuming compliance with or satisfaction of all contingencies or
conditions) of more than $100,000 per year, (ii) all material agreements to
which the Borrower or any Subsidiary is a party under which any party thereto
enters into any covenant not to compete with, or solicit customers of, the other
party or any covenant to maintain the confidentiality of any customer or
employee lists or similar intangible assets, and (iii) all agreements relating
to the investment in, or the voting or disposition of, any outstanding
partnership units or other ownership interests of the Borrower. Each such
agreement listed on Schedule 6.1(n) is, and after giving effect to the
transactions contemplated by the Loan Documents will be, in full force and
effect in accordance with the terms thereof and there are no material defaults
by the Borrower or, to the best of its knowledge, by any other party under any
such agreement.
(o) Employee Matters. The Borrower and its Subsidiaries have a stable
work force in place and are not, except as set forth on Schedule 6.1(o), party
to any collective bargaining agreement nor has any labor union been recognized
as the representative of its respective employees. The Borrower and its
Subsidiaries know of no
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pending, threatened or contemplated strikes, work stoppage or other collective
labor disputes involving its employees.
(p) Trade Relations. Except as set forth on Schedule 6.1(p), to the
best of the Borrower's knowledge, there exist no actual or threatened
termination, cancellation or limitation of, or any adverse modification or
change in, the business relationship of the Borrower or any Subsidiary thereof
with any customer or any group of customers whose purchases individually or in
the aggregate are material to the business of the Borrower or any Subsidiary
thereof, and there exists no present condition or state of facts or
circumstances affecting any customer of the Borrower or any Subsidiary thereof
that would materially adversely affect the Borrower or any Subsidiary thereof or
prevent the Borrower or any Subsidiary thereof from conducting their respective
business after the consummation of the transactions contemplated by the Loan
Documents in substantially the same manner in which it has heretofore been
conducted.
(q) Burdensome Provisions. Neither the Borrower nor any Subsidiary
thereof is a party to any indenture, agreement, lease or other instrument, or
subject to any corporate or partnership restriction, Governmental Approval or
Applicable Law which is so unusual or burdensome as in the foreseeable future
could be reasonably expected to have a Material Adverse Effect. The Borrower and
its Subsidiaries do not presently anticipate that future expenditures needed to
meet the provisions of any statutes, orders, rules or regulations of a
Governmental Authority will be so burdensome as to have a Material Adverse
Effect.
(r) Financial Statements. The (i) Consolidated balance sheets of the
Borrower and its Subsidiaries as of December 31, 1994 and the related statements
of income and retained earnings and cash flows for the Fiscal Year then ended
and, (ii) the unaudited Consolidated balance sheets of the Borrower and its
Subsidiaries as of June 30, 1995, copies of which have been furnished to the
Agent and each Lender, are complete and correct and fairly present the assets,
liabilities and financial position, or the projections thereof, of the Borrower
and its Subsidiaries as at such dates, and the results of the operations and
changes of financial position for the periods then ended, subject, in the case
of unaudited statements, to changes resulting from normal year-end audit
adjustments and information to be included in footnotes to the audited
statements. The projected statements of income and cash flows for the Borrower
and its Subsidiaries for the Fiscal Year 1995 previously delivered to the Agent
and Lenders are based on reasonable and good faith estimates and assumptions of
senior management of the Managing General Partner of the financial condition and
operations of the Borrower and its subsidiaries for such period. All of the
above financial statements, including the related schedules and notes thereto,
have been prepared in accordance with GAAP (to the extent applicable thereto).
The
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Borrower and its Subsidiaries have no Debt, obligations or other unusual forward
or long-term commitment which are not fairly reflected in the foregoing
financial statements or in the notes thereto.
(s) No Material Adverse Change. Since December 31, 1994, there has been
no material adverse change in the properties, business, operations, prospects,
or condition (financial or otherwise) of either the Borrower or any of its
Subsidiaries, including, but not limited to, any material adverse change
resulting from any fire, explosion, accident, drought, storm, hail, earthquake,
embargo, act of God, or of the public enemy or other casualty (whether or not
covered by insurance).
(t) Solvency. As of the Closing Date and after giving effect to each
Loan, each of the Borrower and its Subsidiaries will be Solvent.
(u) Titles to Properties. The Borrower and its Subsidiaries have good
and marketable title to, or valid and subsisting leasehold interests in, the
real property owned or leased, as the case may be, by them and valid and legal
title to all of their personal property, including, but not limited to, the real
and personal property reflected on the financial statements delivered pursuant
to Section 6.1(r), except property which has been disposed of by the Borrower or
any of its Subsidiaries subsequent to such date which dispositions have been in
the ordinary course of business or as otherwise expressly permitted hereunder.
(v) Liens. Except as set forth on Schedule 6.1(v), none of the
properties and assets of the Borrower or any of its Subsidiaries is subject to
any Lien, except Liens permitted pursuant to Section 10.3 hereof. No financing
statement under the Uniform Commercial Code of any state which names the
Borrower or any of its Subsidiaries or any their respective trade names or
divisions as debtor and which has not been terminated, has been filed in any
state or other jurisdiction and neither the Borrower nor any of its Subsidiaries
has signed any such financing statement or any security agreement authorizing
any secured party thereunder to file any such financing statement, except to
perfect those Liens permitted by Section 10.3.
(w) Debt and Contingent Obligations. Schedule 6.1(w) is a complete and
correct listing of all Debt and Contingent Obligations of the Borrower and its
Subsidiaries in excess of $250,000. The Borrower and its Subsidiaries have
performed and are in compliance with all of the terms of such Debt and
Contingent Obligations and all instruments and agreements relating thereto, and
no default or event of default, or event or condition which with notice or lapse
of time or both would constitute such a default or event of default on the part
of the Borrower or its Subsidiaries exists with respect to any such Debt or
Contingent Obligation.
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(x) Litigation. Except as set forth on Schedule 6.1(x), there are no
actions, suits or proceedings pending nor, to the knowledge of the Borrower,
threatened against or in any other way relating adversely to or affecting the
Borrower, any of its Subsidiaries or any of its respective properties in any
court or before any arbitrator of any kind or before or by any Governmental
Authority. There are no outstanding or unpaid final judgments against the
Borrower or any of its Subsidiaries.
(y) Communications Law Matters.
(i) Schedule 6.1(y) hereto sets forth, as of the date hereof, a
true and complete list of the following information for each FCC License issued
to the Borrower or any of its Subsidiaries: all FCC Licenses, the name of the
licensee, the type of service and the expiration dates.
(ii) Neither the Borrower nor any of its Subsidiaries is in
material violation of any duty or obligation required by the Communications Act
of 1934, as amended, or any FCC rule or regulation applicable to the operation
of any portion of any of the CATV Systems.
(iii) Except as set forth on Schedule 6.1(d), the Borrower and its
Subsidiaries possess all Governmental Approvals and Pole Agreements necessary to
own, operate and construct the CATV Systems or otherwise for the operations of
their businesses and are not in violation thereof. All such Governmental
Approvals and Pole Agreements are in full force and effect and no event has
occurred that permits, or after notice or lapse of time could permit, the
revocation, termination or material and adverse modification of any such
Governmental Approval or Pole Agreement.
(iv) There is not pending or, to the best knowledge of the
Borrower, threatened, any action by the FCC to revoke, cancel, suspend or refuse
to renew any FCC License held by the Borrower or any of its Subsidiaries. There
is not pending or, to the best knowledge of the Borrower, threatened, any action
by the FCC to modify adversely, revoke, cancel, suspend or refuse to renew any
other Governmental Approval or Pole Agreement.
(v) Except as set forth on Schedule 6.1(x), there is not issued
or outstanding or, to the best knowledge of the Borrower, threatened, any notice
of any hearing, violation or complaint against the Borrower or any of its
Subsidiaries with respect to the operation of any portion of the CATV Systems
and the Borrower has no knowledge that any Person intends to contest renewal of
any Governmental Approval or Pole Agreement.
(z) Absence of Defaults. No event has occurred or is continuing which
constitutes a Default or an Event of Default, or which constitutes, or which
with the passage of time or giving of
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notice or both would constitute, a default or event of default by the Borrower
or any of its Subsidiaries under any Material Contract or judgment, decree or
order to which either the Borrower or any of its Subsidiaries is a party or by
which either the Borrower, any of its Subsidiaries or any of their respective
properties may be bound or which would require either the Borrower or any of its
Subsidiaries to make any payment thereunder prior to the scheduled maturity date
therefor.
(aa) Accuracy and Completeness of Information. All written information,
reports and other papers and data produced by or on behalf of the Borrower or
any of its Subsidiaries and furnished to the Lenders were, at the time the same
were so furnished, complete and correct in all material respects (except to the
extent projections were prepared on the basis of good faith and reasonable
estimates and assumptions in accordance with Section 6.1(r)) to the extent
necessary to give the recipient a fair and reasonable understanding of the
subject matter. No document furnished or written statement made to the Agent or
the Lenders by either the Borrower or any of its Subsidiaries in connection with
the negotiation, preparation or execution of this Agreement or any of the Loan
Documents contains or will contain any untrue statement of a fact material to
the creditworthiness of the Borrower or any of its Subsidiaries or omits or will
omit to state a material fact necessary in order to make the statements
contained therein not misleading. Neither the Borrower nor any Subsidiary
thereof is aware of any facts which it has not disclosed in writing to the
Agents having a Material Adverse Effect, or insofar as the Borrower can now
foresee, could reasonably be expected to have a Material Adverse Effect.
SECTION 6.2. Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this Article VI and all
representations and warranties contained in any certificate, or any of the Loan
Documents (including but not limited to any such representation or warranty made
in or in connection with any amendment thereto) shall constitute representations
and warranties made under this Agreement. All representations and warranties
made under this Agreement shall be made as of the Closing Date and shall survive
the Closing Date in accordance with Section 5.4(a).
ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been finally and indefeasibly paid and
satisfied in full and the Commitment terminated, unless consent has been
obtained in the manner set forth in Section 13.10 hereof, the Borrower will
furnish or cause to be furnished to the Agent at the Agent's Office (with copies
for each Lender), or such other office as may be designated by the Agent from
time to time:
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SECTION 7.1. Financial Statements and Projections.
(a) Quarterly Financial Statements. As soon as practicable and in any
event within forty-five (45) days after the end of the first three fiscal
quarters of any Fiscal Year, an unaudited Consolidated balance sheet of the
Borrower and its Subsidiaries as of the close of such fiscal quarter and
unaudited Consolidated statements of income, retained earnings and cash flows
for the fiscal quarter then ended and that portion of the Fiscal Year then
ended, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and prepared by the Borrower
in accordance with GAAP (to the extent applicable) and, if applicable,
containing disclosure of the effect on the financial position or results of
operations of any change in the application of accounting principles and
practices during the period, and certified by the chief financial officer of the
Borrower (or other officer reasonably acceptable to the Agent) to present fairly
in all material respects the financial condition of the Borrower and its
Subsidiaries as of their respective dates and the results of operations of the
Borrower and its Subsidiaries for the respective periods then ended, subject to
normal year end adjustments.
(b) Annual Financial Statements. As soon as practicable and in any
event within one hundred and twenty (120) days after the end of each Fiscal
Year, an audited Consolidated balance sheet of the Borrower and its Subsidiaries
as of the close of such Fiscal Year and audited Consolidated statements of
income, retained earnings and cash flows for the Fiscal Year then ended,
including the notes thereto, all in reasonable detail setting forth in
comparative form the corresponding figures for the preceding Fiscal Year and
prepared by an independent certified public accounting firm acceptable to the
Agent in accordance with GAAP and, if applicable, containing disclosure of the
effect on the financial position or results of operation of any change in the
application of accounting principles and practices during the year, and
accompanied by a report thereon by such certified public accountants that is not
qualified with respect to scope limitations imposed by the Borrower or any of
its Subsidiaries or with respect to accounting principles followed by the
Borrower or any of its Subsidiaries not in accordance with GAAP.
(c) Annual Business Plan and Financial Projections. As soon as
practicable and in any event within sixty (60) days after the close of each
Fiscal Year, a business plan of the Borrower and its Subsidiaries for the
ensuing four (4) fiscal quarters, such plan to be prepared in accordance with
GAAP (to the extent applicable) and to include, on a quarterly basis, the
following: a quarterly operating and capital budget, a projected income
statement, a statement of the projected sources and uses of cash and projected
Debt balances, and calculations evidencing compliance with Article IX for such
period, accompanied by a certificate from the chief
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financial officer of the Borrower (or other officer reasonably acceptable to the
Agent) to the effect that, to the best of such officer's knowledge, such
projections are reasonable and good faith estimates and assumptions of senior
management of the Managing General Partner of the financial condition and
operations of the Borrower and its Subsidiaries for such four (4) quarter
period.
SECTION 7.2. Officer's Compliance Certificate. At each time financial
statements are delivered pursuant to Sections 7.1(a) and (b) and at such other
times as the Agent shall reasonably request, a certificate of the chief
executive officer or chief financial officer of the Managing General Partner on
behalf of the Borrower (or other officer reasonably acceptable to the Agent) in
the form of Exhibit E attached hereto (an "Officer's Compliance Certificate").
SECTION 7.3. Accountants' Certificate. At each time financial
statements are delivered pursuant to Section 7.1(b), a certificate of the
independent public accountants certifying such financial statements addressed to
the Agent for the benefit of the Lenders:
(a) stating that in making the examination necessary for the
certification of such financial statements, they obtained no knowledge of any
Default or Event of Default or, if such is not the case, specifying such Default
or Event of Default and its nature and period of existence; and
(b) including the calculations reviewed by such accountants required to
establish whether or not the Borrower and its Subsidiaries are in compliance
with the financial covenants set forth in Article IX hereof as at the end of
each respective period.
SECTION 7.4. Other Reports.
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to the Borrower or the Managing General Partner or its Board of
Directors by its independent public accountants in connection with their
auditing function, including, without limitation, any management report and any
management responses thereto;
(b) As soon as available and in any event within forty-five (45) days
after the end of each Fiscal Year of the Borrower, an updated Schedule 6.1(y)
accompanied by a report identifying any FCC License lost, surrendered or
canceled during such period, and within ten (10) Business Days after the receipt
by the Borrower or any Subsidiary of notice that any FCC License has been lost
or canceled, copies of any such notice accompanied by a report describing the
measures undertaken by either the Borrower or any of its Subsidiaries to prevent
such loss or cancellation (and the anticipated impact, if any, that such loss or
cancellation will
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have upon the business of either the Borrower or any of its Subsidiaries); and
(c) Such other information regarding the operations, business affairs
and financial condition of the Borrower and its Subsidiaries as the Agent or any
Lender may reasonably request.
SECTION 7.5. Notice of Litigation and Other Matters. Prompt (but in no
event later than ten (10) days after an officer of the Borrower or Managing
General Partner obtains knowledge thereof) telephonic and written notice of:
(a) the commencement of all proceedings and investigations by or before
any Governmental Authority and all actions and proceedings in which a claim is
made in an amount in excess of $250,000 in any court or before any arbitrator
against or involving the Borrower, any of its Subsidiaries or any of their
respective properties, assets or businesses including any material notice
received from the Internal Revenue Service or other taxing authority regarding
employment related taxes;
(b) any notice of any violation received by the Borrower or any of its
Subsidiaries from any Governmental Authority including, without limitation, any
notice of violation of Environmental Laws if any such violation could reasonably
be expected to cause a Material Adverse Effect;
(c) any labor controversy that has resulted in, or threatens to result
in, a strike or other work action against the Borrower or any of its
Subsidiaries;
(d) any attachment, judgment, lien, levy or order exceeding $250,000
that may be assessed against or threatened against the Borrower or any of its
Subsidiaries thereof;
(e) (i) any Default or Event of Default or (ii) any event which
constitutes or which with the passage of time or giving of notice or both would
constitute a default or event of default under any Material Contract to which
the either the Borrower or any of its Subsidiaries is a party or by which the
Borrower, any of its Subsidiaries or any of their respective properties may be
bound if any such event referred to in this clause (ii) could reasonably be
expected to cause a Material Adverse Effect;
(f) (i) the failure of the 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; (ii) all notices received by the 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) all notices received by
the Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor concerning
the imposition or amount of withdrawal liability
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pursuant to Section 4202 of ERISA; and (iv) the Borrower obtaining knowledge or
reason to know that the Borrower or any ERISA Affiliate 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;
(g) any event which makes any of the representations set forth in
Section 6.1 inaccurate in any material respect; and
(h) any proposed amendment, change or modification to, or waiver of any
provision of, or any termination of, any Material Contract which could
reasonably be expected to have a Material Adverse Effect.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until all of the Obligations have been finally and indefeasibly paid
and satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner provided for in Section 13.11, the Borrower will, and
will cause each of its respective Subsidiaries to:
SECTION 8.1. Preservation of Existence and Related Matters. Except as
permitted by Section 10.5, preserve and maintain its separate partnership or
corporate existence and all rights, franchises, licenses and privileges
necessary to the conduct of its business including without limitation all FCC
Licenses and filing all applicable notices under 47 U.S.C. 546 in order to
preserve and maintain its CATV Franchises and renewal rights with respect
thereto, and qualify and remain qualified as a foreign corporation and
authorized to do business in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect.
SECTION 8.2. Maintenance of Property. In addition to the requirements
of any of the Security Documents, protect and preserve all properties useful in
and material to its business, including copyrights, patents, trade names and
trademarks; maintain in reasonably good working order and condition all
buildings, equipment and other tangible real and personal property; and from
time to time make or cause to be made all renewals, replacements and additions
to such property reasonably necessary for the conduct of its business, so that
the business carried on in connection therewith may be reasonably properly and
advantageously conducted at all times.
SECTION 8.3. Insurance. Maintain insurance with responsible insurance
companies against such risks and in such amounts as are customarily maintained
by similar businesses and as may be required by Applicable Law. In addition, (a)
cause the Agent, for the
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ratable benefit of itself and the Lenders, to be named as loss payee on each
such insurance policy (of the Borrower and Subsidiary party to a Security
Agreement) covering risks relating to any of its Inventory, Fixtures and
Equipment (each as defined in applicable Security Agreement) and (b) require
each such insurance policy to provide that no cancellation or termination
thereof shall be effective until at least thirty (30) days have elapsed after
receipt by the Agent of written notice thereof. Upon the reasonable request of
the Agent from time to time, deliver to the Agent (i) a detailed list of the
insurance then in effect, stating the names of the insurance companies, the
amounts of the insurance, the dates of the expiration thereof and the risks
covered thereby and (ii) a certified copy (certified by the Borrower) of the
policies of insurance.
SECTION 8.4. Accounting Methods and Financial Records. Maintain a
system of accounting, and keep such books, records and accounts (which shall be
true and complete in all material respects) as may be required or as may be
reasonably necessary to permit the preparation of financial statements in
compliance with the regulations of any Governmental Authority having
jurisdiction over it or any of its properties and, subject to Section 13.9, in
accordance with GAAP.
SECTION 8.5. Payment and Performance of Obligations. Pay and perform
all Obligations under this Agreement and the other Loan Documents and pay or
perform (a) all taxes, assessments and other governmental charges that may be
levied or assessed upon it or any of its property (including, without
limitation, withholding, social security, payroll and similar employment related
taxes on the dates such taxes are due), and (b) all other indebtedness,
obligations and liabilities in accordance with customary trade practices;
provided, that the Borrower may contest any item described in clauses (a) and
(b) hereof in good faith so long as adequate reserves are maintained with
respect thereto in accordance with GAAP.
SECTION 8.6. Compliance With Laws and Approvals. Observe and remain in
compliance with all Applicable Laws and maintain in full force and effect all
Governmental Approvals, in each case applicable or necessary to the conduct of
its business, except to the extent failure to do so could not reasonably be
expected to have a Material Adverse Effect.
SECTION 8.7. Environmental Laws. In addition to and without limiting
the generality of Section 8.6, (a) comply with, and ensure such compliance by
all tenants and subtenants, if any, with, all applicable Environmental Laws and
obtain and comply with and maintain, and ensure that all tenants and subtenants
obtain and comply with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws; (b) conduct and complete all investigations,
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studies, sampling and testing, and all remedial, removal and other actions
required under Environmental Laws, and promptly comply with all lawful orders
and directives of any Governmental Authority regarding Environmental Laws; and
(c) defend, indemnify and hold harmless the Agent and the Lenders, and their
respective parents, Subsidiaries, Affiliates, employees, agents, officers and
directors, from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under any Environmental Laws
applicable to the operations of the Borrower or any Subsidiary, or any orders,
requirements or demands of Governmental Authorities related thereto, including,
without limitation, reasonable attorney's and consultant's fees, investigation
and laboratory fees, response costs, court costs and litigation expenses, except
to the extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor.
SECTION 8.8. Compliance with ERISA. In addition to and without limiting
the generality of Section 8.6, (a) make timely payment of contributions required
to meet the minimum funding standards set forth in ERISA with respect to any
Employee Benefit Plan; (b) not take any action or fail to take action the result
of which could be a liability to the PBGC or to a Multiemployer Plan; (c) not
participate in any prohibited transaction that could result in any civil penalty
under ERISA or tax under the Code; (d) furnish to the Agent upon the Agent's
request such additional information about any Employee Benefit Plan as may be
reasonably requested by the Agent; and (e) operate each Employee Benefit Plan in
such a manner that will not incur any tax liability under Section 4980B of the
Code or any liability to any qualified beneficiary as defined in Section 4980B
of the Code.
SECTION 8.9. Compliance With Agreements. Comply in all respects with
each material term, condition and provision of all leases, agreements and other
instruments entered into in the conduct of its business including, without
limitation, any Material Contract; provided, that the Borrower or any Subsidiary
may contest any such lease, agreement or other instrument in good faith through
applicable proceedings so long as adequate reserves are maintained in accordance
with GAAP.
SECTION 8.10. Conduct of Business. Engage only in the ownership and
operation of cable television service and related advertising and marketing
activities; provided that any Subsidiary of the Borrower may also engage in the
ownership and operation of radio broadcast stations and related advertising and
marketing activities.
SECTION 8.11. Visits and Inspections. Permit representatives
of the Agent or any of the Lenders, from time to time, to visit and
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inspect its properties following notice to the Borrower and during normal
business hours; inspect, audit and make extracts from its books, records and
files, including, but not limited to, management letters prepared by independent
accountants (subject only to applicable privacy requirements of Federal law);
and discuss with its principal officers, and its independent accountants, its
business, assets, liabilities, financial condition, results of operations and
business prospects.
SECTION 8.12. Interest Rate Protection. Within one hundred and twenty
(120) days of the Closing Date enter into and maintain for a minimum of two (2)
years thereafter a Hedging Agreement reasonably satisfactory to the Agent with
respect to increases in interest rates for a minimum notional amount equal to
50% of all Loans outstanding from time to time.
SECTION 8.13. Additional Collateral. (a) Promptly at the request of the
Required Lenders, assign to the Agent for the benefit of itself and the Lenders
all of the rights of the Borrower or Subsidiary under any lease of real property
and/or grant to the Agent for the benefit of itself and the Lenders a security
interest in any such leasehold interest or real property owned by the Borrower
or any Subsidiary pursuant to documentation reasonably satisfactory to the Agent
and Required Lenders, and shall take all actions reasonably requested by the
Agent or Required Lenders in connection with consummating such assignments and
the granting of such security interests including, without limitation, the
obtaining of landlord or lessor consents, mortgagee title insurance policies,
title surveys and real estate appraisals satisfying the requirements of all
Applicable Laws and duly recording each document related thereto in such manner
and in such places as are required by the law to perfect and preserve the Liens
in favor of the Agent granted pursuant to such documents.
(b) Concurrently with the creation of any Subsidiary (i) amend and/or
deliver a supplement to the Stock Pledge Agreement to include the ownership
interests of such Subsidiary as collateral thereunder and cause such Subsidiary
to execute and deliver supplements to the Guaranty Agreement and the Subsidiary
Security Agreement and modify any other applicable Security Document, each in
form and substance satisfactory to the Required Lenders, in order to secure the
Obligations and such Guaranty Agreement in accordance with the terms of such
Security Documents and (ii) cause to be delivered to the Agent such other
documents as the Agent or Required Lenders shall reasonably request in
connection therewith, including without limitation, officers' certificates,
financial statements, opinions of counsel, resolutions, charter documents,
certificates of existence and authority to do business and any other closing
certificates and documents described in Section 5.2.
SECTION 8.14. Further Assurances. Cause the Credit Agreement, the
Subsidiary Security Agreement and the Pledge
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Agreement to be filed with the FCC within 30 days of the Closing Date and make,
execute and deliver all such additional and further acts, things, deeds and
instruments as the Agent or any Lender may reasonably require to document and
consummate the transactions contemplated hereby and to vest completely in and
insure the Agent and the Lenders their respective rights under this Agreement,
the Notes and the other Loan Documents.
ARTICLE IX
FINANCIAL COVENANTS
Until all of the Obligations have been finally and indefeasibly paid
and satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 13.11 hereof, the Borrower and its
Subsidiaries on a Consolidated basis will not:
SECTION 9.1. Maximum Leverage Ratio. As of the end of each fiscal
quarter during the applicable period set forth below, permit the ratio (the
"Leverage Ratio") of (a) Total Debt as of such fiscal quarter end to (b)
Annualized Operating Cash Flow as of such fiscal quarter end, to exceed the
corresponding ratio set forth below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date - 03/31/96 6.25 to 1.00
04/01/96 - 09/30/96 5.75 to 1.00
10/01/96 - 03/31/97 5.50 to 1.00
04/01/97 - 09/30/97 5.20 to 1.00
10/01/97 - 03/31/98 4.90 to 1.00
04/01/98 - 09/30/98 4.45 to 1.00
10/01/98 - 03/31/99 4.15 to 1.00
04/01/99 - 09/30/99 3.75 to 1.00
10/01/99 and Thereafter 3.40 to 1.00
</TABLE>
SECTION 9.2. Interest Coverage Ratio. As of the end of each fiscal
quarter during the applicable period set forth below, permit the ratio of (a)
Annual Operating Cash Flow as of such fiscal quarter end to (b) Consolidated
Interest Expense for the period of four (4) consecutive fiscal quarters ending
on such fiscal quarter end, to be less than the corresponding ratio set forth
below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date - 09/30/97 1.75 to 1.00
10/01/97 - 12/31/97 1.85 to 1.00
01/01/98 and Thereafter 2.00 to 1.00
</TABLE>
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SECTION 9.3. Fixed Charge Coverage Ratio. As of the end of each fiscal
quarter on and after the Closing Date, permit the ratio of (a) (i) Annual
Operating Cash Flow as of such fiscal quarter end plus (ii) the amount available
to be drawn under the Revolving Credit Facility on such date to (b) Fixed
Charges for the period of four (4) consecutive fiscal quarters ending on such
fiscal quarter end, to be less than 1.15 to 1.00.
ARTICLE X
NEGATIVE COVENANTS
Until all of the Obligations have been finally and indefeasibly paid
and satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 13.10 hereof, the Borrower will not
and will not permit any of its Subsidiaries to:
SECTION 10.1. Limitations on Debt. Create, incur, assume or suffer to
exist any Debt, except:
(a) the Obligations;
(b) Debt incurred in connection with a Hedging Agreement with a
counterparty and upon terms and conditions reasonably satisfactory to the Agent;
(c) existing Debt set forth on Schedule 6.1(w) and the renewal and
refinancing (but not the increase) thereof;
(d) Debt of the Borrower and its Subsidiaries incurred in connection
with Capitalized Leases in an aggregate amount not to exceed $250,000 on any
date of determination;
(e) purchase money Debt of the Borrower and its Subsidiaries in an
aggregate amount not to exceed $250,000 on any date of determination;
(f) Debt consisting of Contingent Obligations permitted by Section
10.2; and
(g) Subordinated Debt not to exceed $350,000 at any one time
outstanding.
SECTION 10.2. Limitations on Contingent Obligations. Create, incur,
assume, or suffer to exist any Contingent Obligations except:
(a) Contingent Obligations in favor of the Agent for the benefit of the
Agent and the Lenders; and
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(b) Contingent Obligations existing on the Closing Date and set forth
on Schedule 6.1(w) hereto.
SECTION 10.3. Limitations on Liens. Create, incur, assume or suffer to
exist any Lien on or with respect to any of its assets or properties (including
shares of capital stock), real or personal, whether now owned or hereafter
acquired, except:
(a) Liens for taxes, assessments and other governmental charges or
levies (excluding any Lien imposed pursuant to any of the provisions of ERISA or
Environmental Laws) not yet due or as to which the period of grace (not to
exceed thirty (30) days), if any, related thereto has not expired or which are
being contested in good faith and by appropriate proceedings if adequate
reserves are maintained to the extent required by GAAP;
(b) the claims of materialmen, mechanics, carriers, warehousemen,
processors or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, (i) which are not overdue for a period of more
than thirty (30) days or (ii) which are being contested in good faith and by
appropriate proceedings;
(c) Liens consisting of deposits or pledges made in the ordinary course
of business in connection with, or to secure payment of, obligations under
workers' compensation, unemployment insurance or similar legislation;
(d) Liens constituting encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on the use of real
property, which in the aggregate are not substantial in amount and which do not,
in any case, materially detract from the value of such property or impair the
use thereof in the ordinary conduct of business;
(e) (i) Liens evidencing the interest of the lessor under any Capital
Lease permitted by Section 10.1(d) and (ii) Liens securing purchase money Debt
permitted by Section 10.1(e); provided that the Lien attached only to the asset
being purchased and was created contemporaneously with such purchase, and the
principal amount of the Debt secured by such Lien shall at no time exceed the
purchase price of such asset.
(f) Liens of the Agent for the benefit of the Agent and the Lenders;
and
(g) Existing liens described on Schedule 6.1(v) hereto.
SECTION 10.4. Limitations on Loans, Advances, Investments and
Acquisitions. Purchase, own, invest in or otherwise acquire, directly or
indirectly, any capital stock, interests in any partnership or joint venture,
evidence of Debt or other obligation
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or security, substantially all or a portion of the business or assets of any
other Person or any other investment or interest whatsoever in any other Person;
or make or permit to exist, directly or indirectly, any loans, advances or
extensions of credit to, or any investment in cash or by delivery of property
in, any Person; or enter into, directly or indirectly, any commitment or option
in respect of the foregoing except:
(a) investments in Subsidiaries existing on the Closing Date and the
other existing loans, advances and investments described on Schedule 10.4 and,
provided no Default or Event of Default is then existing, additional investments
in Subsidiaries;
(b) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within 120 days from the date of acquisition thereof, (ii) commercial
paper maturing no more than 120 days from the date of creation thereof and
currently having the highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc., (iii) certificates of deposit
maturing no more than 120 days from the date of creation thereof issued by
commercial banks incorporated under the laws of the United States of America,
each having combined capital, surplus and undivided profits of not less than
$500,000,000 and having a rating of "A" or better by a nationally recognized
rating agency; provided, that the aggregate amount invested in such certificates
of deposit shall not at any time exceed $5,000,000 for any one such certificate
of deposit and $10,000,000 for any one such bank, or (iv) time deposits maturing
no more than 30 days from the date of creation thereof with commercial banks or
savings banks or savings and loan associations each having membership either in
the FDIC or the deposits of which are insured by the FDIC and in amounts not
exceeding the maximum amounts of insurance thereunder; and
(c) investments by the Borrower or any Subsidiary thereof in the form
of acquisitions of a business or a line of business of any other Person (whether
by the acquisition of capital stock or other ownership interests, assets or any
combination thereof) if such acquisition has been previously approved in writing
by the Required Lenders; provided that no such approval shall be required for
any such acquisition the total consideration for which does not exceed $500,000
so long as the aggregate amount of consideration for all such acquisitions does
not exceed $1,000,000 during the term of this Agreement.
SECTION 10.5. Limitations on Mergers and Liquidation. Merge,
consolidate or enter into any similar combination with any other Person or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution), except:
(a) any Wholly-Owned Subsidiary of the Borrower may merge with any
other Wholly-Owned Subsidiary of the Borrower; provided
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that if any such Wholly-Owned Subsidiary is a Guarantor, such Guarantor shall be
the survivor of any such merger; and
(b) any Wholly-Owned Subsidiary may merge into the Person such
Wholly-Owned Subsidiary was formed to acquire in connection with an acquisition
permitted by Section 10.4(c).
SECTION 10.6. Limitations on Sale of Assets. Convey, sell, lease,
assign, transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, the sale of any receivables and leasehold
interests and any sale-leaseback or similar transaction), whether now owned or
hereafter acquired, except:
(a) the sale of assets no longer used or usable in the business of the
Borrower or any of its Subsidiaries;
(b) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the compromise or
collection thereof;
(c) the disposition of assets solely to the extent required to comply
with any rule or regulation of the FCC; and
(d) sales of assets in the ordinary course of business the fair market
value of which assets shall not exceed $500,000 during the term of this
agreement.
SECTION 10.7. Limitations on Distributions; Organizational Structure.
Declare or pay any dividends upon any of its partnership or other ownership
interests; purchase, redeem, retire or otherwise acquire, directly or
indirectly, any shares of its partnership or other ownership interests; make any
distribution of cash, property or assets to or among the holders of shares of
its partnership or other ownership interests; or amend the Partnership Agreement
without the prior written consent of the Required Lenders or make any material
change in its capital or organizational structure that could reasonably be
expected to have a Material Adverse Effect; provided that:
(a) the Borrower or any Subsidiary thereof may pay dividends in shares
of its own partnership or other ownership interests;
(b) any Subsidiary may pay cash dividends to the Borrower;
(c) distributions in the form of reimbursements for expenses actually
incurred by the General Partners or their Affiliates pursuant to Section 12(d)
of the Partnership Agreement which expenses were incurred in compliance with
Section 10.9(b) of this Agreement;
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(d) distributions to the Managing General Partner of Management Fees
permitted by Section 10.12; and
(e) cash distributions by the Borrower to its limited partners not to
exceed (i) $150,000 in the aggregate during Fiscal Year 1995 and (ii) $75,000 in
the aggregate during Fiscal Year 1996.
SECTION 10.8. Limitations on Exchange and Issuance of Equity. Issue,
sell or otherwise dispose of any class or series of partnership or other
ownership interests that, by its terms or by the terms of any security into
which it is convertible or exchangeable, is, or upon the happening of an event
or passage of time would be, (a) convertible or exchangeable into Debt or (b)
required to be redeemed or repurchased, including at the option of the holder,
in whole or in part, or has, or upon the happening of an event or passage of
time would have, a redemption or similar payment due.
SECTION 10.9. Transactions with Affiliates. Directly or indirectly: (a)
make any loan or advance to, or purchase or assume any note or other obligation
to or from, any of its officers, directors, shareholders or other Affiliates, or
to or from any member of the immediate family of any of its officers, directors,
Corsicana shareholders or other Affiliates, or subcontract any operations to any
of its Affiliates, or (b) enter into, or be a party to, any transaction with any
of its Affiliates, except pursuant to the reasonable requirements of its
business and upon fair and reasonable terms that are fully disclosed to the
Required Lenders and are no less favorable to it than would obtain in a
comparable arm's length transaction with a Person not its Affiliate.
SECTION 10.10. Certain Accounting Changes. Change its Fiscal
Year end, or make any material change in its accounting treatment
and reporting practices except as required by GAAP.
SECTION 10.11. Restrictive Agreements. Enter into any Debt which
contains any negative pledge on assets or any covenants more restrictive than
the provisions of Articles VIII, IX and X hereof, or which restricts, limits or
otherwise encumbers its ability to incur Liens on or with respect to any of its
assets or properties other than the assets or properties securing such Debt.
SECTION 10.12. Management Fees. Accrue and/or pay Management Fees in an
aggregate amount during any Fiscal Year in excess of six percent (6%) of "annual
gross revenue" (as defined in the Borrower Management Agreement) in such Fiscal
Year, or accrue and/or pay any Management Fees if (i) a Default or Event of
Default then exists or (ii) as a result of the payment or accrual of any such
Management Fees a Default or Event of Default exists on a pro forma basis.
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SECTION 10.13. Amendments; Payments and Prepayments of Subordinated
Debt. Amend or modify (or permit the modification or amendment of) any of the
terms or provisions of any Subordinated Debt (other than adjustments to a
purchase price required pursuant to section 3 of an Asset Purchase Agreement),
or cancel or forgive, make any voluntary or optional payment or prepayment on,
or, except as expressly permitted by the terms of the applicable Subordination
Agreement, redeem or acquire for value (including without limitation by way of
depositing with any trustee with respect thereto money or securities before due
for the purpose of paying when due) any Subordinated Debt.
SECTION 10.13. Other Amendments. The Borrower shall not enter into any
amendment to any Asset Purchase Agreement or any Management Agreement which
alters in the reasonable opinion of the Agent any material term thereof without
the prior approval of the Agent.
ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.1. Events of Default. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans. The Borrower shall
default in any payment of principal of any Loan or Note when and as due (whether
at maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the payment
when and as due (whether at maturity, by reason of acceleration or otherwise) of
interest on any Loan or Note or the payment of any other Obligations, and such
default shall continue unremedied for five (5) Business Days.
(c) Misrepresentation. Any representation or warranty made or deemed to
be made by the Borrower or any of its Subsidiaries under this Agreement, any
Loan Document or any amendment hereto or thereto, shall at any time prove to
have been incorrect or misleading in any material respect when made or deemed
made.
(d) Default in Performance of Certain Covenants. The Borrower shall
default in the performance or observance of any covenant or agreement contained
in Section 7.5(e) and Articles IX and X of this Agreement or Section 5 of the
Stock Pledge Agreement.
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(e) Default in Performance of Other Covenants and Conditions. The
Borrower or any of its Subsidiaries shall default in the performance or
observance of any term, covenant, condition or agreement contained in this
Agreement (other than as specifically provided for otherwise in this Section
11.1) or any other Loan Document and such default shall continue for a period of
thirty (30) days after written notice thereof has been given to the Borrower by
the Agent.
(f) Hedging Agreement. Any termination payment shall be due by the
Borrower under any Hedging Agreement and such amount is not paid within five (5)
Business Days of the due date thereof.
(g) Cross-Default. The Borrower or any of its Subsidiaries shall (i)
default in the payment of any Debt (other than the Notes) or Contingent
Obligation, the aggregate outstanding principal amount of which is in excess of
$250,000 beyond the period of grace if any, provided in the instrument or
agreement under which such Debt or Contingent Obligation was created; or (ii)
default in the observance or performance of any other agreement or condition
relating to any Debt (other than the Notes) or Contingent Obligations, the
aggregate outstanding principal amount of which is in excess of $250,000 or
contained in any instrument or agreement evidencing, securing or relating
thereto or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
holders of such Debtor the beneficiary or beneficiaries of such Contingent
Obligation (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if required,
any such Debt to become due prior to its stated maturity or such Contingent
Obligation to become payable (any applicable grace period having expired).
(h) Other Cross-Defaults. (i) The Borrower or any of its Subsidiaries
shall default in the payment when due, or in the performance or observance, of
any obligation or condition of any Material Contract, unless, but only as long
as, the existence of any such default is being contested by the Borrower in good
faith by appropriate proceedings and adequate reserves in respect thereof have
been established on the books of the Borrower to the extent required by GAAP or
(ii) a General Partner shall breach any provision of the Partnership Agreement
which could reasonably be expected to have a Material Adverse Effect.
(i) Change in Control. (i) Any person or group of persons (within the
meaning of the Securities Exchange Act of 1934, as amended) shall obtain
ownership or control in one or more series of transactions of more than 30% of
the limited partnership interests of the Borrower, (ii) Northland Communications
Corporation shall cease to be the sole Managing General Partner or Northland
Telecommunications Corporation shall cease to own one hundred percent (100%) of
the outstanding capital stock of the Managing
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General Partner, (iii) there shall have occurred under any indenture or other
instrument evidencing any Debt in excess of $250,000 any "change in control" (as
defined in such indenture or other evidence of Debt) obligating the Borrower to
repurchase, redeem or repay all or any part of the Debt or capital stock
provided for therein, (iv) the Borrower shall cease to own beneficially one
hundred percent (100%) of all of the outstanding ownership interest of any of
the Borrower's Subsidiaries, or (v) the Managing General Partner or
Administrative General Partner shall liquidate or dissolve or enter into any
transaction for the purpose of winding up its business affairs.
(j) Voluntary Bankruptcy Proceeding. Either the Borrower or any of its
Subsidiaries shall (i) commence a voluntary case under the federal bankruptcy
laws (as now or hereafter in effect); (ii) file a petition seeking to take
advantage of any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding up or composition for adjustment of debts;
(iii) consent to or fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such bankruptcy laws or
other laws; (iv) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee, or liquidator of itself or of a substantial part
of its property, domestic or foreign; (v) admit in writing its inability to pay
its debts as they become due; (vi) make a general assignment for the benefit of
creditors; or (vii) take any corporate or partnership action for the purpose of
authorizing any of the foregoing.
(k) Involuntary Bankruptcy Proceeding. A case or other proceeding shall
be commenced against either the Borrower or any of its Subsidiaries in any court
of competent jurisdiction seeking (i) relief under the federal bankruptcy laws
(as now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or adjustment of
debts; or (ii) the appointment of a trustee, receiver, custodian, liquidator or
the like for either the Borrower or any of its Subsidiaries or for all or any
substantial part of its assets, domestic or foreign, and such case or proceeding
shall continue undismissed or unstayed for a period of sixty (60) consecutive
calendar days, or an order granting the relief requested in such case or
proceeding (including, but not limited to, an order for relief under such
federal bankruptcy laws) shall be entered.
(l) Failure of Agreements. Any material provision (as reasonably
determined by the Required Lenders) of this Agreement or of any other Loan
Document shall for any reason cease to be valid and binding on either of the
Borrower or any of its Subsidiaries or any such Person shall so state in
writing, or this Agreement or any other Loan Document shall for any reason cease
to create a valid and perfected first priority Lien on, or security interest in,
any material portion of the Collateral purported to be covered thereby,
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in each case other than in accordance with the express terms thereof.
(m) Termination Event. The occurrence of any of the following events:
(i) the Borrower or any ERISA Affiliate fails to make full payment when due of
all amounts which, under the provisions of any Pension Plan or Section 412 of
the Code, the Borrower or any ERISA Affiliate is required to pay as
contributions thereto; (ii) an accumulated funding deficiency in excess of
$250,000 occurs or exists, whether or not waived, with respect to any Pension
Plan; (iii) a Termination Event; or (iv) the Borrower or any ERISA Affiliate as
employers under one or more Multiemployer Plan makes a complete or partial
withdrawal from any such Multiemployer Plan and the plan sponsor of such
Multiemployer Plans notifies such withdrawing employer that such employer has
incurred a withdrawal liability requiring payments in an amount exceeding
$250,000.
(n) Judgment. A judgment or order for the payment of money which
exceeds $250,000 in amount shall be entered against either of the Borrower or
any of its Subsidiaries by any court and such judgment or order shall continue
undischarged or unstayed for a period of thirty (30) days.
(o) Loss of Governmental Approval. Any FCC License, CATV Franchise,
other Governmental Approval or Pole Agreement of either the Borrower or any of
its Subsidiaries shall expire, terminate, be canceled or otherwise lost or any
application therefor be rejected, any of which could reasonably be expected to
have a Material Adverse Effect.
(p) Phoenix Purchase. The Phoenix Purchase shall fail to occur on or
prior to January 31, 1996.
SECTION 11.2. Remedies. Upon the occurrence of an Event of Default,
with the consent of the Required Lenders, the Agent may, or upon the request of
the Required Lenders, the Agent shall, by notice to the Borrower:
(a) Acceleration; Termination of Facilities. Declare the principal of
and interest on the Loans and the Notes at the time outstanding, and all other
amounts owed to the Lenders and to the Agent under this Agreement or any of the
other Loan Documents and all other Obligations, to be forthwith due and payable,
whereupon the same shall immediately become due and payable without presentment,
demand, protest or other notice of any kind, all of which are expressly waived,
anything in this Agreement or the other Loan Documents to the contrary
notwithstanding, and terminate the Revolving Credit Commitment and any right of
the Borrower to request borrowings thereunder; provided, that upon the
occurrence of an Event of Default specified in Section 11.1(j) or (k), the
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Revolving Credit Commitment shall be automatically terminated and all
Obligations shall automatically become due and payable.
(b) Rights of Collection. Exercise on behalf of the Lenders all of its
other rights and remedies under this Agreement, the other Loan Documents and
Applicable Law, in order to satisfy all of the Borrower's Obligations.
SECTION 11.3. Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the rights and remedies of the Agent and the Lenders set forth in
this Agreement is not intended to be exhaustive and the exercise by the Agent
and the Lenders of any right or remedy shall not preclude the exercise of any
other rights or remedies, all of which shall be cumulative, and shall be in
addition to any other right or remedy given hereunder or under the Loan
Documents or that may now or hereafter exist in law or in equity or by suit or
otherwise. No delay or failure to take action on the part of the Agent or Lender
in exercising any right, power or privilege shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any Event of Default.
No course of dealing between the Borrower, the Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default.
SECTION 11.4. Consents. The Borrower acknowledges that certain
transactions contemplated by this Agreement and the other Loan Documents and
certain actions which may be taken by the Agent or the Lenders in the exercise
of their respective rights under this Agreement and the other Loan Documents may
require the consent of the FCC or another Governmental Authority. If counsel to
the Borrower or Agent reasonably determines that the consent of the FCC or
another Governmental Authority is required in connection with the execution,
delivery and performance of any of the aforesaid documents or any documents
delivered to the Agent or the Lenders in connection therewith or as a result of
any action which may be taken pursuant thereto, then the Borrower, at its sole
cost and expense, agrees to use its reasonable best efforts to secure such
consent and to cooperate with the Agent and the Lenders in any action commenced
by the Agent or Lender to secure such consent.
ARTICLE XII
THE AGENT
SECTION 12.1. Appointment. Each of the Lenders hereby irrevocably
designates and appoints First Union as the Agent of such Lender under this
Agreement and the other Loan Documents and each such Lender irrevocably
authorizes First Union as Agent for such Lender, to take such action on its
behalf under the provisions
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of this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the terms of this
Agreement and such other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement or such other Loan Documents, the Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or the other Loan Documents or otherwise exist
against the Agent.
SECTION 12.2. Delegation of Duties. The Agent may execute any of its
respective duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by the Agent with reasonable care.
SECTION 12.3. Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or
Affiliates shall be (a) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or the
other Loan Documents (except for actions occasioned solely by its or such
Person's own gross negligence or willful misconduct), or (b) responsible in any
manner to any of the Lenders for any recitals, statements, representations or
warranties made by the Borrower or any officer thereof contained in this
Agreement or the other Loan Documents or in any certificate, report, statement
or other document referred to or provided for in, or received by such Agent
under or in connection with, this Agreement or the other Loan Documents or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or the other Loan Documents or for any failure of the Borrower
to perform its obligations hereunder or thereunder. The Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of the Borrower or any
of its Subsidiaries.
SECTION 12.4. Reliance by Agent. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower), independent
accountants and other experts selected by the Agent. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless such
Note shall have been
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transferred in accordance with Section 13.10 hereof. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement and the
other Loan Documents unless it shall first receive such advice or concurrence of
the Required Lenders (or, when expressly required hereby or by the relevant
other Loan Document, all the Lenders) as it deems appropriate or it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action except for its own gross negligence or willful misconduct.
The Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the Notes in accordance with a request of the
Required Lenders (or, when expressly required hereby, all the Lenders), and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders and all future holders of the Notes.
SECTION 12.5. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless it has received notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". In the event that the Agent receives such
a notice, it shall promptly give notice thereof to the Lenders. The Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; provided that unless and until the
Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
SECTION 12.6. Non-Reliance on the Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent nor any of its respective
officers, directors, employees, agents, attor- neys-in-fact, Subsidiaries or
Affiliates has made any representations or warranties to it and that no act by
the Agent hereinafter taken, including any review of the affairs of the Borrower
or any of its Subsidiaries, shall be deemed to constitute any representation or
warranty by the Agent to any Lender. Each Lender represents to the Agent that it
has, independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower and its
Subsidiaries and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial
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and other condition and creditworthiness of the Borrower and its Subsidiaries.
Except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Agent hereunder or by the other Loan Documents,
the Agent shall not have any duty or responsibility to provide any Lender with
any credit or other information concerning the business, operations, property,
financial and other condition or creditworthiness of the Borrower and its
Subsidiaries which may come into the possession of such Agent or any of their
respective officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates.
SECTION 12.7. Indemnification. The Lenders agree to indemnify the Agent
in its capacity as such and (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
the respective amounts of their Commitment Percentages, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time (including, without limitation, at any time following the payment of the
Notes) be imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of this Agreement or the other Loan Documents, or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; provided that no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's bad faith, gross negligence or willful
misconduct. The agreements in this Section 12.7 shall survive the payment of the
Notes and all other amounts payable hereunder and the termination of this
Agreement.
SECTION 12.8. The Agent in Its Individual Capacity. The Agent and its
respective Subsidiaries and Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower as though the
Agent were not an Agent hereunder. With respect to any Loans made or renewed by
it and any Note issued to it, the Agent shall have the same rights and powers
under this Agreement and the other Loan Documents as any Lender and may exercise
the same as though it were not an Agent, and the terms "Lender" and "Lenders"
shall include the Agent in its individual capacity.
SECTION 12.9. Resignation of Agent; Successor Agents. Subject to the
appointment and acceptance of a successor as provided below, the Agent may
resign at any time by giving notice thereof to the Lenders and the Borrower.
Upon any such resignation, the Required Lenders shall have the right to appoint
a successor Agent, and provided no Event of Default exists and is continuing,
with the consent of the Borrower not to be unreasonable withheld, which
successor shall have minimum capital and surplus of at least $500,000,000. If no
successor Agent shall have been so appointed by the Required Lenders and shall
have accepted such
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appointment within thirty (30) days after the retiring Agent's giving of notice
of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent, which successor shall have minimum capital and surplus of at
least $500,000,000 and, provided no Default or Event of Default then exists and
is continuing, be consented to by the Borrower. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, as the case may be, such
successor Agent shall thereupon succeed to and become vested with all rights,
powers, privileges and duties of the retiring Agent, and the retiring Agent
shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, as the case may be,
the provisions of this Section 12.9 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
the Agent. The Borrower shall not be required to reimburse the Agent or any
successor Agent for expenses thereof arising solely as a result of any such
resignation and appointment.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. Notices.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the third Business Day following the date sent by
certified mail, return receipt requested. A telephonic notice to any Agent as
understood by such Agent will be deemed to be the controlling and proper notice
in the event of a discrepancy with or failure to receive a confirming written
notice.
(b) Addresses for Notices. Notices to any party shall be sent to it at
the following addresses, or any other address as to which all the other parties
are notified in writing.
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If to the Borrower: Northland Cable Properties Five
Limited Partnership
c/o Northland Communication
Corporation
1201 Third Avenue, Suite 3600
Seattle, Washington 98101
Attention: John S. Wetzell and
James A. Penney
Telephone No.: (206) 621-1351
Telecopy No.: (206) 623-9015
If to First Union, First Union National Bank of
as Agent or Lender: North Carolina
One First Union Center, TW-19
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: James W. Wood, Jr.
Telephone No.: (704) 374-3242
Telecopy No.: (704) 374-4092
(c) Agent's Office. The Agent hereby designates its office located at
the address set forth above, or any subsequent office which shall have been
specified for such purpose by written notice to the Borrower and Lenders, as the
Agent's Office referred to herein, to which payments due are to be made and at
which Loans will be disbursed.
SECTION 13.2. Expenses. The Borrower will pay all out-of-pocket
expenses of the Agent in connection with: (i) the preparation, execution and
delivery of this Agreement and each of the other Loan Documents, whenever the
same shall be executed and delivered, including all out-of-pocket due diligence
expenses, appraiser's fees, search fees, title insurance premiums, recording
fees, taxes and reasonable fees and disbursements of counsel for the Agent; (ii)
the preparation, execution and delivery of any waiver, amendment or consent by
the Agent or the Lenders relating to this Agreement or any of the other Loan
Documents including reasonable fees and disbursements of counsel for the Agent,
search fees, appraiser's fees, recording fees and taxes imposed in connection
therewith; and (iii) upon occurrence and during the continuance of any Default
or Event of Default, administering and enforcing their respective rights under
the Loan Documents, including consulting with one or more Persons, including
appraisers, accountants, engineers and attorneys, concerning or related to the
nature, scope or value of any right or remedy of the Agent or any Lender
hereunder or under any of the other Loan Documents, including any review of
factual matters in connection therewith, which expenses shall include the
reasonable fees and disbursements of such Persons.
SECTION 13.3. Set-off. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
upon and after the occurrence of any Event of Default and during the continuance
thereof, the Lenders and any
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assignee or participant of a Lender in accordance with Section 13.10 are hereby
authorized by the Borrower at any time or from time to time, without notice to
the Borrower or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all deposits (general
or special, time or demand, including, but not limited to, indebtedness
evidenced by certificates of deposit, whether matured or unmatured, excluding
government securities required by Applicable Law to be held as security for
worker's compensation and similar claims) and any other indebtedness at any time
held or owing by the Lenders, or any such assignee or participant to or for the
credit or the account of the Borrower against and on account of the Obligations
irrespective of whether or not (a) the Lenders shall have made any demand under
this Agreement or any of the other Loan Documents or (b) the Agent shall have
declared any or all of the Obligations to be due and payable as permitted by
Section 11.2 and although such Obligations shall be contingent or unmatured.
SECTION 13.4. Governing Law. THIS AGREEMENT, THE NOTES AND THE OTHER
LOAN DOCUMENTS, UNLESS OTHERWISE EXPRESSLY SET FORTH THEREIN, SHALL BE GOVERNED
BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES
THEREOF.
SECTION 13.5. Consent to Jurisdiction. The Borrower hereby irrevocably
consents to the personal jurisdiction of the state and federal courts located in
Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of any dispute in connection with this Agreement, the Notes and the
other Loan Documents, any rights or obligations hereunder or thereunder, or the
performance of such rights and obligations. The Borrower hereby irrevocably
consents to the service of a summons and complaint and other process in any
action, claim or proceeding brought by the Agent or Lender in connection with
this Agreement, the Notes or the other Loan Documents, any rights or obligations
hereunder or thereunder, or the performance of such rights and obligations, on
behalf of itself or its property, in the manner specified in Section 13.1.
Nothing in this Section 13.5 shall affect the right of the Agent or Lender to
serve legal process in any other manner permitted by Applicable Law or affect
the right of the Agent or Lender to bring any action or proceeding against the
Borrower or its properties in the courts of any other jurisdictions.
SECTION 13.6. Waiver of Jury Trial; Binding Arbitration.
(a) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE AGENT, LENDER AND THE BORROWER HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING
ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE
OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
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(b) Binding Arbitration. Upon demand of any party, whether made before
or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to the Notes or any other
Loan Documents ("Disputes"), between or among parties to the Notes or any other
Loan Document shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, claims brought as class actions, claims arising from
Loan Documents executed in the future, or claims concerning any aspect of the
past, present or future relationships arising out or connected with the Loan
Documents. Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in Charlotte, North Carolina. The
expedited procedures set forth in Rule 51, et seq. of the Arbitration Rules
shall be applicable to claims of less than $1,000,000. All applicable statutes
of limitation shall apply to any Dispute. A judgment upon the award may be
entered in any court having jurisdiction. The panel from which all arbitrators
are selected shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general jurisdiction, state or federal, of the state where the hearing will
be conducted. The arbitrators shall be appointed as provided in the Arbitration
Rules.
SECTION 13.7. Reversal of Payments. To the extent the Borrower makes a
payment or payments to the Agent for the ratable benefit of the Lenders or the
Agent receives any payment or proceeds of the Collateral which payments or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or proceeds
repaid, the Obligations or part thereof intended to be satisfied shall be
revived and continued in full force and effect as if such payment or proceeds
had not been received by the Agent.
SECTION 13.8. Injunctive Relief. The Borrower recognizes that, in the
event the Borrower fails to perform, observe or discharge any of its obligations
or liabilities under this Agreement, any remedy of law may prove to be
inadequate relief to the Lenders. Therefore, the Borrower agrees that the
Lenders, at the Lenders' option, shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages.
SECTION 13.9. Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Borrower or any of its
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Subsidiaries to determine compliance with any covenant contained herein, shall,
except as otherwise expressly contemplated hereby or unless there is an express
written direction by the Agent to the contrary agreed to by the Borrower, be
performed in accordance with GAAP. In the event that changes in GAAP shall be
mandated by the Financial Accounting Standards Board, or any similar accounting
body of comparable standing, or shall be recommended by the Borrower's certified
public accountants, to the extent that such changes would modify such accounting
terms or the interpretation or computation thereof, such changes shall be
followed in defining such accounting terms only from and after the date the
Agent and the Lenders shall have amended this Agreement to the extent necessary
to reflect any such changes in the financial covenants and other terms and
conditions of this Agreement.
SECTION 13.10. Successors and Assigns; Participations.
(a) Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Agent and the Lenders, all future
holders of the Notes, and their respective successors and assigns, except that
the Borrower shall not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of each Lender. Nothing set
forth in the Guaranty Agreement shall impair, as between the Borrower, the Agent
and the Lenders, the obligations of the Borrower hereunder and under the other
Loan Documents.
(b) Assignment by Lenders. Each Lender may, with the consent of the
Agent and the Borrower, which consent of the Borrower shall not be unreasonably
withheld, assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Agreement (including, without
limitation, all or a portion of the Obligations at the time owing to it and the
Notes held by it); provided, that:
(i) each such assignment shall be of a constant, and not
a varying, percentage of all the assigning Lender's rights and
obligations under this Agreement;
(ii) if less than all of the assigning Lender's
Commitment is to be assigned, the Commitment so assigned shall not be
less than $5,000,000;
(iii) the parties to each such assignment shall execute
and deliver to the Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance in the form of Exhibit F
attached hereto (an "Assignment and Acceptance"), together with any
Note or Notes subject to such assignment;
(iv) such assignment shall not, without the prior written
consent of the Borrower, require the Borrower to file a registration
statement with the Securities and Exchange
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Commission or apply to or qualify the Loans or the Notes under the blue
sky laws of any state;
(v) the assigning Lender shall pay to the Agent an
assignment fee of $2,500 upon the execution by such Lender of the
Assignment and Acceptance; provided that no such fee shall be payable
upon any assignment by a Lender to an Affiliate thereof; and
(vi) the Borrower shall not be required to incur any
material expense or to reimburse the assignor or assignee under this
Section 13.10(b) for expenses thereof in any such case arising solely
as a result of such assignment, except for expenses incurred for the
preparation of new Notes.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five (5) Business Days after the execution thereof, (A) the
assignee thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereby
and (B) the Lender thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement.
(c) Rights and Duties Upon Assignment. By executing and delivering an
Assignment and Acceptance, the assigning Lender thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
set forth in such Assignment and Acceptance.
(d) Register. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the names and
addresses of the Lenders and the amount of the Obligations with respect to each
Lender from time to time (the "Register"). The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the Agent and
the Lenders may treat each person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or Lender at any reasonable time and
from time to time upon reasonable prior notice.
(e) Issuance of New Notes. Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an Eligible Assignee together
with any Note or Notes subject to such assignment and the written consent to
such assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is substantially in the form of Exhibit F:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the
Register;
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(iii) give prompt notice thereof to the Lenders and the
Borrower; and
(iv) promptly deliver a copy of such Assignment and
Acceptance to the Borrower.
Within five (5) Business Days after receipt of notice, the Borrower shall
execute and deliver to the Agent, in exchange for the surrendered Note or Notes,
a new Note or Notes to the order of such Eligible Assignee in amounts equal to
the Commitment assumed by it pursuant to such Assignment and Acceptance and a
new Note or Notes to the order of the assigning Lender in an amount equal to the
Commitment retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of the assigned
Notes delivered to the assigning Lender. Each surrendered Note or Notes shall be
canceled and promptly returned to the Borrower.
(f) Participations. Each Lender may, with the consent of the Agent,
which consent shall not be unreasonably withheld, sell participations to one or
more banks or other entities in all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitment and the Notes held by it); provided that:
(i) each such participation shall be in an amount not
less than $5,000,000;
(ii) such Lender's obligations under this Agreement
(including, without limitation, its Commitment) shall remain unchanged;
(iii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obliga- tions;
(iv) such Lender shall remain the holder of the Notes
held by it for all purposes of this Agreement;
(v) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement;
(vi) such Lender shall not permit such participant the
right to approve any waivers, amendments or other modifications to this
Agreement or any other Loan Document other than waivers, amendments or
modifications which would reduce the principal of or the interest rate
on any Loan, extend the term or increase the amount of the Commitment
of such participant, reduce the amount of any fees to which such
participant is entitled, extend any scheduled payment date for
principal
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or, except as expressly contemplated hereby, release Collater-
al;
(vii) any such disposition shall not, without the prior
written consent of the Borrower, require the Borrower to file a
registration statement with the Securities and Exchange Commission to
apply to qualify the Loans or the Notes under the blue sky law of any
state; and
(viii) the Borrower shall not be required to incur any
material expense or to reimburse the applicable Lender or participant
under this Section 13.10(f) for expenses thereof in any such case
arising solely as a result of closing such participation.
(g) Disclosure of Information; Confidentiality. The Agent and the
Lenders shall hold all non-public information obtained pursuant to the Loan
Documents in accordance with their customary procedures for handling
confidential information. Any Lender may, in connection with any assignment,
proposed assignment, participation or proposed participation pursuant to this
Section 13.10, with (unless a Default or Event of Default has occurred and is
continuing) prior approval of the Borrower, which approval shall not be
unreasonably withheld, disclose to the assignee, participant, proposed assignee
or proposed participant, any information relating to the Borrower or any of its
Subsidiaries furnished to such Lender by or on behalf of the Borrower; provided,
that prior to any such disclosure, each such assignee, proposed assignee,
participant or proposed participant shall agree with the Borrower or such Lender
(which in the case of an agreement with only such Lender, the Borrower shall be
recognized as a third party beneficiary thereof) to preserve the confidentiality
of any confidential information relating to the Borrower received from such
Lender.
(h) Certain Pledges or Assignments. Nothing herein shall prohibit any
Lender from pledging or assigning any Note to any Federal Reserve Bank in
accordance with Applicable Law.
SECTION 13.11. Amendments, Waivers and Consents. Except as set forth
below, any term, covenant, agreement or condition of this Agreement or any of
the other Loan Documents may be amended or waived by the Lenders, and any
consent given by the Lenders, if, but only if, such amendment, waiver or consent
is in writing signed by the Required Lenders (or by the Agent with the consent
of the Required Lenders) and delivered to the Agent and, in the case of an
amendment, signed by the Borrower; provided, that no amendment, waiver or
consent shall (i) increase the amount or extend the time of the obligation of
the Lenders to make Loans, (ii) extend the originally scheduled time or times of
payment of the principal of any Loan or the time or times of payment of interest
on any Loan, (iii) reduce the rate of interest or fees payable on any Loan, (iv)
permit any subordination of the principal or interest on any Loan, (v) release
any material portion of the Collateral for any
75
<PAGE> 76
Obligation (other than as specifically permitted in this Agreement or the
Security Documents) or (vi) amend the provisions of this Section 13.11 or the
definition of Required Lenders, without the prior written consent of each
Lender. In addition, no amendment, waiver or consent to the provisions of
Article XII shall be made without the written consent of the Agent.
SECTION 13.12. Performance of Borrower's Duties. The Borrower's
obligations under this Agreement and each of the Loan Documents shall be
performed by the Borrower at its sole cost and expense.
SECTION 13.13. Indemnification. The Borrower agrees to reimburse the
Agent and the Lenders for all reasonable costs and expenses, including all
counsel, appraisal, or other expert or consultant fees and disbursements
incurred, and to indemnify and hold the Agent and the Lenders harmless from and
against all losses suffered by the Agent and the Lenders in connection with (a)
the exercise by the Agent or the Lenders of any right or remedy granted to them
under this Agreement or any of the other Loan Documents, (b) any claim, and the
prosecution or defense thereof, arising out of or in any way connected with this
Agreement or any of the other Loan Documents, and (c) the collection or
enforcement of the Obligations or any of them; provided, that the Borrower shall
not be obligated to reimburse the Agent or any Lender for costs and expenses, or
indemnify the Agent or any Lender for any loss, resulting from the gross
negligence or willful misconduct of the Agent or any Lender.
SECTION 13.14. All Powers Coupled with Interest. All powers of attorney
and other authorizations granted to the Lenders, the Agent and any Persons
designated by the Agent or Lenders pursuant to any provisions of this Agreement
or any of the other Loan Documents shall be deemed coupled with an interest and
shall be irrevocable so long as any of the Obligations remain unpaid or
unsatisfied or the Commitments have not been terminated.
SECTION 13.15. Survival of Indemnities. Notwithstanding any termination
of this Agreement, the indemnities to which the Agent and the Lenders are
entitled under the provisions of this Article XIII and any other provision of
this Agreement and the Loan Documents shall continue in full force and effect
for one year after such termination and until such date shall protect the Agents
and the Lenders against events arising after such termination as well as before.
SECTION 13.16. Titles and Captions. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 13.17. Severability of Provisions. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction,
76
<PAGE> 77
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remainder of such provision or the remaining provisions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
SECTION 13.18. Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.
SECTION 13.19. Term of Agreement. This Agreement shall remain in effect
from the Closing Date through and including the date upon which all Obligations
shall have been indefeasibly and irrevocably paid and satisfied in full. No
termination of this Agreement shall affect the rights and obligations of the
parties hereto arising prior to such termination.
SECTION 13.20. Adjustments. If any Lender (a "Benefitted Lender") shall
at any time receive any payment of all or part of the Obligations, or if any
Lender shall at any time receive any Collateral in respect to the Obligations
(whether voluntarily or involuntarily, by set-off or otherwise) in a greater
proportion than any such payment to and Collateral received by any other Lender,
such Benefitted Lender shall purchase for cash from the other Lenders such
portion of each such other Lender's Loans, or shall provide such other Lenders
with the benefits of any such Collateral, or the proceeds thereof, as shall be
necessary to cause such Benefitted Lender to share the excess payment or
benefits of such Collateral or proceeds ratably with each of the Lenders;
provided, that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned to the extent of such
recovery, but without interest. The Borrower agrees that each Lender so
purchasing a portion of another Lender's Loans may exercise all rights of
payment (including, without limitation, rights of set-off) with respect to such
portion as fully as if such Lender were the direct holder of such portion.
SECTION 13.21. Inconsistencies with Other Documents; Independent Effect
of Covenants. (a) In the event there is a conflict or inconsistency between this
Agreement and any other Loan Document, the terms of this Agreement shall
control; provided, that any provision of the Security Documents which imposes
additional burdens on the Borrower or its Subsidiaries or further restricts the
rights of the Borrower or its Subsidiaries or gives the Agent or Lenders
additional rights shall not be deemed to be in conflict or inconsistent with
this Agreement and shall be given full force and effect.
(b) The Borrower expressly acknowledges and agrees that each covenant
contained in Articles VIII, IX or X hereof shall be given
77
<PAGE> 78
independent effect. Accordingly, the Borrower shall not engage in any
transaction or other act otherwise permitted under any covenant contained in
Articles VIII, IX or X if, before or after giving effect to such transaction or
act, the Borrower shall or would be in breach of any other covenant contained in
Articles VIII, IX or X.
SECTION 13.22 Recourse Loans. The Lenders shall have recourse to the
General Partners, in accordance with Applicable Law, in order to satisfy any due
but unsatisfied portion of the Obligations.
78
<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers, all as of the day and
year first written above.
Borrower:
NORTHLAND CABLE PROPERTIES FIVE LIMITED
PARTNERSHIP
[CORPORATE SEAL] By: Northland Communications Corporation,
its Managing General Partner
By: James A. Benney
Name: James A. Benney
Title: Vice President
Agent and Lender:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Agent and Lender
By: Bruce W. ???
Name: Bruce W. ???
Title: Vice President
79
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